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Exhibit 10.19
[BANK OF AMERICA LOGO]
LEASE NUMBER
BANC OF AMERICA LEASING & CAPITAL, LLC
LEASE AGREEMENT 15689 - 00400
THIS LEASE AGREEMENT (this "Agreement")
dated as of July 26, 2005 between BANC
OF AMERICA LEASING & CAPITAL, LLC
("Lessor"), a Delaware limited liability
company having an office at 2059 Northlake
Parkway, 4 South, Tucker, GA 30084,
and Fred's Stores of Tennessee, Inc.
("Lessee"), a Tennessee corporation, having
their chief executive office at 4300 New
Getwell Road, Memphis, Tennessee 38118.
1. LEASE AGREEMENT; SCHEDULES; TITLE.
Subject to the terms and conditions
hereof, Lessor shall lease to Lessee, and
Lessee shall lease from Lessor, the
items of personal property (collectively
with all attachments and accessories
thereto, the "Units") described in one or
more schedules (each, a "Schedule";
each Schedule, together with this Agreement
as it pertains thereto, a "Lease")
which incorporate by reference this
Agreement. Each Schedule shall constitute a
separate and independent lease and
contractual obligation of Lessee. Upon
delivery and acceptance by Lessee of each
Unit, Lessee shall execute and deliver
the Schedule relating to the Unit, with all
information required on the Schedule
fully completed, identifying and accepting
the Unit. Lessee hereby assigns to
Lessor all of Lessee's interest in any
purchase orders, invoices or other
contracts of sale with respect to the Units
provided that Lessor assumes no
obligations under such agreements other
than the obligation to pay for the Units
if Lessee has complied with the terms of
this Agreement. Lessee hereby conveys
whatever right, title and interest it may
have in the Units to the Lessor
hereunder.
2. TERM OF LEASE; RENTALS. The lease term
with respect to any Unit shall consist
of an "Interim Term" (if any) and a "Base
Term" as specified in the Schedule
covering such Unit. Lessee shall pay rent
for the Interim Term ("Interim Rent")
and for the Base Term ("Base Rent") as
specified in the applicable Schedule.
3. NET LEASE; DISCLAIMER OF WARRANTIES.
EACH LEASE IS A NET LEASE. ALL COSTS,
EXPENSES AND OTHER LIABILITIES ASSOCIATED
WITH THE UNITS SHALL BE BORNE SOLELY
BY LESSEE. LESSEE'S OBLIGATION TO PAY RENT
AND ALL OTHER OBLIGATIONS UNDER ANY
LEASE ARE ABSOLUTE AND UNCONDITIONAL, AND
NOT SUBJECT TO ANY ABATEMENT,
DEFERMENT, REDUCTION, SETOFF, DEFENSE,
COUNTERCLAIM OR RECOUPMENT FOR ANY REASON
WHATSOEVER. NO LEASE SHALL TERMINATE,
EXCEPT AS EXPRESSLY PROVIDED HEREIN, NOR
SHALL THE OBLIGATIONS OF LESSEE BE
AFFECTED, BY REASON OF ANY DEFECT OR DAMAGE
TO, OR ANY DESTRUCTION, LOSS, THEFT,
FORFEITURE, GOVERNMENTAL REQUISITION OR
OBSOLESCENCE OF ANY UNIT, REGARDLESS OF
CAUSE. LESSEE ACKNOWLEDGES THAT LESSOR
IS NOT A MERCHANT OR MANUFACTURER, OR AGENT
OF ANY SUCH PERSON, OR ENGAGED IN
THE SALE OR DISTRIBUTION OF THE UNITS, AND
HAS NOT MADE, AND DOES NOT HEREBY
MAKE, ANY REPRESENTATION OR WARRANTY AS TO
MERCHANTABILITY, PERFORMANCE,
CONDITION, FITNESS OR SUITABILITY FOR
LESSEE'S PURPOSES OF ANY OF THE UNITS, OR
MAKE ANY OTHER REPRESENTATION OR WARRANTY
WITH RESPECT TO THE UNITS. LESSOR
SHALL NOT BE LIABLE TO LESSEE FOR, NOR
SHALL LESSEE'S OBLIGATIONS UNDER ANY
LEASE BE AFFECTED BY, ANY LOSS, CLAIM,
LIABILITY, COST, DAMAGE OR EXPENSE OF ANY
KIND CAUSED, OR ALLEGED TO BE CAUSED,
DIRECTLY OR INDIRECTLY, BY ANY UNIT, OR BY
ANY INADEQUACY OF THE UNIT FOR ANY PURPOSE,
OR BY ANY DEFECT IN, THE USE OR
MAINTENANCE OF, ANY REPAIRS, SERVICING OR
ADJUSTMENTS OF, OR ANY INTERRUPTION OR
LOSS OF SERVICE OR USE OF, ANY UNIT, OR ANY
LOSS OF BUSINESS, PROFITS,
CONSEQUENTIAL OR OTHER DAMAGE OF ANY
NATURE. Lessor hereby transfers and assigns
to Lessee, to the extent allowable by law,
for and during the lease term of each
Schedule, a non-exclusive interest in the
Unit warranties, if any, of the
manufacturer, and hereby authorizes Lessee,
when there exists no Event of
Default, to enforce such warranties and to
obtain at its own expense the
customary services furnished by the
manufacturer in connection with the Units.
