Exhibit 10.1

[Execution]

AMENDMENT NO. 11 TO

LOAN AND SECURITY AGREEMENT

AMENDMENT NO. 11 TO LOAN AND SECURITY AGREEMENT, dated June 8, 2012, by and
among Spartan Stores, Inc., a Michigan corporation (“Parent”), Spartan Stores
Distribution, LLC, a Michigan limited liability company (“Stores Distribution”),
Market Development, LLC, a Michigan limited liability company (“MDC”), Spartan
Stores Associates, LLC, a Michigan limited liability company (“Associates”),
Family Fare, LLC, a Michigan limited liability company (“Family Fare”), MSFC,
LLC, a Michigan limited liability company (“MSFC”), Seaway Food Town, Inc., a
Michigan corporation (“Seaway”), The Pharm of Michigan, Inc. (“Pharm”), a
Michigan corporation, Valley Farm Distributing Co., an Ohio corporation (“Valley
Farm”), Gruber’s Real Estate, LLC, a Michigan limited liability company (“Gruber
RE”), Prevo’s Family Markets, Inc., a Michigan corporation (“Prevo”), Custer
Pharmacy, Inc., a Michigan corporation (“Custer”), Spartan Properties
Management, Inc. (formerly known as Buckeye Real Estate Management Co.), an Ohio
corporation (“SPM”), Spartan Stores Fuel, LLC, a Michigan limited liability
company (together with Lead Borrower, Stores Distribution, United, MDC,
Associates, Family Fare, MSFC, Seaway, Pharm, Valley Farm, Gruber RE, Prevo,
Custer and SPM, each individually a “Borrower” and collectively, “Borrowers”),
any Person that at any time becomes party to a guarantee in favor of
Administrative Agent or otherwise liable on or with respect to the Obligations
(each individually a “Guarantor” and collectively, “Guarantors”), the parties to
the Loan Agreement (as hereinafter defined) from time to time as lenders (each
individually, a “Lender” and collectively, “Lenders”) and Wells Fargo Capital
Finance, LLC, successor by merger to Wachovia Capital Finance Corporation
(Central), formerly known as Congress Financial Corporation (Central), a
Delaware limited liability company, in its capacity as agent for Lenders (in
such capacity, “Administrative Agent”).

W I T N E S S E T H :

WHEREAS, Borrowers and Guarantors have entered into financing arrangements with
Agent and Lenders pursuant to which Lenders (or Administrative Agent on behalf
of Lenders) have made and may make loans and advances and provide other
financial accommodations to Borrowers as set forth in the Loan and Security
Agreement, dated December 23, 2003, by and among Borrowers, Guarantors, Agent
and Lenders, as amended and supplemented by Amendment No. 1 to Loan and Security
Agreement, dated as of July 29, 2004, Amendment No. 2 to Loan and Security
Agreement, dated as of December 22, 2004, Amendment No. 3 to Loan and Security
Agreement, dated as of December 9, 2005, Amendment No. 4 to Loan and Security
Agreement, dated as of March 17, 2006, Amendment No. 5 to Loan and Security
Agreement, dated as of April 5, 2007, Amendment No. 6 to Loan and Security
Agreement, dated as of May 22, 2007, Amendment No. 7 to Loan and Security
Agreement, dated as of May 20, 2009, Amendment No. 8 to Loan and Security
Agreement, dated as of May 4, 2010, Amendment No. 9 to Loan and Security
Agreement, dated September 30, 2010 and Amendment No. 10 to Loan and Security
Agreement, dated July 19, 2011( as the same now exists and is amended and
supplemented pursuant hereto and may hereafter be further amended, modified,
supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and
the other Financing Agreements (as defined therein); and

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WHEREAS, Borrowers and Guarantors have requested that Administrative Agent and
Lenders agree to certain amendments to the Loan Agreement, and Administrative
Agent and Lenders are willing to agree to such amendments, subject to the terms
and conditions herein; and

WHEREAS, by this Amendment No. 11, Borrowers, Guarantors, Administrative Agent
and Lenders desire and intend to evidence such amendments;

NOW THEREFORE, in consideration of the foregoing, the mutual agreements and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

1. Definitions.

(a) Additional Definition. As used herein, “Amendment No. 11” shall mean
Amendment No. 11 to Loan and Security Agreement, dated June 8, 2012, by and
among Borrowers, Guarantors, Administrative Agent and Lenders, as amended,
modified, supplemented, extended, renewed, restated or replaced, and the Loan
Agreement and the other Financing Agreements shall be deemed and are hereby
amended to include, in addition and not in limitation, such definition.

(b) Interpretation. For purposes of this Amendment No. 11, unless otherwise
defined herein, all capitalized terms used herein shall have the respective
meanings assigned to such terms in the Loan Agreement.

2. Amended Loan Agreement.

(a) The Loan Agreement is hereby amended to incorporate all of the terms and
provisions as set forth in the amended Loan Agreement (including all deletions
and additions of text and including the updated exhibits and schedules thereto)
attached hereto as Exhibit A (the “Amended Loan Agreement”), and each reference
in the Loan Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or
words of similar import, and each reference in the other Financing Agreements to
the “Loan Agreement” (including, without limitation, by means of words such as
“thereunder” or “thereof” and words of similar import), shall mean and be a
reference to the Loan Agreement as amended herein as reflected by the Amended
Loan Agreement.

(b) The Commitment of each Lender shall be the principal amount set forth next
to such Lender’s name on Exhibit F to the Amended Loan Agreement.

3. Secured Parties. Any reference in any of the Financing Agreements to a grant
or pledge to Administrative Agent of a security interest in and lien upon any
Collateral of Borrowers or Guarantors shall be deemed to be a grant or pledge of
such security interest to Administrative Agent, for itself and the benefit of
the Secured Parties.

 

2

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4. Representations and Warranties. Each Borrower and Guarantor hereby represents
and warrants to Administrative Agent and Lenders the following (which shall
survive the execution and delivery of this Amendment No. 11), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations to Borrowers:

(a) This Amendment No. 11 and each other agreement or instrument to be executed
and delivered by the Borrowers and Guarantors pursuant hereto have been duly
authorized, executed and delivered by all necessary action on the part of each
of the Borrowers and Guarantors which is a party hereto and thereto and, if
necessary, their respective stockholders, members and managers and is in full
force and effect as of the date hereof, as the case may be, and the agreements
and obligations of each of the Borrowers and Guarantors, as the case may be,
contained herein and therein, constitute the legal, valid and binding
obligations of each of the Borrowers and Guarantors, respectively, enforceable
against them in accordance with their terms, except as enforceability is limited
by bankruptcy, insolvency, reorganization, moratorium or other laws relating to
or affecting generally the enforcement of creditors’ rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.

(b) The execution, delivery and performance of this Amendment No. 11 (a) are all
within each Borrower’s and Guarantor’s corporate or limited liability company
powers and (b) are not in contravention of law or the terms of any Borrower’s or
Guarantor’s certificate or articles of incorporation, by laws, or other
organizational documentation, or any indenture, agreement or undertaking to
which any Borrower or Guarantor is a party or by which any Borrower or Guarantor
or its property are bound.

(c) All of the representations and warranties set forth in the Amended Loan
Agreement and the other Financing Agreements are true and correct in all
material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) on and as of the date hereof, as if
made on the date hereof, except to the extent any such representation or
warranty is made as of a specified date, in which case such representation or
warranty shall have been true and correct in all material respects (except that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof) as of such date.

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

5. Condition Precedent. The amendments contained herein shall only be effective
upon the satisfaction of each of the following conditions precedent in a manner
satisfactory to Administrative Agent:

(a) receipt by Administrative Agent of counterparts of this Amendment No. 11,
duly authorized, executed and delivered by the parties hereto (including all
Lenders required for the amendments provided for herein);

 

3

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(b) Excess Availability of Borrowers on the date hereof and on the date of the
effectiveness of this Amendment No. 11 shall be not less than $150,000,000;

(c) receipt by Administrative Agent, in form and substance satisfactory to
Administrative Agent, of the Servicing Fee Letter, duly authorized, executed and
delivered by Borrowers and Guarantors;

(d) receipt by Administrative Agent, in form and substance satisfactory to
Administrative Agent, of the Fee Letters, duly authorized, executed and
delivered by Borrowers and Guarantors;

(e) receipt by Administrative Agent and Lenders of all fees and expenses owed in
connection with this Amendment No. 11;

(f) receipt by Administrative Agent, in form and substance satisfactory to
Administrative Agent, of updated schedules to the Loan Agreement;

(g) receipt by Administrative Agent, in form and substance satisfactory to
Administrative Agent, of an updated Information Certificate of Borrowers and
Guarantors, duly authorized, executed and delivered by Borrowers and Guarantors;

(h) receipt by Administrative Agent, in form and substance satisfactory to
Administrative Agent, of a certificate of the Secretary or Assistant Secretary
of each Borrower and Guarantor dated as of the date hereof with respect to
(i) resolutions of the boards of directors or other appropriate governing body
of such Borrower or Guarantor; (ii) specimen signatures of officers or other
appropriate representatives executing the documents contemplated by this
Amendment No. 11 on behalf of such Borrower or Guarantor; (iii) the
organizational documents of such Borrower or Guarantor certified as of a recent
date by the Secretary of State of its state of organization; and (iv) true and
correct copies of the by-laws, operating agreement or partnership agreement (as
applicable) of such Borrower or Guarantor;

(i) receipt by Administrative Agent of original good standing certificates (or
its equivalent) from the Secretary of State (or comparable official) from each
jurisdiction where each Borrower and Guarantor is organized and from each other
jurisdiction where each Borrower and Guarantor is qualified to do business;

(j) receipt by Administrative Agent of legal opinions, in form and substance
satisfactory to Administrative Agent, of Spartan counsel, dated the date hereof
and addressed to Administrative Agent and Lenders;

(k) receipt by Administrative Agent of a true and correct copy of any consent,
waiver or approval (if any) to or of this Amendment No. 11, which any Borrower
is required to obtain from any other Person; and

(l) No Default or Event of Default shall exist or have occurred and be
continuing.

6. Qualified Debt Intercreditor Agreement. The Lenders acknowledge that, in the
event a Qualified Debt Offering is consummated, it shall be secured by Liens on
the Collateral and that

 

4

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the exercise of certain of the rights and remedies of Administrative Agent under
the Financing Agreements may be subject to the provisions of the Qualified Debt
Intercreditor Agreement. At such time that the Qualified Debt Intercreditor
Agreement is entered into, each Lender is hereby deemed to irrevocably
(a) consent to the subordination of Liens provided for under the Qualified Debt
Intercreditor Agreement and the other terms and conditions therein,
(b) authorize and direct the Administrative Agent to execute and deliver the
Qualified Debt Intercreditor Agreement and any documents relating thereto, in
each case, on behalf of such Lender and to take all actions (and execute all
documents) required (or deemed advisable) by it in accordance with the terms of
the Qualified Debt Intercreditor Agreement, in each case, and without any
further consent, authorization or other action by such Lender, (c) agree that,
upon the execution and delivery thereof, such Lender will be bound by the
provisions of the Qualified Debt Intercreditor Agreement as if it were a
signatory thereto and will take no actions contrary to the provisions of the
Qualified Debt Intercreditor Agreement, (d) agree that no Lender shall have any
right of action whatsoever against the Administrative Agent as a result of any
action taken by Administrative Agent pursuant to this Section or in accordance
with the terms of the Qualified Debt Intercreditor Agreement unless such action
by Administrative Agent constitutes gross negligence or willful misconduct as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction and (e) acknowledge that a copy of the Qualified Debt Intercreditor
Agreement has been delivered, or made available, to such Lender. At such time
that the Qualified Debt Intercreditor Agreement is entered into, each Lender is
hereby deemed to further irrevocably authorize and direct the Administrative
Agent to enter into such amendments, supplements or other modifications to the
Qualified Debt Intercreditor Agreement as are approved by Administrative Agent
and the Required Lenders, provided, that, Administrative Agent may execute and
deliver such amendments, supplements and modifications thereto as are
contemplated by the Qualified Debt Intercreditor Agreement in connection with
any extension, renewal, refinancing or replacement of the Loan Agreement or any
refinancing of the Obligations, in each case, on behalf of such Lender and
without any further consent, authorization or other action by any Lender. The
Administrative Agent shall have the benefit of the provisions of Section 12 of
the Loan Agreement with respect to all actions taken by it pursuant to this
Section or in accordance with the terms of the Qualified Debt Intercreditor
Agreement to the full extent thereof.

7. U.S. Bank as Lender. By its execution of this Amendment No. 11 and on and
after the effectiveness hereof, U.S. Bank National Association (“U.S. Bank”)
shall be a party to the Loan Agreement and succeed to all of the rights and be
obligated to perform all of the obligations of a Lender under the Loan
Agreement, including the requirements concerning confidentiality and the payment
of indemnification, with a Commitment in an amount equal to the principal amount
set forth next to its name on Exhibit F to the Amended Loan Agreement. U.S. Bank
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Agreement are required to be
performed by it as a Lender.

8. Acknowledgment of Security Interests. Each Borrower hereby acknowledges,
confirms and agrees that Administrative Agent for the benefit of Secured Parties
has been granted a security interest in and lien upon the Collateral as set
forth in the Loan Agreement and shall continue to have a security interest in
and lien upon the Collateral.

 

5

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9. Effect of this Amendment. Except as expressly amended pursuant hereto, no
other changes or modifications to the Financing Agreements are intended or
implied, and, in all other respects, the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent that any provision of the Loan Agreement or
any of the other Financing Agreements are inconsistent with the provisions of
this Amendment No. 11, the provisions of this Amendment No. 11 shall control. By
executing this Amendment No. 11, each Borrower is deemed to execute the Amended
Loan Agreement and to be bound by the terms and conditions thereof.

10. Further Assurances. Borrowers and Guarantors shall execute and deliver such
additional documents and take such additional action as may be reasonably
requested by Administrative Agent to effectuate the provisions and purposes of
this Amendment No. 11.

11. Governing Law. The validity, interpretation and enforcement of this
Amendment No. 11 and the other Financing Agreements (except as otherwise
provided therein) and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of Illinois but excluding any
principles of conflicts of law or other rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
Illinois.

12. Binding Effect. This Amendment No. 11 shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns.

13. Headings. The headings listed herein are for convenience only and do not
constitute matters to be construed in interpreting this Amendment No. 11.

14. Counterparts. This Amendment No. 11 may be executed in any number of
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of this Amendment No. 11 by telefacsimile or other electronic method
of transmission shall have the same force and effect as the delivery of an
original executed counterpart of this Amendment No. 11. Any party delivering an
executed counterpart of this Amendment No. 11 by telefacsimile or other
electronic method of transmission shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

6

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 11 to be
duly executed and delivered by their authorized officers as of the day and year
first above written.

 

ADMINISTRATIVE AGENT    BORROWERS

WELLS FARGO CAPITAL FINANCE, LLC,

successor by merger to Wachovia Capital

Finance Corporation (Central), f/k/a Congress

Financial Corporation (Central), as

Administrative Agent

  

SPARTAN STORES, INC.

 

By:                                                                       
                              By:                             
                                                                    
Title:                                                                      
                           Title:                            
                                                                    

 

SPARTAN STORES DISTRIBUTION, LLC

MARKET DEVELOPMENT, LLC

SPARTAN STORES ASSOCIATES, LLC

FAMILY FARE, LLC

MSFC, LLC

SEAWAY FOOD TOWN, INC.

THE PHARM OF MICHIGAN, INC.

VALLEY FARM DISTRIBUTING CO.

GRUBER’S REAL ESTATE LLC

CUSTER PHARMACY, INC.

PREVO’S FAMILY MARKETS, INC.

SPARTAN PROPERTIES MANAGEMENT,

INC. (f/k/a Buckeye Real Estate Management Co.)

SPARTAN STORES FUEL, LLC

   By:                                                                       
                              Title:                            
                                                                 

 

Amendment No. 11 to LSA

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LENDERS

WELLS FARGO CAPITAL FINANCE, LLC,

successor by merger to Wachovia Capital

Finance Corporation (Central), f/k/a Congress

Financial Corporation (Central)

 

By:     Title:     BANK OF AMERICA, N.A. (successor by merger to Fleet Capital
Corporation)

 

By:     Title:    

PNC BANK, NATIONAL ASSOCIATION,

successor to National City Business Credit, Inc.

 

By:     Title:    

 

FIFTH THIRD BANK, an Ohio Banking

Corporation, successor by merger to Fifth Third

Bank, a Michigan Banking Corporation

 

By:     Title:    

 

U.S. BANK NATIONAL ASSOCIATION

By:     Title:    

 

Amendment No. 11 to LSA

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Exhibit A

to

Amendment No. 11 to Loan and Security Agreement

Amended Loan Agreement

See attached.

 

Amendment No. 11 to LSA

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[Execution]

CONFORMED COPY

THROUGH AMENDMENT NO. 10 AND

AS FURTHER UPDATED THROUGH JUNE 8, 2012

Loan and Security Agreement

by and among

Spartan Stores, Inc.

Spartan Stores Distribution, LLC

Market Development, LLC

Spartan Stores Associates, LLC

Family Fare, LLC

MSFC, LLC

Seaway Food Town, Inc.

The Pharm of Michigan, Inc.

Valley Farm Distributing Co.

Gruber’s Real Estate, LLC

Prevo’s Family Markets, Inc.

Custer Pharmacy, Inc.

Spartan Properties Management, Inc.

Spartan Stores Fuel, LLC

as Borrowers

and

Any Person that becomes a Guarantor hereunder

Wells Fargo Capital Finance, LLC

as Administrative Agent

The Lenders from Time to Time Party Hereto

as Lenders

Wells Fargo Capital Finance, LLC

and

Bank of America, N.A.

as Joint Lead Arranger and Joint Bookrunners

Bank of America, N.A.

as Syndication Agent

Fifth Third Bank

as Documentation Agent

Dated: December 23, 2003,

as amended as of June 8, 2012

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TABLE OF CONTENTS

 

 

     Page  

SECTION 1. DEFINITIONS

     2   

SECTION 2. CREDIT FACILITIES

     38   

2.1 Loans

     38   

2.2 Letter of Credit Accommodations

     39   

2.3 Increase in Maximum Credit

     44   

2.4 Commitments

     46   

2.5 Joint and Several Liability

     46   

SECTION 3. INTEREST AND FEES

     47   

3.1 Interest

     47   

3.2 Fees

     49   

3.3 Changes in Laws and Increased Costs of Loans

     49   

SECTION 4. CONDITIONS PRECEDENT

     52   

4.1 Intentionally deleted

     52   

4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations

     52   

SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST

     53   

5.1 Grant of Security Interest

     53   

5.2 Perfection of Security Interests

     54   

SECTION 6. COLLECTION AND ADMINISTRATION

     58   

6.1 Borrowers’ Loan Accounts

     58   

6.2 Statements

     59   

6.3 Collection of Accounts

     59   

6.4 Payments

     62   

6.5 Authorization to Make Loans

     63   

6.6 Use of Proceeds

     63   

6.7 Appointment of Parent as Lead Borrower for Requesting Loans and Receipts of
Loans and Statements

     64   

6.8 Pro Rata Treatment

     64   

6.9 Sharing of Payments, Etc.

     65   

6.10 Settlement Procedures

     66   

6.11 Obligations Several; Independent Nature of Lenders’ Rights

     71   

6.12 Bank Products

     71   

SECTION 7. COLLATERAL REPORTING AND COVENANTS

     71   

7.1 Collateral Reporting

     71   

 

(ii)

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7.2 Accounts Covenants

     73   

7.3 Inventory Covenants

     74   

7.4 Equipment and Real Property Covenants

     76   

7.5 Prescription Files Covenants

     76   

7.6 Power of Attorney

     77   

7.7 Right to Cure

     78   

7.8 Access to Premises

     78   

SECTION 8. REPRESENTATIONS AND WARRANTIES

     79   

8.1 Corporate Existence, Power and Authority

     79   

8.2 Name; State of Organization; Chief Executive Office; Collateral Locations

     79   

8.3 Financial Statements; No Material Adverse Change

     80   

8.4 Priority of Liens; Title to Properties

     80   

8.5 Tax Returns

     80   

8.6 Litigation

     81   

8.7 Compliance with Other Agreements and Applicable Laws

     81   

8.8 Environmental Compliance

     81   

8.9 Employee Benefits

     82   

8.10 Bank Accounts

     83   

8.11 Intellectual Property

     83   

8.12 Subsidiaries; Affiliates; Capitalization; Solvency

     84   

8.13 Labor Disputes

     84   

8.14 Restrictions on Subsidiaries

     85   

8.15 Material Contracts

     85   

8.16 Credit Card Agreements

     85   

8.17 HIPAA Compliance

     85   

8.18 Compliance with Health Care Laws

     86   

8.19 Interrelated Businesses

     87   

8.20 Notices from Farm Products Sellers, etc.

     87   

8.21 OFAC

     87   

8.22 Patriot Act

     88   

8.23 Accuracy and Completeness of Information

     88   

8.24 Survival of Warranties; Cumulative

     88   

SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS

     88   

9.1 Maintenance of Existence

     88   

9.2 New Collateral Locations

     89   

9.3 Compliance with Laws, Regulations, Etc.

     89   

9.4 Payment of Taxes and Claims

     90   

9.5 Insurance

     91   

9.6 Financial Statements and Other Information

     92   

9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.

     93   

9.8 Encumbrances

     100   

9.9 Indebtedness

     102   

9.10 Loans, Investments, Etc.

     110   

 

(iii)

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9.11 Dividends and Redemptions

     116   

9.12 Transactions with Affiliates

     118   

9.13 Compliance with ERISA

     118   

9.14 End of Fiscal Years; Fiscal Quarters

     119   

9.15 Credit Card Agreements

     119   

9.16 Change in Business

     119   

9.17 Limitation of Restrictions Affecting Subsidiaries

     119   

9.18 Intentionally deleted

     120   

9.19 Intentionally deleted

     120   

9.20 Minimum Excess Availability

     120   

9.21 License Agreements

     120   

9.22 Agricultural Products

     121   

9.23 After Acquired Real Property

     122   

9.24 Costs and Expenses

     123   

9.25 Foreign Assets Control Regulations, Etc.

     123   

9.26 Formation of Subsidiaries

     124   

9.27 Further Assurances

     125   

SECTION 10. EVENTS OF DEFAULT AND REMEDIES

     125   

10.1 Events of Default

     125   

10.2 Remedies

     128   

SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

     132   

11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver

     132   

11.2 Waiver of Notices

     133   

11.3 Amendments and Waivers

     133   

11.4 Waiver of Counterclaims

     135   

11.5 Indemnification

     135   

SECTION 12. THE AGENT

     136   

12.1 Appointment, Powers and Immunities

     136   

12.2 Reliance by Administrative Agent

     137   

12.3 Events of Default

     137   

12.4 Wells in its Individual Capacity

     138   

12.5 Indemnification

     138   

12.6 Non-Reliance on Administrative Agent and Other Lenders

     138   

12.7 Failure to Act

     139   

12.8 Additional Loans

     139   

12.9 Concerning the Collateral and the Related Financing Agreements

     139   

12.10 Field Audit, Examination Reports and other Information; Disclaimer by
Lenders

     140   

12.11 Collateral Matters

     140   

12.12 Agency for Perfection

     142   

12.13 Successor Administrative Agent

     142   

12.14 Co-Administrative Agent

     143   

 

(iv)

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SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS

     143   

13.1 Term

     143   

13.2 Interpretative Provisions

     144   

13.3 Notices

     146   

13.4 Partial Invalidity

     147   

13.5 Confidentiality

     147   

13.6 Successors

     148   

13.7 Assignments; Participations

     149   

13.8 Entire Agreement

     151   

13.9 Patriot Act

     151   

13.10 Counterparts, Etc.

     151   

 

(v)

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INDEX TO

EXHIBITS AND SCHEDULES

 

Exhibit A

   Form of Assignment and Acceptance

Exhibit B

   Form of Borrowing Base Certificate

Exhibit C

   Information Certificate

Exhibit D

   Form of Financial Statements

Exhibit E

   Form of Compliance Certificate

Exhibit F

   Commitments

Schedule 1.26

   Description of Notes

Schedule 1.99

   Mortgages

Schedule 8.9

   ERISA Matters

Schedule 8.16

   Credit Card Agreements

Schedule 8.17

   Business Associate Agreements

Schedule 8.18

   Participation Agreements

Schedule 9.7

   Existing Subleases of Real Property

Schedule 9.9(b)

   List of Capital Leases, Equipment and Real Property Excluded from Calculation
of Purchase Money Indebtedness

Schedule 9.14

   Fiscal Year and Quarter Ends

 

(vi)

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LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement dated December 23, 2003 is entered into by and
among Spartan Stores, Inc., a Michigan corporation (“Parent”), Spartan Stores
Distribution, LLC, a Michigan limited liability company (“Stores Distribution”),
Market Development, LLC, a Michigan limited liability company (“MDC”), Spartan
Stores Associates, LLC, a Michigan limited liability company (“Associates”),
Family Fare, LLC, a Michigan limited liability company (“Family Fare”), MSFC,
LLC, a Michigan limited liability company (“MSFC”), Seaway Food Town, Inc., a
Michigan corporation (“Seaway”), The Pharm of Michigan, Inc. (“Pharm”), a
Michigan corporation, Valley Farm Distributing Co., an Ohio corporation (“Valley
Farm”), Gruber’s Real Estate, LLC, a Michigan limited liability company (“Gruber
RE”), Prevo’s Family Markets, Inc., a Michigan corporation (“Prevo”), Custer
Pharmacy, Inc., a Michigan corporation (“Custer”), Spartan Properties
Management, Inc. (formerly known as Buckeye Real Estate Management Co.), an Ohio
corporation (“SPM”), Spartan Stores Fuel, LLC, a Michigan limited liability
company (“Spartan Fuel” and together with Parent, Stores Distribution, MDC,
Associates, Family Fare, MSFC, Seaway, Pharm, Valley Farm, Gruber RE, Prevo,
Custer and SPM, each individually a “Borrower” and collectively, “Borrowers”),
any Person that at any time becomes a party to a guarantee in favor of
Administrative Agent or is otherwise liable on or with respect to the
Obligations (each individually a “Guarantor” and collectively, “Guarantors”),
the parties hereto from time to time as lenders, whether by execution of this
Agreement or an Assignment and Acceptance (each individually, a “Lender” and
collectively, “Lenders”), Wells Fargo Capital Finance, LLC , successor by merger
to Wachovia Capital Finance Corporation, formerly known as Congress Financial
Corporation (Central), a national banking association, in its capacity as
administrative and collateral agent for Lenders (in such capacity,
“Administrative Agent”), Wells Fargo Capital Finance, LLC, in its capacity as
Joint Lead Arranger and Joint Bookrunner, Bank of America, N.A., in its capacity
as Joint Lead Arranger, Joint Bookrunner and Syndication Agent and Fifth Third
Bank, as Documentation Agent.

W I T N E S S E T H:

WHEREAS, Borrowers and Guarantors have requested that Administrative Agent and
Lenders enter into financing arrangements with Borrowers pursuant to which
Lenders may make loans and provide other financial accommodations to Borrowers;
and

WHEREAS, each Lender is willing to agree (severally and not jointly) to make
such loans and provide such financial accommodations to Borrowers on a pro rata
basis according to its Commitment (as defined below) on the terms and conditions
set forth herein and Administrative Agent is willing to act as agent for Lenders
on the terms and conditions set forth herein and the other Financing Agreements;

NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

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SECTION 1. DEFINITIONS

For purposes of this Agreement, the following terms shall have the respective
meanings given to them below:

1.1 “Account Debtor” shall mean a person obligated on an Account, and including,
without limitation, an account debtor as such term is defined in the UCC, Credit
Card Issuer, Credit Card Processor, Fiscal Intermediary or other Third Party
Payor.

1.2 “Accounts” shall mean, as to each Borrower and Guarantor, all present and
future rights of such Borrower and Guarantor to payment of a monetary
obligation, whether or not earned by performance, which is not evidenced by
chattel paper or an instrument, (a) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (b) for services rendered
or to be rendered, (c) for a secondary obligation incurred or to be incurred, or
(d) arising out of the use of a credit or charge card or information contained
on or for use with the card. The term “Accounts” as used herein shall include,
without limitation, Credit Card Receivables.

1.3 “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period
for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary,
to the next one-sixteenth (1/16) of one (1%) percent) determined by dividing
(a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to:
(i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve
Percentage” shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.

1.4 “Administrative Agent” shall mean Wells Fargo Capital Finance, LLC ,
successor by merger to Wachovia Capital Finance Corporation, formerly known as
Congress Financial Corporation (Central), in its capacity as agent on behalf of
Lenders pursuant to the terms hereof and any replacement or successor agent
hereunder.

1.5 “Affiliate” shall mean, with respect to a specified Person, any other Person
which directly or indirectly, through one or more intermediaries, controls or is
controlled by or is under common control with such Person, and without limiting
the generality of the foregoing, includes (a) any Person which beneficially owns
or holds ten (10%) percent or more of any class of Voting Stock of such Person
or other equity interests in such Person, (b) any Person of which such Person
beneficially owns or holds ten (10%) percent or more of any class of Voting
Stock or in which such Person beneficially owns or holds ten (10%) percent or
more of the equity interests and (c) any director or executive officer of such
Person. For the purposes of this definition, the term “control” (including with
correlative meanings, the terms “controlled by” and “under common control
with”), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of Voting Stock, by
agreement or otherwise.

 

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1.6 “Administrative Agent Payment Account” shall mean account no. 5000000030266
of Administrative Agent at Wells Fargo Bank, National Association, or such other
account of Administrative Agent as Administrative Agent may from time to time
designate to Lead Borrower as the Administrative Agent Payment Account for
purposes of this Agreement and the other Financing Agreements.

1.7 “Applicable Margin” means, at any time, as to the interest rate for Prime
Rate Loans and the interest rate for Eurodollar Rate Loans the applicable
percentage (on a per annum basis) set forth below if the Monthly Average Excess
Availability for the immediately preceding calendar month is at or within the
amounts indicated for such percentage:

 

Tier

  

Monthly Average
Excess Availability

   Applicable
Prime
Rate Margin     Applicable
Eurodollar
Rate Margin  

1

   Greater than $75,000,000      .25 %      1.50 % 

2

   Less than or equal to $75,000,000 and greater than $50,000,000      .50 %   
  1.75 % 

3

   Less than or equal to $50,000,000      .75 %      2.00 % 

provided, that, (a) the Applicable Margin shall be calculated and established
once each calendar month based on the Monthly Average Excess Availability for
the immediately preceding calendar month and shall remain in effect until
adjusted thereafter as of the first day of the next month and
(b) notwithstanding the amount of the Monthly Average Excess Availability, for
each month prior to the month commencing October 1, 2012, in no event shall the
Applicable Margin be less than the percentages set forth in Tier 2 of the
schedule above for the applicable category of Loans. In the event that at any
time after the end of a calendar month the Monthly Average Excess Availability
for such calendar month used for the determination of the Applicable Margin is
determined by Agent to have been greater or less than the actual amount of the
Monthly Average Excess Availability for such calendar month, the Applicable
Margin for such prior calendar month shall be adjusted to the applicable
percentage based on such actual Monthly Average Excess Availability and, as
applicable, any additional interest for the applicable period as a result of
such recalculation shall be promptly paid to Administrative Agent, or any excess
payment of interest for the applicable period as a result of such recalculation
shall be promptly reimbursed to Borrowers by Administrative Agent.

1.8 “Assignment and Acceptance” shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to Administrative Agent in connection with an
assignment of a Lender’s interest hereunder in accordance with the provisions of
Section 13.7 hereof.

 

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1.9 “Bank of America” shall mean Bank of America, N.A., a national banking
association, and its successors and assigns.

1.10 “Bank Product Provider” shall mean any Lender or Affiliate of Lender that
provides any Bank Products to Borrowers or Guarantors.

1.11 “Bank Products” shall mean any one or more of the following types or
services or facilities provided to a Borrower or a Guarantor by a Bank Product
Provider: (a) credit cards, debit cards or stored value cards or the processing
of credit card, debit card or stored value card sales or receipts, (b) purchase
cards (including so-called “procurement cards” or “P-cards”), (c) cash
management or related services, including (i) the automated clearinghouse
transfer of funds for the account of a Borrower pursuant to agreement or
overdraft for any accounts of Borrowers maintained at Agent or any Bank Product
Provider that are subject to the control of Agent pursuant to any Deposit
Account Control Agreement to which Agent or such Bank Product Provider is a
party, as applicable, (ii) controlled disbursement services, and
(iii) card-based accounts payable payment services and (d) Hedge Agreements if
and to the extent permitted hereunder.

1.12 “Blocked Accounts” shall have the meaning set forth in Section 6.3 hereof.

1.13 “Borrowing Base” shall mean, at any time, the amount equal to:

(a) the lesser of:

(i) the amount equal to:

(A) eighty-five (85%) percent of Eligible Accounts (other than those arising
from Pharmacy Receivables), plus

(B) ninety (90%) percent of Eligible Accounts arising from Pharmacy Receivables,
plus

(C) ninety (90%) percent of Eligible Credit Card Receivables, plus

(D) ninety (90%) percent of the Net Recovery Percentage for the Inventory of the
Retail Division multiplied by the Value of such Eligible Inventory; plus

(E) ninety (90%) percent of the Net Recovery Percentage for the Inventory of the
Distribution Division multiplied by the Value of such Eligible Inventory, plus

(F) the Prescription File Availability; plus

(G) the Fixed Asset Availability; or

(ii) the Maximum Credit,

minus

 

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(b) Reserves.

The amounts of Eligible Inventory of any Borrower shall, at Administrative
Agent’s option, be determined based on the lesser of the amount of Inventory set
forth in the general ledger of such Borrower, as reconciled, or the perpetual
inventory record or stock ledger record, as applicable, maintained by such
Borrower.

1.14 “Borrowing Base Certificate” shall mean a certificate substantially in the
form of Exhibit B hereto, as such form may from time to time be modified by
Administrative Agent, which is duly completed (including all schedules thereto)
and executed by the chief financial officer, vice president of finance,
treasurer, corporate treasurer, or controller of Parent and delivered to
Administrative Agent.

1.15 “Business Day” shall mean any day other than a Saturday, Sunday, or other
day on which commercial banks are authorized or required to close under the laws
of the State of Illinois, or the State of North Carolina, and a day on which
Administrative Agent is open for the transaction of business, except that if a
determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.

1.16 “Capital Expenditures” shall mean with respect to any Person for any period
the aggregate of all expenditures by such Person and its Subsidiaries during
such period that in accordance with GAAP are recorded on the statement of cash
flows as purchases of property and equipment.

1.17 “Capital Leases” shall mean, as applied to any Person, any lease of (or any
agreement conveying the right to use) any property (whether real, personal or
mixed) by such Person as lessee which in accordance with GAAP, is required to be
reflected as a liability on the balance sheet of such Person.

1.18 “Capital Stock” shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person’s capital stock or partnership, limited liability company or other equity
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock).

1.19 “Cash Equivalents” shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers’ acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable

 

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rate demand notes) with a maturity of ninety (90) days or less issued by a
corporation (except an Affiliate of any Borrower or Guarantor) organized under
the laws of any State of the United States of America or the District of
Columbia and rated at least A-1 by Standard & Poor’s Ratings Service, a division
of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service,
Inc.; (d) repurchase obligations with a term of not more than thirty (30) days
for underlying securities of the types described in clause (a) above entered
into with any financial institution having combined capital and surplus and
undivided profits of not less than $250,000,000; (e) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within ninety (90) days or less
from the date of acquisition; provided, that, the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985; and (f) investments in money
market funds and mutual funds which invest substantially all of their assets in
securities of the types described in clauses (a) through (e) above.

1.20 “Change of Control” shall mean (a) the transfer (in one transaction or a
series of transactions) of all or substantially all of the assets of any
Borrower or Guarantor to any Person or group (as such term is used in
Section 13(d)(3) of the Exchange Act), other than as permitted in Section 9.7
hereof; (b) the liquidation or dissolution of any Borrower or Guarantor or the
adoption of a plan by the stockholders of any Borrower or Guarantor relating to
the dissolution or liquidation of such Borrower or Guarantor, other than as
permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act), of beneficial
ownership, directly or indirectly, of more than thirty (30%) percent of the
voting power of the total outstanding Voting Stock of Parent; (d) during any
period of two (2) consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of Parent (together with any new
directors whose nomination for election or election was approved by a vote of at
least a majority of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of Parent then still in office; (e) the failure of Parent to
own directly or indirectly one hundred (100%) percent of the voting power of the
total outstanding Voting Stock of any other Borrower or Guarantor (except to the
extent resulting from mergers, consolidations, liquidations or dissolutions
permitted under Section 9.7 hereof); or (f) the occurrence of any “change in
control” (or similar term) as defined in the documents governing the Qualified
Debt Offering.

1.21 “Code” shall mean the Internal Revenue Code of 1986, as the same now exists
or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.

1.22 “Collateral” shall have the meaning set forth in Section 5 hereof.

1.23 “Collateral Access Agreement” shall mean an agreement in writing, in form
and substance satisfactory to Administrative Agent, by any lessor of premises to
any Borrower or Guarantor, or any other person to whom any Collateral is
consigned or who has custody, control or possession of any such Collateral or is
otherwise the owner or operator of any premises on

 

6

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which any of such Collateral is located, in favor of Administrative Agent with
respect to the collateral located at such premises or otherwise in the custody,
control or possession of such person.

1.24 “Commitment” shall mean, at any time, as to each Lender, the principal
amount set forth on Exhibit F hereto for each Lender or on Schedule 1 to the
Assignment and Acceptance Agreement pursuant to which any person that becomes a
Lender hereunder after the date hereof in accordance with the provisions of
Section 13.7 hereof, as the same may be adjusted from time to time in accordance
with the terms hereof; sometimes being collectively referred to herein as
“Commitments”.

1.25 “Consolidated Net Income” shall mean, with respect to any Person for any
period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (and as to Borrowers and
Guarantors, excluding to the extent included therein (i) any extraordinary,
one-time or non-recurring gains, (ii) extraordinary, one-time or non-recurring
non-cash losses or charges, and (iii) operations that have been discontinued on
or before the date hereof, and after deducting the Provision for Taxes for such
period, all as determined in accordance with GAAP; provided, that, (a) the net
income of any Person that is not a wholly-owned Subsidiary or that is accounted
for by the equity method of accounting shall be included only to the extent of
the amount of dividends or distributions paid or payable to such Person or a
wholly-owned Subsidiary of such Person; (b) except to the extent included
pursuant to the foregoing clause, the net income of any Person accrued prior to
the date it becomes a wholly-owned Subsidiary of such Person or is merged into
or consolidated with such Person or any of its wholly-owned Subsidiaries or that
Person’s assets are acquired by such Person or by any of its wholly-owned
Subsidiaries shall be excluded; (c) the effect of any change in accounting
principles adopted by such Person or its Subsidiaries after the date hereof
shall be excluded; (d) net income shall exclude interest accruing, but not paid
on indebtedness owing to a Subsidiary or parent corporation of such Person; and
(e) the net income (if positive) of any wholly-owned Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
wholly-owned Subsidiary to such Person or to any other wholly-owned Subsidiary
of such Person is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such wholly-owned Subsidiary shall be
excluded. For the purposes of this definition, net income excludes any gain and
non-cash loss together with any related Provision for Taxes for such gain and
non-cash loss realized upon the sale or other disposition of any assets that are
not sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions and for this purpose
sales or other dispositions of retail store locations shall not be deemed to be
in the ordinary course of the business of Borrowers and Guarantors) or of any
Capital Stock of such Person or a Subsidiary of such Person and any net income
or non-cash loss realized as a result of changes in accounting principles or the
application thereof to such Person.

1.26 “Convertible Note Indenture” shall mean an Indenture by and between Parent,
as issuer, and a trustee, with respect to the Convertible Notes, entered into,
in all material respects, substantially on the terms set forth in the
Description of Notes attached hereto as Schedule 1.26, as the same may be
amended, modified, supplemented, extended, renewed, restated or replaced from
time to time.

