Document:

CREDIT AGREEMENT

dated
as of

August
22, 2003

among

THE
CATO CORPORATION, a Delaware corporation,

The
Initial Guarantors Listed Herein,

The
Banks Listed Herein

and

BRANCH
BANKING AND TRUST COMPANY,

as
Agent

 

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CREDIT AGREEMENT

AGREEMENT dated as
of August 22, 2003 among THE CATO CORPORATION, a Delaware corporation, CADEL,
LLC, a Delaware limited liability company, CHW LLC, a Delaware limited
liability company, CATO OF TEXAS LP, a Texas limited partnership, CATOSOUTH,
LLC, a North Carolina limited liability company; catocorp.com, LLC, a Delaware limited liability company; CATOWEST, LLC, a
Nevada limited liability company; and CATO SOUTHWEST, INC., a Delaware
corporation, the BANKS listed on the signature pages hereof and BRANCH BANKING
AND TRUST COMPANY, as Agent.

The parties hereto
agree as follows:

Article I

DEFINITIONS

Section 1.01            
 Definitions.  The terms as defined in this Section 1.01 shall, for all
purposes of this Agreement and any amendment hereto (except as otherwise
expressly provided or unless the context otherwise requires), have the meanings
set forth herein:

“Acquisition” means
the acquisition of (i) a controlling equity interest in another Person
(including the purchase of an option, warrant or convertible or similar type
security to acquire such a controlling interest at the time it becomes
exercisable by the holder thereof), whether by purchase of such equity interest
or upon exercise of an option or warrant for, or conversion of securities into,
such equity interest, or (ii) assets of another Person which constitute all or
any material part of the assets of such Person or of a line or lines of
business conducted by such Person.

“Additional
Interest Rate Option Event” shall mean a date specified by the Agent which
shall in no event be more than thirty days after the date that the Agent has
advised the Borrower in writing that the Agent’s loan processing systems automatically
calculate, process and handle interest on the Term Loans based upon the LIBOR
Rate and Base Rate.

“Adjusted Cash
Flow” shall mean, for a specified period, the sum of (i) the net income of the
Borrower 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 GAAP.

“Adjusted Monthly
Libor Index Rate” has the meaning set forth in Section 2.06(c).

“Affiliate” of any
Person means (i) any other Person which directly, or indirectly through one or
more intermediaries, controls such Person, (ii) any other Person which
directly, or indirectly through one or more intermediaries, is controlled by or
is under common control with such Person, or (iii) any other Person of which
such Person owns, directly or indirectly, 20% or more of the common stock or
equivalent equity interests.  As used herein, the term “control” means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

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“Agent” means Branch
Banking and Trust Company, in its capacity as agent for the Banks and the
Issuing Bank hereunder, and its successors and permitted assigns in such
capacity.

“Agent’s Letter Agreement” means that certain
letter agreement, dated of even date herewith, between the Borrower and the
Agent relating to the structure of the Loans, and certain fees from time to
time payable by the Borrower to the Agent, together with all amendments and
modifications thereto.  If there is any conflict between the provisions of this
Agreement and the provisions of the Agent’s Letter Agreement, the provisions of
this Agreement will control.

“Agreement” means this Credit Agreement,
together with all amendments and supplements hereto.

“Anniversary Date” means August 22, 2004 and
each anniversary of the Closing Date thereafter.

“Applicable Margin” has the meaning set forth
in Section 2.06(a).

“Assignee” has the meaning set forth in Section
9.07(c).

“Assignment and Acceptance” means an Assignment
and Acceptance executed in accordance with Section 9.07(c) in the form attached
hereto as Exhibit E.

“Authority” has the meaning set forth in Section 8.02.

“Average Life” shall mean, as of the date of
determination, with respect to any Debt assumed pursuant to Section 5.27(d),
the quotient obtained by dividing (i) the sum of the products of (A) the
periods of time (stated in years, or a fraction thereof, as the case may be)
from the date of determination to the dates of each successive scheduled
principal payment of such Debt and (B) the amount of such payment by (ii) the
sum of all such payments.

“Bank” means each bank listed on the signature
pages hereof as having a Revolving Credit Commitment and/or a Term Loan
Commitment and their respective successors and assigns.

“Base Rate” refers to that interest rate so
denominated and set by BB&T as its prime rate from time to time, minus: 
(a) in the case of Revolving Credit Advances, 1.45%; and (b) in the case of
Term Loans, 1.25%.  The prime rate is but one of several interest rate bases
used by BB&T.  BB&T lends at interest rates above and below the prime
rate.

“Base Rate Loan” means a Revolving Credit
Advance or Term Loan during Interest Periods when the applicable Loan bears or
is to bear interest at a rate based upon the Base Rate.

“BB&T” means Branch Banking and Trust
Company, and its successors.

“Borrower” means
The Cato Corporation, a Delaware corporation, and its successors and permitted
assigns.

“Borrower Margin
Stock” means Margin Stock that is Capital Stock of the Borrower.

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“Capital Expenditures” means for any period the aggregate cost
(less the amount of trade-in allowance included in such cost and any landlord
reimbursements of such cost) of all capital assets acquired by any of the Loan
Parties or any Subsidiary of a Loan Party during such period, less the proceeds
of any capital dispositions made in the ordinary course of business, plus all
Capital Lease Obligations incurred by any Loan Party, during such period, each
calculated in accordance with GAAP; provided, however, “Capital Expenditures”
shall not include any such expenditures for replacements and substitutions of
capital assets that have been damaged or destroyed to the extent such
replacement capital assets are purchased with the proceeds of insurance
covering the damaged or destroyed capital assets.

“Capital Lease”
shall mean any lease of any property that would, in accordance with GAAP, 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 GAAP, appear
as a liability on a balance sheet of such lessee in respect of such Capital
Lease.

“Capital Stock”
shall mean all shares, options, partnership, membership and other interests or
other equivalents (howsoever designated) of or in the equity of a Person,
whether voting or nonvoting, including, without limitation, common stock,
partnership interests, membership interests, 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.

“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.

“Cash” shall mean
legal currency of the United States of America.

“CERCLA” means the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§960l et seq., as amended from time to time, and all rules and regulations from
time to time promulgated thereunder.

“CERCLIS” means the
Comprehensive Environmental Response Compensation and Liability Information
System established pursuant to CERCLA.

“Change of Law”
shall have the meaning set forth in Section 8.02.

“Closing
Certificate” has the meaning set forth in Section 3.01(d).

“Closing Date”
means August 22, 2003.

“Code” means the
Internal Revenue Code of 1986, as amended, or any successor Federal tax code. 
Any reference to any provision of the Code shall also be deemed to be a
reference to any successor provision or provisions thereof.

“Compliance
Certificate” has the meaning set forth in Section 5.01(d).

“Consolidated
Operating Profits” means, for any period, the Operating Profits of the Borrower
and its Consolidated Subsidiaries.

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“Consolidated Subsidiary” means at any date any Subsidiary or
other entity the accounts of which, in accordance with GAAP, would be
consolidated with those of the Borrower in its consolidated and consolidating
financial statements as of such date.

“Consolidated
Tangible Net Worth” means Net Worth less all Intangible Assets.

“Consolidated Total
Assets” means, at any time, the total assets of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis, as set forth or
reflected on the most recent consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, prepared in accordance with GAAP.

“Controlled Group”
means all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which, together
with the Borrower, are treated as a single employer under Section 414 of the
Code.

“Cost of
Acquisition” means, with respect to any Acquisition, as at the date of entering
into any agreement therefor, the sum of the following (without duplication): 
(i) the value of the capital stock, warrants or options to acquire capital
stock of Borrower or any Subsidiary to be transferred in connection therewith,
(ii) the amount of any cash and fair market value of other property (excluding
property described in clause (i) and the unpaid principal amount of any debt
instrument) given as consideration, (iii) the amount (determined by using the
face amount or the amount payable at maturity, whichever is greater) of any
Debt incurred, assumed or acquired by the Borrower or any Subsidiary in
connection with such Acquisition, (iv) all additional purchase price amounts in
the form of earnouts and other contingent obligations that should be recorded
on the financial statements of the Borrower and its Subsidiaries in accordance
with GAAP, (v) all amounts paid in respect of covenants not to compete,
consulting agreements that should be recorded on financial statements of the
Borrower and its Subsidiaries in accordance with GAAP, and other affiliated
contracts in connection with such Acquisition, (vi) the aggregate fair market
value of all other consideration given by the Borrower or any Subsidiary in
connection with such Acquisition, and (vii) out of pocket transaction costs for
the services and expenses of attorneys, accountants and other consultants
incurred in effecting such transaction, and other similar transaction costs so
incurred.  For purposes of determining the Cost of Acquisition for any
transaction, (A) the capital stock of the Borrower shall be valued (I) in the
case of capital stock that is then designated as a national market system
security by the National Association of Securities Dealers, Inc. (“NASDAQ”) or
is listed on a national securities exchange, the average of the last reported
bid and ask quotations or the last prices reported thereon, and (II) with
respect to any other shares of capital stock, as determined by the Board of
Directors of the Borrower and, if requested by the Agent, determined to be a
reasonable valuation by the independent public accountants referred to in
Section 5.01(a), (B) the capital stock of any Subsidiary shall be valued as
determined by the Board of Directors of such Subsidiary and, if requested by
the Agent, determined to be a reasonable valuation by the independent public
accountants referred to in Section 5.01(a), and (C) with respect to any
Acquisition accomplished pursuant to the exercise of options or warrants or the
conversion of securities, the Cost of Acquisition shall include both the cost
of acquiring such option, warrant or convertible security as well as the cost
of exercise or conversion.

“Debt” shall mean,
with respect to any Person, without duplication, (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, or upon which interest
payments are customarily made, (c) all obligations of such Person issued or
assumed as the deferred purchase price of 

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property or
services purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within six months of the incurrence
thereof) which would appear as liabilities on the balance sheet of such Person,
(d) all obligations or liabilities of any Person that are secured by any Lien,
on any asset of such Person, whether or not such Person has assumed or become
liable for the payment thereof, (e) 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 agreements
with respect to property used or acquired by such Person, even though the
rights and remedies of the lessor, seller or lender thereunder are limited to
repossession of such property, (f) all obligations of such Person under Hedge
Agreements (valued as the termination value thereof computed in accordance with
a method approved by the International Swap Dealers Association and agreed to
by such Person in the applicable Hedge Agreement, if any), (g) the maximum
amount of all letters of credit issued or bankers’ acceptances facilities
created for the account of such Person, and, without duplication, all drafts
drawn thereunder (to the extent unreimbursed), (h) all unfunded employee
benefit plan obligations and liabilities, (i) all Debt of others Guaranteed by
such Person; (j) the principal portion of all obligations of such Person under
any synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product where such transaction is
considered borrowed money indebtedness for tax purposes but is classified as an
operating lease under GAAP; (k) deferred taxes and (l) the indebtedness of any
partnership or unincorporated joint venture in which such Person is a general
partner or a joint venturer.  Notwithstanding the foregoing, the term “Debt”
shall be understood to exclude any indebtedness or obligations owed from one
Loan Party to another Loan Party.

“Default” means any
condition or event which constitutes an Event of Default or which with the
giving of notice or lapse of time or both would, unless cured or waived in
writing, become an Event of Default.

“Default Rate”
means, with respect to any Revolving Credit Advance or Term Loan, on any day,
the sum of 2% plus the then highest interest rate (including the Applicable
Margin) which may be applicable to such Loan hereunder (irrespective of whether
any such type of Loan is actually outstanding hereunder).

“Designated
Officer” shall mean the President or Chief Financial Officer of a Loan Party or
any other officer of a Loan Party authorized by resolution of the Board of
Directors of such Loan Party to engage in the activity specified herein with
respect to such officer.

“Dollars” or “$”
means dollars in lawful currency of the United States of America.

“Domestic Business
Day” means any day except a Saturday, Sunday or other day on which commercial
banks in North Carolina are authorized or required by law to close.

“Environmental
Authority” means any foreign, federal, state, local or regional government that
exercises any form of jurisdiction or authority under any Environmental
Requirement.

“Environmental
Authorizations” means all licenses, permits, orders, approvals, notices,
registrations or other legal prerequisites for conducting the business of a
Loan Party or any Subsidiary of a Loan Party required by any Environmental
Requirement.

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“Environmental Judgments and Orders” means all judgments, decrees
or orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.

“Environmental
Laws” means any and all federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges or
releases of pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes into the
environment, including, without limitation, ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.

“Environmental
Liabilities” means any liabilities, whether accrued, contingent or otherwise,
arising from and in any way associated with any Environmental Requirements.

“Environmental
Notices” means notice from any Environmental Authority or by any other person
or entity, of possible or alleged noncompliance with or liability under any
Environmental Requirement, including without limitation any complaints,
citations, demands or requests from any Environmental Authority or from any
other person or entity for correction of any violation of any Environmental
Requirement or any investigations concerning any violation of any Environmental
Requirement.

“Environmental
Proceedings” means any judicial or administrative proceedings arising from or
in any way associated with any Environmental Requirement.

“Environmental
Releases” means releases as defined in CERCLA or under any applicable state or
local environmental law or regulation.

“Environmental
Requirements” means any legal requirement relating to health, safety or the
environment and applicable to a Loan Party, any Subsidiary of a Loan Party or
the Properties, including but not limited to any such requirement under CERCLA
or similar state legislation and all federal, state and local laws, ordinances,
regulations, orders, writs, decrees and common law.

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
or any successor law.  Any reference to any provision of ERISA shall also be
deemed to be a reference to any successor provision or provisions thereof.

“Euro-Dollar
Business Day” means any Domestic Business Day on which dealings in Dollar
deposits are carried out in the London interbank market.

“Euro-Dollar Loan”
means a Revolving Credit Advance or a Term Loan during Interest Periods when
the applicable Loan bears or is to bear interest at a rate based upon the
London Interbank Offered Rate.

“Euro-Dollar
Reserve Percentage” has the meaning set forth in Section 2.06.

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“Event of Default” has the meaning set forth in Section 6.01.

“Federal Funds
Rate” means, for any day, the rate per annum (rounded upward, if necessary, to
the next higher 1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Domestic Business Day next succeeding such day,
provided that (i) if the day for which such rate is to be determined is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if such rate
is not so published for any day, the Federal Funds Rate for such day shall be
the average rate charged to BB&T on such day on such transactions as
determined by the Agent.

“Financials” or
“Financial Statements” shall mean the consolidated balance sheet and statements
of income and cash flow to be delivered to the Banks by the Loan Parties
pursuant to Section 5.01 hereof.

“Financing” shall
mean (i) any transaction or series of transactions for the incurrence by a Loan
Party of any Debt in an aggregate principal amount equal to or greater than
$5,000,000 or for the establishment of a commitment to make advances which
would constitute Debt in an aggregate principal amount equal to or greater than
$5,000,000 of a Loan Party, which Debt is not by its terms subordinate and
junior to other Debt of a Loan Party, (ii) an obligation in an aggregate amount
equal to or greater than $5,000,000 incurred in a transaction or series of
transactions in which assets of a Loan Party are sold and leased back, or (iii)
a sale of accounts or other receivables or any interest therein in an aggregate
amount equal to or greater than $5,000,000, other than a sale or transfer of
accounts or receivables attendant to a sale permitted hereunder of an operating
division.

“Fiscal Month”
means any fiscal month of the Borrower.

“Fiscal Quarter”
means any fiscal quarter of the Borrower.

“Fiscal Year” means
any fiscal year of the Borrower.

“Fixed Charge
Coverage Ratio” shall mean, as of the end of any Fiscal Quarter, the ratio of
(i) the Adjusted Cash Flow for the four-Fiscal Quarter period then ended minus 
depreciation expense and amortization of intangible assets (as determined in
accordance with GAAP) of the Borrower and its Consolidated Subsidiaries for
such period 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 the Borrower and its Consolidated Subsidiaries on a consolidated basis, (b)
regularly scheduled payments of principal of Funded Debt of the Borrower and
its Consolidated Subsidiaries on a consolidated basis and (c) the Gross Rental
Expense for such period, all as determined in accordance with GAAP.

“Funded Debt” shall
mean at any time the aggregate amount of Debt of the Borrower and its
Subsidiaries, on a consolidated basis, but excluding the stated amount of any
Letter of Credit and all other documentary and standby letters of credit
permitted pursuant to Section 5.27 issued for the account of the Borrower.

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“GAAP” means generally accepted accounting principles applied on a
basis consistent with those which, in accordance with Section 1.02, are to be
used in making the calculations for purposes of determining compliance with the
terms of this Agreement.

“Gross Rental
Expense” shall mean for any period the rental expense under non-cancelable
operating leases for such period of the Borrower and its Subsidiaries on a
consolidated basis determined in accordance with GAAP.

“Guarantee” by any
Person means any obligation, contingent or otherwise, of such Person directly
or indirectly guaranteeing any Debt or other obligation of any other Person
and, without limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person (i) to secure, purchase or
pay (or advance or supply funds for the purchase or payment of) such Debt or
other obligation (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
provide collateral security, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), provided  that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.  The
term “Guarantee” used as a verb has a corresponding meaning.

“Guaranteed
Obligations” means any and all liabilities, indebtedness and obligations of any
and every kind and nature, heretofore, now or hereafter owing, arising, due or
payable from the Borrower to the Banks, the Issuing Bank, the Agent, or any of
them, arising under or evidenced by this Agreement, the Notes, the Letter of
Credit Agreements or any other Loan Document.

“Guarantors” shall
mean collectively:  (a) the Initial Guarantors; and (b) all Subsidiaries
acquired, formed or otherwise in existence after the Closing Date (excluding
Cedar Hill National Bank and Providence Insurance Company Ltd.).

“Hazardous
Materials” includes, without limitation, (a) solid or hazardous waste, as
defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. §6901
et seq. and its implementing regulations and amendments, or in any applicable
state or local law or regulation, (b) any “hazardous substance”, “pollutant” or
“contaminant”, as defined in CERCLA, or in any applicable state or local law or
regulation, (c) gasoline, or any other petroleum product or by-product,
including crude oil or any fraction thereof, (d) toxic substances, as defined
in the Toxic Substances Control Act of 1976, or in any applicable state or
local law or regulation and (e) insecticides, fungicides, or rodenticides, as
defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or
in any applicable state or local law or regulation, as each such Act, statute
or regulation may be amended from time to time.

“Hedge Agreement”
means any interest rate or foreign currency hedging agreement entered into by
one or more of the Loan Parties providing for a swap, cap, floor or collar
agreement or similar hedging or arrangement providing for the transfer or
mitigation of interest rate or foreign currency risk, either generally or under
specific contingencies.

“Index Rate Loan”
means a Revolving Credit Advance or a Term Loan during Interest Periods when
the applicable Loan bears or is to bear interest at a rate based upon the 

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London Interbank Offered Rate and having an Interest
Period described in section (2) of the definition of Interest Period.

“Initial
Guarantors” shall mean collectively (i) Cato West, LLC, a Nevada limited
liability company; (ii) Cato Southwest, Inc., a Delaware corporation; (iii) CatoSouth,
LLC, a North Carolina limited liability company; (iv) CHW, LLC, a Delaware
limited liability company; (v) catocorp.com, LLC, a Delaware limited
liability company; (vi) CaDel, LLC, a Delaware limited liability company; and
(vii) Cato of Texas, LP, a Texas limited partnership.

“Intangibles” means
all intangible assets of the Borrower 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 GAAP.

“Interest Payment
Date” shall mean the first day of each month.

“Interest Period”
means with respect to each:   (1) LIBOR Rate Loan, the period commencing on the
date of such Borrowing and ending on the numerically corresponding day in the
first, second, third or sixth month thereafter, as the Borrower may elect in
the applicable Notice of Borrowing; provided  that:

(A)       any
Interest Period (subject to paragraph (C) below) which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls
in another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;

(B)        any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall, subject
to paragraph (C) below, end on the last Euro-Dollar Business Day of the
appropriate subsequent calendar month;

(C)        (1) in the case of the Term Loans, no Interest Period may be
selected which begins before the Maturity Date and would otherwise end after
the Maturity Date; and (2) in the case of Revolving Credit Advances no Interest
Period may be selected which begins before the Termination Date and would
otherwise end after the Termination Date; provided that in any event an
Interest Period may be less than the period selected in and only in the
calendar month in which the Notes originate or mature.

(2)        Index
Rate Loan or Base Rate Loan, a calendar month; provided that (a) the initial
Interest Period (i) for an Index Rate Loan or Base Rate Loan that is a Term
Loan shall mean the period commencing on the Closing Date and ending on August
31, 2003, provided that the London Interbank Offered Rate shall be determined
as if such Interest Period commenced on August 1, 2003, and (ii) for an Index
Rate Loan or Base Rate Loan that is a Revolving Credit Advance made in August,
2003, shall mean the period commencing on the initial advance thereof and
ending on August 31, 2003, provided that the London Interbank Offered Rate
shall be determined as if such Interest Period commenced on August 1, 2003; and
(b) the last Interest Period under this Agreement shall end on:  (i) the
Termination Date in the case of a Revolving Credit Advance; and (ii) the
Maturity Date in the case of a Term Loan.

Notwithstanding anything
contained herein to the contrary, if one or more Principal Payment Dates are
scheduled to occur during an Interest Period selected in accordance with this
Agreement, then a portion of such Term Loans which is equal to the amount of
the Term Loans that would otherwise 

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be so prepaid or
repaid on any of such Principal Payment Dates either (A) shall have applicable
thereto an Interest Period or Interest Periods, as selected by the Borrower,
ending on or before the Principal Payment Date on which Term Loans
corresponding in amount to such portion would otherwise be prepaid or repaid,
or (B) shall instead be made as an Index Rate Loan or a Base Rate Loan.

“Investment” means
any investment in any Person, whether by means of purchase or acquisition of
obligations or securities of such Person, capital contribution to such Person,
loan or advance to such Person, making of a time deposit with such Person,
Guarantee or assumption of any obligation of such Person or otherwise.

“Investment Policy”
shall mean the Investment Policy attached hereto as Schedule 1.01 – Investment
Policy.

“Issuing Bank”
shall mean BB&T, and any successor in such capacity.

“John Cato” shall
mean John P. Derhani Cato and any of his children and trusts for their benefit.

“Lending Office”
means, as to each Bank, its office located at its address set forth on the
signature pages hereof (or identified on the signature pages hereof as its
Lending Office) or such other office as such Bank may hereafter designate as
its Lending Office by notice to the Borrower and the Agent.

“Letter of Credit”
means the letters of credit issued by the Issuing Bank pursuant to Section
2.03(a) and “Letter of Credit” means any one of such Letters of Credit, as any
of such letters of credit may be extended, renewed, replaced or amended from
time to time.

“Letter of Credit
Advance” means an advance made by the Issuing Bank pursuant to Section 2.03(c).

“Letter of Credit
Agreement” means any agreement entered into by the Borrower and the Issuing
Bank pursuant to which a Letter of Credit is issued, as amended, modified or
restated from time to time.

“Letter of Credit
Commitment” means, with respect to each Bank, (i) the amount designated as the
Letter of Credit Commitment set forth opposite the name of such Bank on the
signature pages hereof, or (ii) as to any Bank which enters into an Assignment
and Acceptance (whether as transferor Bank or as Assignee thereunder), the
amount of such Bank’s Letter of Credit Commitment after giving effect to such
Assignment and Acceptance, in each case as such amount may be reduced from time
to time pursuant to Sections 2.08 and 2.09.

“LIBOR Rate Loan”
means a Revolving Credit Advance or a Term Loan during Interest Periods when
the applicable Loan bears or is to bear interest at a rate based upon the
London Interbank Offered Rate and having an Interest Period described in (1) of
the definition of Interest Period.

“Lien” means, with
respect to any asset, any mortgage, deed to secure debt, deed of trust, lien,
pledge, charge, security interest, security title, preferential arrangement
which has the practical effect of constituting a security interest or
encumbrance, servitude or encumbrance of any kind in respect of such asset to
secure or assure payment of a Debt or a Guarantee, whether by 

10

 

consensual agreement or by operation of statute or other
law, or by any agreement, contingent or otherwise, to provide any of the
foregoing.  For the purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.

“Loan” means a Base
Rate Loan, LIBOR Rate Loan, Index Rate Loan, Revolving Credit Advance or Term
Loan and “Loans” means Base Rate Loans, LIBOR Rate Loans, Index Rate Loans,
Revolving Credit Advances, Term Loans (which terms are not necessarily
exclusive of the other said terms, e.g., an Index Rate Loan may also be a
Revolving Credit Advance) or any or all of them, as the context shall require.

“Loan Documents”
means this Agreement, the Notes, the Letter of Credit Agreements, the Letters
of Credit, any other document evidencing, relating to or securing the Revolving
Credit Advances, Term Loans or the Letters of Credit, and any other document or
instrument delivered from time to time in connection with this Agreement, the
Notes, the Letter of Credit Agreements, the Letters of Credit, Revolving Credit
Advances or Term Loans, as such documents and instruments may be amended or
supplemented from time to time.

“Loan Parties”
means collectively the Borrower and each Guarantor that is now or hereafter a
party to any of the Loan Documents.

“London Interbank
Offered Rate” has the meaning set forth in Section 2.06(c).

“Margin Stock”
means “margin stock” as defined in Regulations T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time,
together with all official rulings and interpretations issued thereunder.

“Material Adverse
Effect” means, with respect to any event, act, condition or occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), whether singly or in
conjunction with any other event or events, act or acts, condition or
conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (a) the financial
condition, operations, business or properties of the Borrower or any of its
Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the
Agent or the Banks under the Loan Documents, or the ability of the Loan Parties
to perform their obligations under the Loan Documents, or (c) the legality,
validity or enforceability of any Loan Document.

“Maturity Date”
means August 22, 2008.

“Multiemployer
Plan” shall have the meaning set forth in Section 4001(a)(3) of ERISA.

“Net Income” means
the consolidated net income of the Borrower and its Subsidiaries determined in
accordance with GAAP.

“Net Proceeds of
Capital Stock/Conversion of Debt” means any and all proceeds (whether cash or
non-cash) or other consideration received by the Borrower or a Consolidated
Subsidiary in respect of the issuance of Capital Stock (including, without
limitation, the aggregate amount of any and all Debt converted into Capital
Stock), after deducting therefrom all reasonable and customary costs and
expenses (including, without limitation, underwriting and placement 

11

 

discounts and other reasonable costs associated
therewith, sales commissions, investment banking fees and reasonable accounting
and legal fees and expenses) incurred by the Borrower or such Consolidated
Subsidiary directly in connection with the issuance of such Capital Stock and
taxes paid or payable as a result thereof.

“Net Worth” means
at any time the combined stockholders’ equity of the Borrower and its
Subsidiaries on a consolidated basis at such time determined in accordance with
GAAP.

“Notes” means each
of the Revolving Credit Notes or Term Loan Notes, or any or all of them, as the
context shall require.

“Notice of
Borrowing” has the meaning set forth in Section 2.02.

“Obligations” shall
mean and include the Revolving Credit Advances, Letter of Credit Advances and
Term 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 Loan Party to Agent, the Issuing Bank or any Bank of any
kind or nature, present or future, howsoever evidenced, created, incurred,
acquired or owing, whether arising under this Agreement, the Notes, the Letter
of Credit Agreements, the other Loan Documents or otherwise with respect to the
Revolving Credit Advances, Letter of Credit Advances, Term Loans, 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. 
The term includes, without limitation, all interest, charges, expenses, fees,
attorneys’ fees and any other sums chargeable to any Loan Party by Agent, the
Issuing Bank or any Bank under this Agreement, the Notes, the Letter of Credit
Agreements or any of the other Loan Documents.

“Officer’s
Certificate” has the meaning set forth in Section 3.01(e).

“Operating Profits”
means, as applied to any Person for any period, the operating income of such
Person for such period, as determined in accordance with GAAP.

“Participant” has
the meaning set forth in Section 9.07(b).

“PBGC” means the
Pension Benefit Guaranty Corporation or any entity succeeding to any or all of
its functions under ERISA.

“Permitted Lien”
shall mean the Liens permitted under Section 5.11.

“Person” means an
individual, a corporation, a limited liability company, a partnership
(including without limitation, a joint venture), an unincorporated association,
a trust or any other entity or organization, including, but not limited to, a
government or political subdivision or an agency or instrumentality thereof.

“Plan” shall mean
any “employee benefit plan” within the meaning of Section 3(3) of ERISA
maintained by any member of the Controlled Group.

“Preferred Stock”
shall mean Capital Stock of any of Loan Parties that gives the holder thereof a
preference over the holders of such Loan Party’s common stock with respect to 

12

 

the payment of dividends or liquidation proceeds, or
otherwise designated by such Loan Party as “preferred stock.” 

“Previous Loan
Agreement” shall mean the Loan Agreement, by and between the Loan Parties and
the lenders named therein, dated as of December 27, 2002, as amended.

“Principal Payment
Date” shall mean the first day of each month.

“Prohibited Transaction” shall have the meaning given such term
under ERISA.

“Properties” means
all real property owned, leased or otherwise used or occupied by a Loan Party
or any Subsidiary of a Loan Party, wherever located, now or in the future.

“Proposed
Redemption” shall mean the Stock Repurchase Agreement, dated as of July 22,
2003, providing for the Borrower to repurchase all of the Borrower’s Class B
common stock owned by a limited partnership and trust affiliated with Wayland
H. Cato, Jr. and a limited partnership affiliated with Edgar T. Cato no later
than August 22, 2003, as amended, modified or supplemented from time to time.

“Pro Rata Share” of
any amount means, with respect to any Bank at any time, the product of such
amount times a fraction the numerator of which is the amount of such Bank’s
Revolving Credit Commitment at such time and the denominator of which is the
aggregate amount of the Revolving Credit Commitments of all of the Banks at
such time.

“Quarterly Payment
Date” means March 31, June 30, September 30 and December 31 of each year.

“Redeemable
Preferred Stock” of any Person means any preferred stock issued by such Person
which is at any time prior to the Maturity Date either (i) mandatorily
redeemable (by sinking fund or similar payments or otherwise) or (ii)
redeemable at the option of the holder thereof.

“Reportable Event”
shall have the meaning given such term in ERISA.

“Required Banks”
means (A) at any time there are only two (or fewer) Banks party to this
Agreement: (1) Banks having at least 66 2/3% of the aggregate amount of the
Revolving Credit Commitments plus the aggregate outstanding principal amount of
the Term Loans; or (2) if the Revolving Credit Commitments are no longer in
effect, Banks holding at least 66 2/3% of the aggregate outstanding principal
amount of the Notes, Letter of Credit Advances and Undrawn Amounts; and (B) at
any time there are more than two Banks party to this Agreement:  (1) Banks
having at least 51% of the aggregate amount of the Revolving Credit Commitments
plus the aggregate outstanding principal amount of the Term Loans or, (2) if
the Revolving Credit Commitments are no longer in effect, Banks holding at
least 51% of the aggregate outstanding principal amount of the Notes, Letter of
Credit Advances and Undrawn Amounts.

“Restricted
Payment” means (i) any dividend or other distribution on any shares of the
Borrower’s capital stock (except dividends payable solely in shares of its
capital stock) or (ii) any payment on account of the purchase, redemption,
retirement or acquisition of (a) any shares of the Borrower’s capital stock
(except shares acquired upon the conversion thereof into other shares of its
capital stock) or (b) any option, warrant or other right to acquire shares of
the Borrower’s capital stock.

13

 

“Revolving Credit Advance” shall mean an advance made to the
Borrower under this Agreement pursuant to Section 2.01.  A Revolving Credit
Advance is:  (i) a “Base Rate Advance” if such Revolving Credit Advance is a
Base Rate Loan; (ii) a “Euro-Dollar Advance” if such Revolving Credit Advance
is a Euro-Dollar Loan; (iii) an “Index Rate Advance” if such Revolving Credit
Advance is an Index Rate Loan; (iv) a “LIBOR Rate Advance” if such Revolving
Credit Advance is a LIBOR Rate Loan; or a Domestic Rate Advance if such
Revolving Credit Advance is a Domestic Rate Loan.

“Revolving Credit
Borrowing” means a borrowing hereunder consisting of Revolving Credit Advances
made to the Borrower at the same time by the Banks pursuant to Section 2.01.  A
Revolving Credit Borrowing is:  (i) a “Base Rate Borrowing” if such Revolving
Credit Advances are Base Rate Loans, (ii) an “Index Rate Borrowing” if such
Revolving Credit Advances are Index Rate Loans; (iii) a “LIBOR Rate Borrowing”
if such Revolving Credit Advances are LIBOR Rate Loans; (iv) a “Euro-Dollar
Borrowing” if such Loans are Index Rate Loans or LIBOR Rate Loans; or (v) a
“Domestic Borrowing” if such Revolving Credit Advances are Base Rate Loans or
Index Rate Loans.

“Revolving Credit
Commitment” means, with respect to each Bank, (i) the amount set forth opposite
the name of such Bank on the signature pages hereof and denominated as the
Revolving Credit Commitment, or (ii) as to any Bank which enters into an
Assignment and Acceptance (whether as transferor Bank or as Assignee
thereunder), the amount of such Bank’s Revolving Credit Commitment after giving
effect to such Assignment and Acceptance, in each case as such amount may be
reduced from time to time pursuant to Sections 2.08 and 2.09.

“Revolving Credit
Notes” means the promissory notes of the Borrower, substantially in the form of
Exhibit A-1 hereto, evidencing the obligation of the Borrower to repay the
Revolving Credit Advances, together with all amendments, consolidations,
modifications, renewals and supplements thereto and “Revolving Credit Note”
means any one of such Revolving Credit Notes.

“Subordinated
Debentures” shall mean any Debt of any Loan Party which expressly contains in
the instruments evidencing such Debt, or in the indenture or other similar
instrument pursuant to which such Debt is issued, subordination provisions,
satisfactory to the Required Banks, and substantially to the effect that the
holder agrees that the Debt 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” means
any corporation or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by the Borrower or one or more of its
Subsidiaries.

“Taxes” has the
meaning set forth in Section 2.12(c).

“Term Loan” means a
Loan made pursuant to the terms and conditions set forth in Section 2.14.  The
Term Loans shall at all times be Index Rate Loans unless:  (1) the Term Loans
are to be Base Rate Loans pursuant to Article VIII herein; or (2) an Additional
Interest Rate Option Event has occurred in which case the Term Loans may
thereafter be Index Rate Loans, LIBOR Rate Loans or Base Rate Loans.

14

 

“Term Loan Commitment” means, with respect to each Bank, (i) the
amount set forth opposite the name of such Bank on the signature pages hereof
and denominated as the Term Loan Commitment, and (ii) as to any Bank which
enters into any Assignment and Acceptance (whether as transferor Bank or as
Assignee thereunder), the amount of such Bank’s Term Loan Commitment after
giving effect to such Assignment and Acceptance.

“Term Loan Notes”
means the promissory notes of the Borrower, substantially in the form of
Exhibit A-2 hereto, evidencing the obligation of the Borrower to repay the Term
Loans, together with all amendments, consolidations, modifications, renewals
and supplements thereto and “Term Loan Note” means any one of such Term Loan
Notes.

“Termination Date”
means August 22, 2005, as extended pursuant to Section 2.05.

“Third Parties”
means all lessees, sublessees, licensees and other users of the Properties,
excluding those users of the Properties in the ordinary course of the
Borrower’s business and on a temporary basis.

“Total Unused
Revolving Credit Commitments” means at any date, an amount equal to:  (A) the
aggregate amount of the Revolving Credit Commitments of all of the Banks at
such time, less (B) the sum of:  (i) the aggregate outstanding principal amount
of the Revolving Credit Advances of all of the Banks at such time; (ii) the
aggregate outstanding principal amount of all Letter of Credit Advances; and
(iii) the aggregate Undrawn Amounts.

“Transferee” has
the meaning set forth in Section 9.07(d).

“Undrawn Amount”
means, with respect to any Letter of Credit, at any time, the maximum amount
available to be drawn under such Letter of Credit at such time and “Undrawn
Amounts” means, at any time, the sum of all Undrawn Amounts at such time.

“Unused Revolving
Credit Commitment” means at any date, with respect to any Bank, an amount equal
to its Revolving Credit Commitment less the sum of:  (i) aggregate outstanding
principal amount of its Revolving Credit Advances; (ii) such Bank’s Pro Rata
Share of the aggregate outstanding principal amount of all Letter of Credit
Advances; and (iii) such Bank’s Pro Rata Share of the Undrawn Amounts.

“Wholly Owned
Subsidiary” means any Subsidiary all of the shares of capital stock or other
ownership interests of which (except directors’ qualifying shares) are at the
time directly or indirectly owned by the Borrower.

Section 1.02            
 Accounting Terms and Determinations.  Unless otherwise specified herein, all terms of an
accounting character used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required
to be delivered hereunder shall be prepared in accordance with GAAP, applied on
a basis consistent (except for changes concurred in by the Borrower’s
independent public accountants or otherwise required by a change in GAAP) with
the most recent audited consolidated financial statements of the Borrower and
its Consolidated Subsidiaries delivered to the Banks, unless with respect to
any such change concurred in by the Borrower’s independent public accountants
or required by GAAP, in determining compliance with any of the provisions of
this Agreement or any of the other Loan Documents:  (i) the Borrower shall have
objected to determining such compliance on such basis at the time of delivery
of such financial statements, or (ii) the Required Banks shall so object in
writing within 30 days after the delivery of such financial statements, in
either of which events 

15

 

such calculations shall be made
on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made
(which, if objection is made in respect of the first financial statements
delivered under Section 5.01 hereof, shall mean the financial statements
referred to in Section 4.10).

Section 1.03            
 Use of Defined Terms.  All terms defined in this Agreement shall have the same
meanings when used in any of the other Loan Documents, unless otherwise defined
therein or unless the context shall otherwise require.

Section 1.04            
 Terminology.  All personal pronouns used in this Agreement, whether
used in the masculine, feminine or neuter gender, shall include all other
genders; the singular shall include the plural and the plural shall include the
singular.  Titles of Articles and Sections in this Agreement are for
convenience only, and neither limit nor amplify the provisions of this
Agreement.

Section 1.05            
 References.  Unless otherwise indicated, references in this Agreement
to “Articles”, “Exhibits”, “Schedules”, and “Sections” are references to
articles, exhibits, schedules and sections hereof.

Article II

THE CREDITS

Section 2.01            
 Commitments to Make Revolving Credit
Advances.  Each Bank severally agrees, on
the terms and conditions set forth herein, to make Revolving Credit Advances to
the Borrower from time to time before the Termination Date; provided 
that, immediately after each such Revolving Credit Advance is made, the
aggregate outstanding principal amount of Revolving Credit Advances by such
Bank together with such Bank’s Pro Rata Share of the aggregate outstanding
principal amount of all Letter of Credit Advances and Undrawn Amounts shall not
exceed the amount of its Revolving Credit Commitment, provided  further 
that the aggregate principal amount of all Revolving Credit Advances, together
with the aggregate principal amount of all Letter of Credit Advances and
Undrawn Amounts, shall not exceed the aggregate amount of the Revolving Credit
Commitments of all of the Banks at such time.  Each Revolving Credit Borrowing
under this Section shall be in an aggregate principal amount of $500,000 or any
larger multiple of $100,000 (except that any such Revolving Credit Borrowing
may be in the aggregate amount of the Unused Revolving Credit Commitments) and
shall be made from the several Banks ratably in proportion to their respective
Revolving Credit Commitments.  Within the foregoing limits, the Borrower may
borrow under this Section, repay or, to the extent permitted by Section 2.10,
prepay Revolving Credit Advances and reborrow under this Section at any time
before the Termination Date.

Section 2.02            
 Method of Borrowing Revolving Credit
Advances.  (a)The Borrower shall give the Agent
notice in the form attached hereto as Exhibit B (a “Notice of Borrowing”) prior
to (i) 11:00 A.M. (Winston-Salem, North Carolina time) on the same Domestic
Business Day of each Domestic Borrowing, and (ii) 11:00 A.M. (Winston-Salem,
North Carolina time) at least 3 Euro-Dollar Business Days before each LIBOR
Rate Borrowing, specifying:

(i)                
 the date of such Revolving Credit
Borrowing, which shall be a Euro-Dollar Business Day for LIBOR Rate Borrowings
and a Domestic Business Day for Domestic Borrowings;

(ii)              
 the aggregate amount of such Revolving
Credit Borrowing;

16

 

(iii)            
 whether such Borrowing is to be a LIBOR
Rate Borrowing, Index Rate Borrowing or Base Rate Borrowing, and

(iv)             
 in the case of a LIBOR Rate Borrowing,
the duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.

(b)               
 Except as provided in Section 2.02(d)
of this Agreement, upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank’s ratable
share of such Revolving Credit Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.

(c)               
 Except as provided in Section 2.02(d)
of this Agreement, not later than 12:00 P.M. (Winston-Salem, North Carolina
time) on the date of each Revolving Credit Borrowing, each Bank shall (except
as provided in subsection (d) of this Section) make available its ratable share
of such Revolving Credit Borrowing, in Federal or other funds immediately
available in Winston-Salem, North Carolina, to the Agent at its address
referred to in or specified pursuant to Section 9.01.  Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, the Agent will make the funds so received from the Banks available
to the Borrower at the Agent’s aforesaid address.  Unless the Agent receives
notice from a Bank, at the Agent’s address referred to in Section 9.01, no
later than 4:00 P.M. (local time at such address) on the Domestic Business Day
before the date of a Revolving Credit Borrowing stating that such Bank will not
make a Revolving Credit Advance in connection with such Revolving Credit
Borrowing, the Agent shall be entitled to assume that such Bank will make a
Revolving Credit Advance in connection with such Revolving Credit Borrowing
and, in reliance on such assumption, the Agent may (but shall not be obligated
to) make available such Bank’s ratable share of such Revolving Credit Borrowing
to the Borrower for the account of such Bank.  If the Agent makes such Bank’s
ratable share available to the Borrower and such Bank does not in fact make its
ratable share of such Revolving Credit Borrowing available on such date, the
Agent shall be entitled to recover such Bank’s ratable share from such Bank or
the Borrower (and for such purpose shall be entitled to charge such amount to
any account of the Borrower maintained with the Agent), together with interest
thereon for each day during the period from the date of such Revolving Credit
Borrowing until such sum shall be paid in full at a rate per annum equal to the
rate set forth in Section 2.06 for each such day during such period, provided 
that:  (1) any such payment by the Borrower of such Bank’s ratable share and interest
thereon shall be without prejudice to any rights that the Borrower may have
against such Bank; and (2) until such Bank has paid its ratable share of
such Revolving Credit Borrowing, together with interest pursuant to the
foregoing, it will have no interest in or rights with respect to such Revolving
Credit Borrowing for any purpose hereunder.  If such Bank shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute such
Bank’s Revolving Credit Advance included in such Borrowing for purposes of this
Agreement.

(d)               
 At the Agent’s option and to facilitate
the efficient administration of this Agreement, the Agent shall be entitled to
make settlements and adjustments on a weekly basis provided that:  (1) all
Revolving Credit Borrowings, Revolving Credit Advances and all payments of
principal with respect to such Revolving Credit Borrowings and Revolving Credit
Advances shall be shared by the Banks ratably in proportion to their Revolving
Credit Commitments and in accordance with this Agreement; and (2) all funds
advanced by the Agent under this Agreement and all funds received by the Agent
under this Agreement shall be made or received, as the case may be, by the
Agent, as agent on behalf of the Banks and shall not constitute separate loans
or advances made by the Agent.  Unless the Agent receives notice from a Bank,
at the Agent’s address referred to in Section 9.01, no later than 4:00 P.M.
(local time at such address) on the Domestic Business Day before the date of a
Revolving Credit Borrowing stating that such Bank will not make a Revolving
Credit Advance in connection with such Revolving Credit Borrowing, the Agent
may assume that each Bank will make a Revolving Credit
Advance in connection with each Revolving Credit Borrowing and, in reliance on
such assumption, the Agent may make available such Bank’s ratable share of such
Revolving Credit Borrowing to the Borrower for the account of such Bank.  No
later than 11:00 A.M. (Winston-Salem, North Carolina time) on Friday of each
week the Agent shall advise each Bank of its ratable share of the Revolving
Credit Borrowings and payments made or received 

17

 

by the
Agent for the period ending on the immediately preceding Wednesday.  No later
than 2:00 P.M. (Winston-Salem, North Carolina time) on such Friday the Agent
and Banks shall effect payments (and credits) so that all Revolving Credit
Borrowings, Revolving Credit Advances and payments with respect to the
Revolving Credit Borrowings and Letters of Credit are shared by the Banks
ratably; provided, however, at any time:  (1) upon the request of the Agent,
each Bank shall, make its ratable share of any Revolving Credit Borrowing
available to the Agent on demand but in no event later than one Domestic
Business Day following the Agent’s demand; and (2) the Agent shall be entitled
to recover such Bank’s ratable share of each Revolving Credit Borrowing from
such Bank, together with interest thereon for each day during the period from
the date of any such demand until such sum shall be paid in full at a rate per
annum equal to the rate set forth in Section 2.06.  Each Bank’s obligation
under this Section 2.02(d) shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation:  (i) any setoff,
counterclaim, recoupment, defense or other right which such Bank or any other
Person may have against the Agent requesting such adjustment or payment or any
other Person for any reason whatsoever; (ii) the occurrence or continuance of a
Default or an Event of Default or the termination of the Revolving Credit
Commitment; (iii) any adverse change in the condition (financial or otherwise)
of the Borrower, any Guarantor or any other Person; (iv) any breach of this
Agreement or any of the other Loan Documents by the Borrower, any Guarantor or
any other Bank; or (v) any other circumstance, happening or event whatsoever
whether or not similar to any of the foregoing.

(e)               
 Notwithstanding anything to the
contrary contained in this Agreement, no LIBOR Rate Borrowing may be made if
there shall have occurred a Default, which Default shall not have been cured or
waived; provided that if Borrower has previously delivered a Notice of
Borrowing for a LIBOR Rate Borrowing, unless such Borrower notifies the Agent
prior to such LIBOR Rate Borrowing that it elects not to borrow on such date,
such LIBOR Rate Borrowing shall instead be made as an Index Rate Borrowing and
such Revolving Credit Advances shall bear interest in accordance with Section
2.06(c) for the applicable Interest Period.

(f)                
 If the Borrower is otherwise entitled
under this Agreement to repay any Revolving Credit Advances maturing at the end
of an Interest Period applicable thereto with the proceeds of a new Revolving
Credit Borrowing, and the Borrower fails to repay such Revolving Credit
Advances using its own moneys and fails to give a Notice of Borrowing in
connection with such new Revolving Credit Borrowing, a new Revolving Credit
Borrowing shall be deemed to be made on the date such Revolving Credit Advances
mature in an amount equal to the principal amount of the Revolving Credit
Advances so maturing, and the Revolving Credit Advances comprising such new
Revolving Credit Borrowing shall be an Index Rate Borrowing.

(g)               
 Notwithstanding anything to the
contrary contained herein, there shall not be more than four (4) Interest
Periods outstanding at any given time prior to an Additional Interest Rate
Option Event, and (2) there shall not be more than eight (8) Interest Periods
outstanding at any given time after an Additional Interest Rate Option Event.