4. USE, MAINTENANCE, LOCATION. Lessee shall
use, operate, protect and maintain
the Units in good operating order, repair,
condition and appearance, and in
compliance with all applicable insurance
policies, laws, ordinances, rules,
regulations and manufacturer's recommended
procedures, and shall maintain
comprehensive records regarding the Units.
The Units shall be used solely for
commercial or business purposes, and not
for any consumer, personal, home, or
family purpose, and shall not be abandoned.
Lessee shall not, through
modifications, alterations or otherwise,
impair the value or originally intended
function of any Unit without Lessor's prior
consent. Any replacement or
substitution of parts, improvements,
upgrades, or additions to the Units made by
Lessee shall become and remain the property
of Lessor and subject to the Lease,
except that if no Event of Default exists,
Lessee may at its expense remove
improvements or additions provided by
Lessee that can be readily removed without
impairing the value and function of the
Unit. If requested by Lessor, Lessee
shall cause each Unit to be plainly marked
to disclose Lessor's ownership, as
specified by Lessor. Lessee shall not
change the location or base of any Unit
specified in its Schedule without Lessor's
prior consent. Lessee shall notify
Lessor at least 30 days before changing the
location of its chief executive
office.
5. LOSS AND DAMAGE. Lessee assumes all risk
of, and shall promptly notify Lessor
of any occurrence of, any damage to or
loss, theft, confiscation, or destruction
of (together, "Casualty") each Unit from
any cause whatsoever from the date the
Unit is shipped by the vendor or
manufacturer or otherwise made available to
Lessee ("Shipment Date"). If any Unit
suffers a Casualty from the Shipment Date
until the Acceptance Date (as defined in
the applicable Schedule), Lessee shall
pay Lessor any sum required to be paid
under any Progress Payment Agreement
entered into between Lessor and Lessee in
relation to such Unit. If any Unit
suffers a Casualty on or after its
Acceptance Date, Lessee shall, if the
Casualty is damage that is reparable in the
judgment of Lessor, at its own
expense promptly place the same in good
repair, condition or working order, and,
if the Unit is lost, stolen, confiscated,
destroyed or damaged beyond repair
("Total Loss"), on the rent payment date
following such occurrence (or, if none,
within 30 days) pay Lessor the Stipulated
Loss Value (as defined in the
applicable Schedule) therefor, together
with all other amounts owing under the
Lease with respect to the Unit. Upon such
payment, (a) the Lease of the Unit
shall
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terminate and Lessor thereupon shall become
entitled to possession of the Unit
and (b) Lessee shall become entitled to
proceeds of insurance maintained by
Lessee to the extent of such payment, any
excess proceeds to be retained by
Lessor. If less than all Units in the
applicable Schedule suffer Total Loss, the
remaining Base Rent under the Schedule
shall be reduced as reasonably calculated
by Lessor and notified to Lessee.
6. INSURANCE. Lessee, at its own expense,
shall keep each Unit insured against
all risks for the value of the Unit, and in
no event for less than the
Stipulated Loss Value of the Unit, and
shall maintain public liability insurance
against such risks and for such amounts as
Lessor may require. All such
insurance shall be in such form and with
such companies as Lessor shall approve,
shall specify Lessor and Lessee as insureds
and shall provide that such
insurance may not be canceled as to Lessor
or altered in any way that would
affect the interest of Lessor without at
least 30 days' prior written notice to
Lessor (10 days' in the case of nonpayment
of premium). All insurance shall be
primary, without right of contribution from
any other insurance carried by
Lessor, shall contain waiver of subrogation
and "breach of warranty" provisions
satisfactory to Lessor, shall provide that
all amounts payable by reason of loss
or damage to the Units shall be payable
solely to Lessor, unless Lessor
otherwise agrees, and shall contain such
other endorsements as Lessor may
reasonably require. Lessee shall provide
Lessor with evidence satisfactory to
Lessor of the required insurance upon the
execution of any Schedule and promptly
upon any renewal of any required
policy.