 

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1.27 “Convertible Notes” shall mean, collectively, the Senior Unsecured
Convertible Notes issued by Parent in the original aggregate principal amount
not to exceed $125,000,000 pursuant to the Convertible Note Indenture, as the
same may be amended, modified, supplemented, extended, renewed, restated or
replaced from time to time.

1.28 “Convertible Notes Reserve” shall mean a reserve established by
Administrative Agent on the date which is forty-five (45) days prior to the
commencement of the right of the holders of the Convertible Notes to exercise
their right to require Borrowers to repurchase the Convertible Notes at such
time, in the amount equal to the outstanding principal amount of the Convertible
Notes less the amount of cash held by Borrowers.

1.29 “Credit Card Acknowledgments” shall mean, collectively, the agreements by
Credit Card Issuers or Credit Card Processors who are parties to Credit Card
Agreements in favor of Administrative Agent acknowledging Administrative Agent’s
first priority security interest, in the monies due and to become due to a
Borrower or Guarantor (including, without limitation, credits and reserves)
under the Credit Card Agreements, and agreeing to transfer all such amounts to
the Blocked Accounts, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced; sometimes being
referred to herein individually as a “Credit Card Acknowledgment”.

1.30 “Credit Card Agreements” shall mean all agreements now or hereafter entered
into by any Borrower or any Guarantor for the benefit of any Borrower, in each
case with any Credit Card Issuer or any Credit Card Processor, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced, including, but not limited to, the agreements set forth on
Schedule 8.16 hereto.

1.31 “Credit Card Issuer” shall mean any person (other than a Borrower or
Guarantor) who issues or whose members issue credit cards, including, without
limitation, MasterCard or VISA bank credit or debit cards or other bank credit
or debit cards issued through MasterCard International, Inc., Visa, U.S.A., Inc.
or Visa International and American Express, Discover, Diners Club, Carte Blanche
and other non-bank credit or debit cards, including, without limitation, credit
or debit cards issued by or through American Express Travel Related Services
Company, Inc. or Discover Financial Services, Inc.

1.32 “Credit Card Processor” shall mean any servicing or processing agent or any
factor or financial intermediary who facilitates, services, processes or manages
the credit authorization, billing transfer and/or payment procedures with
respect to any Borrower’s or Guarantor’s sales transactions involving credit
card or debit card purchases by customers using credit cards or debit cards
issued by any Credit Card Issuer.

1.33 “Credit Card Receivables” shall mean, collectively, (a) all present and
future rights of any Borrower or Guarantor to payment from any Credit Card
Issuer, Credit Card Processor or other third party arising from sales of goods
or rendition of services to customers who have purchased such goods or services
using a credit card or debit card and (b) all present

 

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and future rights of any Borrower or Guarantor to payment from any Credit Card
Issuer, Credit Card Processor or other third party in connection with the sale
or transfer of Accounts arising pursuant to the sale of goods or rendition of
services to customers who have purchased such goods or services using a credit
card or a debit card, including, but not limited to, all amounts at any time due
or to become due from any Credit Card Issuer or Credit Card Processor under the
Credit Card Agreements or otherwise.

1.34 “Credit Facility” shall mean the Loans and Letter of Credit Accommodations
provided to or for the benefit of any Borrower pursuant to Sections 2.1 and 2.2
hereof.

1.35 “Default” shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.

1.36 “Defaulting Lender” shall have the meaning set forth in Section 6.10
hereof.

1.37 “Deposit Account Control Agreement” shall mean an agreement in writing, in
form and substance satisfactory to Administrative Agent, by and among
Administrative Agent, the Borrower or Guarantor with a deposit account at any
bank and the bank at which such deposit account is at any time maintained which
provides that such bank will comply with instructions originated by
Administrative Agent directing disposition of the funds in the deposit account
without further consent by such Borrower or Guarantor and has such other terms
and conditions as Administrative Agent may require.

1.38 “Distribution Division” shall mean, collectively, the following (together
with their respective successors and assigns): Parent, Associates, Stores
Distribution, Valley Farm and MDC.

1.39 “EBITDA” shall mean, as to any Person, with respect to any period, an
amount equal to: (a) the Consolidated Net Income of such Person and its
Subsidiaries for such period, plus (b) depreciation and amortization and other
non-cash charges including imputed interest, deferred compensation and in the
case of Borrowers and Guarantors, non-cash costs associated with the closing of
retail store locations or other facilities, in each case for such period (to the
extent deducted in the computation of Consolidated Net Income of such Person),
all in accordance with GAAP, plus (c) Interest Expense for such period (to the
extent deducted in the computation of Consolidated Net Income of such Person),
plus (d) the Provision for Taxes for such period (to the extent deducted in the
computation of Consolidated Net Income of such Person), plus (e) all charges
with respect to the Michigan Corporate Income Tax as levied by the Michigan
Department of Treasury or any replacement taxes thereof for such period (to the
extent deducted in the computation of Consolidated Net Income for such Person),
plus (f) one-time charges for restructurings and “Other unusual items” as
reported in a Form 10-K or a Form 10-Q of Parent filed with the Securities and
Exchange Commission for such period, plus (g) non-cash charges related to
goodwill impairment and impairment of non-cash intangibles.

1.40 “Eligible Accounts” shall mean Accounts created by a Borrower which are and
continue to be acceptable to Administrative Agent in good faith based on the
criteria set forth below. In general, Accounts shall be Eligible Accounts if:

 

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(a) such Accounts arise from the actual and bona fide sale and delivery of goods
by such Borrower or rendition of services by such Borrower in the ordinary
course of its business which transactions are completed in accordance with the
terms and provisions contained in any documents related thereto;

(b) such Accounts are not unpaid (i) for Accounts with stated terms of fifteen
(15) days or greater, more than sixty (60) days after the original due date
thereof or more than ninety (90) days after the original invoice or statement
date (as applicable) or (ii) for Accounts with stated terms of less than fifteen
(15) days, more than thirty (30) days after the original due date thereof or
more than ninety (90) days after the original invoice or statement date (as
applicable) (it being understood that the statement date is applicable to
Accounts of the Distribution Division);

(c) such Accounts comply with the terms and conditions contained in
Section 7.2(b) of this Agreement;

(d) such Accounts do not arise from sales on consignment, guaranteed sale, sale
and return, sale on approval, or other terms under which payment by the Account
Debtor may be conditional or contingent;

(e) the chief executive office of the Account Debtor with respect to such
Accounts is located in the United States of America or Canada (provided, that,
at any time promptly upon Administrative Agent’s request, such Borrower shall
execute and deliver, or cause to be executed and delivered, such other
agreements, documents and instruments as may be required by Administrative Agent
to perfect the security interests of Administrative Agent in those Accounts of
an Account Debtor with its chief executive office or principal place of business
in Canada in accordance with the applicable laws of the Province of Canada in
which such chief executive office or principal place of business is located and
take or cause to be taken such other and further actions as Administrative Agent
may request to enable Administrative Agent as secured party with respect thereto
to collect such Accounts under the applicable Federal or Provincial laws of
Canada) or, at Administrative Agent’s option, if the chief executive office and
principal place of business of the Account Debtor with respect to such Accounts
is located other than in the United States of America or Canada, then if either:
(i) the Account Debtor has delivered to such Borrower an irrevocable letter of
credit issued or confirmed by a bank satisfactory to Administrative Agent and
payable only in the United States of America and in U.S. dollars, sufficient to
cover such Account, in form and substance satisfactory to Administrative Agent
and if required by Administrative Agent, the original of such letter of credit
has been delivered to Administrative Agent or Administrative Agent’s agent, and
such Borrower has complied with the terms of Section 5.2(f) hereof with respect
to the assignment of the proceeds of such letter of credit to Administrative
Agent or naming Administrative Agent as transferee beneficiary thereunder, as
Administrative Agent may specify, or (ii) such Account is subject to credit
insurance payable to Administrative Agent issued by an insurer and on terms and
in an amount acceptable to Administrative Agent, or (iii) such Account is
otherwise acceptable in all respects to Administrative Agent (subject to such
lending formula with respect thereto as Administrative Agent may determine);

 

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(f) such Accounts do not consist of progress billings (such that the obligation
of the Account Debtors with respect to such Accounts is conditioned upon such
Borrower’s satisfactory completion of any further performance under the
agreement giving rise thereto), bill and hold invoices or retainage invoices,
except as to bill and hold invoices, if Administrative Agent shall have received
an agreement in writing from the Account Debtor, in form and substance
satisfactory to Administrative Agent, confirming the unconditional obligation of
the Account Debtor to take the goods related thereto and pay such invoice;

(g) the Account Debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and is not owed any amounts that may give rise
to any right of setoff or recoupment against such Accounts (but the portion of
the Accounts of such Account Debtor in excess of the amount at any time and from
time to time owed by such Borrower to such Account Debtor or claimed owed by
such Account Debtor may be deemed Eligible Accounts),

(h) there are no facts, events or occurrences which would impair the validity,
enforceability or collectability of such Accounts;

(i) such Accounts are subject to the first priority, valid and perfected
security interest of Administrative Agent and any goods giving rise thereto are
not, and were not at the time of the sale thereof, subject to any liens except
those permitted in this Agreement that are subject to an intercreditor agreement
in form and substance satisfactory to Administrative Agent between the holder of
such security interest or lien and Administrative Agent;

(j) neither the Account Debtor nor any officer or employee of the Account Debtor
with respect to such Accounts is an officer, employee, agent or other Affiliate
of any Borrower or Guarantor;

(k) the Account Debtors with respect to such Accounts are not any foreign
government, the United States of America, any State, political subdivision,
department, agency or instrumentality thereof, unless, if the Account Debtor is
the United States of America, any State, political subdivision, department,
agency or instrumentality thereof, upon Administrative Agent’s request, the
Federal Assignment of Claims Act of 1940, as amended or any similar State or
local law, if applicable, has been complied with in a manner satisfactory to
Administrative Agent or except as to Medicaid Accounts, Medicare Accounts and
Accounts arising from WIC or food stamp programs, such Accounts otherwise
constitute Eligible Accounts hereunder;

(l) there are no proceedings or actions which are threatened or pending against
the Account Debtors with respect to such Accounts which might result in any
material adverse change in any such Account Debtor’s financial condition
(including, without limitation, any bankruptcy, dissolution, liquidation,
reorganization or similar proceeding);

(m) the aggregate amount of such Accounts owing by a single Account Debtor do
not constitute more than fifteen (15%) percent of the aggregate amount of all
otherwise Eligible Accounts of Borrowers (but the portion of the Accounts not in
excess of the applicable percentages may be deemed Eligible Accounts);

 

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(n) such Accounts are not owed by an Account Debtor who has Accounts unpaid
(i) for Accounts with stated terms of fifteen (15) days or greater, more than
sixty (60) days after the original due date thereof or more than ninety
(90) days after the original invoice or statement date (as applicable) or
(ii) for Accounts with stated terms of less than fifteen (15) days, more than
thirty (30) days after the original due date thereof or more than ninety
(90) days after the original invoice or statement date (as applicable), in any
case which constitute more than fifty (50%) percent of the total Accounts of
such Account Debtor (it being understood that the statement date is applicable
to Accounts of the Distribution Division);

(o) the Account Debtor is not located in a state requiring the filing of a
Notice of Business Activities Report or similar report in order to permit such
Borrower to seek judicial enforcement in such State of payment of such Account,
unless such Borrower has qualified to do business in such state or has filed a
Notice of Business Activities Report or equivalent report for the then current
year or such failure to file and inability to seek judicial enforcement is
capable of being remedied without any material delay or material cost;

(p) such Accounts are owed by Account Debtors whose total indebtedness to such
Borrower does not exceed the credit limit with respect to such Account Debtors
as determined by such Borrower from time to time, to the extent such credit
limit as to any Account Debtor is established consistent with the current
practices of such Borrower as of the date hereof and such credit limit is
acceptable to Administrative Agent (but the portion of the Accounts not in
excess of such credit limit may be deemed Eligible Accounts);

(q) the collection of such Accounts are not, in Administrative Agent’s good
faith discretion, believed to be doubtful, including by reason of the Account
Debtors financial condition;

(r) as to Medicaid Accounts, (i) the claim for reimbursement related to such
Account has been submitted to the appropriate Fiscal Intermediary in accordance
with the applicable regulations under Medicaid within thirty (30) days from the
date the claim arose, (ii) the person to whom the goods were sold is an eligible
Medicaid beneficiary at the time such goods are sold and such eligibility has
been verified by the Borrower making such sale, (iii) such Account is owed to a
Borrower who is not under any investigation (other than the periodic audits
conducted by a Fiscal Intermediary in the ordinary course of business) or
subject to any action or proceeding concerning the status of such Borrower as a
Certified Medicaid Provider and/or the payments under Medicaid to such Borrower
have not been contested, suspended, delayed, deferred or otherwise postponed due
to any investigation, action or proceeding by the U.S. Justice Department or any
other Governmental Authority, (iv) the amount of such Account does not exceed
the amounts to which the Borrower making such sale is entitled to reimbursement
for such eligible Medicaid beneficiary under applicable Medicaid regulations
(provided, that, to the extent that the amount of any such excess is de minimis,
the portion of the Account not in excess of the reimbursable amount may be
deemed an Eligible Account), (v) all authorization and billing procedures and
documentation required in order for the Borrower making such sale to be
reimbursed and paid on such Account by the Fiscal Intermediary have been
properly completed and satisfied to the extent required in order for such
Borrower to be so reimbursed and paid and (vi) the terms of the sale giving rise
to such Accounts and all practices of such Borrower and Guarantors with respect
to such Accounts comply in all material respects with applicable

 

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Federal, State, and local laws and regulations; provided, that, in no event
shall the aggregate amount of Medicaid Accounts, Medicare Accounts and Accounts
arising from WIC or food stamp programs that are deemed to be Eligible Accounts
(but without limitation as to the amount of such Accounts) exceed $7,500,000 or
such higher amount (not to exceed $12,500,000) as Administrative Agent may agree
in writing;

(s) as to Medicare Accounts, (i) the claim for reimbursement related to such
Account has been submitted to the appropriate Fiscal Intermediary in accordance
with the applicable regulations under Medicare within thirty (30) days from the
date the claim arose, (ii) the person to whom the goods were sold is an eligible
Medicare beneficiary at the time such goods are sold and such eligibility has
been verified by the Borrower making such sale, (iii) such Account is owed to a
Borrower who is not under any investigation (other than the periodic audits
conducted by a Fiscal Intermediary in the ordinary course of business) or
subject to any action or proceeding concerning the status of such Borrower as a
Certified Medicare Provider and/or the payments under Medicare to such Borrower
have not been contested, suspended, delayed, deferred or otherwise postponed due
to any investigation, action or proceeding by the U.S. Justice Department or any
other Governmental Authority, (iv) the amount of such Account does not exceed
the amounts to which the Borrower making such sale is entitled to reimbursement
for such eligible Medicare beneficiary under applicable Medicare regulations
(provided, that, to the extent that the amount of any such excess is de minimis,
the portion of the Account not in excess of the reimbursable amount may be
deemed an Eligible Account); (v) all authorization and billing procedures and
documentation required in order for the Borrower making such sale to be
reimbursed and paid on such Account by the Fiscal Intermediary have been
properly completed and satisfied to the extent required for such Borrower to be
so reimbursed and paid, and (vi) the terms of the sale giving rise to such
Accounts and all practices of such Borrower and Guarantors with respect to such
Accounts comply in all material respects with applicable Federal, State, and
local laws and regulations; provided, that, in no event shall the aggregate
amount of Medicaid Accounts, Medicare Accounts and Accounts arising from WIC or
food stamp programs that are deemed to be Eligible Accounts (but without
limitation as to the amount of such Accounts) exceed $7,500,000 or such higher
amount (not to exceed $12,500,000) as Administrative Agent may agree in writing;
and

(t) as to Accounts where the Account Debtor is a Third Party Payor (other than
for Medicare Accounts and Medicaid Accounts), (i) the Borrower making the sale
giving rise to such Account has a valid and enforceable agreement with the Third
Party Payor providing for payment to such Borrower or such Borrower is otherwise
entitled to payment under the terms of its arrangements with the insurance
company that is the Third Party Payor, and such agreement and arrangements are
in full force and effect and there is no default thereunder that would be a
basis for such Third Party Payor to cease or suspend any payments to such
Borrower (including any deductions, setoffs or defenses), (ii) the goods sold
giving rise to such Account are of the type that are covered under the agreement
or arrangements with the Third Party Payor and the party receiving such goods is
entitled to coverage under such agreement or arrangement, (iii) the Borrower
making the sale giving rise to such Account has contacted the Third Party Payor
or otherwise received confirmation from such Third Party Payor that the party
receiving the goods is entitled to coverage under the terms of the agreement
with such Third Party Payor and the Borrower is entitled to reimbursement for
such Account, (iv) the amount of such

 

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Account does not exceed the amounts to which the Borrower making such sale is
entitled to reimbursement for the goods sold under the terms of such agreements
or arrangements (provided, that, to the extent that the amount of any such
excess is de minimis, the portion of the Account not in excess of the
reimbursable amount may be deemed an Eligible Account), (v) there are no
contractual or statutory limitations or restrictions on the rights of the
Borrower making such sale to assign its rights to payment arising as a result
thereof or to grant any security interest therein, (vi) all authorization and
billing procedures and documentation required in order for the Borrower making
such sale to be reimbursed and paid on such Account by the Third Party Payor
have been properly completed and satisfied to the extent required for such
Borrower to be so reimbursed and paid and (vii) the terms of the sale giving
rise to such Accounts and all practices of such Borrower and Guarantors with
respect to such Accounts comply in all material respects with applicable
Federal, State, and local laws and regulations.

The criteria for Eligible Accounts set forth above may be revised from time to
time by Administrative Agent in its good faith determination to address the
results of any collateral and/or field examination performed by or on behalf of
Administrative Agent after the date hereof. Any Accounts that are not Eligible
Accounts shall nevertheless be part of the Collateral.

1.41 “Eligible Credit Card Receivables” shall mean, as to each Borrower, Credit
Card Receivables of such Borrower which are and continue to be acceptable to
Administrative Agent in good faith based on the criteria set forth below. Credit
Card Receivables shall be Eligible Credit Card Receivables if:

(a) such Credit Card Receivables arise from the actual and bona fide sale and
delivery of goods or rendition of services by such Borrower in the ordinary
course of the business of such Borrower which transactions are completed in
accordance with the terms and provisions contained in any agreements binding on
such Borrower or the other party or parties related thereto;

(b) such Credit Card Receivables are not past due (beyond any stated applicable
grace period, if any, therefor) pursuant to the terms set forth in the Credit
Card Agreements with the Credit Card Issuer or Credit Card Processor of the
credit card or debit card used in the purchase which give rise to such Credit
Card Receivables;

(c) such Credit Card Receivables are not unpaid more than seven (7) days after
the date of the sale of Inventory giving rise to such Credit Card Receivables;

(d) all material procedures required by the Credit Card Issuer or the Credit
Card Processor of the credit card or debit card used in the purchase which gave
rise to such Credit Card Receivables shall have been followed by such Borrower
(including, but not limited to, obtaining any required authorization and
approval by such Credit Card Issuer or Credit Card Processor for the sale giving
rise to such Credit Card Receivables and submitting all materials required by
the Credit Card Issuer or Credit Card Processor obligated in respect of such
Credit Card Receivables in order for such Borrower to be entitled to payment in
respect thereof) and all documents required for the authorization and approval
by such Credit Card Issuer or Credit Card Processor shall have been obtained in
connection with the sale giving rise to such Credit Card Receivables;

 

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(e) the Credit Card Issuer or Credit Card Processor obligated in respect of such
Credit Card Receivable has not failed to remit any monthly payment in respect of
such Credit Card Receivable;

(f) such Credit Card Receivables comply with the applicable terms and conditions
contained in Section 7.2 of this Agreement;

(g) the Credit Card Issuer or Credit Card Processor with respect to such Credit
Card Receivables has not asserted a counterclaim, defense or dispute and does
not have, and does not engage in transactions which may give rise to, any right
of setoff against such Credit Card Receivables (other than setoffs to fees and
chargebacks consistent with the practices of such Credit Card Issuer or Credit
Card Processor with such Borrower as of the date hereof or as such practices may
change as a result of changes to the policies of such Credit Card Issuer or
Credit Card Processor applicable to its customers generally and unrelated to the
circumstance of such Borrower), but the portion of the Credit Card Receivables
owing by such Credit Card Issuer or Credit Card Processor in excess of the
amount owing by such Borrower to such Credit Card Issuer or Credit Card
Processor pursuant to such fees and chargebacks may be deemed Eligible Credit
Card Receivables;

(h) the Credit Card Issuer or Credit Card Processor with respect to such Credit
Card Receivables has not setoff against amounts otherwise payable by such Credit
Card Issuer or Credit Card Processor to such Borrower for the purpose of
establishing a reserve or collateral for obligations of such Borrower to such
Credit Card Issuer or Credit Card Processor (notwithstanding that the Credit
Card Issuer or Credit Card Processor may have setoffs for fees and chargebacks
consistent with the practices of such Credit Card Issuer or Credit Card
Processor with such Borrower as of the date hereof or as such practices may
hereafter change as a result of changes to the policies of such Credit Card
Issuer or Credit Card Processor applicable to its customers generally and
unrelated to the circumstances of such Borrower);

(i) there are no facts, events or occurrences which would impair the validity,
enforceability or collectability of such Credit Card Receivables;

(j) such Credit Card Receivables are subject to the first priority, valid and
perfected security interest and lien of Administrative Agent, for and on behalf
of itself and Lenders, as to such Credit Card Receivables of such Borrower and
any goods giving rise thereto are not, and were not at the time of the sale
thereof, subject to any security interest or lien in favor of any person other
than Administrative Agent except as otherwise permitted in this Agreement, in
each case subject to and in accordance with the terms and conditions applicable
hereunder to any such permitted security interest or lien;

(k) there are no proceedings or actions which are pending against the Credit
Card Issuers or Credit Card Processors with respect to such Credit Card
Receivables which would reasonably be expected to result in any material adverse
change in the financial condition of any such Credit Card Issuer or Credit Card
Processor;

 

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(l) the collection of such Credit Card Receivables are not, in Administrative
Agent’s good faith discretion, believed to be doubtful, including by reason of
the financial condition of the Credit Card Issuer or Credit Card Processor
related thereto;

(m) no event of default has occurred under the Credit Card Agreement of such
Borrower with the Credit Card Issuer or Credit Card Processor who has issued the
credit card or debit card or handles payments under the credit card or debit
card used in the sale which gave rise to such Credit Card Receivables which
event of default gives such Credit Card Issuer or Credit Card Processor the
right to cease or suspend payments to such Borrower or any Guarantor and no
event shall have occurred which gives such Credit Card Issuer or Credit Card
Processor the right to setoff against amounts otherwise payable to such
Borrower, including on behalf of a Guarantor (other than for then current fees
and chargebacks consistent with the current practices of such Credit Card Issuer
or Credit Card Processor as of the date hereof or as such practices may
hereafter change as a result of changes to the policies of such Credit Card
Issuer or Credit Card Processor applicable to its customers generally and
unrelated to the circumstances of such Borrower or any Guarantor), except as may
have been waived in writing on terms and conditions reasonably satisfactory to
Administrative Agent pursuant to the Credit Card Acknowledgment by such Credit
Card Issuer or Credit Card Processor) or the right to establish reserves or
establish or demand collateral, and the Credit Card Issuer or Credit Card
Processor has not sent any written notice of default and/or notice of its
intention to cease or suspend payments to such Borrower in respect of such
Credit Card Receivables or to establish reserves or cash collateral for
obligations of such Borrower to such Credit Card Issuer or Credit Card
Processor, and such Credit Card Agreements are otherwise in full force and
effect and constitute the legal, valid, binding and enforceable obligations of
the parties thereto;

(n) the terms of the sale giving rise to such Credit Card Receivables and all
practices of such Borrower and Guarantors with respect to such Credit Card
Receivables comply in all material respects with applicable Federal, State, and
local laws and regulations; and

(o) the customer using the credit card or debit card giving rise to such Credit
Card Receivable shall not have returned the merchandise purchased giving rise to
such Credit Card Receivable.

Credit Card Receivables which would otherwise constitute Eligible Credit Card
Receivables pursuant to this Section will not be deemed ineligible solely by
virtue of the Credit Card Agreements with respect thereto having been entered
into by any Guarantor, for the benefit of Borrowers. The criteria for Eligible
Credit Card Receivables set forth above may be revised from time to time by
Administrative Agent in its good faith determination to address the results of
any collateral and/or field examination performed by or on behalf of
Administrative Agent after the date hereof. Any Credit Card Receivables that are
not Eligible Credit Card Receivables shall nevertheless be part of the
Collateral.

1.42 “Eligible Equipment” shall mean, as to each Borrower, Equipment owned by
such Borrower after June 8, 2012 and included in an appraisal of Equipment
received by Administrative Agent after June 8, 2012 in accordance with the
requirements of Administrative Agent (including Equipment acquired by such
Borrower after the date hereof), which Equipment is in good order, repair,
running and marketable condition (ordinary wear and tear excepted) and

 

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in each case acceptable to Administrative Agent in good faith based on the
criteria set forth below. In general, Eligible Equipment shall not include:
(a) Equipment at premises other than those owned or leased and controlled by any
Borrower; (b) Equipment subject to a security interest or lien in favor of any
person other than Administrative Agent except those permitted hereunder that are
subject to an intercreditor agreement in form and substance satisfactory to
Administrative Agent between the holder of such security interest or lien and
Administrative Agent); (c) Equipment located outside the United States of
America; (d) Equipment that is not subject to the first priority, valid and
perfected security interest of Administrative Agent; (e) damaged or defective
Equipment or Equipment not used or usable in the ordinary course of such
Borrower’s business as presently conducted. Any Equipment that is not Eligible
Equipment shall nevertheless be part of the Collateral.

1.43 “Eligible Inventory” shall mean, as to each Borrower, Inventory of such
Borrower consisting of finished goods held for resale in the ordinary course of
the business of such Borrower, in each case which are acceptable to
Administrative Agent in good faith based on the criteria set forth below. In
general, Eligible Inventory shall not include (a) spare parts for equipment;
(b) packaging and shipping materials; (c) supplies used or consumed in such
Borrower’s business; (d) Inventory at premises other than those owned or leased
and controlled by any Borrower; (e) Inventory subject to a security interest or
lien in favor of any Person other than Administrative Agent except those
permitted in this Agreement that are subject to an intercreditor agreement in
form and substance satisfactory to Administrative Agent between the holder of
such security interest or lien and Administrative Agent; (f) bill and hold
goods; (g) obsolete Inventory; (h) Inventory which is not subject to the first
priority, valid and perfected security interest of Administrative Agent;
(i) Inventory that is past the expiration date; (j) Inventory that is held for
return to vendors (other than undamaged overstock allowed to be returned to a
vendor under the return policy between a Borrower and the vendor that is on
terms and conditions acceptable to Administrative Agent in good faith);
(k) damaged and/or defective Inventory; (l) Inventory purchased or sold on
consignment and (m) Inventory located outside the United States of America. The
criteria for Eligible Inventory set forth above may be revised from time to time
by Administrative Agent in its good faith determination to address the results
of any collateral and/or field examination performed by or on behalf of
Administrative Agent after the date hereof. Any Inventory that is not Eligible
Inventory shall nevertheless be part of the Collateral.

1.44 “Eligible Prescription Files” shall mean, as to each Borrower, Prescription
Files of such Borrower arising and maintained in the ordinary course of the
business of such Borrower and included in an appraisal of Prescription Files
received by Administrative Agent in accordance with the requirements of
Administrative Agent (including Prescription Files acquired by such Borrower
after the date hereof), in each case which are acceptable to Administrative
Agent in good faith based on the criteria set forth below. In general, Eligible
Prescription Files shall not include (a) Prescription Files at premises other
than those owned or leased and controlled by any Borrower; (b) Prescription
Files subject to a security interest or lien in favor of any Person other than
Administrative Agent except those permitted in this Agreement that are subject
to an intercreditor agreement in form and substance satisfactory to
Administrative Agent between the holder of such security interest or lien and
Administrative Agent; (c) Prescription Files that are not in a form that may be
sold or otherwise transferred or are subject to regulatory

 

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restrictions on the transfer thereof that are not acceptable to Administrative
Agent in good faith, provided that, the existing limitations as of the date
hereof applicable in the States of Ohio and Michigan that the transferee have
the licenses required under applicable State law to operate a pharmacy and sell
products subject to a prescription shall be deemed acceptable to Administrative
Agent. The criteria for Eligible Prescription Files set forth above may be
revised from time to time by Administrative Agent in its good faith
determination to address the results of any collateral and/or field examination
performed by or on behalf of Administrative Agent after the date hereof. Any
Prescription Files that are not Eligible Prescription Files shall nevertheless
be part of the Collateral.

1.45 “Eligible Real Property” shall mean, as to each Borrower, Real Property
owned by such Borrower in fee simple and included in an appraisal of such Real
Property received by Administrative Agent in accordance with the requirements of
Administrative Agent (including Real Property acquired by such Borrower after
the date hereof) and in each case acceptable to Administrative Agent in good
faith based on the criteria set forth below. In general, Eligible Real Property
shall not include: (a) Real Property which is not owned and operated by a
Borrower (and for this purpose vacant land or Real Property, including any
closed retail store location, that is actively managed by a Borrower shall be
deemed to be “operated” by such Borrower); (b) Real Property subject to a
security interest, lien or mortgage or other encumbrance in favor of any person
other than Administrative Agent, except those permitted hereunder that are
subject to an intercreditor agreement in form and substance satisfactory to
Administrative Agent between the holder of such lien and Administrative Agent or
are otherwise acceptable to Administrative Agent); (c) Real Property that is not
located in the United States of America; (d) Real Property that is not subject
to the valid and enforceable, first priority, perfected security interest, lien
and mortgage of Administrative Agent; (e) Real Property where Administrative
Agent determines that issues relating to compliance with Environmental Laws
adversely affect in any material respect the value thereof or the ability of
Administrative Agent to sell or otherwise dispose thereof (but subject to the
right of Administrative Agent to establish Reserves after the date hereof to
reflect such adverse affect); (f) Real Property improved with residential
housing; (g) Real Property for which the applicable Borrower has not delivered
to Administrative Agent, title insurance, a survey, zoning report, flood
certificate, flood insurance in accordance with Section 9.5(b) hereof,
environmental studies and other real estate items as required by FIRREA, each of
which shall be reasonably satisfactory to Administrative Agent. Any Real
Property that is not Eligible Real Property shall nevertheless be part of the
Collateral.

1.46 “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of
any Lender and/or any Affiliate of such Lender which is at least fifty
(50%) percent owned by such Lender or its parent company; (c) any person
(whether a corporation, partnership, trust or otherwise) that is engaged in the
business of making, purchasing, holding or otherwise investing in bank loans and
similar extensions of credit in the ordinary course of its business and is
administered or managed by a Lender or with respect to any Lender that is a fund
which invests in bank loans and similar extensions of credit, any other fund
that invests in bank loans and similar extensions of credit and is managed by
the same investment advisor as such Lender or by an Affiliate of such investment
advisor, and in each case is approved by Administrative Agent; and (A) any other
commercial bank having a combined capital and surplus of at least $250,000,000
or financial institution having a net worth (or the equivalent thereof in the
case of

 

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an investment partnership, managed account, limited liability company or similar
entity) calculated in accordance with applicable generally accepted accounting
principles of not less than $100,000,000, or “accredited investor” (as defined
in Regulation D under the Securities Act) that is engaged in the business of
making, purchasing, holding or otherwise investing in bank loans and similar
extensions of credit in the ordinary course of its business having a net worth
(or the equivalent thereof in the case of an investment partnership, managed
account, limited liability company or similar entity) calculated in accordance
with applicable generally accepted accounting principles of not less than
$100,000,000, and in each case, approved by Administrative Agent, provided,
that, (ii) neither any Borrower nor any Guarantor or any Affiliate of any
Borrower or Guarantor shall qualify as an Eligible Transferee and (iii) no
Person to whom any Indebtedness which is in any way subordinated in right of
payment to any other Indebtedness of any Borrower or Guarantor shall qualify as
an Eligible Transferee, except as Administrative Agent may otherwise
specifically agree.

1.47 “Environmental Laws” shall mean all foreign, Federal, State and local laws
(including common law), legislation, rules, codes, licenses, permits (including
any conditions imposed therein), authorizations, judicial or administrative
decisions, injunctions or agreements between any Borrower or Guarantor and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term “Environmental Laws” includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.

1.48 “Equipment” shall mean, as to each Borrower and Guarantor, all of such
Borrower’s and Guarantor’s now owned and hereafter acquired equipment, wherever
located, including machinery, data processing and computer equipment (whether
owned or licensed and including embedded software), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.

1.49 “ERISA” shall mean the Employee Retirement Income Security Act of 1974,
together with all rules, regulations and interpretations thereunder or related
thereto.

 

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1.50 “ERISA Affiliate” shall mean any person required to be aggregated with any
Borrower, any Guarantor or any of its or their respective Subsidiaries under
Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

1.51 “ERISA Event” shall mean (a) any “reportable event”, as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a non-exempt
“prohibited transaction” with respect to which any Borrower, Guarantor or any of
its or their respective Subsidiaries is a “disqualified person” (within the
meaning of Section 4975 of the Code) or with respect to which any Borrower,
Guarantor or any of its or their respective Subsidiaries could otherwise be
liable; (f) a complete or partial withdrawal by any Borrower, Guarantor or any
ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is
treated as such a withdrawal or notification that a Multiemployer Plan is in
reorganization; (g) the filing of a notice of intent to terminate a Plan subject
to Title IV of ERISA, the treatment of a Plan amendment as a termination under
Section 4041 or 4041A of ERISA, or the commencement of proceedings by the
Pension Benefit Guaranty Corporation to terminate a Plan; (h) an event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (i) the imposition of any liability under Title IV of
ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not
delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or any
ERISA Affiliate in excess of $5,000,000 and (j) any other event or condition
with respect to a Plan including any Plan subject to Title IV of ERISA
maintained, or contributed to, by any ERISA Affiliate that could reasonably be
expected to result in an increase of $5,000,000 or more in the amount required
to be paid by any Borrower in any year in excess of the amount such Borrower
would have been required but for such event or condition.

1.52 “Eurodollar Rate” shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the rate per annum rate appearing on Macro*World’s
(www.mworld.com; the “Service”) Page BBA LIBOR—USD (or on any successor or
substitute page of such Service, or any successor to or substitute for such
Service) 2 Business Days prior to the commencement of the requested Interest
Period, for a term, and in an amount, comparable to the Interest Period and the
amount of the Eurodollar Rate Loan requested (whether as an initial Eurodollar
Rate Loan or as a continuation of a Eurodollar Rate Loan or as a conversion of a
Prime Rate Loan to a Eurodollar Rate Loan) by Borrowers in accordance with this
Agreement (and, if any such rate is below zero, the Eurodollar Rate shall be
deemed to be zero), which determination shall be made by Administrative Agent
and shall be conclusive in the absence of manifest error.

1.53 “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which
interest is payable based on the Adjusted Eurodollar Rate in accordance with the
terms hereof.

1.54 “Event of Default” shall mean the occurrence or existence of any event or
condition described in Section 10.1 hereof.

 

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1.55 “Excess Availability” shall mean the amount, as determined by
Administrative Agent, calculated at any date, equal to:

(a) the lesser of: (i) the Borrowing Base and (ii) the Maximum Credit (in each
case under (i) or (ii) after giving effect to any Reserves other than any
Reserves in respect of Letter of Credit Accommodations), minus

(b) the sum of: (i) the amount of all then outstanding and unpaid Obligations of
such Borrower (but not including for this purpose Obligations of such Borrower
arising pursuant to any guarantees in favor of Administrative Agent and Lenders
of the Obligations of the other Borrowers or any outstanding Letter of Credit
Accommodations), plus (ii) the amount of all Reserves then established in
respect of Letter of Credit Accommodations, plus (iii) the aggregate amount of
all then outstanding and unpaid trade payables and other obligations of such
Borrower which are outstanding more than thirty (30) days past due as of such
time (other than trade payables or other obligations being contested or disputed
by such Borrower in good faith), plus (iv) without duplication, the amount of
checks issued by such Borrower to pay trade payables and other obligations which
are more than thirty (30) days past due as of such time (other than trade
payables or other obligations being contested or disputed by such Borrower in
good faith), but not yet sent, plus

(c) other than for purposes of calculating Excess Availability in connection
with Section 9.20 hereof, Qualified Cash of up to $20,000,000.

1.56 “Exchange Act” shall mean the Securities Exchange Act of 1934, together
with all rules, regulations and interpretations thereunder or related thereto.

1.57 “Farm Products” shall mean crops, livestock, supplies used or produced in a
farming operation and products of crops or livestock and including farm products
as such term is defined in the Food Security Act and the UCC.

1.58 “Farm Products Sellers” shall mean, collectively, sellers or suppliers to
any Borrower of any farm product (as such term is defined in the Food Security
Act and the UCC) and including any perishable agricultural commodity (as defined
in PACA) or livestock (as defined in the PSA), meat, meat food products or
livestock products derived therefrom or any poultry or poultry products derived
therefrom; sometimes being referred to herein individually as a “Farm Product
Seller”.

1.59 “Federal Funds Rate” shall mean, for any period, a fluctuating interest
rate per annum equal to, for each day during such period, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by Agent from three
Federal funds brokers of recognized standing selected by it.

1.60 “Fee Letter” shall mean, collectively, the amended and restated letter
agreement, dated December 23, 2003, by and among Borrowers, Guarantors and
Administrative Agent, the

 

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servicing fee letter, dated June 8, 2012, by and among Borrowers and
Administrative Agent and the other fee letters, dated June 8, 2012, executed by
Borrowers, setting forth certain fees payable by Borrowers to Administrative
Agent for the benefit of itself and Lenders, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

1.61 “Financing Agreements” shall mean, collectively, this Agreement and all
notes, guarantees, security agreements, deposit account control agreements,
investment property control agreements, intercreditor agreements and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by any Borrower or Obligor in connection with this Agreement;
provided, that, in no event shall the term Financing Agreements be deemed to
include any Hedge Agreement or any agreement evidencing a Bank Product.

1.62 “Fiscal Intermediary” shall mean any qualified insurance company or other
financial institution that has entered into an ongoing relationship with any
Governmental Authority to make payments to payees under Medicare, Medicaid or
any other Federal, State or local public health care or medical assistance
program pursuant to any of the Health Care Laws.

1.63 “Fixed Asset Availability” shall mean, at any time, the amount equal to the
sum of:

(a) the lesser of (i) sixty (60%) percent of the fair market value of Eligible
Real Property as set forth in the most recent acceptable appraisal (or
acceptable updates of existing appraisals) of such Real Property received by
Administrative Agent in accordance with Section 7.4 hereof or (ii) the amount
equal to twenty-five (25%) percent of the Borrowing Base, plus

(b) eighty-five (85%) percent of the forced liquidation value of Eligible
Equipment as set forth in the most recent acceptable appraisal (or acceptable
updates of existing appraisals) of such Equipment received by Administrative
Agent after June 8, 2012 in accordance with Section 7.4 hereof, net of estimated
liquidation expenses, costs and commissions;

Provided, that, (i) as of June 8, 2012, there is no Fixed Asset Availability in
respect of Eligible Equipment, (ii) in connection with Fixed Asset Availability
in respect of Eligible Real Property as set forth in clause (a) above,
commencing on the first day of the start of the next calendar quarter after
Fixed Asset Availability with respect to any piece of Eligible Real Property has
been made available and on the first day of each calendar quarter thereafter,
the initial advance rate with respect to each such piece of Eligible Real
Property will be reduced by three-quarters of one ( 3/4%) percent for such piece
of Eligible Real Property for each such calendar quarter and (iii) in connection
with Fixed Asset Availability in respect of Eligible Equipment as set forth in
clause (b) above, commencing on the first day of the start of the next calendar
quarter after Fixed Asset Availability with respect to any piece of Eligible
Equipment has been made available and on the first day of each calendar quarter
thereafter, such Fixed Asset Availability with respect to each such piece of
Eligible Equipment will be reduced by an amount equal to the Fixed Asset
Availability for such piece of Eligible Equipment divided by fifteen (15).