Section 2.03            
 Letters of Credit.

(a)               
 The Issuing Bank may, from time to time
upon request of the Borrower, in its sole discretion issue Letters of Credit
for the account of the Borrower, subject to satisfaction of the conditions
referenced in Section 3.03.

(b)               
 Each Letter of Credit shall be subject
to the provisions of this Agreement and to the provisions set forth in the
Letter of Credit Agreement executed by the Borrower in connection with the
issuance of such Letter of Credit.  The Borrower agrees to promptly perform and
comply with the terms and conditions of each Letter of Credit Agreement.

(c)               
 The payment by the Issuing Bank of a
draft drawn under any Letter of Credit shall constitute for all purposes of
this Agreement a Letter of Credit Advance in the amount of such draft.  Upon 

18

 

written demand by the Issuing Bank, with a copy to the
Agent, each Bank shall purchase from the Issuing Bank, and the Issuing Bank
shall sell to each Bank, a participation interest in such Letter of Credit
Advance equal to such Bank’s Pro Rata Share of such Letter of Credit Advance as
of the date of such purchase, by making available to the Agent for the account
of the Issuing Bank, in Federal or other funds immediately available an amount
equal to such Bank’s Pro Rata Share of the outstanding principal amount of such
Letter of Credit Advance.  Promptly after receipt thereof, the Agent shall
transfer such funds to the Issuing Bank.  The Borrower hereby agrees to each
such sale and purchase of participation interests in Letter of Credit Advances
outstanding from time to time.  Each Bank agrees to purchase its participation
interest in an outstanding Letter of Credit Advance on (i) the Domestic
Business Day on which demand therefor is made by the Issuing Bank, provided
notice of such demand is given not later than 1:00 P.M. (Winston-Salem, North
Carolina time) on such Domestic Business Day or (ii) the first Domestic
Business Day next succeeding the date of such demand if notice of such demand
is given after 1:00 P.M. (Winston-Salem, North Carolina time) on any Domestic
Business Day.  The Issuing Bank makes no representation or warranty and assumes
no responsibility with respect to any sale and purchase of a participation
interest in any Letter of Credit Advance.  If and to the extent that any Bank
shall not have so made the amount available to the Agent in connection with its
purchase of a participation interest in any Letter of Credit Advance, such Bank
agrees to pay to the Agent forthwith on demand such amount together with
interest thereon, for each day from the date of demand by the Issuing Bank,
until the date such amount is paid to the Agent, at the Federal Funds Rate for
the account of the Issuing Bank.

(d)               
 The obligation of each Bank to purchase
a participation interest in any Letter of Credit Advance pursuant to Section
2.03(c) shall be unconditional and shall not be affected by the existence of
any Default, the failure to satisfy any condition set forth in Section 3.1, 3.2
or 3.3 or the termination of the Revolving Credit Commitments or Letter of
Credit Commitments (whether by the Borrower pursuant to Section 2.08 or by the
Agent pursuant to Section 6.1 or otherwise).

(e)               
 The Issuing Bank shall furnish (A) to
the Agent and each Bank on the tenth Domestic Business Day of each April, July,
October and January, a written report summarizing the issuance and expiration
dates of Letters of Credit issued during the preceding calendar quarter and (B)
to the Agent and each Bank upon request a written report setting forth the
aggregate Undrawn Amounts.

(f)                
 The failure of any Bank to purchase a
participation interest in any Letter of Credit Advance shall not relieve any
other Bank of its obligation hereunder to purchase its participation interest
in any Letter of Credit Advance on such date, but no Bank shall be responsible
for the failure of any other Bank to so purchase a participation interest on
such date.

(g)               
 The Borrower shall pay to the Agent for
the account of each Bank that has purchased a participation interest in a
Letter of Credit Advance on the earlier of demand and the Termination Date the
outstanding principal amount of such Letter of Credit Advance. The Agent will
promptly distribute to each Bank its ratable share of any payment of principal
of or interest on any Letter of Credit Advance received by the Agent; provided,
however, that in the event that such payment received by the Agent is required
to be returned, such Bank will return to the Agent any portion thereof
previously distributed by the Agent to it.

(h)               
 The Issuing Bank will notify the
Borrower and the Agent promptly of the presentment for payment of any Letter of
Credit, together with notice of the date such payment shall be made, and the
Agent promptly will notify the Banks of such matters.

Section 2.04            
 Notes.  (a)The Revolving Credit Advances of each Bank shall be
evidenced by a single Revolving Credit Note payable to the order of such Bank
for the account of its Lending Office in an amount equal to the original
principal amount of such Bank’s Revolving Credit Commitment.

19

 

(b)               
 The Term Loan of each Bank shall be
evidenced by a single Term Loan Note payable to the order of such Bank for the
account of its Lending Office in an amount equal to the original principal
amount of such Bank’s Term Loan Commitment.

(c)               
 Upon receipt of each Bank’s Notes
pursuant to Section 3.01, the Agent shall deliver such Notes to such Bank. 
Each Bank shall record, and prior to any transfer of its Notes shall endorse on
the schedule forming a part thereof appropriate notations to evidence, the
date, amount and maturity of, and effective interest rate for, each Revolving
Credit Advance and the Term Loan, as the case may be, made by it, the date and
amount of each payment of principal made by the Borrower with respect thereto
and such schedule shall constitute rebuttable presumptive evidence of the
principal amount owing and unpaid on such Bank’s Note; provided  that the
failure of any Bank to make, or any error in making, any such recordation or
endorsement shall not affect the obligation of the Borrower hereunder or under
the Notes or the ability of any Bank to assign its Notes.  Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Notes and to attach to
and make a part of any Note a continuation of any such schedule as and when
required.

Section 2.05            
 Maturity of Loans.  (a)Each Revolving Credit Advance included in any Revolving
Credit Borrowing shall mature, and the principal amount thereof shall be due
and payable, subject to Section 6.01, on the earlier of:  (i) the Termination
Date, and (ii) the last day of the applicable Interest Period.  Upon the
written request of the Borrower, which request shall be delivered to the Agent
at least 60 days (but no more than 90 days) prior to the Second Anniversary
Date (as such term is hereinafter defined), the Banks shall have the option
(without any obligation whatsoever so to do) of extending the Termination Date
for one additional two-year period on August 22, 2005 (the “Second Anniversary
Date”).  Each Bank shall notify the Borrower and the Agent at least 15 days
prior to the Second Anniversary Date whether or not it chooses to extend the
Termination Date for such an additional two-year period (but any Bank which fails to give such notice within such period shall be
deemed not to have extended); provided, that the Termination Date shall not be
extended with respect to any of the Banks unless all of the Banks are willing
to extend the Termination Date.

(b)               
 Each Term Loan shall mature, and the
principal amount thereof and all then outstanding interest and fees shall be
due and payable, on the Maturity Date.

Section 2.06            
 Interest Rates.  (a)“Applicable Margin” shall mean:  (1) in the case of the
Term Loans, 0% if such Term Loan is a Base Rate Loan and 1.15% if such Term
Loan is an Index Rate Loan or a LIBOR Rate Loan; and (2) in the case of the
Revolving Credit Advances, 0% if such Revolving Credit Advance is a Base Rate
Loan and 0.95% if such Revolving Credit Advance is an Index Rate Loan or a
LIBOR Rate Loan:

(b)               
 During each Interest Period in which a
Revolving Credit Advance or Term Loan is a Base Rate Loan, such Base Rate Loan
shall bear interest on the outstanding principal amount thereof, for each day
during the applicable Interest Period, at a rate per annum equal to the Base
Rate for such day plus the Applicable Margin.  Any overdue principal of and, to
the extent permitted by applicable law, overdue interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid in full at a
rate per annum equal to the Default Rate.

(c)               
 During each Interest Period in which a
Revolving Credit Advance or Term Loan is an Index Rate Loan, such Index Rate
Loan shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of: 
(1) the Applicable Margin for such Loan, plus (2) the applicable Adjusted
Monthly Libor Index Rate for such Interest Period.  Any overdue principal of
and, to the extent permitted by applicable law, overdue interest on any Index
Rate Loan shall bear interest, payable on demand, for each day until paid in
full at a rate per annum equal to the Default Rate.

20

 

The “Adjusted Monthly Libor Index Rate” applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward,
if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable
London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage.

The “London
Interbank Offered Rate” applicable to any Index Rate Loan or LIBOR Rate Loan
means for the Interest Period of such Index Rate Loan or LIBOR Rate Loan the
rate per annum determined on the basis of the rate for deposits in Dollars of
amounts equal or comparable to the principal amount of such Index Rate Loan or
LIBOR Rate Loan offered for a term comparable to such Interest Period, which
rate appears on the display designated as Page “3750” of the Telerate Service
(or such other page as may replace page 3750 of that service or such other
service or services as may be nominated by the British Banker’s Association for
the purpose of displaying London Interbank Offered Rates for U.S. dollar
deposits) determined as of 11:00 a.m. London, England time, on the first day of
such Interest Period or on the immediately preceding Euro-Dollar Business Day
if the first day of such Interest Period is not a Euro-Dollar Business Day.

“Euro-Dollar
Reserve Percentage” means for any day that percentage (expressed as a decimal)
which is in effect on such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement for a member bank of the Federal Reserve System in respect of
“Eurocurrency liabilities” (or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on such Index
Rate Loan or LIBOR Rate Loan is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of
any Bank to United States residents).  The Adjusted Monthly Libor Index shall
be adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.

(d)               
 During each Interest Period in which a
Revolving Credit Advance or Term Loan is a LIBOR Rate Loan, such LIBOR Rate
Loan shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of the
Applicable Margin plus the applicable Adjusted Monthly LIBOR Index Rate for
such Interest Period.  Any overdue principal of and, to the extent permitted by
law, overdue interest on any LIBOR Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the Default Rate.

(e)               
 Interest on each Base Rate Loan and
Index Rate Loan shall be payable for each Interest Period on the Interest
Payment Date immediately succeeding the last day of the Interest Period. 
Interest on each LIBOR Rate Loan shall be payable on the last day of each
Interest Period and, if such Interest Period is longer than 3 months, at
intervals of 3 months after the first day thereof.  Notwithstanding the
foregoing, (1) all accrued unpaid interest on the Revolving Credit Advances
shall be paid in full on the Termination Date; (2) all accrued unpaid interest
on the Term Loan shall be paid in full on the Maturity Date; and (3) should the
Revolving Credit Commitment be terminated at any time prior to the Termination
Date for any reason, any and all accrued unpaid interest shall be paid on the
date of such termination.

(f)                
 Each Letter of Credit Advance shall
bear interest on the outstanding principal amount thereof, payable on demand,
for each day from the date such Letter of Credit Advance is made until paid in
full at a rate per annum equal to the Base Rate, plus 2%.

(g)               
 The Agent shall determine each interest
rate applicable to the Loans hereunder.  The Agent shall give prompt notice to
the Borrower and the Banks by telecopy of each rate of interest so determined,
and its determination thereof shall be conclusive in the absence of manifest
error.

21

 

(h)               
 After the occurrence and during the
continuance of a Default, the principal amount of the Revolving Credit Advances
and Term Loans (and, to the extent permitted by applicable law, all accrued
interest thereon) may, at the election of the Required Banks, bear interest at
the Default Rate; provided, however, that automatically whether or not the
Required Banks elect to do so, any overdue principal of and, to the extent
permitted by law, overdue interest on any Loan shall bear interest payable on
demand, for each day until paid at a rate per annum equal to the Default Rate. 
Interest shall continue to accrue after the filing by or against any Loan Party
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.

Section 2.07            
 Fees.  (a)The Borrower shall pay to the Agent for the ratable account
of each Bank a non-utilization fee equal to the product of:  (i) the aggregate
of the daily average amounts of such Bank’s Unused Revolving Credit Commitment,
times (ii) a per annum percentage equal to 0.20%.  Such non-utilization fee
shall accrue from and including the Closing Date to and including the
Termination Date.  Non-Utilization fees shall be payable quarterly in arrears on each Quarterly Payment Date and on the
Termination Date; provided that should the Revolving Credit Commitments be
terminated at any time prior to the Termination Date for any reason, the entire
accrued and unpaid fee shall be paid on the date of such termination.

(b)               
 The Borrower shall pay to the Agent for
the ratable account of each Bank, with respect to each Letter of Credit, a per
annum letter of credit fee (the “Letter of Credit Fee”) equal to the product
of:  (i) the aggregate average daily Undrawn Amounts, times (ii) a per annum
percentage equal to 0.95% (calculated in accordance with Section 2.13).  Such
Letter of Credit Fees shall be payable in arrears for each Letter of Credit on
each Quarterly Payment Date during the term of each respective Letter of Credit
and on the termination thereof (whether at its stated expiry date or earlier).

(c)               
 The Borrower shall pay to the Agent,
for the account and sole benefit of the Agent, such fees and other amounts at
such times as set forth in the Agent’s Letter Agreement.

Section 2.08            
 Optional Termination or Reduction of
Revolving Credit Commitments.  The
Borrower may, upon at least 3 Domestic Business Days’ irrevocable notice to the
Agent, terminate at any time, or proportionately reduce from time to time by an
aggregate amount of at least $500,000 or any larger multiple of $100,000, the
Revolving Credit Commitments; provided, however:  (1) each termination or
reduction, as the case may be, shall be permanent and irrevocable; (2) no such termination
or reduction shall be in an amount greater than the Total Unused Revolving
Credit Commitments on the date of such termination or reduction; and (3) no
such reduction pursuant to this Section 2.08 shall result in the aggregate
Revolving Credit Commitments of all of the Banks to be reduced to an amount
less than $10,000,000, unless the Revolving Credit Commitments are terminated
in their entirety, in which case all accrued fees (as provided under Section
2.07) shall be payable on the effective date of such termination.

Section 2.09            
 Mandatory Reduction and Termination
of Revolving Credit Commitments.  The
Revolving Credit Commitments shall terminate on the Termination Date and any
Revolving Credit Advances and if demand had not been earlier made Letter of
Credit Advances then outstanding (together with accrued interest thereon) shall
be due and payable on such date.

Section 2.10            
 Optional Prepayments of Revolving
Credit Advances.  (a)Subject to any payments
required pursuant to the terms of Article VIII, upon 3 Domestic Business Days
prior written notice, the Borrower may prepay the Revolving Credit Advances in
whole or in part without premium or penalty (other than any payments required
pursuant to the terms of Article VIII) at any time, or from time to time in
part in amounts aggregating at least $500,000.00, 

22

 

or
any larger multiple of $100,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment;

(b)               
 Upon receipt of a notice of prepayment
pursuant to this Section, the Agent shall promptly notify each Bank of the
contents thereof and of such Bank’s ratable share of such prepayment and such
notice shall not thereafter be revocable by the Borrower.

Section 2.11            
 Mandatory Prepayments of Revolving
Credit Advances.  (a)On each date on which
the Revolving Credit Commitments are reduced or terminated pursuant to Section
2.08 or Section 2.09, the Borrower shall repay or prepay such principal amount
of the outstanding Revolving Credit Advances, if any (together with interest
accrued thereon and any amounts due under Section 8.05(a)), as may be necessary
so that after such payment the aggregate unpaid principal amount of the
Revolving Credit Advances, together with the aggregate principal amount of all
Letter of Credit Advances and Undrawn Amounts does not exceed the aggregate
amount of the Revolving Credit Commitments as then reduced.

(b)               
 In the event that the aggregate
principal amount of all Revolving Credit Advances, together with the aggregate
principal amount of the Letter of Credit Advances and Undrawn Amounts at any
one time outstanding shall at any time exceed the aggregate amount of the
Revolving Credit Commitments of all of the Banks at such time, the Borrower
shall immediately repay so much of the Revolving Credit Advances as is
necessary in order that the aggregate principal amount of the Revolving Credit
Advances thereafter outstanding, together with the aggregate principal amount
of the Letter of Credit Advances and Undrawn Amounts shall not exceed the
aggregate amount of the Revolving Credit Commitments of all of the Banks at
such time.

Section 2.12            
 General Provisions as to Payments.  (a)The Borrower shall make each payment of principal of, and
interest on, the Loans and of fees hereunder, not later than 11:00 A.M.
(Winston-Salem, North Carolina time) on the date when due, in Federal or other
funds immediately available in Winston-Salem, North Carolina, to the Agent at
its address referred to in Section 9.01.  Subject to the terms of Section
2.02(d), the Agent will promptly distribute to each Bank its ratable share of
each such payment received by the Agent for the account of the Banks; provided
that payments of interest shall be distributed by the Agent within three
Domestic Business Days of the date such payment is received by the Agent for
the account of the Banks.

(b)               
 Whenever any payment of principal of,
or interest on, the Revolving Credit Advances, Term Loans or of fees shall be
due on a day which is not a Domestic Business Day (including, without limitation,
any payments pursuant to Sections 2.02(c) and 2.02(d)), the date for payment
thereof shall be extended to the next succeeding Domestic Business Day.  If the
date for any payment of principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.

(c)               
 All payments of principal, interest and
fees and all other amounts to be made by the Borrower pursuant to this
Agreement with respect to any Revolving Credit Advance, Term Loan or fee
relating thereto shall be paid without deduction for, and free from, any tax,
imposts, levies, duties, deductions, or withholdings of any nature now or at
anytime hereafter imposed by any governmental authority or by any taxing
authority thereof or therein excluding in the case of each Bank, taxes imposed
on or measured by its net income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank is organized or any political subdivision
thereof and, in the case of each Bank, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction of such Bank’s applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, imposts, levies, duties, deductions or withholdings of any nature being
“Taxes”).  In the event that the Borrower is required by applicable law to make
any such withholding or deduction of Taxes with respect to any Revolving Credit
Advance, Term Loan or fee or other amount, the Borrower shall pay such
deduction or withholding to the applicable taxing authority, shall promptly
furnish to any Bank in respect of which such
deduction or 

23

 

withholding is made all receipts and
other documents evidencing such payment and shall pay to such Bank additional
amounts as may be necessary in order that the amount received by such Bank
after the required withholding or other payment shall equal the amount such Bank
would have received had no such withholding or other payment been made.  If no
withholding or deduction of Taxes are payable in respect of any Revolving
Credit Advance, Term Loan or fee relating thereto, the Borrower shall furnish
any Bank, at such Bank’s request, a certificate from each applicable taxing
authority or an opinion of counsel reasonably acceptable to such Bank, in
either case stating that such payments are exempt from or not subject to
withholding or deduction of Taxes.  If the Borrower fails to provide such
original or certified copy of a receipt evidencing payment of Taxes or
certificate(s) or opinion of counsel of exemption, the Borrower hereby agrees
to compensate such Bank for, and indemnify them with respect to, the tax
consequences of the Borrower’s failure to provide evidence of tax payments or
tax exemption.

In the event any
Bank receives a refund of any Taxes paid by the Borrower pursuant to this
Section 2.12, it will pay to the Borrower the amount of such refund promptly
upon receipt thereof; provided, however, if at any time
thereafter it is required to return such refund, the Borrower shall promptly
repay to it the amount of such refund.

Without prejudice
to the survival of any other agreement of the Borrower hereunder, the
agreements and obligations of the Borrower contained in this Section 2.12 shall
be applicable with respect to any Participant, Assignee or other Transferee,
and any calculations required by such provisions (i) shall be made based upon
the circumstances of such Participant, Assignee or other Transferee, and (ii)
constitute a continuing agreement and shall survive the termination of this
Agreement and the payment in full or cancellation of the Notes.

Section 2.13            
 Computation of Interest and Fees.  Interest on the Revolving Credit Advances and Term Loans
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day). 
Non-utilization fees, letter of credit fees and any other fees payable
hereunder shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).

Section 2.14            
 Term Loans.  (a)Each Bank severally agrees, upon the terms and conditions
set forth herein, to make a Term Loan to the Borrower on the Closing Date in an
amount equal to such Bank’s Term Loan Commitment.  Borrower shall not have the
right to reborrow any Term Loan or any portion thereof which is repaid.

(b)               
 The Term Loans shall at all times be
Index Rate Loans unless:  (1) the Term Loans are to be Base Rate Loans pursuant
to Article VIII herein; or (2) an Additional Interest Rate Option Event has
occurred in which case the Term Loans may thereafter be Index Rate Loans, LIBOR
Rate Loans or Base Rate Loans.  The Term Loans shall bear interest on the
outstanding principal amount thereof in accordance with Section 2.06.  Interest
on each Term Loan shall be payable in accordance with Section 2.06.

(c)               
 The principal of the Term Loans shall
be repaid in fifty-nine (59) consecutive monthly installments of $500,000 each
commencing on October 1, 2003 and continuing on each Principal Payment Date
thereafter until the Maturity Date when the unpaid principal
balance of, and accrued but unpaid interest on, the Term Loans shall be due and
payable in full.

Section 2.15            
 Continuation and Conversion
Elections Applicable to Term Loans After Additional Interest Rate Option Event.  After the occurrence of an Additional Interest Rate
Option Event, by delivering a notice (a “Notice of Continuation or
Conversion”), which shall be substantially in the form of Exhibit D, to the
Agent on or before 11:00 A.M., Winston-Salem, 

24

 

North
Carolina time, on a Domestic Business Day, the Borrower may from time to time,
after the occurrence of an Additional Interest Rate Option Event irrevocably
elect, by notice on the same Domestic Business Day, in the case of (Term Loans
to be continued as, or be converted into) Domestic Rate Loans or 3 Euro-Dollar
Business Days in the case of (Term Loans to be continued as, or be converted
into) LIBOR Rate Loans, that all of such Term Loans or any portion thereof in
the case of Domestic Rate Loans or in an aggregate principal amount of $500,000
or any larger integral multiple of $100,000 in the case of LIBOR Rate Loans be
continued or converted; provided, however, that (x) each such conversion or
continuation shall be pro rated among the applicable outstanding Term Loans of
all Banks that have made such Term Loans, and (y) no portion of the outstanding
principal amount of any Term Loans may be continued as, or be converted into,
any LIBOR Rate Loan when any Default has occurred and is continuing and shall
bear interest as provided in Section 2.06.  If the Borrower fails to deliver a
Notice of Continuation or Conversion described above, then on the last day of
the then current Interest Period, such Term Loans shall be deemed to be
converted to Index Rate Loans in the same principal amount.

Section 2.16            
 Prepayments of Term Loans.  (a)The Borrower shall have the right to prepay the outstanding
principal of the Term Loan in whole or in part without premium or penalty
(other than any payments required pursuant to the terms of Article VIII); provided,
however, (i) that all partial prepayments of the Term Loans made under
this section shall be in an aggregate principal amount of $500,000 or any
larger multiple of $100,000; (ii) at any time a Term Loan or a portion of a
Term Loan is a LIBOR Rate Loan, prepayments may be made only on the last day of
the Interest Period applicable to the portion of the Term Loan being prepaid
unless such prepayment is accompanied with any and all amounts required
pursuant to Article VIII; and (iii) at any time the Loan or a portion of the
Loan is a Domestic Rate Loan, prepayments may be made at any time;

(b)               
 Except as expressly provided in this
Section, no prepayment of the Loan or the Note is permitted.  Notwithstanding
anything to the contrary in this Section, no prepayment may be made pursuant to
paragraph (a) of this Section except after not less than three (3) Domestic
Business Days prior written notice to the Agent, specifying the prepayment
date, the amount of such prepayment and that such prepayment is being made
pursuant to this Section 2.16 of this Agreement.  Any such notice shall be
irrevocable.  The Borrower shall pay with such prepayment all accrued interest
on the principal of the Term Loan so prepaid to the date of such prepayment,
any applicable charges pursuant to Article VIII and, if the prepayment is in
whole, any and all other amounts payable by the Borrower to the Agent under
this Agreement or any other Loan Document.  Each prepayment of principal of the
Term Loan shall be applied to the installments of principal in the inverse
order of their maturities.

Article III

CONDITIONS TO BORROWINGS

Section 3.01            
 Conditions to First Borrowing.  The obligation of each Bank to make the Term Loan on the
Closing Date and/or make a Revolving Credit Advance on the occasion of the
first Revolving Credit Borrowing is subject to the satisfaction of the
conditions set forth in Section 3.02 and the following additional conditions:

(a)               
 receipt by the Agent from each of the
parties hereto of a duly executed counterpart of this Agreement signed by such
party;

(b)               
 receipt by the Agent of duly executed
Notes for the account of each lender complying with the provisions of Section
2.04;

25

 

(c)               
 receipt by the Agent of an opinion of
Robinson, Bradshaw & Hinson, P.A., counsel for the Borrower and Guarantors,
dated as of the Closing Date, substantially in the form of Exhibit C hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Agent or any Bank may reasonably request;

(d)               
 receipt by the Agent of a certificate
(the “Closing Certificate”), dated the date of the first Borrowing,
substantially in the form of Exhibit G hereto, signed by a principal financial
officer of each Loan Party, to the effect that (i) no Default has occurred and
is continuing on the date of the first Borrowing and (ii) the representations
and warranties of the Loan Parties contained in Article IV are true on and as
of the date of the first Borrowing hereunder;

(e)               
 receipt by the Agent of all documents
which the Agent or any Bank may reasonably request relating to the existence of
each Loan Party, the authority for and the validity of this Agreement, the
Notes and the other Loan Documents, and any other matters relevant hereto, all
in form and substance satisfactory to the Agent, including without limitation a
certificate of incumbency of each Loan Party (the “Officer’s Certificate”),
signed by the Secretary or an Assistant Secretary of the respective Loan Party,
substantially in the form of Exhibit H hereto, certifying as to the names, true
signatures and incumbency of the officer or officers of the respective Loan
Party, authorized to execute and deliver the Loan Documents, and certified
copies of the following items:  (i) the Loan Party’s Certificate of
Incorporation or Articles of Organization, as the case may be, (ii) the Loan
Party’s Bylaws or Operating Agreement, as the case may be, (iii) a certificate
of the Secretary of State of such Loan Party’s State of organization as to the
good standing of such Loan Party, and (iv) the action taken by the Board of
Directors of the Loan Party authorizing the Loan Party’s execution, delivery
and performance of this Agreement, the Notes and the other Loan Documents to
which the Loan Party is a party;

(f)                
 receipt by the Agent of a Notice of
Borrowing;

(g)               
 evidence satisfactory to the Agent that
the Previous Loan Agreement has been terminated and all indebtedness,
liabilities and obligations thereunder have been paid in full;

(h)               
 the Borrower shall pay to the Agent,
for the account and sole benefit of the Agent, such fees and other amounts that
are due and payable on the Closing Date as set forth in the Agent’s Letter
Agreement; and

(i)                
 such other documents or items as the
Agent, the Banks or their counsel may reasonably request.

Section 3.02            
 Conditions to All Borrowings.  The obligation of each Bank to make a Revolving Credit
Advance on the occasion of each Revolving Credit Borrowing is subject to the
satisfaction of the following conditions:

(a)               
 receipt by the Agent of a Notice of
Borrowing as required by Section 2.02;

(b)               
 the fact that, immediately before and
after such Borrowing, no Default shall have occurred and be continuing;

(c)               
 the fact that the representations and
warranties of the Loan Parties contained in Article IV of this Agreement shall
be true, on and as of the date of such Borrowing; and

(d)               
 the fact that, immediately after such
Revolving Credit Borrowing (i) the aggregate outstanding principal amount of
the Revolving Credit Advances of each Bank together with such Bank’s Pro Rata
Share of the aggregate outstanding principal amount of all Letter of Credit
Advances and Undrawn Amounts, will not exceed the amount of its Revolving
Credit Commitment and (ii) the aggregate outstanding principal amount of the
Revolving Credit Advances together with the aggregate outstanding 

26

 

principal amount of all Letter of Credit Advances and
Undrawn Amounts, will not exceed the aggregate amount of the Revolving Credit
Commitments of all of the Banks as of such date.

Each Revolving
Credit Borrowing hereunder shall be deemed to be a representation and warranty
by the Loan Parties on the date of such Revolving Credit Borrowing as to the
truth and accuracy of the facts specified in clauses (b), (c) and (d) of this
Section; provided that a Revolving Credit Borrowing shall not be deemed a
representation or warranty as to the facts specified in clause (c) of this
Section if the aggregate outstanding principal amount of the Revolving Credit
Advances immediately after such Revolving Credit Borrowing will not exceed the
aggregate outstanding principal amount of Revolving Credit Advances immediately
before such Revolving Credit Borrowing.

Section 3.03            
 Conditions to Issuance of Letters of
Credit.  The issuance by the Issuing Bank
of each Letter of Credit shall be subject to satisfaction of the conditions set
forth in the related Letter of Credit Agreement and satisfaction of the
following conditions:

(a)               
 the fact that, immediately before and
after the issuance of such Letter of Credit, no Default shall have occurred and
be continuing;

(b)               
 the fact that the representations and
warranties of the Loan Parties contained in Article IV of this Agreement shall
be true, on and as of the date of issuance of such Letter of Credit;

(c)               
 the fact that, immediately after the
issuance of such Letter of Credit:  (i) the sum of (A) the entire outstanding
principal amount of the Revolving Credit Advances, (B) the aggregate
outstanding principal amount of the Letter of Credit Advances, and (C) the
aggregate Undrawn Amounts, will not exceed the aggregate amount of the
Revolving Credit Commitments of all of the Banks at such time; and

(d)               
 no Letter of Credit shall have an
expiry date or termination date on or after the earlier of:  (1) the date
twelve months after the date of the issuance of such Letter of Credit; or (2)
the date two Domestic Business Days prior to the Termination Date.

Article IV

REPRESENTATIONS AND WARRANTIES

The Loan Parties represent and warrant
that:

Section 4.01            
 Corporate Organization and Power.  Each Loan Party (i) is a corporation, limited
partnership or limited liability company duly organized, formed or registered,
as applicable, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, as applicable, 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 Loan Party has the requisite 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.

Section 4.02            
 Litigation; Government Regulation.  There is no action, suit or proceeding pending, or to
the knowledge of the Loan Parties threatened, against or affecting the Loan
Parties or any of their respective Subsidiaries before any court or arbitrator
or any governmental body, agency or official which could have a Material
Adverse Effect or which in any manner draws into question the validity or
enforceability of, or could impair the ability of the 

27

 

Loan
Parties to perform their respective obligations under, this Agreement, the
Notes or any of the other Loan Documents.  No Loan Party 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 would have a Material Adverse Effect.

Section 4.03            
 Taxes.  There have been filed on behalf of the Loan Parties and
their respective Subsidiaries all Federal, state and local income, excise,
sales, property and other tax returns which are required to be filed by them
and all taxes due pursuant to such returns or pursuant to any levy or
assessment received by or on behalf of the Loan Parties or any Subsidiary have
been paid, unless such taxes are being diligently contested by such Loan Party
by appropriate proceedings, such Loan Party has established reserves in
accordance with GAAP and the failure to timely pay such taxes will not have a
Material Adverse Effect.  The charges, accruals and reserves on the books of
the Loan Parties and their respective Subsidiaries in respect of taxes or other
governmental charges are, in the opinion of the Loan Parties, adequate.  To the
knowledge of each Loan Party, no material controversy in respect of any taxes
is pending or threatened.  United States income tax returns of the Loan Parties
and their respective Subsidiaries have been closed through the Fiscal Year
ended January 30, 1999.

Section 4.04            
 Enforceability of Loan Documents;
Compliance With Other Instruments.  The
execution, delivery and performance by each Loan Party of this Agreement, the
Notes and the other Loan Documents to which it is a party (i) are within the
corporate, partnership and limited liability powers of each Loan Party, as
applicable, and (ii) have been duly authorized by all necessary and appropriate
corporate, partnership and limited liability action, as applicable, and have
been validly executed and delivered.  Each of the Loan Documents executed by
each Loan Party is the legal, valid and binding obligation of such Loan Party,
enforceable against such Loan Party in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’ rights generally or by
general equitable principles.  No Loan Party or any Subsidiary of a Loan Party
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 Loan Party is a party or by which it is bound.  Neither
the execution, delivery or performance of the Loan Documents executed by the
Loan Parties, 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, certificate of partnership, articles of
organization, certificate of formation, bylaws, partnership agreement,
operating agreement or any other organic documents of any Loan Party or any
Subsidiary of a Loan Party, (ii) any law, order, writ, injunction or decree of
any court or governmental authority, or (iii) any agreement or instrument to
which any Loan Party or any Subsidiary of a Loan Party is a party or by which
any Loan Party or any Subsidiary of a Loan Party, or its respective properties,
is bound or (b) results or will result in the creation or imposition of any
Lien upon the properties or assets of any Loan Party or any Subsidiary of a
Loan Party, except Permitted Liens.

Section 4.05            
 Governmental 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 Loan Party of the Loan Documents or the
consummation by each Loan Party of the transactions contemplated hereby and
thereby.  Each Loan Party has, and is in material good standing with respect
to, all governmental approvals, permits, certificates, licenses, 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, except for those the failure to obtain which (or
maintain 

28

 

good standing with regard to) would not
individually or in the aggregate have a Material Adverse Effect.  None of such
approvals, permits, certificates, consents, or franchises contains any term,
provision, condition or limitation materially more burdensome than such as are
generally applicable to Persons engaged in the same or similar business as such
Loan Party.

Section 4.06            
 No Default.

(a)               
 No Loan Party nor any of their
respective Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound that would reasonably be expected to result in a Material
Adverse Effect.

(b)               
 No Default or Event of Default has
occurred and is continuing.

Section 4.07            
 Margin Securities.  No Loan Party nor any of their respective Subsidiaries
is engaged principally, or as one of its important activities, in the business
of purchasing or carrying any Margin Stock.  No part of the proceeds of any
Revolving Credit Advance or Term Loan will be used to purchase or carry any
Margin Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock, or be used for any purpose in each case which violates, or
which is inconsistent with, the provisions of Regulation T, U or X.  Neither
the making of any Revolving Credit Advance or Term Loan hereunder, nor the use
of the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.

Section 4.08            
 Full Disclosure.  None of the Loan Documents, nor any statements or
information furnished to Agent or any Bank by or on behalf of a Loan Party for
purposes of or in connection with this Agreement or any transaction contemplated
by the 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 and all such statements and information are true,
accurate and complete in every material respect or based on reasonable
estimates on the date as of which such information is stated or certified. 
There is no fact known to any Loan Party not disclosed to the Banks in writing
that has or, to the best of such Loan Party’s knowledge, would have a Material
Adverse Effect.

Section 4.09            
 ERISA.

(a)               
 No accumulated funding deficiency (as
defined in Section 302 of ER1SA and Section 412 of the Code), whether or not
waived, has occurred with respect to any Plan, and no termination event or
Reportable Event has occurred or is reasonably expected to occur with respect
to any Plan.  The present value of all accrued benefits under each Plan (based
on those assumptions used to fund such Plan) did not, as of the most recent
valuation date, exceed the then current value of the assets of such Plan allocable
to such benefits.  Full payment has been made on or before the due date thereof
of all amounts that each Loan Party and member of the Controlled Group is
required under the terms of each Plan to have paid as contributions to such
Plan.

(b)               
 No Loan Party or any member of the
Controlled Group has incurred any withdrawal liability under Section 4201 of
ERISA.

(c)               
 No Loan Party or any member of the
Controlled Group has participated in any prohibited transaction (as defined in
Section 406 of ERISA or Section 4975 of the 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 Code, respectively.  No Loan Party has incurred,
or is reasonably expected to incur, any liability to the PBGC (other than for
insurance premiums which have been paid when due).

29

 

(d)               
 To the knowledge of each Loan Party 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 Loan Party and any member
of the Controlled Group 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 Code.

(f)                
 Neither the Loan Parties nor any member
of the Controlled Group is making or has ever made or been required to make any
contributions to a Multiemployer Plan.

Section 4.10            
 Financial Statements.  (a)The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of February 1, 2003 and the related consolidated
statements of income, shareholders’ equity and cash flows for the Fiscal Year
then ended, reported on by Deloitte & Touche, LLP, copies of which have
been delivered to each of the Banks, and the unaudited consolidated financial
statements of the Borrower for the interim period ended May 3, 2003, copies of
which have been delivered to each of the Banks, fairly present, in conformity
with GAAP (except as otherwise expressly noted therein), the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of such
dates and their consolidated results of operations and cash flows for such
periods stated.

(b)               
 Since February 1, 2003 there has been
no event, act, condition or occurrence having a Material Adverse Effect.

Section 4.11            
 Title to Assets.  Each of the Loan Parties and their respective
Subsidiaries 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 material
assets, including without limitation, the assets reflected in the most recent
Financial Statements, free and clear of all Liens, except Permitted Liens, and
except for financing statements filed in connection with the Permitted Liens,
no financing statement under the Uniform Commercial Code that names any Loan
Party or any Subsidiary of a Loan Party as debtor has been filed and is still
in effect, and no Loan Party or any Subsidiary of a Loan Party has signed any
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement.  Each Loan Party enjoys
peaceful and undisturbed possession under all of its material leases and all
such leases are valid and subsisting and in full force and effect.  Each of the
Loan Parties and their respective Subsidiaries has title to its properties
sufficient for the conduct of its business.

Section 4.12            
 Use of Proceeds.  The Borrower’s uses of the proceeds of each Revolving
Credit Advance and Term Loan made by Banks to Borrower pursuant to this
Agreement are, and continue to be, legal and proper uses and such uses are and
will be consistent with the terms of Section 5.15 and all applicable laws and
statutes, as in effect from time to time.

Section
4.13            
 Environmental Matters.  (a)No Hazardous Materials have been or are being used,
produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed or otherwise handled at, or shipped or transported to or
from or located on any Property (except in material compliance with applicable
Environmental Laws) and no part of any Property, including the groundwater
located thereon and thereunder, is presently known by 

30

 

such
Loan Party or any Subsidiary of a Loan Party to be contaminated by any
Hazardous Materials in violation of applicable
Environmental Laws.  To the knowledge of each Loan Party, no improvement
located on any Property contains any friable asbestos or asbestos-containing
materials in material violation of any federal, state or local laws,
regulations or orders respecting such asbestos or asbestos-containing
materials.  To the knowledge of each Loan Party, there were no material
releases of Hazardous Materials in violation of Environmental Law on any
Property previously owned by such Loan Party or any Subsidiary of a Loan Party
while such Loan Party or any Subsidiary of a Loan Party owned such Property.

(b)               
 No Property has, to the knowledge of
any Loan Party 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 Loan Parties,
there are no underground storage tanks situated on the Denmark Road Real
Estate, other than tanks installed by the Loan Parties which have been properly
closed in material compliance with all applicable Environment Laws and, to the
knowledge of Borrowers, no material underground leakage from such tanks has
occurred;

(d)               
 All activities, and operations of each
Loan Party and each Subsidiary of a Loan Party meet in all material respects
the requirements of all applicable Environmental Laws;

(e)               
 Each Loan Party, to its knowledge, has
never sent a Hazardous Material 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)                
 Each Loan Party, 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 Materials nor has it
received notice of any claims from any Person relating to personal injuries
from exposure to Hazardous Materials;

(g)               
 Each Loan Party 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; and

(h)               
 No Loan Party nor any Subsidiary of a
Loan Party is subject to any Environmental Liability and no Loan Party nor any
Subsidiary of a Loan Party has been designated as a potentially responsible
party under CERCLA.  None of the Properties has been identified on any current
or proposed (i) National Priorities List under 40 C.F.R. § 300, (ii) CERCLIS
list or (iii) any list arising from a state statute similar to CERCLA.

Section 4.14            
 Assets for Conduct of Business.  Each Loan Party 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 or infringement with the rights of others.

Section 4.15            
 Compliance With Laws.  Each Loan Party and each Subsidiary of a Loan Party has
duly complied with, and its Properties and business operations are in
compliance in all material respects with, the provisions of all federal, state
and local laws, rules and regulations applicable to each such Loan Party and
each Subsidiary of a Loan Party, the Properties or the conduct of such
business, including, without limitation, all federal and state securities and
antitrust laws, ERISA and Environmental Laws.  There have been no citations, 

31

 

notices or orders of noncompliance issued to any Loan
Party or any Subsidiary of a Loan Party under any federal, state or local law,
rule or regulation applicable to each Loan Party and each Subsidiary of a Loan
Party which would have a Material Adverse Effect.

Section 4.16            
 Contracts.  No Loan Party is a party to any contract or agreement,
or subject to any charge, corporate, partnership or limited liability company
restriction, judgment, injunction, decree, rule, regulation or order of any
court or governmental authority, which has or would have a Material Adverse
Effect.

Section 4.17            
 Subsidiaries.  Each of the Loan Parties’ Subsidiaries is a corporation,
partnership or limited liability company (or in the case of Cedar Hill National
Bank, a national bank) duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, as the
case may be, is duly qualified to transact business in every jurisdiction
where, by the nature of its business, such qualification is necessary, and has
all organizational powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.  No
Loan Party has any Subsidiaries except those Subsidiaries listed on Schedule
4.17, which accurately sets forth each such Subsidiary’s complete name and
jurisdiction of organization.

Section 4.18            
 Not an Investment Company.  No Loan Party nor any Subsidiary of a Loan Party is an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.

Section 4.19            
 Public Utility Holding Company Act.  No Loan Party nor any Subsidiary of a Loan Party is a
“holding company”, or a “subsidiary company” of a “holding company”, or an
“affiliate” of a “holding company” or of a “subsidiary company” of a “holding
company”, as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended.

Section 4.20            
 Insolvency.  After giving effect to the execution and delivery of the
Loan Documents and the making of the Revolving Credit Advances and Term Loan
under this Agreement, no Loan Party will be “insolvent”, within the meaning of
such term as defined in § 101 of Title 11 of the United States Code or Section
2 of the Uniform Fraudulent Transfer Act, or any other applicable state law
pertaining to fraudulent transfers, as each may be amended from time to time,
or be unable to pay its debts generally as such debts become due, or have an
unreasonably small capital to engage in any business or transaction, whether
current or contemplated.

Section 4.21            
 Labor Matters.  There are no significant strikes, lockouts, slowdowns or
other labor disputes against any Loan Party or any Subsidiary of any Loan Party
pending or, to the knowledge of any Loan Party, threatened which would have a
Material Adverse Effect.  The hours worked by and payment made to employees of
the Loan Parties and each Subsidiary of any Loan Party
have not been in violation of the Fair Labor Standards Act or any other
applicable federal, state or foreign law dealing with such matters except to
the extent such violation would not have a Material Adverse Effect.

32

 

Article V

COVENANTS

The Loan Parties
agree, jointly and severally, that, so long as any Bank has any Revolving
Credit Commitment hereunder or any Letter of Credit or Term Loan is outstanding
or any amount payable under any Note or Letter of Credit Advance remains
unpaid:

Section 5.01            
 Information.  The Borrower will deliver to each of the Banks:

(a)               
 As soon as practicable and in any event
45 days after the close of each Fiscal Quarter (except the fourth Fiscal
Quarter in each Fiscal Year) of Borrower, a consolidated balance sheet of
Borrower 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 GAAP, 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
Borrower;

(b)               
 As soon as practicable and in any event
within 120 days after the close of each Fiscal Year of Borrower an audited
consolidated balance sheet of Borrower 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 GAAP, each audited by an
independent certified public accountant reasonably acceptable to the Banks in
accordance with GAAP, applied on a basis consistent with those of the preceding
Fiscal 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 Fiscal 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 Borrower and its Subsidiaries not being in
accordance with GAAP, all in a form reasonably acceptable to Agent and the
Banks;

(c)               
 Concurrently with the delivery of the
financial statements of Borrower described in subsection (b) above, a
certificate from the independent certified public accountants that in making
their examination of the financial statements of Borrower and its Subsidiaries,
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 Default or 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
(a “Compliance Certificate”) from the Borrower by a Designated Officer (i)
certifying to the Banks that the Loan Parties have kept, observed, performed
and fulfilled in all material respects each and every covenant, obligation and agreement binding upon any Loan Party contained in this
Agreement or the other Loan Documents, (ii) calculating the financial covenants
set forth in Sections 5.03, 5.05, 5.06(b), 5.07 and 5.08 hereof, (iii) setting
forth the identity of the Subsidiaries of the Borrower on the date of such
certificate; and (iv) certifying to the Banks that no Event of Default or
Default has occurred, or specifying any such Event of Default or Default;

(e)               
 within 5 Domestic Business Days after a
Loan Party becomes aware of the occurrence of any Default, a certificate of the
Chief Financial Officer of such Loan Party setting forth the details thereof
and the action which such Loan Party is taking or proposes to take with respect
thereto;

(f)                
 promptly upon the mailing thereof to
the shareholders of any Loan Party generally, copies of all financial
statements, reports and proxy statements so mailed;

33

 

(g)               
 to the extent not otherwise publicly
available promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and annual, quarterly or monthly reports which any
Loan Party shall have filed with the Securities and Exchange Commission;

(h)               
 if and when any Loan Party or any
member of the Controlled Group (i) gives or is required to give notice to the
PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event, a copy of
the notice of such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice;

(i)                
 promptly, but in no event later than
three Domestic Business Days after any Loan Party obtains knowledge thereof,
give written notice to the Agent of:  (a) any material litigation or proceeding
brought against any Loan Party, whether or not the claim is considered by any
such Loan Party to be covered by insurance (for the purpose hereof, any
litigation against any Loan Party seeking to recover $1,000,000 or more in
damages shall be deemed material); (b) any written notice of a violation
received by any Loan Party 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 Loan Party, or any property of
a Loan Party, other than Permitted Liens; (e) any judgments or orders involving
cost to the Loan Parties in aggregate of more than $1,000,000 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 Loan Parties shall promptly
give notice to the Agent of any change in any Designated Officer; and

(m)       from time to time such additional information
regarding the financial position or business of the Loan Parties and their
respective Subsidiaries as the Agent, at the request of any Bank, may
reasonably request.

Section 5.02            
 Inspection of Property, Books and
Records.  The Borrower will (i) keep, and
will cause each Subsidiary to keep, proper books of record and account in which
full, true and correct entries in conformity with GAAP and applicable law shall
be made of all dealings and transactions in relation to its business and
activities; (ii) permit, and will cause each Subsidiary of the Loan Parties to
permit, with reasonable prior notice (which notice shall not be required in the
case of an emergency) and during business hours, the Agent or its designee, at
the expense of the Loan Parties, to perform periodic field audits and investigations
of the respective Loan Parties; and (iii) permit, and will cause each
Subsidiary to permit, representatives of any Bank at such Bank’s expense prior
to the occurrence of an Event of Default and at the Borrower’s expense after
the occurrence of an Event of Default to visit and inspect any of their
respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective officers, employees and upon the consent of
such Loan Party, which shall not be unreasonably withheld, its independent
public accountants (and by this provision each Loan Party authorizes said
accountants to discuss the finances and affairs of such Loan Party and to provide
said accountants with such further written authorization as they may require),
upon reasonable notice and during business hours and as often as may be
reasonably requested.  The Loan Parties agree to cooperate and assist in such
visits and inspections, in each case at such reasonable times and during
business hours and as often as may reasonably be desired.