7. INDEMNITIES. (a) General Indemnity.
Lessee shall indemnify, on an after-tax
basis, Lessor, its successors and assigns,
and their respective officers,
directors, employees, agents and affiliates
("Indemnified Persons") against all
claims, liabilities, losses and expenses
whatsoever (except those directly and
primarily caused by the Indemnified
Person's gross negligence or willful
misconduct), including reasonable
attorneys' fees and allocated costs of
internal counsel (together, "Attorney
Costs"), in any way relating to or arising
out of this Agreement, the Units or the
Leases at any time, or the ordering,
acquisition, rejection, installation,
possession, maintenance, use, ownership,
condition, destruction, return, or
disposition of the Units, including such
matters based in negligence and strict
liability in tort, environmental
liability, statutory liability, or
infringement or Lessee's breach of any
representation, warranty or covenant
contained herein or any other agreement
related hereto.
(b) General Tax Indemnity. Lessee shall pay
or reimburse Lessor and its
successors and assigns on demand for, and
indemnify and hold Lessor harmless
from, on an after-tax basis, all taxes,
assessments, fees and other governmental
charges paid or required to be paid by
Lessor or Lessee in any way arising out
of or related to the Units or the Leases,
before, during or after the lease
term, including foreign, Federal, state,
county and municipal fees, taxes and
assessments, and property, value-added,
sales, use, gross receipts, excise,
stamp and documentary taxes, and all
related penalties, fines, additions to tax
and interest charges (together,
"Impositions"), excluding only Federal and state
taxes based on Lessor's net income unless
such taxes are in lieu of any
Imposition Lessee would otherwise be
required to pay hereunder. Lessee shall
timely pay any Imposition for which Lessee
is primarily responsible under law
and any other Imposition not payable or not
paid by Lessor, but Lessee shall
have no obligation to pay any such
Imposition that Lessee is contesting in good
faith and by appropriate legal proceedings,
the nonpayment of which does not, in
the opinion of Lessor, result in a material
risk of adverse effect on the title,
property, use, disposition or other rights
of Lessor with respect to the Units.
Lessee shall furnish on Lessor's request
proof of payment of any Imposition paid
by Lessee.
(c) Special Tax Indemnity. (i) All
references to "Lessor" in this Section 7(c)
shall include (A) Lessor's successors and
assigns, and (B) each member of the
affiliated group of corporations, as
defined in Section 1504(a) of the Internal
Revenue Code of 1986, as amended (the
"Code"), of which Lessor or such successor
or assign is at any time a member.
(ii) Lessor shall be
treated for Federal, state and local income tax
purposes as the owner
of the Units and shall be entitled to take into
account in computing
its income tax liabilities all items of income,
deduction (including
depreciation consistent with Lessee's representation
in the applicable
Schedule), credit, gain or loss relating to ownership of
the Units as are
provided to owners of similar equipment under the Code
and applicable state
and local tax laws as in effect on the Acceptance
Date of such Units
(collectively, the "Tax Benefits").
(iii) If (A) Lessor
loses, is delayed in claiming, is required to
recapture (other than
in connection with a sale of the Unit following the
end of the lease term,
provided Lessee is not then in default), is not
allowed or does not
claim as a result of a written opinion of Lessor tax
counsel to the effect
that Lessor's claiming of such Tax Benefits probably
would not be upheld by
a court if the matter were litigated (that is, that
the chances of a
finding against Lessor are at least as great as the
chances of a finding
in favor of Lessor) all or any portion of any Tax
Benefits, under any
circumstances, at any time and for any reason, or (B)
Lessor is required
under Section 467 of the Code or otherwise to include
in its gross income
with respect to any Lease or Unit any amount at any
time other than
rentals and other amounts as and when accrued in
accordance with the
express terms of the Lease (together, "Tax Loss"),
then, upon Lessor's
demand and at Lessor's option, either: (x) all further
rental payments with
respect to such Unit, if any, shall be increased by
an amount, or (y)
Lessee shall pay to Lessor a lump sum amount, which
shall in either case
maintain the net economic after-tax yield,