 

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1.64 “Fixed Charge Coverage Ratio” shall mean, as to any Person, with respect to
any period, the ratio of (a) the amount equal to EBITDA of such Person for such
period to (b) the Fixed Charges of such Person for such period.

1.65 “Fixed Charges” shall mean, as to any Person, with respect to any period,
the sum of, without duplication, (a) all cash Interest Expense during such
period, plus (b) all Capital Expenditures during such period, plus (c) all
regularly scheduled (as determined at the beginning of the respective period)
principal payments in respect of Indebtedness for borrowed money (excluding
payments in respect of Revolving Loans which do not result in a reduction of the
Maximum Credit) and Indebtedness with respect to Capital Leases (and without
duplicating items (a) and (c) of this definition, the interest component with
respect to Indebtedness under Capital Leases) during such period, plus (d) taxes
paid during such period in cash.

1.66 “Food Security Act” shall mean the Food Security Act of 1984, 7 U.S.C.
Section 1631 et. seq., as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules and
regulations thereunder.

1.67 “Food Security Act Notices” shall have the meaning set forth in
Section 8.21 hereof.

1.68 “Flood Insurance Laws” means, collectively, the following (in each case as
now or hereafter in effect or any successor statute thereto): (i) the National
Flood Insurance Act of 1968, (ii) the Flood Disaster Protection Act of 1973,
(iii) the National Flood Insurance Reform Act of 1994 and (iv) the Flood
Insurance Reform Act of 2004.

1.69 “GAAP” shall mean generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board which are applicable to the circumstances
as of the date of determination consistently applied, except that, for purposes
of Section 9.18 hereof, GAAP shall be determined on the basis of such principles
in effect on the date hereof and consistent with those used in the preparation
of the most recent audited financial statements delivered to Administrative
Agent prior to the date hereof.

1.70 “Governmental Authority” shall mean any nation or government, any state,
province, or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

1.71 “Guarantors” shall have the meaning assigned thereto in the preamble to
this Agreement.

1.72 “Hazardous Materials” shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, polychlorinated
biphenyls, pesticides, herbicides, sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including any
other substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).

 

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1.73 “Health Care Laws” shall mean all Federal, State and local laws, rules,
regulations, interpretations, guidelines, ordinances and decrees primarily
relating to patient healthcare, any health care provider, medical assistance and
cost reimbursement program, as now or at any time hereafter in effect,
applicable any Borrower or Guarantor, including, but not limited to, the Social
Security Act, the Social Security Amendments of 1972, the Medicare-Medicaid
Anti-Fraud and Abuse Amendments of 1977, the Medicare and Medicaid Patient and
Program Protection Act of 1987 and HIPAA.

1.74 “Hedge Agreement” shall mean an agreement between any Borrower or Guarantor
and Agent or any Bank Product Provider that is a swap agreement as such term is
defined in 11 U.S.C. Section 101, and including any rate swap agreement, basis
swap, forward rate agreement, commodity swap, interest rate option, forward
foreign exchange agreement, spot foreign exchange agreement, rate cap agreement
rate, floor agreement, rate collar agreement, currency swap agreement,
cross-currency rate swap agreement, currency option, any other similar agreement
(including any option to enter into any of the foregoing or a master agreement
for any the foregoing together with all supplements thereto) for the purpose of
protecting against or managing exposure to fluctuations in interest or exchange
rates, currency valuations or commodity prices; sometimes being collectively
referred to herein as “Hedge Agreements”.

1.75 “HIPAA” shall mean the Health Insurance Portability and Accountability Act
of 1996, as the same now exists or may hereafter from time to time be amended,
modified, recodified or supplemented, together with all rules and regulations
thereunder.

1.76 “Indebtedness” shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing the balance deferred and unpaid of the purchase
price of any property or services (except any such balance that constitutes an
account payable to a trade creditor (whether or not an Affiliate) created,
incurred, assumed or guaranteed by such Person in the ordinary course of
business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker’s acceptances, drafts or similar documents or
instruments issued for such Person’s account; (g) all indebtedness

 

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of such Person in respect of indebtedness of another Person for borrowed money
or indebtedness of another Person otherwise described in this definition which
is secured by any consensual lien, security interest, collateral assignment,
conditional sale, mortgage, deed of trust, or other encumbrance on any asset of
such Person, whether or not such obligations, liabilities or indebtedness are
assumed by or are a personal liability of such Person, all as of such time;
(h) all obligations, liabilities and indebtedness of such Person (marked to
market) arising under swap agreements, cap agreements and collar agreements and
other agreements or arrangements designed to protect such person against
fluctuations in interest rates or currency or commodity values; (i) all
obligations owed by such Person under License Agreements with respect to
non-refundable, advance or minimum guarantee royalty payments; and (j) the
principal and interest portions of all rental obligations of such Person under
any synthetic lease or similar off-balance sheet financing where such
transaction is considered to be borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP.

1.77 “Information Certificate” shall mean, collectively, the Information
Certificates of Borrowers and Guarantors constituting Exhibit C hereto
containing material information with respect to Borrowers and Guarantors, their
respective businesses and assets provided by or on behalf of Borrowers and
Guarantors to Administrative Agent in connection with the preparation of this
Agreement and the other Financing Agreements and the financing arrangements
provided for herein.

1.78 “Intellectual Property” shall mean, as to each Borrower and Guarantor, such
Borrower’s and Guarantor’s now owned and hereafter arising or acquired: patents,
patent rights, patent applications, copyrights, works which are the subject
matter of copyrights, copyright registrations, trademarks, trade names, trade
styles, trademark and service mark applications, and licenses and rights to use
any of the foregoing; all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing; all rights to
sue for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or the license of any
trademark); customer and other lists in whatever form maintained; trade secret
rights, copyright rights, rights in works of authorship, domain names and domain
name registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.

1.79 “Interest Expense” shall mean, for any period, as to any Person, as
determined in accordance with GAAP, the total interest expense of such Person,
whether paid or accrued during such period (including the interest component of
Capital Leases for such period), including, without limitation, discounts in
connection with the sale of any Accounts, but excluding interest paid in
property other than cash and any other interest expense not payable in cash.

1.80 “Interest Period” shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), three (3) or six (6) months duration as any
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
such Borrower may not elect an Interest Period which will end after the last day
of the then-current term of this Agreement.

 

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1.81 “Interest Rate” shall mean,

(a) Subject to clause (b) of this definition below:

(i) as to Prime Rate Loans, a rate equal to the then Applicable Margin for Prime
Rate Loans on a per annum basis plus the Prime Rate;

(ii) as to Eurodollar Rate Loans, a rate equal to the then Applicable Margin for
Eurodollar Rate Loans on a per annum basis plus the Adjusted Eurodollar Rate (in
each case, based on the Eurodollar Rate applicable for the relevant Interest
Period, whether such rate is higher or lower than any rate previously quoted to
a Borrower);

(b) Notwithstanding anything to the contrary contained in clause (a) of this
definition, the Applicable Margin otherwise used to calculate the Interest Rate
for Prime Rate Loans and Eurodollar Rate Loans shall be the highest percentage
set forth in the definition of the term Applicable Margin for each category of
Loans (without regard to the amount of Monthly Average Excess Availability) plus
two (2%) percent per annum, at Administrative Agent’s option, (i) for the period
(A) from and after the effective date of termination or non-renewal hereof until
Administrative Agent and Lenders have received full and final payment of all
outstanding and unpaid Obligations which are not contingent and cash collateral
or letter of credit, as Administrative Agent may specify, in the amounts and on
the terms required under Section 13.1 hereof for contingent Obligations
(notwithstanding entry of a judgment against any Borrower or Guarantor) and
(B) from and after the date of the occurrence of an Event of Default and for so
long as such Event of Default is continuing and (ii) on Loans to a Borrower at
any time outstanding in excess of the Borrowing Base of such Borrower (whether
or not such excess(es) arise or are made with or without the knowledge or
consent of Administrative Agent or any Lender and whether made before or after
an Event of Default).

1.82 “Inventory” shall mean, as to each Borrower and Guarantor, all of such
Borrower’s and Guarantor’s now owned and hereafter existing or acquired goods,
wherever located, which (a) are leased by such Borrower or Guarantor as lessor;
(b) are held by such Borrower for sale or lease or to be furnished under a
contract of service; (c) are furnished by such Borrower or Guarantor under a
contract of service; or (d) consist of raw materials, work in process, finished
goods or materials used or consumed in its business

1.83 “Investment Property Control Agreement” shall mean an agreement in writing,
in form and substance satisfactory to Administrative Agent, by and among
Administrative Agent, any Borrower or Guarantor (as the case may be) and any
securities intermediary, commodity intermediary or other person who has custody,
control or possession of any investment property of such Borrower or Guarantor
agreeing that such securities intermediary, commodity intermediary or other
person will comply with entitlement orders originated by Administrative Agent
with respect to such investment property, or other instructions of
Administrative Agent and including such other terms and conditions as
Administrative Agent may require.

1.84 “Issuing Bank” shall have the meaning set forth for such term in
Section 2.2(a) hereof.

 

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1.85 “Joinder Agreement” shall mean an agreement, in form and substance
reasonably satisfactory to Administrative Agent, pursuant to which, among other
things, a Person becomes a party to, and bound by the terms of, this Agreement
and/or the other Financing Agreements as a Borrower or a Guarantor, as the
Administrative Agent may reasonably determine.

1.86 “Lead Borrower” shall mean Spartan Stores, Inc., a Michigan corporation in
its capacity as Lead Borrower on behalf of itself and the other Borrowers
pursuant to Section 6.7 hereof and it successors and assigns in such capacity.

1.87 “Lenders” shall mean the financial institutions who are signatories hereto
as Lenders and other persons made a party to this Agreement as a Lender in
accordance with Section 13.7 hereof, and their respective successors and
assigns; each sometimes being referred to herein individually as a “Lender”.

1.88 “Letter of Credit Accommodations” shall mean, collectively, the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by an Issuing Bank for the account of any Borrower
or Obligor or (b) with respect to which Administrative Agent or Lenders have
agreed to indemnify the issuer or guaranteed to the issuer the performance by
any Borrower or Obligor of its obligations to such issuer; sometimes being
referred to herein individually as “Letter of Credit Accommodation”.

1.89 “License Agreements” shall have the meaning set forth in Section 8.11
hereof.

1.90 “Loans” shall mean the loans now or hereafter made by or on behalf of any
Lender or by Administrative Agent for the account of any Lender on a revolving
basis pursuant to the Credit Facility (involving advances, repayments and
readvances) as set forth in Section 2.1 hereof.

1.91 “Material Adverse Effect” shall mean a material adverse effect on (a) the
financial condition, business, performance or operations of Borrowers and
Guarantors (taken as a whole) or the legality, validity or enforceability of
this Agreement or any of the other Financing Agreements; (b) the legality,
validity, enforceability, perfection or priority of the security interests and
liens of Administrative Agent upon the Collateral (taken as a whole); (c) the
Collateral (taken as a whole) or its value (taken as a whole), (d) the ability
of Borrowers (taken as a whole) to repay the Obligations or of Borrowers (taken
as a whole) to perform their obligations under this Agreement or any of the
other Financing Agreements as and when to be performed; or (e) the ability of
Administrative Agent or any Lender to enforce the Obligations or realize upon
the Collateral or otherwise with respect to the rights and remedies of
Administrative Agent and Lenders under this Agreement or any of the other
Financing Agreements (taken as a whole).

1.92 “Material Contract” shall mean (a) any contract or other agreement (other
than the Financing Agreements or contracts relating to the purchase or sale of
Inventory in the ordinary course of business)), written or oral, of any Borrower
or Guarantor involving monetary liability of or to any Person in an amount in
excess of $5,000,000 in any fiscal year and (b) any other contract or other
agreement (other than the Financing Agreements or contracts relating to the
purchase or sale of Inventory in the ordinary course of business), whether
written or oral, to which any Borrower or Guarantor is a party as to which the
breach, nonperformance, cancellation or failure to renew by any party thereto
would have a Material Adverse Effect.

 

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1.93 “Maximum Credit” shall mean the amount of $200,000,000 (subject to
adjustment as provided in Section 2.3 hereof).

1.94 “Medicaid” shall mean the health care financial assistance program jointly
financed and administered by the Federal and State governments under Title XIX
of the Social Security Act.

1.95 “Medicaid Account” shall mean any Accounts of Borrowers or Guarantors
arising pursuant to services rendered by Borrowers or Guarantors to eligible
Medicaid beneficiaries to be paid by a Fiscal Intermediary or by the United
States of America acting under the Medicaid program, any State or the District
of Columbia acting pursuant to a health plan adopted pursuant to Title XIX of
the Social Security Act or any other Governmental Authority under Medicaid.

1.96 “Medicare” shall mean the health care financial assistance program under
Title XVIII of the Social Security Act.

1.97 “Medicare Account” shall mean any Accounts of Borrowers or Guarantors
arising pursuant to goods sold or services rendered by Borrowers or Guarantors
to eligible Medicare beneficiaries to be paid by a Fiscal Intermediary or by the
United States of America acting under the Medicare program or any other
Governmental Authority under Medicare.

1.98 “Monthly Average Excess Availability” shall mean, at any time, the average
of the aggregate amount of the Excess Availability of Borrowers during the
immediately preceding calendar month as calculated by Administrative Agent in
good faith based on the date of the information received by Administrative Agent
with respect to the components of the Borrowing Base during such month.

1.99 “Mortgages” shall mean, collectively, the mortgages, deeds of trust and
deeds to secure debt with respect to Real Property of any Borrower or Guarantor
in favor of, or for the benefit of Administrative Agent, as set forth on
Schedule 1.99 hereto, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

1.100 “Multiemployer Plan” shall mean a “multi-employer plan” as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by any Borrower,
Guarantor or any ERISA Affiliate.

1.101 “Net Proceeds” shall mean the aggregate cash proceeds payable to any
Borrower or Guarantor in respect of any sale, lease, transfer or other
disposition of any assets or properties, or interest in assets and properties or
as proceeds of any loans or other financial accommodations provided to any
Borrower or Guarantor or as proceeds from the issuance and/or sale of any
Capital Stock, in each case net of the reasonable and customary direct costs
relating to such sale, lease, transfer or other disposition or loans or other
financial accommodation or issuance and/or sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and taxes
paid or payable as a result thereof (after taking into account any

 

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available tax credits or deductions and any tax sharing arrangements), and
amounts applied to the repayment of indebtedness secured by a valid and
enforceable lien on the asset or assets that are the subject of such sale or
other disposition required to be repaid in connection with such transaction. Net
Proceeds shall exclude any non-cash proceeds received from any sale or other
disposition or other transaction, but shall include such proceeds when and as
converted by any Borrower or Guarantor to cash or other immediately available
funds.

1.102 “Net Recovery Percentage” shall mean the fraction, expressed as a
percentage, as to Inventory, (a) the numerator of which is the amount equal to
the amount of the recovery in respect of the Inventory at such time, as to
Inventory of the Retail Division, on a “net orderly liquidation value” basis,
and as to Inventory of the Distribution Division, on a “net orderly liquidation
value” basis as set forth in the most recent acceptable appraisal of Inventory
received by Administrative Agent in accordance with Section 7.3, in each case,
net of operating expenses, liquidation expenses and commissions, and (b) the
denominator of which is the applicable original cost of the aggregate amount of
the Inventory subject to such appraisal.

1.103 “Obligations” shall mean (a) any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrowers to Administrative
Agent or any Lender and/or any of their Affiliates, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, arising under this
Agreement or any of the other Financing Agreements, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to such Borrower under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, or secured or unsecured and
(b) for purposes only of Section 5.1 hereof and subject to the priority in right
of payment set forth in Section 6.4 hereof, all obligations, liabilities and
indebtedness of every kind, nature and description owing by any Borrower or
Guarantor to Administrative Agent or any Bank Product Provider arising under or
pursuant to any Bank Products, whether now existing or hereafter arising,
provided, that, (i) as to any such obligations, liabilities and indebtedness
arising under or pursuant to a Hedge Agreement, the same shall only be included
within the Obligations if upon Administrative Agent’s request, Administrative
Agent shall have entered into an agreement, in form and substance reasonably
satisfactory to Administrative Agent, with the Bank Product Provider that is a
counterparty to such Hedge Agreement, as acknowledged and agreed to by
Borrowers, providing for the delivery to Administrative Agent by such
counterparty of information with respect to the amount of such obligations and
providing for the other rights of Administrative Agent and such Bank Product
Provider in connection with such arrangements and (ii) Administrative Agent
shall have received from any Bank Product Provider, other than Wells and its
Affiliates, written notice that (A) such Bank Product Provider has entered into
a transaction to provide Bank Products to such Borrower and (B) the obligations
arising pursuant to such Bank Products provided to such Borrower constitute
Obligations entitled to the benefits of the security interest of Administrative
Agent granted hereunder. In no event shall any Bank Product Provider acting in
such capacity to whom such obligations, liabilities or indebtedness are

 

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owing be deemed a Lender for purposes hereof to the extent of and as to such
obligations, liabilities or indebtedness except that each reference to the term
“Lender” in Sections 12.1, 12.2, 12.5, 12.6, 12.7, 12.9, 12.12 and 13.6 hereof
shall be deemed to include such Bank Product Provider and in no event shall the
approval of any such person in its capacity as Bank Product Provider be required
in connection with the release or termination of any security interest or lien
in favor of Administrative Agent.

1.104 “Obligor” shall mean any guarantor, endorser, acceptor, surety or other
person liable on or with respect to the Obligations or who is the owner of any
property which is security for the Obligations (including, without limitation,
Guarantors), other than Borrowers.

1.105 “OFAC” shall mean the Office of Foreign Assets Control of the U.S.
Department of the Treasury.

1.106 “PACA” shall mean the Perishable Agricultural Commodities Act, 1930, as
amended, 7 U.S.C. Section 499a et. seq., as the same now exists or may hereafter
from time to time be amended, modified, recodified or supplemented, together
with all rules and regulations thereunder.

1.107 “PSA” shall mean the Packers and Stockyard Act of 1921, 7 U.S.C.
Section 181 et. seq., as the same now exists or may from time to time hereafter
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.

1.108 “Parent” shall mean Spartan Stores, Inc., a Michigan corporation, and its
successors and assigns.

1.109 “Participant” shall mean any financial institution that acquires and holds
a participation in the interest of any Lender in any of the Loans and Letter of
Credit Accommodations in conformity with the provisions of Section 13.7 of this
Agreement governing participations.

1.110 “Patriot Act” shall have the meaning set forth in Section 8.22 hereof.

1.111 “Person” or “person” shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.

1.112 “Pharmacy Receivables” means as to each Borrower, all present and future
rights of such Borrower to payment from a Third Party Payor arising from the
sale of prescription drugs by such Borrower (it being understood that the
portion of the purchase price for such prescription drugs payable by the
purchaser of such prescription drugs or any Person other than a Third Party
Payor shall not be deemed to be a Pharmacy Receivable).

 

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1.113 “Plan” means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years.

1.114 “Prescription Files” shall mean, as to each Borrower and Guarantor, all of
such Borrower’s or Guarantor’s now owned or hereafter existing or acquired
retail customer files, including prescriptions for retail customers and other
medical information related thereto, maintained by the retail pharmacies of
Borrowers and Guarantors, wherever located.

1.115 “Prescription File Availability” shall mean the lesser of: (a) eighty-five
(85%) percent of the “net orderly liquidation value” of the Eligible
Prescription Files based on the most recent acceptable appraisal thereof
received by Administrative Agent using the average of the average recovery under
each of the percent of script sales method, the dollars per average number of
scripts filled per week method and the percent of past year script margin method
(or such other methodology or methodologies as may be acceptable to
Administrative Agent), net of estimated liquidation expenses, costs (such costs
and expenses not to be duplicated with the liquidation expenses of the
Inventory) and commissions, or (b) $50,000,000.

1.116 “Prime Rate” shall mean the greatest of (a) the Federal Funds Rate plus
one-half of one ( 1/2%) percent, (b) the Eurodollar Rate (which rate shall be
calculated based upon an Interest Period of one (1) month and shall be
determined on a daily basis), plus one (1%) percent, and (c) the rate of
interest announced, from time to time, within Wells Fargo Bank, National
Association at its principal office in San Francisco as its “prime rate”, with
the understanding that the “prime rate” is one of Wells Fargo’s base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publications as Wells Fargo may designate.

1.117 “Prime Rate Loans” shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.

1.118 “Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a
percentage) the numerator of which is such Lender’s Commitment and the
denominator of which is the aggregate amount of all of the Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.7 hereof; provided, that, if the Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender’s Loans and its interest
in the Letter of Credit Accommodations and the denominator shall be the
aggregate amount of all unpaid Loans and Letter of Credit Accommodations.

1.119 “Provision for Taxes” shall mean an amount equal to all taxes imposed on
or measured by net income, whether Federal, State, Provincial, county or local,
and whether foreign or domestic, that are paid or payable by any Person in
respect of any period in accordance with GAAP.

1.120 “Qualified Cash” shall mean, as of any date of determination, the amount
of unrestricted cash or, subject to the terms below, Cash Equivalents of
Borrowers that are (a) free

 

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and clear of any pledge, security interest, lien, claim or other encumbrance
(other than in favor of Administrative Agent and other than in favor of the
depository bank or securities intermediary where the deposit account or
investment account is maintained for its customary fees and charges and any
other liens permitted under this Agreement that are subject to an intercreditor
agreement in form and substance satisfactory to Administrative Agent between the
holder of such security interest or lien and Administrative Agent), (b) subject
to the first priority perfected security interest of Administrative Agent
(subject to the liens of the depository bank or securities intermediary where
the deposit account or investment account is maintained for its customary fees
and charges), (c) in a deposit account or an investment account maintained at
Wells Fargo Bank, National Association and which account is subject to a Deposit
Account Control Agreement or an Investment Property Control Agreement, and which
cash or Cash Equivalents are not permitted to be withdrawn from such account
without the prior written consent of Administrative Agent and for which
Administrative Agent shall have received evidence, in form and substance
satisfactory to Administrative Agent, of the amount of such cash or Cash
Equivalents held in such deposit account or investment account as of the
applicable date of the calculation of the Excess Availability; provided, that,
to the extent such amounts represent payments in respect of Accounts or other
Collateral included in the Borrowing Base as of such date, such amounts shall
not constitute Qualified Cash (and Lead Borrower shall provide such evidence
thereof as Agent may request). For purposes of this definition, “Qualified Cash”
shall only include Cash Equivalents maturing within ninety (90) days from the
date of the acquisition thereof and in the case of obligations or indebtedness
described in clauses (b) and (c) of the definition of the term Cash Equivalents,
obligations or indebtedness having a rating of at least A-1 from S&P or at least
P-1 from Moody’s (or, if at any time neither S&P nor Moody’s shall be rating
such obligations, then an equivalent rating from another nationally recognized
rating service).

1.121 “Qualified Debt Agent” shall mean the entity acting in the capacity as
agent or trustee, as applicable, with respect to a Qualified Debt Offering and
any successor or replacement agent or trustee, as applicable, and their
respective successors and assigns.

1.122 “Qualified Debt Intercreditor Agreement” shall mean, in form and substance
reasonably satisfactory to Administrative Agent in its sole discretion, the
Intercreditor Agreement entered into on the date that Borrowers incur
Indebtedness permitted to be incurred pursuant to Section 9.9(f) hereof, by and
between Administrative Agent and each set of holders of such debt, as applicable
(or their agent or trustee, as applicable), as acknowledged and agreed to by
Borrowers and Guarantors, pursuant to which Administrative Agent shall
subordinate its lien on the Qualified Debt Offering Priority Collateral (to no
less than a second priority lien) and the holders of such debt (or their agent
or trustee, as applicable) shall subordinate its lien on all Collateral other
than the Qualified Debt Offering Priority Collateral, as the same be amended,
modified, supplemented, extended, renewed, restated or replaced.

1.123 “Qualified Debt Offering” shall mean, at the option of the Borrowers, in
each case, pursuant to and in accordance with the terms of Section 9.9(f)
hereof, one or more (i) term loans made to the Borrowers or Guarantors after
June 8, 2012 or (ii) senior notes issued by any Borrower or Guarantor after
June 8, 2012.

 

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1.124 “Qualified Debt Offering Priority Collateral” shall mean, after the date
that Borrowers or Guarantors have incurred Indebtedness pursuant to
Section 9.9(f) hereof, collectively, that portion of the Collateral now owned or
at any time hereafter acquired by any Borrower or Guarantor or in which any
Borrower or Guarantor now has or at any time in the future may acquire any
right, title or interest, consisting of (a) Equipment (other than Equipment that
constitutes Eligible Equipment as of the date of the incurrence of such
Indebtedness), (b) Real Property and fixtures (other than Real Property that
constitutes Eligible Real Property as of the date of the incurrence of such
Indebtedness), (c) Intellectual Property, (d) instruments, documents, investment
property, letters of credit, supporting obligations and chattel paper, in each
case, to the extent that any amounts payable under or in connection with any of
the items or types of assets described in clauses (a) through (c) above are
evidenced by the items described in this clause (d) and (e) all proceeds and
products of any of the items or types of assets described in clauses (a) through
(d) above.

1.125 “Real Property” shall mean all now owned and hereafter acquired real
property of each Borrower and Guarantor, including leasehold interests, together
with all buildings, structures, and other improvements located thereon and all
licenses, easements and appurtenances relating thereto, wherever located,
including the real property and related assets more particularly described in
the Mortgages.

1.126 “Receivables” shall mean all of the following now owned or hereafter
arising or acquired property of each Borrower and Guarantor: (a) all Accounts;
(b) all interest, fees, late charges, penalties, collection fees and other
amounts due or to become due or otherwise payable in connection with any
Account; (c) all payment intangibles of such Borrower or Guarantor; (d) letters
of credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to any Borrower or Guarantor or otherwise in favor of or
delivered to any Borrower or Guarantor in connection with any Account; or
(e) all other accounts, contract rights, chattel paper, instruments, notes,
general intangibles and other forms of obligations owing to any Borrower or
Guarantor, whether from the sale and lease of goods or other property, licensing
of any property (including Intellectual Property or other general intangibles),
rendition of services or from loans or advances by any Borrower or Guarantor or
to or for the benefit of any third person (including loans or advances to any
Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise associated
with any Accounts, Inventory or general intangibles of any Borrower or Guarantor
(including, without limitation, choses in action, causes of action, tax refunds,
tax refund claims, any funds which may become payable to any Borrower or
Guarantor in connection with the termination of any Plan or other employee
benefit plan and any other amounts payable to any Borrower or Guarantor from any
Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and
proceeds thereof, casualty or any similar types of insurance and any proceeds
thereof and proceeds of insurance covering the lives of employees on which any
Borrower or Guarantor is a beneficiary).

1.127 “Records” shall mean, as to each Borrower and Guarantor, all of such
Borrower’s and Guarantor’s present and future books of account of every kind or
nature, purchase and sale agreements, invoices, ledger cards, bills of lading
and other shipping evidence, statements, correspondence, memoranda, credit files
and other data relating to the Collateral or any Account

 

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Debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of any Borrower or Guarantor with
respect to the foregoing maintained with or by any other person).

1.128 “Reference Bank” shall mean Wells Fargo Bank, National Association, or
such other bank as Administrative Agent may from time to time designate.

1.129 “Refinancing Indebtedness” shall have meaning set forth in Section 9.9
hereof.

1.130 “Renewal Date” shall the meaning set forth in Section 13.1 hereof.

1.131 “Register” shall have the meaning set forth in Section 13.7 hereof.

1.132 “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata
Shares aggregate fifty-one (51%) percent or more of the aggregate of the
Commitments of all Lenders, or if the Commitments shall have been terminated,
Lenders to whom at least fifty-one (51%) percent of the then outstanding
Obligations are owing; provided, that, at any time that there are two (2) or
more Lenders, “Required Lenders” must include at least two (2) Lenders.

1.133 “Reserves” shall mean as of any date of determination, such amounts as
Administrative Agent may from time to time establish and revise in good faith
reducing the amount of Loans and Letter of Credit Accommodations which would
otherwise be available to any Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which
adversely affect, or have a reasonable likelihood of adversely affecting (i) the
assets or business of Borrowers, including the Collateral or its value or the
amount that might be obtained upon the sale or other disposition or realization
on such Collateral or (ii) the security interests and other rights of
Administrative Agent or any Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect
Administrative Agent’s good faith belief that any collateral report or financial
information furnished by or on behalf of any Borrower or Obligor to
Administrative Agent is or was incomplete, inaccurate or misleading in any
material respect or (c) to reflect outstanding Letter of Credit Accommodations
as provided in Section 2.2 hereof or (d) in respect of any state of facts which
Administrative Agent determines in good faith constitutes a Default or an Event
of Default. Without limiting the generality of the foregoing, Reserves may, at
Administrative Agent’s option in good faith, be established to reflect:
(i) chargebacks with respect to Accounts, (ii) returns, discounts, claims,
credits and allowances of any nature that are not paid pursuant to the reduction
of Accounts, (iii) the sales, excise or similar taxes included in the amount of
any Accounts reported to Administrative Agent, (iv) a change in the turnover,
age or mix of the categories of Inventory that adversely affects the aggregate
value of all Inventory, (v) variances between the perpetual inventory records of
Borrowers (to the extent such perpetual inventory records are maintained) and
the results of the test counts of the Inventory that is subject to such
perpetual inventory records conducted by Administrative Agent with respect
thereto in excess of the percentage acceptable to Administrative Agent,
(vi) variances between the inventory records of Borrowers and Guarantors and the
results of test counts or physical counts of inventory with respect thereto,
(vii) variances between the stock ledger inventory report for non-perishable
items in the Retail Division and the general ledger with respect thereto;
(viii) intentionally

 

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deleted, (ix) intentionally deleted, (x) amounts owing by Borrowers to Credit
Card Issuers or Credit Card Processors in connection with the Credit Card
Agreements, (xi) amounts due or to become due in respect of sales, excise, use
and/or withholding taxes, (xii) liabilities of any Borrower or Guarantor that
are entitled to receive the benefit of a security interest or trust pursuant to
the PACA, the PSA or any other similar state law (provided, that, as of June 8,
2012, Borrowers represent that there are no such liabilities under the PSA since
Borrowers have written agreements providing for the extension of credit to them
for all purchases of meat, meat products and livestock products by Borrowers),
(xiii) inventory shrinkage, (xiv) the aggregate amount of merchandise gift
certificates and coupons, (xv) any rental payments, service charges or other
amounts to become due to lessors of real property to the extent Inventory,
Equipment or Records are located in or on such property or such Records are
needed to monitor or otherwise deal with the Collateral (except for rents and
amounts due for the lease of Real Property by Borrowers where Administrative
Agent has received a Collateral Access Agreement in a form acceptable to
Administrative Agent, provided, that, in the event that Administrative Agent has
not received a Collateral Access Agreement or has received a Collateral Access
Agreement that does not have terms that are acceptable to Administrative Agent
for any retail store location that is leased by a Borrower, the Reserves
established in respect of such location pursuant to this clause (xvi) shall not
exceed at any time the lesser of (A) the aggregate of amounts payable to the
owners and lessors of such location for the next two (2) months from any such
time and including amounts if any, then outstanding and unpaid owed by a
Borrower to such owners and lessors or (B) the value of the Eligible Equipment
and Eligible Inventory at such location to the extent included in the Borrowing
Base, except that such limitation on the amount of the Reserves shall not apply
at any time that a Default or Event of Default shall exist or have occurred and
be continuing, or a notice of any default or event of default under the lease
with respect to such location has been received by or on behalf of any Borrower
or Guarantor (except where the existence of the default specified in such notice
is being disputed in good faith by such Borrower or Guarantor provided that such
Borrower or Guarantor is continuing to pay rent and all other amounts payable
under the lease with respect to such premises or if not, then is paying such
rent and other amounts into escrow so that such funds will be available to the
lessor in the event that such Borrower or Guarantor does not succeed in such
dispute) or a Borrower has granted to the owner and lessor a security interest
or lien upon any assets of such Borrower, (xvii) reductions in the number of
repeat prescriptions, the average volume of prescriptions being filled, or the
change in the mix of the types of payors with respect to sales of prescriptions,
or any other changes to the factors identified in any appraisal that adversely
affect the amount that may be recovered by Administrative Agent from the sale or
other disposition of the Prescription Files (provided, that, Borrowers may at
any time and from time to time obtain appraisals that satisfy the requirements
of Administrative Agent provided for herein with respect to the Prescription
Files, and to the extent that the Borrowing Base has been adjusted to reflect
the then current value of the Eligible Prescription Files based on the results
of such appraisal, such Reserves shall not be established), (xviii) any
statutory or regulatory changes after the date hereof, or as to Ohio and
Michigan laws are not disclosed in the opinions of counsel to Borrowers
addressed and delivered to Administrative Agent on the date hereof, that
adversely affect the transferability of the Prescription Files, and
(xix) [intentionally deleted]. To the extent Administrative Agent may revise the
lending formulas used to determine the Borrowing Base or establish new criteria
or revise existing criteria for Eligible Accounts or Eligible Inventory so as to
address any circumstances, condition, event or contingency in a manner
satisfactory to Administrative Agent,

 

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Administrative Agent shall not establish a Reserve for the same purpose. The
amount of any Reserve established by Administrative Agent shall have a
reasonable relationship to the event, condition or other matter which is the
basis for such reserve as determined by Administrative Agent in good faith. The
term “Reserves” as used herein shall include in addition, and not in limitation,
the Convertible Notes Reserve.

1.134 “Retail Division” shall mean, collectively (together with their respective
successors and assigns): Family Fare, Prevo, MSFC, Seaway, Custer, Pharm, Gruber
RE and Spartan Fuel.

1.135 “Sale and Lease-Back Transaction” shall mean the sale by any Borrower or
Guarantor of real property pursuant to any arrangement, directly or indirectly,
with any person whereby it shall sell or transfer any real property, whether now
owned or hereafter acquired, and thereafter rent or lease such real property
that it intends to use for substantially the same purpose or purposes as the
real property being sold or transferred.

1.136 “Sanctioned Entity” shall mean (a) a country or a government of a country,
(b) an agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, (d) a Person resident in
or determined to be resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.

1.137 “Sanctioned Person” shall mean a person named on the list of Specially
Designated Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise
published from time to time.

1.138 “Secured Parties” shall mean, collectively, (a) Administrative Agent,
(b) Issuing Bank, (c) Lenders and (d) Bank Product Providers; provided, that, as
to any Bank Product Provider, only to the extent of the Obligations owing to
such Bank Product Provider.

1.139 “Social Security Act” shall mean the Social Security Act, 92 U.S.C.
Section 1396, et seq, as the same now exists or may from time to time hereafter
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.

1.140 “Solvent” shall mean, at any time with respect to any Person, that at such
time such Person (a) is able to pay its debts as they mature and has (and has a
reasonable basis to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).

 

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1.141 “Special Administrative Agent Advances” shall have the meaning set forth
in Section 12.11 hereof.

1.142 “Store Accounts” shall have the meaning set forth in Section 6.3 hereof.

1.143 “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any
corporation, limited liability company, limited liability partnership or other
limited or general partnership, trust, association or other business entity of
which an aggregate of at least a majority of the outstanding Capital Stock or
other interests entitled to vote in the election of the board of directors of
such corporation (irrespective of whether, at the time, Capital Stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency), managers, trustees or other
controlling persons, or an equivalent controlling interest therein, of such
Person is, at the time, directly or indirectly, owned by such Person and/or one
or more subsidiaries of such Person.

1.144 “Third Party Payor” shall mean any Person, such as, a Fiscal Intermediary,
Blue Cross/Blue Shield, or private health insurance company, which is obligated
to reimburse or otherwise make payments to health care providers who provide
medical care or medical assistance or other goods or services for eligible
patients under Medicare, Medicaid or any private insurance contract.

1.145 “Total Funded Indebtedness” shall mean, as of any date of determination,
with respect to Parent and its Subsidiaries (determined on a consolidated
basis), without duplication, any liability, whether or not contingent, (a) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof) or evidenced by
bonds, notes, debentures or similar instruments (including, but not limited to,
mortgages); (b) representing the balance deferred and unpaid of the purchase
price of any property or services (other than an account payable to a trade
creditor (whether or not an Affiliate) incurred in the ordinary course of
business of such Person and payable in accordance with customary trade
practices, but including, without limitation, all earn-outs and similar deferred
payment obligations); (c) all obligations as lessee under leases which have
been, or should be, in accordance with GAAP recorded as Capital Leases; (d) all
reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise), letters of credit,
banker’s acceptances, bank guaranties, drafts or similar documents or
instruments issued for such Person’s account; (e) the principal and interest
portions of all rental obligations of such Person under any synthetic lease or
similar off-balance sheet financing where such transaction is considered to be
borrowed money for tax purposes but is classified as an operating lease in
accordance with GAAP, (f) in respect of letters of credit issued on behalf of
the Borrowers and Guarantors (and/or in connection with the Borrowers and
Guarantors have reimbursement obligations) and (g) all obligations, liabilities
and indebtedness of such Person (marked to market) arising under swap
agreements, cap agreements, hedging agreements, collar agreements and other
agreements or arrangements designed to protect such person against fluctuations
in interest rates or currency or commodity values.

1.146 “UCC” shall mean the Uniform Commercial Code as in effect in the State of
Illinois, and any successor statute, as in effect from time to time (except that
terms used herein which are defined in the Uniform Commercial Code as in effect
in the State of Illinois on the date hereof shall continue to have the same
meaning notwithstanding any replacement or amendment of such statute except as
Administrative Agent may otherwise determine).

 

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1.147 “Value” shall mean, as determined by Administrative Agent in good faith,
with respect to Inventory, the lower of (A) cost computed on a first-in
first-out basis in accordance with GAAP or (b) market value, provided, that, for
purposes of the calculation of the Borrowing Base, (i) the Value of the
Inventory shall not include: (A) the portion of the value of Inventory equal to
the profit earned by any Affiliate on the sale thereof to any Borrower (other
than the profit of the Distribution Division for sales of Inventory to the
Retail Division in the ordinary course of business consistent with current
practices and for sales at prices no more than the Retail Division could
purchase such Inventory from a person that is not an Affiliate), (B) the amount
of cigarette taxes that are capitalized in inventory, or (C) write-ups or
write-downs in value with respect to currency exchange rates and
(ii) notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Administrative Agent
prior to the date hereof, if any (except to the extent that the method of
calculation of the cost may be affected by the establishment of a reliable,
consistent and accurate perpetual inventory system at the Retail Division for
pharmacy Inventory or non-perishable Inventory.

1.148 “Voting Stock” shall mean with respect to any Person, (a) one (1) or more
classes of Capital Stock of such Person having general voting powers to elect at
least a majority of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.

1.149 “Weighted Average Life to Maturity” shall mean, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (A) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (B) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.

1.150 “Wells” shall mean Wells Fargo Capital Finance, LLC , successor by merger
to Wachovia Capital Finance Corporation, formerly known as Congress Financial
Corporation (Central), a Delaware limited liability company, in its individual
capacity, and its successors and assigns.

SECTION 2. CREDIT FACILITIES

2.1 Loans.

(i) Subject to and upon the terms and conditions contained herein, each Lender
severally (and not jointly) agrees to make its Pro Rata Share of Loans to
Borrowers from time to time in amounts requested by a Borrower up to the amount
outstanding at any time equal to the lesser of: (i) the Borrowing Base at such
time or (ii) the Maximum Credit.