34

 

Section 5.03            
 Ratio of Debt/Capitalized Rents to
Adjusted Cash Flow.  At the end of each
Fiscal Quarter, commencing with the Fiscal Quarter ending August 2, 2003, the
ratio of (i) the sum of the aggregate amount of Funded Debt then outstanding
plus Capitalized Rents to (ii) the Adjusted Cash Flow for the Fiscal Quarter
then ending and the immediately preceding three Fiscal Quarters will not at any
time exceed 4.50 to 1.00.

Section 5.04            
 Acquisitions.  (a)No Loan Party nor any Subsidiary of a Loan Party shall
enter into any agreement, contract, binding commitment or other arrangement
providing for any Acquisition, or take any action to solicit the tender of
securities or proxies in respect thereof in order to effect any Acquisition,
unless (i) the Acquisition has been approved and recommended by the board of
directors of the Person to be acquired or from which such assets or business is
to be acquired and the line or lines of business of the Person to be acquired
are the same as or reasonably related to one or more line or lines of business
in which the Loan Party is engaged on the Closing Date, (ii) no Default or
Event of Default shall have occurred and be continuing either immediately prior
to or immediately after giving effect to such Acquisition, (iii) the Person
acquired shall be a Subsidiary, or be merged into a Loan Party, immediately
upon consummation of the Acquisition (or if assets are being acquired, the
acquiror shall be a Loan Party), and (iv) after giving effect to such
Acquisition:  (A) the aggregate Costs of Acquisition incurred by any Loan Party
or any Subsidiary of a Loan Party in any single transaction or in a series of
related transactions shall not exceed $50,000,000; and (B) the aggregate Costs
of Acquisition incurred by the Loan Parties and all Subsidiaries of the Loan
Parties during any Fiscal Year shall not exceed $75,000,000 in the aggregate.

(b)               
 Not less than ten (10) Domestic
Business Days prior to the consummation of any Acquisition permitted under
Section 5.04(a) with respect to which the Costs of Acquisition exceeds
$10,000,000, the Loan Parties shall have delivered to the Agent and each Bank pro forma financial statements demonstrating that none
of the financial covenants in Article V will be violated after giving pro forma
effect to such Acquisition.

Section 5.05            
 Minimum Consolidated Tangible Net
Worth.  Consolidated Tangible Net Worth
will at no time be less than $165,000,000:  (A) plus the sum of (i) if Net
Income for any Fiscal Year ending after February 1, 2003 is a positive number,
an amount equal to 50% of such Net Income, and (ii) 100% of the cumulative Net
Proceeds of Capital Stock/Conversion of Debt received during any period after
February 1, 2003, calculated quarterly; and (B) minus any amount paid by
Borrower to purchase shares of its own capital stock after the Closing Date.

Section 5.06            
 Restrictions on Dividends, Share
Repurchase, etc.  No Loan Party nor any
Subsidiary of a Loan Party shall (a)declare or pay any
dividends (other than dividends payable solely in its own Capital Stock) upon
any of its Capital Stock (other than dividends paid to a Loan Party) 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 (or options or rights to acquire its Capital Stock), provided, however,
that:  (1) the Borrower may consummate the Proposed Redemption; and (2)
Borrower may pay up to $15,000,000 in the aggregate during any period of 4
consecutive Fiscal Quarters 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

35

 

(c)               
 With respect to Borrower, make any
other distribution of property or assets (other than distributions of cash or
Capital Stock as provided in paragraphs (a) and (b) of this Section 5.06) among
the holders of shares of its Capital Stock.

Section 5.07            
 Fixed Charge Coverage.  At the end of each Fiscal Quarter, commencing with the
Fiscal Quarter ending August 2, 2003, the Fixed Charge Coverage Ratio shall not
be less than 1.5 to 1.00:

Section 5.08            
 Capital Expenditures.  Capital Expenditures will not exceed (a) during any
single Fiscal Year, in an aggregate amount in excess of $50,000,000, and (b)
during the period of 12 consecutive Fiscal Quarters immediately preceding any
date of determination or, if such date of determination is the last day of a
Fiscal Quarter, the period of 12 consecutive Fiscal Quarters ending on such
date, in the aggregate amount in excess of $125,000,000; provided that after
giving effect to the incurrence of any Capital Expenditures permitted by this
Section, no Default shall have occurred and be continuing (with the effect that
amounts not incurred in any Fiscal Year may not be carried forward to a
subsequent period).

Section 5.09            
 Loans or Advances.  No Loan Party nor any Subsidiary of a Loan Party shall
make loans or advances to any Person except:  (i) loans and advances to
employees of a Loan Party for reasonable travel and business and relocation
expenses in the ordinary course of business and consistently with practices
existing on February 1, 2003, (ii) extensions of trade credit in the ordinary
course of business and consistently with practices existing on February 1,
2003, (iii) prepaid expenses incurred in the ordinary course of business and
consistently with practices existing on February 1, 2003, (iv) loans or
advances to the Borrower or any Guarantor that is a Consolidated Subsidiary,
and (v) loans or advances not otherwise permitted under this Section 5.09,
which when aggregated with the total Investments made under Section 5.10(v) do
not exceed Ten Million Dollars ($10,000,000) in the aggregate outstanding;
provided that after giving effect to the making of any loans, advances or
deposits permitted by clause (i), (ii), (iii), (iv) or (v) of this Section, no
Default shall have occurred and be continuing.

Section 5.10            
 Investments.  No Loan Party nor any Subsidiary of a Loan Party shall
make Investments in any Person except as permitted by Section 5.09 and except
Investments in (i) Acquisitions permitted under Section 5.04; (ii) investments
consisting of purchases and acquisitions of inventory, supplies, materials and
equipment in the ordinary course of business and consistently with practices
existing on February 1, 2003, (iii) Investments by the Borrower in a Guarantor
that is a Consolidated Subsidiary made in the ordinary course of business and
consistently with practices existing on February 1, 2003, (iv) Investments made
in the ordinary course of business and in accordance with the Borrower’s
Investment Policies as in effect on the Closing Date; and (v) Investments not
otherwise permitted under this Section 5.10, which when aggregated with the
aggregate outstanding loans and advances made under Section 5.09(v) do not
exceed $10,000,000 in the aggregate outstanding.

Section 5.11            
 Negative Pledge.  No Loan Party nor any Subsidiary of a Loan Party will
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:

(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 Debt of not more than $1,000,000 that are being contested
in good faith;

36

 

(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 Loan Party has established adequate reserves with respect thereto in
accordance with GAAP or, with respect to liens arising in connection with
income tax withholding, such Loan Party 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 Loan Party’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 Loan Party;

(h)               
 Liens securing the purchase price of
assets attaching only to such assets securing aggregate Debt of Loan Parties
and their Subsidiaries not in excess of $1,000,000;

(i)                
 Liens not described in subclauses (a)
through (h) above that relate to liabilities not in excess of $1,000,000 in the
aggregate; and

(j)                
 Liens on Borrower Margin Stock, to the
extent the fair market value thereof exceeds 25% of the fair market value of
the assets of the Borrower and its Subsidiaries (including Borrower Margin
Stock).

Section 5.12            
 Maintenance of Existence.  Each Loan Party shall, and shall cause each Subsidiary
of a Loan Party to, maintain its organizational existence and carry on, its
business in substantially the same manner and in the same fields as such
business is now carried on and maintained and other lines of business
reasonably related thereto, except through corporate reorganization to the
extent permitted by Section 5.14.

Section 5.13            
 Dissolution.  No Loan Party nor any Subsidiary of a Loan Party shall
suffer or permit dissolution or liquidation either in whole or in part or
redeem or retire any shares of its own stock or that of any Subsidiary of a
Loan Party, except:  (1) through corporate reorganization to the extent
permitted by Section 5.14; and (2) redemptions of Capital Stock permitted by
Section 5.06.

Section 5.14            
 Consolidations, Mergers and Sales of
Assets.  No Loan Party will, nor will it
permit any Subsidiary of a Loan Party to, consolidate or merge with or into, or
sell, lease or otherwise transfer all or any part of its assets to, any other
Person, or discontinue or eliminate any business line or segment, provided 
that (a) a Loan Party may merge with another Person if (i) such Person was
organized under the laws of the United States of America or one of its states,
(ii) the Loan Party is the corporation surviving such merger, (iii) immediately
after giving 

37

 

effect to such merger, no Default shall have
occurred and be continuing, and (iv) if the Borrower merges with another Loan
Party, the Borrower is the corporation surviving such merger, and (v) the
merger will have no material adverse effect on the Loan Parties’ ability to
repay the Revolving Credit Advances and Term Loans when due, (b) Subsidiaries
of a Loan Party (excluding Loan Parties) may merge with one another, and (c)
the foregoing limitation on the sale, lease or other transfer of assets and on
the discontinuation or elimination of a business line or segment shall not
prohibit:  (i) sales, transfers, leases, licenses or other dispositions of
inventory for fair value in the ordinary course of business, (ii) the sale,
exchange or other disposition of cash equivalents and other short-term investments
for fair value in the ordinary course of business so long as the proceeds
thereof are used in accordance with this Agreement, (iii) the sale, lease or
other disposition of assets by the Borrower or any Subsidiary of the Borrower
to the Borrower or to a Guarantor, in each case in the ordinary course of
business for fair value and so long as no Event of Default shall have occurred
and be continuing or would result therefrom, (iv) the sale, exchange or other
disposition in the ordinary course of business of equipment or other capital
assets no longer used or useful in the business of the Borrower and its
Subsidiaries, and (v) during any Fiscal Quarter and to the extent not otherwise
permitted under this Section 5.14, a transfer of assets or the discontinuance
or elimination of a business line or segment (in a
single transaction or in a series of related transactions) unless the aggregate
assets to be so transferred or utilized in a business line or segment to be so
discontinued, when combined with all other assets transferred, and all other
assets utilized in all other business lines or segments discontinued during
such Fiscal Quarter and the immediately preceding 3 Fiscal Quarters, either (x)
constituted more than 5% of Consolidated Total Assets at the end of the most
recent Fiscal Year immediately preceding such Fiscal Quarter, or (y)
contributed more than 5% of Consolidated Operating Profits during the 4 Fiscal
Quarters immediately preceding such Fiscal Quarter.

Section 5.15            
 Use of Proceeds.  No portion of the proceeds of the Revolving Credit Advances
or Term Loans will be used by the Borrower or any Subsidiary (i) in connection
with, either directly or indirectly, any tender offer for, or other acquisition
of, stock of any corporation with a view towards obtaining control of such
other corporation (other than an Acquisition permitted under Section 5.04),
(ii) directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock which violates Regulation
T, U or X, or (iii) for any purpose in violation of any applicable law or
regulation.  The proceeds of the Revolving Credit Advances and Term Loans shall
be used for the Proposed Redemption, general corporate purposes and working
capital.

Section 5.16            
 Compliance with Laws; Payment of
Taxes.  Each Loan Party will, and will
cause each Subsidiary of a Loan Party and each member of the Controlled Group
to:  (a) comply with applicable laws (including but not limited to ERISA),
regulations and similar requirements of governmental authorities (including but
not limited to PBGC), except where the necessity of such compliance is being
contested in good faith through appropriate proceedings diligently pursued; (b)
make timely payment of contributions required to meet the minimum funding
standards set forth in ERISA with respect to any Plan; (c) promptly, upon the
request of any Banks, furnish to the Agent and the Banks copies of any annual
report required to be filed under ERISA in connection with any Plan; (d) not
take any action or fail to take action, the result of which action or inaction
could be a material liability of any Loan Party to the PBGC or to a Multiemployer
Plan; (e) notify the Agent and the Banks as soon as practicable of any
Reportable Event and of any additional act or condition arising in connection
with any Plan which any Loan Party believes might constitute grounds for the
termination thereof by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer such plan; and (f)
observe and remain in compliance with all licenses, permits, franchises or
other 

38

 

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 Loan Party is a party, except where
the necessity of such compliance is being contested in good faith through
appropriate proceedings diligently pursued.  Each Loan Party will, and will
cause each Subsidiary of a Loan Party to, pay promptly when due all taxes,
assessments, governmental charges, claims for labor, supplies, rent and other
obligations which, if unpaid, might become a lien against the property of a
Loan Party or any Subsidiary of a Loan Party, except liabilities being
contested in good faith by appropriate proceedings diligently pursued and
against which, if requested by the Agent, the Borrower shall have set up
reserves in accordance with GAAP.  No Loan Party shall participate in any
Prohibited Transaction which could subject any Loan Party to any material civil
penalty under ERISA or material tax under the Code.  Each Loan Party shall
furnish to Banks upon any Bank’s request such additional information about any
Plan or other employee benefit plan as may be reasonably requested by such
Bank.  The Plans shall be operated in such a manner
that none of the Loan Parties will incur any material tax liability under
Section 4980B of the Code or any material liability to any qualified
beneficiary as defined in Section 4980B

Section 5.17            
 Insurance.  Notwithstanding any provision in any other Loan
Documents requiring specified types or amounts of insurance, each Loan Party
will maintain, and will cause each Subsidiary of a Loan Party to maintain
(either in the name of such Loan Party or in such Subsidiary’s own name), with
financially sound and reputable insurance companies, 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 as shall be selected by management
of Borrower in its reasonable discretion and as are customarily maintained by
prudent companies similarly situated in Borrower’s industries.

Section 5.18            
 Change in Fiscal Year.  Each Loan Party will not change its Fiscal Year without
the consent of the Required Banks.

Section 5.19            
 Maintenance of Property.  Each Loan Party shall, and shall cause each Subsidiary
of a Loan Party to (a) 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 (b) 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.

Section 5.20            
 Environmental Notices.  Each Loan Party shall upon receiving actual notice,
furnish to the Banks and the Agent prompt written notice of all Environmental
Liabilities, pending Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders, and Environmental Releases at, on, in,
under or in any way materially affecting any owned Properties, and all facts,
events, or conditions that are reasonably likely to lead to any of the foregoing.

Section 5.21            
 Environmental Matters.  No Loan Party or any Subsidiary of a Loan Party will,
nor will any Loan Party permit any Third Party to, use, produce, manufacture,
process, treat, recycle, generate, store, dispose of, manage at, or otherwise
handle or ship or transport to or from the Properties any Hazardous Materials
except for Hazardous Materials such 

39

 

as cleaning
solvents, pesticides and other similar materials used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed, managed or otherwise
handled in minimal amounts in the ordinary course of business in material
compliance with all applicable Environmental Requirements.

Section 5.22            
 Environmental Release.  Each Loan Party agrees that upon the occurrence of a
material Environmental Release at or on any of the owned Properties it will act
immediately to investigate the extent of, and to take appropriate remedial
action to address such Environmental Release in compliance with material
applicable Environmental Laws, whether or not ordered or otherwise directed to
do so by any Environmental Authority.

Section 5.23            
 Additional Covenants, Etc.  In the event that at any time this Agreement is in effect
or any Note remains unpaid any Loan Party shall enter into any agreement, guarantee, indenture or other instrument governing,
relating to, providing for commitments to advance or guaranteeing any Financing
or to amend any terms and conditions applicable to any Financing, which
agreement, guarantee, indenture or other instrument includes covenants, warranties,
representations, defaults or events of default (or any other type of
restriction which would have the practical effect of any of the foregoing,
including, without limitation, any “put” or mandatory prepayment of such debt)
or other terms or conditions not substantially as, or in addition to those,
provided in this Agreement or any other Loan Document, or more favorable to the
lender or other counterparty thereunder than those provided in this Agreement
or any other Loan Document, the Loan Party shall promptly so notify the Agent
and the Banks.  Thereupon, if the Agent shall request by written notice to the
Loan Party (after a determination has been made by the Required Banks that any
of the above referenced documents or instruments contain any provisions which
either individually or in the aggregate are more favorable than one of the
provisions set forth herein), the Loan Parties, the Agent and the Banks shall
enter into an amendment to this Agreement providing for substantially the same
such covenants, warranties, representations, defaults or events of default or
other terms or conditions as those provided for in such agreement, guarantee,
indenture or other instrument, to the extent required and as may be selected by
the Agent, such amendment to remain in effect, unless otherwise specified in
writing by the Agent, for the entire duration of the stated term to maturity of
such Financing (to and including the date to which the same may be extended at
the option of the Loan Party), notwithstanding that such Financing might be
earlier terminated by prepayment, refinancing, acceleration or otherwise, provided 
that if any such agreement, guarantee, indenture or other instrument shall be
modified, supplemented, amended or restated so as to modify, amend or eliminate
from such agreement, guarantee, indenture or other instrument any such
covenant, warranty, representation, default or event of default or other term
or condition so made a part of this Agreement, then unless required by the
Agent pursuant to this Section, such modification, supplement or amendment
shall not operate to modify, amend or eliminate such covenant, warranty,
representation, default or event of default or other term or condition as so
made a part of this Agreement.

Section 5.24            
 Transactions with Affiliates.  No Loan Party nor any Subsidiary of a Loan Party shall
enter into, or be a party to, any transaction with any Affiliate of a Loan
Party or such Subsidiary (which Affiliate is not a Loan Party or a Subsidiary
of a Loan Party), except as permitted by law and in the ordinary course of
business and pursuant to reasonable terms which are fully disclosed to the
Agent and the Banks and are no less favorable to the Loan Party or such
Subsidiary than would be obtained in a comparable arm’s length transaction with
a Person which is not an Affiliate; provided, however, that nothing contained
in this Section shall prohibit:  (A) transactions under incentive compensation
plans, stock option plans and other employee benefit 

40

 

plans,
and loans and advances from any Loan Party or any subsidiary of a Loan Party to
its officers, in each case that have been approved by the board of directors,
or a committee thereof, of any Loan Party or any subsidiary of a Loan Party,
and subject to any other applicable limitations and restrictions set forth in
this Agreement, (B) the payment by any Loan Party of reasonable and customary
fees to members of its board of directors, and (C) transactions among the
Borrower and its Subsidiaries (provided that such transactions shall remain
subject to any other applicable limitations and restrictions set forth in this
Agreement).

Section 5.25            
 No Restrictive Agreement.  No Loan Party will, nor will any Loan Party permit any
of its Subsidiaries to, enter into, after the date of this Agreement, any
indenture, agreement, instrument or other arrangement that, directly or
indirectly, prohibits or restrains, or has the effect
of prohibiting or restraining, or imposes materially adverse conditions upon,
any of the following by the Loan Party or any such Subsidiary:  (a) the
declaration or payment of Restricted Payments or other distributions in respect
of Capital Stock of the Loan Party or any Subsidiary, (b) the prompt payment
and performance of 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; or (c) the granting of Liens other than provisions
applicable to the granting of Liens as set forth in (i) this Agreement; (ii)
any agreement or instrument creating a Permitted Lien (but only to the extent
such agreement or restriction applies to the assets subject to such Permitted
Lien), and (iii) operating leases of real or personal property entered into by
any Borrower as lessee in the ordinary course of business (but only to the
extent such agreement or restriction applies to the assets subject to such
operating lease).

Section 5.26            
 Partnerships and Joint Ventures.  No Loan Party shall create, acquire or otherwise permit
to exist any Subsidiary or transfer any assets to a Subsidiary or become a
general partner or joint venturer in any general or limited partnership or
joint venture; provided, however, a Loan Party may create or acquire a
Subsidiary or transfer any assets to a Subsidiary if such Subsidiary becomes a
party to, and agrees to be bound by the terms of, this Agreement pursuant to a
Joinder Agreement, in the form attached hereto as Exhibit F satisfactory to the
Agent in all respects and executed and delivered to the Agent within ten (10)
Domestic Business Days after the day on which such Person became a Subsidiary. 
The Borrower shall also cause the items specified in Section 3.01(c), (e) and
(i) to be delivered to the Agent concurrently with the instrument referred to
above, modified appropriately to refer to such instrument and such Subsidiary.

Section 5.27            
 Additional Debt.  No Loan Party or Subsidiary of a Loan Party shall
directly or indirectly issue, assume, create, incur or suffer to exist any Debt
or the equivalent (including obligations under Capital Leases), except for:

(a)               
 the Obligations owed to the Agent and
Banks under this Agreement and the other Loan Documents;

(b)               
 the Debt existing and outstanding on
the Closing Date of the Loan Parties set forth in Schedule 5.27 hereto (and
renewals, refinancings and extensions thereof on terms and conditions no less
favorable to such Loan Party than currently existing and so long as the
principal amount of such Debt is not increased);

(c)               
 aggregate Debt of the Loan Parties and
their Subsidiaries secured by Liens permitted under Section 5.11(h);

41

 

(d)               
 Debt assumed in connection with any
merger, acquisition or consolidation permitted pursuant to Section 5.14 or 5.04
so long as (i) such assumed Debt does not exceed in the aggregate $20,000,000
and (ii) any such Debt exceeding $1,000,000 (A) ranks no higher than pari passu
with respect to the Obligations, (B) has a maturity no sooner than the Maturity
Date as in effect on the date such Debt is assumed, (C) has financial covenants
no more restrictive than the financial covenants set forth in Article V, (D)
has a weighted average interest rate not exceeding the interest rate in effect
for Base Rate Loans pursuant to Section 2.06 as of the date such Debt is
assumed, and (E) has an Average Life of no less than 5.0;

(e)               
 Debt permitted pursuant to Sections
5.09, 5.10 and 5.28;

(f)                
 endorsement of instruments or items of
payment for deposit to the general account of the Loan Parties or for delivery
to Banks on account of the Obligations of Loan Parties and except for
guaranties of Debt in an aggregate amount of no more than $5,000,000;

(g)               
 obligations (contingent or otherwise)
of the Borrower or any Guarantor existing or arising under any Hedge Agreement;
provided that (i) such obligations are (or were) entered into by such Person in
the ordinary course of business for the purpose of directly mitigating risks
associated with interest rate or foreign currency fluctuations and not for
purposes of speculation or taking a “market view”; and (ii) such Hedge
Agreement does not contain any provision exonerating the non-defaulting party
from its obligation to make payments on outstanding transactions to the
defaulting party; and (iii) the aggregate notional amount covered by such Hedge
Agreements does not at any time exceed the outstanding principal amount of the
Term Loans; and

(h)               
 other Debt for borrowed money not
otherwise permitted under this Section 5.27, the aggregate outstanding
principal amount of which shall not, at any time, exceed $5,000,000.

Section 5.28            
 Subordinated Debentures and
Preferred Stock.  No Loan Party or
Subsidiary of a Loan Party shall directly or indirectly issue, assume, create,
incur or suffer to exist any Subordinated Debenture or Preferred Stock; provided,
however, that the Borrower 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 Loan Parties or their Subsidiaries to redeem or repurchase such
Subordinated Debentures or Preferred Stock at any time before October 31, 2008;
(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.

Section 5.29            
 Repayment of Obligations.  The Loan Parties 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.

Section 5.30            
 Performance Under Loan Documents.  Each Loan Party 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 Loan Parties, the Agent and Banks, subject to subordination,
notice and cure provisions contained therein.

42

 

Article VI

DEFAULTS

Section 6.01            
 Events of Default.  If one or more of the following events (“Events of
Default”) shall have occurred and be continuing:

(a)               
 the Borrower shall fail to pay when due
any principal of any Revolving Credit Advance or the Term Loan, or shall fail
to pay when due any reimbursement for any amount disbursed under a Letter of
Credit, or shall fail to pay any interest on any Revolving Credit Advance or
the Term Loan within five Domestic Business Days after such interest shall
become due, or any Loan Party shall fail to pay any fee or other amount payable
hereunder within ten (10) Domestic Business Days after such fee or other amount
becomes due; or

(b)               
 any Loan Party shall fail to observe,
perform or comply with any covenant contained in Sections 5.02(ii), 5.03 to
5.15, inclusive, or Section 5.18, 5.26, 5.27 or 5.28; or

(c)               
 any Loan Party shall fail to observe or
perform any covenant or agreement contained or incorporated by reference in
this Agreement (other than those covered by clause (a) or (b) above or clauses
(n) or (p), or (q) below) for thirty days after the earlier of (i) the first
day on which any Loan Party has knowledge of such failure or (ii) written
notice thereof has been given to the Borrower by the Agent at the request of
any Bank; or

(d)               
 any representation, warranty,
certification or statement made or deemed made by the Loan Parties in Article
IV of this Agreement or in any financial statement, material certificate or
other material document delivered pursuant to this Agreement shall prove to
have been incorrect or misleading in any material respect when made (or deemed
made); or

(e)               
 any Loan Party or any Subsidiary of a
Loan Party shall fail to make any payment in respect of Debt outstanding in an
aggregate principal amount equal to or greater than $5,000,000 (other than the
Notes) when due or within any applicable grace period; or

(f)                
 any event or condition shall occur
which results in the acceleration of the maturity of Debt outstanding in an
aggregate principal amount equal to or greater than $5,000,000 of any Loan
Party or any Subsidiary of a Loan Party (including without limitation any
mandatory prepayment or purchase of such Debt by any Loan Party (or its
designee) or such Subsidiary of a Loan Party (or its designee) prior to the
scheduled maturity thereof), or enables (or, with the giving of notice or lapse
of time or both, would enable) the holders of such Debt or commitment or any
Person acting on such holders’ behalf to accelerate the maturity thereof or
terminate any such commitment (including without limitation any required
mandatory prepayment or purchase thereof prior to the scheduled maturity
thereof), without regard to whether such holders or other Person shall have
exercised or waived their right to do so; or

(g)               
 any Loan Party or any Subsidiary of a
Loan Party shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial pan of its property, or
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail generally, or shall admit in writing its inability, to pay its debts
as they become due, or shall take any corporate action to authorize any of the
foregoing; or

(h)               
 an involuntary case or other proceeding
shall be commenced against any Loan Party or any Subsidiary of a Loan Party
seeking liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the 

43

 

appointment
of a trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days; or an
order for relief shall be entered against any Loan Party or any Subsidiary of a
Loan Party under the federal bankruptcy laws as now or hereafter in effect; or

(i)                
 any Loan Party or any member of the
Controlled Group shall fail to pay when due any material amount which it shall
have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans shall be filed under Title IV of
ERISA by any Loan Party, any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to be
appointed to administer any such Plan or Plans or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30
days thereafter; or a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or

(j)                
 one or more judgments or orders for the
payment of money involving an aggregate amount equal to or greater than
$5,000,000 shall be rendered against any Loan Party or any Subsidiary of a Loan
Party and such judgment or order shall not be paid, dismissed, bonded, vacated,
stayed or discharged for a period of 30 days; or

(k)               
 a notice of lien, levy or assessment is
filed of record (other than with respect to a Permitted Lien) on all or any
portion of the assets of any Borrower involving an aggregate amount equal to or
greater than $1,000,000 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
any Loan Party or any Subsidiary of a Loan Party and the same is not dismissed,
released or discharged within 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; or

(l)                
 (i)         any Person or two or more
Persons acting in concert (other than John Cato) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 30% or more of the
outstanding shares of the voting stock of the Borrower; or (ii) as of any date
a majority of the Board of Directors of the Borrower consists of individuals
who were not either (A) directors of the Borrower as of the corresponding date
of the previous year, (B) selected or nominated to become directors by the
Board of Directors of the Borrower of which a majority consisted of individuals
described in clause (A), or (C) selected or nominated to become directors by the
Board of Directors of the Borrower of which a majority consisted of individuals
described in clause (A) and individuals described in clause (B); or

(m)             
 any Loan Party is enjoined, restrained
or in any way prevented by court order from conducting all or any material part
of its business affairs and such action has a Material Adverse Effect;

(n)               
 a default or event of default shall
occur and be continuing under any of the Letter of Credit Agreements or any
Loan Party shall fail to observe or perform any obligation to be observed or
performed by it under any Letter of Credit Agreements, and such default, event
of default or failure to perform or observe any obligation continues beyond any
applicable cure or grace period provided in such Letter of Credit Agreement; or

(o)               
 the occurrence of any default or event
of default on the part of any Loan Party under the terms of any agreement or
contract and such default would have a Material Adverse Effect;

44

 

(p)               
 a default or event of default shall occur
and be continuing under any Hedge Agreement, the Debt under which is equal to
or greater than $5,000,000, or any Loan Party shall fail to observe or perform
any obligation to be observed or performed by it under any Hedge Agreement; or

(q)               
 (i) any of the Guarantors shall fail to
pay when due any Guaranteed Obligations or shall fail to pay any fee or other
amount payable hereunder when due; or (ii) any Guarantor shall disaffirm or deny
its obligations under Article X; or

(r)                
 if the Borrower at any time fails to
own (directly or indirectly, through Wholly Owned Subsidiaries) 100% of the
outstanding shares of the voting stock (in the case of a corporation ) or
membership interests (in the case of a limited liability company) (or
equivalent equity interests) of each Subsidiary of the Borrower; or

(s)                
 the occurrence of any event, act or
condition which the Required Banks determine either does or would have a
Material Adverse Effect,

then, and in every such event, the Agent shall (i) if
requested by the Required Banks, by notice to the Borrower terminate the
Revolving Credit Commitments and they shall thereupon terminate, (ii) if
requested by the Required Banks, by notice to the Issuing Bank, instruct the
Issuing Bank to declare an Event of Default under the Letter of Credit
Agreements, and (iii) if requested by the Required Banks, by notice to the
Borrower declare the Notes (together with accrued interest thereon), the
Revolving Credit Advances, Term Loans and all other amounts payable hereunder
and under the other Loan Documents to be, and the Notes (together with all
accrued interest thereon), the Revolving Credit Advances, Term Loans and all
other amounts payable hereunder and under the other Loan Documents shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Loan
Parties; provided  that if any Event of Default specified in clause (g)
or (h) above occurs with respect to any Loan Party, without any notice to any
Loan Party or any other act by the Agent or the Banks, the Revolving Credit Commitments
shall thereupon automatically terminate and the Notes (together with accrued
interest thereon) and all other amounts payable hereunder and under the other
Loan Documents shall automatically become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Loan Parties.  Notwithstanding the foregoing, the Agent
shall have available to it all other remedies at law or equity, and shall
exercise any one or all of them at the request of the Required Banks. 
Notwithstanding the foregoing, the Agent shall have available to it all rights
and remedies provided under the Loan Documents and in addition thereto, all
other rights and remedies at law or equity, and the
Agent shall exercise any one or all of them at the request of the Required
Banks.

Section 6.02            
 Notice of Default.  The Agent shall give notice to the Borrower of any
Default under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.

Section 6.03            
 Cash Cover.  If any Event of Default shall have occurred and be
continuing, the Borrower shall, if requested by the Agent, pay to the Agent,
for the benefit of the Banks an amount in immediately available funds (which
funds shall be held as collateral pursuant to arrangements satisfactory to the
Agent) equal to the aggregate Undrawn Amounts, provided that, if any Event of
Default specified in clause (g) or (h) above occurs, the Borrower shall be
obligated to pay such amount to the Agent forthwith without any notice to the
Borrower or any other act by the Agent.

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Section 6.04            
 Allocation of Proceeds.  If an Event of Default has occurred and not been waived,
and the maturity of the Notes has been accelerated pursuant to Article VI hereof,
all payments received by the Agent hereunder, in respect of any principal of or
interest on the Obligations or any other amounts payable by the Borrower or any
other Loan Party hereunder, shall be applied by the Agent in the following
order:

(a)               
 the reasonable expenses incurred in
connection with retaking, holding, preserving, processing, maintaining or
preparing for sale, lease or other disposition of, any collateral, including reasonable
attorney’s fees and legal expenses pertaining thereto;

(b)               
 amounts due to the Banks, Agent and the
Issuing Bank pursuant to Sections 2.7(a), 2.7(b), 2.7(c), 2.7(d) and 9.03(a);

(c)               
 payments of interest on Revolving
Credit Advances, the Term Loans and Letter of Credit Advances, to be applied
for the ratable benefit of the Banks;

(d)               
 payments of principal of Revolving
Credit Advances, the Term Loans and Letter of Credit Advances, to be applied
for the ratable benefit of the Banks;

(e)               
 payments of cash amounts to the Agent
in respect of outstanding Letters of Credit pursuant to Section 6.03;

(f)                
 amounts due to the Issuing Bank, the
Agent and the Banks pursuant to Sections 7.05 and 9.03(b) and (c);

(g)               
 payments of all other amounts due under
any of the Loan Documents, if any, to be applied for the ratable benefit of the
Banks;

(h)               
 any surplus remaining after application
as provided for herein, to the Borrower or otherwise as may be required by
applicable law.

Article VII

THE AGENT

Section 7.01            
 Appointment, Powers and Immunities.  Each Bank hereby irrevocably appoints and authorizes the
Agent to act as its agent hereunder and under the other Loan Documents with
such powers as are specifically delegated to the Agent by the terms hereof and
thereof, together with such other powers as are reasonably incidental thereto. 
The Agent:  (a) shall have no duties or responsibilities except as expressly
set forth in this Agreement and the other Loan Documents, and shall not by
reason of this Agreement or any other Loan Document be a trustee for any Bank;
(b) shall not be responsible to the Banks for any recitals, statements,
representations or warranties contained in this Agreement or any other Loan
Document, or in any certificate or other document referred to or provided for
in, or received by any Bank under, this Agreement or any other Loan Document,
or for the validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Loan Document or any other document referred to
or provided for herein or therein or for any failure by any Loan Party to
perform any of its obligations hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by
the Required Banks, and then only on terms and conditions satisfactory to the
Agent, and (d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Loan Document or any other document or
instrument referred to or provided for herein 

46

 

or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct.  The Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care.  The
provisions of this Article VII are solely for the benefit of the Agent and the
Banks, and no Loan Party shall have any rights as a third party beneficiary of
any of the provisions hereof.  In performing its functions and duties under
this Agreement and under the other Loan Documents, the Agent shall act solely
as agent of the Banks and does not assume and shall not be deemed to have
assumed any obligation towards or relationship of agency or trust with or for
the Loan Parties.  The duties of the Agent shall be ministerial and
administrative in nature, and the Agent shall not have by reason of this
Agreement or any other Loan Document a fiduciary relationship in respect of any
Bank.  Without limiting the foregoing, each Bank authorizes the Agent to
release a Guarantor from the provisions of Article X to the extent such
Guarantor ceases to be a Subsidiary of the Borrower as a result of the
Borrower’s transfer or sale of one hundred percent (100%) of the capital stock
of such Subsidiary in accordance with and to the extent permitted by the terms
of Section 5.14.

Section 7.02            
 Reliance by Agent.  The Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telefax, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants or other experts selected by the Agent.  As to any matters not
expressly provided for by this Agreement or any other Loan Document, the Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Required
Banks, and such instructions of the Required Banks in any action taken or
failure to act pursuant thereto shall be binding on all of the Banks.

Section 7.03            
 Defaults.  The Agent shall not be deemed to have knowledge of the
occurrence of a Default or an Event of Default (other than the non-payment of
principal of or interest on the Loans) unless the Agent has received notice
from a Bank or a Loan Party specifying 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 of the occurrence of a Default or an Event of Default,
the Agent shall give prompt notice thereof to the Banks.  The Agent shall give
each Bank prompt notice of each non-payment of principal of or interest on the
Loan, whether or not it has received any notice of the occurrence of such
non-payment.  The Agent shall (subject to Section 9.05) take such action with
respect to such Default or Event of Default as shall be directed by the
Required Banks, provided that, unless and until the Agent shall have received
such directions, the Agent may (hut 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 Banks.

Section 7.04            
 Rights of Agent and its Affiliates
as a Bank.  With respect to any Revolving
Credit Advance or Term Loan made and any Letter of Credit issued by BB&T or
an Affiliate of BB&T, such Affiliate and BB&T in their capacity as a
Bank hereunder shall have the same rights and powers hereunder as any other
Bank and may exercise the same as though it were not an Affiliate of BB&T
(or in BB&T’s case, acting as the Agent), and the term “Bank” or “Banks”
shall, unless the context otherwise indicates, include such Affiliate of
BB&T or BB&T in its individual capacity.  Such Affiliate and BB&T
may (without having to account therefor to any Bank) accept deposits from, lend
money to and generally engage in any kind of banking, trust or other business
with any Loan Party (and any of the Affiliates of any Loan Party) as if they
were not an Affiliate of the Agent or the Agent, respectively; and such
Affiliate and BB&T may accept fees and other consideration from any Loan
Party (in -addition to any agency fees and arrangement 

47

 

fees heretofore agreed to between the Borrower and
BB&T) for services in connection with this Agreement or any other Loan
Document or otherwise without having to account for the same to the Banks.

Section 7.05            
 Indemnification.  Each Bank severally agrees to indemnify the Agent, to
the extent the Agent shall not have been reimbursed by the Borrower, ratably in
accordance with the aggregate of its Revolving Credit Commitment and Term Loan
Commitment, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (excluding, unless
an Event of Default has occurred and is continuing, the normal administrative
costs and expenses incident to the performance of its agency duties hereunder)
or the enforcement of any of the terms hereof or thereof or any such other
documents; provided, however, that no Bank shall be liable for
any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the Agent.  If any indemnity furnished to the Agent for
any purpose shall, in the opinion of the Agent, be insufficient or become
impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.

Section
7.06            
 CONSEQUENTIAL DAMAGES.  THE AGENT SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY
BANK, THE BORROWER, ANY GUARANTOR OR ANY OTHER PERSON
OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

Section 7.07            
 Payee of Note Treated as Owner.  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 or transfer thereof shall have been filed with the Agent and the
provisions of Section 9.07(c) have been satisfied.  Any requests, authority or
consent of any Person 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 or assignee of that Note or of any Note or
Notes issued in exchange therefor or replacement thereof.

Section 7.08            
 Non-Reliance on Agent and Other
Banks.  Each Bank agrees that it has,
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own
credit analysis of the Loan Parties and decision to enter into this Agreement
and that it will, independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents.  The Agent shall not be required to keep itself (or any Bank)
informed as to the performance or observance by the Loan Parties of this
Agreement or any of the other Loan Documents or any other document referred to
or provided for herein or therein or to inspect the properties or books of the
Borrower or any other Person.  Except for notices, reports and other documents
and information expressly required to be furnished to the Banks by the Agent
hereunder or under the other Loan Documents, the Agent shall not have any duty
or responsibility to provide any Bank with any credit or other information 

48

 

concerning the affairs, financial condition or business
of the Loan Parties or any other Person (or any of their Affiliates) which may
come into the possession of the Agent.

Section 7.09            
 Failure to Act.  Except for action expressly required of the Agent
hereunder or under the other Loan Documents, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless
it shall receive further assurances to its satisfaction by the Banks of their
indemnification obligations under Section 7.05 against any and all liability
and expense which may be incurred by the Agent by reason of taking, continuing
to take, or failing to take any such action.

Section 7.10            
 Resignation or Removal of Agent.  Subject to the appointment and acceptance of a successor
Agent as provided below, the Agent may resign at any time by giving notice
thereof to the Banks and the Borrower and the Agent may be removed at any time
with or without cause by the Required Banks.  Upon any such resignation or
removal, the Required Banks shall have the right to appoint a successor Agent. 
If no successor Agent shall have been so appointed by the Required Banks and
shall have accepted such appointment within 30 days after the retiring Agent’s
notice of resignation or the Required Banks’ removal of the retiring Agent,
then the retiring Agent may, on behalf of the Banks, appoint a successor
Agent.  Any successor Agent shall be a bank which has a combined capital and
surplus of at least $500,000,000.  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 hereunder.  After any retiring
Agent’s resignation or removal hereunder as Agent, the provisions of this
Article VII shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent hereunder.

Article VIII

CHANGE IN CIRCUMSTANCES; COMPENSATION

Section 8.01            
 Basis for Determining Interest Rate
Inadequate or Unfair.  If on or prior to
the first day of any Interest Period:

(a)               
 the Agent determines that deposits in
Dollars (in the applicable amounts) are not being offered in the relevant
market for such Interest Period, or

(b)               
 the Required Banks advise the Agent
that the London Interbank Offered Rate as determined by the Agent will not
adequately and fairly reflect the cost to such Banks of funding the Revolving
Credit Advances or Term Loans, as the case may be, for such Interest Period,

the Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make Euro-Dollar Loans shall be suspended.  Unless
the Borrower notifies the Agent at least 2 Domestic Business Days before the
date of any Revolving Credit Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, such Borrowing shall
instead be made as a Base Rate Borrowing.

Section 8.02            
 Illegality.  If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change in any existing or future
law, rule or regulation, 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 (any such 

49

 

authority, bank or agency being referred to as an
“Authority” and any such event being referred to as a “Change of Law”), or
compliance by any Bank (or its Lending Office) with any request or directive
(whether or not having the force of law) of any Authority shall make it
unlawful or impossible for any Bank (or its Lending Office) to make, maintain
or fund its Euro-Dollar Loan and such Bank shall so notify the Agent, the Agent
shall forthwith give notice thereof to the other Banks and the Borrower,
whereupon until such Bank notifies the Borrower and the Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to make its portion of the Euro-Dollar Loan shall be suspended. 
Before giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Lending Office if such designation will avoid the need
for giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank.  If such Bank shall determine that it may not
lawfully continue to maintain and fund any of its portion of the outstanding
Euro-Dollar Loan to maturity and shall so specify in such notice, the Borrower
shall immediately prepay in full the then outstanding principal amount of the
Euro-Dollar Loan of such Bank, together with accrued interest thereon and any
amount due such Bank pursuant to Section 8.05(a).  Concurrently with prepaying
such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal
principal amount from such Bank (on which interest and principal shall
be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base
Rate Loan.

Section 8.03            
 Increased Cost and Reduced Return.  (a)If after the date hereof, a Change of Law or compliance by
any Bank (or its Lending Office) with any request or directive (whether or not
having the force of law) of any Authority:

(i)                
 shall subject any Bank (or its Lending
Office) to any tax, duty or other charge with respect to its Euro-Dollar Loan,
its Notes or its obligation to make a Euro-Dollar Loan, or shall change the
basis of taxation of payments to any Bank (or its Lending Office) of the
principal of or interest on its Euro-Dollar Loan or any other amounts due under
this Agreement in respect of its Euro-Dollar Loan or its obligation to make a
Euro-Dollar Loan (except for changes in the rate of tax on the overall net
income of such Bank or its Lending Office imposed by the jurisdiction in which
such Bank’s principal executive office or Lending Office is located); or

(ii)              
 shall impose, modify or deem applicable
any reserve, special deposit or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any such requirement included in an
applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or
for the account of, or credit extended by, any Bank (or its Lending Office); or

(iii)            
 shall impose on any Bank (or its Lending
Office) or on the United States market for certificates of deposit or the
London interbank market any other condition affecting its Euro-Dollar Loan, its
Notes or its obligation to make a Euro-Dollar Loan;

and the result of any of the foregoing is to increase the
cost to such Bank (or its Lending Office) of making or maintaining any
Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by
such Bank (or its Lending Office) under this Agreement or under its Notes with
respect thereto, by an amount deemed by such Bank, in its reasonable
discretion, to be material, then, within 15 days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will reasonably compensate such Bank for such increased
cost or reduction; provided that the Borrower shall not be obligated to
reimburse any Bank for such increase or reduction for any period ninety (90) days
prior to such Bank 

50

 

providing notice if such Bank was
aware of the circumstances that existed which would cause such additional
amounts during such period.

(b)               
 If any Bank shall have determined that
after the date hereof the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change in any existing or future law, rule
or regulation, or any change in the interpretation or administration thereof,
or compliance by any Bank (or its Lending Office) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any
Authority, has or would have the effect of reducing the rate of return on such
Bank’s capital as a consequence of its obligations hereunder to a level below
that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank’s policies with respect to
capital adequacy) by an amount deemed by such Bank,
in its reasonable discretion, to be material, then from time to time, within 15
days after demand by such Bank, the Borrower shall pay to such Bank such
additional amount or amounts as will reasonably compensate such Bank for such
reduction; provided that the Borrower shall not be obligated to reimburse any
Bank for such increase or reduction for any period ninety (90) days prior to
such Bank providing notice if such Bank was aware of the circumstances that
existed which would cause such additional amounts during such period.

(c)               
 Each Bank will promptly notify the
Borrower and the Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank to compensation pursuant to this
Section (subject to the provisos in this Section) and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank.  A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error.  In determining such amount, such Bank may use any reasonable
averaging and attribution methods; provided that such determinations are made
in good faith and in the same manner as such Bank makes such determinations for
its other borrowers who are similarly situated.

(d)               
 The provisions of this Section 8.03
shall be applicable with respect to any Participant, Assignee or other
Transferee, and any calculations required by such provisions shall be made
based upon the circumstances of such Participant, Assignee or other Transferee.

Section 8.04            
 Base Rate Loans Substituted for
Affected Euro-Dollar Loans.  If (i) the
obligation of any Bank to make or maintain a Euro-Dollar Loan has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03, and the Borrower shall, by at least 5 Euro-Dollar Business
Days’ prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer apply:

(a)               
 all Revolving Credit Advances and Term
Loans which would otherwise be made by such Bank as part of a Euro-Dollar Loan
shall be made instead as a Base Rate Loan, and

(b)               
 after its portion of the Euro-Dollar
Loan has been repaid, all payments of principal which would otherwise be
applied to repay such Euro-Dollar Loan shall be applied to repay its Base Rate
Loan instead.

In the event that the
Borrower shall elect that the provisions of this Section shall apply to any
Bank, the Borrower shall remain liable for, and shall pay to such Bank as
provided herein, all amounts due such Bank under Section 8.03 in respect of the
period preceding the date of conversion of such Bank’s portion of the Loan
resulting from the Borrower’s election.

51

 

Section 8.05            
 Compensation.  Upon the request of any Bank, delivered to the Borrower
and the Agent, the Borrower shall pay to such Bank such amount or amounts as
shall compensate such Bank for any loss, cost or expense incurred by such Bank
as a result of:

(a)               
 any payment or prepayment (pursuant to
Section 2.09, Section 2.10, Section 2.11, Section 2.16, Section 8.02 or
otherwise) of a Euro-Dollar Loan on a date other than the last day of an
Interest Period for such Euro-Dollar Loan;

(b)               
 any failure by the Borrower to prepay a
Euro-Dollar Loan on the date for such prepayment specified in the relevant
notice of prepayment hereunder; or

(c)               
 any failure by the Borrower to borrow a
Euro-Dollar Loan on the date for the Borrowing specified in the applicable
Notice of Borrowing delivered pursuant to Section 2.02.

such compensation to include, without limitation, an amount
equal to the excess, if any, of (x) the amount of interest which would have
accrued on the amount so paid or prepaid or not prepaid or borrowed for the
period from the date of such payment, prepayment or failure to prepay or borrow
to the last day of the then current Interest Period for such Euro-Dollar Loan
(or, in the case of a failure to prepay or borrow, the Interest Period for such
Euro-Dollar Loan which would have commenced on the date of such failure to
prepay or borrow) at the applicable rate of interest for such Euro-Dollar Loan
provided for herein over (y) the amount of interest (as reasonably determined
by such Bank) such Bank would have paid on deposits in Dollars of comparable
amounts having terms comparable to such period placed with it by leading banks
in the London interbank market.

Article IX

MISCELLANEOUS

Section 9.01            
 Notices.  All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or
similar writing) and shall be given to such party at its address or telecopy
number set forth on the signature pages hereof or such other address or
telecopy number as such party may hereafter specify for the purpose by notice
to each other party.  Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopy number specified in this Section and the telecopy machine used by the
sender provides a written confirmation that such telecopy has been so
transmitted or receipt of such telecopy transmission is otherwise confirmed,
(ii) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid, and (iii) if
given by any other means, when delivered at the address specified in this
Section; provided  that notices to the Agent under Article II or Article
VIII shall not be effective until received.

Section 9.02            
 No Waivers.  No failure or delay by the Agent or any Bank in
exercising any right, power or privilege hereunder or under any Note or other
Loan Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.  The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

Section 9.03            
 Expenses; Documentary Taxes;
Indemnification.  (a)The Loan Parties shall,
jointly and severally, pay (i) all expenses of the Agent, including fees and 

52

 

disbursements of the Agent in connection with any field
audits and investigations and fees and disbursements
of special counsel for the Agent, in connection with the preparation of this
Agreement and the other Loan Documents, any waiver or consent hereunder or
thereunder or any amendment hereof or thereof or any Default or alleged Default
hereunder or thereunder and (ii) if a Default occurs, all out-of-pocket
expenses incurred by the Agent or any Bank, including reasonable and documented
fees and disbursements of counsel, in connection with such Default and
collection and other enforcement proceedings resulting therefrom, including
reasonable and documented out-of-pocket expenses incurred in enforcing this
Agreement and the other Loan Documents.

(b)               
 The Loan Parties shall, jointly and
severally, indemnify the Agent and each Bank against any transfer taxes,
documentary taxes, assessments or charges made by any Authority by reason of
the execution and delivery of this Agreement or the other Loan Documents.

(c)               
 The Loan Parties shall, jointly and
severally, indemnify the Agent, the Banks and each Affiliate thereof and their
respective directors, officers, employees and agents from, and hold each of
them harmless against, any and all third party losses, liabilities, claims or
damages to which any of them may become subject, insofar as such losses,
liabilities, claims or damages arise out of or result from any actual or
proposed use by the Borrower of the proceeds of any extension of credit by any
Bank hereunder or breach by any Loan Party of this Agreement or any other Loan
Document or from investigation, litigation (including, without limitation, any
actions taken by the Agent or any of the Banks to enforce this Agreement or any
of the other Loan Documents) or other proceeding (including, without limitation,
any threatened investigation or proceeding) relating to the foregoing, and the
Loan Parties shall reimburse the Agent and each Bank, and each Affiliate
thereof and their respective directors, officers, employees and agents, upon
demand for any expenses (including, without limitation, reasonable and
documented legal fees) incurred in connection with any such investigation or
proceeding; but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of,
or breach of applicable law by, the Person to be indemnified.

Section 9.04            
 Setoffs; Sharing of Set-Offs.  (a)Each Loan Party hereby grants to each Bank, as security for
the full and punctual payment and performance of the obligations of each Loan
Party under this Agreement and the other Loan Documents, a continuing lien on
and security interest in all deposits and other sums credited by or due from
such Bank to such Loan Party or subject to withdrawal by such Loan Party; and
regardless of the adequacy of any collateral or other means of obtaining
repayment of such obligations, each Bank may at any time upon or after the
occurrence of any Event of Default, and without notice to any Loan Party, set
off the whole or any portion or portions of any or all such deposits and other
sums against such obligations, whether or not any other Person or Persons could
also withdraw money therefrom.

(b)               
 Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest owing with
respect to the Letter of Credit Advances and Notes held by it which is greater
than the proportion received by any other Bank in respect of the aggregate
amount of all Letter of Credit Advances and principal and interest owing with
respect to the Notes held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Letter
of Credit Advances and Notes held by the other Banks owing to such other Banks,
and/or such other adjustments shall be made, as may be required so that all
such payments of principal and interest with respect
to the Letter of Credit Advances and Notes held by the Banks owing to such
other Banks shall be shared by the Banks pro rata; provided  that (i)
nothing in this Section shall impair the right of any Bank to exercise any
right of set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of the Loan Parties other than its
indebtedness under the Letter of Credit Advances and Notes, and (ii) if all or
any portion of such payment received by the purchasing Bank is thereafter
recovered from such purchasing Bank, such purchase 

53

 

from
each other Bank shall be rescinded and such other Bank shall repay to the
purchasing Bank the purchase price of such participation to the extent of such
recovery together with an amount equal to such other Bank’s ratable share
(according to the proportion of (x) the amount of such other Bank’s required
repayment to (y) the total amount so recovered from the purchasing Bank) of any
interest or other amount paid or payable by the purchasing Bank in respect of
the total amount so recovered.  The Loan Parties agree, to the fullest extent
they may effectively do so under applicable law, that any holder of a
participation in the Letter of Credit Advances or Notes, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of set-off
or counterclaim and other rights with respect to such participation as fully as
if such holder of a participation were a direct creditor of the Loan Parties in
the amount of such participation.

Section 9.05            
 Amendments and Waivers.  (a)Any provision of this Agreement, the Notes or any other
Loan Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Required Banks (and,
if the rights or duties of the Agent are affected thereby, by the Agent); provided 
that no such amendment or waiver shall, unless signed by all the Banks, (i)
change the Revolving Credit Commitment or Term Loan Commitment of any Bank or
subject any Bank to any additional obligation, (ii) change the principal of or
decrease the rate of interest on any Revolving Credit Advance or Term Loan or
decrease any fees (excluding fees payable solely to the Issuing Bank for its own
account) hereunder, (iii) change the date fixed for any payment of principal of
or interest on any Revolving Credit Advance, Term Loan or any fees (excluding
fees payable solely to the Issuing Bank for its own account) hereunder, (iv)
change the amount of principal, decrease the amount of interest or decrease the
amount of fees (excluding fees payable solely to the Issuing Bank for its own
account) due on any date fixed for the payment thereof, (v) change the
percentage of the Revolving Credit Commitments or Term Loan Commitments or of
the aggregate unpaid principal amount of the Notes, or the percentage of Banks,
which shall be required for the Banks or any of them to take any action under
this Section or any other provision of this Agreement, (vi) change the manner
of application of any payments made under this Agreement or the other Loan
Documents, (vii) release or substitute all or substantially all of the
collateral, if any, held as security for the Obligations, (viii) change or
modify the definition of “Required Banks,” or (ix) release any guaranty (other
than a release described in Section 7.01) given to support payment of the
Guaranteed Obligations and provided further that no amendment or waiver shall,
unless signed by the Issuing Bank, (A) modify or amend Section 2.03; or (B)
change in any manner, any term or condition applicable to the Letters of Credit
or the Letter of Credit Agreements.  The amount of fees payable solely to the
Issuing Bank for its own account may be amended, from time to time, by the
Borrower and the Issuing Bank without the approval of any of the Banks.

(b)               
 No Loan Party will solicit, request or
negotiate for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement unless each Bank shall be informed thereof by the
Borrower and shall be afforded an opportunity of considering the same and shall be supplied by the Borrower with sufficient
information to enable it to make an informed decision with respect thereto. 
Executed or true and correct copies of any waiver or consent effected pursuant
to the provisions of this Agreement shall be delivered by the Borrower to each
Bank forthwith following the date on which the same shall have been executed
and delivered by the requisite percentage of Banks.  No Loan Party will,
directly or indirectly, pay or cause to be paid any remuneration, whether by
way of supplemental or additional interest, fee or otherwise, to any Bank (in
its capacity as such) as consideration for or as an inducement to the entering
into by such Bank of any waiver or amendment of any of the terms and provisions
of this Agreement unless such remuneration is concurrently paid, on the same
terms, ratably to all such Banks.

Section 9.06            
 Margin Stock Collateral.  Each of the Banks represents to the Agent and each of
the other Banks that it in good faith is not, directly or indirectly (by
negative 

54

 

pledge or otherwise), relying upon any Margin
Stock as collateral in the extension or maintenance of the credit provided for
in this Agreement.

Section 9.07            
 Successors and Assigns.  (a)The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no Loan Party may assign or otherwise transfer any of
its rights under this Agreement.

(b)               
 Any Bank may at any time sell to one or
more Persons (each a “Participant”) participating interests in any Revolving
Credit Advance or Term Loan owing to such Bank, any Note held by such Bank, any
Revolving Credit Commitment or Term Loan Commitment hereunder or any other
interest of such Bank hereunder.  In the event of any such sale by a Bank of a
participating interest to a Participant, such Bank’s obligations under this
Agreement shall remain unchanged, such Bank shall remain solely responsible for
the performance thereof, such Bank shall remain the holder of any such Note for
all purposes under this Agreement, and the Borrower and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank’s rights and obligations under this Agreement.  In no event shall a Bank
that sells a participation be obligated to the Participant to take or refrain
from taking any action hereunder except that such Bank may agree that it will
not (except as provided below), without the consent of the Participant, agree
to (i) the change of any date fixed for the payment of principal of or interest
on the related Revolving Credit Advance, Term Loan, Term Loans or Revolving
Credit Advances, (ii) the change of the amount of any principal, interest or
fees due on any date fixed for the payment thereof with respect to the related
Revolving Credit Advance, Term Loan, Term Loans or Revolving Credit Advances,
(iii) the change of the principal of the related Revolving Credit Advance, Term
Loan, Term Loans or Revolving Credit Advances, (iv) any change in the rate at
which either interest is payable thereon or (if the Participant is entitled to
any part thereof) any fee is payable hereunder from the rate at which the
Participant is entitled to receive interest or any fee (as the case may be) in
respect of such participation, (v) the release or substitution of all or any
substantial part of the collateral (if any) held as security for the
Obligations, or (vi) the release of any guaranty (other than a release
described in Section 7.01) given to support payment of the Guaranteed
Obligations.  Each Bank selling a participating interest in any Revolving
Credit Advance, Note, Revolving Credit Commitment, Term Loan, Term Loan
Commitment or other interest under this Agreement shall, within 10 Domestic
Business Days of such sale, provide the Borrower and the Agent with written
notification stating that such sale has occurred and identifying the
Participant and the interest purchased by such
Participant; provided, that a Bank shall not be required to provide written
notification of a participation sold to an Affiliate of a Bank.  The Loan
Parties agree that each Participant shall be entitled to the benefits of
Article VIII with respect to its participation in Loans outstanding from time
to time.

(c)               
 Any Bank may at any time assign to one
or more banks or financial institutions (each an “Assignee”) all, or a
proportionate part of all, of its rights and obligations under this Agreement,
the Notes and the other Loan Documents, and such Assignee shall assume all such
rights and obligations, pursuant to an Assignment and Acceptance in the form
attached hereto as Exhibit E, executed by such Assignee, such transferor Bank
and the Agent (and, in the case of:  (i) an Assignee that is not then a Bank or
an Affiliate of a Bank; and (ii) an assignment not made during the existence of
a Default or an Event of Default, by the Borrower); provided that (i) no
interest may be sold by a Bank pursuant to this paragraph (c) unless the
Assignee shall agree to assume ratably equivalent portions of the transferor
Bank’s Revolving Credit Commitment, Revolving Credit Advances, Letter of Credit
Commitment (including without limitation a ratably equivalent portion of such
transferor’s obligations under Section 2.03(c)), Term Loan Commitment and Term
Loan, (ii) the amount of the Revolving Credit Commitment of the assigning Bank
being assigned pursuant to such assignment (determined as of the effective date
of the assignment) shall be equal to $5,000,000 (or any larger multiple of $1,000,000)
(except that any such assignment may be in the full amount of the assigning
Bank’s Revolving Credit Commitment), (iii) no interest may be sold by a Bank
pursuant to this paragraph (c) to any Assignee that is not then a Bank or an
Affiliate of a Bank without the consent of the Borrower, which consent shall
not be unreasonably withheld, provided that the Borrower’s consent shall not be
necessary with respect to any assignment made during the existence of a Default
or an Event of Default; (iv) a Bank may not have more than two Assignees that
are not then Banks at any one 

55

 

time, (v) no interest
may be sold by a Bank pursuant to this paragraph (c) to any Assignee that is
not then a Bank or an Affiliate of a Bank, without the consent of the Agent,
which consent shall not be unreasonably withheld, provided, that although the
Agent’s consent may not be necessary with respect to an Assignee that is then a
Bank or an Affiliate of a Bank, no such assignment shall be effective until the
conditions set forth in the following sentence are satisfied; and (vi) no
interest in a Letter of Credit Commitment (including without limitation any
portion of such transferor’s obligations under Section 2.03(c)) may be sold by
a Bank pursuant to this paragraph (c) to any Assignee that is not then a Bank
or an Affiliate of a Bank, without the consent of the Issuing Bank, which
consent may be withheld by the Issuing Bank in its sole and absolute
discretion.  Upon (A) execution of the Assignment and Acceptance by such
transferor Bank, such Assignee, the Agent and (if applicable) the Borrower, (B)
delivery of an executed copy of the Assignment and Acceptance to the Borrower
and the Agent, (C) payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, and (D) payment by the assigning Bank of a processing and recordation
fee of $3,500 to the Agent if the Assignee is not a Bank or Affiliate of a Bank
and $1,000 if the Assignee is a Bank or Affiliate of a Bank, such Assignee
shall for all purposes be a Bank party to this Agreement and shall have all the
rights and obligations of a Bank under this Agreement to the same extent as if
it were an original party hereto with a Revolving Credit Commitment, Letter of
Credit Commitment (including, without limitation obligations under Section
2.03(c)) and Term Loan Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by the
Borrower, the Banks or the Agent shall be required.  Upon the consummation of
any transfer to an Assignee pursuant to this paragraph (c), the transferor
Bank, the Agent and the Borrower shall make
appropriate arrangements so that, if required, a new Note is issued to each of
such Assignee and such transferor Bank.

(d)               
 Subject to the provisions of Section
9.08, the Loan Parties authorize each Bank to disclose to any Participant,
Assignee or other transferee (each a “Transferee”) and any prospective
Transferee any and all financial and other information in such Bank’s possession
concerning the Loan Parties which has been delivered to such Bank by the Loan
Parties pursuant to this Agreement or which has been delivered to such Bank by
the Loan Parties in connection with such Bank’s credit evaluation prior to
entering into this Agreement.

(e)               
 No Transferee shall be entitled to
receive any greater payment under Section 8.03 than the transferor Bank would
have been entitled to receive with respect to the rights transferred, unless
such transfer is made with the Borrower’s prior written consent or by reason of
the provisions of Section 8.02 or 8.03 requiring such Bank to designate a
different Lending Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.

(f)                
 Anything in this Section 9.07 to the
contrary notwithstanding, any Bank may assign and pledge all or any portion of
the Loan and/or obligations owing to it to any Federal Reserve Bank or the
United States Treasury as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and Operating Circular issued
by such Federal Reserve Bank, provided that any payment in respect of such
assigned Loan and/or obligations made by the Borrower to the assigning and/or
pledging Bank in accordance with the terms of this Agreement shall satisfy the
Borrower’s obligations hereunder in respect of such assigned Loan and/or
obligations to the extent of such payment.  No such assignment shall release
the assigning and/or pledging Bank from its obligations hereunder.

Section 9.08            
 Confidentiality.  Each Bank agrees to exercise its best efforts to keep
any information delivered or made available by the Loan Parties to it which is
clearly indicated to be confidential information, confidential from anyone
other than persons employed or retained by such Bank who are or are expected to
become engaged in evaluating, approving, structuring or administering the Loan;
provided, however, that nothing herein shall prevent any Bank
from disclosing such information (i) to any other Bank, (ii) upon the order of
any court or administrative agency, (iii) upon the request or demand of any
regulatory agency or authority 

56

 

having jurisdiction
over such Bank, (iv) which has been publicly disclosed, (v) to the extent
reasonably required in connection with any litigation to which the Agent, any
Bank or their respective Affiliates may be a party, (vi) to the extent
reasonably required in connection with the exercise of any remedy hereunder,
(vii) to such Bank’s legal counsel and independent auditors and (viii) to any
actual or proposed Participant, Assignee or other Transferee of all or part of
its rights hereunder which has agreed in writing to be bound by the provisions
of this Section 9.08.

Section 9.09            
 Representation by Banks.  Each Bank hereby represents that it is a commercial
lender or financial institution which makes loans in the ordinary course of its
business and that it will make its Revolving Credit Advances and Term Loans
hereunder for its own account in the ordinary course of such business; provided,
however, that, subject to Section 9.07, the disposition of the Note or
Notes held by that Bank shall at all times be within its exclusive control.

Section 9.10            
 Obligations Several.  The obligations of each Bank hereunder are several, and
no Bank shall be responsible for the obligations or commitment of any other
Bank hereunder.  Nothing contained in this Agreement and no action taken by the
Banks pursuant hereto shall be deemed to constitute the Banks to be a
partnership, an association, a joint venture or any other kind of entity.  The
amounts payable at any time hereunder to each Bank shall be a separate and
independent debt, each Bank shall be entitled to protect and enforce its rights
arising out of this Agreement or any other Loan Document and it shall not be
necessary for any other Bank to be joined as an additional party in any
proceeding for such purpose.

Section 9.11            
 Survival of Certain Obligations.  Sections 8.03(a), 8.03(b), 8.05 and 9.03, and the
obligations of the Loan Parties thereunder, shall survive, and shall continue
to be enforceable notwithstanding, the termination of this Agreement and the
Revolving Credit Commitments and the payment in full of the principal of and
interest on all Revolving Credit Advances and Term Loans.

Section 9.12            
 North Carolina Law.  This Agreement and each Note shall be construed in
accordance with and governed by the law of the State of North Carolina.

Section 9.13            
 Severability.  In case any one or more of the provisions contained in
this Agreement, the Notes or any of the other Loan Documents should be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby and shall be enforced to the
greatest extent permitted by law.

Section 9.14            
 Interest.  In no event shall the amount of interest due or payable
hereunder or under the Notes exceed the maximum rate of interest allowed by
applicable law, and in the event any such payment is inadvertently made to any
Bank by the Borrower or inadvertently received by any Bank, then such excess
sum shall be credited as a payment of principal, unless the Borrower shall notify
such Bank in writing that it elects to have such excess sum returned
forthwith.  It is the express intent hereof that the Borrower not pay and the
Banks not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may legally be paid by the Borrower under applicable law.

Section 9.15            
 Interpretation.  No provision of this Agreement or any of the other Loan
Documents shall be construed against or interpreted to the disadvantage of any
party 

57

 

hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.

Section 9.16            
 Consent to Jurisdiction.  The Loan Parties (a) and each of the Banks and the Agent
irrevocably waives, to the fullest extent permitted by law, any and all right
to trial by jury in any legal proceeding arising out of this Agreement, any of
the other Loan Documents, or any of the transactions contemplated hereby or
thereby, (b) submit to personal jurisdiction in the State of North Carolina,
the courts thereof and the United States District Courts sitting therein, for
the enforcement of this Agreement, the Notes and the other Loan Documents, (c)
waives any and all personal rights under the law of any jurisdiction to object
on any basis (including, without limitation, inconvenience of forum) to
jurisdiction or venue within the State of North Carolina for the purpose of
litigation to enforce this Agreement, the Notes or the other Loan Documents,
and (d) agrees that service of process may be made upon it in the manner
prescribed in Section 9.01 for the giving of notice to the Borrower.  Nothing
herein contained, however, shall prevent the Agent
from bringing any action or exercising any rights against any security and
against the Loan Parties personally, and against any assets of the Loan
Parties, within any other state or jurisdiction.

Section 9.17            
 Counterparts.  This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.

Article X

GUARANTY

Section 10.01        
 Unconditional Guaranty.  Each Guarantor hereby irrevocably, unconditionally and
jointly and severally guarantees, each as a primary obligor and not merely as a
surety, to the Agent, the Issuing Bank and the Banks the due and punctual
payment of the principal of and the premium, if any, and interest on the
Guaranteed Obligations and any and all other amounts due under or pursuant to
the Loan Documents, when and as the same shall become due and payable (whether
at stated maturity or by optional or mandatory prepayment or by declaration,
redemption or otherwise) in accordance with the terms of the Loan Documents. 
The Guarantors’ guaranty under this Section is an absolute, present and
continuing guarantee of payment and not of collectibility, and is in no way
conditional or contingent upon any attempt to collect from the Borrower, any of
the Guarantors or any other guarantor of the Guaranteed Obligations (or any
portion thereof) or upon any other action, occurrence or circumstances
whatsoever.  In the event that the Borrower or any Guarantor shall fail so to
pay any such principal, premium, interest or other amount to the Agent, the
Issuing Bank or a Bank, the Guarantors will pay the same forthwith, without
demand, presentment, protest or notice of any kind (all of which are waived by
the Guarantors to the fullest extent permitted by law), in lawful money of the
United States, at the place for payment specified in Loan Documents or
specified by such Agent in writing, to such Agent.  The Guarantors further
agree, promptly after demand, to pay to the Agent, the Issuing Bank and Banks
the costs and expenses incurred by such Agent, Issuing Bank or Bank in
connection with enforcing the rights of such Agent, Issuing Bank, and Banks
against the Borrower and any or all of the Guarantors (whether in a bankruptcy
proceeding or otherwise) following any default in payment of any of the
Guaranteed Obligations or the obligations of the Guarantors hereunder,
including, without limitation, the reasonable fees and expenses of counsel to
the Agent, Issuing Bank and such Banks.

58

 

Section 10.02        
 Obligations Absolute.  The obligations of the Guarantors hereunder are and
shall be absolute and unconditional, irrespective of the validity, regularity
or enforceability of this Agreement, any of the Guaranteed Obligations or any
of the Loan Documents, shall not be subject to any counterclaim, set-off,
deduction or defense (other than the defense of payment or performance) based
upon any claim any of the Guarantors may have against the Borrower, any other
Guarantor or the Agent, Issuing Bank or any Bank hereunder or otherwise, and
shall remain in full force and effect without regard to, and shall not be
released, discharged or in any way affected by, to the fullest extent permitted
by law, any circumstance or condition whatsoever (whether or not any of the
Guarantors shall have any knowledge or notice thereof), including, without
limitation:

(a)               
 any amendment or modification of or
supplement to any of the Loan Documents or any other instrument referred to
herein or therein, or any assignment or transfer of any
thereof or of any interest therein, or any furnishing or acceptance of
additional security for any of the Guaranteed Obligations;

(b)               
 any waiver, consent or extension under
any Loan Document or any such other instrument, or any indulgence or other
action or inaction under or in respect of, or any extensions or renewals of,
any Loan Document, any such other instrument or any Guaranteed Obligation;

(c)               
 any failure, omission or delay on the
part of the Agent to enforce, assert or exercise any right, power or remedy
conferred on or available to the Agent, the Issuing Bank or any Bank against
the Borrower or any Guarantor, any Subsidiary of the Borrower or any Subsidiary
of any Guarantor;

(d)               
 any bankruptcy, insolvency,
readjustment, composition, liquidation or similar proceeding with respect to
the Borrower, any Guarantor, any Subsidiary of the Borrower or any Subsidiary
of any Guarantor or any property of the Borrower, any Guarantor or any such
Subsidiary or any unavailability of assets against which the Guaranteed
Obligations, or any of them, may be enforced;

(e)               
 any merger or consolidation of the
Borrower, any Subsidiary of the Borrower or any Guarantor or any of the
Guarantors into or with any other Person or any sale, lease or transfer of any
or all of the assets of any of the Guarantors, the Borrower or any Subsidiary
of the Borrower or any Guarantor to any Person;

(f)                
 any failure on the part of the
Borrower, any Guarantor or any Subsidiary of the Borrower or any Guarantor for
any reason to comply with or perform any of the terms of any agreement with any
of the Guarantors;

(g)               
 any exercise or non-exercise by the
Agent, the Issuing Bank or any Bank, of any right, remedy, power or privilege
under or in respect of any of the Loan Documents or the Guaranteed Obligations,
including, without limitation, under this Section;

(h)               
 any default, failure or delay, willful
or otherwise, in the performance or payment of any of the Guaranteed
Obligations;

(i)                
 any furnishing or acceptance of security,
or any release, substitution or exchange thereof, for any of the Guaranteed
Obligations;

(j)                
 any failure to give notice to any of
the Guarantors of the occurrence of any breach or violation of, or any event of
default or any default under or with respect to, any of the Loan Documents or
the Guaranteed Obligations;

(k)               
 any partial prepayment, or any
assignment or transfer, of any of the Guaranteed Obligations; or

59

 

(l)                
 any other circumstance (other than
indefeasible payment in full) which might otherwise constitute a legal or
equitable discharge or defense of a guarantor or which might in any manner or
to any extent vary the risk of such Guarantor.

The Guarantors
covenant that their respective obligations hereunder will not be discharged
except by complete performance of the obligations contained in the Loan
Documents and this Agreement and the final and indefeasible payment in full of
the Guaranteed Obligations.  The Guarantors unconditionally waive, to the
fullest extent permitted by law (A) notice of any of the matters referred to in
this Section, (B) any and all rights which any of the Guarantors may now or
hereafter have arising under, and any right to claim a discharge of the
Guarantor’s obligations hereunder by reason of the failure or refusal by the
Agent, the Issuing Bank, or any Bank to take any action pursuant to any statute
(including, without limitation, Sections 26-7, 26-8 or 26-9 of the North
Carolina General Statutes or any similar or successor provisions) permitting a
Guarantor to request that the Agent or any Bank attempt to collect the
Guaranteed Obligations from the Borrower, any of the Guarantors or any other
guarantor, (C) all notices which may be required by statute, rule of law or
otherwise to preserve any of the rights of the Agent, the Issuing Bank or any
Bank against the Guarantors, including, without limitation, presentment to or
demand of payment from the Borrower, any of the Subsidiaries of the Borrower or
any Guarantor, or any of the other Guarantors with respect to any Loan Document
or this agreement, notice of acceptance of the Guarantors’ guarantee hereunder
and/or notice to the Borrower, any of the Subsidiaries of the Borrower or any
Guarantor, or any Guarantor of default or protest for nonpayment or dishonor,
(D) any diligence in collection from or protection of or realization upon all
or any portion of the Guaranteed Obligations or any security therefor, any
liability hereunder, or any party primarily or secondarily liable for all or
any portion of the Guaranteed Obligations, and (E) any duty or obligation of
the Agent, the Issuing Bank or any Bank to proceed to collect all or any
portion of the Guaranteed Obligations from, or to commence an action against,
the Borrower, any Guarantor or any other Person, or to resort to any security
or to any balance of any deposit account or credit on the books of the Agent,
the Issuing Bank or any Bank in favor of the Borrower, any Guarantor or any
other Person, despite any notice or request of any of the Guarantors to do so.

Section 10.03        
 Continuing Obligations;
Reinstatement.  The obligations of the
Guarantors under this Article X are continuing obligations and shall
continue in full force and effect until such time as all of the Guaranteed
Obligations (and any renewals and extensions thereof) shall have been finally
and indefeasibly paid and satisfied in full.  The obligations of the Guarantors
under this Article X shall continue to be effective or be automatically
reinstated, as the case may be, if any payment made by the Borrower, any
Guarantor or any Subsidiary of the Borrower or any Guarantor on, under or in
respect of any of the Guaranteed Obligations is rescinded or must otherwise be
restored or returned by the recipient upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower, any Guarantor or
any such Subsidiary, or upon or as a result of the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to the
Borrower, any Guarantor or any such Subsidiary or any substantial part of the
property of the Borrower, any Guarantor or any such Subsidiary, or otherwise,
all as though such payment had not been made.  If an event permitting the
acceleration of all or any portion of the Guaranteed Obligations shall at any
time have occurred and be continuing, and such acceleration shall at such time
be stayed, enjoined or otherwise prevented for any reason, including without
limitation because of the pendency of a case or proceeding relating to the
Borrower, any Guarantor or any Subsidiary of the Borrower or any Guarantor
under any bankruptcy or insolvency law, for purposes of this Article X
and the obligations of the Guarantors hereunder, such Guaranteed Obligations
shall be deemed to have been accelerated with the same 

60

 

effect
as if such Guaranteed Obligations had been accelerated in accordance with the
terms of the applicable Loan Documents or of this Agreement.

Section 10.04        
 Additional Security, Etc.  The Guarantors authorize the Agent on behalf of the
Issuing Bank and Banks without notice to or demand on the Guarantors and
without affecting their liability hereunder, from time to time (a) to obtain
additional or substitute endorsers or guarantors; (b) to exercise or refrain
from exercising any rights against, and grant indulgences to, the Borrower, any
Subsidiary of the Borrower or any Guarantor, any other Guarantor or others; and
(c) to apply any sums, by whomsoever paid or however realized, to the payment
of the principal of, premium, if any, and interest on, and other obligations
consisting of, the Guaranteed Obligations.  The Guarantors waive any right to
require the Agent, the Issuing Bank or any Bank to proceed against any
additional or substitute endorsers or guarantors or the Borrower or any of
their Subsidiaries or any other Person or to pursue any other remedy available
to the Agent, the Issuing Bank or any such Bank.

Section 10.05        
 Information Concerning the Borrower.  The Guarantors assume all responsibility for being and
keeping themselves informed of the financial condition and assets of the
Borrower, the other Guarantors and their respective Subsidiaries, and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which the Guarantors
assume and insure hereunder, and agree that neither the Agent, the Issuing Bank
nor any Bank shall have any duty to advise the Guarantors of information known
to the Agent, the Issuing Bank or any such Bank regarding or in any manner
relevant to any of such circumstances or risks.

Section 10.06        
 Guarantors’ Subordination.  The Guarantors hereby absolutely subordinate, both in
right of payment and in time of payment, any present and future indebtedness of
the Borrower or any Subsidiary of the Borrower or any Guarantor to any or all
of the Guarantors to the indebtedness of the Borrower or any such Subsidiary to
the Issuing Bank or the Banks (or any of them), provided that the
Guarantors may receive scheduled payments of principal, premium (if any) and
interest in respect of such present or future indebtedness so long as there is
no Event of Default then in existence.

Section 10.07        
 Waiver of Subrogation.  Notwithstanding anything herein to the contrary, the
Guarantors hereby waive any right of subrogation (under contract, Section 509
of the Bankruptcy Code or otherwise) or any other right of indemnity,
reimbursement or contribution and hereby waive any right to enforce any remedy that
the Agent, the Issuing Bank or any Bank now has or may hereafter have against
the Borrower, any Guarantor or any endorser or any other guarantor of all or
any part of the Guaranteed Obligations, and the Guarantors hereby waive any
benefit of, and any right to participate in, any security or collateral given
to the Agent, the Issuing Bank or any Bank to secure payment or performance of
the Guaranteed Obligations or any other liability of the Borrower to the Agent,
the Issuing Bank or any Bank.  The waiver contained in this Section shall
continue and survive the termination of this Agreement and the final and
indefeasible payment in full of the Guaranteed Obligations.

Section 10.08        
 Enforcement.  In the event that the Guarantors shall fail forthwith to
pay upon demand of the Agent, the Issuing Bank or any Bank any amounts due
pursuant to this Article X or to perform or comply with or to cause
performance or compliance with any other obligation of the Guarantors under
this Agreement, the Agent, the Issuing Bank and any Bank shall be entitled and
empowered to institute any action or proceeding at law or in equity for the
collection of the sums so due and unpaid or for the performance of or
compliance with such 

61

 

terms, and may prosecute any such
action or proceeding to judgment or final decree and
may enforce such judgment or final decree against the Guarantors and collect in
the manner provided by law out of the property of the Guarantors, wherever
situated, any monies adjudged or decreed to be payable.  The obligations of the
Guarantors under this Agreement are continuing obligations and a fresh cause of
action shall arise in respect of each default hereunder.

Section 10.09        
 Miscellaneous.  Except as may otherwise be expressly agreed upon in
writing, the liability of the Guarantors under this Article X shall neither
affect nor be affected by any prior or subsequent guaranty by the Guarantors of
any other indebtedness to the Agent, the Issuing Bank or the Banks. 
Notwithstanding anything in this Article X to the contrary, the maximum liability
of each Guarantor hereunder shall in no event exceed the maximum amount which
could be paid out by such Guarantor without rendering such Guarantor’s
obligations under this Article X, in whole or in part, void or voidable under
applicable law, including, without limitation, (i) the Bankruptcy Code of 1978,
as amended, and (ii) any applicable state or federal law relative to fraudulent
conveyances.

[The remainder of this page intentionally left blank.]

 

62

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, under seal, by their respective authorized officers as of
the day and year first above written.

THE CATO CORPORATION

By:      \s\ John P. Derham Cato                                          

John
P. Derham Cato

President, Vice Chairman of
the Board and Chief Executive Officer

P.O. Box 34216

Charlotte, North Carolina 28234

Attn:    J. Gregory Fagan, Vice
President and

General Counsel

Telecopy number:       704-551-7547

Telephone number:     704-554-8510

CADEL LLC

By:      CHW,
LLC, as Member

By:      \s\ Michael O. Moore                                   

Michael O. Moore

President of CHW, LLC, Member of CaDel LLC

c/o The Cato Corporation

P.O. Box 34216

Charlotte, North Carolina 28234

Attn:    J. Gregory Fagan, Vice
President and

General Counsel

Telecopy number:       704-551-7547

Telephone number:     704-554-8510

 

 

63

 

CHW,
LLC

By:      \s\ Michael O. Moore                                               

Michael
O. Moore

President

c/o The Cato Corporation

P.O. Box 34216

Charlotte, North Carolina 28234

Attn:    J. Gregory Fagan, Vice
President and

General Counsel

Telecopy number:       704-551-7547

Telephone number:     704-554-8510

CATO OF TEXAS LP

By:      Cato
Southwest, Inc., as General Partner

By:      \s\ Michael O. Moore                                   

Michael
O. Moore

President of Cato Southwest,
Inc., General Partner

c/o The Cato Corporation

P.O. Box 34216

Charlotte, North Carolina 28234

Attn:    J. Gregory Fagan, Vice
President and

General Counsel

Telecopy number:       704-551-7547

Telephone number:     704-554-8510

 

 

64

 

CATO
SOUTHWEST, INC.

By:      \s\ Michael O. Moore                                               

Michael
O. Moore

President

c/o The Cato Corporation

P.O. Box 34216

Charlotte, North Carolina 28234

Attn:    J. Gregory Fagan, Vice
President and

General Counsel

Telecopy number:       704-551-7547

Telephone number:     704-554-8510

CATOWEST, LLC

By:      \s\ Michael O. Moore                                               

Michael
O. Moore

President

c/o The Cato Corporation

P.O. Box 34216

Charlotte, North Carolina 28234

Attn:    J. Gregory Fagan, Vice
President and

General Counsel

Telecopy number:       704-551-7547

Telephone number:     704-554-8510

 

 

65

 

CATOSOUTH
LLC

By:      The
Cato Corporation, as Member

By:      \s\ Michael O. Moore                                   

Michael
O. Moore

Executive Vice President,
Secretary and Chief Financial Officer of The Cato Corporation, Member of
CatoSouth LLC

c/o The Cato Corporation

P.O. Box 34216

Charlotte, North Carolina 28234

Attn:    J. Gregory Fagan, Vice
President and

General Counsel

Telecopy number:       704-551-7547

Telephone number:     704-554-8510

catocorp.com, LLC

By:      \s\ Michael O. Moore                                               

Michael
O. Moore

President

c/o The Cato Corporation

P.O. Box 34216

Charlotte, North Carolina 28234

Attn:    J. Gregory Fagan, Vice
President and

General Counsel

Telecopy number:       704-551-7547

Telephone number:     704-554-8510

 

 

66

 

	
  COMMITMENTS

  Revolving Credit
  Commitment:

  $35,000,000

  (Letter of Credit

  Commitment:  $35,000,000)

  Term Loan Commitment:

  $30,000,000

  	
  BRANCH
  BANKING AND TRUST COMPANY, as Agent, Issuing Bank and as a Bank

  By:      \s\ Wright Uzzell                          (SEAL)

  Title:    Senior Vice President

  
	
   

  	
  Lending Office

  Branch Banking and Trust
  Company

  2nd Floor

  200 South College Street

  Charlotte, North Carolina
  28202-2005

  Attention:  H. Wright
  Uzzell, Senior Vice President

  Telecopy number: 
  704-954-1021

  Telephone number:  704-954-1136

   

  with a copy to

   

  Christopher E. Leon, Esq.

  Womble Carlyle Sandridge
  & Rice, PLLC

  P.O. Drawer 84

  One West Fourth Street
  (27101)

  Winston-Salem, North
  Carolina 27102

  Telecopy:  (336) 726-6932

  Telephone:  (336) 721-3518

  

 

67

 

[Execution Copy]

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST
AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made as of the 22nd day of
August, 2005, by and among THE CATO CORPORATION, a Delaware corporation,
CATOWEST, LLC, a Nevada limited liability company, CATO SOUTHWEST, INC., a
Delaware corporation, CATOSOUTH, LLC, a North Carolina limited liability
company, CHW, LLC, a Delaware limited liability company, catocorp.com, LLC, a Delaware limited liability company,
CaDeL, LLC, a Delaware limited liability company and CATO OF TEXAS, L.P., a
Texas limited partnership, BRANCH BANKING AND TRUST COMPANY, as Agent, Issuing
Bank, and a Bank and RBC CENTURA BANK, as a Bank.

RECITALS:

The Borrower, the
Guarantors, the Agent and the Banks have entered into a certain Credit
Agreement dated as of August 22, 2003 (referred to herein as the “Credit
Agreement”).  Capitalized terms used in this Amendment which are not otherwise
defined in this Amendment shall have the respective meanings assigned to them
in the Credit Agreement.

The Borrower and
Guarantors have requested that:  (1) the “Termination Date” be extended to
August 22, 2008; and (2) Section 5.05 be modified as set forth herein.

The Borrower and
Guarantors have requested the Agent and the Banks to amend the Credit Agreement
to modify certain additional provisions of the Credit Agreement as more fully
set forth herein.  The Banks, the Agent, the Guarantors and the Borrower desire
to amend the Credit Agreement upon the terms and conditions hereinafter set
forth.

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower, the Guarantors, the Agent and the Banks,
intending to be legally bound hereby, agree as follows:

Section 1.              
 Recitals.  The Recitals are incorporated herein by reference and
shall be deemed to be a part of this Amendment.

Section 2.              
 Amendments.  The Credit Agreement is hereby amended as set forth in
this Section 2. 

Section 2.01.              
 Amendment to Section 1.01.  Section 1.01 of the Credit Agreement is amended to amend
and restate the following definitions:

“Termination Date” means August 22, 2008, as
extended pursuant to Section 2.05.

Section 2.02.              
 Amendment to Section 2.05(a).  Section 2.05(a) of the Credit Agreement is amended and
restated to read in its entirety as follows:

SECTION 2.05.     Maturity
of Loans (a) Each Revolving Credit Advance included in any Revolving Credit
Borrowing shall mature, and the principal amount thereof shall be due and
payable, subject to Section 6.01, on the earlier of:  (i) the Termination Date,
and (ii) the last day of the applicable Interest Period.  Upon the written
request of the Borrower, which request 

1

 

shall be
delivered to the Agent at least 60 days (but no more than 90 days) prior to the
Second Anniversary Date (as such term is hereinafter defined), the Banks shall
have the option (without any obligation whatsoever so to do) of extending the
Termination Date for one additional two-year period on August 22, 2007 (the
“Second Anniversary Date”).  Each Bank shall notify the Borrower and the Agent
at least 15 days prior to the Second Anniversary Date whether or not it chooses
to extend the Termination Date for such an additional two-year period (but any
Bank which fails to give such notice within such period shall be deemed not to
have extended); provided, that the Termination Date shall not be extended with
respect to any of the Banks unless all of the Banks are willing to extend the
Termination Date.

Section 2.03.              
 Amendment to Section 5.05.  Section 5.05 of the Credit Agreement is amended and
restated to read in its entirety as follows:

SECTION 5.05.     Minimum
Consolidated Tangible Net Worth.  Consolidated Tangible Net Worth will at
no time be less than $210,000,000:  (A) plus the sum of (i) if Net Income for
any Fiscal Year ending after January 29, 2005 is a positive number, an amount
equal to 50% of such Net Income, and (ii) 100% of the cumulative Net Proceeds
of Capital Stock/Conversion of Debt received during any period after January
29, 2005, calculated quarterly; and (B) minus any amount paid by Borrower to
purchase shares of its own capital stock after the Closing Date.

Section 3.              
 Conditions to Effectiveness.  The effectiveness of this Amendment and the obligations
of the Banks hereunder are subject to the following conditions, unless the
Required Banks waive such conditions:

(a)               
 receipt by the Agent from each of the
parties hereto of a duly executed counterpart of this Amendment signed by such
party; and

(b)               
 the fact that the representations and
warranties of the Borrower and Guarantors contained in Section 5 of this
Amendment shall be true on and as of the date hereof.

Section 4.              
 No Other Amendment.  Except for the amendments set forth above, the text of
the Credit Agreement shall remain unchanged and in full force and effect.  This
Amendment is not intended to effect, nor shall it be construed as, a novation. 
The Credit Agreement and this Amendment shall be construed together as a single
agreement.  Nothing herein contained shall waive, annul, vary or affect any
provision, condition, covenant or agreement contained in the Credit Agreement,
except as herein amended, nor affect nor impair any rights, powers or remedies
under the Credit Agreement as hereby amended.  The Banks and the Agent do
hereby reserve all of their rights and remedies against all parties who may be
or may hereafter become secondarily liable for the repayment of the Notes.  The
Borrower and Guarantors promise and agree to perform all of the requirements,
conditions, agreements and obligations under the terms of the Credit Agreement,
as heretofore and hereby amended, the Credit Agreement, as amended, and the
other Loan Documents being hereby ratified and affirmed.  The Borrower and
Guarantors hereby expressly agree that the Credit Agreement, as amended, and
the other Loan Documents are in full force and effect.

Section 5.              
 Representations and Warranties.  The Borrower and Guarantors hereby represent and warrant
to each of the Banks as follows:

(a)               
 No Default or Event of Default under
the Credit Agreement or any other Loan Document has occurred and is continuing
unwaived by the Banks on the date hereof.

2

 

(b)               
 The Borrower and Guarantors have the
power and authority to enter into this Amendment and to do all acts and things
as are required or contemplated hereunder to be done, observed and performed by
them.

(c)               
 This Amendment has been duly
authorized, validly executed and delivered by one or more authorized officers
of the Borrower and Guarantors and constitutes the legal, valid and binding
obligations of the Borrower and Guarantors enforceable against them in
accordance with its terms, provided that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally or by general principles of equity.

(d)               
 The execution and delivery of this
Amendment and the performance by the Borrower and Guarantors hereunder do not
and will not require the consent or approval of any regulatory authority or
governmental authority or agency having jurisdiction over the Borrower, or any
Guarantor, nor be in contravention of or in conflict with the articles of
incorporation, bylaws or other organizational documents of the Borrower, or any
Guarantor that is a corporation, the articles of organization or operating
agreement of any Guarantor that is a limited liability company, the certificate
of partnership or limited partnership agreement of any Guarantor that is a
limited partnership, or the provision of any statute, or any judgment, order or
indenture, instrument, agreement or undertaking, to which any Borrower, or any
Guarantor is party or by which the assets or properties of the Borrower, and
Guarantors are or may become bound.

Section 6.              
 Counterparts.  This Amendment may be executed in multiple counterparts,
each of which shall be deemed to be an original and all of which, taken
together, shall constitute one and the same agreement.

Section 7.              
 Governing Law.  This Amendment shall be construed in accordance with and
governed by the laws of the State of North Carolina.

Section 8.              
 Effective Date.  This Amendment shall be effective as of August 22, 2005.

 

 

3

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered, or have caused their respective duly authorized officers or
representatives to execute and deliver, this Amendment as of the day and year
first above written.

THE CATO CORPORATION

By:      \s\ John P. Derham Cato                                          

John
P. Derham Cato

Chairman,
President,

and Chief Executive Officer

CADEL LLC

By:      CHW,
LLC, as Member

By:      \s\ Michael O. Moore                                   

Michael
O. Moore

President of CHW, LLC,
Member of

CaDel LLC

CHW, LLC

By:      \s\ Michael O. Moore                                               

Michael
O. Moore

President

CATO OF TEXAS LP

By:      Cato
Southwest, Inc., as General Partner

By:      \s\ Michael O. Moore                                   

Michael
O. Moore

President
of Cato Southwest, Inc.,

General Partner

 

 

4

 

CATO
SOUTHWEST, INC.

By:      \s\ Michael O. Moore                                               

Michael
O. Moore

President

CATOWEST, LLC

By:      \s\ Michael O. Moore                                               

Michael
O. Moore

President

CATOSOUTH LLC

By:      The
Cato Corporation, as Member

By:      \s\ Michael O. Moore                                   

Michael
O. Moore

Executive
Vice President, Secretary

and
Chief Financial Officer of

The
Cato Corporation,

Member of CatoSouth LLC

catocorp.com, LLC

By:      \s\ Michael O. Moore                                               

Michael
O. Moore

President

[Remainder of this page
intentionally left blank]

 

 

5

 

BRANCH
BANKING AND TRUST COMPANY

as Agent, Issuing Bank and as a Bank

By:      \s\
Wright Uzzell                                (SEAL) 

Title:    Senior
Vice President                         

[Remainder of this page
intentionally left blank]

 

 

6

 

RBC CENTURA BANK,
as a Bank

By:      \s\
[Authorized Signatory]                 (SEAL) 

Title:    Senior
Vice President                         

[Remainder of this page
intentionally left blank]

 

 

7

 

 

 

1

 

SECOND AMENDMENT TO CREDIT AGREEMENT

THIS SECOND
AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made as of the 29th day of
October, 2007, by and between THE CATO CORPORATION, a Delaware corporation,
CATOWEST, LLC, a Nevada limited liability company, CATO SOUTHWEST, INC., a
Delaware corporation, CATOSOUTH, LLC, a North Carolina limited liability
company, CHW, LLC, a Delaware limited liability company, catocorp.com, LLC, a Delaware limited liability company, CaDeL, LLC, a
Delaware limited liability company and CATO OF TEXAS, L.P., a Texas limited
partnership and BRANCH BANKING AND TRUST COMPANY, as Agent, Issuing Bank, and a
Bank.

RECITALS:

The Borrower, the
Guarantors, the Agent and the Bank entered into a certain Credit Agreement
dated as of August 22, 2003, as amended by a certain First Amendment to Credit
Agreement dated August 22, 2005 (as may be further amended, modified or
supplemented from time to time, the “Credit Agreement”).  Capitalized terms
used in this Amendment which are not otherwise defined in this Amendment shall
have the respective meanings assigned to them in the Credit Agreement.

The Borrower and
Guarantors have requested that:  (1) the “Termination Date” be extended to
August 22, 2010; (2) Sections 2.05(a), 2.07(a), 5.05 and 5.06(b) be modified as
set forth herein; and (3) Sections 5.07 and 5.08 be deleted.

The Borrower and
Guarantors have requested the Agent and the Bank to amend the Credit Agreement
to modify certain additional provisions of the Credit Agreement as more fully
set forth herein.  The Bank, the Agent, the Guarantors and the Borrower desire
to amend the Credit Agreement upon the terms and conditions hereinafter set
forth.

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower, the Guarantors, the Agent and the Bank,
intending to be legally bound hereby, agree as follows:

Section 9.              
 Recitals.  The Recitals are incorporated herein by reference and
shall be deemed to be a part of this Amendment.