 

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(ii) Except in Administrative Agent’s discretion, with the consent of all
Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit and (ii) the aggregate principal amount of the Loans and
Letter of Credit Accommodations outstanding at any time shall not exceed the
Borrowing Base.

(iii) In the event that the aggregate principal amount of the Loans and Letter
of Credit Accommodations outstanding exceed the Borrowing Base, or the aggregate
amount of the outstanding Letter of Credit Accommodations exceed the sublimit
for Letter of Credit Accommodations set forth in Section 2.2(e), or the
aggregate amount of the Loans and Letter of Credit Accommodations exceed the
Maximum Credit, such event shall not limit, waive or otherwise affect any rights
of Administrative Agent or Lenders in such circumstances or on any future
occasions and Borrowers shall, upon demand by Administrative Agent, which may be
made at any time or from time to time, immediately repay to Administrative Agent
the entire amount of any such excess(es) for which payment is demanded.

2.2 Letter of Credit Accommodations.

(a) Subject to and upon the terms and conditions contained herein, at the
request of a Borrower, Administrative Agent agrees, for the ratable risk of each
Lender according to its Pro Rata Share, to provide or arrange for Letter of
Credit Accommodations for the account of such Borrower containing terms and
conditions acceptable to Administrative Agent and the issuer thereof (which
issuer shall be Wells Fargo Bank, National Association, a Lender or such other
institution reasonably acceptable to Administrative Agent and Parent (each, an
“Issuing Bank”)). Any payments made by or on behalf of Administrative Agent or
any Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations provided to or for the benefit of a Borrower
shall constitute additional Loans to such Borrower pursuant to this Section 2
(or Special Administrative Agent Advances as the case may be).

(b) In addition to any charges, fees or expenses charged by any bank or issuer
in connection with the Letter of Credit Accommodations, Borrowers shall pay to
Administrative Agent, for the benefit of Lenders, monthly a letter of credit fee
on the daily outstanding balance of the Letter of Credit Accommodations during
the immediately preceding month (or part thereof) at a rate equal to the
percentage (on a per annum basis) set forth below if the Monthly Average Excess
Availability for the immediately preceding calendar month is at or within the
amounts indicated for such percentages, payable in arrears as of the first day
of each succeeding month:

 

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Tier

  

Monthly Average

Excess Availability

   Applicable Letter of
Credit Fee Margin  

1

   Greater than $75,000,000      1.50 % 

2

  

Less than or equal to $75,000,000

and greater than $50,000,000

     1.75 % 

3

   Less than or equal to $50,000,000      2.00 % 

Provided, that, (i) the applicable percentage shall be calculated and
established once each calendar month and shall remain in effect until adjusted
thereafter after the end of the next calendar month, (ii) notwithstanding the
amount of the Monthly Average Excess Availability, for each month prior to the
month commencing October 1, 2012, in no event shall the Applicable Letter of
Credit Fee Margin be less than the percentage set forth in Tier 2 of the
schedule above and (iii) notwithstanding anything to the contrary contained
herein, Administrative Agent may, and upon the written direction of Required
Lenders shall, require Borrowers to pay to Administrative Agent for the benefit
of Lenders, such letter of credit fee at a rate equal to four (4%) percent per
annum on such daily outstanding balance (A) for the period (1) from and after
the effective date of termination or non-renewal hereof until Administrative
Agent and Lenders have received full and final payment of all outstanding and
unpaid Obligations which are not contingent and cash collateral or letter of
credit, as Administrative Agent may specify, in the amounts and on the terms
required under Section 13.1 hereof for contingent Obligations (notwithstanding
entry of a judgment against any Borrower or Guarantor) and (2) from and after
the date of the occurrence of an Event of Default and for so long as such Event
of Default is continuing. Such letter of credit fee shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrowers to pay such fee shall survive the termination of this
Agreement.

(c) The Borrower requesting such Letter of Credit Accommodation shall give
Administrative Agent two (2) Business Days’ prior written notice of such
Borrower’s request for the issuance of a Letter of Credit Accommodation. Such
notice shall be irrevocable and shall specify the original face amount of the
Letter of Credit Accommodation requested, the effective date (which date shall
be a Business Day and in no event shall be a date less than ten (10) days prior
to the end of the then current term of this Agreement) of issuance of such
requested Letter of Credit Accommodation, whether such Letter of Credit
Accommodations may be drawn in a single or in partial draws, the date on which
such requested Letter of Credit Accommodation is to expire (which date shall be
a Business Day), the purpose for which such Letter of Credit Accommodation is to
be issued, and the beneficiary of the requested Letter of Credit Accommodation.
The Borrower requesting the Letter of Credit Accommodation shall attach to such
notice the proposed terms of the Letter of Credit Accommodation.

(d) In addition to being subject to the satisfaction of the applicable
conditions precedent contained in Section 4 hereof and the other terms and
conditions contained herein, no Letter of Credit Accommodations shall be
available unless each of the following conditions precedent have been satisfied
in a manner satisfactory to Administrative Agent: (i) the Borrower requesting
such Letter of Credit Accommodation shall have delivered to the proposed issuer
of such Letter of Credit Accommodation at such times and in such manner as such
proposed issuer may require, an application, in form and substance satisfactory
to such proposed issuer and

 

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Administrative Agent, for the issuance of the Letter of Credit Accommodation and
such other documents as may be required pursuant to the terms thereof, and the
form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Administrative Agent and such proposed issuer, (ii) as of the
date of issuance, no order of any court, arbitrator or other Governmental
Authority shall purport by its terms to enjoin or restrain money center banks
generally from issuing letters of credit of the type and in the amount of the
proposed Letter of Credit Accommodation, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that
the proposed issuer of such Letter of Credit Accommodation refrain from, the
issuance of letters of credit generally or the issuance of such Letters of
Credit Accommodation; and (iii) the Excess Availability of the Borrower
requesting such Letter of Credit Accommodation, prior to giving effect to any
Reserves with respect to such Letter of Credit Accommodations, on the date of
the proposed issuance of any Letter of Credit Accommodations, shall be equal to
or greater than: (A) if the proposed Letter of Credit Accommodation is for the
purpose of purchasing Eligible Inventory and the documents of title with respect
thereto are consigned to the issuer, the sum of (1) the percentage equal to one
hundred (100%) percent minus the then applicable percentage with respect to
Eligible Inventory set forth in the definition of the term Borrowing Base
multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes,
duty and other amounts which Administrative Agent estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of such
Borrower’s locations for Eligible Inventory within the United States of America
and (B) if the proposed Letter of Credit Accommodation is for any other purpose
or the documents of title are not consigned to the issuer in connection with a
Letter of Credit Accommodation for the purpose of purchasing Inventory, an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Administrative Agent with
respect thereto. Effective on the issuance of each Letter of Credit
Accommodation, a Reserve shall be established in the applicable amount set forth
in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).

(e) Except in Administrative Agent’s discretion, with the consent of all
Lenders, the amount of all outstanding Letter of Credit Accommodations and all
other commitments and obligations made or incurred by Administrative Agent or
any Lender in connection therewith shall not at any time exceed $30,000,000.

(f) Borrowers and Guarantors shall indemnify and hold Administrative Agent and
Lenders harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Administrative Agent or any Lender may
suffer or incur in connection with any Letter of Credit Accommodations and any
documents, drafts or acceptances relating thereto, including any losses, claims,
damages, liabilities, costs and expenses due to any action taken by any issuer
or correspondent with respect to any Letter of Credit Accommodation, except to
the extent of losses, claims, damages, liabilities, costs or expenses resulting
from the gross negligence or willful misconduct of Administrative Agent or any
Lender as determined pursuant to a final non-appealable order of a court of
competent jurisdiction. As between Administrative Agent and Lenders, on the one
hand, and Borrowers and Guarantors, on the other hand, and without limitation of
any rights of any Borrower or Guarantor as against any issuer of a Letter of
Credit Accommodation, each Borrower and Guarantor assumes all risks with respect
to the acts

 

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or omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
such Borrower’s agent. Each Borrower and Guarantor assumes all risks for, and
agrees to pay, all foreign, Federal, State and local taxes, duties and levies
relating to any goods subject to any Letter of Credit Accommodations or any
documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby
releases and holds Administrative Agent and Lenders harmless from and against
any acts, waivers, errors, delays or omissions, whether caused by any Borrower,
Guarantor, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation, except to the extent resulting
from the gross negligence or wilful misconduct of Administrative Agent or any
Lender as determined pursuant to a final, non-appealable order of a court of
competent jurisdiction. The provisions of this Section 2.2(f) shall survive the
payment of Obligations and the termination of this Agreement.

(g) In connection with Inventory purchased pursuant to Letter of Credit
Accommodations, Borrowers and Guarantors shall, at Administrative Agent’s
request, instruct all suppliers, carriers, forwarders, customs brokers,
warehouses or others receiving or holding cash, checks, Inventory, documents or
instruments in which Administrative Agent holds a security interest to, at such
time as Administrative Agent may request, deliver them to Administrative Agent
and/or subject to Administrative Agent’s order, and if they shall come into such
Borrower’s or Guarantor’s possession, to deliver them, upon Administrative
Agent’s request, to Administrative Agent in their original form, provided, that,
Administrative Agent shall not exercise its rights under this clause (g) to have
such persons deliver any cash, checks or Inventory to Administrative Agent
unless a Default or Event of Default shall exist or have occurred and be
continuing. Borrowers and Guarantors shall also, at Administrative Agent’s
request, designate Administrative Agent as the consignee on all bills of lading
and other negotiable and non-negotiable documents.

(h) Each Borrower and Guarantor hereby irrevocably authorizes and directs any
issuer of a Letter of Credit Accommodation to name such Borrower or Guarantor as
the account party therein and to deliver to Administrative Agent all
instruments, documents and other writings and property received by issuer
pursuant to the Letter of Credit Accommodations and to accept and rely upon
Administrative Agent’s instructions and agreements with respect to all matters
arising in connection with the Letter of Credit Accommodations or the
applications therefor. Nothing contained herein shall be deemed or construed to
grant any Borrower or Guarantor any right or authority to pledge the credit of
Administrative Agent or any Lender in any manner. Administrative Agent and
Lenders shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Administrative Agent or any
Lender unless Administrative Agent has duly executed and delivered to such
issuer the application or a guarantee or indemnification in writing with respect
to such Letter of Credit Accommodation. Borrowers and Guarantors shall be bound
by any reasonable interpretation made in good faith by Administrative Agent, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of any Borrower or Guarantor, except as to any issuer without
limiting the rights of any Borrower or Guarantor as against any issuer to the
extent provided in clause (m) below.

 

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(i) So long as no Event of Default exists or has occurred and is continuing, a
Borrower may (i) approve or resolve any questions of non-compliance of
documents, (ii) give any instructions as to acceptance or rejection of any
documents or goods, (iii) execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders, and (iv) with Administrative
Agent’s consent, grant any extensions of the maturity of, time of payment for,
or time of presentation of, any drafts, acceptances, or documents, and agree to
any amendments, renewals, extensions, modifications, changes or cancellations of
any of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral.

(j) At any time an Event of Default exists or has occurred and is continuing,
Administrative Agent shall have the right and authority to, and Borrowers shall
not, without the prior written consent of Administrative Agent, (i) approve or
resolve any questions of non-compliance of documents, (ii) give any instructions
as to acceptance or rejection of any documents or goods, (iii) execute any and
all applications for steamship or airway guaranties, indemnities or delivery
orders, (iv) grant any extensions of the maturity of, time of payments for, or
time of presentation of, any drafts, acceptances, or documents, and (v) agree to
any amendments, renewals, extensions, modifications, changes or cancellations of
any of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Administrative Agent may take such actions
either in its own name or in any Borrower’s name.

(k) Any rights, remedies, duties or obligations granted or undertaken by any
Borrower or Guarantor to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by such Borrower or Guarantor to Administrative
Agent for the ratable benefit of Lenders. Any duties or obligations undertaken
by Administrative Agent to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement by Administrative
Agent in favor of any issuer or correspondent to the extent relating to any
Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrowers and Guarantors to Administrative Agent for the ratable benefit of
Lenders and to apply in all respects to Borrowers and Guarantors.

(l) Immediately upon the issuance or amendment of any Letter of Credit
Accommodation, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty, an
undivided interest and participation to the extent of such Lender’s Pro Rata
Share of the liability with respect to such Letter of Credit Accommodation
(including, without limitation, all Obligations with respect thereto).

(m) Each Borrower is irrevocably and unconditionally obligated, without
presentment, demand or protest, to pay to Administrative Agent any amounts paid
by an issuer of a Letter of Credit Accommodation with respect to such Letter of
Credit Accommodation (whether through the borrowing of Loans in accordance with
Section 2.2(a) or otherwise); provided, that, nothing contained herein shall be
construed to limit or waive any right of any Borrower to assert against an
issuer of a Letter of Credit Accommodation any claim for direct damages suffered
by such Borrower to the extent caused by the gross negligence or wilful
misconduct of the issuer in

 

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determining whether a request presented under any Letter of Credit Accommodation
issued by it complied with the terms of such Letter of Credit Accommodation. In
the event that any Borrower fails to pay Administrative Agent on the date of any
payment under a Letter of Credit Accommodation in an amount equal to the amount
of such payment, Administrative Agent (to the extent it has actual notice
thereof) shall promptly notify each Lender of the unreimbursed amount of such
payment and each Lender agrees, upon one (1) Business Day’s notice, to fund to
Administrative Agent the purchase of its participation in such Letter of Credit
Accommodation in an amount equal to its Pro Rata Share of the unpaid amount. The
obligation of each Lender to deliver to Administrative Agent an amount equal to
its respective participation pursuant to the foregoing sentence is absolute and
unconditional and such remittance shall be made notwithstanding the occurrence
or continuance of any Event of Default, the failure to satisfy any other
condition set forth in Section 4 or any other event or circumstance. If such
amount is not made available by a Lender when due, Administrative Agent shall be
entitled to recover such amount on demand from such Lender with interest
thereon, for each day from the date such amount was due until the date such
amount is paid to Administrative Agent at the interest rate then payable by any
Borrower in respect of Loans that are Prime Rate Loans as set forth in
Section 3.1(a) hereof.

2.3 Increase in Maximum Credit.

(a) Lead Borrower may, at any time, deliver a written request to Administrative
Agent to increase the Maximum Credit. Any such written request shall specify the
amount of the increase in the Maximum Credit that Borrowers are requesting,
provided, that, (i) in no event shall the aggregate amount of any such increase
cause the Maximum Credit to exceed $300,000,000, (ii) any such request shall be
for an increase of not less than $20,000,000, (iii) any such request shall be
irrevocable, (iv) in no event shall there be more than three (3) such increases
and (v) as of the date of any such increase, and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing.

(b) Upon the receipt by Administrative Agent of any such written request,
Administrative Agent shall notify each of the Lenders of such request and each
Lender shall have the option (but not the obligation) to increase the amount of
its Commitment by an amount up to its Pro Rata Share of the amount of the
increase thereof requested by Lead Borrower as set forth in the notice from
Administrative Agent to such Lender. Each Lender shall notify Administrative
Agent within fifteen (15) days after the receipt of such notice from
Administrative Agent whether it is willing to so increase its Commitment, and if
so, the amount of such increase; provided, that, (i) the minimum increase in the
Commitments of each such Lender providing the additional Commitments shall equal
or exceed $1,000,000, and (ii) except as provided in clause (g) below, no Lender
shall be obligated to provide such increase in its Commitment and the
determination to increase the Commitment of a Lender shall be within the sole
and absolute discretion of such Lender. If the aggregate amount of the increases
in the Commitments received from the Lenders does not equal or exceed the amount
of the increase in the Maximum Credit requested by Lead Borrower, Administrative
Agent may seek additional increases from Lenders or Commitments from such
Eligible Transferees as it may determine, after consultation with Lead Borrower.
In the event Lenders (or Lenders and any such Eligible Transferees, as the case
may be) have committed in writing to provide increases in their

 

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Commitments or new Commitments in an aggregate amount in excess of the increase
in the Maximum Credit requested by Borrowers or permitted hereunder,
Administrative Agent shall then have the right to allocate such commitments,
first to Lenders and then to Eligible Transferees, in such amounts and manner as
Administrative Agent may determine, after consultation with Borrower
Administrative Agent. If the aggregate amount of the increase in Commitments and
new Commitments, as the case may be, do not equal or exceed the amount of the
increase in the Maximum Credit requested by Lead Borrower, then Lead Borrower in
its sole discretion may determine to not proceed with the proposed increase in
Maximum Credit; provided, that, Lead Borrower notifies Administrative Agent of
such decision not to proceed within three (3) days after Administrative Agent
notifes Lead Borrower of the aggregate amount of the increase in Commitments and
new Commitments that the Lenders and/or Eligible Assignees have committed to.

(c) The Maximum Credit shall be increased by the amount of the increase in the
applicable Commitments from Lenders or new Commitments from Eligible
Transferees, in each case, except as provided in clause (g) below, selected in
accordance with Section 2.3(b) above, for which Administrative Agent has
received Assignment and Acceptances thirty (30) days after the date of the
request by Lead Borrower for the increase or such earlier date as Administrative
Agent and Lead Borrower may agree (but subject to the satisfaction of the
conditions set forth below), whether or not the aggregate amount of the increase
in Commitments and new Commitments, as the case may be, exceed the amount of the
increase in the Maximum Credit requested by Lead Borrower in accordance with the
terms hereof, effective on the date that each of the following conditions have
been satisfied:

(i) Administrative Agent shall have received from each Lender or Eligible
Transferee that is providing an additional Commitment as part of the increase in
the Maximum Credit, an Assignment and Acceptance duly executed by such Lender or
Eligible Transferee and each Borrower, provided, that, the aggregate Commitments
set forth in any such Assignment and Acceptance shall be not less than
$1,000,000;

(ii) (ii) the conditions precedent to the making of Loans set forth in
Section 4.2 shall be satisfied as of the date of the increase in the Maximum
Credit, both before and after giving effect to such increase;

(iii) such increase in the Maximum Credit, on the date of the effectiveness
thereof, shall not violate any applicable law, regulation or order or decree of
any court or other Governmental Authority and shall not be enjoined,
temporarily, preliminarily or permanently; and

(iv) there shall have been paid to each Lender and Eligible Transferee providing
an additional Commitment in connection with such increase in the Maximum Credit
all fees and expenses due and payable to such Person on or before the
effectiveness of such increase.

(d) As of the effective date of any such increase in the Maximum Credit, each
reference to the term Commitments and Maximum Credit herein, as applicable, and
in any of the other Financing Agreements shall be deemed amended to mean the
amount of the Commitments and Maximum Credit specified in the most recent
written notice from Administrative Agent to Lead Borrower of the increase in the
Commitments and Maximum Credit, as applicable.

 

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(e) Effective on the date of each increase in the Maximum Credit pursuant to
this Section 2.3, as applicable, each reference in this Agreement to an amount
of Excess Availability shall, automatically and without any further action, be
deemed to be increased so that the ratio of each amount of Excess Availability
to the amount of the Maximum Credit after such increase in the Maximum Credit
remains the same as the ratio of such the amount of Excess Availability to the
amount of the Maximum Credit prior to such increase in the Maximum Credit.

(f) In the event that, as a result of an increase in the Maximum Credit, the Pro
Rata Shares of any Lender or Lenders with respect to any Eurodollar Rate Loans
are decreased (other than on the last date of the Interest Period(s) applicable
thereto), Borrowers shall pay such Lenders, on the effective date of such
increase in the Maximum Credit, break funding compensation with respect to such
decrease in the amount that would be due pursuant to Section 3.3(d) hereof had
the Borrowers prepaid such Lenders’ interests in such Eurodollar Rate Loans by
an amount equal to the decrease.

(g) In connection with any request by Lead Borrower to increase the Maximum
Credit in accordance with the terms of this Section 2.3, in the event that
Lenders and any Eligible Transferees, as the case may be, have not committed in
writing to provide increases in their Commitments or new Commitments in an
aggregate amount at least equal to any increase in the Maximum Credit requested
by Borrowers or permitted hereunder within ten (10) Business Days of such
request by Lead Borrower, Wells and Bank of America hereby agree to provide such
increases in their Commitments, on a pro rata basis as set forth below, in an
amount equal to the difference between the amount so requested by Lead Borrower
and the amount so committed by Lenders and any Eligible Transferees, as the case
may be, up to $35,000,000 in the aggregate for all such requests (on a pro-rata
basis which reflects Wells committing up to the aggregate amount of $20,000,000
and which reflects Bank of America committing up to the aggregate amount of
$15,000,000), provided, that, as of the date of any such increase and after
giving effect thereto, no Default or Event of Default shall exist or have
occurred and be continuing. In no event shall Wells be obligated to increase its
Commitment pursuant to this Section 2.3 in excess of $20,000,000. In no event
shall Bank of America be obligated to increase its Commitment pursuant to this
Section 2.3 in excess of $15,000,000.

2.4 Commitments. The aggregate amount of each Lender’s Pro Rata Share of the
Loans and Letter of Credit Accommodations shall not exceed the amount of such
Lender’s Commitment, as the same may from time to time be amended in accordance
with the provisions hereof.

2.5 Joint and Several Liability. All Borrowers shall be jointly and severally
liable for all amounts due to Administrative Agent and Lenders under this
Agreement and the other Financing Agreements, regardless of which Borrower
actually receives the Loans or Letter of Credit Accommodations hereunder or the
amount of such Loans received or the manner in which Administrative Agent or any
Lender accounts for such Loans, Letter of Credit Accommodations or other
extensions of credit on its books and records. All references herein or in any
of the other Financing Agreements to any of the obligation of Borrowers to make
any payment hereunder or

 

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thereunder shall constitute joint and several obligations of Borrowers. The
Obligations with respect to Loans made to a Borrower, and the Obligations
arising as a result of the joint and several liability of a Borrower hereunder,
with respect to Loans made to the other Borrowers, shall be separate and
distinct obligations, but all such other Obligations shall be primary
obligations of all Borrowers. The Obligations arising as a result of the joint
and several liability of a Borrower hereunder with respect to Loans, Letter of
Credit Accommodations or other extensions of credit made to the other Borrowers
shall, to the fullest extent permitted by law, be unconditional irrespective of
(a) the validity or enforceability, avoidance or subordination of the
Obligations of the other Borrowers or of any promissory note or other document
evidencing all or any part of the Obligations of the other Borrowers, (b) the
absence of any attempt to collect the Obligations from the other Borrowers, any
Guarantor or any other security therefor, or the absence of any other action to
enforce the same, (c) the waiver, consent, extension, forbearance or granting of
any indulgence by Administrative Agent or any Lender with respect to any
provisions of any instrument evidencing the Obligations of the other Borrowers,
or any part thereof, or any other agreement now or hereafter executed by the
other Borrowers and delivered to Administrative Agent or any Lender, (d) the
failure by Administrative Agent or any Lender to take any steps to perfect and
maintain its security interest in, or to preserve its rights and maintain its
security or collateral for the Obligations of the other Borrowers, (e) the
election of Administrative Agent and Lenders in any proceeding instituted under
the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, (f) the disallowance of all or any portion of the claim(s) of
Administrative Agent or any Lender for the repayment of the Obligations of the
other Borrowers under Section 502 of the Bankruptcy Code, or (g) any other
circumstances which might constitute a legal or equitable discharge or defense
of a Guarantor or of the other Borrowers other than to the extent of the gross
negligence or wilful misconduct of Administrative Agent or a Lender as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. With respect to the Obligations arising as a result of the joint
and several liability of a Borrower hereunder with respect to Loans, Letter of
Credit Accommodations or other extensions of credit made to the other Borrowers
hereunder, each Borrower waives, until the Obligations shall have been paid in
full and this Agreement shall have been terminated, any right to enforce any
right of subrogation or any remedy which Administrative Agent or any Lender now
has or may hereafter have against any Borrower or Guarantor and any benefit of,
and any right to participate in, any security or collateral given to
Administrative Agent or any Lender. Upon any Event of Default, and for so long
as such Event of Default is continuing, Administrative Agent may proceed
directly and at once, without notice, against any Borrower to collect and
recover the full amount, or any portion of the Obligations, without first
proceeding against the other Borrowers or any other Person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that Administrative Agent and Lenders shall be under no obligation to marshall
any assets in favor of Borrower(s) or against or in payment of any or all of the
Obligations.

SECTION 3. INTEREST AND FEES

3.1 Interest.

(a) Borrowers shall pay to Administrative Agent, for the benefit of Lenders,
interest on the outstanding principal amount of the Loans at the Interest Rate.
All interest accruing hereunder on and after the date of any Event of Default or
termination hereof shall be payable on demand.

 

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(b) Each Borrower may from time to time request Eurodollar Rate Loans or may
request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any
existing Eurodollar Rate Loans continue for an additional Interest Period. Such
request from a Borrower shall specify the amount of the Eurodollar Rate Loans or
the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or
the amount of the Eurodollar Rate Loans to be continued (subject to the limits
set forth below) and the Interest Period to be applicable to such Eurodollar
Rate Loans. Subject to the terms and conditions contained herein, three
(3) Business Days after receipt by Administrative Agent of such a request from a
Borrower, such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be
converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue,
as the case may be, provided, that, (i) no Default or Event of Default shall
exist or have occurred and be continuing, (ii) no party hereto shall have sent
any notice of termination of this Agreement, such Borrower shall have complied
with such customary procedures as are established by Administrative Agent and
specified by Administrative Agent to Lead Borrower from time to time for
requests by Borrowers for Eurodollar Rate Loans, (iii) no more than eight
(8) Interest Periods may be in effect at any one time, (iv) the amount of any
Eurodollar Rate Loan shall be not less than $1,000,000 and the aggregate amount
of the Eurodollar Rate Loans outstanding at any time must be in an amount not
less than $5,000,000, and (v) Administrative Agent and each Lender shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available to
Administrative Agent and such Lender and can be readily determined as of the
date of the request for such Eurodollar Rate Loan by such Borrower. Any request
by or on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime Rate
Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans
shall be irrevocable. Notwithstanding anything to the contrary contained herein,
Administrative Agent and Lenders shall not be required to purchase United States
Dollar deposits in the London interbank market or other applicable Eurodollar
Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall
be deemed to apply as if Administrative Agent and Lenders had purchased such
deposits to fund the Eurodollar Rate Loans.

(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans
upon the last day of the applicable Interest Period, unless Administrative Agent
has received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Administrative Agent’s option,
upon notice by Administrative Agent to Parent, be subsequently converted to
Prime Rate Loans in the event that this Agreement shall terminate or not be
renewed. Borrowers shall pay to Administrative Agent, for the benefit of
Lenders, upon demand by Administrative Agent (or Administrative Agent may, at
its option, charge any loan account of any Borrower) any amounts required to
compensate any Lender or Participant for any loss (including loss of anticipated
profits), cost or expense incurred by such person, as a result of the conversion
of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

(d) Interest shall be payable by Borrowers to Administrative Agent, for the
account of Lenders, monthly in arrears not later than the first day of each
calendar month and shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed. The

 

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interest rate on non-contingent Obligations (other than Eurodollar Rate Loans)
shall increase or decrease by an amount equal to each increase or decrease in
the Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day of the
month in which any such change occurs. In no event shall charges constituting
interest payable by Borrowers to Administrative Agent and Lenders exceed the
maximum amount or the rate permitted under any applicable law or regulation, and
if any such part or provision of this Agreement is in contravention of any such
law or regulation, such part or provision shall be deemed amended to conform
thereto.

3.2 Fees.

(a) Borrowers shall pay to Administrative Agent, for the account of Lenders,
monthly an unused line fee at a rate equal to one-quarter (1/4%) percent per
annum calculated upon the amount by which the Maximum Credit exceeds the average
daily principal balance of the outstanding Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) while
this Agreement is in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be payable on the first day of each month in
arrears.

(b) Borrowers agree to pay to Administrative Agent the other fees and amounts
set forth in the Fee Letter in the amounts and at the times specified therein.

3.3 Changes in Laws and Increased Costs of Loans.

(a) If after the date hereof, either (i) any change in, or in the interpretation
of, any law or regulation is introduced, including, without limitation, with
respect to reserve requirements, applicable to Lender or any banking or
financial institution from whom any Lender borrows funds or obtains credit
necessary to fund the Loans hereunder (a “Funding Bank”), or (ii) a Funding Bank
or any Lender complies with any future guideline or request from any central
bank or other Governmental Authority or (iii) a Funding Bank or any Lender
determines that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof has or would
have the effect described below, or a Funding Bank or any Lender complies with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, and in
the case of any event set forth in this clause (iii), such adoption, change or
compliance has or would have the direct or indirect effect of reducing the rate
of return on any Lender’s capital as a consequence of its obligations hereunder
to a level below that which Lender could have achieved but for such adoption,
change or compliance (taking into consideration the Funding Bank’s or Lender’s
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, and the result of any of the foregoing events described in clauses
(i), (ii) or (iii) is or results in an increase in the cost to any Lender of
funding or maintaining the Loans, the Letter of Credit Accommodations or its
Commitment, then Borrowers and Guarantors shall from time to time upon demand by
Administrative Agent pay to Administrative Agent additional amounts sufficient
to indemnify Lenders against such increased cost on an after-tax basis (after
taking into account applicable deductions and credits in respect of the amount
indemnified). A certificate as to the amount of such increased cost shall be
submitted to Lead Borrower by Administrative Agent and shall be conclusive,
absent manifest error.

 

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(b) If prior to the first day of any Interest Period, (i) Administrative Agent
shall have determined in good faith (which determination shall be conclusive and
binding upon Borrowers and Guarantors) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period, (ii) Administrative
Agent has received notice from the Required Lenders that the Eurodollar Rate
determined or to be determined for such Interest Period will not adequately and
fairly reflect the cost to Lenders of making or maintaining Eurodollar Rate
Loans during such Interest Period, or (iii) Dollar deposits in the principal
amounts of the Eurodollar Rate Loans to which such Interest Period is to be
applicable are not generally available in the London interbank market,
Administrative Agent shall give telecopy or telephonic notice thereof to Lead
Borrower as soon as practicable thereafter, and will also give prompt written
notice to Lead Borrower when such conditions no longer exist. If such notice is
given (A) any Eurodollar Rate Loans requested to be made on the first day of
such Interest Period shall be made as Prime Rate Loans, (B) any Loans that were
to have been converted on the first day of such Interest Period to or continued
as Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans
and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last
day of the then-current Interest Period thereof, to Prime Rate Loans. Until such
notice has been withdrawn by Administrative Agent, no further Eurodollar Rate
Loans shall be made or continued as such, nor shall any Borrower have the right
to convert Prime Rate Loans to Eurodollar Rate Loans.

(c) Notwithstanding any other provision herein, if the adoption of or any change
in any law, treaty, rule or regulation or final, non-appealable determination of
an arbitrator or a court or other Governmental Authority or in the
interpretation or application thereof occurring after the date hereof shall make
it unlawful for Administrative Agent or any Lender to make or maintain
Eurodollar Rate Loans as contemplated by this Agreement, (i) Administrative
Agent or such Lender shall promptly give written notice of such circumstances to
Lead Borrower (which notice shall be withdrawn whenever such circumstances no
longer exist), (ii) the commitment of such Lender hereunder to make Eurodollar
Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans
to Eurodollar Rate Loans shall forthwith be canceled and, until such time as it
shall no longer be unlawful for such Lender to make or maintain Eurodollar Rate
Loans, such Lender shall then have a commitment only to make a Prime Rate Loan
when a Eurodollar Rate Loan is requested and (iii) such Lender’s Loans then
outstanding as Eurodollar Rate Loans, if any, shall be converted automatically
to Prime Rate Loans on the respective last days of the then current Interest
Periods with respect to such Loans or within such earlier period as required by
law. If any such conversion of a Eurodollar Rate Loan occurs on a day which is
not the last day of the then current Interest Period with respect thereto,
Borrowers and Guarantors shall pay to such Lender such amounts, if any, as may
be required pursuant to Section 3.3(d) below.

(d) Borrowers and Guarantors shall indemnify Administrative Agent and each
Lender and to hold Administrative Agent and each Lender harmless from any loss
or expense which Administrative Agent or such Lender may sustain or incur as a
consequence of (i) default by a Borrower in making a borrowing of, conversion
into or extension of Eurodollar Rate Loans after

 

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such Borrower has given a notice requesting the same in accordance with the
provisions of this Loan Agreement, (ii) default by any Borrower in making any
prepayment of a Eurodollar Rate Loan after such Borrower has given a notice
thereof in accordance with the provisions of this Agreement, and (iii) the
making of a prepayment of Eurodollar Rate Loans on a day which is not the last
day of an Interest Period with respect thereto. With respect to Eurodollar Rate
Loans, such indemnification may include an amount equal to the excess, if any,
of (A) the amount of interest which would have accrued on the amount so prepaid,
or not so borrowed, converted or extended, for the period from the date of such
prepayment or of such failure to borrow, convert or extend to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or extend, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Rate Loans provided for herein over (B) the amount of interest (as determined by
such Administrative Agent or such Lender) which would have accrued to
Administrative Agent or such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank Eurodollar
market. This covenant shall survive the termination or non-renewal of this Loan
Agreement and the payment of the Obligations.

(e) Borrowers and Guarantors shall be liable for any tax or penalties imposed on
Administrative Agent or any Lender as a result of the financing arrangements
provided for herein and each Borrower and Guarantor agrees to indemnify and hold
Administrative Agent harmless with respect to the foregoing, and to repay to
Administrative Agent, for the benefit of Lenders, on demand the amount thereof,
and until paid by such Borrower or Guarantor such amount shall be added and
deemed part of the Loans, provided, that, nothing contained herein shall be
construed to require any Borrower or Guarantor to pay any income, franchise or
similar taxes imposed upon Lenders and attributable to any amounts charged or
paid hereunder to Lenders. The foregoing indemnity shall survive the payment of
the Obligations and the termination of this Agreement.

(f) Each Lender requiring compensation pursuant to Section 3.3(a), 3.3(d) or
3.3(e) shall notify Borrowers and Administrative Agent in writing of any event
or circumstance giving rise to such demand for compensation no later than ninety
(90) days following the date upon which the Lender has actual knowledge of such
event or circumstance, and Borrowers shall not be obligated to compensate a
Lender for any such increased cost or reduction which is not covered in such
notice within such ninety (90) day period. Any demand for compensation pursuant
to this Section 3.3 shall be in writing and shall state the amount due, if any,
under Section 3.3(d) or 3.3(e) and shall set forth in reasonable detail the
calculations upon which such Lender determined such amount. Such written demand
shall be conclusive, absent manifest error.

(g) If a Borrower is required to pay additional amounts to any Lender pursuant
to Section 3.3(a) or Section 3.3(e) that increase the effective lending rate of
such Lender with respect to its share of the Loans to greater than one-eighth
(1/8%) percent in excess of the percentage of the effective lending rate of the
other Lenders, then such Lender shall use reasonable efforts (consistent with
legal and regulatory restrictions) to change the jurisdiction of its lending
office with respect to making Eurodollar Rate Loans so as to eliminate any such
additional payment by Borrowers which may thereafter accrue, if such change in
the judgment of

 

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such Lender is not otherwise disadvantageous to such Lender. In the event that
any one or more Lenders, pursuant to Section 3.3(a) or Section 3.3(e) hereof,
incur any increased costs or taxes (other than increased costs to the extent
such increased costs are not a recurring cost) for which any such Lender demands
compensation pursuant to Section 3.3(a) or Section 3.3(e) hereof which increases
the effective lending rate of such Lender with respect to its share of the Loans
to greater than one-eighth (1/8%) percent in excess of the percentage of the
effective lending rate of the other US Lenders and such Lender has not mitigated
such costs within sixty (60) days after receipt by such Lender from Lead
Borrower of a written notice that such Lender’s effective lending rate has so
exceeded the effective lending rate of the other Lenders, then and in any such
event, Lead Borrower may substitute another financial institution which is an
Eligible Transferee acceptable to Administrative Agent for such Lender to assume
the Commitment of such Lender and to purchase the Loans of such Lender
hereunder, without recourse to or warranty by, or expense to, such Lender for a
purchase price equal to the outstanding principal amount of the Loans owing to
such Lender plus any accrued but unpaid interest on such Loans and accrued but
unpaid fees and other amounts in respect of such Lender’s Commitment and share
of the Loans (other than any early termination fee). Upon such purchase such
Lender shall no longer be a party hereto or have any rights or benefits
hereunder (except for rights or benefits that such Lender would retain hereunder
and under the other Financing Agreements upon payment in full of all of the
Obligations other than as to any early termination fee) and the replacement
Lender shall succeed to the rights and benefits, and shall assume the
obligations, of such Lender hereunder and thereunder. In no event may Lead
Borrower replace a Lender that is also Administrative Agent or an issuer of a
Letter of Credit Accommodation.

(h) For purposes of this Section 3.3 and any other applicable provision of this
Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection, the Basel
Committee on Banking Supervision (or any successor or similar authority), the
Bank for International Settlements and all rules, regulations, orders, requests,
guidelines or directives in connection therewith are deemed to have been enacted
and become effective after the date of this Agreement.

SECTION 4. CONDITIONS PRECEDENT

4.1 Intentionally deleted.

4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations. Each
of the following is a condition precedent to the making of any Loans and/or
providing Letter of Credit Accommodations to Borrowers:

(a) all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material respects (except
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof) with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate in all material respects (except that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof) on and as
of such earlier date);

 

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(b) no law, regulation, order, judgment or decree of any Governmental Authority
shall exist, and no action, suit, investigation, litigation or proceeding shall
be pending or threatened in any court or before any arbitrator or Governmental
Authority, which purports to enjoin, prohibit, restrain or otherwise affect
(i) the making of the Loans or providing the Letter of Credit Accommodations, or
(ii) the consummation of the transactions contemplated pursuant to the terms
hereof or the other Financing Agreements; and

(c) no Default or Event of Default shall exist or have occurred and be
continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto.

SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST

5.1 Grant of Security Interest.

(a) To secure payment and performance of all Obligations, each Borrower and
Guarantor hereby grants to Administrative Agent, for itself and the benefit of
Secured Parties, a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Administrative Agent, for itself and the
benefit of Secured Parties, as security, all personal and real property and
fixtures, and interests in property and fixtures, of each Borrower and
Guarantor, whether now owned or hereafter acquired or existing, and wherever
located (together with all other collateral security for the Obligations at any
time granted to or held or acquired by Administrative Agent or any Secured
Party, collectively, the “Collateral”), including:

(i) all Accounts;

(ii) all general intangibles, including, without limitation, all Intellectual
Property;

(iii) all goods, including, without limitation, Inventory and Equipment;

(iv) all Real Property and fixtures;

(v) all chattel paper, including, without limitation, all tangible and
electronic chattel paper;

(vi) all instruments, including, without limitation, all promissory notes;

(vii) all documents;

(viii) all deposit accounts;

(ix) all letters of credit, banker’s acceptances and similar instruments and
including all letter-of-credit rights;

 

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(x) all supporting obligations and all present and future liens, security
interests, rights, remedies, title and interest in, to and in respect of
Receivables and other Collateral, including (A) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (B) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (C) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (D) deposits by and property of Account Debtors or
other persons securing the obligations of Account Debtors;

(xi) all (1) investment property (including securities, whether certificated or
uncertificated, securities accounts, security entitlements, commodity contracts
or commodity accounts) and (2) monies, credit balances, deposits and other
property of any Borrower or Guarantor now or hereafter held or received by or in
transit to Administrative Agent, any Lender or its Affiliates or at any other
depository or other institution from or for the account of any Borrower or
Guarantor, whether for safekeeping, pledge, custody, transmission, collection or
otherwise;

(xii) all commercial tort claims, including, without limitation, those
identified in the Information Certificate;

(xiii) to the extent not otherwise described above, all Receivables;

(xiv) all Prescription Files and other Records; and

(xv) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.