Section 10.          
 Amendments.  The Credit Agreement is hereby amended as set forth in
this Section 2. 

Section 10.01.           
 Amendment to Section 1.01.  Section 1.01 of the Credit Agreement is amended to amend
and restate the following definitions:

“Termination Date” means August 22, 2010, as
extended pursuant to Section 2.05.

Section 10.02.           
 Amendment to Section 2.05(a).  Section 2.05(a) of the Credit Agreement is amended and
restated to read in its entirety as follows:

SECTION 2.05.  (a) Each Revolving Credit
Advance included in any Revolving Credit Borrowing shall mature, and the
principal amount thereof shall be due and payable, subject to Section 6.01, on
the earlier of:  (i) the Termination Date, and (ii) the last day of the
applicable Interest Period.  Upon the written request of the 

1

 

Borrower, which request shall be delivered to the Agent
at least 60 days (but no more than 90 days) prior to the Second Anniversary
Date (as such term is hereinafter defined), the Banks shall have the option
(without any obligation whatsoever so to do) of extending the Termination Date
for one additional two-year period on August 22, 2009 (the “Second Anniversary
Date”).  Each Bank shall notify the Borrower and the Agent at least 15 days prior
to the Second Anniversary Date whether or not it chooses to extend the
Termination Date for such an additional two-year period (but any Bank which
fails to give such notice within such period shall be deemed not to have
extended); provided, that the Termination Date shall not be extended with
respect to any of the Banks unless all of the Banks are willing to extend the
Termination Date.

Section 10.03.           
 Amendment to Section
2.07(a).  Section 2.07(a) of
the Credit Agreement is amended and restated to read in its entirety as
follows:

SECTION 2.07.  Fees.  (a) The Borrower shall
pay to the Agent for the ratable account of each Bank a non-utilization fee
equal to the product of:  (i) the aggregate of the daily average amounts of
such Bank’s Unused Revolving Credit Commitment, times (ii) a per annum percentage
equal to 0.125%.  Such non-utilization fee shall accrue from and including the
Closing Date to and including the Termination Date.  Non-Utilization fees shall
be payable quarterly in arrears on each Quarterly Payment Date and on the
Termination Date; provided that should the Revolving Credit Commitments be
terminated at any time prior to the Termination Date for any reason, the entire
accrued and unpaid fee shall be paid on the date of such termination.

Section 10.04.           
 Amendment to Section 5.05.  Section 5.05 of the Credit Agreement is amended and
restated to read in its entirety as follows:

SECTION 5.05.  Minimum Consolidated Tangible
Net Worth.  Consolidated Tangible Net Worth will at no time be less than
$275,000,000:  (A) plus the sum of (i) if Net Income for any Fiscal Year ending
after February 3, 2007 is a positive number, an amount equal to 50% of such Net
Income, and (ii) 100% of the cumulative Net Proceeds of Capital
Stock/Conversion of Debt received during any period after February 3, 2007,
calculated quarterly; and (B) minus any amount paid by Borrower to purchase
shares of its own capital stock after the Closing Date.

Section 10.05.           
 Amendment to Section 5.06(b).  Section 5.06(b) of the Credit Agreement is amended and
restated in its entirety as follows:

SECTION 5.06.          Restrictions
on Dividends, Share Repurchase, etc.

...

(b)        Repurchase shares of its own Capital
Stock (or options or rights to acquire its Capital Stock), provided, however,
that:  (1) the Borrower may consummate the Proposed Redemption; and (2)
Borrower may 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

2

 

...

Section 10.06.           
 Deletion of Section 5.07.  Section 5.07 of the Credit Agreement is hereby deleted
in its entirety.

Section 10.07.           
 Deletion of Section 5.08.  Section 5.08 of the Credit Agreement is hereby deleted
in its entirety.

Section 11.          
 Conditions to Effectiveness.  The effectiveness of this Amendment and the obligations
of the Bank hereunder are subject to the following conditions, unless the
Required Banks waive such conditions:

(a)               
 receipt by the Agent from each of the
parties hereto of a duly executed counterpart of this Amendment signed by such
party; and

(b)               
 the fact that the
representations and warranties of the Borrower and Guarantors contained in
Section 5 of this Amendment shall be true on and as of the date hereof.

Section 12.          
 No Other Amendment.  Except for the amendments set forth above and those
contained in the First Amendment to Credit Agreement dated August 22, 2005
(“First Amendment”), the text of the Credit Agreement shall remain unchanged
and in full force and effect.  This Amendment is not intended to effect, nor
shall it be construed as, a novation.  The Credit Agreement, the First
Amendment and this Amendment shall be construed together as a single
agreement.  Nothing herein contained shall waive, annul, vary or affect any
provision, condition, covenant or agreement contained in the Credit Agreement,
except as herein amended, nor affect nor impair any rights, powers or remedies
under the Credit Agreement as hereby amended.  The Bank and the Agent do hereby
reserve all of their rights and remedies against all parties who may be or may
hereafter become secondarily liable for the repayment of the Notes.  The
Borrower and Guarantors promise and agree to perform all of the requirements,
conditions, agreements and obligations under the terms of the Credit Agreement,
as heretofore and hereby amended, the Credit Agreement, as amended, and the
other Loan Documents being hereby ratified and affirmed.  The Borrower and
Guarantors hereby expressly agree that the Credit Agreement, as amended, and
the other Loan Documents are in full force and effect.

Section 13.          
 Representations and Warranties.  The Borrower and Guarantors hereby represent and warrant
to the Bank as follows:

(a)               
 No Default or Event of Default under
the Credit Agreement or any other Loan Document has occurred and is continuing
unwaived by the Bank on the date hereof.

(b)               
 The Borrower and Guarantors have the
power and authority to enter into this Amendment and to do all acts and things
as are required or contemplated hereunder to be done, observed and performed by
them.

(c)               
 This Amendment has been duly
authorized, validly executed and delivered by one or more authorized officers
of the Borrower and Guarantors and constitutes the legal, valid and binding
obligations of the Borrower and Guarantors enforceable against them in
accordance with its terms, provided that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally or by general principles of equity.

(d)               
 The execution and delivery of this
Amendment and the performance by the Borrower and Guarantors hereunder do not
and will not require the consent or approval of any regulatory authority or
governmental authority or agency having jurisdiction over the Borrower, or any
Guarantor, nor be in contravention of or in conflict with the articles of
incorporation, bylaws or other organizational documents of the Borrower, or
any  Guarantor that is a corporation, the articles of organization or operating

3

 

agreement of any Guarantor that is a limited liability
company, the certificate of partnership or limited partnership agreement of any
Guarantor that is a limited partnership, or the provision of any statute, or
any judgment, order or indenture, instrument, agreement or undertaking, to
which any Borrower, or any Guarantor is part or by which the assets or
properties of the Borrower, and Guarantors are or may become bound.

Section 14.          
 Counterparts.  This Amendment may be executed in multiple counterparts,
each of which shall be deemed to be an original and all of which, taken
together, shall constitute one and the same agreement.

Section 15.          
 Governing Law.  This Amendment shall be construed in accordance with and
governed by the laws of the State of North Carolina.

Section 16.          
 Effective Date.  This Amendment shall be effective as of October 29,
2007.

[The remainder of this page
intentionally left blank.]

 

 

4

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered, or have caused their respective duly authorized officers or
representatives to execute and deliver, this Amendment as of the day and year
first above written.

THE CATO CORPORATION

By:      \s\ Tom Stoltz                                                          

Name:                                                                                    

Title:    Chief
Financial Officer                                            

CADEL LLC

By:      CHW,
LLC, as Member

By:      \s\ [Authorized Signatory]                                       

Name:                                                                                    

Title:    Assistant
Treasurer                                                  

CHW, LLC

By:      \s\ [Authorized Signatory]                                       

Name:                                                                                    

Title:    Assistant
Treasurer                                                  

CATO OF TEXAS LP

By:      Cato
Southwest, Inc., as General Partner

By:      \s\ [Authorized Signatory]                                       

Name:                                                                                    

Title:    Assistant
Treasurer                                                  

 

 

5

 

CATO
SOUTHWEST, INC.

By:      \s\ [Authorized Signatory]                                       

Name:                                                                                    

Title:    Assistant
Treasurer                                                  

CATOWEST, LLC

By:      \s\ Gregory S. Harrison                                            

Name:  Gregory S. Harrison                                                 

Title:    Assistant
Treasurer                                                  

CATOSOUTH LLC

By:      The
Cato Corporation, as Member

By:      \s\ Stuart L. Uselton                                                 

Name:  Stuart L. Uselton                                                      

Title:    CAO                                                                          

catocorp.com, LLC

By:      \s\ [Authorized Signatory]                                       

Name:                                                                                    

Title:    Assistant
Treasurer                                                  

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intentionally left blank]

 

 

6

 

BRANCH
BANKING AND TRUST COMPANY

as Agent, Issuing Bank and as a Bank

By:      \s\
Wright Uzzell                                (SEAL) 

H. Wright Uzzell, Jr.

Senior Vice President

[Remainder of this page
intentionally left blank]

 

 

 

7

 

Execution Version

THIRD AMENDMENT TO CREDIT AGREEMENT

THIS THIRD
AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made as of the 29 
day of October, 2010, by and among THE CATO CORPORATION, a Delaware corporation
(the “Borrower”), CATOWEST, LLC, a Nevada limited liability company, CATO
SOUTHWEST, INC., a Delaware corporation, CATOSOUTH, LLC, a North Carolina
limited liability company, CHW, LLC, a Delaware limited liability company,
CaDeL, LLC, a Delaware limited liability company, CATO OF TEXAS, L.P., a Texas
limited partnership and catocorp.com, LLC, a Delaware limited liability company
(each of the foregoing, other than the Borrower, a “Guarantor” and, collectively,
the “Guarantors”) and BRANCH BANKING AND TRUST COMPANY, as Agent, Issuing Bank,
and a Bank.

RECITALS:

The Borrower, the
Guarantors, the Agent and the Banks entered into a certain Credit Agreement
dated as of August 22, 2003, as amended by (i) the First Amendment to Credit
Agreement dated August 22, 2005, (ii) the Second Amendment to Credit Agreement
dated October 29, 2007 and (iii) the Waiver Agreement dated July 30, 2008 (as
so amended, modified or supplemented, the “Credit Agreement”).  Capitalized
terms used in this Amendment which are not otherwise defined in this Amendment
shall have the respective meanings assigned to them in the Credit Agreement.

The Borrower and
the Guarantors have requested that the Agent and the Banks extend the term of
the Credit Agreement and modify certain provisions of the Credit Agreement as
more fully set forth herein.  The Agent and the Banks have agreed to extend the
term of and so modify the Credit Agreement, all upon the terms and conditions
hereinafter set forth.

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower, the Guarantors, the Agent and the Banks,
intending to be legally bound hereby, agree as follows:

SECTION 1.   Recitals; Definitions. 

(a)        The Recitals are incorporated  herein by reference and shall be deemed
to be a part of this Amendment.

(b)        As used in this Amendment, the following
capitalized terms shall have the meanings set forth below:

“Governmental
Authority” means the government of the United States of America or any other
nation, or of any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).

“Operating
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized 

1

 

incorporated or unincorporated entity,
the bylaws, operating agreement, partnership agreement, limited partnership
agreement, shareholder agreement or other applicable documents relating to the
operation, governance or management of such entity.

“Organizational
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized incorporated or unincorporated entity, the articles of
incorporation, certificate of incorporation, articles of organization,
certificate of limited partnership or other applicable organizational or
charter documents relating to the creation of such entity.

SECTION 2.   Amendments  to Credit Agreement. 

(a)        Section
1.01 of the Credit Agreement is hereby amended by:

(i)   amending and restating the definition of
“Termination Date” to read as follows:

“Termination Date” shall mean August 22, 2013,
as extended pursuant to Section 2.05.

(ii)   adding the following new definitions in appropriate
alphabetical order:

“Permitted L/C Facility” shall mean (i) any
letter of credit facility to which any Loan Party is a party as of the Third
Amendment Effective Date (excluding the Credit Agreement) and (ii) any letter
of credit facility entered into by a Loan Party after the Third Amendment
Effective Date having terms that are not materially less favorable to the
applicable Loan Party or Loan Parties party thereto, taken as a whole, than the
letter of credit facilities described in the foregoing clause (i).

“Third Amendment” shall mean the Third
Amendment to Credit Agreement, dated as of October __, 2010, by and among the
Loan Parties and BB&T as Agent, Issuing Bank and a Bank.

“Third Amendment Effective Date” shall have the
meaning set forth in the Third Amendment.

(b)         Section 2.05 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

SECTION 2.05.  Maturity of Loans.  (a)
Each Revolving Credit Advance included in any Revolving Credit Borrowing shall
mature, and the principal amount thereof shall be due and payable, subject to
Section 6.01, on the earlier of:  (i) the Termination Date, and (ii) the last
day of the applicable Interest Period.  Upon the written request of the
Borrower, which request shall be delivered to the Agent at least 60 days (but
no more than 90 days) prior to the Second Anniversary Date (as such term is
hereinafter defined), the Banks shall have the option (without any obligation
whatsoever so to do) of extending the Termination Date for one additional
two-year period on August 22, 2012 (the “Second Anniversary Date”).  Each Bank
shall notify the Borrower and the Agent at least 15 days prior to the Second
Anniversary Date whether or not it chooses to extend the Termination Date 

2

 

for such an additional two-year period (but any Bank
which fails to give such notice within such period shall be deemed not to have
extended); provided, that the Termination Date shall not be extended with
respect to any of the Banks unless all of the Banks are willing to extend the
Termination Date.

(c)        Section
2.07 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

SECTION 2.07.  Fees.  (a) The Borrower
shall pay to the Agent for the ratable account of each Bank a non-utilization
fee equal to the product of (i) the aggregate of the daily average amounts of
such Bank’s Unused Revolving Credit Commitment, times (ii) a per annum
percentage equal to 0.175%.  Such non-utilization fee shall accrue from and
including the Closing Date to and including the Termination Date.  Non-utilization
fees shall be payable quarterly in arrears on each Quarterly Payment Date and
on the Termination Date; provided that should the Revolving Credit Commitments
be terminated at any time prior to the Termination Date for any reason, the
entire accrued and unpaid fee shall be paid on the date of such termination.

(d)       Section
5.05 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

SECTION 5.05.  Minimum Consolidated Tangible
Net Worth.  Consolidated Tangible Net Worth will at no time be less than
$275,000,000:  (A) plus the sum of (i) if Net Income for any Fiscal Year ending
after January 30, 2010 is a positive number, an amount equal to 50% of such Net
Income, and (ii) 100% of the cumulative Net Proceeds of Capital
Stock/Conversion of Debt received during any period after January 30, 2010,
calculated quarterly; and (B) minus any amount paid by Borrower to purchase
shares of its own capital stock after the Closing Date.

(e)        Section
5.11 of the Credit Agreement is hereby amended by:

(i)         amending
and restating subclause (i) of such Section in its entirety to read as follows:

(i)  Liens not described in subclauses (a)
through (h) above or subclause (k) below that relate to liabilities not in
excess of $2,000,000 in the aggregate;

(ii)        replacing
the period at the end of clause (j) with the text “; and” and adding a new
subclause (k) to read as follows:

(k)  Liens on the documents to be presented
under documentary trade letters of credit permitted under Section 5.27(i) (and
the inventory the purchase, shipment or storage price of which is supported by
such documentary trade letters of credit) so long as such Liens are
extinguished when such inventory is delivered to the Loan Parties and provided
that such 

3

 

Liens secure only the reimbursement
obligations of the Loan Parties in respect of such documentary trade letters of
credit.

(f)        Section
5.27 of the Credit Agreement is hereby amended by deleting the word “and”
appearing at the end of clause (g) of such Section, replacing the period
appearing at the end of clause (h) of such Section with the text “; and” and
adding a new clause (i) to the end of such Section to read as follows:

(i)         reimbursement obligations in
respect of documentary trade letters of credit issued under any Permitted L/C
Facility to support obligations of the Loan Parties (other than obligations in
respect of Debt) to purchase inventory in the ordinary course of business,
provided that the stated amount of all such documentary trade letters of credit
shall not exceed $35, 000,000 in the aggregate.

(g)        Article
V of the Credit Agreement is hereby amended by adding the following new Section
5.07 and Section 5.08:

SECTION 5.07.  Banking Relationship. 
The Loan Parties shall at all times maintain their primary demand deposit, cash
management and other operating accounts with Agent.

SECTION 5.08.  Modification of Permitted L/C
Facilities.  The Loan Parties shall not amend or otherwise modify any
Permitted L/C Facility in any manner that would adversely affect the rights of
the Agent, Issuing Bank or Banks under the Loan Documents or confer additional
material rights on the provider or issuer of letters of credit under any
Permitted L/C Facility (or such provider’s or issuer’s successors or assigns)
without the prior written consent of the Required Banks.

SECTION 3.   Conditions
to Effectiveness.  The effectiveness of this Amendment and the obligations
of the Agent and Banks hereunder are subject to the following conditions:

(a)        receipt
by the Agent from each of the parties hereto of a duly executed counterpart of
this Amendment signed by such party;

(b)        receipt
by the Agent of the following, all in form and substance satisfactory to the
Agent:

(i)         a closing certificate,
substantially in the form of Exhibit G to the Credit Agreement, appropriately
modified to refer to this Amendment, signed by a principal officer of each Loan
Party; and

(ii)         a certificate of
each Loan Party, signed by the Secretary, an Assistant Secretary, a member,
manager, partner, trustee or other authorized representative of the respective
Loan Party, certifying as to the names, true signatures and incumbency of the
officer or officers of the respective Loan Party authorized to execute and
deliver the Loan Documents, and certified copies of the following items:  (i)
the Loan Party’s Organizational Documents; (ii) the Loan Party’s Operating
Documents; (iii) if applicable, a certificate of the Secretary of State of such
Loan Party’s State of organization as to the good standing or existence of such
Loan Party, and (iv) the organizational action, if any, taken by the board of
directors of 

4

 

the Loan Party or the members, managers,
trustees, partners or other applicable Persons authorizing the Loan Party’s
execution, delivery and performance of this Amendment, and any other documents
which the Agent or any Bank may reasonably request relating to the existence of
each Loan Party, the authority for and the validity of this Amendment.

(c)        receipt
by the Agent of all other documents that the Agent may reasonably request,
respecting this Amendment and the transactions contemplated hereunder;

(d)       the fact
that after giving effect to this Amendment, the representations and warranties
of the Loan Parties contained in Section 5 of this Amendment shall be true on
and as of the date hereof;

(e)        the
Borrower shall have paid to the Agent all fees and expenses (including, without
limitation, reasonable attorney’s fees and expenses to the extent invoiced and
presented to the Borrower as of the date hereof) payable to the Agent arising
from or relating to the negotiation, preparation, execution, delivery
performance or administration of this Amendment or which are otherwise required
to be paid by the Borrower on or before the date hereof; and

(f)        all
other documents and legal matters in connection with the transactions
contemplated by this Amendment shall be reasonably satisfactory in form and
substance to the Agent and its counsel.

SECTION 4.   No
Other Amendment.  Except for the amendments expressly set forth herein, the
text of the Credit Agreement shall remain unchanged and in full force and
effect.  On and after the Third Amendment Effective Date (as defined below),
all references to the Credit Agreement in each of the Loan Documents shall hereafter mean the Credit
Agreement as amended by this Amendment.  This Amendment is not intended to
effect, nor shall it be construed as, a novation.  The Credit Agreement and
this Amendment shall be construed together as a single agreement.  Nothing
herein contained shall waive, annul, vary or affect any provision, condition,
covenant or agreement contained in the Credit Agreement, except as herein
amended, nor affect nor impair any rights, powers or remedies under the Credit
Agreement as hereby amended.  The Agent and Banks do hereby reserve all of its
rights and remedies against all parties who may be or may hereafter become
secondarily liable for the repayment of the Notes.  The Loan Parties promise
and agree to perform all of the requirements, conditions, agreements and
obligations under the terms of the Credit Agreement, as heretofore and hereby
amended and the other Loan Documents, the Credit Agreement, as amended, and the
other Loan Documents being hereby ratified and affirmed (including the
obligations of the Guarantors with respect to the Guaranteed Obligations).  The
Loan Parties hereby expressly agree that the Credit Agreement, as amended
hereby, and the other Loan Documents are in full force and effect.

SECTION 5.   Representations
and Warranties.  The Borrower and each Guarantor hereby represent and
warrant to the Agent and Banks as follows:

(a)        After
giving effect to this Amendment, no Default has occurred and is continuing on
the date hereof.

(b)       Each Loan Party has
the power and authority to enter into this Amendment and to do all acts and
things as are required or contemplated hereunder to be done, observed and
performed by it.

5

 

(c)       This
Amendment has been duly authorized, validly executed and delivered by one or
more authorized officers of each Loan Party and this Amendment, and the Credit
Agreement as amended hereby, constitute the legal, valid and binding
obligations of the Loan Parties enforceable against them in accordance with its
terms, provided that such enforceability is subject to general principles of
equity.

(d)       The execution and
delivery of this Amendment and the performance hereunder, and under the Credit
Agreement as amended hereby, by the Loan Parties do not and will not, as a
condition to such execution, delivery and performance, require the consent or
approval of any Governmental Authority having jurisdiction over any Loan Party,
nor be in contravention of or in conflict with the Operating Documents or
Organizational Documents of any Loan Party, or the provision of any statute, or
any judgment, order or indenture, instrument, agreement or undertaking, to
which any Loan Party is party or by which the assets or properties of any Loan
Party are or may become bound.

SECTION 6.   Counterparts. 
This Amendment may be executed in multiple counterparts, each of which shall be
deemed to be an original and all of which, taken together, shall constitute one
and the same agreement.

SECTION 7.   Governing
Law.  This Amendment shall be construed in accordance with and governed by
the laws of the State of North Carolina without regard to conflict of laws
principles.

SECTION 8.   Consent
by Guarantors.  Each Guarantor consents to the foregoing amendments.  Each
Guarantor promises and agrees to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement as hereby
amended, said Credit Agreement, as hereby amended, being hereby ratified and
affirmed.

SECTION 9.   Further
Assurances.  Each Loan Party agrees to promptly take such action, upon the
request of the Agent or any Bank, as is necessary to carry out the intent of
this Amendment.

SECTION 10. Effective
Date.  This Amendment shall be effective as of the date first written above
upon satisfaction of all the conditions set forth in Section 3 (the “Third
Amendment Effective Date”).

SECTION 11. Loan
Document.  This Amendment is a Loan Document and is subject to all
provisions of the Credit Agreement applicable to Loan Documents, all of which
are incorporated in this Amendment by reference the same as if set forth in
this Amendment verbatim.

SECTION 12. Severability. 
Any provision of this Amendment that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

SECTION 13. Entire
Agreement.  This Amendment contains the entire and exclusive agreement of
the parties hereto with reference to the matters discussed herein.  This
Amendment supersedes all prior drafts and communications with respect hereto.

[The
remainder of this page intentionally left blank.] 

 

6

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered, or have caused their respective duly authorized officers or
representatives to execute and deliver, this Amendment as of the day and year
first above written.

THE CATO CORPORATION (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CaDel, LLC (SEAL)

By:  CHW, LLC, as Member

By:                                                       (SEAL)

Name:  

Title:  

CHW, LLC (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

CATO OF TEXAS LP (SEAL)

By: Cato Southwest, Inc., as
General Partner

By:                                                       (SEAL)

Name:  

Title:  

CATO SOUTHWEST, INC. (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

CATOWEST, LLC (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

 

 

2

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered, or have caused their respective duly authorized officers or
representatives to execute and deliver, this Amendment as of the day and year
first above written.

THE CATO CORPORATION (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

CaDel, LLC (SEAL)

By:  CHW, LLC, as Member

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith R. Sattesahn

Title:  Secretary

CHW, LLC (SEAL)

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith R. Sattesahn

Title:  Secretary

CATO OF TEXAS LP (SEAL)

By: Cato Southwest, Inc., as
General Partner

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith R. Sattesahn

Title:  Secretary

CATO SOUTHWEST, INC. (SEAL)

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith R. Sattesahn

Title:  Secretary

CATOWEST, LLC (SEAL)

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith R. Sattesahn

Title:  Secretary

 

3

 

CATOSOUTH
LLC (SEAL)

By: The Cato Corporation, as Member

By: s\ [Authorized Signatory]            (SEAL)

Name:  

Title:  

catocorp.com, LLC (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

 

 

2

 

CATOSOUTH
LLC (SEAL)

By: The Cato Corporation, as Member

By: \s\ [Authorized Signatory]           (SEAL)

Name:  

Title:  

catocorp.com, LLC (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

 

2

 

CATOSOUTH
LLC (SEAL)

By: The Cato Corporation, as Member

By:                                                       (SEAL)

Name:  

Title:  

catocorp.com, LLC (SEAL)

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith R. Sattesahn

Title:  Secretary

 

 

2

 

BRANCH
BANKING AND TRUST

COMPANY,

as Agent, Issuing Bank and a Bank

By: \s\ H. Wright Uzzell, Jr.              (SEAL)

Name:  H. Wright Uzzell, Jr.

Title:  Senior Vice President

 

 

3

 

FOURTH AMENDMENT TO CREDIT AGREEMENT

THIS FOURTH
AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made as of the 12th day of
March, 2013, by and among THE CATO CORPORATION, a Delaware corporation (the
“Borrower”), CATOWEST, LLC, a Nevada limited liability company, CATO SOUTHWEST,
INC., a Delaware corporation, CATOSOUTH, LLC, a North Carolina limited
liability company, CHW, LLC, a Delaware limited liability company, CaDeL, LLC,
a Delaware limited liability company, CATO OF TEXAS, L.P., a Texas limited
partnership and catocorp.com, LLC, a Delaware limited liability company (each of the
foregoing, other than the Borrower, a “Guarantor” and, collectively, the
“Guarantors”) and BRANCH BANKING AND TRUST COMPANY, as Agent, Issuing Bank, and
a Bank.

RECITALS:

The Borrower, the
Guarantors, the Agent and the Banks entered into a certain Credit Agreement
dated as of August 22, 2003, as amended by (i) the First Amendment to Credit
Agreement dated August 22, 2005, (ii) the Second Amendment to Credit Agreement
dated October 29, 2007, (iii) the Waiver Agreement dated July 30, 2008, and
(iv) the Third Amendment to Credit Agreement dated October 31, 2010 (as so
amended, modified or supplemented, the “Credit Agreement”).  Capitalized terms
used in this Amendment which are not otherwise defined in this Amendment shall
have the respective meanings assigned to them in the Credit Agreement.

The Borrower and
the Guarantors have requested that the Agent and the Banks extend the term of
the Credit Agreement and modify certain provisions of the Credit Agreement as
more fully set forth herein.  The Agent and the Banks have agreed to extend the
term of and so modify the Credit Agreement, all upon the terms and conditions
hereinafter set forth.

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower, the Guarantors, the Agent and the Banks,
intending to be legally bound hereby, agree as follows:

SECTION 1.   Recitals;
Definitions. 

(a)        The
Recitals are incorporated herein by reference and shall be deemed to be a part
of this Amendment.

(b)        As used
in this Amendment, the following capitalized terms shall have the meanings set
forth below:

“Governmental
Authority” means the government of the United States of America or any other
nation, or of any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).

“Operating
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized incorporated or unincorporated entity, the bylaws, operating
agreement, partnership agreement, 

1

 

limited partnership
agreement, shareholder agreement or other applicable documents relating to the
operation, governance or management of such entity.

“Organizational
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized incorporated or unincorporated entity, the articles of
incorporation, certificate of incorporation, articles of organization,
certificate of limited partnership or other applicable organizational or charter
documents relating to the creation of such entity.

SECTION 2.   Amendments
to Credit Agreement. 

(a)        Section
1.01 of the Credit Agreement is hereby amended by amending and restating the
definition of “Termination Date” to read as follows:

“Termination Date” shall mean August 22, 2015,
as extended pursuant to Section 2.05.

(b)        Section
2.05(a) of the Credit Agreement is hereby amended and restated in its entirety
to read as follows:

SECTION 2.05.  Maturity of Loans.  (a)
Each Revolving Credit Advance included in any Revolving Credit Borrowing shall
mature, and the principal amount thereof shall be due and payable, subject to
Section 6.01, on the earlier of (i) the Termination Date, and (ii) the last day
of the applicable Interest Period.  Upon the written request of the Borrower,
which request shall be delivered to the Agent at least 60 days (but no more than
90 days) prior to the Second Anniversary Date (as such term is hereinafter
defined), the Banks shall have the option (without any obligation whatsoever so
to do) of extending the Termination Date for one additional two-year period on
August 22, 2014 (the “Second Anniversary Date”).  Each Bank shall notify the
Borrower and the Agent at least 15 days prior to the Second Anniversary Date
whether or not it chooses to extend the Termination Date for such an additional
two-year period (but any Bank which fails to give such notice within such
period shall be deemed not to have extended); provided, that the Termination
Date shall not be extended with respect to any of the Banks unless all of the
Banks are willing to extend the Termination Date.

 

(c)        A new
Section 2.17 is added to the Credit Agreement to read in its entirety as
follows:

SECTION 2.17.  Increase in Commitments. 

(a)        The Borrower shall have the right,
at any time and from time to time after January 31, 2013 by written notice to
and in consultation with the Agent, to request an increase in the aggregate
Revolving Credit Commitment (but the aggregate outstanding principal amount of
Letter of Credit Advances and Undrawn Amounts shall not be increased and shall
in no event exceed $35,000,000) (each such requested increase, a “Commitment
Increase”), by having one or more existing Banks increase 

2

 

their
respective Revolving Credit Commitments then in effect (each, an “Increasing
Bank”), by adding as a Bank with a new Revolving Credit Commitment hereunder
one or more Persons that are not already Banks (each, an “Additional Bank”), or
a combination thereof provided that (i) any such request for a Commitment
Increase shall be in a minimum amount of $5,000,000, (ii) immediately after
giving effect to any Commitment Increase, (y) the aggregate Revolving Credit
Commitments shall not exceed $75,000,000 and (z) the aggregate of all Commitment
Increases effected shall not exceed $40,000,000, (iii) no Default shall have
occurred and be continuing on the applicable Commitment Increase Date (as
hereinafter defined) or shall result from any Commitment Increase, (iv)
immediately after giving effect to any Commitment Increase (including any
Revolving Credit Borrowings in connection therewith and the application of the
proceeds thereof), the Borrower shall be in compliance with the covenants
contained in Article V, (v) subject to the terms of (vi), the Borrower may
invite an Additional Bank to provide a Commitment Increase subject to the
Agent’s consent to such Additional Bank in writing which consent may not be
unreasonably withheld; and (vi) the Borrower shall give the existing Banks the
right of first refusal for participating in any such Commitment Increase by
providing such notice to the Agent fifteen (15) Domestic Business Days before
making a request to any Person that is not already a Bank. An existing Bank
shall have priority over Additional Banks to participate in such requested
Commitment Increase if such existing Bank provides written notice of its
election to participate within fifteen (15) Domestic Business Days of such
existing Bank’s receipt of such notice.  Such notice from the Borrower shall
specify the requested amount of the Commitment Increase.  No Bank shall have
any obligation to become an Increasing Bank.  Any fees paid by the Borrower for
a Commitment Increase to an Increasing Bank, an Additional Bank, or the Agent
shall be for their own account and shall be in an amount, if any, mutually
agreed upon by each such party and the Borrower, in each party’s sole
discretion.

(b)        The Borrower, the other Loan Parties
and each Additional Bank shall execute a joinder agreement, and the Borrower,
the other Loan Parties and each Bank shall execute all such other documentation
as the Agent and the Borrower may reasonably require, all in form and substance
reasonably satisfactory to the Agent and the Borrower, to evidence the
Revolving Credit Commitment adjustments referred to in Section 2.17.

(c)         If the aggregate Revolving Credit Commitments
are increased in accordance with this Section 2.17, the Borrower (in
consultation with the Agent), Increasing Bank(s) (if any) and Additional
Bank(s) (if any) shall agree upon the effective date (the “Commitment Increase
Date,” which shall be a Domestic Business Day not less than thirty (30) days
prior to the Maturity Date).  The Agent shall promptly notify the Banks of such
increase and the Commitment Increase Date.  Each of the Borrower, the
Guarantors, the Banks and the Agent acknowledges and agrees that each
Commitment Increase meeting the conditions set forth in this Section 2.17 (x)
shall not require the consent of any Guarantor or any Bank other than the
Increasing Banks and Additional Banks who have 

3

 

agreed
to make such Commitment Increase and shall not constitute an amendment,
modification or waiver subject to Section 9.05 or Section 9.07 and (y) subject
to clause (d) of this Section 2.17, shall be effective as of the Commitment
Increase Date.

(d)         Notwithstanding anything set forth in this
Section 2.17 to the contrary, the Borrower shall not incur any Revolving Credit
Advances pursuant to any Commitment Increase (and no Commitment Increase shall
be effective) unless the conditions set forth in Section 2.17(a) as well as the
following conditions precedent are satisfied on the applicable Commitment
Increase Date:

(i)         The Agent shall have received the
following, each dated the Commitment Increase Date and in form and substance
reasonably satisfactory to the Agent:

(A)       a supplement to this Agreement signed
by each Increasing Bank (if any) and Additional Bank (if any), setting forth
the reallocation of Revolving Credit Commitments referred to in Section
2.17(e), all other documentation required by the Agent pursuant to Section
2.17(b) and such other modifications, documents or items as the Agent, such
Banks or their counsel may reasonably request;

(B)       an instrument, duly executed by the
Borrower and each Guarantor, if any, acknowledging and reaffirming its
obligations under this Agreement and the other Loan Documents to which it is a
party;

(C)       a certificate of the secretary or an
assistant secretary of the Borrower and each Guarantor, certifying to and
attaching the resolutions adopted by the board of directors (or similar
governing body) of such party approving or consenting to such Commitment
Increase;

(D)        a certificate of the chief financial officer of
the Borrower, certifying that (x) as of the Commitment Increase Date, all
representations and warranties of the Borrower and the Guarantors contained in
this Agreement and the other Loan Documents are true and correct (except to the
extent any such representation or warranty is expressly stated to have been
made as of a specific date, in which case such representation or warranty is
true and correct as of such date), except that for purposes of this Section
2.17(d)(i) the representations and warranties contained in Section 4.10(a)
shall be deemed to refer to the most recent statements furnished pursuant to
clauses (a) and (b), respectively, of Section 5.01, (y) immediately after
giving effect to such Commitment Increase (including any 

4

 

Borrowings
in connection therewith and the application of the proceeds thereof), the
Borrower is in compliance with the covenants contained in Article V, and (z) no
Default has occurred and is continuing, both immediately before and after
giving effect to such Commitment Increase (including any Borrowings in
connection therewith and the application of the proceeds thereof);

(E)        an opinion or opinions of counsel for the
Borrower and the Guarantors, in a form reasonably satisfactory to Agent and
covering such matters as Agent may reasonably request, addressed to the Agent
and the Banks, together with such other documents, instruments and certificates
as the Agent shall have reasonably requested; and

(F)        such other documents or items that the Agent,
such Banks or their counsel may reasonably request.

(e)        On the Commitment Increase Date, (i)
the aggregate principal outstanding amount of the Revolving Credit Advances
(the “Initial Advances”) immediately prior to giving effect to the Commitment
Increase shall be deemed to be repaid, (ii) immediately after the effectiveness
of the Commitment Increase, the Borrower shall be deemed to have made new
Revolving Credit Borrowings of Revolving Credit Advances (the “Subsequent
Borrowings”) in an aggregate principal amount equal to the aggregate principal
amount of the Initial Advances and of the types and for the Interest Periods
specified in a Notice of Borrowing delivered to the Agent in accordance with
Section 2.02(a), (iii) each Bank shall pay to the Agent in immediately
available funds an amount equal to the difference, if positive, between (y)
such Bank’s pro rata percentage (calculated after giving effect to the
Commitment Increase) of the Subsequent Borrowings and (z) such Bank’s pro rata
percentage (calculated without giving effect to the Commitment Increase) of the
Initial Advances, (iv) after the Agent receives the funds specified in clause
(iii) above, the Agent shall pay to each Bank the portion of such funds equal
to the difference, if positive, between (y) such Bank’s pro rata percentage
(calculated without giving effect to the Commitment Increase) of the Initial
Advances and (z) such Bank’s pro rata percentage (calculated after giving
effect to the Commitment Increase) of the amount of the Subsequent Borrowings,
(v) the Bank shall be deemed to hold the Subsequent Borrowings ratably in
accordance with their respective Revolving Credit Commitments (calculated after
giving effect to the Commitment increase), (vi) the Borrower shall pay all
accrued but unpaid interest on the Initial Advances to the Banks entitled
thereto, and (vii) the signature pages hereto shall be deemed amended to
reflect the Revolving Credit Commitments of all Banks after giving effect to
the Commitment Increase.  The deemed payments made pursuant to clause (i) above
in respect of each Euro-Dollar Advance shall be subject to indemnification by
the Borrower pursuant to the provisions of Section 8.05 

5

 

if the
Commitment Increase Date occurs other than on the last day of the Interest
Period relating thereto.

(d)       Section
5.05 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

SECTION 5.05.  Minimum Consolidated Tangible
Net Worth.  Consolidated Tangible Net Worth will at no time be less than
$295,000,000:  (A) plus the sum of (i) if Net Income for any Fiscal Quarter
ending after October 27, 2012 is a positive number, an amount equal to 50% of
such Net Income, and (ii) 100% of the cumulative Net Proceeds of Capital
Stock/Conversion of Debt received during any period after October 27, 2012,
calculated quarterly; and (B) minus any amount paid by Borrower to purchase
shares of its own capital stock after the Closing Date.

SECTION 3.   Conditions
to Effectiveness.  The effectiveness of this Amendment and the obligations
of the Agent and Banks hereunder are subject to the following conditions:

(a)        receipt
by the Agent from each of the parties hereto of a duly executed counterpart of
this Amendment signed by such party;

(b)        receipt
by the Agent of the following, all in form and substance satisfactory to the
Agent:

(i)         a closing certificate,
substantially in the form of Exhibit G to the Credit Agreement, appropriately
modified to refer to this Amendment, signed by a principal officer of each Loan
Party;

(ii)         an
opinion, substantially in the form of Exhibit C to the Credit Agreement,
appropriately modified to refer to this Amendment, signed by the General
Counsel of the Borrower; and

(iii)        a
certificate of each Loan Party, signed by the Secretary, an Assistant
Secretary, a member, manager, partner, trustee or other authorized
representative of the respective Loan Party, certifying as to the names, true
signatures and incumbency of the officer or officers of the respective Loan
Party authorized to execute and deliver the Loan Documents, and certified
copies of the following items:  (i) the Loan Party’s Organizational Documents;
(ii) the Loan Party’s Operating Documents; (iii) if applicable, a certificate
of the Secretary of State of such Loan Party’s State of organization as to the
good standing or existence of such Loan Party, and (iv) the organizational
action, if any, taken by the board of directors of the Loan Party or the
members, managers, trustees, partners or other applicable Persons authorizing
the Loan Party’s execution, delivery and performance of this Amendment, and any
other documents which the Agent or any Bank may reasonably request relating to
the existence of each Loan Party, the authority for and the validity of this
Amendment.

(c)        receipt
by the Agent of all other documents that the Agent may reasonably request,
respecting this Amendment and the transactions contemplated hereunder;

6

 

(d)       the fact that after giving effect to this Amendment, the
representations and warranties of the Loan Parties contained in Section 5 of
this Amendment shall be true on and as of the date hereof; and

(e)        the
Borrower shall have paid to the Agent all fees and expenses (including, without
limitation, reasonable attorney’s fees and expenses to the extent invoiced and
presented to the Borrower as of the date hereof) payable to the Agent arising
from or relating to the negotiation, preparation, execution, delivery
performance or administration of this Amendment or which are otherwise required
to be paid by the Borrower on or before the date hereof.

SECTION 4.   No
Other Amendment.  Except for the amendments expressly set forth herein, the
text of the Credit Agreement shall remain unchanged and in full force and
effect.  On and after the Fourth Amendment Effective Date (as defined below),
all references to the Credit Agreement in each of the Loan Documents shall
hereafter mean the Credit Agreement as amended by this Amendment.  This
Amendment is not intended to effect, nor shall it be construed as, a novation. 
The Credit Agreement and this Amendment shall be construed together as a single
agreement.  Nothing herein contained shall waive, annul, vary or affect any
provision, condition, covenant or agreement contained in the Credit Agreement,
except as herein amended, nor affect nor impair any rights, powers or remedies
under the Credit Agreement as hereby amended.  The Agent and Banks do hereby
reserve all of its rights and remedies against all parties who may be or may
hereafter become secondarily liable for the repayment of the Notes.  The Loan
Parties promise and agree to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement, as
heretofore and hereby amended and the other Loan Documents, the Credit
Agreement, as amended, and the other Loan Documents being hereby ratified and affirmed
(including the obligations of the Guarantors with respect to the Guaranteed
Obligations).  The Loan Parties hereby expressly agree that the Credit
Agreement, as amended hereby, and the other Loan Documents are in full force
and effect.

SECTION 5.   Representations
and Warranties.  The Borrower and each Guarantor hereby represent and
warrant to the Agent and Banks as follows:

(a)        After
giving effect to this Amendment, no Default has occurred and is continuing on the
date hereof.

(b)         Each Loan Party has the power and authority to enter into this
Amendment and to do all acts and things as are required or contemplated
hereunder to be done, observed and performed by it.

(c)         This Amendment has been duly authorized, validly executed and
delivered by one or more authorized officers of each Loan Party and this
Amendment, and the Credit Agreement as amended hereby, constitute the legal,
valid and binding obligations of the Loan Parties enforceable against them in
accordance with its terms, provided that such enforceability is subject to general
principles of equity.

(d)        The execution and delivery of this Amendment and the performance
hereunder, and under the Credit Agreement as amended hereby, by the Loan
Parties do not and will not, as a condition to such execution, delivery and
performance, require the consent or approval of any Governmental Authority
having jurisdiction over any Loan Party, nor be in contravention of or in
conflict with the Operating Documents or Organizational Documents of any Loan
Party, or the provision of any statute, or any judgment, order or indenture,
instrument, 

7

 

agreement or undertaking, to which any
Loan Party is party or by which the assets or properties of any Loan Party are
or may become bound.

SECTION 6.   Counterparts. 
This Amendment may be executed in multiple counterparts, each of which shall be
deemed to be an original and all of which, taken together, shall constitute one
and the same agreement.

SECTION 7.   Governing
Law.  This Amendment shall be construed in accordance with and
governed by the laws of the State of North Carolina without regard to conflict
of laws principles.

SECTION 8.   Consent
by Guarantors.  Each Guarantor consents to the foregoing amendments.  Each
Guarantor promises and agrees to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement as hereby
amended, said Credit Agreement, as hereby amended, being hereby ratified and
affirmed.

SECTION 9.   Further
Assurances.  Each Loan Party agrees to promptly take such action, upon the
request of the Agent or any Bank, as is necessary to carry out the intent of
this Amendment.

SECTION 10.  Effective
Date.  This Amendment shall be effective as of the date first written above
upon satisfaction of all the conditions set forth in Section 3 (the “Fourth
Amendment Effective Date”).

SECTION 11.  Loan
Document.  This Amendment is a Loan Document and is subject to all
provisions of the Credit Agreement applicable to Loan Documents, all of which
are incorporated in this Amendment by reference the same as if set forth in
this Amendment verbatim.

SECTION 12.  Severability. 
Any provision of this Amendment that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

SECTION 13.  Entire
Agreement.  This Amendment contains the entire and exclusive agreement of
the parties hereto with reference to the matters discussed herein.  This
Amendment supersedes all prior drafts and communications with respect hereto.

[The
remainder of this page intentionally left blank.]

 

8

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered, or have caused their respective duly authorized officers or
representatives to execute and deliver, this Amendment as of the day and year
first above written.

THE CATO CORPORATION (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP – Chief Financial Officer

CaDel, LLC (SEAL)

By:  CHW, LLC, as Member

By:                                                       (SEAL)

Name:  

Title:  

CHW, LLC (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

CATO OF TEXAS LP (SEAL)

By: Cato Southwest, Inc., as
General Partner

By:                                                       (SEAL)

Name:  

Title:  

CATO SOUTHWEST, INC. (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

 

 

1

 

CATOWEST, LLC (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

CATOSOUTH LLC (SEAL)

By: The Cato Corporation, as Member

By: \ s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP – Chief Financial Officer

catocorp.com, LLC (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

 

 

2

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered, or have caused their respective duly authorized officers or
representatives to execute and deliver, this Amendment as of the day and year
first above written.

THE CATO CORPORATION (SEAL)

By:                                                       (SEAL)

Name:  

Title:  

CaDel, LLC (SEAL)

By:  CHW, LLC, as Member

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith Sattesahn

Title:  Secretary

CHW, LLC (SEAL)

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith Sattesahn

Title:  Secretary

CATO OF TEXAS LP (SEAL)

By: Cato Southwest, Inc., as
General Partner

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith Sattesahn

Title:  Secretary

CATO SOUTHWEST, INC. (SEAL)

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith Sattesahn

Title:  Secretary

 

 

3

 

CATOWEST, LLC (SEAL)

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith Sattesahn

Title:  Secretary

CATOSOUTH LLC (SEAL)

By: The Cato Corporation, as Member

By:                                                       (SEAL)

Name:  

Title:  

catocorp.com, LLC (SEAL)

By: \s\ Keith R. Sattesahn                  (SEAL)

Name:  Keith Sattesahn

Title:  Secretary

 

 

4

 

BRANCH
BANKING AND TRUST

COMPANY,

as Agent, Issuing Bank and a Bank

By: \s\ [Authorized Signatory]           (SEAL)

Name:  

Title:  

 

5

 

FIFTH AMENDMENT TO CREDIT AGREEMENT

THIS FIFTH
AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made as of the 1st day of
May, 2015, by and among THE CATO CORPORATION, a Delaware corporation (the
“Borrower”), CATOWEST, LLC, a Nevada limited liability company, CATO SOUTHWEST,
INC., a Delaware corporation, CATOSOUTH, LLC, a North Carolina limited
liability company, CHW, LLC, a Delaware limited liability company, CaDeL, LLC,
a Delaware limited liability company, CATO OF TEXAS, L.P., a Texas limited
partnership and catocorp.com, LLC, a Delaware
limited liability company (each of the foregoing, other than the Borrower, a “Guarantor” and, collectively, the
“Guarantors”) and BRANCH BANKING AND TRUST COMPANY, as Agent, Issuing Bank, and
a Bank.

RECITALS:

The Borrower, the
Guarantors, the Agent and the Banks entered into a certain Credit Agreement
dated as of August 22, 2003, as amended by (i) the First Amendment to Credit
Agreement dated August 22, 2005, (ii) the Second Amendment to Credit Agreement
dated October 29, 2007, (iii) the Waiver Agreement dated July 30, 2008, (iv)
the Third Amendment to Credit Agreement dated October 31, 2010, and (v) the
Fourth Amendment to Credit Agreement dated March 12, 2013 (as so amended,
modified or supplemented, the “Credit Agreement”).  Capitalized terms used in
this Amendment which are not otherwise defined in this Amendment shall have the
respective meanings assigned to them in the Credit Agreement.

The Borrower and
the Guarantors have requested that the Agent and the Banks extend the term of
the Credit Agreement and modify certain provisions of the Credit Agreement as
more fully set forth herein.  The Agent and the Banks have agreed to extend the
term of and so modify the Credit Agreement, all upon the terms and conditions
hereinafter set forth.

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower, the Guarantors, the Agent and the Banks,
intending to be legally bound hereby, agree as follows:

SECTION 1.   Recitals;
Definitions. 

(a)        The
Recitals are incorporated herein by reference and shall be deemed to be a part
of this Amendment.

(b)        As used
in this Amendment, the following capitalized terms shall have the meanings set
forth below:

“Governmental
Authority” means the government of the United States of America or any other
nation, or of any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).

“Operating
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized incorporated or unincorporated entity, the bylaws, operating
agreement, partnership agreement, 

1

 

limited partnership
agreement, shareholder agreement or other applicable documents relating to the
operation, governance or management of such entity.

“Organizational
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized incorporated or unincorporated entity, the articles of
incorporation, certificate of incorporation, articles of organization,
certificate of limited partnership or other applicable organizational or
charter documents relating to the creation of such entity.

SECTION 2.   Amendments
to Credit Agreement. 

(a)        Section
1.01 of the Credit Agreement is hereby amended by amending and restating the
definition of “Termination Date” to read as follows:

“Termination Date” shall mean August 22, 2018,
as extended pursuant to Section 2.05.

(b)        Section
2.06(a) of the Credit Agreement is hereby amended and restated in its entirety
to read as follows:

(a)  “Applicable Margin” shall mean in the case
of the Revolving Credit Advances, 0% if such Revolving Credit Advance is a Base
Rate Loan and 0.875% if such Revolving Credit Advance is an Index Rate Loan or
a LIBOR Rate Loan.

(c)        Section
2.07(a) and (b) of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

(a)  The Borrower shall pay to the Agent for
the ratable account of each Bank a facility fee equal to the product of:  (i)
the aggregate of the daily average amounts of such Bank’s Revolving Credit
Commitment, times (ii) a per annum percentage equal to 0.125%.  Such facility
fee shall accrue from and including the Fifth Amendment Effective Date to and
including the Termination Date.  Facility fees shall be payable quarterly in
arrears on each Quarterly Payment Date and on the Termination Date; provided
that should the Revolving Credit Commitments be terminated at any time prior to
the Termination Date for any reason, the entire accrued and unpaid fee shall be
paid on the date of such termination.

(b)  The Borrower shall pay to the Agent for
the ratable account of each Bank; with respect to each Letter of Credit, a per
annum letter of credit fee (the “Letter of Credit Fee”) equal to the product
of:  (i) the aggregate average daily Undrawn Amounts, times (ii) a per annum
percentage equal to 0.875% (calculated in accordance with Section 2.13).  Such
Letter of Credit Fees shall be payable in arrears for each Letter of Credit on
each Quarterly Payment Date during the term of each respective Letter of Credit
and on the termination thereof (whether at its stated expiry date or earlier.)

(d)       Section
5.05 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

2

 

SECTION 5.05.  Minimum Consolidated Tangible Net Worth. 
Consolidated Tangible Net Worth will at no time be less than $309,929,826.00: 
(A) plus the sum of (i) if Net Income for any Fiscal Quarter ending after
January 31, 2015 is a positive number, an amount equal to 50% of such Net
Income, and (ii) 100% of the cumulative Net Proceeds of Capital
Stock/Conversion of Debt received during any period after January 31, 2015,
calculated quarterly; and (B) minus any amount paid by Borrower to purchase
shares of its own capital stock after the Closing Date.

SECTION 3.   Conditions
to Effectiveness.  The effectiveness of this Amendment and the obligations
of the Agent and Banks hereunder are subject to the following conditions:

(a)        receipt
by the Agent from each of the parties hereto of a duly executed counterpart of
this Amendment signed by such party;

(b)        receipt
by the Agent of the following, all in form and substance satisfactory to the
Agent:

(i)         a closing certificate,
substantially in the form of Exhibit G to the Credit Agreement, appropriately
modified to refer to this Amendment, signed by a principal officer of each Loan
Party;

(ii)        an opinion, substantially in the
form of Exhibit C to the Credit Agreement, appropriately modified to refer to
this Amendment, signed by the General Counsel of the Borrower; and

(iii)       a certificate of each Loan Party,
signed by the secretary, an Assistant Secretary, a member, manager, partner,
trustee or other authorized representative of the respective Loan Party,
certifying as to the names, true signatures and incumbency of the officer or
officers of the respective Loan Party authorized to execute and deliver the
Loan Documents, and certified copies of the following items:  (i) the Loan
Party’s Organizational Documents; (ii) the Loan Party’s Operating Documents;
(iii) if applicable, a certificate of the Secretary of State of such Loan
Party’s State of organization as to the good standing or existence of such Loan
Party, and (iv) the organizational action, if any, taken by the board of
directors of the Loan Party or the members, managers, trustees, partners or
other applicable Persons authorizing the Loan Party’s execution, delivery and performance
of this Amendment, and any other documents which the Agent or any Bank may
reasonably request relating to the existence of each Loan Party, the authority
for and the validity of this Amendment.

(c)        receipt
by the Agent of all other documents that the Agent may reasonably request,
respecting this Amendment and the transactions contemplated hereunder;

(d)       the fact
that after giving effect to this Amendment, the representations and warranties
of the Loan Parties contained in Section 5 of this Amendment shall be true on
and as of the date hereof; and

(e)         the Borrower shall have paid to the Agent all fees and expenses
(including, without limitation, reasonable attorney’s fees and expenses to the
extent invoiced and presented to the Borrower as of the date hereof) payable to
the Agent arising from or relating to the negotiation, 

3

 

preparation,
execution, delivery performance or administration of this Amendment or which
are otherwise required to be paid by the Borrower on or before the date hereof.

SECTION 4.  No
Other Amendment.  Except for the amendments expressly set forth herein, the
text of the Credit Agreement shall remain unchanged and in full force and
effect.  On and after the Fifth Amendment Effective Date (as defined below),
all references to the Credit Agreement in each of the Loan Documents shall
hereafter mean the Credit Agreement as amended by this Amendment.  This
Amendment is not intended to effect, nor shall it be construed as, a novation. 
The Credit Agreement and this Amendment shall be construed together as a single
agreement.  Nothing herein contained shall waive, annul, vary or affect any
provision, condition, covenant or agreement contained in the Credit Agreement,
except as herein amended, nor affect nor impair any rights, powers or remedies
under the Credit Agreement as hereby amended.  The Agent and Banks do hereby
reserve all of its rights and remedies against all parties who may be or may
hereafter become secondarily liable for the repayment of the Notes.  The Loan
Parties promise and agree to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement, as
heretofore and hereby amended and the other Loan Documents, the Credit
Agreement, as amended, and the other Loan Documents being hereby ratified and
affirmed (including the obligations of the Guarantors with respect to the
Guaranteed Obligations).  The Loan Parties hereby expressly agree that the
Credit Agreement, as amended hereby, and the other Loan Documents are in full
force and effect.

SECTION 5.   Representations
and Warranties.  The Borrower and each Guarantor hereby represent and
warrant to the Agent and Banks as follows:

(a)        After
giving effect to this Amendment, no Default has occurred and is continuing on
the date hereof.

(b)        Each
Loan Party has the power and authority to enter into this Amendment and to do
all acts and things as are required or contemplated hereunder to be done,
observed and performed by it.

(c)        This
Amendment has been duly authorized, validly executed and delivered by one or
more authorized officers of each Loan Party and this Amendment, and the Credit
Agreement as amended hereby, constitute the legal, valid and binding
obligations of the Loan Parties enforceable against them in accordance with its
terms, provided that such enforceability is subject to general principles of
equity.

(d)       The
execution and delivery of this Amendment and the performance hereunder, and under
the Credit Agreement as amended hereby, by the Loan Parties do not and will
not, as a condition to such execution, delivery and performance, require the
consent or approval of any Governmental Authority having jurisdiction over any
Loan Party, nor be in contravention of or in conflict with the Operating
Documents or Organizational Documents of any Loan Party, or the provision of
any statute, or any judgment, order or indenture, instrument, agreement or
undertaking, to which any Loan Party is party or by which the assets or
properties of any Loan Party are or may become bound.

SECTION 6.   Counterparts. 
This Amendment may be executed in multiple counterparts, each of which shall be
deemed to be an original and all of which, taken together, shall constitute one
and the same agreement.

4

 

SECTION 7.   Governing Law.  This Amendment shall be
construed in accordance with and governed by the laws of the State of North
Carolina without regard to conflict of laws principles.

SECTION 8.   Consent
by Guarantors.  Each Guarantor consents to the foregoing amendments.  Each
Guarantor promises and agrees to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement as hereby
amended, said Credit Agreement, as hereby amended, being hereby ratified and
affirmed.

SECTION 9.   Further
Assurances.  Each Loan Party agrees to promptly take such action, upon the
request of the Agent or any Bank, as is necessary to carry out the intent of
this Amendment.

SECTION 10.  Effective
Date.  This Amendment shall be effective as of the date first written above
upon satisfaction of all the conditions set forth in Section 3 (the “Fifth
Amendment Effective Date”).

SECTION 11.  Loan
Document.  This Amendment is a Loan Document and is subject to all
provisions of the Credit Agreement applicable to Loan Documents, all of which
are incorporated in this Amendment by reference the same as if set forth in
this Amendment verbatim.

SECTION 12.  Severability. 
Any provision of this Amendment that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

SECTION 13.  Entire
Agreement.  This Amendment contains the entire and exclusive agreement of
the parties hereto with reference to the matters discussed herein.  This
Amendment supersedes all prior drafts and communications with respect hereto.

[The
remainder of this page intentionally left blank.]

 

5

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered, or have caused their respective duly authorized officers or
representatives to execute and deliver, this Amendment as of the day and year
first above written.

THE CATO CORPORATION (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CaDel, LLC (SEAL)

By:  CHW, LLC, as Member

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CHW, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CATO OF TEXAS LP (SEAL)

By: Cato Southwest, Inc., as
General Partner

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CATO SOUTHWEST, INC. (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

 

 

1

 

CATOWEST, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CATOSOUTH LLC (SEAL)

By: The Cato Corporation, as Member

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

catocorp.com, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

 

 

2

 

BRANCH
BANKING AND TRUST

COMPANY,

as Agent, Issuing Bank and a Bank

By: \s\ Stuart M. Jones                       (SEAL)

Name:  Stuart M. Jones

Title:  Senior Vice President

 

 

3

 

SIXTH AMENDMENT TO CREDIT AGREEMENT

THIS SIXTH
AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made as of the 1st day of
May, 2017, but effective as of the Sixth Amendment Effective Date (as defined
herein), by and among THE CATO CORPORATION, a Delaware corporation (the
“Borrower”), CATO WEST, LLC, a Nevada limited liability company, CATO
SOUTHWEST, INC., a Delaware corporation, CATOSOUTH, LLC, a North Carolina
limited liability company, CHW, LLC, a Delaware limited liability company,
CaDeL, LLC, a Delaware limited liability company, CATO OF TEXAS, L.P., a Texas
limited partnership and catocorp.com, LLC, a Delaware limited liability company
(each of the foregoing, other than the Borrower, a “Guarantor” and,
collectively, the “Guarantors”) and BRANCH BANKING AND TRUST COMPANY, as Agent,
Issuing Bank, and a Bank.

RECITALS:

The Borrower, the
Guarantors, the Agent and the Banks entered into a certain Credit Agreement
dated as of August 22, 2003, as amended by (i) the First Amendment to Credit
Agreement dated August 22, 2005, (ii) the Second Amendment to Credit Agreement
dated October 29, 2007, (iii) the Waiver Agreement dated July 30, 2008, (iv)
the Third Amendment to Credit Agreement dated October 31, 2010, (v) the Fourth
Amendment to Credit Agreement dated March 12, 2013, and (vi) the Fifth
Amendment to Credit Agreement dated May 1, 2015 (as so amended, modified or
supplemented, the “Credit Agreement”). Capitalized terms used in this Amendment
which are not otherwise defined in this Amendment shall have the respective
meanings assigned to them in the Credit Agreement.

The Borrower and
the Guarantors have requested that the Agent and the Banks extend the term of
the Credit Agreement and modify certain provisions of the Credit Agreement as
more fully set forth herein. The Agent and the Banks have agreed to extend the
term of and so modify the Credit Agreement, all upon  the terms and conditions
hereinafter set forth.

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower, the Guarantors, the Agent and the Banks,
intending to be legally bound hereby, agree as follows:

SECTION 1.   Recitals:
Definitions.

(a)        The Recitals are incorporated herein by reference and
shall be deemed to be a part of this Amendment.

(b)         As used
in this Amendment, the following capitalized terms shall have the meanings set
forth below:

“Governmental
Authority” means the government of the United States of America or any other
nation, or of any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).

1

 

“Operating Documents” means with respect to any corporation,
limited liability company, partnership, limited partnership, limited liability
partnership or other legally authorized incorporated or unincorporated entity,
the bylaws, operating agreement, partnership agreement, limited partnership
agreement, shareholder agreement or other applicable documents relating to the
operation, governance or management of such entity.

“Organizational
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized incorporated or unincorporated entity, the articles of
incorporation, certificate of incorporation, articles of organization,
certificate of limited partnership or other applicable organizational or
charter documents relating to the creation of such entity.

“Sixth Amendment
Effective Date” has the meaning set forth in Section 10.

SECTION 2.    Amendment
to Credit Agreement.  Section 1.01 of the Credit Agreement is hereby
amended by amending and restating the definition of “Adjusted Cash Flow” to
read as follows:

“Adjusted Cash Flow” shall mean, for a
specified period the sum of (i) the net income of the Borrower 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) (a) the Gross Rental Expense for such period and (b)
soley for purposes of calculating Adjusted Cash Flow       for the Fiscal
Quarter ending April 30, 2017, $13,500,000 (representing an impairment charge
related to one-time expenses at Borrower stores), all as determined in
accordance with GAAP.

SECTION 3.    Conditions
to Effectiveness.  The effectiveness of this Amendment and the obligations
of the Agent and Banks hereunder are subject to the following conditions:

(a)        receipt
by the Agent from each of the parties hereto of a duly executed counterpart of
this Amendment signed by such party;

(b)         receipt by the Agent of all other
documents that the Agent may reasonably request, respecting this Amendment and
the transactions contemplated hereunder;

(c)          the fact that after giving effect to this
Amendment, the representations and warranties of the Loan Parties contained in
Section 5 of this Amendment shall be true on and as of the date hereof; and

(d)          the Borrower shall have paid to the Agent all
fees and expenses (including, without limitation, reasonable attorney’s fees
and expenses to the extent invoiced and presented to the Borrower as of the
date hereof) payable to the Agent arising from or relating to the negotiation,
preparation, execution, delivery performance or administration of this
Amendment or which are otherwise required to be paid by the Borrower on or
before the date hereof.

SECTION 4.    No Other Amendment. 
Except for the amendments expressly set forth herein, the text of the Credit
Agreement shall remain unchanged and in full force and effect. On and after the
Sixth Amendment Effective Date (as defined below), all references to the Credit

2

 

Agreement in each of the Loan Documents shall
hereafter mean the Credit Agreement as amended by this Amendment. This
Amendment is not intended to effect, nor shall it be construed as, a novation.
The Credit Agreement and this Amendment shall be construed together as a single
agreement. Nothing herein contained shall waive, annul, vary or affect any
provision, condition, covenant or agreement contained in the Credit Agreement,
except as herein amended, nor affect nor impair any rights, powers or remedies
under the Credit Agreement as hereby amended. The Agent and Banks do hereby
reserve all of its rights and remedies against all parties who may be or may
hereafter become secondarily liable for the repayment of the Notes. The Loan
Parties promise and agree to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement, as
heretofore and hereby amended and the other Loan Documents, the Credit Agreement,
as amended, and the other Loan Documents being hereby ratified and affirmed
(including the obligations of the Guarantors with respect to the Guaranteed
Obligations). The Loan Parties hereby expressly agree that the Credit
Agreement, as amended hereby, and the other Loan Documents are in full force
and effect.

SECTION 5.    Representations and Warranties. 
The Borrower and each Guarantor hereby represent and warrant to the Agent and
Banks as follows:

(a)        After giving effect to this
Amendment, no Default has occurred and is continuing on the date hereof.

(b)         Each Loan Party has the power and
authority to enter into this Amendment and to do all acts and things as are
required or contemplated hereunder to be done, observed and performed by it.

(c)          This Amendment has been duly authorized,
validly executed and delivered by one or more authorized officers of each Loan
Party and this Amendment, and the Credit Agreement as amended hereby,
constitute the legal, valid and binding obligations of the Loan Parties
enforceable against them in accordance with its terms, provided that such
enforceability is subject to general principles of equity.

(d)       The
execution and delivery of this Amendment and the performance hereunder, and
under the Credit Agreement as amended hereby, by the Loan Parties do not and
will not, as a condition to such execution, delivery and performance, require
the consent or approval of any Governmental Authority having jurisdiction over
any Loan Party, nor be in contravention of or in conflict with the Operating
Documents or Organizational Documents of any Loan Party, or the provision of
any statute, or any judgment, order or indenture, instrument, agreement or
undertaking, to which any Loan Party is party or by which the assets or
properties of any Loan Party are or may become bound.

SECTION 6.    Counterparts. 
This Amendment may be executed in multiple counterparts, each of which shall be
deemed to be an original and all of which, taken together, shall constitute one
and the same agreement.

SECTION 7.    Governing
Law.  This Amendment shall be construed in accordance with and governed by
the laws of the State of North Carolina without regard to conflict of laws
principles.

SECTION 8.    Consent
by Guarantors.  Each Guarantor consents to the foregoing amendments. Each
Guarantor promises and agrees to perform all of the requirements, conditions, 

3

 

agreements and obligations under the terms of the Credit
Agreement as hereby amended, said Credit Agreement, as hereby amended, being
hereby ratified and affirmed.

SECTION 9.    Further
Assurances.  Each Loan Party agrees to promptly take such action, upon the
request of the Agent or any Bank, as is necessary to carry out the intent of
this Amendment.

SECTION 10.  Effective
Date.  This Amendment shall be effective as of April 28, 2017 (the “Sixth
Amendment Effective Date”).

SECTION 11.  Loan
Document.  This Amendment is a Loan Document and is subject to all
provisions of the Credit Agreement applicable to Loan Documents, all of which
are incorporated in this Amendment by reference the same as if set forth in
this Amendment verbatim.

SECTION 12.  Severability. 
Any provision of this Amendment that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or enforceability without invalidating the remainder
of such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

SECTION 13.  Entire
Agreement.  This Amendment contains the entire and exclusive agreement of
the parties hereto with reference to the matters discussed herein.  This
Amendment supersedes all prior drafts and communications with respect hereto.

[The
remainder of this page intentionally left blank.]

 

4

 

IN WITNESS
WHEREOF, the parties hereto have executed and delivered, or have caused their respective
duly authorized officers or representatives to execute and deliver, this
Amendment as of the day and year first above written.

THE CATO CORPORATION (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CaDel, LLC (SEAL)

By:  CHW, LLC, as Member

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CHW, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CATO OF TEXAS LP (SEAL)

By: Cato Southwest, Inc., as
General Partner

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CATO SOUTHWEST, INC. (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

 

 

1

 

CATOWEST, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CATOSOUTH LLC (SEAL)

By: The Cato Corporation, as Member

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

catocorp.com, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

 

 

2

 

BRANCH
BANKING AND TRUST

COMPANY,

as Agent, Issuing Bank and a Bank

By:                                                       (SEAL)

Name:  

Title:  

 

 

3

 

SEVENTH AMENDMENT TO CREDIT AGREEMENT

THIS SEVENTH AMENDMENT
TO CREDIT AGREEMENT (this “Amendment”) is made as of the 28th day of
July, 2017, but effective as of the Seventh Amendment Effective Date (as
defined herein), by and among THE CATO CORPORATION, a Delaware corporation (the
“Borrower”), CATOWEST, LLC, a Nevada limited liability company, CATO SOUTHWEST,
INC., a Delaware corporation, CATOSOUTH, LLC, a North Carolina limited
liability company, CHW, LLC, a Delaware limited liability company, CaDeL, LLC,
a Delaware limited liability company, CATO OF TEXAS, L.P., a Texas limited
partnership, catocorp.com, LLC, a Delaware
limited liability company and CATO WO LLC, a Delaware limited
liability company (each of the foregoing, other than the Borrower, a
“Guarantor” and, collectively, the “Guarantors”) and BRANCH BANKING AND TRUST
COMPANY, as Agent, Issuing Bank, and a Bank.

RECITALS:

The Borrower, the
Guarantors, the Agent and the Banks entered into a certain Credit Agreement
dated as of August 22, 2003, as amended by (i) the First Amendment to Credit
Agreement dated August 22, 2005, (ii) the Second Amendment to Credit Agreement
dated October 29, 2007, (iii) the Waiver Agreement dated July 30, 2008, (iv)
the Third Amendment to Credit Agreement dated October 31, 2010, (v) the Fourth
Amendment to Credit Agreement dated March 12, 2013, (vi) the Fifth Amendment to
Credit Agreement dated May 1, 2015, and (vii) the Sixth Amendment to Credit
Agreement dated May 1, 2017 (as so amended, modified or supplemented, the
“Credit Agreement”).  Capitalized terms used in this Amendment which are not
otherwise defined in this Amendment shall have the respective meanings assigned
to them in the Credit Agreement.

The Borrower and
the Guarantors have requested that the Agent and the Banks extend the term of
the Credit Agreement and modify certain provisions of the Credit Agreement as
more fully set forth herein.  The Agent and the Banks have agreed to extend the
term of and so modify the Credit Agreement, all upon the terms and conditions
hereinafter set forth.

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower, the Guarantors, the Agent and the Banks,
intending to be legally bound hereby, agree as follows:

SECTION 1.   Recitals;
Definitions. 

(a)        The
Recitals are incorporated herein by reference and shall be deemed to be a part
of this Amendment.

(b)        As used
in this Amendment, the following capitalized terms shall have the meanings set
forth below:

“Governmental
Authority” means the government of the United States of America or any other
nation, or of any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).

1

 

“Operating Documents” means with respect to any corporation,
limited liability company, partnership, limited partnership, limited liability
partnership or other legally authorized incorporated or unincorporated entity,
the bylaws, operating agreement, partnership agreement, limited partnership
agreement, shareholder agreement or other applicable documents relating to the
operation, governance or management of such entity.

“Organizational
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized incorporated or unincorporated entity, the articles of
incorporation, certificate of incorporation, articles of organization,
certificate of limited partnership or other applicable organizational or
charter documents relating to the creation of such entity.

“Seventh Amendment
Effective Date” has the meaning set forth in Section 10.

SECTION 2.   Amendment
to Credit Agreement. 

(a)        Section
1.01 of the Credit Agreement is hereby amended by adding the following
definitions in appropriate alphabetical order:

“Anti-Corruption
Laws” means:  (a) the U.S. Foreign Corrupt Practices Act of 1977, as amended;
(b) the U.K. Bribery Act 2010, as amended; and (c) any other anti-bribery or
anti­corruption laws, regulations or ordinances in any jurisdiction in which
Borrower or any other Loan Party is located or doing business.

“Anti-Money
Laundering Laws” means applicable laws or regulations in any jurisdiction in
which Borrower or any other Loan Party is located or doing business that
relates to money laundering, any predicate crime to money laundering, financing
terrorism or any financial record keeping and reporting requirements related
thereto, including the Patriot Act, The Currency and Foreign Transactions
Reporting Act (31 U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and
1951-1959) (also known as the “Bank Secrecy Act”), the Trading With the Enemy
Act (50 U.S.C. § 1 et seq.) and Executive Order 13224 (effective September 24,
2001).

“OFAC” means The
Office of Foreign Assets Control of the U.S. Department of the Treasury.

“Patriot Act” means
the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001, Pub, L. 107-56, signed into
law October 26, 2001.

“Sanctioned
Country” means, at any time, a country or territory that is, or whose
government is, the subject or target of Sanctions including, without
limitation, Crimea, Cuba, Iran, North Korea, Sudan and Syria.

“Sanctioned Person”
means any Person that is a target of Sanctions, including, but not limited to,
any Person that is:  (a) listed on OFAC’s Specially Designated Nationals and
Blocked Persons List; (b) listed on OFAC’s Consolidated Sanctions List; (c) a
legal entity deemed by OFAC to be a target of Sanctions based on the ownership
of such legal entity by Sanctioned Person(s); or (d) a target of Sanctions
pursuant to any territorial or country-based Sanctions program.

2

 

“Sanctions” means any and all economic or financial sanctions,
sectoral sanctions, secondary sanctions, trade embargoes and anti-terrorism
laws, including, but not limited to, those imposed, administered or enforced
from time to time by:  (a) the United States of America; including those
administered by OFAC, the U.S. State Department, the U.S. Department of
Commerce, or through any existing or future Executive Order; (b) the United
Nations Security Council; (c) the European Union; (d) the United Kingdom; or
(e) any other governmental authorities.

“Seventh Amendment
Effective Date” means July 28, 2017.

(b)        Section
1.01 of the Credit Agreement is hereby amended by amending and restating the
definitions of “Adjusted Cash Flow”, “Capital Expenditures”, “Fixed Charge
Coverage Ratio”, “Fixed Charges” and “Termination Date” to read as follows:

“Adjusted Cash
Flow” shall mean, for a specified period, the sum of (a) the net income of the
Borrower 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, (b) non-cash impairment charges
related to one-time or non-recurring expenses at Borrower’s stores not to
exceed $13,600,000.00, in the aggregate, for any four quarter period, all as
determined in accordance with GAAP.

“Capital
Expenditures” means for any period the sum of all capital expenditures incurred
during such period by the Borrower and its Consolidated Subsidiaries, as
determined in accordance with GAAP, which shall include, without limitation,
the purchase or lease of any assets which if purchased would constitute fixed
assets or which if leased would constitute a capitalized lease.

“Fixed Charge
Coverage Ratio” shall mean, as of the end of any Fiscal Quarter, the ratio of
(i) the Adjusted Cash Flow for the four-Fiscal Quarter period then ended (as
determined in accordance with GAAP) of the Borrower and its Consolidated
Subsidiaries for such period to (ii) the Fixed Charges for such four-Fiscal
Quarter period then ended.

“Fixed Charges” for any period means the sum of
(i) Consolidated Interest Expense for such period, and (ii) Capital
Expenditures of the Borrower and its Consolidated Subsidiaries for such
period.  As used herein, “Consolidated Interest Expense” for any period means
interest, whether expensed or capitalized, in respect of Debt of the Borrower
or any of its Consolidated Subsidiaries outstanding during such period
(including, without limitation, interest expense attributable to Capital
Leases).

“Termination Date” shall
mean July 29, 2019.

(c)        Section
2.06(a) of Credit Agreement is hereby amended and restated in its entirety to
read as follows:

“Applicable Margin”
initially means a percentage per annum equal to (i) in the case of Revolving
Credit Advances maintained as (A) Base Rate Advances, 0.375%, and (B)
Euro-Dollar Advances or Index Rate Advances, 1.25% and (ii) in the case of
calculating the unused fee pursuant to Section 2.07(a), 0.10%.  From and after
each Start Date (commencing with the Start Date that occurs after September 30,
2017) and including the applicable End Date, the Applicable Margins for such
Revolving Credit Advances and calculating the unused fees pursuant to Section
2.07(a) 

3

 

shall be those set forth below opposite the
Average Quarterly Availability for such Start Date, as determined by the Agent.

	
  Level

  	
  Average Quarterly Availability

  	
  Revolving Credit

  Advances

  Maintained as Euro-

  Dollar Advances and Index Rate Advances

  	
  Revolving Credit

  Advances

  Maintained as Base

  Rate Advances

  	
  Unused Fees

  
	
            I

  	
  Greater than 66% of the Total Revolving Credit
  Commitment as then in effect

  	
  1.25%

  	
  0.375%

  	
  0.10%

  
	
            II

  	
  Less than or equal to 66% of the
  Total Revolving Credit Commitment but greater than 33% of the Total Revolving
  Credit Commitment as then in effect

  	
  1.50%

  	
  0.625%

  	
  0.20%

  
	
             III

  	
  Less than or equal to 33% of the
  Total Revolving Credit Commitment as then In effect

  	
  1.75%

  	
  0.875%

  	
  0.30%

  

 

The Average
Quarterly Availability used in a determination of Applicable Margins shall be
determined by the Agent on or before the third Business Day following the last
day of each calendar quarter (March 31, June 30, September 30 and December 31
of each calendar year) and shall be communicated in writing by the Agent to the
Borrower and the Banks, which determination shall be conclusive and binding
upon all parties hereto absent manifest error. 
The Applicable Margins so determined shall apply,
except as set forth in the immediately succeeding sentence, from the relevant
Start Date to and including the applicable End Date.  Notwithstanding anything
to the contrary contained above in this definition, at all times during which
there shall exist any Event of Default, the Applicable Margins shall be
maintained at Level III (and such Applicable Margins shall be used in
calculating the Default Rate).  “Average Quarterly Availability” means
for the purposes of the definition of Applicable Margin, in the case of each
Start Date, an amount equal to (x) the sum of each day’s Total Unused Revolving
Credit Commitments during the most recently ended calendar quarter divided 
by  (y) the number of days in such calendar quarter.  “Business Day”
means any day (a) that is not a Saturday, Sunday or other day on which
commercial banks in North Carolina are authorized or required by law to remain
closed and, (b) if such day relates to a borrowing of, a payment or prepayment
of principal of or interest on, a continuation or conversion of or into, or the
Interest Period for, a Euro-Dollar Advance or Index Rate Advance, or to a
notice by the Borrower with respect to any such borrowing, payment, prepayment,
continuation, conversion, or Interest Period, that is also a day on which
dealings in deposits denominated in Dollars are carried out in the London
interbank market.  “End Date” means, in respect of any Start Date, for
the purposes of the definition of Applicable Margin, the last day of the
calendar quarter in which such Start Date occurred.  “Start  Date”
means for purposes of the definition of Applicable Margin, the first day of
each calendar quarter commencing with the calendar quarter commencing October
1, 2017.  “Total Revolving Credit Commitment” means, at any time, the
aggregate Revolving Credit Commitments of the Banks at such time.  The Total
Revolving Credit Commitment as of the Seventh Amendment Effective Date is
$35,000,000.  Notwithstanding anything contained in this Agreement to the
contrary at no time and in no event is the Base Rate or the Adjusted Monthly
Libor Index Rate intended to be less than zero.  If the Base Rate or the
Adjusted Monthly Libor Index Rate 

4

 

determined as
provided in this Agreement would be less than zero, the Base Rate or the
Adjusted Monthly Libor Index Rate, as the case may be, shall be deemed to be
zero.

(d)       Section
2.07(a) and (b) of the Credit Agreement are hereby amended and restated in
their entirety to read as follows:

(a)        The Borrower shall pay to the Agent for the ratable
account of each Bank an unused fee equal to the product of:  (i) the aggregate
of the daily average amounts of such Bank’s Unused Revolving Credit Commitment,
times (ii) a per annum percentage equal to the then-applicable Applicable
Margin for the calculation of unused fees (as set forth in Section 2.06(a)). 
Such unused fee shall accrue from and including the Seventh Amendment Effective
Date to and including the Termination Date.  Unused fees shall be payable
quarterly in arrears on each Quarterly Payment Date and on the Termination
Date; provided that should the Revolving Credit Commitments be terminated at
any time prior to the Termination Date for any reason, the entire accrued and
unpaid fee shall be paid on the date of such termination.

(b)        The Borrower shall pay to the Agent for the ratable
account of each Bank, with respect to each Letter of Credit, a per annum letter
of credit fee (the “Letter of Credit Fee”) equal to the product of:  (i) the
aggregate average daily Undrawn Amounts, times (ii) a per annum percentage
equal to the then applicable Applicable Margin for Revolving Credit Advances
maintained as Euro-Dollar Advances or Index Rate Advances (as set forth in
Section 2.06(a)) (calculated in accordance with Section 2.13).  Such Letter of
Credit Fees shall be payable in arrears for each Letter of Credit on each
Quarterly Payment Date during the term of each respective Letter of Credit and
on the termination thereof (whether at its stated expiry date or earlier.)

(e)        The
third paragraph of Section 2.06(c) (setting forth the definition of “London
Interbank Offered Rate”) is hereby amended and restated in its entirety to read
as follows:

The “London
Interbank Offered Rate” applicable to any Index Rate Loan or LIBOR Rate Loan
means, as of any date of determination for the Interest Period of such Index
Rate Loan or LIBOR Rate Loan, the rate per annum determined by the Agent at
approximately 11:00 a.m. London, England time two (2) Business Days prior to
the first day of such Interest Period by reference to the ICE Benchmark
Administration, or any successor thereto, Interest Settlement Rates for
deposits in Dollars (as set forth by any service selected by the Agent that has
been nominated by the ICE Benchmark Administration or successor thereto as an
authorized information vendor for the purpose of displaying such rates) for a
period equal to such Interest Period; provided, that, to the extent that an
interest rate is not ascertainable pursuant to the foregoing provisions of this
definition, “London Interbank Offered Rate” shall be the interest rate per
annum determined by the Agent to be the average of the rates per annum at which
deposits in Dollars are offered for such Interest Period to major banks in the
London interbank market in London, England by the Agent at approximately 11:00
a.m. (London time) two (2) Business Days prior to the first day of such Interest
Period.  If the London Interbank Offered Rate determined as provided above
would be less than zero, the London Interbank Offered Rate shall be deemed to
be zero.

(f)        Article
IV of the Credit Agreement is amended by adding the following new Sections 4.22
and 4.23:

5

 

SECTION 4.22.  Anti-Terrorism Laws.  None of the Loan
Parties, nor any of their respective Subsidiaries, is in violation of any laws
relating to terrorism or money laundering, including the Patriot Act.

SECTION 4.23.  Compliance
with Sanctions; Anti-Money Laundering Program; Anti-Corruption Laws. 

(a)        Neither the Borrower nor any
Affiliate of the Borrower nor, to the Borrower’s knowledge, any director,
officer, agent, employee of the Borrower or any Affiliate of the Borrower:  (i)
has used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expense relating to political activity or to influence
official action; (ii) has made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
has made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment; or (iv) has violated or is in violation of any Anti-Corruption
Laws or Anti-Money Laundering Laws; and each of the Borrower and each Affiliate
of the Borrower have conducted their business in compliance with the
Anti-Corruption Laws and Anti-Money Laundering Laws.

(b)        Neither:  (i) Borrower, any
Affiliate of Borrower, nor, to Borrower’s knowledge, any of their respective
directors, officers, agents, employees or Affiliates; nor (ii) to Borrower’s
knowledge, any agent or representative of Borrower or any such Affiliate that
will act in any capacity in connection with any Revolving Credit Advances or
that will benefit from any Revolving Credit Advances:  (A) is a Sanctioned
Person or is owned or Controlled by a Sanctioned Person; (B) has any assets
located in a Sanctioned Country; (C) directly or indirectly derives revenues
from investments in, or transactions with, Sanctioned Persons; or (D) has taken
any action, directly or indirectly, that violates any Sanctions,
Anti-Corruption Laws or Anti-Money Laundering Laws.

(c)        No proceeds of any Revolving Credit
Advance have been used, directly or indirectly, by Borrower or any Affiliate of
Borrower or any of their respective directors, officers, agents, employees,
Affiliates, agents or representatives for the purpose of funding, financing or
facilitating any activity, business or transaction of or with any Sanctioned
Person, or of, with or in any Sanctioned Country, including, but not limited
to, any payment (directly or indirectly) to a Sanctioned Person or a Sanctioned
Country, or that violates any Sanctions applicable to any party hereto.

The provisions of this Section 4.23 shall
prevail and control over any contrary provisions of this Agreement or any Loan
Documents.

(g)        Section
5.03 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

SECTION 5.03.  Fixed
Charge Coverage.  At the end of the Fiscal Quarter ending July 31, 2017,
the Fixed Charge Coverage Ratio shall not be less than 1.25 to 1.0.  At the end
of each Fiscal Quarter thereafter, commencing with the Fiscal Quarter ending
October 31, 2017, the Fixed Charge Coverage Ratio shall not be less than 1.50
to 1.0.

(h)        Section
5.05 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

6

 

SECTION 5.05.  Liquidity.  Borrower shall at all times
maintain, possess, own and have access to unencumbered Liquid Assets of not
less than $150,000,000 (net of the sum of the aggregate unsecured indebtedness,
liabilities and obligations of the Borrower).  As used herein, “Liquid Assets”
shall be defined as cash and Cash Equivalents which meet all of the following
requirements:  (1) such assets must be owned by and in the name of the Borrower
free and clear of any restriction, limitation, earmark, encumbrance, assignment,
hypothecation, pledge, lien, security interest or other third-party interest,
and (2) such assets shall be readily available to the Borrower and shall not be
subject to any restriction, agreement, governmental requirement, or other
restriction which would prevent the immediate free use of such assets by the
Borrower.

“Cash Equivalents”
means (a) securities issued or directly and fully guaranteed or insured by the
United States of America or any agency thereof (provided that the full faith
and credit of the United States is pledged in support thereof) with maturities
of not more than one year from the date acquired; (b) marketable direct
obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof, in each
case maturing within one year after such date and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody’s; (c) time deposits and certificates of deposit with maturities of not
more than one year from the date acquired issued by a United States federal or
state chartered commercial bank of recognized standing having capital and
surplus in excess of $500 million, and which bank or its holding company has a
short-term commercial paper rating of at least A-1 or the equivalent by S&P
or at least P-1 or the equivalent by Moody’s; and (d) investments in money
market funds (i) which mature not more than ninety (90) days from the date
acquired and are payable on demand, (ii) with respect to which there has been
no failure to honor a request for withdrawal, (iii) which are registered under
the Investment Company Act of 1940, (iv) which have net assets of at least
$500,000,000 and (v) which maintain a stable share price of not less than One
Dollar ($1.00) per share and are either (A) directly and fully guaranteed or
insured by the United States of America or any agency thereof (provided that
the full faith and credit of the United States is pledged in support thereof)
or (B) maintain a rating of at least A-2 or better by S&P and are
maintained with an investment fund manager that is otherwise acceptable at all
times and from time to time to the Agent in its sole discretion.

(i)         Article
V of the Credit Agreement is hereby amended by adding the following new Section
5.31:

SECTION 5.31.  Compliance
with Anti-Corruption Laws and Sanctions.  The Borrower will maintain in
effect and enforce policies and procedures designed to promote and achieve
compliance by the Borrower, its Subsidiaries and their respective directors,
officers, employees and agents with all applicable Anti-Corruption Laws,
Anti-Money Laundering Laws and Sanctions.  Borrower and its Subsidiaries shall
comply at all times with all applicable Anti-Corruption Laws, Anti-Money
Laundering Laws and Sanctions.

(f)        Article
IX of the Credit Agreement is hereby amended by adding the following new
Sections 9.18 and 9.19:

SECTION 9.18.  Patriot
Act Notice.  Each Bank and the Agent (the Agent for itself and not on
behalf of any Bank) hereby notifies each Loan Party that pursuant to the
requirements of the Patriot Act it is required to obtain, verify and record
information that identifies such Loan Party, which information includes the
name and address of such Loan Party and other information that will allow such
Bank or the Agent, as applicable, to identify such Loan Party in accordance
with such Patriot Act.

7

 

SECTION 9.19.  No
Fiduciary Relationship.  The Borrower and Guarantors, on behalf of
themselves and their respective subsidiaries, agree that in connection with all
aspects of the transactions contemplated hereby and any communications in
connection therewith, the Borrower, the Guarantors, the Subsidiaries and their
respective Affiliates, on the one hand, and the Agent, the Banks, the Issuing
Bank and their Affiliates, on the other hand, will have a business relationship
that does not create, by implication or otherwise, any fiduciary duty on the
part of the Agent, the Banks, the Issuing Bank or their Affiliates, and no such
duty will be deemed to have arisen in connection with any such transactions or
communications.

SECTION 3.  Conditions
to Effectiveness.  The effectiveness of this Amendment and the obligations
of the Agent and Banks hereunder are subject to the following conditions:

(a)        receipt
by the Agent from each of the parties hereto of a duly executed counterpart of
this Amendment signed by such party;

(b)        receipt
by the Agent of the following, all in form and substance satisfactory to the
Agent:

(i)         a closing certificate,
substantially in the form of Exhibit G to the Credit Agreement, appropriately
modified to refer to this Amendment, signed by a principal officer of each Loan
Party;

(ii)        an opinion, substantially in the
form of Exhibit C to the Credit Agreement, appropriately modified to refer to
this Amendment, signed by the General Counsel of the Borrower; and

(iii)        a
certificate of each Loan Party, signed by the Secretary, an Assistant
Secretary, a member, manager, partner, trustee or other authorized
representative of the respective Loan Party, certifying as to the names, true
signatures and incumbency of the officer or officers of the respective Loan
Party authorized to execute and deliver the Loan Documents, and certified
copies of the following items:  (i) the Loan Party’s Organizational Documents;
(ii) the Loan Party’s Operating Documents; (iii) if applicable, a certificate
of the Secretary of State of such Loan Party’s State of organization as to the
good standing or existence of such Loan Party, and (iv) the organizational
action, if any, taken by the board of directors of the Loan Party or the members,
managers, trustees, partners or other applicable Persons authorizing the Loan
Party’s execution, delivery and performance of this Amendment, and any other
documents which the Agent or any Bank may reasonably request relating to the
existence of each Loan Party, the authority for and the validity of this
Amendment.

(c)        receipt
by the Agent of all other documents that the Agent may reasonably request,
respecting this Amendment and the transactions contemplated hereunder;

(d)       the fact that after giving effect to
this Amendment, the representations and warranties of the Loan Parties
contained in Section 5 of this Amendment shall be true on and as of the date
hereof; and

(e)        the
Borrower shall have paid to the Agent all fees and expenses (including, without
limitation, the upfront fee payable to Agent in the amount of $17,500.00, and
reasonable 

8

 

attorney’s fees and expenses to the extent
invoiced and presented to the Borrower as of the date hereof) payable to the
Agent arising from or relating to the negotiation, preparation, execution,
delivery performance or administration of this Amendment or which are otherwise
required to be paid by the Borrower on or before the date hereof.

SECTION 4.   No
Other Amendment.  Except for the amendments expressly set forth herein, the
text of the Credit Agreement shall remain unchanged and in full force and
effect.  On and after the Seventh Amendment Effective Date (as defined below),
all references to the Credit Agreement in each of the Loan Documents shall
hereafter mean the Credit Agreement as amended by this Amendment.  This
Amendment is not intended to effect, nor shall it be construed as, a novation. 
The Credit Agreement and this Amendment shall be construed together as a single
agreement.  Nothing herein contained shall waive, annul, vary or affect any
provision, condition, covenant or agreement contained in the Credit Agreement,
except as herein amended, nor affect nor impair any rights, powers or remedies
under the Credit Agreement as hereby amended.  The Agent and Banks do hereby
reserve all of its rights and remedies against all parties who may be or may
hereafter become secondarily liable for the repayment of the Notes.  The Loan
Parties promise and agree to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement, as
heretofore and hereby amended and the other Loan Documents, the Credit
Agreement, as amended, and the other Loan Documents being hereby ratified and
affirmed (including the obligations of the Guarantors with respect to the
Guaranteed Obligations).  The Loan Parties hereby expressly agree that the
Credit Agreement, as amended hereby, and the other Loan Documents are in full
force and effect.

SECTION 5.   Representations
and Warranties.  The Borrower and each Guarantor hereby represent and
warrant to the Agent and Banks as follows:

(a)        After
giving effect to this Amendment, no Default has occurred and is continuing on
the date hereof.

(b)        Each
Loan Party has the power and authority to enter into this Amendment and to do
all acts and things as are required or contemplated hereunder to be done,
observed and performed by it.

(c)        This
Amendment has been duly authorized, validly executed and delivered by one or
more authorized officers of each Loan Party and this Amendment, and the Credit
Agreement as amended hereby, constitute the legal, valid and binding
obligations of the Loan Parties enforceable against them in accordance with its
terms, provided that such enforceability is subject to general principles of
equity.

(d)       The
execution and delivery of this Amendment and the performance hereunder, and
under the Credit Agreement as amended hereby, by the Loan Parties do not and
will not, as a condition to such execution, delivery and performance, require
the consent or approval of any Governmental Authority having jurisdiction over
any Loan Party, nor be in contravention of or in conflict with the Operating
Documents or Organizational Documents of any Loan Party, or the provision of
any statute, or any judgment, order or indenture, instrument, agreement or
undertaking, to which any Loan Party is party or by which the assets or
properties of any Loan Party are or may become bound.

9

 

SECTION 6.   Counterparts.  This Amendment may be executed
in multiple counterparts, each of which shall be deemed to be an original and
all of which, taken together, shall constitute one and the same agreement.

SECTION 7.   Governing
Law.  This Amendment shall be construed in accordance with and governed by
the laws of the State of North Carolina without regard to conflict of laws
principles.

SECTION 8.   Consent
by Guarantors.  Each Guarantor consents to the foregoing amendments.  Each
Guarantor promises and agrees to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement as hereby
amended, said Credit Agreement, as hereby amended, being hereby ratified and
affirmed.

SECTION 9.   Further
Assurances.  Each Loan Party agrees to promptly take such action, upon the
request of the Agent or any Bank, as is necessary to carry out the intent of
this Amendment.

SECTION 10.  Effective
Date.  This Amendment shall be effective as of July 28, 2017 (the “Seventh
Amendment Effective Date”).

SECTION 11.  Loan
Document.  This Amendment is a Loan Document and is subject to all
provisions of the Credit Agreement applicable to Loan Documents, all of which
are incorporated in this Amendment by reference the same as if set forth in
this Amendment verbatim.

SECTION 12.  Severability. 
Any provision of this Amendment that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

SECTION 13.  Entire
Agreement.  This Amendment contains the entire and exclusive agreement of
the parties hereto with reference to the matters discussed herein.  This
Amendment supersedes all prior drafts and communications with respect hereto.

SECTION 14.  Post-Closing
Actions.  Notwithstanding anything to the contrary contained in this
Amendment or the other Loan Documents, the parties hereto acknowledge and agree
that the actions and other matters described on Annex X shall be completed in
accordance with Annex X.  The provisions of Annex X shall be deemed
incorporated herein by reference as fully as if set forth herein in its
entirety.