(b) Notwithstanding anything to the contrary set forth in Section 5.1(a) above,
the types or items of Collateral described in such Section shall not include any
alcoholic liquor of any Borrower or Guarantor, if under applicable law with
respect thereto, the valid grant of a security interest or lien therein to
Administrative Agent is prohibited and such prohibition is not capable of being
waived or modified under such applicable law; provided, that, the foregoing
exclusion shall in no way be construed so as to limit, impair or otherwise
affect Administrative Agent’s unconditional continuing security interests in and
liens upon all proceeds of any such alcoholic liquor and any rights or interests
of such Borrower or Guarantor in or to monies due or to become due with respect
to or under any contract, lease, permit, license, charter or license agreement
(including any Receivables) with respect thereto.

5.2 Perfection of Security Interests.

(a) Each Borrower and Guarantor irrevocably and unconditionally authorizes
Administrative Agent (or its agent) to file at any time and from time to time
such financing statements with respect to the Collateral naming Administrative
Agent or its designee as the secured party and such Borrower or Guarantor as
debtor, as Administrative Agent may require, and including any other information
with respect to such Borrower or Guarantor or otherwise

 

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required by part 5 of Article 9 of the Uniform Commercial Code of such
jurisdiction as Administrative Agent may determine, together with any amendment
and continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof. Each Borrower
and Guarantor hereby ratifies and approves all financing statements naming
Administrative Agent or its designee as secured party and such Borrower or
Guarantor, as the case may be, as debtor with respect to the Collateral (and any
amendments with respect to such financing statements) filed by or on behalf of
Administrative Agent prior to the date hereof and ratifies and confirms the
authorization of Administrative Agent to file such financing statements (and
amendments, if any). Each Borrower and Guarantor hereby authorizes
Administrative Agent to adopt on behalf of such Borrower and Guarantor any
symbol required for authenticating any electronic filing. In the event that the
description of the collateral in any financing statement naming Administrative
Agent or its designee as the secured party and any Borrower or Guarantor as
debtor includes assets and properties of such Borrower or Guarantor that do not
at any time constitute Collateral, whether hereunder, under any of the other
Financing Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by such Borrower or Guarantor to the extent of
the Collateral included in such description and it shall not render the
financing statement ineffective as to any of the Collateral or otherwise affect
the financing statement as it applies to any of the Collateral. In no event
shall any Borrower or Guarantor at any time file, or permit or cause to be
filed, any correction statement or termination statement with respect to any
financing statement (or amendment or continuation with respect thereto) naming
Administrative Agent or its designee as secured party and such Borrower or
Guarantor as debtor.

(b) Each Borrower and Guarantor does not have any chattel paper (whether
tangible or electronic) or instruments as of the date hereof, except as set
forth in the Information Certificate. In the event that any Borrower or
Guarantor shall be entitled to or shall receive any chattel paper or instrument
after the date hereof, Borrowers and Guarantors shall promptly notify
Administrative Agent thereof in writing. Promptly upon the receipt thereof by or
on behalf of any Borrower or Guarantor (including by any agent or
representative), such Borrower or Guarantor shall deliver, or cause to be
delivered to Administrative Agent, all tangible chattel paper and instruments
that such Borrower or Guarantor has or may at any time acquire, accompanied by
such instruments of transfer or assignment duly executed in blank as
Administrative Agent may from time to time specify, in each case except as
Administrative Agent may otherwise agree. At Administrative Agent’s option, each
Borrower and Guarantor shall, or Administrative Agent may at any time on behalf
of any Borrower or Guarantor, cause the original of any such instrument or
chattel paper to be conspicuously marked in a form and manner acceptable to
Administrative Agent with the following legend referring to chattel paper or
instruments as applicable: “This [chattel paper][instrument] is subject to the
security interest of Wells Fargo Capital Finance, LLC and any sale, transfer,
assignment or encumbrance of this [chattel paper][instrument] violates the
rights of such secured party.”

(c) In the event that any Borrower or Guarantor shall at any time hold or
acquire an interest in any electronic chattel paper or any “transferable record”
(as such term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), such Borrower or
Guarantor shall promptly notify Administrative Agent thereof in writing.

 

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Promptly upon Administrative Agent’s request, such Borrower or Guarantor shall
take, or cause to be taken, such actions as Administrative Agent may request to
give Administrative Agent control of such electronic chattel paper under
Section 9-105 of the UCC and control of such transferable record under
Section 201 of the Federal Electronic Signatures in Global and National Commerce
Act or, as the case may be, Section 16 of the Uniform Electronic Transactions
Act, as in effect in such jurisdiction.

(d) Each Borrower and Guarantor does not have any deposit accounts as of the
date hereof, except as set forth in the Information Certificate. Borrowers and
Guarantors shall not, directly or indirectly, after the date hereof open,
establish or maintain any deposit account unless each of the following
conditions is satisfied: (i) Administrative Agent shall have received not less
than five (5) Business Days prior written notice of the intention of any
Borrower or Guarantor to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Administrative Agent
the name of the account, the owner of the account, the name and address of the
bank at which such account is to be opened or established, the individual at
such bank with whom such Borrower or Guarantor is dealing and the purpose of the
account, (ii) the bank where such account is opened or maintained shall be
acceptable to Administrative Agent, and (iii) on or before the opening of such
deposit account, such Borrower or Guarantor shall as Administrative Agent may
specify either (A) deliver to Administrative Agent a Deposit Account Control
Agreement with respect to such deposit account duly authorized, executed and
delivered by such Borrower or Guarantor and the bank at which such deposit
account is opened and maintained The terms of this subsection (d) shall not
apply to deposit accounts specifically and exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of any
Borrower’s or Guarantor’s salaried employees or deposit accounts for which a
Deposit Account Control Agreement is not required pursuant to Section 6.3.

(e) No Borrower or Guarantor owns or holds, directly or indirectly, beneficially
or as record owner or both, any investment property, as of the date hereof, or
have any investment account, securities account, commodity account or other
similar account with any bank or other financial institution or other securities
intermediary or commodity intermediary as of the date hereof, in each case
except as set forth in the Information Certificate.

(f) In the event that any Borrower or Guarantor shall be entitled to or shall at
any time after the date hereof hold or acquire any certificated securities, such
Borrower or Guarantor shall promptly endorse, assign and deliver the same to
Administrative Agent, accompanied by such instruments of transfer or assignment
duly executed in blank as Administrative Agent may from time to time specify. If
any securities, now or hereafter acquired by any Borrower or Guarantor are
uncertificated and are issued to such Borrower or Guarantor or its nominee
directly by the issuer thereof, such Borrower or Guarantor shall immediately
notify Administrative Agent thereof and cause the issuer to agree to comply with
instructions from Administrative Agent as to such securities, without further
consent of any Borrower or Guarantor or such nominee.

(g) Borrowers and Guarantors shall not, directly or indirectly, after the date
hereof open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or

 

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commodity intermediary unless each of the following conditions is satisfied:
(i) Administrative Agent shall have received not less than five (5) Business
Days prior written notice of the intention of such Borrower or Guarantor to open
or establish such account which notice shall specify in reasonable detail and
specificity acceptable to Administrative Agent the name of the account, the
owner of the account, the name and address of the securities intermediary or
commodity intermediary at which such account is to be opened or established, the
individual at such intermediary with whom such Borrower or Guarantor is dealing
and the purpose of the account, (ii) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Administrative Agent, and (iii) on or before the opening
of such investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower or Guarantor
shall execute and deliver, and cause to be executed and delivered to
Administrative Agent, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower or Guarantor
and such securities intermediary or commodity intermediary.

(h) Borrowers and Guarantors are not the beneficiary or otherwise entitled to
any right to payment under any letter of credit, banker’s acceptance or similar
instrument as of the date hereof, except as set forth in the Information
Certificate. In the event that any Borrower or Guarantor shall be entitled to or
shall receive any right to payment under any letter of credit, banker’s
acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower or Guarantor shall promptly
notify Administrative Agent thereof in writing. Such Borrower or Guarantor shall
immediately, as Administrative Agent may specify, either (i) deliver, or cause
to be delivered to Administrative Agent, with respect to any such letter of
credit, banker’s acceptance or similar instrument, the written agreement of the
issuer and any other nominated person obligated to make any payment in respect
thereof (including any confirming or negotiating bank), in form and substance
satisfactory to Administrative Agent, consenting to the assignment of the
proceeds of the letter of credit to Administrative Agent by such Borrower or
Guarantor and agreeing to make all payments thereon directly to Administrative
Agent or as Administrative Agent may otherwise direct or (ii) cause
Administrative Agent to become, at Borrowers’ expense, the transferee
beneficiary of the letter of credit, banker’s acceptance or similar instrument
(as the case may be).

(i) Borrowers and Guarantors do not have any commercial tort claims in excess of
$1,000,000 as of the date hereof, except as set forth in the Information
Certificate. In the event that any Borrower or Guarantor shall at any time after
the date hereof have any commercial tort claims, such Borrower or Guarantor
shall promptly notify Administrative Agent thereof in writing, which notice
shall (i) set forth in reasonable detail the basis for and nature of such
commercial tort claim and (ii) include the express grant by such Borrower or
Guarantor to Administrative Agent of a security interest in such commercial tort
claim (and the proceeds thereof). In the event that such notice does not include
such grant of a security interest, the sending thereof by such Borrower or
Guarantor to Administrative Agent shall be deemed to constitute such grant to
Administrative Agent. Upon the sending of such notice, any commercial tort claim
described therein shall constitute part of the Collateral and shall be deemed
included therein. Without limiting the authorization of Administrative Agent
provided in Section 5.2(a) hereof or otherwise arising by the execution by such
Borrower or Guarantor of this Agreement or any of the other Financing
Agreements, Administrative Agent is hereby irrevocably authorized

 

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from time to time and at any time to file such financing statements naming
Administrative Agent or its designee as secured party and such Borrower or
Guarantor as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, each Borrower and
Guarantor shall promptly upon Administrative Agent’s request, execute and
deliver, or cause to be executed and delivered, to Administrative Agent such
other agreements, documents and instruments as Administrative Agent may require
in connection with such commercial tort claim.

(j) Borrowers and Guarantors do not have any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth in the Information Certificate and except for goods
located in the United States in transit to a location of a Borrower or Guarantor
permitted herein in the ordinary course of business of such Borrower or
Guarantor in the possession of the carrier transporting such goods. In the event
that any goods, documents of title or other Collateral are at any time after the
date hereof in the custody, control or possession of any other person not
referred to in the Information Certificate or such carriers, Borrowers and
Guarantors shall promptly notify Administrative Agent thereof in writing.
Promptly upon Administrative Agent’s request, Borrowers and Guarantors shall
deliver to Administrative Agent a Collateral Access Agreement duly authorized,
executed and delivered by such person and the Borrower or Guarantor that is the
owner of such Collateral.

(k) Borrowers and Guarantors shall take any other actions reasonably requested
by Administrative Agent from time to time to cause the attachment, perfection
and first priority of, and the ability of Administrative Agent to enforce, the
security interest of Administrative Agent in any and all of the Collateral,
including, without limitation, (i) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the UCC or
other applicable law, to the extent, if any, that any Borrower’s or Guarantor’s
signature thereon is required therefor, (ii) causing Administrative Agent’s name
to be noted as secured party on any certificate of title for a titled good if
such notation is a condition to attachment, perfection or priority of, or
ability of Administrative Agent to enforce, the security interest of
Administrative Agent in such Collateral, (iii) complying with any provision of
any statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of Administrative Agent to enforce, the security
interest of Administrative Agent in such Collateral, (iv) obtaining the consents
and approvals of any Governmental Authority or third party, including, without
limitation, any consent of any licensor, lessor or other person obligated on
Collateral, and taking all actions required by any earlier versions of the UCC
or by other law, as applicable in any relevant jurisdiction.

SECTION 6. COLLECTION AND ADMINISTRATION

6.1 Borrowers’ Loan Accounts. Administrative Agent shall maintain one or more
loan account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of any Borrower or Guarantor and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs, expenses and interest. All entries in the loan account(s) shall be made
in accordance with Administrative Agent’s customary practices as in effect from
time to time.

 

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6.2 Statements. Administrative Agent shall render to Lead Borrower each month a
statement setting forth the balance in the Borrowers’ loan account(s) maintained
by Administrative Agent for Borrowers pursuant to the provisions of this
Agreement, including principal, interest, fees, costs and expenses. Each such
statement shall be subject to subsequent adjustment by Administrative Agent but
shall, absent manifest errors or omissions, be considered correct and deemed
accepted by Borrowers and Guarantors and conclusively binding upon Borrowers and
Guarantors as an account stated except to the extent that Administrative Agent
receives a written notice from Lead Borrower of any specific exceptions of Lead
Borrower thereto within forty-five (45) days after the date such statement has
been received by Parent. Until such time as Administrative Agent shall have
rendered to Lead Borrower a written statement as provided above, the balance in
any Borrower’s loan account(s) shall be presumptive evidence of the amounts due
and owing to Administrative Agent and Lenders by Borrowers and Guarantors.

6.3 Collection of Accounts.

(a) Each Borrower and Guarantor shall establish and maintain, at its expense,
deposit account arrangements and merchant payment arrangements with the banks
set forth on Schedule 8.10 to the Information Certificate and subject to
Section 5.2(d) hereof such other banks as such Borrower or Guarantor may
hereafter select. The banks set forth on Schedule 8.10 to the Information
Certificate constitute all of the banks with which Borrowers and Guarantors have
deposit account arrangements and merchant payment arrangements as of the date
hereof and identifies each of the deposit accounts at such banks that are used
solely for receiving store receipts from a retail store location of a Borrower
(together with any other deposit accounts at any time established or used by any
Borrower for receiving such store receipts from any retail store location,
collectively, the “Store Accounts” and each individually, a “Store Account”) or
otherwise describes the nature of the use of such deposit account by such
Borrower.

(i) Each Borrower shall deposit all proceeds from sales of Inventory in every
form, including, without limitation, cash, checks, credit card sales drafts,
credit card sales or charge slips or receipts and other forms of daily store
receipts, from each retail store location of such Borrower (other than Medicare
Accounts and Medicaid Accounts) into the Store Account of such Borrower used
solely for such purpose in accordance with the current practices of such
Borrower as of the date hereof, but in any event no less frequently than
(x) once every five (5) Business Days if Excess Availability is equal to or
greater than $50,000,000, or (y) once every three (3) Business Days if Excess
Availability is less than $50,000,000; provided, that, each retail store of a
Borrower may retain in such store funds of up to $30,000 immediately after each
deposit of funds from such store into the applicable Store Account. All such
funds deposited into the Store Accounts shall be sent by wire transfer or other
electronic funds transfer on each Business Day to the Blocked Accounts as
provided in Section 6.3(a)(ii) below, except nominal amounts which are required
to be maintained in such Store Accounts under the terms of such Borrower’s
arrangements with the bank at which such Store Accounts are maintained (which
amounts, together with all amounts held at the retail store locations and not
yet deposited in the Store Accounts, shall not in the aggregate exceed
$6,000,000 at any one time, except to the extent from time to time additional
amounts may be held in the retail stores or the Store Accounts on Saturday,
Sunday or other days where the applicable depository bank is closed,

 

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which additional amounts are to be, and shall be, transferred on the next
Business Day to the Blocked Accounts) and except as Administrative Agent may
otherwise agree; provided, that, the $6,000,000 amount referenced above shall be
automatically increased if the aggregate number of retail store locations of
Borrowers increases from the aggregate net number of retail store locations of
Borrowers that exist on the date of this Agreement, by a pro rata amount based
on such increase.

(ii) Within thirty (30) days after the date hereof, each Borrower shall
establish and maintain a separate lockbox and related deposit account into which
such Borrower shall promptly deposit, and shall direct each Fiscal Intermediary
or other Third Party Payor in accordance with the applicable Medicare and
Medicaid regulations to directly remit, all payments in respect of any Medicare
Accounts or Medicaid Accounts. Such separate lockboxes and related deposit
accounts shall only be used for purposes of receiving payments in respect of
Medicare Accounts and Medicaid Accounts and shall be under the sole control of
the applicable Borrower; provided, that, (A) Borrowers shall authorize, direct
and instruct the depository banks at which such separate lockboxes and deposit
accounts are maintained to remit by federal funds wire transfer all funds
received or deposited into such lockboxes and related deposit accounts amounts
on deposit in such accounts on a daily basis to one of the Blocked Accounts or
such bank account of Administrative Agent as Administrative Agent may from time
to time designate for such purpose, which instructions by Borrowers to such
banks may only be changed after not less than three (3) Business Days’ prior
written notice to such banks and Administrative Agent and (B) any change in such
instructions without the prior written consent of Administrative Agent shall be
an Event of Default hereunder.

(iii) Each Borrower shall establish and maintain, at its expense, deposit
accounts with such banks as are reasonably acceptable to Administrative Agent
(the “Blocked Accounts”) into which each Borrower shall promptly either cause
all amounts on deposit in the Store Accounts of such Borrower to be sent as
provided in Section 6.3(a)(i) above or shall itself deposit or cause to be
deposited all proceeds of Receivables or other Collateral, including all
proceeds from sales of Inventory, all amounts payable to each Borrower from
Credit Card Issuers and Credit Card Processors and all other proceeds of
Collateral (but not including payments of Medicare Accounts or Medicaid Accounts
that are sent to the separate lockbox and related deposit accounts established
pursuant to clause (ii) above).

(iv) Borrowers and Guarantors shall deliver, or cause to be delivered to
Administrative Agent a Deposit Account Control Agreement duly authorized,
executed and delivered by each bank where a Blocked Account is maintained as
provided in Section 5.2 hereof. At any time a Default or an Event of Default
shall exist or have occurred and be continuing, promptly upon Administrative
Agent’s request, Borrowers and Guarantors shall deliver, or cause to be
delivered, to Administrative Agent a Deposit Account Control Agreement duly
authorized, executed and delivered by such banks where a Store Account is
maintained as Administrative Agent shall specify. Without limiting any other
rights or remedies of Administrative Agent or Lenders, Administrative Agent may,
at its option, instruct the depository banks at which the Blocked Accounts are
maintained to transfer all available funds received or deposited into the
Blocked Accounts to the Administrative Agent Payment Account at any time that
either: (A) an Event of Default shall exist or have occurred and be continuing,
or

 

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(B) at any time Excess Availability is less than an amount equal to twelve and
one-half (12.5%) of the Borrowing Base. Without limiting any other rights or
remedies of Administrative Agent or Lenders, in the event that a Deposit Account
Control Agreement is in effect for a Store Account, then Administrative Agent
may, at its option, instruct the depository bank at which the Store Account is
maintained to transfer all available funds received or deposited into the Store
Account to the Administrative Agent Payment Account at any time that an Event of
Default shall exist or have occurred and be continuing. As to the Blocked
Accounts or the Store Accounts, as the case may be, Administrative Agent shall
send to Lead Borrower a copy of any such written instruction sent by
Administrative Agent to the depository bank promptly thereafter. In the event
that at any time ninety (90) days after Administrative Agent has instructed such
depository banks to transfer such funds to the Administrative Agent Payment
Account, the Monthly Average Excess Availability for the immediately preceding
ninety (90) consecutive days is greater than an amount equal to twelve and
one-half (12.5%) of the Borrowing Base and so long as no Event of Default exist
or have occurred, upon Lead Borrower’s written request received by
Administrative Agent within five (5) Business Days after the satisfaction of
such conditions, Administrative Agent shall rescind its prior instructions and
give new instructions to such depository banks to transfer the funds on deposit
in such accounts to such operating deposit account of Borrowers and Guarantors
as Lead Borrower may specify in writing to Administrative Agent until such time
as Administrative Agent is entitled to notify and shall notify the depository
bank otherwise as provided above. At all times that Administrative Agent shall
have notified any depository bank to transfer funds from a Blocked Account or
Store Account to the Administrative Agent Payment Account, all payments made to
such Blocked Accounts or Store Accounts, whether in respect of the Receivables,
as proceeds of Inventory or other Collateral or otherwise shall be treated as
payments to Administrative Agent in respect of the Obligations and therefore
shall constitute the property of Administrative Agent and Lenders to the extent
of the then outstanding Obligations.

(b) For purposes of calculating the amount of the Loans available to each
Borrower, such payments will be applied (conditional upon final collection) to
the Obligations on the Business Day of receipt by Administrative Agent of
immediately available funds in the Administrative Agent Payment Account provided
such payments and notice thereof are received in accordance with Administrative
Agent’s usual and customary practices as in effect from time to time and within
sufficient time to credit the applicable loan account on such day, and if not,
then on the next Business Day. For the purposes of calculating interest on the
Obligations, such payments or other funds received will be applied (conditional
upon final collection) to the Obligations on the Business Day of receipt of
immediately available funds by Administrative Agent in the Administrative Agent
Payment Account provided such payments or other funds and notice thereof are
received in accordance with Administrative Agent’s usual and customary practices
as in effect from time to time and within sufficient time to credit the
applicable loan account on such day, and if not, then on the next Business Day.
In the event that at any time or from time to time there are no Loans
outstanding or the amounts on deposit in the Blocked Accounts are not being
remitted to the Administrative Agent Payment Account, Administrative Agent shall
be entitled to an administrative fee in an amount calculated based on the
Interest Rate for Eurodollar Rate Loans (on a per annum basis) then in effect
multiplied by the amount of the funds received in the Blocked Account for such
day in accordance with the customary practice of Administrative Agent. The
economic benefit of the timing in the application of payments (and the
administrative fee with respect thereto, if applicable) shall be for the sole
benefit of Administrative Agent.

 

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(c) Each Borrower and Guarantor and their respective employees, agents and
Subsidiaries shall, acting as trustee for Administrative Agent, receive, as the
property of Administrative Agent, any monies, checks, notes, drafts or any other
payment relating to and/or proceeds of Accounts or other Collateral which come
into their possession or under their control and promptly upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts, or
remit the same or cause the same to be remitted, in kind, to Administrative
Agent. In no event shall the same be commingled with any Borrower’s or
Guarantor’s own funds. Borrowers agree to reimburse Administrative Agent on
demand for any amounts owed or paid to any bank or other financial institution
at which a Blocked Account or any other deposit account or investment account is
established or any other bank, financial institution or other person involved in
the transfer of funds to or from the Blocked Accounts arising out of
Administrative Agent’s payments to or indemnification of such bank, financial
institution or other person. The obligations of Borrowers to reimburse
Administrative Agent for such amounts pursuant to this Section 6.3 shall survive
the termination of this Agreement.

6.4 Payments.

(a) All Obligations shall be payable to the Administrative Agent Payment Account
as provided in Section 6.3 or such other place as Administrative Agent may
designate from time to time. Administrative Agent shall apply payments received
or collected from any Borrower or Guarantor or for the account of any Borrower
or Guarantor (including the monetary proceeds of collections or of realization
upon any Collateral) as follows: first, to pay any fees, indemnities or expense
reimbursements then due to Administrative Agent and Lenders from any Borrower or
Guarantor; second, to pay interest due in respect of any Loans (and including
any Special Administrative Agent Advances); third, to pay principal in respect
of Special Administrative Agent Advances; fourth, to pay principal in respect of
the Loans, on a pro rata basis; fifth, to pay or prepay any other Obligations
whether or not then due, in such order and manner as Administrative Agent
determines or to be held as cash collateral in connection with any Letter of
Credit Accommodations or other contingent Obligations (but not including for
this purpose any Obligations arising under or pursuant to any Bank Products) and
sixth, to pay or prepay any Obligations arising under or pursuant to Bank
Products on a pro rata basis. Notwithstanding anything to the contrary contained
in this Agreement, (i) unless so directed by Lead Borrower, or unless a Default
or an Event of Default shall exist or have occurred and be continuing,
Administrative Agent shall not apply any payments which it receives to any
Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period
applicable to any such Eurodollar Rate Loans or (B) in the event that there are
no outstanding Prime Rate Loans and (ii) to the extent any Borrower uses any
proceeds of the Loans or Letter of Credit Accommodations to acquire rights in or
the use of any Collateral or to repay any Indebtedness used to acquire rights in
or the use of any Collateral, payments in respect of the Obligations shall be
deemed applied first to the Obligations arising from Loans and Letter of Credit
Accommodations that were not used for such purposes and second to the
Obligations arising from Loans and Letter of Credit Accommodations the proceeds
of which were used to acquire rights in or the use of any Collateral in the
chronological order in which such Borrower acquired such rights in or the use of
such Collateral.

 

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(b) At Administrative Agent’s option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of any Borrower
maintained by Administrative Agent. Borrowers and Guarantors shall make all
payments to Administrative Agent and Lenders on the Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Administrative Agent or any Lender is required to surrender or
return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Administrative
Agent or such Lender. Borrowers and Guarantors shall be liable to pay to
Administrative Agent, and do hereby indemnify and hold Administrative Agent and
Lenders harmless for the amount of any payments or proceeds surrendered or
returned. This Section 6.4(b) shall remain effective notwithstanding any
contrary action which may be taken by Administrative Agent or any Lender in
reliance upon such payment or proceeds. This Section 6.4 shall survive the
payment of the Obligations and the termination of this Agreement.

6.5 Authorization to Make Loans. Administrative Agent and Lenders are authorized
to make the Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be the chief
financial officer, vice president of finance, treasurer, assistant treasurer,
director of finance, corporate treasurer, controller of Parent or other
authorized person designated by any of such persons from time to time to
Administrative Agent or, at the discretion of Administrative Agent, if such
Loans are necessary to satisfy any Obligations. All requests for Loans or Letter
of Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a Business Day) and the amount of the requested Loan. Requests received
after 12:00 p.m. Boston time on any day shall be deemed to have been made as of
the opening of business on the immediately following Business Day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of, any
Borrower or Guarantor when deposited to the credit of any Borrower or Guarantor
or otherwise disbursed or established in accordance with the instructions of any
Borrower or Guarantor or in accordance with the terms and conditions of this
Agreement.

6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans
provided by Administrative Agent to Borrowers hereunder only for: (a) payments
to each of the persons listed in the disbursement direction letter furnished by
Borrowers to Administrative Agent on or about the date hereof and (b) costs,
expenses and fees in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Financing Agreements. All other Loans
made or Letter of Credit Accommodations provided to or for the benefit of any
Borrower pursuant to the provisions hereof shall be used by such Borrower only
for general operating, working capital and other proper corporate purposes of
such Borrower not otherwise prohibited

 

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by the terms hereof. None of the proceeds will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security or for the
purposes of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose which might
cause any of the Loans to be considered a “purpose credit” within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as
amended.

6.7 Appointment of Parent as Lead Borrower for Requesting Loans and Receipts of
Loans and Statements.

(a) Each Borrower hereby irrevocably appoints and constitutes Lead Borrower to
request and receive Loans and Letter of Credit Accommodations pursuant to this
Agreement and the other Financing Agreements from Administrative Agent or any
Lender in the name or on behalf of such Borrower, to select the applicable
Interest Rate for any such Loans or to take other actions contemplated as being
taken by any Borrower under this Agreement or any of the other Financing
Agreements. Administrative Agent and Lenders may disburse the Loans to such bank
account of Lead Borrower or a Borrower or otherwise make such Loans to a
Borrower and provide such Letter of Credit Accommodations to a Borrower as Lead
Borrower may designate or direct, without notice to any other Borrower or
Obligor. Notwithstanding anything to the contrary contained herein,
Administrative Agent and Lead Borrower may at any time and from time to time
require that Loans to or for the account of any Borrower be disbursed directly
to an operating account of such Borrower.

(b) Lead Borrower hereby accepts the appointment by Borrowers to act for and on
behalf of the other Borrowers pursuant to this Section 6.7. Lead Borrower shall
ensure that the disbursement of any Loans to each Borrower requested by or paid
to or for the account of Parent, or the issuance of any Letter of Credit
Accommodations for a Borrower hereunder, shall be paid to or for the account of
such Borrower.

(c) Each other Borrower and Guarantor hereby irrevocably appoints and
constitutes Lead Borrower to receive statements on account and all other notices
from Administrative Agent and Lenders with respect to the Obligations or
otherwise under or in connection with this Agreement and the other Financing
Agreements and any statements or notices sent to or received by Lead Borrower
shall be deemed received by each of the other Borrowers and Guarantors.

(d) Any notice, election, representation, warranty, agreement or undertaking by
or on behalf of any other Borrower or any Guarantor by Lead Borrower shall be
deemed for all purposes to have been made by such Borrower or Guarantor, as the
case may be, and shall be binding upon and enforceable against such Borrower or
Guarantor to the same extent as if made directly by such Borrower of Guarantor.

(e) No purported termination of the appointment of Lead Borrower as agent as
aforesaid shall be effective, except after ten (10) days’ prior written notice
to Administrative Agent.

6.8 Pro Rata Treatment. Except to the extent otherwise provided in this
Agreement: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rata Shares as to the Loans and (b) each
payment on account of any Obligations

 

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to or for the account of one or more of Lenders in respect of any Obligations
due on a particular day shall be allocated among the Lenders entitled to such
payments based on their respective Pro Rata Shares and shall be distributed
accordingly.

6.9 Sharing of Payments, Etc.

(a) Each Borrower and Guarantor agrees that, in addition to (and without
limitation of) any right of setoff, banker’s lien or counterclaim Administrative
Agent or any Lender may otherwise have, each Lender shall be entitled, at its
option (but subject, as among Administrative Agent and Lenders, to the
provisions of Section 12.3(b) hereof), to offset balances held by it for the
account of such Borrower or Guarantor at any of its offices, in dollars or in
any other currency, against any principal of or interest on any Loans owed to
such Lender or any other amount payable to such Lender hereunder, that is not
paid when due (regardless of whether such balances are then due to such Borrower
or Guarantor), in which case it shall promptly notify Lead Borrower and
Administrative Agent thereof; provided, that, such Lender’s failure to give such
notice shall not affect the validity thereof.

(b) If any Lender (including Administrative Agent) shall obtain from any
Borrower or Guarantor payment of any principal of or interest on any Loan owing
to it or payment of any other amount under this Agreement or any of the other
Financing Agreements through the exercise of any right of setoff, banker’s lien
or counterclaim or similar right or otherwise (other than from Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received more than its Pro Rata Share of the principal of the Loans or more
than its share of such other amounts then due hereunder or thereunder by any
Borrower or Guarantor to such Lender than the percentage thereof received by any
other Lender, it shall promptly pay to Administrative Agent, for the benefit of
Lenders, the amount of such excess and simultaneously purchase from such other
Lenders a participation in the Loans or such other amounts, respectively, owing
to such other Lenders (or such interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all Lenders shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving such excess payment) in accordance with their respective Pro Rata
Shares or as otherwise agreed by Lenders. To such end all Lenders shall make
appropriate adjustments among themselves (by the resale of participation sold or
otherwise) if such payment is rescinded or must otherwise be restored.

(c) Each Borrower and Guarantor agrees that any Lender purchasing a
participation (or direct interest) as provided in this Section may exercise, in
a manner consistent with this Section, all rights of setoff, banker’s lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.

(d) Nothing contained herein shall require any Lender to exercise any right of
setoff, banker’s lien, counterclaims or similar rights or shall affect the right
of any Lender to exercise, and retain the benefits of exercising, any such right
with respect to any other Indebtedness or obligation of any Borrower or
Guarantor. If, under any applicable bankruptcy, insolvency or other similar law,
any Lender receives a secured claim in lieu of a setoff to which this Section
applies, such Lender shall, to the extent practicable, assign such rights to
Administrative Agent

 

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for the benefit of Lenders and, in any event, exercise its rights in respect of
such secured claim in a manner consistent with the rights of Lenders entitled
under this Section to share in the benefits of any recovery on such secured
claim.

6.10 Settlement Procedures.

(a) In order to administer the Credit Facility in an efficient manner and to
minimize the transfer of funds between Administrative Agent and Lenders,
Administrative Agent may, at its option, subject to the terms of this Section,
make available, on behalf of Lenders, the full amount of the Loans requested or
charged to any Borrower’s loan account(s) or otherwise to be advanced by Lenders
pursuant to the terms hereof, without requirement of prior notice to Lenders of
the proposed Loans.

(b) With respect to all Loans made by Administrative Agent on behalf of Lenders
as provided in this Section, the amount of each Lender’s Pro Rata Share of the
outstanding Loans shall be computed weekly, and shall be adjusted upward or
downward on the basis of the amount of the outstanding Loans as of 5:00 p.m.
Boston time on the Business Day immediately preceding the date of each
settlement computation; provided, that, Administrative Agent retains the
absolute right at any time or from time to time to make the above described
adjustments at intervals more frequent than weekly, but in no event more than
twice in any week. Administrative Agent shall deliver to each of the Lenders
after the end of each week, or at such lesser period or periods as
Administrative Agent shall determine, a summary statement of the amount of
outstanding Loans for such period (such week or lesser period or periods being
hereinafter referred to as a “Settlement Period”). If the summary statement is
sent by Administrative Agent and received by a Lender prior to 12:00 p.m. Boston
time, then such Lender shall make the settlement transfer described in this
Section by no later than 3:00 p.m. Boston time on the same Business Day and if
received by a Lender after 12:00 p.m. Boston time, then such Lender shall make
the settlement transfer by not later than 3:00 p.m. Boston time on the next
Business Day following the date of receipt. If, as of the end of any Settlement
Period, the amount of a Lender’s Pro Rata Share of the outstanding Loans is more
than such Lender’s Pro Rata Share of the outstanding Loans as of the end of the
previous Settlement Period, then such Lender shall forthwith (but in no event
later than the time set forth in the preceding sentence) transfer to
Administrative Agent by wire transfer in immediately available funds the amount
of the increase. Alternatively, if the amount of a Lender’s Pro Rata Share of
the outstanding Loans in any Settlement Period is less than the amount of such
Lender’s Pro Rata Share of the outstanding Loans for the previous Settlement
Period, Administrative Agent shall forthwith transfer to such Lender by wire
transfer in immediately available funds the amount of the decrease. The
obligation of each of the Lenders to transfer such funds and effect such
settlement shall be irrevocable and unconditional and without recourse to or
warranty by Administrative Agent. Administrative Agent and each Lender agrees to
mark its books and records at the end of each Settlement Period to show at all
times the dollar amount of its Pro Rata Share of the outstanding Loans and
Letter of Credit Accommodations. Each Lender shall only be entitled to receive
interest on its Pro Rata Share of the Loans to the extent such Loans have been
funded by such Lender. Because the Administrative Agent on behalf of Lenders may
be advancing and/or may be repaid Loans prior to the time when Lenders will
actually advance and/or be repaid such Loans, interest with respect to Loans
shall be allocated by Administrative

 

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Agent in accordance with the amount of Loans actually advanced by and repaid to
each Lender and the Administrative Agent and shall accrue from and including the
date such Loans are so advanced to but excluding the date such Loans are either
repaid by Borrowers or actually settled with the applicable Lender as described
in this Section.

(c) To the extent that Administrative Agent has made any such amounts available
and the settlement described above shall not yet have occurred, upon repayment
of any Loans by a Borrower, Administrative Agent may apply such amounts repaid
directly to any amounts made available by Administrative Agent pursuant to this
Section. In lieu of weekly or more frequent settlements, Administrative Agent
may, at its option, at any time require each Lender to provide Administrative
Agent with immediately available funds representing its Pro Rata Share of each
Loan, prior to Administrative Agent’s disbursement of such Loan to Borrower. In
such event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender’s obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender’s obligation to make a Loan hereunder.

(d) If Administrative Agent is not funding a particular Loan to or for the
benefit of a Borrower pursuant to Sections 6.10(a) and 6.10(b) on any day, but
is requiring each Lender to provide Administrative Agent with immediately
available funds on the date of such Loan, Administrative Agent may assume that
each Lender will make available to Administrative Agent such Lender’s Pro Rata
Share of the Loan requested or otherwise made on such day and Administrative
Agent may, in its discretion, but shall not be obligated to, cause a
corresponding amount to be made available to or for the benefit of such Borrower
on such day. If Administrative Agent makes such corresponding amount available
to a Borrower and such corresponding amount is not in fact made available to
Administrative Agent by such Lender, Administrative Agent shall be entitled to
recover such corresponding amount on demand from such Lender together with
interest thereon for each day from the date such payment was due until the date
such amount is paid to Administrative Agent at the Federal Funds Rate for each
day during such period (as published by the Federal Reserve Bank of New York or
at Administrative Agent’s option based on the arithmetic mean determined by
Administrative Agent of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on that day by each of
the three leading brokers of Federal funds transactions in New York City
selected by Administrative Agent) and if such amounts are not paid within three
(3) days of Administrative Agent’s demand, at the highest Interest Rate provided
for in Section 3.1 hereof applicable to Prime Rate Loans. During the period in
which such Lender has not paid such corresponding amount to Administrative
Agent, notwithstanding anything to the contrary contained in this Agreement or
any of the other Financing Agreements, the amount so advanced by Administrative
Agent to or for the benefit of any Borrower shall, for all purposes hereof, be a
Loan made by Administrative Agent for its own account.

(e) Upon any failure by a Lender to pay Administrative Agent pursuant to the
settlement described in Section 6.10(b) above or to pay Administrative Agent
pursuant to Section 6.10(c) or 6.10(d), Administrative Agent shall promptly
thereafter notify Lead Borrower of such failure and Borrowers shall pay such
corresponding principal amount to Administrative Agent

 

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for its own account within five (5) Business Days of Administrative Borrower’s
receipt of such notice. The term “Defaulting Lender” shall mean (i) any Lender
that has failed to fund any portion of the Loans or participations in Letter of
Credit Accommodations required to be funded by it hereunder within one
(1) Business Day of the date required to be funded by it hereunder, or has
otherwise failed to pay over to Administrative Agent or any other Lender any
other amount required to be paid by it hereunder within one (1) Business Day of
the date when due, and such failure has not been cured by the making of such
funding or payment over to Administrative Agent or such Lender by such Lender
within such one (1) Business Day period, (ii) any Lender that has notified
Administrative Agent, any Lender, Issuing Bank, or any Borrower or Guarantor in
writing that it will not or does not intend to comply with any of its funding
obligations under this Agreement (and such Lender has not retracted such
notification in writing) or has made a public statement in writing to the effect
that it will not or does not intend to comply with its funding obligations under
this Agreement (and such Lender has not retracted such public statement in
writing), or (iii) any Lender that becomes or is insolvent or has a parent
company that has become or is insolvent or becomes the subject of a bankruptcy
or insolvency proceeding, or has a receiver, conservator, trustee or custodian
appointed for it, or has taken any action in furtherance of, or indicating its
consent to, approval of or acquiescence in any such proceeding or appointment
and has not obtained all required orders, approvals or consents of any court or
other Governmental Authority to continue to fulfill its obligations hereunder,
in form and substance reasonably satisfactory to Administrative Agent and
Administrative Borrower; provided, that, a Lender shall not be a Defaulting
Lender soley by virtue of the ownership or acquisition of any equity interest in
that Lender or any direct or indirect parent company thereof by a Governmental
Authority so long as such ownership does not result in or provide such Lender
with immunity from the jurisdiction of courts within the United States or from
the enforcement of judgments or writs of attachment on its assets or permit such
Lender (or such Governmental Authority) to reject, repudiate, disavow or
disaffirm any contracts or agreement made with such Lender.