All provisions of
this Amendment and the other Loan Documents (including, without limitation, all
conditions precedent, representations, warranties, covenants, events of default
and other agreements herein and therein) shall be deemed modified to the extent
necessary to effect the foregoing (and to permit the taking of the actions
described above within the time periods required above, rather than as
otherwise provided in the Loan Documents); provided that (x) to the extent any
representation and warranty would not be true because the foregoing actions
were not taken on the Seventh Amendment Effective Date the respective
representation and warranty shall be required to be true and correct in all
material respects at the time the respective action is taken (or was required
to be taken) in accordance with the foregoing provisions of this Section 14 and
(y) all representations and warranties relating to this Amendment and the Loan
Documents shall be required to be true immediately after the actions required
to be taken by this 

10

 

Section 14 have been taken (or
were required to be taken).  The acceptance of the benefits of this Amendment
shall constitute a covenant and agreement by each Loan Party to the Agent and
Banks that the actions required pursuant to this Section 14 will be, or have
been, taken within the relevant time periods referred to in this Section 14 and
that, at such time, all representations and warranties contained in this
Amendment and the other Loan Documents shall then be true and correct without
any modification pursuant to this Section 14.  The parties hereto acknowledge
and agree that the failure to take any of the actions required above, within
the relevant time periods required above, shall give rise to an immediate Event
of Default pursuant to this Amendment.

[The
remainder of this page intentionally left blank.]

 

11

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered, or have caused their respective duly authorized officers or
representatives to execute and deliver, this Amendment as of the day and year
first above written.

THE CATO CORPORATION (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO

CaDel, LLC (SEAL)

By:  CHW, LLC, as Member

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President of CHW, LLC Managing Member

CHW, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

CATO OF TEXAS LP (SEAL)

By: Cato Southwest, Inc., as
General Partner

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President of Cato SW Inc., General Partner

CATO SOUTHWEST, INC. (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

 

 

1

 

CATOWEST, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

CATOSOUTH LLC (SEAL)

By: The Cato Corporation, as Member

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO Cato Corp.

catocorp.com, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

CATO WO LLC (SEAL)

 

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  EVP-CFO Cato Corp.

 

 

2

 

BRANCH
BANKING AND TRUST

COMPANY,

as Agent, Issuing Bank and a Bank

By: \s\ Stuart M. Jones                       (SEAL)

Name:  Stuart M. Jones

Title:  Senior Vice President

 

3

 

ANNEX
“X”

TO
CREDIT AGREEMENT

POST-CLOSING MATTERS

	
  DATE

  	
  ACTION

  
	
  Not later than September
  15, 2017, or such other date as may be agreed to by the Agent, in its sole
  discretion.

  	
  The Borrower shall have
  delivered to the Agent the items described in Section 3(b) of the Amendment.

  

 

 

1

 

EIGHTH
AMENDMENT TO CREDIT AGREEMENT

THIS EIGHTH
AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made as of the 24th
day of May, 2019, but effective as of the Eighth Amendment Effective Date (as
defined herein), by and among THE CATO CORPORATION, a Delaware corporation (the
“Borrower”), CATOWEST, LLC, a Nevada limited liability company, CATO SOUTHWEST,
INC., a Delaware corporation, CATOSOUTH, LLC, a North Carolina limited
liability company, CHW, LLC, a Delaware limited liability company, CaDeL, LLC,
a Delaware limited liability company, CATO OF TEXAS, L.P., a Texas limited
partnership, catocorp.com, LLC, a Delaware
limited liability company, and CATO WO LLC, a Delaware limited
liability company (each of the foregoing, other than the Borrower, a
“Guarantor” and, collectively, the “Guarantors”), and BRANCH BANKING AND TRUST
COMPANY, as Agent, Issuing Bank, and a Bank.

RECITALS:

The Borrower, the
Guarantors, the Agent and the Banks entered into a certain Credit Agreement
dated as of August 22, 2003, as amended by (i) the First Amendment to Credit
Agreement dated August 22, 2005, (ii) the Second Amendment to Credit Agreement
dated October 29, 2007, (iii) the Waiver Agreement dated July 30, 2008, (iv)
the Third Amendment to Credit Agreement dated October 31, 2010, (v) the Fourth
Amendment to Credit Agreement dated March 12, 2013, (vi) the Fifth Amendment to
Credit Agreement dated May 1, 2015, (vii) the Sixth Amendment to Credit
Agreement dated May 1, 2017, (viii) the Seventh Amendment to Credit Agreement
dated July 28, 2017, and (ix) the waiver and amendment letter dated March 27,
2019 (the “Specified Waiver”) (as so amended, modified or supplemented, the
“Credit Agreement”).  Capitalized terms used in this Amendment which are not
otherwise defined in this Amendment shall have the respective meanings assigned
to them in the Credit Agreement.

The Borrower and
the Guarantors have requested that the Agent and the Banks extend the term of
the Credit Agreement and modify certain provisions of the Credit Agreement as
more fully set forth herein.  The Agent and the Banks have agreed to extend the
term of and so modify the Credit Agreement, all upon the terms and conditions
hereinafter set forth.

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower, the Guarantors, the Agent and the Banks,
intending to be legally bound hereby, agree as follows:

SECTION 1.   Recitals;
Definitions. 

(a)        The
Recitals are incorporated herein by reference and shall be deemed to be a part
of this Amendment.

(b)        As used
in this Amendment, the following capitalized terms shall have the meanings set
forth below:

“Eighth Amendment
Effective Date” has the meaning set forth in Section 10. 

“Governmental
Authority” means the government of the United States of America or any other
nation, or of any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to 

1

 

government
(including any supra-national bodies such as the European Union or the European
Central Bank).

“Operating
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized incorporated or unincorporated entity, the bylaws, operating
agreement, partnership agreement, limited partnership agreement, shareholder
agreement or other applicable documents relating to the operation, governance
or management of such entity.

“Organizational
Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other
legally authorized incorporated or unincorporated entity, the articles of
incorporation, certificate of incorporation, articles of organization, certificate
of limited partnership or other applicable organizational or charter documents
relating to the creation of such entity.

SECTION 2.   Amendments
to Credit Agreement. 

(a)        Section
1.01 of the Credit Agreement is hereby amended by adding the following
definition in appropriate alphabetical order:

“Eighth Amendment
Effective Date” means May 24, 2019.

(b)        Section
1.01 of the Credit Agreement is hereby amended by amending and restating the
definitions of “Capital Expenditures”, “Capital Lease” and “Termination Date”
to read as follows:

“Capital
Expenditures” means for any period the sum of all capital expenditures incurred
during such period by the Borrower and its Consolidated Subsidiaries, as
determined in accordance with FASB ASC 842, which shall include, without
limitation, the purchase or lease of any assets which if purchased would
constitute fixed assets or which if leased would constitute a finance lease or
Type A lease (but excluding, for the avoidance of doubt, any operating lease or
Type B lease).

“Capital Lease”
means any lease of property that would, in accordance with FASB ASC 842, be
required to be classified and accounted for as a finance lease or Type A lease
(but excluding, for the avoidance of doubt, any operating lease or Type B
lease).

“Termination Date”
means May 24, 2022.

(c)        Section
2.06(a) of the Credit Agreement is hereby amended and restated in its entirety
to read as follows:

“Applicable Margin” initially means a
percentage per annum equal to (i) in the case of Revolving Credit Advances
maintained as (A) Base Rate Advances, 0.125%, and (B) Euro-Dollar Advances or
Index Rate Advances, 1.00% and (ii) in the case of calculating the unused fee
pursuant to Section 2.07(a), 0.10%.  From and after each Start Date (commencing
with the Start Date that occurs after June 30, 2019) and including the
applicable End Date, the Applicable Margins for such Revolving Credit Advances
and calculating the unused fees pursuant to Section 2.07(a) shall be those set
forth below opposite the Average Quarterly Availability for such Start Date, as
determined by the Agent.

 

2

 

	
  Level

  	
  Average
  Quarterly Availability

  	
  Revolving
  Credit

  Advances

  Maintained
  as Euro-

  Dollar
  Advances and Index Rate

  Advances

  	
  Revolving
  Credit

  Advances

  Maintained
  as Base

  Rate
  Advances

  	
  Unused
  Fees

  
	
  I

  	
  Greater
  than 66% of the Total Revolving Credit Commitment as then in effect

  	
  1.00%

  	
  0.125%

  	
  0.10%

  
	
  II

  	
  Less than or equal to 66% of the Total Revolving
  Credit Commitment but greater than 33% of the Total Revolving Credit
  Commitment as then in effect

  	
  1.25%

  	
  0.375%

  	
  0.15%

  
	
  III

  	
  Less than or equal to 33% of the Total Revolving
  Credit Commitment as then in effect

  	
  1.50%

  	
  0.625%

  	
  0.20%

  

 

The Average
Quarterly Availability used in a determination of Applicable Margins shall be
determined by the Agent on or before the third Business Day following the last
day of each calendar quarter (March 31, June 30, September 30 and December 31
of each calendar year) and shall be communicated in writing by the Agent to the
Borrower and the Banks, which determination shall be conclusive and binding
upon all parties hereto absent manifest error.  The Applicable Margins so
determined shall apply, except as set forth in the immediately succeeding
sentence, from the relevant Start Date to and including the applicable End Date.
 Notwithstanding anything to the contrary contained above in this definition,
at all times during which there shall exist any Event of Default, the
Applicable Margins shall be maintained at Level III (and such Applicable
Margins shall be used in calculating the Default Rate).  “Average Quarterly
Availability” means for the purposes of the definition of Applicable
Margin, in the case of each Start Date, an amount equal to (x) the sum of each
day’s Total Unused Revolving Credit Commitments during the most recently ended
calendar quarter divided  by  (y) the number of days in such
calendar quarter.  “Business Day” means any day (a) that is not a
Saturday, Sunday or other day on which commercial banks in North Carolina are
authorized or required by law to remain closed, and (b) if such day relates to
a borrowing of, a payment or prepayment of principal of or interest on, a
continuation or conversion of or into, or the Interest Period for, a
Euro-Dollar Advance or Index Rate Advance, or to a notice by the Borrower with
respect to any such borrowing, payment, prepayment, continuation, conversion,
or Interest Period, that is also a day on which dealings in deposits
denominated in Dollars are carried out in the London interbank market.  “End
Date” means, in respect of any Start Date, for the purposes of the
definition of Applicable Margin, the last day of the calendar quarter in which
such Start Date occurred.  “Start Date” means for purposes of the
definition of Applicable Margin, the first day of each calendar quarter
commencing with the calendar quarter commencing July 1, 2019.  “Total
Revolving Credit Commitment” means, at any time, the aggregate Revolving
Credit Commitments of the Banks at such time.  The Total Revolving Credit
Commitment as of the Eighth Amendment Effective Date is $35,000,000. 
Notwithstanding anything contained in this Agreement to the contrary at no time
and in no event is the Base Rate or the Adjusted Monthly Libor Index Rate
intended to be less than zero.  If the Base Rate or the Adjusted Monthly Libor
Index Rate determined as provided in this 

3

 

Agreement
would be less than zero, the Base Rate or the Adjusted Monthly Libor Index
Rate, as the case may be, shall be deemed to be zero.

(d)       Section
5.05 of the Credit Agreement (Liquidity) is hereby amended and restated in its
entirety to read as follows:

SECTION 5.05.  Liquidity. 
Borrower shall at all times maintain, possess, own and have access to
unencumbered Liquid Assets of not less than $100,000,000 (net of the sum of the
aggregate unsecured indebtedness, liabilities and obligations of the
Borrower).  As used herein, “Liquid Assets” shall be defined as Cash and short
term investments which meet all of the following requirements:  (1) such assets
must be owned by and in the name of the Borrower free and clear of any
restriction, limitation, earmark, encumbrance, assignment, hypothecation,
pledge, lien, security interest or other third-party interest, and (2) such
assets shall be readily available to the Borrower and shall not be subject to
any restriction, agreement, governmental requirement, or other restriction
which would prevent the immediate free use of such assets by the Borrower.

For the purposes of
this Section 5.05, “Cash and short term investments” means a portfolio of the
following types of securities with an aggregate duration of no more than 2.5
years:  (a) securities issued or directly and fully guaranteed or insured by
the United States of America or any agency thereof (provided that the full
faith and credit of the United States is pledged in support thereof) with a
minimum rating of P-1 by Moody’s or A-1 by Standard & Poors; (b) marketable
direct obligations issued by any state of the United States, or any political
subdivision of any such state or any public instrumentality thereof, having a
rating of at least BBB from S&P or at least Baa2 from Moody’s; (c) time
deposits and certificates of deposit issued by a United States federal or state
chartered commercial bank of recognized standing having capital and surplus in
excess of $500,000,000, and which bank or its holding company has a short-term
commercial paper rating of at least A-1 or the equivalent by S&P or at
least P-1 or the equivalent by Moody’s; (d) investments in money market funds
(i) which mature not more than ninety (90) days from the date acquired and are
payable on demand, (ii) with respect to which there has been no failure to
honor a request for withdrawal (iii) which are registered under the Investment
Company Act of 1940, (iv) which have net assets of at least $500,000,000 and
(v) which trade on a constant net asset value and are readily available
marketable funds and are either (A) directly and fully guaranteed or insured by
the United States of America or any agency thereof (provided that the full
faith and credit of the United States is pledged in support thereof) or (B)
have a rating of at least P-1 or A-3 by Moody’s or A- or better by S&P and
are maintained with an investment fund manager that is otherwise acceptable at
all times and from time to time to the Agent in its sole discretion; (e) Debt
issued by Persons with a rating of BBB or higher from S&P or Baa2 or higher
from Moody’s, including corporate notes, corporate bonds, commercial paper,
floating rate notes, mutual funds and auction rate preferred stock; (f)
asset-backed obligations related to mortgage loans, automobile loans and credit
card portfolios that are senior in the deal capital structure and are at least
$250,000,000 in trust size; and (g) repurchase agreements placed through a
recognized broker/dealer or banks acting as principal and backed by (1) direct
obligations of the U.S. government having a present market value equal to the
investment, (2) obligations of federal agencies having a present market value
equal to the investment, or (3) commercial paper having a short-term commercial
paper rating of at least A-1 or the equivalent by S&P or at least P-1 or
the equivalent by Moody’s, having a present market value equal to the
investment.

SECTION 3.   Conditions
to Effectiveness.  The effectiveness of this Amendment and the obligations
of the Agent and the Banks hereunder are subject to the following conditions:

4

 

(a)        receipt by the Agent from each of the parties hereto of
a duly executed counterpart of this Amendment signed by such party;

(b)        receipt
by the Agent of the following, all in form and substance satisfactory to the
Agent:

(i)         a closing certificate,
substantially in the form of Exhibit G to the Credit Agreement, appropriately
modified to refer to this Amendment, signed by a principal officer of each Loan
Party;

(ii)        an opinion, substantially in the
form of Exhibit C to the Credit Agreement, appropriately modified to refer to
this Amendment, signed by the General Counsel of the Borrower; and

(iii)       a certificate of each Loan Party,
signed by the Secretary, an Assistant Secretary, a member, manager, partner,
trustee or other authorized representative of the respective Loan Party,
certifying as to the names, true signatures and incumbency of the officer or
officers of the respective Loan Party authorized to execute and deliver the
Loan Documents, and certified copies of the following items:  (A) the Loan
Party’s Organizational Documents; (B) the Loan Party’s Operating Documents; (C)
if applicable, a certificate of the Secretary of State of such Loan Party’s
State of organization as to the good standing or existence of such Loan Party;
and (D) the organizational action, if any, taken by the board of directors of
the Loan Party or the members, managers, trustees, partners or other applicable
Persons authorizing the Loan Party’s execution, delivery and performance of
this Amendment, and any other documents which the Agent or any Bank may
reasonably request relating to the existence of each Loan Party, the authority
for and the validity of this Amendment.

(c)        receipt
by the Agent of all other documents that the Agent may reasonably request,
respecting this Amendment and the transactions contemplated hereunder;

(d)       the fact
that after giving effect to this Amendment, the representations and warranties
of the Loan Parties contained in Section 5 of this Amendment shall be
true on and as of the date hereof; and

(e)         the Borrower shall have paid to the Agent all
fees and expenses (including, without limitation, the upfront fee payable to
the Agent in the amount of $35,000.00, and reasonable attorneys’ fees and
expenses to the extent invoiced and presented to the Borrower as of the date
hereof) payable to the Agent arising from or relating to the negotiation,
preparation, execution, delivery performance or administration of this
Amendment or which are otherwise required to be paid by the Borrower on or
before the date hereof.

SECTION 4.   No
Other Amendment.  Except for the amendments expressly set forth herein, the
text of the Credit Agreement shall remain unchanged and in full force and
effect.  On and after the Eighth Amendment Effective Date, all references to
the Credit Agreement in each of the Loan Documents shall hereafter mean the
Credit Agreement as amended by this Amendment.  This Amendment is not intended
to effect, nor shall it be construed as, a novation.  The Credit Agreement and
this Amendment shall be construed together as a single agreement.  

5

 

Nothing herein contained shall waive, annul, vary or
affect any provision, condition, covenant or agreement contained in the Credit
Agreement, except as herein amended, nor affect nor impair any rights, powers
or remedies under the Credit Agreement as hereby amended.  The Agent and Banks
do hereby reserve all of its rights and remedies against all parties who may be
or may hereafter become secondarily liable for the repayment of the Notes.  The
Loan Parties promise and agree to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement, as
heretofore and hereby amended and the other Loan Documents, the Credit Agreement,
as amended, and the other Loan Documents being hereby ratified and affirmed
(including the obligations of the Guarantors with respect to the Guaranteed
Obligations).  The Loan Parties hereby expressly agree that the Credit
Agreement, as amended hereby, and the other Loan Documents are in full force
and effect.

SECTION 5.   Representations
and Warranties.  The Borrower and each Guarantor hereby represent and
warrant to the Agent and Banks as follows:

(a)        After giving
effect to this Amendment, no Default has occurred and is continuing on the date
hereof.

(b)        Each Loan Party has the power and
authority to enter into this Amendment and to do all acts and things as are
required or contemplated hereunder to be done, observed and performed by it.

(c)        This
Amendment has been duly authorized, validly executed and delivered by one or
more authorized officers of each Loan Party and this Amendment, and the Credit
Agreement as amended hereby, constitute the legal, valid and binding
obligations of the Loan Parties enforceable against them in accordance with its
terms, provided that such enforceability is subject to general principles of
equity.

(d)       The
execution and delivery of this Amendment and the performance hereunder, and
under the Credit Agreement as amended hereby, by the Loan Parties do not and
will not, as a condition to such execution, delivery and performance, require
the consent or approval of any Governmental Authority having jurisdiction over
any Loan Party, nor be in contravention of or in conflict with the Operating
Documents or Organizational Documents of any Loan Party, or the provision of
any statute, or any judgment, order or indenture, instrument, agreement or
undertaking, to which any Loan Party is party or by which the assets or
properties of any Loan Party are or may become bound.

SECTION 6.   Counterparts. 
This Amendment may be executed in multiple counterparts, each of which shall be
deemed to be an original and all of which, taken together, shall constitute one
and the same agreement.

SECTION 7.   Governing
Law.  This Amendment shall be construed in accordance with and governed by
the laws of the State of North Carolina without regard to conflict of laws
principles.

SECTION 8.   Consent
by Guarantors.  Each Guarantor consents to the foregoing amendments.  Each
Guarantor promises and agrees to perform all of the requirements, conditions,
agreements and obligations under the terms of the Credit Agreement as hereby
amended, said Credit Agreement, as hereby amended, being hereby ratified and
affirmed.

6

 

SECTION 9.   Further Assurances.  Each Loan Party agrees to
promptly take such action, upon the request of the Agent or any Bank, as is
necessary to carry out the intent of this Amendment.

SECTION 10.  Effective
Date.  This Amendment shall be effective as of May 24, 2019 (the “Eighth
Amendment Effective Date”).

SECTION 11.  Loan
Document.  This Amendment is a Loan Document and is subject to all
provisions of the Credit Agreement applicable to Loan Documents, all of which
are incorporated in this Amendment by reference the same as if set forth in
this Amendment verbatim.

SECTION 12.  Acknowledgement
of Specified Waiver.  The Agent and the Banks party hereto, constituting
the Required Banks, hereby acknowledge and confirm the terms and effectiveness
of the Specified Waiver, including the amendment to the Credit Agreement set
forth therein (the terms of which amendment, for the avoidance of doubt, have
been superseded by the amendments set forth herein).

SECTION 13.  Severability. 
Any provision of this Amendment that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

SECTION 14.  Entire
Agreement.  This Amendment contains the entire and exclusive agreement of
the parties hereto with reference to the matters discussed herein.  This
Amendment supersedes all prior drafts and communications with respect hereto.

 

7

 

IN WITNESS WHEREOF, the parties hereto have executed and
delivered, or have caused their respective duly authorized officers or
representatives to execute and deliver, this Amendment as of the day and year
first above written.

THE CATO CORPORATION (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  Executive Vice President
and Chief

Financial Officer

CaDel, LLC (SEAL)

By:  CHW, LLC, as Member

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

CHW, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

CATO OF TEXAS LP (SEAL)

By: Cato Southwest, Inc., as
General Partner

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

CATO SOUTHWEST, INC. (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

 

 

 

8

 

CATOWEST, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

CATOSOUTH LLC (SEAL)

By: The Cato Corporation, as Member

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  Executive Vice President
and Chief

Financial Officer

catocorp.com, LLC (SEAL)

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  President

CATO WO LLC (SEAL)

By: The Cato Corporation, as Member

By: \s\ John R. Howe                         (SEAL)

Name:  John R. Howe

Title:  Executive Vice President
and Chief

Financial Officer

 

 

9

 

BRANCH
BANKING AND TRUST

COMPANY,

as Agent, Issuing Bank and a Bank

By: \s\ Max N Greer III                     (SEAL)

Name:  Max N Greer III

Title:  Senior Vice President

 

 

10Document

TEMPUR SEALY INTERNATIONAL, INC.

and

American Stock Transfer & Trust Company, LLC, 
as Rights Agent

Rights Agreement
Dated as of March 27, 2020

Table of Contents

															
					Page
	Section 1	Certain Definitions			1
	Section 2	Appointment of Rights Agent			8
	Section 3	Issuance of Rights Certificates			8
	Section 4	Form of Rights Certificates			11
	Section 5	Countersignature and Registration			12
	Section 6	Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates			13
	Section 7	Exercise of Rights; Purchase Price; Expiration Date of Rights			14
	Section 8	Cancellation and Destruction of Rights Certificates			16
	Section 9	Reservation and Availability of Capital Stock			17
	Section 10	Preferred Stock Record Date			18
	Section 11	Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights			18
	Section 12	Certificate of Adjusted Purchase Price or Number of Shares			26
	Section 13	Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power			27
	Section 14	Fractional Rights and Fractional Shares			29
	Section 15	Rights of Action			31
	Section 16	Agreement of Rights Holders			31
	Section 17	Rights Certificate Holder Not Deemed a Stockholder			32
	Section 18	Concerning the Rights Agent			32
	Section 19	Merger or Consolidation or Change of Name of Rights Agent			33
	Section 20	Duties of Rights Agent			34
	Section 21	Change of Rights Agent			36
	Section 22	Issuance of New Rights Certificates			37
	Section 23	Redemption and Termination			37
	Section 24	Exchange			38
	Section 25	Notice of Certain Events			40
	Section 26	Notices			40
	Section 27	Supplements and Amendments			41
	Section 28	Successors			42
	Section 29	Determinations and Actions by the Board, etc			42
	Section 30	Benefits of this Agreement			42
	Section 31	Severability			42
	Section 32	Governing Law; Waiver of Jury Trial			43
	Section 33	Counterparts			43
	Section 34	Interpretation			43
	Section 35	Force Majeure			43

 RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of March 27, 2020 (the “Agreement”), between Tempur Sealy International, Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company  (the “Rights Agent”).
W I T N E S E T H
WHEREAS, on March 27, 2020 (the “Rights Dividend Declaration Date”), the Board of Directors of the Company (the “Board”) authorized and declared a dividend distribution of one right (a “Right”) for each share of Common Stock (as hereinafter defined) of the Company outstanding at the Close of Business on April 7, 2020  (the “Record Date”), and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 1(p)) for each share of Common Stock issued between the Record Date (whether originally issued or delivered from the Company’s treasury) and the earlier of the Distribution Date and the Expiration Date (as such terms are hereinafter defined), each Right initially representing the right to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock of the Company having the rights, powers and preferences set forth in the form of Second Amended and Restated Certificate of Designation, Preferences and Rights attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
Section 1.  Certain Definitions.  For purposes of this Agreement, the following terms have the meanings indicated:
(a) “Acquiring Person” shall mean any Person who or that, alone or together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 10% (20% in the case of a Passive Institutional Investor) or more of the Common Stock then outstanding, but shall not include:
(i) the Company;
(ii) any Subsidiary of the Company;
(iii) any employee benefit plan of the Company, or of any Subsidiary of the Company, or any Person organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan; and
(iv) any Person who or that, alone or together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 10% (20% in the case of a Passive Institutional Investor) or more of the Common Stock then outstanding as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of shares of Common Stock by the Company, unless and until such Person, after becoming aware that such Person has become the Beneficial Owner of 10% (20% in the case of a Passive Institutional Investor) or more of the then outstanding Common Stock, acquires beneficial ownership of such number of additional shares that represent 1% or more of the Common Stock then outstanding at the time of acquisition of any such additional shares; or 
provided, however, that if the Board determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this subsection (a), has become such inadvertently and had no intention of changing or influencing control of the Company, and such Person divests promptly (and in any event within five Business Days after being so requested by the Company) or enters into an irrevocable commitment satisfactory to the Board promptly (and in any event within five Business Days or such shorter period as shall be determined by the Board) to divest, and thereafter divests as required by such commitment, a sufficient number of shares of Common Stock so that such Person would no longer be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this subsection (a), then such Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement at such time.  For purposes of this definition, the determination of whether any Person has acted in “good faith” shall be conclusively determined by the Board in its sole discretion. 
(b) “Act” shall mean the Securities Act of 1933, as amended.
(c) “Adjustment Shares” shall have the meaning set forth in Section 11(a)(ii).
1

(d) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act (defined below), as amended and in effect as of the date of this Agreement.
(e) A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “beneficially own” or have “beneficial ownership” of, any securities:
(i) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time or upon the satisfaction of one or more conditions (whether or not within the control of such Person)) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise, and including any securities of the Company represented by “when-issued” trading thereof; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, to “beneficially own,” or to have “beneficial ownership” of, (A) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange or cease to be subject to withdrawal by the tendering security holder, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event (as hereinafter defined), or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person’s Affiliates or Associates prior to the Distribution Date (as hereinafter defined) or pursuant to Section 3(a) or Section 22 (the “Original Rights”) or pursuant to Section 11(a)(i) in connection with an adjustment made with respect to any Original Rights;
(ii) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, to “beneficially own,” or to have “beneficial ownership” of, any security under this clause (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not reportable by such Person on Schedule 13D or Schedule 13G under the Exchange Act (or any comparable or successor report); 
(iii) that are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof), with which such Person (or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding, whether or not in writing, for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to clause (ii) of this subsection (e)) or disposing of any voting securities of the Company; or 
(iv) that are beneficially owned, directly or indirectly, by a Counterparty (or any of such Counterparty’s Affiliates or Associates) under any Derivatives Contract (without regard to any short or similar position under the same or any other Derivatives Contract) to which such Person or any of such Person’s Affiliates or Associates is a Receiving Party (as such terms are hereinafter defined); provided, however, that the number of shares of Common Stock that a Person is deemed to beneficially own pursuant to this clause (iv) in connection with a particular Derivatives Contract shall not exceed the number of Notional Common Shares (as such term is hereinafter defined) with respect to such Derivatives Contract; provided further that the number of securities beneficially owned by each Counterparty (including its Affiliates and Associates) under a Derivatives Contract shall for purposes of this clause (iv) be deemed to include all securities that are beneficially owned, directly or indirectly, by any other Counterparty (or any of such other Counterparty’s Affiliates or Associates) under any Derivatives Contract to which such first Counterparty (or any of such first Counterparty’s Affiliates or Associates) is a Receiving Party, with this proviso being applied to successive Counterparties as appropriate;
Notwithstanding anything to the contrary in this Section 1(e), no Person (x) engaged in business as an underwriter of securities shall be deemed to be the “Beneficial Owner” of, to “beneficially own,” or to have “beneficial ownership” of, any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of 40 days or (y) shall be deemed to be the “Beneficial Owner” of, to “beneficially own,” or to have “beneficial ownership” of any such security on account of such Person’s status as a “clearing agency,” as defined in Section 3(a)(23) of the Exchange Act.
(f) “Board” shall have the meaning set forth in the recitals to this Agreement.
(g) “Book-Entry” shall mean the book-entry in the Company’s share register maintained by the Company or its transfer agent evidencing a holder’s uncertificated share (or shares) of Common Stock or Preferred Stock, as the case may be.
2

(h) “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York or the Commonwealth of Kentucky are authorized or obligated by law or executive order to close.
(i) “Close of Business” on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.
(j) “Common Stock” shall mean the common stock, par value $0.01 per share, of the Company at the date hereof or any other stock resulting from successive changes or reclassifications of such common stock, except that “Common Stock” when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interests having power to control or direct the management, of such Person.
(k) “Common Stock Equivalents” shall have the meaning set forth in Section 11(a)(iii).
(l) “Company” shall have the meaning set forth in the preamble of this Agreement.
(m) “Counterparty” shall have the meaning set forth in Section 1(p) hereof.
(n) “Current Market Price” shall have the meaning determined in accordance with Section 11(d).
(o) “Current Value” shall have the meaning set forth in Section 11(a)(iii).
(p) “Derivatives Contract” shall mean any option, warrant, swap, participation, convertible security, stock appreciation right or other right or contract (in each case other than the Rights) between two parties that is designed to produce economic benefits and risks for one party (the “Receiving Party”, and the other party, the “Counterparty”), that has an exercise or conversion privilege or a settlement payment or mechanism at a price related to shares of Common Stock or a value determined in whole or in part with reference to, or derived in whole or in part from, the market price or value of shares of Common Stock or that is otherwise designed to produce the economic benefits and risks to a Person that correspond substantially to the ownership by such Person of a number of shares of Common Stock specified or referenced in such contract (such number corresponding to such economic benefits and risks, the “Notional Common Shares”), and that increases in value as the value of shares of Common Stock increases or that provides to the holder of such contract an opportunity, directly or indirectly, to profit or share in any profit derived from any increase in the value of shares of Common Stock (in any case, regardless of (i) whether such contract, right or derivative transaction conveys any voting rights, (ii) whether obligations under such contract, right or derivative transaction are required or permitted to be settled, in whole or in part, through the delivery of cash, shares of Common Stock or other property, (iii) any short or similar position under the same or any other Derivative Contract, or (iv) whether or not presently exercisable), but shall not include:
(i) rights of a bona fide pledgee of shares of Common Stock to sell the shares of Common Stock upon the bona fide exercise of its rights as a secured party;
(ii) rights of all holders of shares of Common Stock to receive shares of Common Stock, or obligations of all holders of shares of Common Stock to dispose of shares of Common Stock, pro rata, as a result of a merger, exchange offer or consolidation involving the Company;
(iii) interests in broad-based index options, broad-based index futures and broad-based publicly traded market baskets of stocks approved for trading by the appropriate federal governmental authority;
(iv) interests or rights to participate in, or awards under, employee benefit plans of the Company established by the Company and held by employees or former employees of the Company or their permitted transferees; or
(v) options granted to an underwriter in a registered public offering for the purpose of satisfying over-allotments in such offering.
(q) “Distribution Date” shall have the meaning set forth in Section 3(a).
(r) “Equivalent Preferred Stock” shall have the meaning set forth in Section 11(b).
(s) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
3