(f) Administrative Agent shall not be obligated to transfer to a Defaulting
Lender any payments received by Administrative Agent for such Defaulting
Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of
any payments hereunder (including any principal or fees and whether in respect
of Loans, participation interests or otherwise). No fees otherwise payable
hereunder to a Lender shall accrue for the benefit of such Defaulting Lender for
such period as it is a Defaulting Lender but interest on the portion of the then
outstanding Loans (and any participations) for which such Defaulting Lender has
provided funds prior to becoming a Defaulting Lender shall be payable to it in
the same manner as for the other Lenders that are not Defaulting Lenders in
accordance with the terms hereof. For purposes of voting or consenting to
matters with respect to this Agreement and the other Financing Agreements (other
than with respect to the items set forth in Sections 11.3(a)(i) and (ii)) and
determining Pro Rata Shares (other than as to interest to the extent provided
herein), such Defaulting Lender shall be deemed not to be a “Lender” and such
Lender’s Commitment shall be deemed to be zero (0). So long as there is a
Defaulting Lender, the maximum amount of the Loans and Letter of Credit
Accommodations shall not exceed the aggregate amount of the Commitments of the
Lenders that are not Defaulting Lenders plus the Pro Rata Share of the
Defaulting Lender (determined immediately prior to its being a Defaulting
Lender) of the Loans and Letter of Credit Accommodations outstanding as of the
date that the Defaulting Lender has become a Defaulting

 

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Lender. At any time that there is a Defaulting Lender, payments received for
application to the Obligations payable to Lenders in accordance with the terms
of this Agreement shall be distributed to Lenders based on their Pro Rata Shares
calculated after giving effect to the reduction of such Defaulting Lender’s
Commitment to zero (0) as provided herein (other than as to interest as provided
above) or at Administrative Agent’s option, Administrative Agent may instead
receive and retain such amounts that would be otherwise attributable to the Pro
Rata Share of such Defaulting Lender (which for such purpose shall be such Pro
Rata Share as in effect immediately prior to its being a Defaulting Lender). To
the extent that Administrative Agent elects to receive and retain such amounts,
Administrative Agent may hold such amounts (which shall not accrue interest)
and, in its reasonable discretion, relend such amounts to a Borrower. To the
extent that Administrative Agent exercises its option to relend such amounts,
such amounts shall be treated as Loans for the account of Administrative Agent
in addition to the Loans that are made by the Lenders other than such Defaulting
Lender based on their respective Pro Rata Shares as calculated after giving
effect to the reduction of such Defaulting Lender’s Commitment to zero (0) as
provided herein but shall be repaid in the same order of priority as the
principal amount of the Loans on a pro rata basis for purposes of Section 6.4
hereof. Administrative Agent shall determine whether any Loans requested shall
be made from relending such amounts or from Loans from the Lenders (other than
such Defaulting Lender) and any allocation of requested Revolving Loans between
them. The rights of a Lender that is a Defaulting Lender shall be limited as
provided herein until such time as such Defaulting Lender has made all payments
to Administrative Agent of the amounts that it had failed to pay causing it to
become a Defaulting Lender and such Lender is otherwise in compliance with the
terms of this Agreement (including making any payments as it would have been
required to make as a Lender during the period that it was a Defaulting Lender
other than in respect of the principal amount of Loans, which payments as to the
principal amount of Loans shall be made based on the outstanding balance thereof
on the date of the cure by Defaulting Lender or at such other time thereafter as
Administrative Agent may specify) or has otherwise provided evidence in form and
substance reasonably satisfactory to Administrative Agent and Lead Borrower that
such Defaulting Lender will be able to fund its Pro Rata Share (as in effect
immediately prior to its being a Defaulting Lender) in accordance with the terms
hereof. Upon the cure by any Lender that is a Defaulting Lender of the event
that is the basis for it to be a Defaulting Lender by making such payment or
payments and such Lender otherwise being in compliance with the terms hereof,
and upon the agreement of Administrative Agent and Lead Borrower, such Lender
shall cease to be a Defaulting Lender and shall only be entitled to payment of
interest accrued during the period that such Lender was a Defaulting Lender to
the extent previously received and retained by Administrative Agent from or for
the account of Borrowers on the funds constituting Loans funded by such Lender
prior to the date of it being a Defaulting Lender (and not previously paid to
such Lender) and shall otherwise, on and after such cure, make Loans and settle
in respect of the Loans and other Obligations in accordance with the terms
hereof. The existence of a Defaulting Lender and the operation of this Section
shall not be construed to increase or otherwise affect the Commitment of any
Lender, or relieve or excuse the performance by any Borrower or Guarantor of its
duties and obligations hereunder (including, but not limited to, the obligation
of such Borrower or Guarantor to make any payments hereunder, whether in respect
of Loans by a Defaulting Lender or otherwise), except as specifically set forth
herein.

 

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(g) Notwithstanding anything to the contrary contained in this Agreement, in the
event that there is a Defaulting Lender, if there are any Letter of Credit
Accommodations outstanding, and the aggregate amount of the Letter of Credit
Obligations and the Loans exceed the aggregate amount of the Commitments of the
Lenders that are not Defaulting Lenders plus the Pro Rata Share of the
Defaulting Lender (determined immediately prior to its being a Defaulting
Lender) of the Loans and Letter of Credit Accommodations outstanding as of the
date that the Defaulting Lender has become a Defaulting Lender, then (A) within
one (1) Business Day after the written request of an Issuing Bank, Borrowers
shall pay to Administrative Agent an amount equal to the Pro Rata Share of the
Defaulting Lender (calculated as in effect immediately prior to such Lender
becoming a Defaulting Lender) of the Letter of Credit Accommodations then
outstanding to be held by Administrative Agent on terms and conditions
satisfactory to Administrative Agent and such Issuing Bank as cash collateral
for the Obligations and (B) for so long as there is a Defaulting Lender, such
Issuing Bank shall not be required to issue any Letter of Credit, or increase or
extend or otherwise amend any Letter of Credit, unless upon the request of such
Issuing Bank, Administrative Agent has cash collateral from Borrowers in an
amount equal to the Pro Rata Share of the Defaulting Lender (calculated as in
effect immediately prior to such Lender becoming a Defaulting Lender) of the
Letter of Credit Accommodations outstanding after giving effect to any such
requested Letter of Credit Accommodation (or increase, extension or other
amendment) to be held by Administrative Agent on its behalf on terms and
conditions satisfactory to Administrative Agent and such Issuing Bank or there
are other arrangements reasonably satisfactory to such Issuing Bank with respect
to the participation in Letter of Credit Accommodations by such Defaulting
Lender. Such cash collateral shall be applied first to the Letter of Credit
Accommodations before application to any other Obligations, notwithstanding
anything to the contrary contained in Section 6.4 hereof.

(h) Lead Borrower and Administrative Agent shall have the right, but not the
obligation, at any time that there is a Defaulting Lender, and upon the exercise
by either Lead Borrower or Administrative Agent of such right, such Defaulting
Lender shall have the obligation, to sell, assign and transfer to an Eligible
Transferee designated by Lead Borrower and approved by Administrative Agent or
designated by Administrative Agent after consultation with Lead Borrower, the
Commitment of such Defaulting Lender and all rights and interests of such
Defaulting Lender pursuant thereto. Lead Borrower or Administrative Agent, as
the case may be, shall provide the Defaulting Lender (and the Lead Borrower or
the Administrative Agent as the case may be) with prior written notice of its
intent to exercise its right under this Section, which notice shall specify the
date on which such purchase and sale shall occur. Such purchase and sale shall
be pursuant to the terms of an Assignment and Acceptance (whether or not
executed by the Defaulting Lender), except that on the date of such purchase and
sale, the Eligible Transferee specified by Lead Borrower and approved by
Administrative Agent or Administrative Agent, shall pay to the Defaulting Lender
(except as Administrative Agent and such Defaulting Lender may otherwise agree)
the amount equal to: (i) the principal balance of the Loans held by the
Defaulting Lender outstanding as of the close of business on the Business Day
immediately preceding the effective date of such purchase and sale, plus
(ii) amounts accrued and unpaid in respect of interest and fees payable to the
Defaulting Lender to the effective date of the purchase (but in no event shall
the Defaulting Lender be deemed entitled to any early termination fee), minus
(iii) the amount of the closing fee received by the Defaulting Lender pursuant
to the terms hereof or of any of the other Financing Agreements multiplied by

 

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the fraction, the numerator of which is the number of months remaining in the
then current term of the Credit Facility and the denominator of which is the
number of months in the then current term thereof. Such purchase and sale shall
be effective on the date of the payment of such amount to the Defaulting Lender
and the Commitment of the Defaulting Lender shall terminate on such date.

(i) Nothing in this Section or elsewhere in this Agreement or the other
Financing Agreements shall be deemed to require Administrative Agent to advance
funds on behalf of any Lender or to relieve any Lender from its obligation to
fulfill its Commitment hereunder or to prejudice any rights that any Borrower
may have against any Lender as a result of any default by any Lender hereunder
in fulfilling its Commitment.

6.11 Obligations Several; Independent Nature of Lenders’ Rights. The obligation
of each Lender hereunder is several, and no Lender shall be responsible for the
obligation or commitment of any other Lender hereunder. Nothing contained in
this Agreement or any of the other Financing Agreements and no action taken by
the Lenders pursuant hereto or thereto shall be deemed to constitute the Lenders
to be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and subject to Section 12.3 hereof, each Lender
shall be entitled to protect and enforce its rights arising out of this
Agreement and it shall not be necessary for any other Lender to be joined as an
additional party in any proceeding for such purpose.

6.12 Bank Products. Borrowers and Guarantors, or any of their Subsidiaries, may
(but no such Person is required to) request that the Bank Product Providers
provide or arrange for such Person to obtain Bank Products from Bank Product
Providers, and each Bank Product Provider may, in its sole discretion, provide
or arrange for such Person to obtain the requested Bank Products. Borrowers and
Guarantors or any of their Subsidiaries that obtain Bank Products shall
indemnify and hold Administrative Agent, each Lender and their respective
Affiliates harmless from any and all obligations now or hereafter owing to any
other Person by any Bank Product Provider in connection with any Bank Products
other than for gross negligence or willful misconduct on the part of any such
indemnified Person. This Section 6.12 shall survive the payment of the
Obligations and the termination of this Agreement. Borrower and its Subsidiaries
acknowledge and agree that the obtaining of Bank Products from Bank Product
Providers (a) is in the sole discretion of such Bank Product Provider, and
(b) is subject to all rules and regulations of such Bank Product Provider.

SECTION 7. COLLATERAL REPORTING AND COVENANTS

7.1 Collateral Reporting.

(a) Borrowers shall provide Administrative Agent with the following documents in
a form reasonably satisfactory to Administrative Agent:

(i) Intentionally deleted;

(ii) as soon as possible after the end of each fiscal four (4) week period of
Borrowers and Guarantors determined in accordance with the current accounting
practices of

 

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Borrowers and Guarantors as of the date hereof (but in any event within ten
(10) Business Days after the end thereof), or weekly (but in any event by no
later than Wednesday of each week) at any time that Excess Availability is less
than an amount equal to fifteen (15%) percent of the Borrowing Base, or more
frequently as Administrative Agent may request at any time that a Default or
Event of Default shall exist or have occurred, (A) a Borrowing Base Certificate
setting forth the calculation of the Borrowing Base as of the last Business Day
of the immediately preceding period as to the Accounts and Inventory, duly
completed and executed by the chief financial officer, vice president of
finance, corporate treasurer or controller of Parent, together with all
schedules required pursuant to the terms of the Borrowing Base Certificate duly
completed (including a recap of all Accounts created, collections received and
credit memos issued for the immediately preceding period), (B) an aging of
accounts receivable for each of the Retail Division and the Distribution
Division, (C) an inventory summary report for each of the Retail Division and
the Distribution Division and (D) perpetual inventory reports for the
Distribution Division, (E) intentionally deleted;

(iii) only in the event that Excess Availability is less than an amount equal to
fifteen (15%) percent of the Borrowing Base and such reports are requested by
Administrative Agent, as soon as possible after the end of each fiscal four
(4) week period of Borrowers and Guarantors determined in accordance with the
current accounting practices of Borrowers and Guarantors as of the date hereof
(but in any event within ten (10) Business Days after the end thereof), reports
by retail store location of sales and four wall cash flows for each such retail
store location;

(iv) as soon as possible after the end of each fiscal four (4) week period of
Borrowers and Guarantors determined in accordance with the current accounting
practices of Borrowers and Guarantors as of the date hereof (but in any event
ten (10) Business Days after the end thereof), in each case certified by the
chief financial officer, vice president of finance, corporate treasurer,
treasurer or controller of Borrowers or Lead Borrower as true and correct: (A) a
statement confirming the payment of the aggregate amount of rent and other
amounts due to owners and lessors of real property used by Borrowers (other than
amounts being contested or disputed in good faith), subject to year-end or
monthly percentage rent payment adjustments, (B) the addresses of all new retail
store locations of Borrowers and Guarantors opened and existing retail store
locations closed or sold, in each case since the date of the most recent
certificate delivered to Administrative Agent containing the information
required under this clause, and (C) a report of any new deposit account
established or used by any Borrower or Guarantor with any bank or other
financial institution, including the Borrower or Guarantor in whose name the
account is maintained, the account number, the name and address of the financial
institution at which such account is maintained, the purpose of such account
and, if any, the amount held in such account on or about the date of such
report;

(v) Intentionally deleted;

(vi) Intentionally deleted;

(vii) such other reports as to the Collateral as Administrative Agent shall
reasonably request from time to time, including, but not limited to, (A) list of
outstanding accounts payable, (B) the number of prescriptions filled in the
immediately preceding month, the average dollar amount of such prescriptions
during such period, and the dollar amount of sales of prescriptions in the
preceding period and (C) reports of sales for each category of Inventory.

 

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(b) Nothing contained in any Borrowing Base Certificate shall be deemed to
limit, impair or otherwise affect the rights of Administrative Agent contained
herein and in the event of any conflict or inconsistency between the calculation
of the Borrowing Base as set forth in any Borrowing Base Certificate and as
determined by Administrative Agent in good faith, the determination of
Administrative Agent shall govern and be conclusive and binding upon Borrowers
and Guarantors. Without limiting the foregoing, Borrowers shall furnish to
Administrative Agent any information which Administrative Agent may reasonably
request regarding the determination and calculation of any of the amounts set
forth in any Borrowing Base Certificate. The Borrowing Base may be adjusted
based on the information set forth in the reports received by Administrative
Agent under Section 7.1(a)(i) above. If any Borrower’s or Guarantor’s records or
reports of the Collateral are prepared or maintained by an accounting service,
contractor, shipper or other agent, such Borrower and Guarantor hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Administrative Agent and to
follow Administrative Agent’s instructions with respect to further services at
any time that an Event of Default exists or has occurred and is continuing.

7.2 Accounts Covenants.

(a) Borrowers shall notify Administrative Agent promptly of: (i) any material
delay in any Borrower’s or performance of any of its material obligations to any
Account Debtor or the assertion of any material claims, offsets, defenses or
counterclaims by any Account Debtor, or any material disputes with Account
Debtors, or any settlement, adjustment or compromise thereof, (ii) all material
adverse information known to any Borrower or Guarantor relating to the financial
condition of any Account Debtor reasonably likely to adversely impact the
collectability or enforceability of an Account, (iii) any event or circumstance
which, to the best of any Borrower’s or Guarantor’s knowledge, would cause
Administrative Agent to consider any then existing material Accounts as no
longer constituting Eligible Accounts, (iv) any notice of a material default by
any Borrower under any of the Credit Card Agreements or of any default which
might result in the Credit Card Issuer or Credit Card Processor ceasing to make
payments or suspending payments to any Borrower, (v) any notice from any Credit
Card Issuer or Credit Card Processor that such person is ceasing or suspending,
or will cease or suspend, any present or future payments due or to become due to
any Borrower from such person, or that such person is terminating or will
terminate any of the Credit Card Agreements, and (vi) the failure of any
Borrower to comply with any material terms of the Credit Card Agreements or any
terms thereof which might result in the Credit Card Issuer or Credit Card
Processor ceasing or suspending payments to any Borrower. No credit, discount,
allowance or extension or agreement for any of the foregoing in excess of
$100,000 shall be granted to any Account Debtor without Administrative Agent’s
consent, except in the ordinary course of a Borrower’s or Guarantor’s business
in accordance with its practices and policies previously disclosed in writing to
Administrative Agent and except as set forth in the schedules delivered to
Administrative Agent pursuant to Section 7.1(a) above. So long as no Event of
Default exists or has occurred and is continuing, Borrowers and Guarantors shall
settle, adjust or compromise any claim, offset,

 

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counterclaim or dispute with any Account Debtor. At any time that an Event of
Default exists or has occurred and is continuing, Administrative Agent shall, at
its option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with Account Debtors or grant any credits,
discounts or allowances.

(b) With respect to each Account: (i) the amounts shown on any invoice delivered
to Administrative Agent or schedule thereof delivered to Administrative Agent
shall be true and complete in all material respects, (ii) no payments shall be
made thereon except payments immediately delivered to Blocked Accounts (or other
deposit accounts in the case of Medicare Accounts and Medicaid Accounts
identified to Administrative Agent that are used exclusively for handling
payments or other remittances in respect of such Accounts), in each case,
maintained in accordance with the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any Account Debtor except as reported to Administrative Agent in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of each Borrower’s business in
accordance with practices and policies previously disclosed to Administrative
Agent, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Administrative Agent in accordance with the terms of this Agreement,
(v) none of the transactions giving rise thereto will violate any applicable
foreign, Federal, State or local laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.

(c) Administrative Agent shall have the right at any time or times, in
Administrative Agent’s name or in the name of a nominee of Administrative Agent,
to verify the validity, amount or any other matter relating to any Receivables
or other Collateral, by mail, telephone, facsimile transmission or otherwise.

7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower and
Guarantor shall at all times maintain correct and accurate inventory records in
a manner consistent with its current practices as of the date hereof (except to
the extent of changes in such practices as a result of the establishment of a
reliable, consistent and accurate perpetual inventory system at the Retail
Division for pharmacy and non-perishables), (b) Borrowers and Guarantors shall,
or a third party inventory counting service on behalf of Borrowers and
Guarantors shall, conduct a physical count of the Inventory at least twice each
fiscal year as to non-perishable Inventory of the Retail Division (or on and
after the establishment of a retail perpetual inventory system for pharmacy or
non-perishables at the Retail Division that is satisfactory to Borrowers and
Administrative Agent, one (1) time each year with respect to pharmacy and/or
non-perishables, as applicable, whether through periodic cycle counts or
otherwise) and once each fiscal four (4) week period of Borrowers and Guarantors
(determined in accordance with the current accounting practices of Borrowers and
Guarantors as of the date hereof) as to the perishable Inventory of the Retail
Division, and at least once each year, whether through periodic cycle counts or
otherwise, as to the Inventory of the Distribution Division, but in each case at
any time or times as Administrative Agent may request on or after an Event of
Default, and promptly following any such physical inventory shall supply
Administrative Agent with a report in the form and with such specificity as may
be reasonably satisfactory to Administrative Agent

 

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concerning such physical count; (c) Borrowers and Guarantors shall not remove
any Inventory from the locations set forth or permitted herein, without the
prior written consent of Administrative Agent, except for sales, returns or
transfers of Inventory in the ordinary course of its business that are reported
to Administrative Agent in accordance with the terms hereof and except to move
Inventory directly from one location set forth or permitted herein to another
such location and except for Inventory shipped from the manufacturer thereof to
such Borrower or Guarantor which is in transit to the locations set forth or
permitted herein; (d) upon Administrative Agent’s request, Borrowers shall, at
their expense, (i) no more than one (1) time in any twelve (12) month period, if
Excess Availability at all times during such twelve (12) month period is greater
than an amount equal to twenty (20%) percent of the Borrowing Base, (ii) no more
than two (2) times in any twelve (12) month period, if Excess Availability at
any time during such twelve (12) month period is less than or equal to an amount
equal to twenty (20%) percent of the Borrowing Base and (iii) at any time or
times as Administrative Agent may request on or after an Event of Default or at
Administrative Agent’s own expense, in each case, deliver or cause to be
delivered to Administrative Agent written appraisals as to the Inventory in
form, scope and methodology reasonably acceptable to Administrative Agent and by
an appraiser acceptable to Administrative Agent, addressed to Administrative
Agent and Lenders and upon which Administrative Agent and Lenders are expressly
permitted to rely; (e) Borrowers and Guarantors shall produce, use, store and
maintain the Inventory with all reasonable care and caution and in accordance
with applicable standards of any insurance and in conformity with applicable
laws in all material respects (including the requirements of the Federal Fair
Labor Standards Act of 1938, as amended and all rules, regulations and orders
related thereto); (f) as between Administrative Agent and Lenders, on the one
hand, and Borrowers and Guarantors, on the other hand, each Borrower and
Guarantor assumes all responsibility and liability arising from or relating to
the production, use, sale or other disposition of the Inventory (but nothing
contained herein shall be construed as the basis for any liability of any
Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall
not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate any Borrower or Guarantor to
repurchase such Inventory; except for the right of return given to retail
customers of Borrowers in the ordinary course of business and in accordance with
the then current return policy of Borrowers; (h) Borrowers and Guarantors shall
keep the Inventory in good and marketable condition; and (i) upon Administrative
Agent’s request, Borrowers shall, at their expense, conduct through an inventory
counting service acceptable to Administrative Agent, a physical count of the
Inventory of the Retail Division in form, scope and methodology acceptable to
Administrative Agent (but only to the extent that a physical count that is
acceptable to Borrowers and Administrative Agent has not been conducted by such
inventory counting service within the immediately preceding two fiscal quarters
so long as no Default or Event of Default shall exist or have occurred or four
(4) fiscal week period of Borrowers and Guarantors (determined in accordance
with the current accounting principles of Borrowers and Guarantors as of the
date hereof) at any time a Default or Event of Default shall exist or have
occurred, the results of which shall be reported directly by such inventory
counting service to Administrative Agent and Borrowers shall promptly deliver
confirmation to Administrative Agent that appropriate adjustments have been made
to the inventory records of Borrowers to reconcile the inventory count to the
inventory records of Borrowers.

 

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7.4 Equipment and Real Property Covenants. With respect to the Equipment and
Real Property: (a) upon Administrative Agent’s request, Borrowers and Guarantors
shall, at their expense, no more than one (1) time in any twelve (12) month
period if Excess Availability at any time during such twelve (12) month period
is less than or equal to an amount equal to fifty (50%) percent of the Borrowing
Base, but at any time or times as Administrative Agent may request on or after
an Event of Default or at Administrative Agent’s own expense, deliver or cause
to be delivered to Administrative Agent written appraisals as to the Equipment
and/or the Real Property in form, scope and methodology reasonably acceptable to
Administrative Agent and by an appraiser acceptable to Administrative Agent,
addressed to Administrative Agent and upon which Administrative Agent is
expressly permitted to rely; (b) Borrowers and Guarantors shall keep the
Equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (c) Borrowers and Guarantors shall use the Equipment and
Real Property with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable laws
in all material respects; (d) the Equipment is and shall be used in the business
of Borrowers and Guarantors and not for personal, family, household or farming
use; (e) Borrowers and Guarantors shall not remove any Equipment from the
locations set forth or permitted herein, except to the extent necessary to have
any Equipment repaired, replaced or maintained in the ordinary course of its
business or to move Equipment directly from one location set forth or permitted
herein to another such location and except for the movement of motor vehicles
used by or for the benefit of such Borrower or Guarantor in the ordinary course
of business; (f) the Equipment is now and shall remain personal property and
Borrowers and Guarantors shall not permit any of the Equipment to be or become a
part of or affixed to real property (but not including for this purpose any
plumbing and electrical fixtures, heating, ventilation and air conditioning,
wall and floor coverings, walls or ceilings and other fixtures not constituting
trade fixtures); and (g) as between Administrative Agent and Lenders, on the one
hand, and Borrowers and Guarantors, on the other hand, each Borrower and
Guarantor assumes all responsibility and liability arising from or relating to
the use, sale or other disposition of the Equipment (but nothing contained
herein shall be construed as the basis for any liability of any Borrower or
Guarantor as to any third party).

7.5 Prescription Files Covenants. With respect to the Prescription Files:
(a) each Borrower and Guarantor shall at all times maintain the Prescription
Files in a manner consistent with the requirements of Federal, State and local
laws and regulations in all material respects, including all Health Care Laws,
which files and records related thereto shall be correct and accurate;
(b) Borrowers and Guarantors shall not remove any Prescription Files from the
locations set forth or permitted herein, without providing prior notice to
Administrative Agent, except for transfers of Prescription Files in the ordinary
course of its business (including at the request of customers with respect to
such customer’s own Prescription Files) and except to move Prescription Files
directly from one location set forth or permitted herein to another such
location; (c) upon Administrative Agent’s request, Borrowers shall, at their
expense, (i) no more than one (1) time in any twelve (12) month period, if
Excess Availability at all times during such twelve (12) month period is greater
than an amount equal to twenty (20%) percent of the Borrowing Base, (ii) no more
than two (2) times in any twelve (12) month period, if Excess Availability at
any time during such twelve (12) month period is less than or equal to an amount
equal to twenty (20%) percent of the Borrowing Base and (iii) at any time or
times as Administrative Agent may request on or after an Event of Default or at
Administrative Agent’s

 

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own expense, in each case, deliver or cause to be delivered to Administrative
Agent written appraisals as to the Prescription Files in form, scope and
methodology reasonably acceptable to Administrative Agent and by an appraiser
acceptable to Administrative Agent, addressed to Administrative Agent and
Lenders and upon which Administrative Agent and Lenders are expressly permitted
to rely; (d) Borrowers and Guarantors shall use, store and maintain the
Prescription Files with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including the requirements of the HIPAA, as amended and all rules, regulations
and orders related thereto) in all material respects; (e) there are no
limitations or restrictions on the rights of any Borrower or Guarantor to sell,
transfer or otherwise assign the Prescription Files to any third party so long
as such third party has the licenses required under applicable state law to
operate a pharmacy and sell products subject to a prescription; (f) each
Borrower and Guarantor assumes all responsibility and liability arising from or
relating to the use and sale of prescriptions and the maintenance and use of the
Prescription Files (but nothing contained herein shall be construed as the basis
for any liability of any Borrower or Guarantor as to any third party); and
(g) Borrowers and Guarantors shall keep the Prescription Files in good and
marketable condition.

7.6 Power of Attorney. Each Borrower and Guarantor hereby irrevocably designates
and appoints Administrative Agent (and all persons designated by Administrative
Agent) as such Borrower’s and Guarantor’s true and lawful attorney-in-fact, and
authorizes Administrative Agent, in such Borrower’s, Guarantor’s or
Administrative Agent’s name, to: (a) at any time on and after an Event of
Default exists or has occurred and is continuing (i) demand payment on
Receivables or other Collateral, (ii) enforce payment of Receivables by legal
proceedings or otherwise, (iii) exercise all of such Borrower’s or Guarantor’s
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Administrative Agent deems advisable, (v) settle, adjust, compromise,
extend or renew an Account, (vi) discharge and release any Receivable,
(vii) prepare, file and sign such Borrower’s or Guarantor’s name on any proof of
claim in bankruptcy or other similar document against an Account Debtor or other
obligor in respect of any Receivables or other Collateral, (viii) notify the
post office authorities to change the address for delivery of remittances from
Account Debtors or other obligors in respect of Receivables or other proceeds of
Collateral to an address designated by Administrative Agent, and open and
dispose of all mail addressed to such Borrower or Guarantor and handle and store
all mail relating to the Collateral; and (ix) do all acts and things which are
necessary, in Administrative Agent’s determination, to fulfill such Borrower’s
or Guarantor’s obligations under this Agreement and the other Financing
Agreements and (b) at all times that Administrative Agent has exercised its
right to instruct the depository banks at which Blocked Accounts are maintained
to transfer funds to the Administrative Agent Payment Account as provided in
Section 6.3 hereto (or at any time that any item of payment referred to below
may be received by Administrative Agent or any Lender), to (i) take control in
any manner of any item of payment in respect of Receivables or constituting
Collateral or otherwise received in or for deposit in the Blocked Accounts or
otherwise received by Administrative Agent or any Lender, (ii) have access to
any lockbox or postal box into which remittances from Account Debtors or other
obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (iii) endorse such Borrower’s or Guarantor’s name upon any items of
payment in respect of Receivables or constituting Collateral or otherwise
received by Administrative Agent and any Lender and deposit the same

 

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in Administrative Agent’s account for application to the Obligations, and (c) at
any time to (i) endorse such Borrower’s or Guarantor’s name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Receivable or any goods pertaining thereto or any other Collateral,
including any warehouse or other receipts, or bills of lading and other
negotiable or non-negotiable documents, (ii) clear Inventory the purchase of
which was financed with Letter of Credit Accommodations through U.S. Customs or
foreign export control authorities in such Borrower’s or Guarantor’s name,
Administrative Agent’s name or the name of Administrative Agent’s designee, and
to sign and deliver to customs officials powers of attorney in such Borrower’s
or Guarantor’s name for such purpose, and to complete in such Borrower’s or
Guarantor’s or Administrative Agent’s name, any order, sale or transaction,
obtain the necessary documents in connection therewith and collect the proceeds
thereof, and (iii) sign such Borrower’s or Guarantor’s name on any verification
of Receivables and notices thereof to Account Debtors or any secondary obligors
or other obligors in respect thereof. Each Borrower and Guarantor hereby
releases Administrative Agent and Lenders and their respective officers,
employees and designees from any liabilities arising from any act or acts under
this power of attorney and in furtherance thereof, whether of omission or
commission, except to the extent resulting from Administrative Agent’s or any
Lender’s own gross negligence or wilful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.

7.7 Right to Cure. Administrative Agent may, at its option, upon notice to Lead
Borrower, (a) cure any default by any Borrower or Guarantor under any material
agreement with a third party that affects the Collateral, its value or the
ability of Administrative Agent to collect, sell or otherwise dispose of the
Collateral or the rights and remedies of Administrative Agent or any Lender
therein or the ability of any Borrower or Guarantor to perform its obligations
hereunder or under any of the other Financing Agreements, (b) pay or bond on
appeal any judgment entered against any Borrower or Guarantor, (c) discharge
taxes, liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and pay any amount, incur any expense or
perform any act which, in Administrative Agent’s good faith judgment, is
necessary or appropriate to preserve, protect, insure or maintain the Collateral
and the rights of Administrative Agent and Lenders with respect thereto.
Administrative Agent may add any amounts so expended to the Obligations and
charge any Borrower’s account therefor, such amounts to be repayable by
Borrowers on demand. Administrative Agent and Lenders shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of any Borrower or
Guarantor. Any payment made or other action taken by Administrative Agent or any
Lender under this Section shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed accordingly.

7.8 Access to Premises. From time to time as requested by Administrative Agent,
at the cost and expense of Borrowers, (a) Administrative Agent or its designee
shall have complete access to all of each Borrower’s and Guarantor’s premises
during normal business hours and after notice to Parent, or at any time and
without notice to Lead Borrower if an Event of Default exists or has occurred
and is continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of each Borrower’s and Guarantor’s books and records,
including the Records, and (b) each Borrower and Guarantor shall promptly
furnish to Administrative Agent

 

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such copies of such books and records or extracts therefrom as Administrative
Agent may request, and Administrative Agent or any Lender or Administrative
Agent’s designee may use during normal business hours such of any Borrower’s and
Guarantor’s personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing for the collection of Receivables and realization of other
Collateral.

SECTION 8. REPRESENTATIONS AND WARRANTIES

Each Borrower and Guarantor hereby represents and warrants to Administrative
Agent and Lenders the following (which shall survive the execution and delivery
of this Agreement), the truth and accuracy of which are a continuing condition
of the making of Loans and providing Letter of Credit Accommodations to
Borrowers:

8.1 Corporate Existence, Power and Authority. Each Borrower and Guarantor is a
corporation or limited liability company duly organized and in good standing
under the laws of its state of organization and is duly qualified as a foreign
corporation or limited liability company and in good standing in all states or
other jurisdictions where the nature and extent of the business transacted by it
or the ownership of assets makes such qualification necessary, except for those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder (a) are all within each Borrower’s and Guarantor’s corporate or
limited liability company powers, (b) have been duly authorized, (c) are not in
contravention of law or the terms of any Borrower’s or Guarantor’s certificate
or articles of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which any Borrower or Guarantor is a
party or by which any Borrower or Guarantor or its property are bound and
(d) will not result in the creation or imposition of, or require or give rise to
any obligation to grant, any lien, security interest, charge or other
encumbrance upon any property of any Borrower or Guarantor, except in favor of
Administrative Agent. This Agreement and the other Financing Agreements to which
any Borrower or Guarantor is a party constitute legal, valid and binding
obligations of such Borrower and Guarantor enforceable in accordance with their
respective terms, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors’ rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.

8.2 Name; State of Organization; Chief Executive Office; Collateral Locations.

(a) The exact legal name as of the date hereof of each Borrower and Guarantor is
as set forth on the signature page of this Agreement and in the Information
Certificate. No Borrower or Guarantor has, during the five years prior to the
date of this Agreement, been known by or used any other corporate or fictitious
name or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its property
or assets out of the ordinary course of business, except as set forth in the
Information Certificate.

 

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(b) Each Borrower and Guarantor is as of the date hereof an organization of the
type and organized in the jurisdiction set forth in the Information Certificate.
The Information Certificate accurately sets forth the organizational
identification number of each Borrower and Guarantor or accurately states that
such Borrower or Guarantor has none and accurately sets forth the federal
employer identification number of each Borrower and Guarantor, in each case, as
of the date hereof.

(c) The chief executive office and mailing address of each Borrower and
Guarantor and each Borrower’s and Guarantor’s Records concerning Accounts are
located only at the address identified as such in Schedule 8.2 to the
Information Certificate and its only other places of business and the only other
locations of Collateral not in transit to the extent permitted herein, if any,
are the addresses set forth in Schedule 8.2 to the Information Certificate,
subject to the rights of any Borrower or Guarantor to establish new locations in
accordance with Section 9.2 below. The Information Certificate correctly
identifies any of such locations which as of the date hereof are not owned by a
Borrower or Guarantor and sets forth the owners and/or operators thereof.

8.3 Financial Statements; No Material Adverse Change. All financial statements
relating to any Borrower or Guarantor which have been or may hereafter be
delivered by any Borrower or Guarantor to Administrative Agent and Lenders have
been prepared in accordance with GAAP (except as to any interim financial
statements, to the extent such statements are subject to normal year-end
adjustments and do not include any notes) and fairly present in all material
respects the financial condition and the results of operation of such Borrower
and Guarantor at the dates and for the periods set forth therein. Except as
disclosed in any interim financial statements furnished by Borrowers and
Guarantors to Administrative Agent prior to the date of this Agreement, as of
the date hereof, there has been no act, condition or event which has had or is
reasonably likely to have a Material Adverse Effect since the date of the most
recent audited financial statements of any Borrower or Guarantor furnished by
any Borrower or Guarantor to Administrative Agent prior to the date of this
Agreement.

8.4 Priority of Liens; Title to Properties. The security interests and liens
granted to Administrative Agent under this Agreement and the other Financing
Agreements constitute a valid perfected first priority security interest in all
of the Collateral, subject only to the liens indicated on Schedule 8.4 to the
Information Certificate and the other liens permitted under Section 9.8 hereof.
Each Borrower and Guarantor has good and marketable fee simple title to or valid
leasehold interests in all of its Real Property and good, valid and merchantable
title to all of its other properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
granted to Administrative Agent and such others as are specifically listed on
Schedule 8.4 to the Information Certificate or permitted under Section 9.8
hereof.

8.5 Tax Returns. Each Borrower and Guarantor has filed, or caused to be filed,
in a timely manner all material tax returns, reports and declarations which are
required to be filed by it. All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
and Guarantor has paid or caused to be paid all material taxes due and payable
or claimed due and payable in any assessment received by it, except taxes the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued

 

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and available to such Borrower or Guarantor and with respect to which adequate
reserves have been set aside on its books. Adequate provision has been made for
the payment of all material accrued and unpaid Federal, State, county, local,
foreign and other taxes whether or not yet due and payable and whether or not
disputed.

8.6 Litigation. Except as set forth on Schedule 8.6 to the Information
Certificate, (a) there is no investigation by any Governmental Authority
pending, or to the best of any Borrower’s or Guarantor’s knowledge threatened,
against or affecting any Borrower or Guarantor, or its or their assets or
business and (b) there is no action, suit, proceeding or claim by any Person
pending, or to the best of any Borrower’s or Guarantor’s knowledge threatened,
against any Borrower or Guarantor or its or their assets or goodwill, or against
or affecting any transactions contemplated by this Agreement, in each case,
which if adversely determined against such Borrower or Guarantor has or could
reasonably be expected to have a Material Adverse Effect.

8.7 Compliance with Other Agreements and Applicable Laws.

(a) Borrowers and Guarantors are not in default in any respect under, or in
violation in any respect of the terms of, any agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound where such default or violation has or could reasonably be
expected to have a Material Adverse Effect. Borrowers and Guarantors are in
compliance with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority relating to their respective businesses,
including, without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, and all Environmental Laws where the failure to so
comply has or could reasonably be expected to have a Material Adverse Effect.

(b) Borrowers and Guarantors have obtained all permits, licenses, approvals,
consents, certificates, orders or authorizations of any Governmental Authority
required for the lawful conduct of its business (the “Permits”) where the
failure to have such Permits has or could reasonably be expected to have a
Material Adverse Effect. All of the material Permits are valid and subsisting
and in full force and effect. Except as set forth on Schedule 8.8 of the
Information Certificate, there are no actions, claims or proceedings pending or
to the best of any Borrower’s or Guarantor’s knowledge, threatened that seek the
revocation, cancellation, suspension or modification of any of the material
Permits.

8.8 Environmental Compliance.

(a) Except as set forth on Schedule 8.8 to the Information Certificate,
Borrowers, Guarantors and any Subsidiary of any Borrower or Guarantor have not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off its premises (whether or not
owned by it) in any manner that violates any applicable Environmental Law or
Permit where such violation has or could reasonably be expected to have a
Material Adverse Effect.

 

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(b) Except as set forth on Schedule 8.8 to the Information Certificate, there
has been no, and to the best of any Borrower’s or Guarantor’s knowledge there is
no pending or threatened, investigation by any Governmental Authority or any
proceeding, complaint, order, directive, claim, citation or notice by any
Governmental Authority or any other person with respect to any non-compliance
with or violation of the requirements of any Environmental Law by any Borrower
or Guarantor and any Subsidiary of any Borrower or Guarantor or the release,
spill or discharge, threatened or actual, of any Hazardous Material or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which has or could reasonably be expected to have a
Material Adverse Effect.

(c) Except as set forth on Schedule 8.8 to the Information Certificate, as of
the date hereof, Borrowers, Guarantors and their Subsidiaries have no material
liability (contingent or otherwise) in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.

8.9 Employee Benefits.

(a) Except as could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect: (i) each Plan is in compliance in
all material respects with the applicable provisions of ERISA, the Code and
other Federal or State law; and (ii) each Borrower and its ERISA Affiliates have
made all required contributions to any Plan subject to Section 412 of the Code,
and no application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code has been made with respect to any
Plan.

(b) Except as set forth on Schedule 8.9, as of the date hereof each Plan which
is intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service and to the best of any
Borrower’s or Guarantor’s knowledge, nothing has occurred which would cause the
loss of such qualification.

(c) Except as set forth on Schedule 8.9, (i) as of the date hereof, there are no
pending, or to the best of any Borrower’s or Guarantor’s knowledge, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan and (ii) there has been no non-exempt prohibited transaction
or violation of the fiduciary responsibility rules with respect to any Plan that
has in either case resulted or could reasonably be expected to result in a
Material Adverse Effect.

(d) Except as set forth on Schedule 8.9 or except as has not or could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, (i) no ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan’s assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan’s liabilities under Section 4001(a)(16) of
ERISA (provided, that, any underfunding set forth on Schedule 8.9 has not, as of
the date hereof, given rise to the requirement that any additional minimum
funding payments be made except as disclosed therein); (iii) each Borrower and
Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably
expect to incur, any liability under Title IV of ERISA with

 

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respect to any Plan (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) each Borrower and Guarantor, and their ERISA
Affiliates, have not incurred and do not reasonably expect to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) each Borrower and
Guarantor, and their ERISA Affiliates, have not engaged in a transaction that
would be subject to Section 4069 or 4212(c) of ERISA.

8.10 Bank Accounts. All of the deposit accounts, investment accounts or other
accounts in the name of or used by any Borrower or Guarantor maintained at any
bank or other financial institution are set forth on Schedule 8.10 to the
Information Certificate, subject to the right of each Borrower and Guarantor to
establish new accounts in accordance with Section 5.2 hereof.

8.11 Intellectual Property.

(a) Each Borrower and Guarantor owns or licenses or otherwise has the right to
use all Intellectual Property necessary for the operation of its business as
presently conducted. As of the date hereof, Borrowers and Guarantors do not have
any Intellectual Property registered, or subject to pending applications, in the
United States Patent and Trademark Office or any similar office or agency in the
United States, any State thereof, any political subdivision thereof or in any
other country, other than those described in Schedule 8.11 to the Information
Certificate and has not granted any licenses with respect thereto other than as
set forth in Schedule 8.11 to the Information Certificate. No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights where any such event has or
could reasonably be expected to have a Material Adverse Effect.

(b) To the best of any Borrower’s and Guarantor’s knowledge, no slogan or other
advertising device, product, process, method, substance or other Intellectual
Property or goods bearing or using any Intellectual Property presently
contemplated to be sold by or employed by any Borrower or Guarantor infringes in
any material respect as to any patent, trademark, servicemark, tradename,
copyright, license or other Intellectual Property owned by any other Person
presently and no claim or litigation is pending or threatened against or
affecting any Borrower or Guarantor contesting its right to sell or use any such
Intellectual Property where any such infringements, claims or litigation have or
could reasonably be expected to have a Material Adverse Effect. Schedule 8.11 to
the Information Certificate sets forth all of the agreements or other
arrangements of each Borrower and Guarantor pursuant to which such Borrower or
Guarantor has a license or other right to use any trademarks, logos, designs,
representations or other Intellectual Property owned by another person as in
effect on the date hereof and the dates of the expiration of such agreements or
other arrangements of such Borrower or Guarantor as in effect on the date hereof
(collectively, together with such agreements or other arrangements as may be
entered into by any Borrower or Guarantor after the date hereof, collectively,
the “License Agreements” and individually, a “License Agreement”). No trademark,
servicemark, copyright or other Intellectual Property at any time used by any
Borrower or Guarantor which is owned by another person, or owned by such
Borrower or Guarantor subject to any security interest, lien, collateral
assignment, pledge or other encumbrance in favor of any person other than
Administrative Agent, is affixed to any Eligible Inventory, except (a) to the
extent permitted under the term of the license agreements listed on Schedule
8.11 to the Information Certificate

 

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and (b) to the extent the sale of Inventory to which such Intellectual Property
is affixed is permitted to be sold by such Borrower or Guarantor under
applicable law (including the United States Copyright Act of 1976).

8.12 Subsidiaries; Affiliates; Capitalization; Solvency.

(a) Each Borrower and Guarantor does not have any direct or indirect
Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in Schedule 8.12 to the Information Certificate
and except to the extent permitted after the date hereof under Section 9.10
hereof.

(b) Each Borrower and Guarantor is the record and beneficial owner of all of the
issued and outstanding shares of Capital Stock of each of the Subsidiaries
listed on Schedule 8.12 to the Information Certificate as being owned by such
Borrower or Guarantor and as may be permitted after the date hereof under
Section 9.10 hereof.

(c) The issued and outstanding shares of Capital Stock of each Borrower (other
than Parent) and Guarantor are directly and beneficially owned and held by the
persons indicated in the Information Certificate, and in each case all of such
shares of Borrowers (other than Parent) and Guarantors have been duly authorized
and are fully paid and non-assessable, free and clear of all claims, liens,
pledges and encumbrances of any kind, except as disclosed in Schedule 8.12 of
the Information Certificate or as otherwise disclosed in Administrative Agent in
writing prior to the date hereof.

(d) Borrowers and Guarantors (taken as a whole) are and will continue to be
Solvent after the creation of the Obligations, the security interests of
Administrative Agent and the other transactions contemplated hereunder.

8.13 Labor Disputes.

(a) Set forth on Schedule 8.13 to the Information Certificate is a list
(including dates of termination) of all collective bargaining or similar
agreements between or applicable to each Borrower and Guarantor and any union,
labor organization or other bargaining agent in respect of the employees of any
Borrower or Guarantor on the date hereof.

(b) There is no significant unfair labor practice complaint pending against any
Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s
knowledge, threatened against it, before the National Labor Relations Board, and
no significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is pending on the date hereof against
any Borrower or Guarantor or, to best of any Borrower’s or Guarantor’s
knowledge, threatened against it which has or could reasonably be expected to
have a Material Adverse Effect, and no significant strike, labor dispute,
slowdown or stoppage is pending against any Borrower or Guarantor or, to the
best of any Borrower’s or Guarantor’s knowledge, threatened against any Borrower
or Guarantor which has or could reasonably be expected to have a Material
Adverse Effect.

 

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8.14 Restrictions on Subsidiaries. Except for restrictions contained in this
Agreement or any other agreement with respect to Indebtedness of any Borrower or
Guarantor permitted hereunder as in effect on the date hereof, there are no
contractual or consensual restrictions on any Borrower or Guarantor or any of
its Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash
or other assets (i) between any Borrower or Guarantor and any of its or their
Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor or
(b) the ability of any Borrower or Guarantor or any of its or their Subsidiaries
to incur Indebtedness or grant security interests to Administrative Agent or any
Lender in the Collateral.

8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets forth
all Material Contracts to which any Borrower or Guarantor is a party or is bound
as of the date hereof. Borrowers and Guarantors have delivered true, correct and
complete copies of such Material Contracts to Administrative Agent on or before
the date hereof. Borrowers and Guarantors are not in breach or in default in any
material respect of or under any Material Contract and have not received any
notice of the intention of any other party to terminate any Material Contract.

8.16 Credit Card Agreements. Set forth in Schedule 8.16 hereto is a correct and
complete list of all of the Credit Card Agreements and all other agreements,
documents and instruments existing as of the date hereof between or among any
Borrower, any of its Affiliates, the Credit Card Issuers, the Credit Card
Processors and any of their Affiliates. The Credit Card Agreements constitute
all of such agreements necessary for each Borrower to operate its business as
presently conducted with respect to credit cards and debit cards and no
Receivables of any Borrower arise from purchases by customers of Inventory with
credit cards or debit cards, other than those which are issued by Credit Card
Issuers with whom such Borrower has entered into one of the Credit Card
Agreements set forth on Schedule 8.16 hereto or with whom Borrower has entered
into a Credit Card Agreement in accordance with Section 9.15 hereof. Each of the
Credit Card Agreements constitutes the legal, valid and binding obligations of
the Borrower that is party thereto and to the best of each Borrower’s and
Guarantor’s knowledge, the other parties thereto, enforceable in accordance with
their respective terms and is in full force and effect. No default or event of
default, or act, condition or event which after notice or passage of time or
both, would constitute a default or an event of default under any of the Credit
Card Agreements exists or has occurred. Each Borrower and the other parties
thereto have complied in all material respects with all of the terms and
conditions of the Credit Card Agreements to the extent necessary for such
Borrower to be entitled to receive all payments thereunder. Borrowers have
delivered, or caused to be delivered to Administrative Agent, true, correct and
complete copies of all of the Credit Card Agreements in effect as of the date
hereof.

8.17 HIPAA Compliance.

(a) To the extent that and for so long as any Borrower or Guarantor is a
“covered entity” within the meaning of HIPAA, such Borrower or Guarantor (i) has
undertaken or will promptly undertake all appropriate surveys, audits,
inventories, reviews, analyses and/or assessments (including any necessary risk
assessments) of all areas of its business and operations required by HIPAA;
(ii) has developed or will promptly develop an appropriate plan and time line
for becoming HIPAA Compliant (a “HIPAA Compliance Plan”); and (iii) has
implemented or will implement those provisions of such HIPAA Compliance Plan in
all material respects necessary to ensure that such Borrower or Guarantor is or
becomes HIPAA Compliant.

 

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(b) For purposes hereof, “HIPAA Compliant’ shall mean that a Borrower or
Guarantor (i) is or will be in compliance in all material respects with each of
the applicable requirements of the so-called “Administrative Simplification”
provisions of HIPAA on and as of each date that any part thereof, or any final
rule or regulation thereunder, becomes effective in accordance with its or their
terms, as the case may be (each such date, a “HIPAA Compliance Date”) and
(ii) is not and could not reasonably be expected to become, as of any date
following any such HIPAA Compliance Date, the subject of any civil or criminal
penalty, process, claim, action or proceeding, or any administrative or other
regulatory review, survey, process or proceeding (other than routine surveys or
reviews conducted by any government health plan or other accreditation entity)
that could result in any of the foregoing or that has or could reasonably be
expected to have a Material Adverse Effect.

(c) Schedule 8.17 hereto sets forth a complete list of all “business associate
agreements” (as such term is defined in HIPAA) that any Borrower or Guarantor
has entered into with any person as of the date hereof.

8.18 Compliance with Health Care Laws. Without limiting the generality of
Sections 8.7 or 8.17, or any other representation or warranty made herein or in
any of the other Financing Agreements:

(a) Each Borrower and Guarantor is in compliance in all material respects with
all applicable Health Care Laws, including all Medicare and Medicaid program
rules and regulations applicable to them. Without limiting the generality of the
foregoing, no Borrower or Guarantor has received notice by a Governmental
Authority of any violation of any provisions of the Medicare and Medicaid
Anti-Fraud and Abuse or Anti-Kickback Amendments of the Social Security Act
(presently codified in Section 1128(B)(b) of the Social Security Act) or the
Medicare and Medicaid Patient and Program Protection Act of 1987.

(b) Each Borrower and Guarantor has maintained in all material respects all
records required to be maintained by the Joint Commission on Accreditation of
Healthcare Organizations, the Food and Drug Administration, Drug Enforcement
Agency and State Boards of Pharmacy and the Federal and State Medicare and
Medicaid programs as required by the Health Care Laws each Borrower and
Guarantor and has all necessary permits, licenses, franchises, certificates and
other approvals or authorizations of Governmental Authority as are required
under applicable Health Care Laws.

(c) Each Borrower and Guarantor who is a Certified Medicare Provider or
Certified Medicaid Provider has in a timely manner filed all requisite cost
reports, claims and other reports required to be filed in connection with all
Medicare and Medicaid programs due on or before the date hereof, all of which
are complete and correct in all material respects. There are no known claims,
actions or appeals pending before any Third Party Payor or Governmental
Authority, including without limitation, any Fiscal Intermediary, the Provider
Reimbursement Review Board or the Administrator of the Centers for Medicare and
Medicaid Services, with respect to any Medicare or Medicaid cost reports or
claims filed by any Borrower or Guarantor on or

 

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before the date hereof. There currently exist no restrictions, deficiencies,
required plans of correction actions or other such remedial measures with
respect to Federal and State Medicare and Medicaid certifications or licensure.

(d) Schedule 8.18 hereto sets forth an accurate, complete and current list of
all participation agreements of any Borrower or Guarantor with health
maintenance organizations, insurance programs, preferred provider organizations
and other Third Party Payors and all such agreements are in full force and
effect and no material default exists thereunder.

8.19 Interrelated Businesses. Borrowers and Guarantors make up a related
organization of various entities constituting an overall economic and business
enterprise such that any benefit from the Loans or other financial
accommodations hereunder received by any one of them benefits the others.
Borrowers and Guarantors render services to or for the benefit of the other
Borrowers and/or Guarantors purchase or sell and supply goods to or from or for
the benefit of the others, make loans, advances and provide other financial
accommodations to or for the benefit of the other Borrowers and Guarantors and
provide administrative, marketing, payroll and management services to or for the
benefit of the other Borrowers and Guarantors, as the case may be. Borrowers and
Guarantors have the same chief executive office, certain centralized accounting
and legal services, certain common officers and directors and generally do not
provide consolidating financial statements to creditors.

8.20 Notices from Farm Products Sellers, etc.

(a) Each Borrower has not, within the one (1) year period prior to the date
hereof, received any written notice pursuant to the applicable provisions of the
PSA, PACA, the Food Security Act, the UCC or any other applicable local laws
from (i) any Farm Products Seller or (ii) any lender to any Farm Products Seller
or any other Person with a security interest in the assets of any Farm Products
Seller or (iii) the Secretary of State (or equivalent official) or other
Governmental Authority of any State, Commonwealth or political subdivision
thereof in which any Farm Products purchased by such Borrower are produced, in
any case advising or notifying such Borrower of the intention of such Farm
Products Seller or other Person to preserve the benefits of any trust applicable
to any assets of any Borrower established in favor of such Farm Products Seller
or other Person under the provisions of any law or claiming a security interest
in or lien upon or other claim or encumbrance with respect to any perishable
agricultural commodity or any other Farm Products which may be or have been
purchased by a Borrower or any related or other assets of such Borrower (all of
the foregoing, together with any such notices as any Borrower may at any time
hereafter receive, collectively, the “Food Security Act Notices”).

(b) No Borrower is a “live poultry dealer” (as such term is defined in the PSA)
or otherwise purchases or deals in live poultry of any type whatsoever.
Borrowers and Guarantors do not purchase livestock pursuant to cash sales as
such term is defined in the PSA. Each Borrower is not engaged in, and shall not
engage in, raising, cultivating, propagating, fattening, grazing or any other
farming, livestock or aquacultural operations.

8.21 OFAC. Neither any Borrower, any Guarantor nor any of their Subsidiaries is
in violation of any of the country or list based economic and trade sanctions
administered and

 

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enforced by OFAC. Neither any Borrower, any Guarantor nor any of their
Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its
assets located in Sanctioned Entities, or (c) derives revenues from investments
in, or transactions with Sanctioned Persons or Sanctioned Entities. No proceeds
of any loan made hereunder will be used to fund any operations in, finance any
investments or activities in, or make any payments to, a Sanctioned Person or a
Sanctioned Entity.

8.22 Patriot Act. To the extent applicable, each Borrower and Guarantor is in
compliance, in all material respects, with the (a) Trading with the Enemy Act,
as amended, and each of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any
other enabling legislation or executive order relating thereto, and (b) Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”).

8.23 Accuracy and Completeness of Information. All information furnished by or
on behalf of any Borrower or Guarantor in writing to Administrative Agent or any
Lender in connection with this Agreement or any of the other Financing
Agreements or any transaction contemplated hereby or thereby, including all
information on the Information Certificate is true and correct in all material
respects on the date as of which such information is dated or certified and does
not omit any material fact necessary in order to make such information not
misleading; provided, that, with respect to projected financial information,
Borrowers and Guarantors represent only that such information is prepared in
good faith based upon assumptions believed to be reasonable.

8.24 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Administrative Agent and Lenders on the date of each
additional borrowing or other credit accommodation hereunder (except to the
extent that such representations and warranties expressly relate to an earlier
date) and shall be conclusively presumed to have been relied on by
Administrative Agent and Lenders regardless of any investigation made or
information possessed by Administrative Agent or any Lender. The representations
and warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which any Borrower or Guarantor shall now or
hereafter give, or cause to be given, to Administrative Agent or any Lender.

SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS

9.1 Maintenance of Existence.

(a) Each Borrower and Guarantor shall at all times (i) preserve, renew and keep
in full force and effect its corporate or limited liability company existence
and rights and franchises with respect thereto and (ii) maintain in full force
and effect all licenses, trademarks, tradenames, approvals, authorizations,
leases, contracts and Permits necessary to carry on the business as presently
conducted or as conducted after the date hereof, except as to any Borrower or
Guarantor other than Parent as permitted in Section 9.7 hereto and except, as to
clause (ii) only, where the failure to do so, individually or in the aggregate,
has or could reasonably be expected to have a Material Adverse Effect.

 

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(b) No Borrower or Guarantor shall change its name unless each of the following
conditions is satisfied: (i) Administrative Agent shall have received not less
than fifteen (15) days prior written notice from Lead Borrower of such proposed
change in its corporate or limited liability company name, which notice shall
accurately set forth the new name; and (ii) Administrative Agent shall have
received a copy of the amendment to the Certificate of Incorporation or Articles
of Incorporation (or Certificate of Formation or other organizational document
as applicable) of such Borrower or Guarantor providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation or
organization of such Borrower or Guarantor as soon as it is available.

(c) No Borrower or Guarantor shall change its chief executive office or its
mailing address or organizational identification number (or if it does not have
one, shall not acquire one) unless Administrative Agent shall have received not
less than thirty (30) days’ prior written notice from Lead Borrower of such
proposed change, which notice shall set forth such information with respect
thereto as Administrative Agent may in good faith require and Administrative
Agent shall have received such agreements as Administrative Agent may reasonably
require in connection therewith. No Borrower or Guarantor shall change its type
of organization, jurisdiction of organization or other legal structure, except
as to any Borrower (other than Parent) to the extent permitted in Section 9.7
hereof and in any event after not less than thirty (30) days prior written
notice to Administrative Agent.

9.2 New Collateral Locations. Each Borrower and Guarantor may only open any new
location within the continental United States provided such Borrower or
Guarantor (a) gives Administrative Agent written notice of the opening of any
such new location concurrently at the time of the delivery of the next Borrowing
Base Certificate required to be delivered pursuant to Section 7.1(a)(ii) hereof
and (b) executes and delivers, or causes to be executed and delivered, to
Administrative Agent such agreements, documents, and instruments as
Administrative Agent may deem reasonably necessary or desirable to protect its
interests in the Collateral at such location.

9.3 Compliance with Laws, Regulations, Etc.

(a) Each Borrower and Guarantor shall, and shall cause any Subsidiary to, at all
times, comply in all material respects with all laws, rules, regulations,
licenses, approvals, orders and other Permits applicable to it and duly observe
all requirements of any foreign, Federal, State or local Governmental Authority,
including ERISA, the Code, the Occupational Safety and Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, all Health Care Laws
and all Environmental Laws where the failure to so comply has or could
reasonably be expected to have a Material Adverse Effect.

(b) Each Borrower and Guarantor shall give written notice to Administrative
Agent promptly after any Borrower’s or Guarantor’s receipt of any notice of, or
any Borrower’s or Guarantor’s otherwise obtaining knowledge of, (i) any release,
spill or discharge, threatened or actual, of any Hazardous Material at or from
its premises (whether or not owned by it) other than as permitted under any
applicable Environmental Law or other occurrence that constitutes a violation in
any material respect of any Environmental Law at any such premises or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice from or on behalf

 

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of any Governmental Authority with respect to: (A) any material non-compliance
with or violation of any Environmental Law by any Borrower or Guarantor or
(B) the release, spill or discharge, threatened or actual, of any Hazardous
Material other than as permitted under any applicable Environmental Law. Upon
the request of Administrative Agent, copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by such Borrower or
Guarantor to Administrative Agent. Each Borrower and Guarantor shall take prompt
action to respond to any material non-compliance with any of the Environmental
Laws and shall keep Administrative Agent reasonably informed regarding the
status of such response.

(c) Without limiting the generality of the foregoing, whenever Administrative
Agent reasonably determines that there is material non-compliance, or any
condition that requires any action by or on behalf of any Borrower or Guarantor
in order to avoid any material non-compliance, with any Environmental Law,
Borrowers shall, at Administrative Agent’s request and Borrowers’ expense:
(i) cause an independent environmental engineer reasonably acceptable to
Administrative Agent to conduct such tests of the site where material
non-compliance or alleged material non-compliance with such Environmental Laws
has occurred as to such material non-compliance and prepare and deliver to
Administrative Agent a report as to such material non-compliance setting forth
the results of such tests, a proposed plan for responding to any environmental
problems described therein, and an estimate of the costs thereof and
(ii) provide to Administrative Agent a supplemental report of such engineer
whenever the scope of such material non-compliance, or such Borrower’s or
Guarantor’s response thereto or the estimated costs thereof, shall change in any
material respect.

(d) Each Borrower and Guarantor shall indemnify and hold harmless Administrative
Agent and Lenders and their respective directors, officers, employees, agents,
invitees, representatives, successors and assigns, from and against any and all
losses, claims, damages, liabilities, costs, and expenses (including reasonable
attorneys’ fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of any Borrower or
Guarantor and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.

9.4 Payment of Taxes and Claims. Each Borrower and Guarantor shall, and shall
cause any Subsidiary to, duly pay and discharge when due all material taxes,
assessments, contributions and governmental charges upon or against it or its
properties or assets, except for taxes, assessments, contributions and
governmental charges the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower,
Guarantor or Subsidiary, as the case may be, and with respect to which adequate
reserves have been set aside on its books and Administrative Agent may, at its
option, establish any Reserves in respect thereof to the extent that such taxes
give rise to a security interest, lien or other claim that is pari passu or has
priority over the security interests of Administrative Agent or that would
otherwise impair the ability of Administrative Agent to realize upon the
Collateral.

 

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9.5 Insurance.

(a) Each Borrower and Guarantor shall, and shall cause any Subsidiary to, at all
times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be reasonably satisfactory
to Administrative Agent as to form, amount and insurer. Borrowers and Guarantors
shall furnish certificates, policies or endorsements to Administrative Agent as
Administrative Agent shall reasonably require as proof of such insurance, and,
if any Borrower or Guarantor fails to do so, Administrative Agent is authorized,
but not required, to obtain such insurance at the expense of Borrowers. All
policies shall provide for at least thirty (30) days prior written notice to
Administrative Agent of any cancellation or reduction of coverage and that
Administrative Agent may act as attorney for each Borrower and Guarantor in
obtaining (if any Borrower or Guarantor fails to do so), and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrowers and Guarantors shall cause
Administrative Agent to be named as a loss payee and an additional insured (but
without any liability for any premiums) under such insurance policies and
Borrowers and Guarantors shall obtain non-contributory lender’s loss payable
endorsements to all insurance policies in form and substance satisfactory to
Administrative Agent. Such lender’s loss payable endorsements shall specify that
the proceeds of such insurance shall be payable to Administrative Agent as its
interests may appear and further specify that Administrative Agent and Lenders
shall be paid regardless of any act or omission by any Borrower, Guarantor or
any of its or their Affiliates. Without limiting any other rights of
Administrative Agent or Lenders, any insurance proceeds received by
Administrative Agent at any time may be applied to payment of the Obligations,
whether or not then due, in any order and in such manner as Administrative Agent
may determine. Upon application of such proceeds to the Loans, Loans may be
available subject and pursuant to the terms hereof to be used for the costs of
repair or replacement of the Collateral lost or damages resulting in the payment
of such insurance proceeds.

(b) If any portion of any Collateral is at any time located in an area
identified by the Federal Emergency Management Agency (or any successor agency)
as a “flood hazard area” with respect to which flood insurance has been made
available under any of the Flood Insurance Laws, then Borrowers shall (i) with
respect to such Collateral maintain with responsible and reputable insurance
companies acceptable to Administrative Agent, flood insurance in an amount and
otherwise sufficient to comply with all applicable rules and regulations
promulgated pursuant to the Flood Insurance Laws and (ii) deliver to
Administrative Agent evidence of such compliance in form and substance
reasonably acceptable to Administrative Agent. All premiums on any of the
insurance referred to in this Section 9.5(b) shall be paid when due by Borrowers
and if requested by Administrative Agent, summaries of the policies shall be
provided to Administrative Agent annually or as it may otherwise request.
Without limiting the rights of Administrative Agent provided for above, if
Borrowers fail to obtain or maintain any insurance required under the Flood
Insurance Laws, Administrative Agent may obtain it at Borrowers’ expense. By
purchasing any of the insurance referred to in this Section 9.5(b),
Administrative Agent shall not be deemed to have waived any Default or Event of
Default arising from Borrowers’ failure to maintain such insurance or pay any
such premiums in respect thereof.

 

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9.6 Financial Statements and Other Information.

(a) Each Borrower and Guarantor shall, and shall cause any Subsidiary to, keep
proper books and records of all dealings or transactions of or in relation to
the Collateral and the business of such Borrower, Guarantor and its Subsidiaries
in accordance with GAAP. Borrowers and Guarantors shall furnish to
Administrative Agent and Lenders within a reasonable time all such financial and
other information as Administrative Agent shall reasonably request relating to
the Collateral and the assets, business and operations of Borrowers and
Guarantors, and Borrower shall notify the auditors and accountants of Borrowers
and Guarantors that Administrative Agent is authorized to obtain such
information directly from them; provided, that, so long as no Default or Event
of Default shall exist or have occurred and be continuing, Administrative Agent
shall not exercise its right under this Section 9.6 to contact the accountants
and auditors directly to obtain information from them not relating to the
Collateral without the prior approval of Lead Borrower, which approval shall not
be unreasonably withheld, conditioned or delayed. Without limiting the
foregoing, Borrowers and Guarantors shall furnish or cause to be furnished to
Administrative Agent, the following: (i) within thirty (30) days after the end
of each fiscal four (4) week period (or forty-five (45) days after the end of
each fiscal quarter), unaudited consolidated financial statements (including in
each case balance sheets, statements of income and loss, statements of cash
flows, and statements of shareholders’ equity), and unaudited consolidating
financial statements (including balance sheets and statements of income and
loss), all in reasonable detail and substantially in the form of Exhibit D-1
hereto, fairly presenting the financial position and the results of the
operations of Parent and its Subsidiaries as of the end of and through such
fiscal four (4) week period, certified to be correct by the chief financial
officer, corporate treasurer or vice president of finance of Parent, subject to
normal year-end adjustments and no footnotes and accompanied by a compliance
certificate substantially in the form of Exhibit E hereto, along with a schedule
in a form satisfactory to Administrative Agent in good faith of the calculations
used in determining, as of the end of such four (4) week period, whether
Borrowers and Guarantors are in compliance with the covenant set forth in
Section 9.20 of this Agreement for such fiscal four (4) week period and
(ii) within ninety (90) days after the end of each fiscal year, audited
consolidated financial statements of Parent and its Subsidiaries (including in
each case balance sheets, statements of income and loss, statements of cash
flows, and statements of shareholders’ equity) and unaudited consolidating
financial statements (including balance sheets and statements of income and
loss), and the accompanying notes thereto, all in reasonable detail and
substantially in the form of Exhibit D-2 hereto, fairly presenting in all
material respects the financial position and the results of the operations of
Parent and its Subsidiaries as of the end of and for such fiscal year, together
with the unqualified opinion of independent certified public accountants with
respect to the audited consolidated financial statements, which accountants
shall be Deloitte & Touche LLP, another nationally recognized independent
accounting firm selected by Borrowers and acceptable to Administrative Agent or
a regional independent accounting firm selected by Borrowers and acceptable to
Administrative Agent, that such audited consolidated financial statements have
been prepared in accordance with GAAP, and present fairly in all material
respects the results of operations and financial condition of Parent and its
Subsidiaries as of the end of and for the fiscal year then ended. All references
to a “fiscal four (4) week period” herein or otherwise in this Agreement or any
of the other Financing Agreements shall mean such four (4) or five (5) week
periods as calculated in accordance with the current accounting practices of
Borrowers and Guarantors as of the date hereof.

 

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(b) Borrowers and Guarantors shall promptly notify Administrative Agent in
writing of the details of (i) any loss, damage, investigation, action, suit,
proceeding or claim relating to Collateral having a value of more than
$5,000,000, or which if adversely determined would result in a Material Adverse
Effect, (ii) any order, judgment or decree in excess of $10,000,000 that shall
have been entered against any Borrower or Guarantor any of its or their
properties or assets, (iv) any notification of a material violation of laws or
regulations received by any Borrower or Guarantor, (v) any ERISA Event, and
(vi) the occurrence of any Default or Event of Default.

(c) Borrowers and Guarantors shall promptly after the sending or filing thereof
furnish or cause to be furnished to Administrative Agent copies of all reports
which Parent sends to its stockholders generally and copies of all reports and
registration statements which any Borrower or Guarantor files with the
Securities and Exchange Commission, any national securities exchange or the
National Association of Securities Dealers, Inc.

(d) Borrowers and Guarantors shall furnish or cause to be furnished to
Administrative Agent such budgets, forecasts, projections and other information
respecting the Collateral and the business of Borrowers and Guarantors, as
Administrative Agent may, from time to time, reasonably request. Subject to the
terms of Section 13.5 hereof, Administrative Agent is hereby authorized to
deliver a copy of any financial statement or any other information relating to
the business of Borrowers and Guarantors to any court or other Governmental
Authority or to any Lender or Participant or prospective Lender or Participant
or any Affiliate of any Lender or Participant. Each Borrower and Guarantor
hereby irrevocably authorizes and directs all accountants or auditors to deliver
to Administrative Agent, at Borrowers’ expense, upon Administrative Agent’s
request, copies of the financial statements of any Borrower and Guarantor and
any reports or management letters prepared by such accountants or auditors on
behalf of any Borrower or Guarantor and to disclose to Administrative Agent and
Lenders upon Administrative Agent’s request such information as they may have
regarding the business of any Borrower and Guarantor. So long as no Default or
Event of Default shall exist or have occurred and be continuing, Administrative
Agent shall not exercise its right under this Section 9.6 to contact the
accountants and auditors directly to obtain information from them not relating
to the Collateral without the prior approval of Lead Borrower, which approval
shall not be unreasonably withheld, conditioned or delayed. Any documents,
schedules, invoices or other papers delivered to Administrative Agent or any
Lender may be destroyed or otherwise disposed of by Administrative Agent or such
Lender one (1) year after the same are delivered to Administrative Agent or such
Lender, except as otherwise designated by Lead Borrower to Administrative Agent
or such Lender in writing.

9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each Borrower and
Guarantor shall not, and shall not permit any Subsidiary to, directly or
indirectly,

(a) merge into or with or consolidate with any other Person or permit any other
Person to merge into or with or consolidate with it except that any Borrower may
merge with and into or consolidate with any other Borrower and any Guarantor may
merge with and into or

 

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consolidate with any Borrower, provided, that, each of the following conditions
is satisfied as determined by Administrative Agent in good faith:
(i) Administrative Agent shall have received not less than ten (10) Business
Days’ prior written notice of the intention of such Subsidiaries to so merge or
consolidate, which notice shall set forth in reasonable detail satisfactory to
Administrative Agent, the persons that are merging or consolidating, which
person will be the surviving entity, the locations of the assets of the persons
that are merging or consolidating, and the material agreements and documents
relating to such merger or consolidation, (ii) Administrative Agent shall have
received such other information with respect to such merger or consolidation as
Administrative Agent may reasonably request, (iii) as of the effective date of
the merger or consolidation and after giving effect thereto, no Default or Event
of Default shall exist or have occurred, (iv) Administrative Agent shall have
received, true, correct and complete copies of all agreements, documents and
instruments relating to such merger or consolidation, including, but not limited
to, the certificate or certificates of merger to be filed with each appropriate
Secretary of State (with a copy as filed promptly after such filing), (v) the
surviving corporation shall expressly confirm, ratify and assume the Obligations
and the Financing Agreements to which it is a party in writing, in form and
substance satisfactory to Administrative Agent, and Borrowers and Guarantors
shall execute and deliver such other agreements, documents and instruments as
Administrative Agent may request in connection therewith and (v) to the extent a
Guarantor is merging with and into or consolidating with a Borrower, the
Borrower shall be the surviving corporation;

(b) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose
of any Capital Stock, or Indebtedness owed to it, to any other Person or any of
its assets to any other Person, except for

(i) sales of Inventory in the ordinary course of business,

(ii) the sale or other disposition of Equipment (including worn-out or obsolete
Equipment or Equipment no longer used or useful in the business of any Borrower
or Guarantor) so long as such sales or other dispositions do not involve
Equipment having an aggregate fair market value in excess of $2,500,000 for all
such Equipment disposed of in any fiscal year of Borrowers or as Administrative
Agent may otherwise agree, and

(iii) the issuance and sale by any Borrower or Guarantor of Capital Stock of
such Borrower or Guarantor after the date hereof; provided, that,
(A) Administrative Agent shall have received not less than ten (10) Business
Days’ prior written notice of such issuance and sale by such Borrower or
Guarantor, which notice shall specify the parties to whom such shares are to be
sold, the terms of such sale, the total amount which it is anticipated will be
realized from the issuance and sale of such stock and the net cash proceeds
which it is anticipated will be received by such Borrower or Guarantor from such
sale, (B) such Borrower or Guarantor shall not be required to pay any cash
dividends or repurchase or redeem such Capital Stock or make any other payments
in respect thereof, except as otherwise permitted in Section 9.11 hereof,
(C) the terms of such Capital Stock, and the terms and conditions of the
purchase and sale thereof, shall not include any terms that include any
limitation on the right of any Borrower to request or receive Loans or Letter of
Credit Accommodations or the right of any Borrower and Guarantor to amend or
modify any of the terms and conditions of this Agreement or any of the other
Financing Agreements or otherwise in any way relate to or affect the
arrangements of Borrowers

 

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and Guarantors with Administrative Agent and Lenders or are more restrictive or
burdensome to any Borrower or Guarantor than the terms of any Capital Stock in
effect on the date hereof, (D) except as Administrative Agent may otherwise
agree in writing, all of the Net Proceeds of the sale and issuance of such
Capital Stock shall be paid to Administrative Agent for application to the
Obligations in such order and manner as Administrative Agent may determine and
(E) as of the date of such issuance and sale and after giving effect thereto, no
Default or Event of Default shall exist or have occurred,

(iv) the issuance of Capital Stock of any Borrower or Guarantor consisting of
common stock pursuant to an employee stock option or grant or similar equity
plan (including the Associate Stock Purchase Plan and the Restricted Stock Plan
of Parent) or 401(k) plans of such Borrower or Guarantor for the benefit of its
employees, directors and consultants, provided, that, in no event shall such
Borrower or Guarantor be required to issue, or shall such Borrower or Guarantor
issue, Capital Stock pursuant to such stock plans or 401(k) plans which would
result in a Change of Control or other Event of Default,

(v) sales or other dispositions by any Borrower of assets in connection with the
closing or sale of a retail store location of such Borrower in the ordinary
course of such Borrower’s business which consist of leasehold interests in the
premises of such store (including the subleasing of the leasehold interest of
such Borrower in such premises), the bulk sale of Inventory, Equipment and
fixtures located at such premises to the purchaser of the leasehold interests
and the books and records relating exclusively and directly to the operations of
such store; provided, that, as to each and all such sales and closings, (A) on
the date of, and after giving effect to, any such closing or sale, the number of
retail store locations that had been operated by Borrowers that are closed or
sold by Borrowers in any fiscal year shall not be greater than twenty
(20%) percent of the number of retail stores operated by Borrowers as of the end
of the immediately preceding fiscal year, (B) Administrative Agent shall have
received not less than ten (10) Business Days prior written notice of such sale
or closing, which notice shall set forth in reasonable detail satisfactory to
Administrative Agent, the parties to such sale or other disposition, the assets
to be sold or otherwise disposed of, the purchase price and the manner of
payment thereof and such other information with respect thereto as
Administrative Agent may request, (C) as of the date of such sale or other
disposition and after giving effect thereto, no Event of Default shall exist or
have occurred and be continuing, (D) such sale shall be on commercially
reasonable prices and terms in a bona fide arm’s length transaction with a
Person that is not an Affiliate, (E) as of the date of any such sale or other
disposition and after giving effect thereto, the Excess Availability shall have
been not less than $20,000,000 for each of the immediately preceding ten
(10) consecutive days and as of the date of any such sale or other disposition
and after giving effect thereto, the Excess Availability shall be not less than
$20,000,000, and (F) any and all Net Proceeds payable or delivered to such
Borrower in respect of such sale or other disposition shall be paid or
delivered, or caused to be paid or delivered, to Administrative Agent in
accordance with the terms of this Agreement for application to the Obligations
in such order and manner as Administrative Agent may determine,

(vi) the sale (including a Sale and Lease-Back Transaction) by Borrowers of
Eligible Real Property; provided, that:

 

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(A) as to any such sale or Sale and Lease-Back Transaction, each of the
following conditions is satisfied: (1) the aggregate amount of the fair market
value of all such Eligible Real Property disposed of pursuant to both this
Section 9.7(b)(vi) and Section 9.7(b)(vii) below since June 8, 2012, shall not
exceed $75,000,000, (2) as of the date of any such sale or sale and leaseback
and after giving effect thereto, no Default or Event of Default shall exist or
have occurred, (3) on the date of the consummation of any such disposition, all
of the Net Proceeds of any such disposition shall be remitted to Administrative
Agent for application to the Obligations in such order and manner as
Administrative Agent shall determine, which Net Proceeds as to any Eligible Real
Property shall be not less than the amount of Fixed Asset Availability provided
in respect of any such Eligible Real Property so disposed of, (4) the Fixed
Asset Availability in respect of Eligible Real Property as set forth in clause
(a) of the definition of “Fixed Asset Availability” shall be reduced by the
amount of Fixed Asset Availability provided in respect of any such Eligible Real
Property, (5) Administrative Agent shall have received true, correct and
complete copies of all agreements, documents and instruments related to any such
sale or Sale and Lease-Back Transaction, (6) with respect to any such Sale and
Lease-Back Transaction, the lease contemplated by such Sale and Lease-Back
Transaction is executed within one-hundred and eighty (180) days of the sale of
such Eligible Real Property, and (7) all consideration delivered or payable to
any Borrower or Guarantor in respect of such disposition, including all amounts
at any time payable to any Borrower or Guarantor, and all rights, benefits and
remedies of any Borrower and Guarantor pursuant to any agreement, document or
instrument related to any such disposition, is and shall continue at all times
to be subject to the valid and enforceable, first priority perfected security
interest and lien of Administrative Agent, and Borrowers and Guarantors shall
take such other and further actions as may be required hereunder with respect to
any such consideration, and

(B) upon the satisfaction of each of the conditions set forth in clause
(A) above, including, but not limited to, the receipt by Administrative Agent of
the Net Proceeds from such sale or Sale and Lease-Back Transaction in
immediately available funds in the Administrative Agent Payment Account,
Administrative Agent shall, at Borrowers’ expense, (1) release the security
interest, mortgage and lien of Administrative Agent in and upon such Eligible
Real Property and (2) execute and deliver to Lead Borrower a release instrument
with respect to such Eligible Real Property, in form and substance satisfactory
to Administrative Agent;

(vii) the sale (including a Sale and Lease-Back Transaction) by Borrowers of
Real Property (other than Eligible Real Property); provided, that:

(A) as to any such sale or Sale and Lease-Back Transaction, each of the
following conditions is satisfied: (1) the aggregate amount of the fair market
value of all such Real Property (other than Eligible Real Property) disposed of
pursuant to both this Section 9.7(b)(vii) and Section 9.7(b)(vi) above since
June 8, 2012, shall not exceed $75,000,000, (2) as of the date of any such sale
or sale and leaseback and after giving effect thereto, no Default or Event of
Default shall exist or have occurred, (3) Borrowers and Guarantors shall cause
all of the Net Proceeds at any time payable to any Borrower or Guarantor
pursuant to any agreement, document or instrument related to the such
disposition to be paid by the other party or parties thereto directly to
Administrative Agent for application to the Obligations in such order and

 

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manner as Administrative Agent shall determine, (4) Administrative Agent shall
have received true, correct and complete copies of all agreements, documents and
instruments related to any such sale or Sale and Lease-Back Transaction,
(5) with respect to any such Sale and Lease-Back Transaction, the lease
contemplated by such Sale and Lease-Back Transaction is executed within
one-hundred and eighty (180) days of the sale of such Real Property, and (6) all
consideration delivered or payable to any Borrower or Guarantor in respect of
such disposition, including all amounts at any time payable to any Borrower or
Guarantor, and all rights, benefits and remedies of any Borrower and Guarantor
pursuant to any agreement, document or instrument related to any such
disposition, is and shall continue at all times to be subject to the valid and
enforceable, first priority perfected security interest and lien of
Administrative Agent, and Borrowers and Guarantors shall take such other and
further actions as may be required hereunder with respect to any such
consideration,

(B) upon the satisfaction of each of the conditions set forth in clause
(A) above, including, but not limited to, the receipt by Administrative Agent of
the Net Proceeds from such sale or Sale and Lease-Back Transaction in
immediately available funds in the Administrative Agent Payment Account,
Administrative Agent shall, at Borrowers’ expense, (1) release the security
interest, mortgage and lien of Administrative Agent in and upon such Real
Property and (2) execute and deliver to Lead Borrower a release instrument with
respect to such Real Property, in form and substance satisfactory to
Administrative Agent;

(viii) Intentionally deleted;

(ix) Intentionally deleted;

(x) Intentionally deleted;

(xi) the subleases by MDC in effect on the date hereof of Real Property
subleased by such Borrower to a customer of Borrowers listed on Schedule 9.7
hereto and leases or subleases entered into after the date hereof by a Borrower
or Guarantor of Real Property leased or owned by such Borrower or Guarantor
acquired after the date hereof to a customer of a Borrower (other than in
connection with the closing or sale of a then existing retail store location of
a Borrower or Guarantor which shall be subject to clause (v) above); provided,
that, as to leases or subleases entered into after the date hereof, (A) any such
lease or sublease shall be entered into in the ordinary course of the business
of such Borrower or Guarantor consistent with the current practices of such
Borrower or Guarantor as of the date hereof, (B) the aggregate amount of the
payments by Borrowers and Guarantors to purchase or otherwise acquire all of
such Real Property that is to be leased or subleased to a customer in any fiscal
year and the aggregate amount of the rent and other amounts payable by Borrowers
and Guarantors to the owner of such Real Property that is to be subleased by
such Borrower or Guarantor to a customer in any fiscal year, together with the
maximum aggregate amount that Borrowers and Guarantors may be required to pay
under the guarantees issued by them permitted under Section 9.9(i) below in such
fiscal year, shall not exceed $5,000,000 and after giving effect to any payments
for the purchase or other acquisition of any such Real Property, the Excess
Availability shall be not less than $20,000,000, (C) to the extent applicable,
the Borrower or Guarantor acquiring such Real Property shall have complied with
the terms of Section 9.23 hereof with respect to such Real Property and the
terms of such lease shall in all respects be subordinate to the Mortgage

 

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applicable to such Real Property and otherwise subject to the terms with respect
thereto set forth in the Mortgage applicable to such Real Property, and (D) as
of the date of entering into any such lease or sublease and after giving effect
thereto, no Default or Event of Default shall exist or have occurred,

(xii) the licensing by a Borrower or Guarantor of Intellectual Property owned by
it to another Borrower or Guarantor; provided, that, as to any such license:
(A) any rights of such Borrower or Guarantor shall be subject to the rights of
Administrative Agent in such Intellectual Property (including the rights of
Administrative Agent to use such Intellectual Property upon an Event of
Default), and (B) such license shall not impair, hinder or otherwise adversely
affect the rights of Administrative Agent;

(xiii) the abandonment or cancellation of trademarks or the failure to maintain
or not renew, or the allowing to lapse of, any trademarks as registered under
the laws of any country which are not material and are no longer used or useful
in the business of any Borrower, Guarantor or their Subsidiaries and do not
appear on or are not otherwise affixed to or incorporated in any Inventory or
Equipment or necessary in connection with the Records and Borrowers and
Guarantors have determined in good faith in the ordinary course of its business
that such trademark being abandoned or cancelled, or not maintained or renewed,
or allowed to lapse, as the case may be, under the laws of the jurisdiction of
any country does not have a value in excess of $100,000 as to such trademark in
such country, provided, that, no Default or Event of Default shall exist or have
occurred;

(xiv) sales of Eligible Prescription Files; provided, that,

(A) each of the following conditions is satisfied: (1) the aggregate amount of
all such Eligible Prescription Files disposed of pursuant to this Section 9.7
(b)(xiv) in any one Fiscal Year shall not exceed $3,000,000 of Prescription File
Availability as determined by most recent appraisal received by Agent in
accordance with Section 7.5(c) hereof, (2) as of the date of any such sale and
after giving effect thereto, no Default or Event of Default shall exist or have
occurred, (3) on the date of consummation of any such disposition, all of the
Net Proceeds of any such disposition shall be remitted to Administrative Agent
for application to the Obligations in such order and manner as Administrative
Agent shall determine, which Net Proceeds as to the Eligible Prescription Files
shall be not less than the amount of the Prescription File Availability provided
in respect to any such Eligible Prescription Files so disposed of, (4) the
Eligible Prescription File Availability with respect of any Eligible
Prescription Files as set forth in clause (a) of the definition of “Prescription
File Availability” shall be reduced by the amount of Eligible Prescription File
Availability provided in respect of any such Prescription Files,
(5) Administrative Agent shall have received true, correct and complete copies
of all agreements, documents and instruments related to any such sale, and
(6) all consideration delivered or payable to any Borrower or Guarantor in
respect of such sale, including all amounts at any time payable to any Borrower
or Guarantor, and all rights, benefits and remedies of any Borrower and
Guarantor pursuant to any agreement, document or instrument related to any such
sale, is and shall continue at all times to be subject to the valid and
enforceable, first priority perfected security interest of Administrative Agent,
and Borrowers and Guarantors shall take all such other and further actions as
may be required hereunder with respect to any such consideration; and

 

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(B) Upon the satisfaction of each of the conditions set forth in clause
(A) above, including but not limited to the receipt by Administrative Agent of
the Net Proceeds from such sale in immediately available funds in the
Administrative Agent Payment Account, Administrative Agent shall, at Borrower’s
expense, (1) release the security interest of Administrative Agent in and upon
such Prescription Files and (2) execute and deliver to Lead Borrower a release
instrument with respect to such Prescription Files, in form and substance
satisfactory to Administrative Agent.