(t) “Exchange Ratio” shall have the meaning set forth in Section 24(a).
(u) “Expiration Date” shall have the meaning set forth in Section 7(a).
(v) “Final Expiration Date” shall have the meaning set forth in Section 7(a).
(w) “Notional Common Shares” shall have the meaning set forth in Section 1(p) hereof.
(x) “Passive Institutional Investor” shall mean any Person who or which has reported or is required to report Beneficial Ownership of shares of Common Stock on Schedule 13G under the Exchange Act (or any comparable or successor report), but only so long as (i) such Person is eligible to report such ownership on Schedule 13G under the Exchange Act (or any comparable or successor report), and (ii) such Person has not reported and is not required to report such ownership on Schedule 13D under the Exchange Act (or any comparable or successor report) and such Person does not hold shares of Common Stock on behalf of any other Person who is required to report Beneficial Ownership of shares of Common Stock on such Schedule 13D; provided that if a formerly Passive Institutional Investor should report or become required to report Beneficial Ownership of shares of Common Stock on Schedule 13D, that formerly Passive Institutional Investor will not be deemed to be or to have become an Acquiring Person if and for so long as (A) at the time it reports or becomes required to report Beneficial Ownership of shares of Common Stock of the Company on Schedule 13D, that formerly Passive Institutional Investor has Beneficial Ownership of less than 10% of the shares of Common Stock then outstanding; or (B) (1) it divests as promptly as practicable (but in any event not later than five Business Days after becoming required to report on Schedule 13D) Beneficial Ownership of a sufficient number of shares of Common Stock so that it would no longer be an “Acquiring Person,” as defined herein, and (2) prior to reducing its Beneficial Ownership of shares of Common Stock then outstanding to below 10%, it does not increase its Beneficial Ownership of the shares of Common Stock then outstanding (other than by reason of share purchases by the Company) above such Person’s lowest Beneficial Ownership of the Common Stock then outstanding at any time during such five Business Day period.
(y) “Person” shall mean any individual, firm, corporation, limited liability company, partnership, trust or other entity, and shall include any successor (by merger or otherwise) of such entity.
(z) “Preferred Stock” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company, and, to the extent that there are not a sufficient number of shares of Series A Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of preferred stock of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Participating Preferred Stock.  Any reference in this Agreement to Preferred Stock shall be deemed to include any authorized fraction of a share of Preferred Stock, unless the context otherwise requires.
(aa) “Principal Party” shall have the meaning set forth in Section 13(b).
(bb) “Purchase Price” shall have the meaning set forth in Section 4(a).
(cc) “Receiving Party” shall have the meaning set forth in Section 1(p) hereof.
(dd) “Record Date” shall have the meaning set forth in the recitals to this Agreement.
(ee) “Redemption Price” shall have the meaning set forth in Section 23(a).
(ff) “Right” shall have the meaning set forth in the recitals to this Agreement.
(gg) “Rights Agent” shall have the meaning set forth in the preamble of this Agreement.
(hh) “Rights Certificates” shall have the meaning set forth in Section 3(a).
(ii) “Rights Dividend Declaration Date” shall have the meaning set forth in the recitals to this Agreement.
(jj) “Section 11(a)(ii) Event” shall mean any event described in Section 11(a)(ii).
(kk) “Section 11(a)(ii) Trigger Date” shall mean the date on which a Section 11(a)(ii) Event first occurs.
(ll) “Section 13 Event” shall mean any event described in clauses (x), (y) or (z) of Section 13(a).
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(mm) “Spread” shall have the meaning set forth in Section 11(a)(iii).
(nn) “Stock Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include a report filed or amended pursuant to Section 13(d) or Section 13(g) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such.
(oo) “Subsidiary” shall mean, with reference to any Person, any other Person of which an amount of voting securities (or comparable ownership interests) sufficient to elect at least a majority of the directors (or comparable persons) of such other Person is beneficially owned, directly or indirectly, by such Person, or otherwise controlled by such Person. 
(pp) “Substitution Period” shall have the meaning set forth in Section 11(a)(iii).
(qq) “Summary of Rights” shall have the meaning set forth in Section 3(b).
(rr) “Trading Day” shall have the meaning set forth in Section 11(d)(i).
(ss) “Triggering Event” shall mean any Section 11(a)(ii) Event or any Section 13 Event.
(tt) “Trust” shall have the meaning set forth in Section 24(f).
(uu) “Trust Agreement” shall have the meaning set forth in Section 24(f).
Section 2.  Appointment of Rights Agent.  The Company hereby appoints the Rights Agent to act as rights agent for the Company and the registered holders of the Rights (who, in accordance with Section ‎3, shall prior to the Distribution Date also be the registered holders of the Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint one or more co-Rights Agents as it may deem necessary or desirable upon 10 days’ written notice to the Rights Agent.  The Rights Agent has no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agent.  If the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agents shall be determined by the Company.
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Section 3.  Issuance of Rights Certificates.
(a) Until the earlier of (i) the Close of Business on the 10th Business Day after the Stock Acquisition Date (or, if the 10th Business Day after the Stock Acquisition Date occurs before the Record Date, the Close of Business on the Record Date), and (ii) the Close of Business on the 10th Business Day (or such later date as the Board shall determine) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if, upon consummation thereof, such Person would become an Acquiring Person (the earlier of (i) and (ii) being herein referred to as the “Distribution Date”), (x) the Rights shall be evidenced (subject to the provisions of subsection (b) of this Section 3) by the certificates for Common Stock registered in the names of the holders of Common Stock (which certificates for Common Stock shall also be deemed to be certificates for the associated Rights) and not by separate certificates, or, in the case of uncertificated shares of Common Stock, by the Book-Entries for such Common Stock (which Book-Entries shall also be deemed to be book-entries for the associated Rights) and not by separate book-entries, and (y) the Rights shall be transferable only in connection with the transfer of the underlying shares of Common Stock (including any transfer to the Company or any of its Subsidiaries).  As soon as practicable after the Distribution Date, the Company shall prepare and execute, the Rights Agent shall countersign and the Company shall send or cause to be sent (or the Rights Agent shall, if requested and provided with all necessary documentation, send) by first-class, postage-prepaid mail, to each record holder of the Common Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company or the transfer agent or registrar for the shares of Common Stock, one or more Rights certificates, in substantially the form of Exhibit B hereto (the “Rights Certificates”), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein.  To the extent that a Section 11(a)(ii) Event has also occurred, the Company may implement such procedures, as it deems appropriate in its sole discretion, to minimize the possibility that Rights are received by Persons for whom Rights would be null and void under Section 7(e).  In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a)) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights.  As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates, and the Rights will be transferable separately from the transfer of shares of Common Stock.  The Company shall promptly notify the Rights Agent upon the occurrence of the Distribution Date and, if such notification is given orally, the Company shall promptly confirm the same in writing on or prior to the next Business Day.  Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.
(b) The Company shall make available a copy of the Summary of Rights, in substantially the form attached hereto as Exhibit C (the “Summary of Rights”), to any record holder of Rights as of the Record Date upon request from such record holder prior to the Expiration Date.  With respect to Common Stock outstanding as of the Record Date (it being understood that treasury shares and shares held by direct or indirect wholly owned Subsidiaries of the Company, but excluding shares held by such Persons on behalf of third parties in a fiduciary capacity, shall not be considered as outstanding for all purposes of this Agreement), or issued subsequent to the Record Date, unless and until the earlier of (i) the Distribution Date and (ii) the Expiration Date, (x) the Rights will be evidenced by the certificates or Book-Entries for the Common Stock, as the case may be, and the holders of the Common Stock will also be the registered holders of the associated Rights, and (y) the transfer of any shares of Common Stock in respect of which Rights have been issued will also constitute the transfer of the Rights associated with such shares of Common Stock.  Notwithstanding anything to the contrary set forth in this Agreement, upon the effectiveness of a redemption pursuant to Section 23 or an exchange pursuant to Section 24, the Company shall not thereafter issue any additional Rights and, for the avoidance of doubt, no Rights shall be attached to or shall be issued with any shares of Common Stock (including any shares of Common Stock issued pursuant to an exchange) at any time thereafter.
(c) Rights shall be issued in respect of all shares of Common Stock that are issued (whether originally issued or from the Company’s treasury or transferred to third parties by wholly owned Subsidiaries of the Company) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date, or, in certain circumstances provided in Section 22, after the Distribution Date.  
(i) Certificates evidencing such Common Stock (including upon transfer of outstanding Common Stock, disposition of Common Stock out of treasury stock or issuance or reissuance of Common Stock out of authorized but unissued shares) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date shall bear a legend in substantially the following form (but the failure of any certificate to bear such legend shall not affect the status or validity of the Rights associated with the Common Stock evidenced by such Rights Certificate):
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This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Tempur Sealy International, Inc. (the “Company”) and American Stock Transfer & Trust Company, LLC (the “Rights Agent”), dated as of March 27, 2020, as amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the office of the Rights Agent designated for such purpose. The Rights are not exercisable prior to the occurrence of certain events specified in the Rights Agreement.  Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may be exchanged, may expire, may be amended, or may be evidenced by separate certificates and will no longer be evidenced by this certificate.  The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge, promptly after receipt of a written request therefor.  Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person, or any Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.
(ii) In the case of the initial transaction statement or subsequent periodic statements with respect to Book-Entries evidencing such Common Stock, such statement or statements shall bear a legend in substantially the following form (but the failure of any initial transaction statement or subsequent periodic statement to bear such a legend shall not affect the status or validity of the Rights associated with the Common Stock evidenced by the Book-Entries referenced in such initial transaction statement or subsequent periodic statement):
The registration in the share register of Tempur Sealy International, Inc. (the “Company”) of the shares of common stock to which this initial transaction or subsequent periodic statement relates also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between the Company and American Stock Transfer & Trust Company, LLC (the “Rights Agent”), dated as of March 27, 2020, as amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the office of the Rights Agent designated for such purpose.  The Rights are not exercisable prior to the occurrence of certain events specified in the Rights Agreement.  Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may be exchanged, may expire, may be amended, or may be evidenced by separate certificates and will no longer be evidenced by this registration.  The Company will mail to the registered holder of such shares a copy of the Rights Agreement, as in effect on the date of mailing, without charge, promptly after receipt of a written request therefor.  Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person, or any Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.
With respect to the certificates and Book-Entries (in either case, whether or not containing the foregoing legend) described in the foregoing clauses (i) and (ii), until the earlier of (x) the Distribution Date and (y) the Expiration Date, the Rights associated with the Common Stock represented by such certificates and Book-Entries shall be evidenced by such certificates or by such Book-Entries alone, and holders of Common Stock shall also be holders of the associated Rights, and the transfer of any such shares of Common Stock shall also constitute the transfer of the Rights associated with such Common Stock.
Section 4.  Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any applicable rule or regulation made pursuant thereto or with any applicable rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage (but which shall not, in any case, affect the rights, duties or responsibilities of the Rights Agent). Subject to the provisions of Section 11 and Section 22, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per one one-thousandth of a share, the “Purchase Price”), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.
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(b) Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a direct or indirect transferee of an Acquiring Person (or of any such Associate or Affiliate), who becomes a transferee after the Acquiring Person becomes such, or (iii) a direct or indirect transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board has determined is part of a plan, arrangement or understanding (whether or not in writing) which has as a primary purpose or effect the avoidance of Section 7(e), and any Rights Certificate issued pursuant to Section 6 or Section 11 upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible, and only if the Company has provided specific written instructions to the Rights Agent) a legend in substantially the following form:
The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement).  Accordingly, this Rights Certificate and the Rights represented hereby may be, or may become, null and void in the circumstances specified in Section 7(e) of the Rights Agreement.
Notwithstanding this Section 4(b) or anything to the contrary that may be contained elsewhere in this Agreement, the omission of the foregoing legend or any legend substantially similar thereto shall not affect the enforceability of any part of this Agreement or the rights of any registered holder of Rights Certificates.
Section 5.  Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company by any proper officer of the Company either manually or by facsimile or portable document format signature.  The Rights Certificates shall be countersigned by an authorized signatory of the Rights Agent, either manually or by facsimile or portable document format signature and shall not be valid for any purpose unless so countersigned.  In case any authorized officer of the Company who has signed any of the Rights Certificates ceases to be such an authorized officer of the Company before countersignature by the Rights Agent and/or issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be an authorized officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, is an authorized officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such person was not such an authorized officer.
(b) In case any authorized signatory of the Rights Agent who has countersigned any of the Rights Certificates ceases to be an authorized signatory of the Rights Agent before issuance and delivery by the Company, such Rights Certificates, nevertheless, may be issued and delivered by the Company with the same force and effect as though the person who countersigned such Rights Certificates had not ceased to be an authorized signatory of the Rights Agent; and any Rights Certificates may be countersigned on behalf of the Rights Agent by any person who, at the actual date of the countersignature of such Rights Certificate, is properly authorized to countersign such Rights Certificate, although at the date of the execution of this Agreement any such person was not so authorized.
(c) Following the Distribution Date, upon receipt by the Rights Agent of notice to that effect and all other relevant information referred to in Section 3(a), the Rights Agent will keep, or cause to be kept, at its office designated for such purpose, books for registration and transfer of the Rights Certificates issued hereunder.  Such books shall show the names and addresses of the respective registered holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.
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Section 6.  Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b) and Section 14, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Certificates (other than Rights Certificates representing Rights that have become null and void pursuant to Section 7(e), or that have been redeemed pursuant to Section 23 or exchanged pursuant to Section 24) may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of a transfer) to purchase.  Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose, along with a signature guarantee and such other and further documentation as the Company or the Rights Agent may reasonably request.  Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder has properly completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and has provided such additional evidence, as the Company or the Rights Agent may reasonably request, of the identity of the Beneficial Owner (or former Beneficial Owner), any Affiliates or Associates of such Beneficial Owner, or of any other Person with which such Beneficial Owner or any of such Beneficial Owner’s Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of securities of the Company.  Pursuant to Section 9(e), the Company or the Rights Agent may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.  The Rights Agent shall not deliver any Rights Certificates unless and until it is satisfied that all such payments have been made, and the Rights Agent shall promptly forward any such sum collected by it to the Company or to such Persons as the Company may specify by written notice.  Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14, Section 20(k), Section 23 and Section 24, countersign and deliver to the Person entitled thereto, a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Rights Agent shall have no duty or obligation under any Section of this Agreement that requires the payment of taxes or charges unless and until it is satisfied that all such taxes and/or charges have been paid. 
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation (in the case of mutilation, surrender of such mutilated certificate) of a Rights Certificate (other than Rights Certificates representing Rights that have become null and void pursuant to Section 7(e) or that have been redeemed pursuant to Section 23 or exchanged pursuant to Section 24), and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, along with a signature guarantee and such other and further documentation as the Company or the Rights Agent may reasonably request, and if requested by the Company, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, such Rights Certificate shall be cancelled, and the Company shall execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
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Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e), at any time after the Distribution Date the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii), Section 23(a) and Section 24(b)) in whole or in part upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof properly completed and duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-thousandths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, and an amount equal to any tax or charge required to be paid under Section 9(e), at or prior to the earlier of (i) 5:00 P.M., New York City time, on March 26, 2021 or such earlier or later date as may be established by the Board prior to the Stock Acquisition Date (such date, as it may be modified by the Board prior to the Stock Acquisition Date, the “Final Expiration Date”), and (ii) the time at which the Rights are redeemed or exchanged as provided in Section 23 or Section 24 (the earlier of (i) and (ii) being herein referred to as the “Expiration Date”).  Except for those provisions herein that expressly survive the termination of this Agreement, this Agreement shall terminate upon the earlier of the Expiration Date and such time as all outstanding Rights have been exercised, exchanged or redeemed hereunder (other than Rights which have become null and void pursuant to the provisions of Section 7(e)).
(b) The Purchase Price for each one one-thousandth of a share of Preferred Stock pursuant to the exercise of a Right initially shall be $273.00, and shall be subject to adjustment from time to time as provided in Section 11 and Section 13(a) and shall be payable in lawful money of the United States of America in accordance with subsection (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate properly completed and duly executed, accompanied by payment, with respect to each Right so exercised, as described in subsection (a) of this Section 7, the Rights Agent shall, subject to Section 20(k), thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-thousandths of a share of Preferred Stock to be purchased or, in the case of uncertificated Preferred Stock, requisition from any transfer agent therefor a notice setting forth such number of Preferred Stock to be purchased for which registration will be made in the share register of the Company (and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests), or (B) if the Company elects to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) (and the Company hereby irrevocably authorizes and directs such depositary agent to comply with all such requests), (ii) when necessary to comply with this Agreement, requisition from the Company the amount of cash, if any, to be paid in lieu of issuance of fractional shares in accordance with Section 14, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or, upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) when necessary to comply with this Agreement, after receipt thereof, deliver such cash to or upon the order of the registered holder of such Rights Certificate.  The payment of the Purchase Price (as such amount may be adjusted from time to time as provided in Section 11 or Section 13) and any taxes or charges required to be paid under Section 9(e), shall be made by certified check, cashier’s check, bank draft or money order payable to the order of the Company.  In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a), the Company shall make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when necessary to comply with this Agreement.  The Company reserves the right to require, prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14.
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(e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a direct or indirect transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a direct or indirect transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or from such Associate or Affiliate) to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person (or any such Associate or Affiliate) has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board has determined is part of a plan, arrangement or understanding (whether or not in writing) which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise.  The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) are complied with, but shall have no liability to any holder of Rights or any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights or other securities upon the occurrence of any purported exercise as set forth in this Section 7 unless and until such registered holder has (i) properly completed and duly executed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or any former Beneficial Owner) of the Rights evidenced thereby and the Affiliates and Associates of such Beneficial Owner or holder or of any other Person with which such holder or any of such holder’s Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of any securities of the Company as the Company or the Rights Agent shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise, transfer, split-up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement.  The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof.  Subject to applicable law and regulation, the Rights Agent shall maintain a retrievable database electronic records of all cancelled or destroyed stock certificates which have been canceled or destroyed by the Rights Agent.  The Rights Agent shall maintain such electronic records or physical records for the time period required by applicable law and regulation.  Upon written request of the Company, the Rights Agent shall provide to the Company or its designee copies of such electronic records or physical records relating to rights certificates cancelled or destroyed by the Rights Agent.
Section 9.  Reservation and Availability of Capital Stock.
(a) The Company shall cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares held in its treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that, as provided in this Agreement including Section 11(a)(iii), will be sufficient to permit the exercise in full of all outstanding Rights in accordance with this Agreement.
(b) So long as the shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the Rights are listed on any national securities exchange or included for quotation on any national market system, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.  
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(c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii), a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the Final Expiration Date.  The Company shall also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights.  The Company may temporarily suspend, for a period of time not to exceed 90 days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension has been rescinded.  The Company shall notify the Rights Agent whenever it makes a public announcement pursuant to this Section 9(c) and give the Rights Agent a copy of such announcement.  In addition, if the Company determines that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective.  Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction has not been obtained, the exercise thereof is not permitted under applicable law, or a registration statement has not been declared effective.
(d) The Company shall take all such action as may be necessary to ensure that all one one-thousandths of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates (or creation of the Book-Entries) for such shares (subject to payment of the Purchase Price and compliance with all other applicable provisions of this Agreement), be duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company shall pay when due and payable any and all federal and state transfer taxes and charges that may be payable in respect of the issuance or delivery of Rights Certificates or of any Preferred Stock (or Common Stock or other securities, as the case may be) upon the exercise or exchange of Rights.  The Company shall not, however, be required (i) to pay any transfer tax or charge that may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or in respect of the issuance or delivery of certificates or depositary receipts, or the creation of a Book-Entry, for the Preferred Stock (or Common Stock or other securities, as the case may be), in respect of a name other than, that of the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or (ii) to exchange, or to issue or deliver any certificates or depositary receipts, or create a Book-Entry, for Preferred Stock (or Common Stock or other securities, as the case may be) in respect of a name other than that of the registered holder upon the exercise of any Rights until any such tax or charge has been paid (any such tax or charge being payable by the holder of such Rights Certificates at the time of surrender) or until it has been established to the Company’s and the Rights Agent’s reasonable satisfaction that no such tax or charge is due.
Section 10.  Preferred Stock Record Date.  Each Person in whose name any certificate or Book-Entry representing Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued or created upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such Preferred Stock (or Common Stock or other securities, as the case may be) represented thereby on, and such certificate or Book-Entry shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes or charges) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate or Book-Entry shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock or other securities, as the case may be) transfer books of the Company are open.  Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights will be exercisable, including the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
Section 11.  Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.  The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
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(a) (i) In the event the Company, at any time after the date of this Agreement, (A) declares a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivides the outstanding Preferred Stock, (C) combines the outstanding Preferred Stock into a smaller number of shares, or (D) issues any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Preferred Stock or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time will be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Stock or capital stock, as the case may be, that, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, such holder would have owned upon such exercise and would have been entitled to receive by virtue of such dividend, subdivision, combination or reclassification.  If an event occurs that would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).
(iii) In the event any Person, at any time after the Rights Dividend Declaration Date, becomes an Acquiring Person, unless the event causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a), then, promptly following the later of the occurrence of such event and the Record Date, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e)) will thereafter have the right to receive, upon exercise thereof at a price equal to the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-thousandths of a share of Preferred Stock, the number of shares of Common Stock of the Company equal to the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event (which product, following such first occurrence, shall thereafter be referred to as the “Purchase Price” for, and be the total amount payable upon the exercise of, each Right for all purposes of this Agreement), and (y) dividing that product by 50% of the Current Market Price (as determined pursuant to Section 11(d)) per share of Common Stock on the date of such first occurrence (such number of shares, the “Adjustment Shares”), provided that, for the avoidance of doubt, the Purchase Price and the number of Adjustment Shares shall be further adjusted as provided in this Agreement to reflect any events occurring after the date of such first occurrence.  The Company shall give the Rights Agent written notice of the identity of any such Acquiring Person, Associate or Affiliate, or the nominee of any of the foregoing, and the Rights Agent may rely on such notice in carrying out its duties under this Agreement and shall be deemed not to have any knowledge of the identity of any such Acquiring Person, Associate or Affiliate, or the nominee of any of the foregoing, unless and until it shall have received such notice. 
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(iii) In the event the number of shares of Common Stock authorized by the Company’s Amended and Restated Certificate of Incorporation, as amended from time to time, but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing clause (ii) of this Section 11(a), the Company shall: (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”) over (2) the Purchase Price (such excess, the “Spread”), and (B) with respect to each Right (subject to Section 7(e)), make adequate provision to substitute for the Adjustment Shares, upon the exercise of a Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity securities of the Company (including shares, or units of shares, of preferred stock, such as the Preferred Stock, that the Board has deemed to have essentially the same value or economic rights as shares of Common Stock (such shares of preferred stock, “Common Stock Equivalents”)), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value (less the amount of any reduction in the Purchase Price), where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected by the Board; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within 30 days following the Section 11(a)(ii) Trigger Date, then the Company shall deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread.  If the Board determines in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the 30-day period set forth above may be extended to the extent necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such 30-day period, as it may be extended, the “Substitution Period”).  To the extent that the Company determines that action should be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e), that such action applies uniformly to all outstanding Rights, and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek such stockholder approval for such authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof.  In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.  The Company shall notify the Rights Agent whenever it makes a public announcement pursuant to this Section 11(a)(iii) and give the Rights Agent a copy of such announcement.  For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall be the Current Market Price per share of the Common Stock on the Section 11(a)(ii) Trigger Date and the per share or per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per share of the Common Stock on such date.
(b) In case the Company fixes a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Stock (or shares having substantially the same rights, privileges and preferences as the shares of Preferred Stock (“Equivalent Preferred Stock”)) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or per share of Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into Preferred Stock or Equivalent Preferred Stock) less than the Current Market Price (as determined pursuant to Section 11(d)) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible).  In case such subscription price may be paid by delivery of consideration, part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights.  Such adjustment shall be made successively whenever such a record date is fixed and, in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
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(c) In case the Company fixes a record date for the making of a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of cash (other than a regular periodic cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or evidences of indebtedness, or subscription rights or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Price (as determined pursuant to Section 11(d)) per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and holders of the Rights) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Stock, and the denominator of which shall be such Current Market Price (as determined pursuant to Section 11(d)) per share of Preferred Stock.  Such adjustments shall be made successively whenever such a record date is fixed and, in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price that would have been in effect if such record date had not been fixed.
(d) (i) The Current Market Price per share of Common Stock on any date shall be (x) for any computation made hereunder other than any computation made pursuant to Section 11(a)(iii), the average of the daily closing prices per share of such Common Stock for the 30 consecutive Trading Days immediately prior to, but not including, such date, and (y) for purposes of any computation made pursuant to Section 11(a)(iii), the average of the daily closing prices per share of such Common Stock for the 10 consecutive Trading Days immediately following, but not including, such date; provided, however, that in the event that the Current Market Price per share of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Stock, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification shall not have occurred prior to the commencement of the requisite 30-Trading Day or 10-Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall be appropriately adjusted to take into account ex-dividend trading or the pending corporate action.  The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by OTC Bulletin Board service or such other system then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board.  If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board shall be used.  The term “Trading Day” shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day.  If the Common Stock is not publicly held or not so listed or traded, Current Market Price per share shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes and shall be binding on the Rights Agent and holders of the Rights.
(ii) For the purpose of any computation hereunder, the Current Market Price per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in clause (i) of this Section 11(d) (other than the last sentence thereof).  If the Current Market Price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the Current Market Price per share of Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the Current Market Price per share of Common Stock.  If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, Current Market Price per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes and shall be binding on the Rights Agent and the holders of the Rights.  
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(e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments that by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock or other share or ten-millionth of a share of Preferred Stock, as the case may be.  Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction that mandates such adjustment, and (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a), the holder of any Right thereafter exercised becomes entitled to receive any shares of capital stock other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k), (l) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company has exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and 11(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a share of Preferred Stock obtained by (i) multiplying (x) the number of one one-thousandths of a share covered by a Right immediately prior to such adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-thousandths of a share of Preferred Stock purchasable upon the exercise of a Right.  Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment.  Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price.  The Company shall make a public announcement (with prompt written notice thereof to the Rights Agent) of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made.  This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least 10 days later than the date of the public announcement.  If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14, the additional Rights to which such holders are entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders will be entitled after such adjustment.  Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.
(j) It is acknowledged that, irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-thousandth of a share and the number of one one-thousandths of a share that were expressed in the initial Rights Certificates issued hereunder.  The Rights evidenced by such Rights Certificates shall be subject to adjustment hereunder notwithstanding the Purchase Price and the number of one one-thousandth of a share expressed in such Rights Certificates.
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(k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the number of one one-thousandths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such number of fully paid and nonassessable one one-thousandths of a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 requires that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (with prompt written notice thereof to the Rights Agent) until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-thousandths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in its good faith judgment the Board shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less than the Current Market Price, (iii) issuance wholly for cash of shares of Preferred Stock or securities that by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends, or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders.
(n) The Company shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o)), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o)), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction or a series of related transactions, assets (measured by book value), cash flow or earning power aggregating more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o)), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect that would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of the Person that constitutes, or would constitute, the “Principal Party” for purposes of Section 13(a) shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates.
(o) The Company shall not, after the Distribution Date, except as permitted by Section 23, Section 24 or Section 27, take (nor permit any Subsidiary to take), any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares of Common Stock, or (iii) combines the outstanding shares of Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event equals the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event.
(q)  Notwithstanding anything in this Agreement to the contrary, prior to the Distribution Date, the Company may, in lieu of making any adjustment to the Purchase Price, the number of one one-thousandths of a share of Preferred Stock eligible for purchase on exercise of each Right or the number of Rights outstanding, which adjustment would otherwise be required by Sections 11(a)(i), 11(b), 11(c), 11(h) or 11(i), make such other equitable adjustment or adjustments thereto as the Board (whose determination shall be conclusive) deems appropriate in the circumstances and not inconsistent with the objectives of the Board in adopting this Agreement and such Sections.
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Section 12.  Certificate of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made or an event affecting the Rights or their exercisability (including an event that causes Rights to become null and void) occurs as provided in Section 11 or Section 13, the Company shall (a) promptly prepare a certificate setting forth such adjustment or describing such event and a brief, reasonably detailed statement of the facts, computations and methodology accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate, and (c) if a Distribution Date has occurred, mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of Common Stock) in accordance with Section 25 and Section 26; provided that the failure to prepare, file or mail such certificate or summary shall not affect the validity of such adjustment.  The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment or statement contained therein and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of, any adjustment or any such event unless and until it shall have received such a certificate.
Section 13.  Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power.
(a) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company consolidates with, or merges with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o)), and the Company is not the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o)) consolidates with, or merges with or into, the Company, and the Company is the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Common Stock are changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company sells or otherwise transfers (or one or more of its Subsidiaries sells or otherwise transfers), in one transaction or a series of related transactions, assets (measured by book value), cash flow or earning power aggregating more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o)), then, and in each such case, proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e), will thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, nonassessable and freely tradeable shares of Common Stock of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, equal to the result obtained by (A) multiplying the then current Purchase Price by the number of one one-thousandths of a share of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one-thousandths of a share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence of a Section 11(a)(ii) Event), and (B) dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the Current Market Price (as determined pursuant to Section 11(d)(i)) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as they reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) shall be of no effect following the first occurrence of any Section 13 Event.
(b) “Principal Party” shall mean:
(i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation; and
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(ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions; provided, however, that in any case described in clause (i) or (ii) above, (x) if the Common Stock of such Person is not at such time or has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, “Principal Party” shall refer to such other Person; (y) if such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stock of two or more of which are and have been so registered, “Principal Party” shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value; and (z) if the Common Stock of such Person is not and has not been so registered and such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in clauses (i) and (ii) above shall apply to each of the chains of ownership having an interest in such joint venture as if such Person were a Subsidiary of both or all of such joint venturers, and the Principal Parties in each such chain shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any Section 13 Event unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock that have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in subsections (a) and (b) of this Section 13 and further providing that, as soon as practicable after the effective date of any consolidation, merger or sale of assets mentioned in subsection (a) of this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date;
(ii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates that comply in all respects with the requirements for registration on Form 10 under the Exchange Act; and
(iii) take all such other action as may be necessary to enable the Principal Party to issue the securities purchasable upon exercise of the Rights, including but not limited to the registration or qualification of such securities under all requisite securities laws of the various jurisdictions and the listing of such securities on such exchanges and trading markets as may be necessary or appropriate.
(d) In case the Principal Party which is to be a party to a transaction referred to in this Section 13 has any provision in any of its authorized securities or in its certificate of incorporation or by-laws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Stock of such Principal Party at less than the then Current Market Price per share (as determined pursuant to Section 11(d)) or securities exercisable for, or convertible into, Common Stock of such Principal Party at less than such then Current Market Price (other than to holders of Rights pursuant to this Section 13) or (ii) providing for any special payment, tax or similar provisions in connection with the issuance of the Common Stock of such Principal Party pursuant to the provisions of Section 13; then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party has been cancelled, waived or amended, or that the authorized securities have been redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction.
The provisions of this Section 13 shall similarly apply to successive Section 13 Events.  In the event that a Section 13 Event occurs at any time after the occurrence of a Section 11(a)(ii) Event, the Rights that have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a).
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Section 14.  Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p), or to distribute Rights Certificates that evidence fractional Rights.  In lieu of such fractional Rights, the Company shall pay (or cause to be paid) to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right.  For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable.  The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by OTC Bulletin Board service or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights, selected by the Board.  If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board shall be used, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes and shall be binding on the Rights Agent and holders of the Rights.
(b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions that are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights, to authorize Book-Entries that evidence fractional shares of Preferred Stock (other than fractions that are integral multiples of one one-thousandth of a share of Preferred Stock), or to distribute certificates that evidence fractional shares of Preferred Stock (other than fractions that are integral multiples of one one-thousandth of a share of Preferred Stock).  In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one-thousandth of a share of Preferred Stock.  For purposes of this Section 14(b), the current market value of one one-thousandth of a share of Preferred Stock shall be one one-thousandth of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii)) for the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights, to authorize Book-Entries that evidence fractional shares of Preferred Stock, or to distribute certificates that evidence fractional shares of Common Stock.  In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one share of Common Stock.  For purposes of this Section 14(c), the current market value of one share of Common Stock shall be the closing price per share of Common Stock (as determined pursuant to Section 11(d)(i)) on the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by acceptance of such Right expressly waives its right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14.
(e) Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payments and the prices and/or formulas utilized in calculating such payments, and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments.  The Rights Agent shall be fully protected in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed to have knowledge of, any payment of cash for fractional Rights or fractional shares under any Section of this Agreement relating to the payment of cash for fractional Rights or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies.
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Section 15.  Rights of Action.  All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 and Section 20, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock), and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, on such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement.  Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.  
Section 16.  Agreement of Rights Holders.  Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed, along with a signature guarantee and such other and further documentation as the Company or the Rights Agent may reasonably request;
(c) subject to Section 6(a) and Section 7(e), the Company and the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate or Book-Entry) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, judgment, decree or ruling (whether interlocutory or final) issued by a court of competent jurisdiction or by a governmental, regulatory, self-regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such injunction, order, judgment, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17.  Rights Certificate Holder Not Deemed a Stockholder.  No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one-thousandths of a share of Preferred Stock or any other securities of the Company that may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.
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Section 18.  Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, to reimburse the Rights Agent for all of its reasonable and documented expenses, counsel fees and disbursements and other disbursements incurred in the preparation, delivery, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder.  The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, judgment, fine, penalty, claim, demand, settlement, damage, cost, liability or expense, including, without limitation, the reasonable fees and expenses of legal counsel, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction), for any action taken, suffered or omitted by the Rights Agent pursuant to this Agreement or in connection with the acceptance, administration, exercise and performance of its duties under this Agreement, including the reasonable and documented costs and expenses of defending against any claim of liability in the premises of the Rights Agent.  The reasonable and documented costs and expenses incurred in enforcing this right of indemnification shall be paid by the Company.  Any liability of the Rights Agent under this Agreement will be limited to the amount of fees paid by the Company to the Rights Agent.  The provisions of this Section 18 and Section 20 below shall survive the termination of this Agreement, the exercise or expiration of the Rights, and the resignation, replacement or removal of the Rights Agent.  
(b) The Rights Agent shall be fully protected and authorized and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its acceptance and administration of this Agreement and the exercise and performance of its duties hereunder, in reliance upon any Rights Certificate, certificate or Book-Entry for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, instruction, adjustment notice, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20.  The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take any action in connection therewith.
(c) The Company shall be entitled to participate at its own expense in the defense of any such action, proceeding, suit or claim, and, if the Company so elects, the Company shall assume the defense of any such action, proceeding, suit or claim.  In the event that the Company assumes such defense, the Company shall not thereafter be liable for the fees and expenses of any counsel retained by the Rights Agent, so long as the Company shall retain counsel satisfactory to the Rights Agent, in the exercise of its reasonable judgment, to defend such action, proceeding, suit or claim.  The Rights Agent agrees not to settle any litigation in connection with any action, proceeding, suit or claim with respect to which it may seek indemnification from the Company without the prior written consent of the Company, which shall not be unreasonably withheld.
Section 19.  Merger or Consolidation or Change of Name of Rights Agent.
(a) Any Person into which the Rights Agent or any successor Rights Agent is merged or with which the Rights Agent or any successor Rights Agent is consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent is a party, or any Person succeeding to the corporate trust, stock transfer or other stockholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; but only if such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21.  In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates have not been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
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Section 20.  Duties of Rights Agent.  The Rights Agent undertakes to perform only the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates or, prior to the Distribution Date, Common Stock, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be, without limitation, legal counsel for the Company or an employee of the Rights Agent), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in good faith and in accordance with such advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person or any other Person referred to in Section 7(e) and the determination of Current Market Price) be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any of the Chairman of the Board, its President, or any Executive or Senior Vice President of the Company and delivered to the Rights Agent; and such certificate shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in good faith under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other Persons only for its own gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction).  In no case, however, will the Rights Agent be liable for special, indirect, punitive, incidental or consequential losses or damages of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the possibility or likelihood of such losses or damages.  
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any liability for or be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 7(e) hereof) or any adjustment required under the provisions of Section 11, Section 13 or Section 24 or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or Preferred Stock will, when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
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(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder and certificates delivered pursuant to any provision hereof from any of the Chairman of the Board, its President, or any Executive or Senior Vice President of the Company and to apply to such officers for advice or instructions in connection with its duties, and such instructions shall be full authorization and protection to the Rights Agent and the Rights Agent shall not be liable for or in respect of any action taken, suffered or omitted by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions.  The Rights Agent shall be fully authorized and protected in relying in good faith upon the most recent instructions received from any such officers.  Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken, suffered or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or suffered or such omission shall be effective.  The Rights Agent shall not be liable for any good faith action taken or suffered by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date).
(h) The Rights Agent and any stockholder, affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement.  Nothing herein shall preclude the Rights Agent or any such stockholder, affiliate, director, officer or employee of the Rights Agent from acting in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers and employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct in the selection and continued employment thereof (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction).
(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if there are reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, either (i) the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, or (ii) any other actual or suspected irregularity exists, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.
Section 31.  Change of Rights Agent.  The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon at least 30 days’ notice in writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock known to the Rights Agent, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the registered holders of the Rights Certificates by first-class mail.  The Company may remove the Rights Agent or any successor Rights Agent upon at least 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and, if such removal occurs after the Distribution Date, to the holders of the Rights Certificates by first-class mail.  If the Rights Agent resigns or is removed or otherwise becomes incapable of acting, the Company shall appoint a successor to the Rights Agent.  If the Company fails to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (such holder shall, with such notice, submit its Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a Person organized and doing business under the laws of the United States or any State thereof, in good standing, which is authorized under such laws to exercise corporate trust, stock transfer or stockholder services powers and which at the time of its appointment as Rights Agent has, or with its parent has, a combined capital and surplus of at least $1,000,000 or (b) an affiliate of a Person described in clause (a) of this sentence.  After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent under this Agreement without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for 
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the purpose.  Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and, if such appointment occurs after the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates.  Failure to give any notice provided for in this Section 21, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22.  Issuance of New Rights Certificates.  Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, granted or awarded as of the Distribution Date, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment has otherwise been made in lieu of the issuance thereof.
Section 23.  Redemption and Termination.
(a) The Board may, at its option, at any time prior to the earlier of (i) the Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the Record Date), and (ii) the Close of Business on the Final Expiration Date, (x) redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 per Right (rounded up to the nearest whole $0.01 in the case of any holder whose holdings are not in a multiple of ten), as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “Redemption Price”) or (y) amend this Agreement to change the Final Expiration Date to another date, including an earlier date.  The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the Current Market Price, as defined in Section 11(d), of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board.
(b) Immediately upon the action of the Board ordering the redemption of the Rights pursuant to subsection (a) of this Section 23, or such later time as shall be specified in such Board action, evidence of which shall have been filed with the Rights Agent, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held.  Promptly after such action of the Board ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder’s last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such redemption.  Any notice that is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.  Each such notice of redemption will state the method by which the payment of the Redemption Price will be made.
Section 24.  Exchange.
(a) The Board may, at its option, at any time after the Stock Acquisition Date, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 7(e)) for Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan), together with all Affiliates and Associates thereof, becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.
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(b) Immediately upon the action of the Board ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public notice of any such exchange (with prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange.  The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.  Each such notice of exchange will state the method by which the exchange of the Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 7(e)) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute shares of Preferred Stock (or Equivalent Preferred Stock, as such term is defined in subsection (b) of Section 11) for shares of Common Stock exchangeable for Rights, at the initial rate of one one-thousandth of a share of Preferred Stock (or share of Equivalent Preferred Stock) for each share of Common Stock as appropriately adjusted to reflect stock splits, stock dividends and other similar transactions after the date hereof.
(d) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights.  
(e) The Company shall not be required to issue fractions of shares of Common Stock, or to distribute certificates or create Book-Entries that evidence fractional shares of Common Stock.  In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock.  For the purposes of this subsection (e), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i)) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. 
(f) Following the action of the Board ordering the exchange of any Rights pursuant to this Section 24, the Company may implement such procedures as it deems appropriate, in its sole discretion, for the purpose of ensuring that shares of Common Stock (or such other consideration) issuable upon an exchange pursuant to this Section 24 is not received by holders of Rights that have become null and void pursuant to Section 7(e).  Before effecting an exchange pursuant to this Section 24, the Board may direct the Company to enter into a Trust Agreement in such form and with such terms as the Board shall then approve (the “Trust Agreement”).  If the Board so directs, the Company shall enter into the Trust Agreement and shall issue to the trust created by such agreement (the “Trust”) all or a portion (as designated by the Board) of the shares of Common Stock (or other securities) issuable pursuant to this Section 24, and all holders of Rights entitled to receive such shares or securities pursuant to the exchange shall be entitled to receive such shares or securities (and any dividends paid or distributions made thereon after the date on which such shares are deposited in the Trust) only from the Trust and solely upon compliance with the relevant terms and provisions of the Trust Agreement.  Prior to effecting an exchange and registering shares of Common Stock (or other such securities) in any Person’s name, including any nominee or transferee of a Person, the Company may require (or cause the trustee of the Trust to require), as a condition thereof, that any holder of Rights provide evidence, including the identity of the Beneficial Owners thereof and their Affiliates and Associates (or former Beneficial Owners thereof and their Affiliates and Associates) as the Company shall reasonably request in order to determine if such Rights are null and void.  If any Person shall fail to comply with such request, the Company shall be entitled conclusively to deem the Rights formerly held by such Person to be null and void pursuant to ‎Section 7(e) and not transferable or exercisable or exchangeable in connection herewith.  Any shares of Common Stock or other securities issued at the direction of the Board in connection herewith shall be validly issued, fully paid, and nonassessable shares of Common Stock or of such other securities (as the case may be), and the Company shall be deemed to have received as consideration for such issuance a benefit having a value that is at least equal to the aggregate par value of the shares so issued.
26

Section 25.  Notice of Certain Events.
(a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular periodic cash dividend out of earnings or retained earnings of the Company), (ii) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o)), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets (measured by book value), cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o)), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to the Rights Agent and to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of shares of Preferred Stock, whichever shall be the earlier.
(b) In case a Section 11(a)(ii) Event shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26, and to the Rights Agent in accordance with Section 26, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii), and (ii) all references in the preceding Section 25(a) to Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 26.  Notices.  Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class or express United States mail, FedEx or UPS, postage prepaid and properly addressed (until another address is filed in writing by the Rights Agent with the Company) as follows:
Tempur Sealy International, Inc.  
1000 Tempur Way
Lexington, KY 40511
Attention: General Counsel 

Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class or express United States mail, FedEx or UPS, postage prepaid and properly addressed (until another address is filed in writing with the Rights Agent) as follows:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Attention: General Counsel
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of shares of Common Stock) shall be sufficiently given or made if sent by first-class or express United States mail, FedEx or UPS, postage prepaid and properly addressed, to such holder at the address of such holder as shown on the registry books of the Company.
27

Section 27.  Supplements and Amendments.  Prior to the Stock Acquisition Date, the Company and the Rights Agent shall, if the Company so directs, from time to time supplement or amend any provision of this Agreement without the approval of any holders of Rights or Common Stock.  From and after the Stock Acquisition Date, the Company and the Rights Agent shall, if the Company so directs, from time to time supplement or amend this Agreement without the approval of any holders of Rights or Common Stock solely in order (a) to cure any ambiguity, (b) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or (c) to supplement or amend the provisions hereunder in any manner which the Company may deem necessary or desirable and that do not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person).  Any such supplement or amendment shall be evidenced by a writing signed by the Company and the Rights Agent.  Upon delivery of a certificate from an appropriate officer of the Company and, if requested by the Rights Agent, an opinion of counsel, that states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment; provided, that any supplement or amendment that does not amend Section 18, Section 19, Section 20, or Section 21 in a manner adverse to the Rights Agent shall become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent.  Notwithstanding anything contained in this Agreement to the contrary, the Rights Agent may, but shall not be obligated to, enter into any supplement or amendment that affects the Rights Agent’s own rights, duties, obligations or immunities under this Agreement.  Prior to the Stock Acquisition Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock.
Section 28.  Successors.  All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 29.  Determinations and Actions by the Board, etc.  For all purposes of this Agreement, any calculation of the number of shares of Common Stock or any other class of capital stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.  The Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including the right and power to (a) interpret the provisions of this Agreement and (b) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement).  All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board or any of the directors on the Board to any liability to the holders of the Rights or any stockholders.  The Rights Agent is entitled always to assume that the Board acted in good faith and shall be fully protected and incur no liability in reliance thereon.  Nothing contained in this Agreement shall be deemed to be in derogation of the obligation of the Board to exercise its fiduciary duties.  Without limiting the foregoing, nothing contained herein shall be construed to suggest or imply that the Board is not entitled to reject any tender offer or other acquisition proposal, or to recommend that holders of shares of Common Stock reject any tender offer, or to take any other action (including the commencement, prosecution, defense or settlement of any litigation and the submission of additional or alternative offers or other proposals) with respect to any tender offer or other acquisition proposal that the Board believes is necessary or appropriate in the exercise of its fiduciary duties.
Section 30.  Benefits of this Agreement.   Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of Common Stock).
Section 31.  Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that nothing contained in this Section 31 will affect the ability of the Company under the provisions of Section 27 to supplement or amend this Agreement to replace such invalid, void or unenforceable term, provision, covenant or restriction with a legal, valid and enforceable term, provision, covenant or restriction.
Section 32.  Governing Law; Waiver of Jury Trial.  This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State.  EACH OF THE PARTIES HERETO ALSO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF THIS AGREEMENT.
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Section 33.  Counterparts.  This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.  A signature to this Agreement transmitted electronically shall have the same authority, effect and enforceability as an original signature.
Section 34.  Interpretation.  Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.  Whenever the words “include,” “includes” or “including” are used in this Agreement they shall be deemed to be followed by the words “without limitation.”  The words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, subsection, paragraph and exhibit references are to the articles, sections, subsections, paragraphs and exhibits of this Agreement unless otherwise specified.  The meaning assigned to each term defined herein shall be equally applicable to both the singular and the plural forms of such term, and words denoting any gender shall include all genders.  Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning.
Section 35.  Force Majeure.  Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunctions of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil unrest.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written.
TEMPUR SEALY INTERNATIONAL, INC.

By:    /s/ Bhaskar Rao                                             
Name: Bhaskar Rao
Title: Executive Vice President and Chief Financial Officer

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, AS RIGHTS AGENT,as Rights Agent

By:       /s/ Michael A. Nespoli                                            
Name:  Michael A. Nespoli
Title:    Executive Director

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Exhibit A

FORM OF
SECOND AMENDED AND RESTATED CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of 
TEMPUR SEALY INTERNATIONAL, INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
We, the undersigned, Bhaskar Rao, Executive Vice President and Chief Financial Officer, and Joseph M. Kamer, Senior Vice President, General Counsel and Secretary, of Tempur Sealy International, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), in accordance with the provisions of Sections 103 and 151 thereof, DO HEREBY CERTIFY:
That pursuant to the authority expressly vested in the Board of Directors of the Corporation (the “Board”) by the Amended and Restated Certificate of Incorporation, the Board has duly adopted the following resolutions:
WHEREAS, that, pursuant to Article IV of the Amended and Restated Certificate of Incorporation, as amended, which authorizes Ten Million (10,000,000) shares of preferred stock, $0.01 par value per share (“Preferred Stock”) of which 300,000 were designated as of March 14, 2017 as Series A Junior Participating Preferred Stock pursuant to that certain Amended and Restated Certificate of Designation of Series A Junior Participating Preferred Stock (the “Amended Certificate of Designation”);
WHEREAS, that, the Amended Certificate of Designation was filed with the Delaware Secretary of State on March 14, 2017; 
WHEREAS, that, no shares of the Series A Junior Participating Preferred Stock are issued or outstanding; and
WHEREAS, that, the following resolution amending and restating the Amended Certificate of Designation was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a duly convened meeting of the Board of Directors dated March 27, 2020, and that, pursuant to Section 151(g) of the General Corporation Law of the State of Delaware, stockholder approval of this amendment and restatement is not required and has not been obtained;
NOW THEREFORE BE IT RESOLVED, that pursuant to the authority vested in the Board in accordance with the provisions of the Amended and Restated Certificate of Incorporation, the relative rights, preferences, and limitations of the Series A Junior Participating Preferred Stock shall be amended and restated as set forth below, and that the designation and amount thereof and the voting powers, preferences and rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows:
Section 1.   Designation and Amount.  The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” and the number of shares constituting such series shall be 1,000,000.  
1

Exhibit A

Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board out of funds legally available for the purpose, quarterly dividends payable in cash on the 1st day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00 or (ii) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock of the Corporation since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock.  In the event the Corporation shall at any time after March 27, 2020 (the “Rights Declaration Date”) (A) declare any dividend on Common Stock payable in shares of Common Stock, (B) subdivide the outstanding Common Stock, or (C) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in Section 2(a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).  Each such dividend or distribution on the Series A Junior Participating Preferred Stock shall be payable immediately prior to the time at which the related dividend or distribution on the Common Stock is payable.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.
Section 3.  Voting Rights.  The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
2

Exhibit A

(c) (i)        If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a “default period”) which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment.  During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two directors; provided that the election of any such directors shall not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or any other exchange or automated quotation system on which the Corporation’s securities may be listed or quoted) that requires listed or quoted companies to have a majority of independent directors; provided, further, that the Board shall, at no time, include more than two directors elected pursuant to this Section 3(c).
(ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to ‎Section 3(c)(iii) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of directors shall be exercised unless the holders of 10% in number of shares of Preferred Stock outstanding shall be present in person or by proxy.  The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right.  At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect directors to fill such vacancies, if any, in the Board as may then exist up to two directors or, if such right is exercised at an annual meeting, to elect two directors.  If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of directors as shall be necessary to permit the election by them of the required number.  After the holders of the Preferred Stock shall have exercised their right to elect directors in any default period and during the continuance of such period, the number of directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect directors, the Board may order, or any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by any of the Chairman of the Board, its President or any Executive or Senior Vice President of the Company.  Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Section 3(c)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to such holder at its last address as the same appears on the books of the Corporation.  Such meeting shall be called for a time not earlier than 10 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding.  Notwithstanding the foregoing provisions of this Section 3(c)(iii), no such special meeting shall be called during the period within 90 days immediately preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of directors until the holders of Preferred Stock shall have exercised their right to elect 2 directors voting as a class, after the exercise of which right (x) the directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board may (except as provided in Section 3(c)(ii)) be filled by vote of a majority of the remaining directors theretofore elected by the holders of the class of stock which elected the director whose office shall have become vacant.  References in this Section 3(c) to directors elected by the holders of a particular class of stock shall include directors elected by such directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect directors shall cease, (y) the term of any directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of directors shall be such number as may be provided for in the Corporation’s Amended and Restated Certificate of Incorporation or Amended and Restated By-laws, irrespective of any increase made pursuant to the provisions of Section 3(c)(ii) (such number being subject, however, to change thereafter in any manner provided by law or in such Amended and Restated Certificate of Incorporation or Amended and Restated By-laws).  Any vacancies in the Board effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining directors.
3

Exhibit A

(d) Except as set forth herein or required by applicable law, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 4.  Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Section 4(a), purchase or otherwise acquire such shares at such time and in such manner.
Section 5.  Reacquired Shares.  Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof.  All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board, subject to the conditions and restrictions on issuance set forth herein.
Section 6.  Liquidation, Dissolution or Winding Up.  (a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received an amount equal to $100.00 per share of Series A Junior Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Series A Liquidation Preference”).  Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in Section 6(c) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the “Adjustment Number”).  Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.
4

Exhibit A

(b) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences.  In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.
(c) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 7.  Consolidation, Merger, etc.  In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.  In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8.  No Redemption.  The shares of Series A Junior Participating Preferred Stock shall not be redeemable.
Section 9.  Ranking.  The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporation’s Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
Section 10. Amendment.  At any time when any shares of Series A Junior Participating Preferred Stock are outstanding, the Amended and Restated Certificate of Incorporation of the Corporation shall not be amended (whether by merger or otherwise) in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11.  Fractional Shares.  Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock.
Section 12.  Certain Definitions.  As used herein with respect to the Series A Junior Participating Preferred Stock, the term “Common Stock” means the common stock, par value $0.01 per share, of the Corporation at the date hereof or any other class of stock resulting from successive changes or reclassification of the common stock.
IN WITNESS WHEREOF, this Second Amended and Restated Certificate of Designation, Preferences and Rights has been executed on behalf of the Corporation as of this 27th day of March 2020.
TEMPUR SEALY INTERNATIONAL, INC.
By:                                                                              
       Name: Bhaskar Rao
        Its: Executive Vice President and Chief Financial Officer
Attest: 
                                                                
Joseph M. Kamer, Senior Vice President, 
General Counsel and Secretary

5

Exhibit B

Form of Rights Certificate
Certificate No. R-                                                                                                                           ___________Rights
NOT EXERCISABLE AFTER MARCH 26, 2021, UNLESS EXTENDED PRIOR THERETO BY THE BOARD OF DIRECTORS OF THE COMPANY, OR EARLIER IF REDEEMED OR EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION AND TO EXCHANGE, AT THE OPTION OF THE COMPANY ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.  [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).  ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]1
Rights Certificate
TEMPUR SEALY INTERNATIONAL, INC.
This certifies that ____________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of March 27, 2020, as it may have been or as it may be amended from time to time (the “Rights Agreement”), by and between Tempur Sealy International, Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, as rights agent (the “Rights Agent”), to purchase from the Company at any time prior to 5:00 P.M. (New York City time) on March 26, 2021, (unless such date is modified prior thereto by the Board of Directors of the Company) at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-thousandth of a fully paid, nonassessable share of Series A Junior Participating Preferred Stock (the “Preferred Stock”) of the Company, at a purchase price of $273.00 per one one-thousandth of a share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate properly completed and duly executed, along with a signature guarantee and such other and further documentation as the Company or the Rights Agent may reasonably request.  The number of Rights evidenced by this Rights Certificate (and the number of shares that may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of March 27, 2020, based on the Preferred Stock as constituted at such date.  
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a direct or indirect transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a direct or indirect transferee of a Person who, after such transfer, became an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and kind of shares of Preferred Stock or other securities that may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement.  Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Company.
___________________________
1 NTD: The portion of the legend in brackets shall be inserted only if applicable and shall replace the preceeding sentence.

1

Exhibit B

Subject to the provisions of the Rights Agreement, this Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-thousandths of a share of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase.  If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof, along with a signature guarantee and such other and further documentation as the Company or the Rights Agent may reasonably request, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.001 per Right at any time prior to the earlier of (i) the Stock Acquisition Date (or, if the Stock Acquisition Date has occurred prior to the Record Date, the Record Date, as such time period may be extended pursuant to the Rights Agreement), and (ii) the Close of Business on the Final Expiration Date (as each such term is defined in the Rights Agreement).  In addition, subject to the provisions of the Rights Agreement, at any time after a Person becomes an Acquiring Person, the Rights may be exchanged, in whole or in part, for shares of the Common Stock, or shares of preferred stock of the Company having essentially the same value or economic rights as such shares.  Immediately upon the action of the Board of Directors of the Company authorizing any such exchange, and without any further action or any notice, the Rights (other than Rights which are not subject to such exchange) will terminate and the Rights will only enable holders to receive the shares issuable upon such exchange.
The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions that are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights, or to authorize book-entries or distribute certificates that evidence fractional shares of Preferred Stock (other than fractions that are integral multiples of one one-thousandth of a share of Preferred Stock).  In lieu of fractional rights of Preferred Stock that are not integral multiples of one one-thousandth of a share of Preferred Stock, the Company may pay to the registered holder of this Rights Certificate at the time such Rights are exercised an amount in cash equal to the same fraction of the current market value of one one-thousandth of a share of Preferred Stock.  The Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole shares of Preferred Stock will be issued.
No holder of this Rights Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give consent to or withhold consent from any corporate action, or, to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised or exchanged for securities of the Company having any of the foregoing rights as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose until it is countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company.
Dated as of ___________, ____
ATTEST:                                                                        TEMPUR SEALY INTERNATIONAL, INC.
                                                                                        By                                                                              
Secretary                                                                                 Title:

2

Exhibit B

Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
 as Rights Agent

By                                                       
    Authorized Signature

3

Exhibit B

Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED __________________________________ hereby sells, assigns and transfers unto 
                                                                                          
(Please print name and address of transferee) 
this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ______________________ Attorney, to transfer the within Rights Certificate on the books of the within named Company, with full power of substitution.
Dated:__________, ____
                                                           
Signature

Signature Medallion Guaranteed:
Signatures must be guaranteed by a participant in the Securities Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc. Medallion Signature Program. 
4

Exhibit B

Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); and
(2)  after due inquiry and to the best knowledge of the undersigned, the undersigned did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: _________, ____
                                                            
Signature
Signature Medallion Guaranteed:
Signatures must be guaranteed by a participant in the Securities Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc. Medallion Signature Program.

NOTICE
The signature to the foregoing Form of Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

5

Exhibit B

FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the Rights Certificate.)
To:  Tempur Sealy International, Inc.:
The undersigned hereby irrevocably elects to exercise _____________ Rights represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to, or entries for such shares be made in the book-entry account system of the transfer agent in the name of and with written confirmation to:
Please insert social security or other identifying number
                                                                                                                                                                                              
 (Please print name and address)

                                                                                                                                                  
If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:
Please insert social security or other identifying number
                                                                                                                                                   
(Please print name and address)
                                                                                                                                               
                                                                                                                                               
Dated:  _____________, ____
                                                              
Signature

Signature Medallion Guaranteed:
Signatures must be guaranteed by a participant in the Securities Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc. Medallion Signature Program. 
6

Exhibit B

Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the undersigned did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated:  __________, ____
                                                              
Signature
Signature Medallion Guaranteed:
Signatures must be guaranteed by a participant in the Securities Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc. Medallion Signature Program.

NOTICE
The signature to the foregoing Form of Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

7

Exhibit C

SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
On March 27, 2020 (the “Rights Dividend Declaration Date”), the Board of Directors (the “Board”) of Tempur Sealy International, Inc. (the “Company”) authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $0.01 per share, of the Company (the “Common Stock”) to stockholders of record at 5:00 P.M., New York City time, on April 7, 2020 (the “Record Date”).  Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share (a “Unit”) of Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) at a Purchase Price of $273.00 per Unit, subject to adjustment.  The description and terms of the Rights are set forth in a Rights Agreement (the “Rights Agreement”), dated as of March 27, 2020 , between the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent.
Initially, the Rights will be attached to all shares of Common Stock then outstanding, and no separate certificates evidencing the Rights (the “Rights Certificates”) will be distributed.  Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a Distribution Date (as defined below) will occur upon the earlier of (i) 10 business days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired beneficial ownership of 10% (20% in the case of a Passive Institutional Investor) or more of the outstanding shares of Common Stock (the “Stock Acquisition Date”), (or, if the 10th Business Day after the Stock Acquisition Date occurs before the Record Date, on the Record Date) or (ii) 10 business days (or such later date as the Board shall determine) following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”).  
Until the Distribution Date, (i) the Rights will be evidenced by the Common Stock certificates or, in the case of uncertificated Common Stock, the book-entries in the Company’s share register registered in the names of the holders of Common Stock, (ii) any new Common Stock certificates, or initial transaction statements or periodic statements sent to holders of uncertificated Common Stock, will contain a notation incorporating the Rights Agreement by reference, and (iii) the transfer of any shares of Common Stock outstanding will also constitute the transfer of the Rights associated with such shares of Common Stock.  Pursuant to the Rights Agreement, the Company reserves the right to require prior to the occurrence of a Triggering Event (as defined below) that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Series A Preferred Stock will be issued.
The Rights are not exercisable until the Distribution Date and will expire at 5:00 P.M. (New York City time) on March 26, 2021 (the “Final Expiration Date”), unless the Rights Agreement is earlier terminated or such date is extended or the Rights are earlier redeemed or exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the Rights.
In the event that a person becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value (as determined pursuant to the Rights Agreement) equal to two times the exercise price of the Right.  Notwithstanding any of the foregoing, following the occurrence of the event described in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void.  
In the event that a person becomes an Acquiring Person and (i) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation, (ii) the Company engages in a merger or other business combination transaction in which the Company is the surviving corporation and the Common Stock of the Company is changed or exchanged, or (iii) 50% or more of the Company’s assets (measured by book value), cash flow or earning power is sold or transferred, each holder of a Right (except Rights which have previously been voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the Right.  The events set forth in this paragraph and in the preceding paragraph are referred to as the “Triggering Events.”
At any time after a person or group becomes an Acquiring Person and prior to the acquisition by such person or group of 50% or more of the outstanding Common Stock, the Board may exchange all or part of the then outstanding Rights (other than Rights owned by such person or group which have become null and void) for Common Stock or Series A Preferred Stock, at an exchange ratio of one share of Common Stock or one Unit, as applicable (or for a share of a class or series of the Company’s preferred stock having equivalent rights, privileges and preferences to the Series A Preferred Stock), per Right (subject to adjustment).

Exhibit C

In addition to the adjustment to the Purchase Price referred to above, the Purchase Price payable, and the number of Units of Series A Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series A Preferred Stock, (ii) if holders of the Series A Preferred Stock are granted certain rights or warrants to subscribe for Series A Preferred Stock or convertible securities at less than the current market price of the Series A Preferred Stock, or (iii) upon the distribution to holders of the Series A Preferred Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends) or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price.  No fractional Units will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Series A Preferred Stock on the last trading date prior to the date of exercise.
At any time prior to the earlier of (i) the Stock Acquisition Date (or, if the Stock Acquisition Date has occurred prior to the Record Date, the Record Date) and (ii) the Final Expiration Date, the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (payable in cash, Common Stock or other consideration deemed appropriate by the Board) or amend the Rights Agreement to change the Final Expiration Date to another date, including without limitation an earlier date.  Immediately upon the action of the Board ordering redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no separate rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends in respect of the Rights.  While the distribution of the Rights will not be taxable to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Stock (or other consideration) of the Company or for common stock of the acquiring company or in the event of the redemption of the Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended by the Board prior to the Stock Acquisition Date.  From and after the Stock Acquisition Date, the provisions of the Rights Agreement may only be amended by the Board in order to cure any ambiguity, to correct or supplement any provision contained in the Rights Agreement which may be defective or inconsistent with any other provisions in the Rights Agreement or to make changes which the Company may deem necessary or desirable and that do not adversely affect the interests of holders of Rights.
A copy of the Rights Agreement has been or will be filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A of the Company and as an Exhibit to a Current Report on Form 8-K.  A copy of the Rights Agreement is available free of charge from the Company.  This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference.

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