(xv) sale of Prescription Files (other than Eligible Prescription Files);
provided, that,

(A) each of the following conditions is satisfied: (1) as of the date of any
such sale and after giving effect thereto, no Default or Event of Default shall
exist or have occurred, (2) on the date of consummation of any such disposition,
all of the Net Proceeds of any such disposition shall be remitted to
Administrative Agent for application to the Obligations in such order and manner
as Administrative Agent shall determine, (3) Administrative Agent shall have
received true, correct and complete copies of all agreements, documents and
instruments related to any such sale, and (4) all consideration delivered or
payable to any Borrower or Guarantor in respect to such sale, including any
amounts at any time payable to any Borrower or Guarantor, and all rights,
benefits and remedies of any Borrower and Guarantor pursuant to any agreement,
document or instrument related to any such sale, shall continue at all times to
be subject to the valid and enforceable, first priority perfected security
interest of Administrative Agent and Borrowers and Guarantors shall take all
such other and further actions as may be required hereunder with respect to any
such considerations; and

(B) upon the satisfaction of each of the conditions set forth in clause
(A) above, including but not limited to the receipt by Administrative Agent of
the Net Proceeds from such sale in immediately available funds in the
Administrative Agent Payment Account, Administrative Agent shall, at Borrower’s
expense, (1) release the security interest of Administrative Agent in and upon
such Prescription Files and (2) execute and deliver to Lead Borrower a release
instrument with respect to such Prescription Files, in form and substance
satisfactory to Administrative Agent.

(xvi) sales or other dispositions by any Borrower or Guarantor of assets not
otherwise permitted in this Agreement; provided, that, each of the following
conditions is satisfied: (A) as of the date of any such sale or other
disposition and after giving effect thereto, no Default or Event of Default
shall exist or have occurred and be continuing, (B) any such sale is made at
fair market values and the aggregate fair market value of all such assets sold
during any fiscal year of Borrowers shall not exceed $2,000,000, except as
Administrative Agent may otherwise agree in writing, (C) Borrowers and
Guarantors shall cause all of the Net Proceeds at any time payable to any
Borrower or Guarantor pursuant to any agreement, document or instrument related
to the such disposition to be paid by the other party or parties thereto
directly to Administrative Agent for application to the Obligations in such
order and manner as Administrative Agent shall determine, (D) not less than
eighty (80%) percent of the consideration for such disposition is in the form of
cash and (E) the assets to be so disposed are not necessary or economically
desirable in connection with the principal business of Borrowers.

 

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(xvii) wind up, liquidate or dissolve, except that any Borrower or Guarantor
(other than Parent) may wind up, liquidate and dissolve, provided, that, each of
the following conditions is satisfied, (A) the winding up, liquidation and
dissolution of such Borrower or Guarantor (as the case may be) shall not violate
any law or any order or decree of any court or other Governmental Authority in
any material respect and shall not conflict with or result in the breach of, or
constitute a default under, any indenture, mortgage, deed of trust, or any other
agreement or instrument to which any Borrower or Guarantor is a party or may be
bound, (B) such winding up, liquidation or dissolution shall be done in
accordance with the requirements of all applicable laws and regulations,
(C) effective upon such winding up, liquidation or dissolution, substantially
all of the assets and properties of such Borrower or Guarantor shall be duly and
validly transferred and assigned to any Borrower, free and clear of any liens,
restrictions or encumbrances other than the security interest and liens of
Administrative Agent (and Administrative Agent shall have received such evidence
thereof as Administrative Agent may require) and Administrative Agent shall have
received such deeds, assignments or other agreements as Administrative Agent may
request to evidence and confirm the transfer of such assets of such Borrower or
Guarantor (as the case may be) to such Borrower, (D) Administrative Agent shall
have received all documents and agreements that any Borrower or Guarantor has
filed with any Governmental Authority or as are otherwise required to effectuate
such winding up, liquidation or dissolution, (E) no Borrower or Guarantor shall
assume any Indebtedness, obligations or liabilities as a result of such winding
up, liquidation or dissolution, or otherwise become liable in respect of any
obligations or liabilities of the entity that is winding up, liquidating or
dissolving, unless such Indebtedness is otherwise expressly permitted hereunder,
(F) Administrative Agent shall have received not less than ten (10) Business
Days prior written notice of the intention of such Borrower or Guarantor to wind
up, liquidate or dissolve and (G) as of the date of such winding up, liquidation
or dissolution and after giving effect thereto, no Default or Event of Default
shall exist or have occurred; or

(xviii) agree to do any of the foregoing.

9.8 Encumbrances. Each Borrower and Guarantor shall not, and shall not permit
any Subsidiary to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the Collateral, or file
or permit the filing of, or permit to remain in effect, any financing statement
or other similar notice of any security interest or lien with respect to any
such assets or properties, except:

(a) the security interests and liens of Administrative Agent for itself and the
benefit of Secured Parties;

(b) liens securing the payment of taxes, assessments or other governmental
charges or levies either not yet overdue or the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower, or Guarantor or Subsidiary, as the case may be and
with respect to which adequate reserves have been set aside on its books;

(c) non-consensual statutory liens (other than liens securing the payment of
taxes) arising in the ordinary course of such Borrower’s, Guarantor’s or
Subsidiary’s business to the

 

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extent: (i) such liens secure Indebtedness which is not overdue or (ii) such
liens secure Indebtedness relating to claims or liabilities which are fully
insured (subject to customary deductibles with respect to such insurance) and
being defended at the sole cost and expense and at the sole risk of the insurer
or being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower, Guarantor or such Subsidiary, in each case prior
to the commencement of foreclosure or other similar proceedings and with respect
to which adequate reserves have been set aside on its books;

(d) zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of Real Property which do not interfere in any material
respect with the use of such Real Property or ordinary conduct of the business
of such Borrower, Guarantor or such Subsidiary as presently conducted thereon or
materially impair the value of the Real Property which may be subject thereto
(including any of such zoning restrictions, easements, licenses, covenants and
other restrictions that are set forth in the title insurance policies issued to
Administrative Agent with respect to the Real Property as of the date hereof);

(e) purchase money security interests in or landlord liens upon Equipment or
other property (including Capital Leases) and purchase money mortgages on Real
Property in each case either (i) existing on the date of this Agreement or
(ii) arising after the date hereof to secure Indebtedness permitted under
Section 9.9(b) hereof;

(f) pledges and deposits of cash by any Borrower or Guarantor after the date
hereof in the ordinary course of business in connection with workers’
compensation, social security, unemployment insurance and other types of social
security benefits consistent with the current practices of such Borrower or
Guarantor as of the date hereof;

(g) pledges and deposits of cash by any Borrower or Guarantor after the date
hereof to secure the performance of tenders, bids, leases, trade contracts
(other than for the repayment of Indebtedness), leases, surety and appeal bonds,
statutory obligations and other similar obligations in each case in the ordinary
course of business consistent with the current practices of such Borrower or
Guarantor as of the date hereof; provided, that, in connection with any
performance or surety and appeal bonds issued by a surety or other person, the
issuer of such bond shall have waived in writing any rights in or to, or other
interest in, any of the Collateral in an agreement, in form and substance
satisfactory to Administrative Agent and as to any surety and appeal bonds, the
judgment for which any such bond or bonds are being provided shall not otherwise
constitute an Event of Default hereunder;

(h) liens arising from (i) operating leases and the precautionary UCC financing
statement filings in respect thereof and (ii) equipment or other goods which are
not owned by any Borrower or Guarantor located on the premises of such Borrower
or Guarantor (but not in connection with, or as part of, the financing thereof),
whether pursuant to consignment arrangements or otherwise, from time to time in
the ordinary course of business and consistent with current practices of such
Borrower or Guarantor and the precautionary UCC financing statement filings in
respect thereof;

(i) liens or rights of setoff against credit balances of Borrowers with Credit
Card Issuers or Credit Card Processors or amounts owing by such Credit Card
Issuers or Credit Card

 

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Processors to Borrowers in the ordinary course of business, but not liens on or
rights of setoff against any other property or assets of Borrowers or
Guarantors, pursuant to the Credit Card Agreements (as in effect on the date
hereof) to secure the obligations of Borrowers to the Credit Card Issuers or
Credit Card Processors as a result of fees and chargebacks;

(j) statutory or common law liens or rights of setoff of depository banks with
respect to funds of Borrowers or Guarantors at such banks to secure fees and
charges in connection with returned items or the standard fees and charges of
such banks in connection with the deposit accounts maintained by Borrowers and
Guarantors at such banks (but not any other Indebtedness or obligations);

(k) judgments and other similar liens arising after the date hereof in
connection with court proceedings that do not constitute an Event of Default,
provided, that, (i) such liens are being contested in good faith and by
appropriate proceedings diligently pursued, (ii) adequate reserves or other
appropriate provision, if any, as are required by GAAP have been made therefor,
(iii) a stay of enforcement of any such liens is in effect and
(iv) Administrative Agent may establish a Reserve with respect thereto;

(l) the security interests and liens in favor of the Qualified Debt Agent, in
and on the assets and properties of Borrowers and Guarantors to secure the
Indebtedness to the extent permitted under Section 9.9(f) hereof; provided,
that, such security interests and liens in favor of the Qualified Debt Agent are
junior and subordinate to the security interests and liens on the Collateral
(other than with respect to the Qualified Debt Offering Priority Collateral)
granted by Borrowers and Guarantors in favor of Administrative Agent as set
forth in the Qualified Debt Intercreditor Agreement, in form and substance
satisfactory to Administrative Agent;

(m) the security interests and liens upon Equipment, Real Property and related
assets permitted to secure Refinancing Indebtedness in accordance with the terms
of Section 9.9(j) hereof;

(n) the rights of use and possession of lessees of Real Property of any Borrower
or Guarantor to the extent the lease giving rise to such rights is otherwise
permitted hereunder;

(o) the security interests and liens set forth on Schedule 8.4 to the
Information Certificate; and

(p) pledges of stock of third parties acquired by Borrowers in the ordinary
course of business in connection with investments permitted under
Section 9.10(k) hereof.

9.9 Indebtedness. Each Borrower and Guarantor shall not, and shall not permit
any Subsidiary to, incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse,
or otherwise become responsible for (directly or indirectly), the Indebtedness,
performance, obligations or dividends of any other Person, except:

(a) the Obligations;

 

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(b) purchase money Indebtedness (including Capital Leases) existing on the date
hereof or arising after the date hereof to the extent secured by purchase money
security interests in Equipment (including Capital Leases) and purchase money
mortgages on Real Property not to exceed $50,000,000 incurred in the aggregate
during any fiscal year of Borrowers and Guarantors or $150,000,000 in the
aggregate at any time outstanding, in each case so long as such security
interests and mortgages do not apply to any property of such Borrower, Guarantor
or Subsidiary other than the Equipment or Real Property so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Equipment or Real
Property so acquired, as the case may be; provided, that, (i) the outstanding
Indebtedness under (x) the Capital Leases, Equipment and Real Property in the
amounts for such Capital Leases, Equipment and Real Property, respectively,
listed on Schedule 9.9(b) hereto (as reduced by any payments thereof or
otherwise) and (y) such other purchase money Indebtedness as consented to by the
Administrative Agent, shall be permitted hereunder and, with respect to clause
(x) only, shall not be included in the calculation of the amount of purchase
money Indebtedness permitted under this clause (b) and (ii) up to $25,000,000 of
purchase money Indebtedness secured by purchase money security interests in
Equipment (including Capital Leases) and Real Property assumed by Borrowers in
connection with each separate Permitted Acquisition shall not be included in the
calculation of the amount of purchase money Indebtedness permitted under this
clause (b);

(c) guarantees by any Borrower or Guarantor of the Obligations of the other
Borrowers or Guarantors in favor of Administrative Agent for the benefit of
Lenders;

(d) the Indebtedness of any Borrower or Guarantor to any other Borrower or
Guarantor arising after the date hereof pursuant to loans by any Borrower or
Guarantor permitted under Section 9.10(g) hereof;

(e) unsecured Indebtedness of any Borrower or Guarantor arising after the date
hereof to any third person (but not to any other Borrower or Guarantor),
provided, that, each of the following conditions is satisfied as determined by
Administrative Agent: (i) such Indebtedness shall be on terms and conditions
acceptable to Administrative Agent, (ii) Administrative Agent shall have
received not less than ten (10) days prior written notice of the intention of
such Borrower or Guarantor to incur such Indebtedness, which notice shall set
forth in reasonable detail satisfactory to Administrative Agent the amount of
such Indebtedness, the person or persons to whom such Indebtedness will be owed,
the interest rate, the schedule of repayments and maturity date with respect
thereto and such other information as Administrative Agent may request with
respect thereto, (iii) Administrative Agent shall have received true, correct
and complete copies of all agreements, documents and instruments evidencing or
otherwise related to such Indebtedness, (iv) except as Administrative Agent may
otherwise agree in writing, all of the proceeds of the loans or other
accommodations giving rise to such Indebtedness shall be paid to Administrative
Agent for application to the Obligations in such order and manner as
Administrative Agent may determine, (v) as of the date of incurring such
Indebtedness and after giving effect thereto, no Default or Event of Default
shall exist or have occurred, (vi) such Borrower and Guarantor shall not,
directly or indirectly, (A) amend, modify, alter or change the terms of such
Indebtedness or any agreement, document or instrument related thereto, except,
that, such Borrower or Guarantor may, after prior written notice to
Administrative Agent, amend, modify, alter or change the terms thereof so as to
extend the

 

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maturity thereof, or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such Indebtedness (other than pursuant to
payments thereof), or to reduce the interest rate or any fees in connection
therewith, or (B) without Administrative Agent’s prior written consent, redeem,
retire, defease, purchase or otherwise acquire such Indebtedness (except
pursuant to regularly scheduled payments permitted herein), or set aside or
otherwise deposit or invest any sums for such purpose; and (vii) Borrowers and
Guarantors shall furnish to Administrative Agent all notices or demands in
connection with such Indebtedness either received by any Borrower or Guarantor
or on its behalf promptly after the receipt thereof, or sent by any Borrower or
Guarantor or on its behalf concurrently with the sending thereof, as the case
may be;

(f) Indebtedness arising after the date hereof to the Qualified Debt Agent or
other holders thereof (but not to any other Borrower or Guarantor or other
Subsidiary of Parent) pursuant to the Qualified Debt Offering, provided, that,
each of the following conditions is satisfied:

(i) the aggregate principal amount of such Indebtedness shall not exceed
$400,000,000 less the aggregate amount of all repayments or redemptions, whether
optional or mandatory, in respect thereof, plus interest thereon at the rate
provided for in the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date such agreement or instrument is entered
into,

(ii) Administrative Agent shall have received not less than thirty (30) days
prior written notice of the intention of such Borrower or Guarantor to incur
such Indebtedness, which notice shall set forth in reasonable detail
satisfactory to Administrative Agent the amount of such Indebtedness, the person
or persons to whom such Indebtedness will be owed, the interest rate, the
schedule of repayments and maturity date with respect thereto and such other
information as Administrative Agent may request with respect thereto,

(iii) such Indebtedness shall have a maturity date no earlier than six
(6) months after the Renewal Date and shall not include terms and conditions
with respect to any Borrower or Guarantor which are more burdensome or
restrictive in any material respect than those contained in this Agreement,
taken as a whole, except with respect to financial covenants, provided, that,
prior to incurring such Indebtedness, Borrowers shall have delivered to
Administrative Agent projections, in form and substance satisfactory to
Administrative Agent, which show that Borrowers will be in compliance with such
financial covenants through the end of the term of such Indebtedness,

(iv) the Indebtedness incurred pursuant to this Section 9.9(f) may be secured by
a lien on the Collateral, provided, that, Administrative Agent shall have
received the Qualified Debt Intercreditor Agreement applicable to such
Indebtedness, in form and substance satisfactory to Administrative Agent in its
sole discretion, duly authorized, executed and delivered by the holders of such
Indebtedness or the Qualified Debt Agent, which shall provide among other things
for the subordination of such Persons’ lien on the Collateral (other than the
Qualified Debt Offering Priority Collateral) and the subordination of the
Administrative Agent’s lien on the Qualified Debt Offering Priority Collateral
as provided in Section 9.8(l) hereof,

 

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(v) to the extent that the holders of such Indebtedness or the Qualified Debt
Agent are granted a security interest in the Qualified Debt Offering Priority
Collateral, Administrative Agent shall have a second priority security interest
on such Collateral,

(vi) as of the date of incurring such Indebtedness, and after giving effect
thereto, the ratio of Total Funded Indebtedness to pro-forma EBITDA shall not
exceed 4.0 to 1.0,

(vii) Administrative Agent shall have received true, correct and complete copies
of all agreements, documents or instruments evidencing or otherwise related to
such Indebtedness, in each case in form and substance reasonably satisfactory to
Administrative Agent,

(viii) Borrowers and Guarantors shall not, directly or indirectly, make any
payments in respect of such Indebtedness, except that Borrowers may make
regularly scheduled payments of principal and interest in respect of such
Indebtedness so long as, as of the date of any such payment and after giving
effect thereto, either (A) (1) the aggregate amount of the Excess Availability
of Borrowers shall be greater than an amount equal to twenty-five (25%) percent
of the Borrowing Base, (2) the pro forma projected aggregate amount of the
Excess Availability of Borrowers (subject to the receipt of such certificates or
information as Administrative Agent may require to confirm such projection)
shall be greater than an amount equal to twenty-five (25%) percent of the
Borrowing Base for the first six (6) months after such payment and (3) no
Default or Event of Default shall exist or have occurred and is continuing, or
(B) (1) the aggregate amount of the Excess Availability of Borrowers shall be
greater than an amount equal to twenty (20%) percent of the Borrowing Base,
(2) the pro forma projected aggregate amount of the Excess Availability of
Borrowers (subject to the receipt of such certificates or information as
Administrative Agent may require to confirm such projection) shall be greater
than an amount equal to twenty (20%) percent of the Borrowing Base for the first
six (6) months after such payment, (3) the pro-forma Fixed Charge Coverage Ratio
of Borrowers (on a combined basis) for the most recently ended twelve (12) month
period for which Administrative Agent has received financial statements of
Borrowers shall be greater than 1.00 to 1:00 and (4) no Default or Event of
Default shall exist or have occurred and is continuing,

(ix) except as Administrative Agent may otherwise agree in writing, (A) to the
extent that such Indebtedness shall be incurred for the purpose of financing an
acquisition permitted by Section 9.10(i) hereof , the proceeds of such Qualified
Debt Offering shall be used for the purchase price and expenses of such
acquisition and (B) otherwise such proceeds shall be paid to Administrative
Agent for application to the Obligations in accordance with the terms hereof,

(x) Borrowers and Guarantors shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such Indebtedness or any agreement,
document or instrument related thereto, except, that, Borrowers or Guarantors
may, after prior written notice to Administrative Agent, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose (except pursuant to
payments permitted in clause (f)(viii) above),

 

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(xi) Borrowers and Guarantors shall furnish to Administrative Agent all notices
or demands in connection with such Indebtedness either received by any Borrower
or Guarantor or on its behalf promptly after the receipt thereof, or sent by any
Borrower or Guarantor or on its behalf concurrently with the sending thereof, as
the case may be, and

(xii) only one Qualified Debt Offering can be outstanding at any time.

(g) Indebtedness of any Borrower or Guarantor arising from (i) any judgment that
constitutes Indebtedness that does not constitute an Event of Default under
Section 10.1(d) hereof and (ii) any ERISA Event that constitutes Indebtedness
that does not constitute an Event of Default under Section 10.1(k) hereof;

(h) Indebtedness of any Borrower or Guarantor entered into in the ordinary
course of business pursuant to Hedge Agreements; provided, that, (i) such
arrangements are with a Bank Product Provider, (ii) such arrangements are not
for speculative purposes and (iii) such Indebtedness shall be unsecured, except
to the extent such Indebtedness constitutes part of the Obligations arising
under or pursuant to Hedge Agreements with a Bank Product Provider that are
secured under the terms hereof;

(i) Indebtedness of any Borrower or Guarantor arising after the date hereof in
the ordinary course of the business of such Borrower or Guarantor pursuant to
guarantees in favor of third parties by such Borrower or Guarantor of the
obligations of its customers under leases of real or personal property from such
third parties by such customers, provided, that, (i) the maximum aggregate
amount that Borrowers and Guarantors may be required to pay in any fiscal year
pursuant to such guarantees, together with the maximum aggregate amount that
Borrowers and Guarantors may be required to pay in respect of rent and other
amounts to the owners of Real Property as provided in Section 9.7(b)(x) above in
such fiscal year, shall not exceed $5,000,000, (ii) as of the date of entering
into any such guarantee, the Excess Availability shall be not less than
$20,000,000 and (iii) as of the date of entering into any such guarantee and
after giving effect thereto, no Default or Event of Default shall exist or have
occurred;

(j) Intentionally deleted;

(k) Indebtedness of any Borrower or Guarantor arising after the date hereof
issued in exchange for, or the proceeds of which are used to extend, refinance,
replace or substitute for Indebtedness permitted under Sections 9.9(b), 9.9(l)
and 9.9(m) hereof (the “Refinancing Indebtedness”); provided, that, as to any
such Refinancing Indebtedness, each of the following conditions is satisfied:
(i) Administrative Agent shall have received not less than ten (10) Business
Days’ prior written notice of the intention to incur such Indebtedness, which
notice shall set forth in reasonable detail satisfactory to Administrative
Agent, the amount of such Indebtedness, the schedule of repayments and maturity
date with respect thereto and such other information with respect thereto as
Administrative Agent may reasonably request, (ii) promptly upon Administrative
Agent’s request, Administrative Agent shall have received true, correct and
complete copies of all agreements, documents and instruments evidencing or
otherwise related to

 

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such Indebtedness, as duly authorized, executed and delivered by the parties
thereto, (iii) the Refinancing Indebtedness shall have a Weighted Average Life
to Maturity and a final maturity equal to or greater than the Weighted Average
Life to Maturity and the final maturity, respectively, of the Indebtedness being
extended, refinanced, replaced, or substituted for, (iv) the Refinancing
Indebtedness shall rank in right of payment no more senior than, and be at least
subordinated (if subordinated) to, the Obligations as the Indebtedness being
extended, refinanced, replaced or substituted for, (v) the Refinancing
Indebtedness shall not include terms and conditions with respect to any Borrower
or Guarantor which are more burdensome or restrictive in any material respect
than those included in the Indebtedness so extended, refinanced, replaced or
substituted for, (vi) such Indebtedness incurred by any Borrower or Guarantor
shall be at rates and with fees or other charges that are commercially
reasonable, (vii) the incurring of such Indebtedness shall not result in an
Event of Default, (viii) the principal amount of such Refinancing Indebtedness
shall not exceed the principal amount of the Indebtedness so extended,
refinanced, replaced or substituted for (plus the amount of reasonable
refinancing fees and expenses incurred in connection therewith outstanding on
the date of such event), (ix) the Refinancing Indebtedness shall be secured by
substantially the same assets (or less of such assets) that secure the
Indebtedness so extended, refinanced, replaced or substituted for, provided,
that, such security interests with respect to the Refinancing Indebtedness shall
have a priority no more senior than, and be at least as subordinated, if
subordinated (on terms and conditions substantially similar to the subordination
provisions applicable to the Indebtedness so extended, refinanced, replaced or
substituted for or as is otherwise acceptable to Administrative Agent) as the
security interest with respect to the Indebtedness so extended, refinanced,
replaced or substituted for, (x) Borrowers and Guarantors may only make payments
of principal, interest and fees, if any, in respect of such Indebtedness to the
extent such payments would have been permitted hereunder in respect of the
Indebtedness so extended, refinanced, replaced or substituted for (and except as
otherwise permitted below), (xi) Borrowers and Guarantors shall not, directly or
indirectly, (A) amend, modify, alter or change any terms of the agreements with
respect to such Refinancing Indebtedness, except that Borrowers and Guarantors
may, after prior written notice to Administrative Agent, amend, modify, alter or
change the terms thereof to the extent permitted with respect to the
Indebtedness so extended, refinanced, replaced or substituted for, or
(B) redeem, retire, defease, purchase or otherwise acquired such Indebtedness,
or set aside or otherwise deposit or invest any sums for such purpose (other
than with Refinancing Indebtedness to the extent permitted herein and to the
extent permitted with respect to the Indebtedness so extended, refinanced,
replaced or substituted for), and (xii) Borrowers and Guarantors shall furnish
to Administrative Agent copies of all material notices or demands in connection
with Indebtedness received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof or sent by any Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may be;

(l) the Indebtedness set forth on Schedule 9.9 to the Information Certificate;
provided, that, (i) Borrowers and Guarantors may only make regularly scheduled
payments of principal and interest in respect of such Indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, (ii) Borrowers and Guarantors
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such Indebtedness or any agreement, document or instrument related thereto as
in effect on the date hereof except, that, Borrowers and Guarantors may, after
prior

 

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written notice to Administrative Agent, amend, modify, alter or change the terms
thereof so as to extend the maturity thereof, or defer the timing of any
payments in respect thereof, or to forgive or cancel any portion of such
Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrowers and
Guarantors shall furnish to Administrative Agent all notices or demands in
connection with such Indebtedness either received by any Borrower or Guarantor
or on its behalf, promptly after the receipt thereof, or sent by any Borrower or
Guarantor or on its behalf, concurrently with the sending thereof, as the case
may be;

(m) unsecured Indebtedness of Parent evidenced by the Convertible Notes as in
effect on the date of their issuance or as permitted to be amended pursuant to
the terms hereof, provided, that:

(i) the aggregate principal amount of all such Indebtedness evidenced by the
Convertible Notes shall not exceed $125,000,000 less the aggregate amount of all
repayments or redemptions, whether optional or mandatory, in respect thereof,
plus interest thereon calculated in the manner provided for in the Convertible
Notes as in effect on the date of the issuance thereof,

(ii) Borrowers and Guarantors shall not, directly or indirectly, make any
payments in respect of such Indebtedness, except that Parent may make
(A) regularly scheduled payments of interest and fees (which interest rate on
the principal amount of the Convertible Notes, excluding contingent interest and
additional amounts payable upon a Registration Default as defined in the
Description of Notes attached hereto as Schedule 1.24, shall not exceed 5% per
annum), if any, in respect of such Indebtedness when due in accordance with the
terms of the Convertible Notes as in effect on the date of the issuance thereof,
(B) payments of principal in respect of such Indebtedness when scheduled to
mature in accordance with the terms of the Convertible Note Indenture as in
effect on the date thereof and any other mandatory prepayments as required under
the terms of the Convertible Note Indenture as in effect on May 22, 2007,
provided, that, as of the date of any such payment or prepayment and after
giving effect thereto, either (1) (aa) the aggregate amount of the Excess
Availability of Borrowers shall be greater than an amount equal to twenty-five
(25%) percent of the Borrowing Base and (bb) the pro forma projected aggregate
amount of the Excess Availability of Borrowers (subject to the receipt of such
certificates or information as Administrative Agent may require to confirm such
projections) shall be greater than an amount equal to twenty-five (25%) percent
of the Borrowing Base for the first six (6) months after the date of any such
acquisition or investment and the making of any payment in respect thereof, or
(2) (aa) the aggregate amount of the Excess Availability of Borrowers shall be
greater than twenty (20%) percent of the Borrowing Base, (bb) the pro forma
projected aggregate amount of the Excess Availability of Borrowers (subject to
the receipt of certificates or information as Administrative Agent may require
to confirm such projections) shall be greater than twenty (20%) percent of the
Borrowing Base for the first six (6) months after the date of any such
conversion or purchase or the making of any payment in respect thereof, and
(cc) the Fixed Charge Coverage Ratio of Borrowers (on a combined basis) for the
most recently ended twelve (12) month period for which Administrative Agent has
received financial statements of Borrowers shall be greater than 1.00 to 1.00,
and (C) payments to the extent permitted under Section 9.9(m)(iv) below,

 

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(iii) Borrowers and Guarantors shall not, directly or indirectly, amend, modify,
alter or change in any material respect any terms of such Indebtedness or any of
the Convertible Notes or the Convertible Note Indenture or any related
agreements, documents and instruments, except that Parent may, after prior
written notice to Administrative Agent, amend, modify, alter or change the terms
thereof so as to extend the maturity thereof or defer the timing of any payments
in respect thereof, or to forgive or cancel any portion of such Indebtedness
other than pursuant to payments thereof, or to reduce the interest rate or any
fees in connection therewith,

(iv) Borrowers and Guarantors shall not, directly or indirectly, redeem, retire,
defease, purchase, convert Convertible Notes to cash or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, except, that, (A) Parent may convert Convertible Notes to cash or
purchase such Indebtedness in accordance with and to the extent required by the
terms of the Convertible Note Indenture, so long as (1) Administrative Agent
shall have received not less than one (1) Business Day prior written notice of
the intention of Parent to so convert Convertible Notes to cash or purchase such
Indebtedness if such conversion or purchase requires payments in excess of
$5,000,000, or the aggregate amount of all such payments prior thereto has been
in excess of $20,000,000, which notice shall specify the date of the proposed
purchase or conversion, the amount to be paid by Parent in respect thereof and
the amount of the Convertible Notes to be so purchased or converted and (2) as
of the date of any such conversion to cash or purchase and after giving effect
thereto, either (aa) (x) the aggregate amount of the Excess Availability of
Borrowers shall be greater than an amount equal to twenty-five (25%) percent of
the Borrowing Base and (y) the pro forma projected aggregate amount of the
Excess Availability of Borrowers (subject to the receipt of such certificates or
information as Administrative Agent may require to confirm such projections)
shall be greater than an amount equal to twenty-five (25%) percent of the
Borrowing Base for the first six (6) months after the date of any such
acquisition or investment and the making of any payment in respect thereof, or
(bb) (x) the aggregate amount of the Excess Availability of Borrowers shall be
greater than twenty (20%) percent of the Borrowing Base, (y) the pro forma
projected aggregate amount of the Excess Availability of Borrowers (subject to
the receipt of certificates or information as Administrative Agent may require
to confirm such projections) shall be greater than twenty (20%) percent of the
Borrowing Base for the first six (6) months after the date of any such
conversion or purchase or the making of any payment in respect thereof, and
(z) the Fixed Charge Coverage Ratio of Borrowers (on a combined basis) for the
most recently ended twelve (12) month period for which Administrative Agent has
received financial statements of Borrowers shall be greater than 1.00 to 1.00,
(B) Parent may make optional prepayments or redemptions of the Convertible
Notes, so long as, as of the date of any such optional prepayment or redemption
or any payment in respect thereof and after giving effect thereto,
(1) Administrative Agent shall have received not less than three (3) Business
Days’ prior written notice of the intention of Parent to so redeem or prepay
such Indebtedness, which notice shall specify the date of the proposed
prepayment or redemption, the amount to be paid by parent in respect thereof and
the amount of the Convertible Notes to be so prepaid or redeemed, (2) as of the
date of any such prepayment or redemption or any payment in respect thereof and
after giving effect thereto, either (aa) (x) the aggregate amount of the Excess
Availability of Borrowers shall be greater than an amount equal to twenty-five
(25%) percent of the Borrowing Base and (y) the pro forma projected aggregate
amount of the Excess Availability of Borrowers (subject to the receipt of such
certificates or information as Administrative Agent may require to

 

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confirm such projections) shall be greater than an amount equal to twenty-five
(25%) percent of the Borrowing Base for the first six (6) months after the date
of any such acquisition or investment and the making of any payment in respect
thereof, or (bb) (x) the aggregate amount of the Excess Availability of
Borrowers shall be greater than twenty (20%) percent of the Borrowing Base,
(y) the pro forma projected aggregate amount of the Excess Availability of
Borrowers (subject to the receipt of certificates or information as
Administrative Agent may require to confirm such projections) shall be greater
than twenty (20%) percent of the Borrowing Base for the first six (6) months
after the date of any such prepayment or redemption or any payment in respect
thereof, and (z) the Fixed Charge Coverage Ratio of Borrowers (on a combined
basis) for the most recently ended twelve (12) month period for which
Administrative Agent has received financial statements of Borrowers shall be
greater than 1.00 to 1.00, and (3) as of the date of any such prepayment or
redemption or any payment in respect thereof and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing,
(C) nothing contained herein shall be construed to limit the right of Parent to
convert Convertible Notes to shares of common stock of Parent in accordance with
the terms thereof as in effect on the date of the issuance thereof and
(D) Parent may make payments to the extent permitted under Section 9.9(m)(ii)
above;

(v) the Convertible Notes and the Convertible Note Indenture shall each be, in
all material respects, substantially on the terms set forth in the Description
of Notes attached hereto as Schedule 1.24, and Administrative Agent shall have
received true, correct and complete copies of the Convertible Notes and the
Convertible Note Indenture promptly after the issuance of the Convertible Notes
(and Administrative Agent shall receive copies of drafts thereto promptly after
they are distributed to Parent), and

(vi) Borrowers and Guarantors shall furnish to Administrative Agent all written
notices or demands in connection with such Indebtedness either received by any
Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be;

(n) guarantees by any Borrower of any Indebtedness of any other Borrower
otherwise permitted to be incurred under this Agreement; and

(o) contingent Indebtedness of any Borrower or Guarantor arising pursuant to a
performance, bid or surety bond in the ordinary course of business, provided,
that, (i) Administrative Agent shall have received true, correct and complete
copies of all material agreements, documents or instruments evidencing or
otherwise related to such Indebtedness, as duly authorized, executed and
delivered by the parties thereto, (ii) Administrative Agent shall have received
not less than five (5) days prior written notice of the intention of such
Borrower or Guarantor to incur such Indebtedness and (iii) such Indebtedness
does not exceed $10,000,000 in the aggregate at any time outstanding.

9.10 Loans, Investments, Etc. Each Borrower and Guarantor shall not, and shall
not permit any Subsidiary to, directly or indirectly, make any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all
or a substantial part of the assets or property of any person, or form or
acquire any Subsidiaries, or agree to do any of the foregoing, except:

 

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(a) the endorsement of instruments for collection or deposit in the ordinary
course of business;

(b) investments in cash or Cash Equivalents, provided, that, (i) other than with
respect to Qualified Cash of up to $20,000,000, no Loans are then outstanding in
the aggregate principal amount of greater than $50,000,000 and (ii) the terms
and conditions of Section 5.2 hereof shall have been satisfied with respect to
the deposit account, investment account or other account in which such cash or
Cash Equivalents are held;

(c) the existing equity investments of each Borrower and Guarantor as of the
date hereof in its Subsidiaries, provided, that, no Borrower or Guarantor shall
have any further obligations or liabilities to make any capital contributions or
other additional investments or other payments to or in or for the benefit of
any of such Subsidiaries, except for Subsidiaries that become a party to this
Agreement as described in subsection (n) below;

(d) loans and advances by any Borrower or Guarantor to employees of such
Borrower or Guarantor not to exceed the principal amount of $1,000,000 in the
aggregate at any time outstanding for: (i) reasonably and necessary work-related
travel or other ordinary business expenses to be incurred by such employee in
connection with their work for such Borrower or Guarantor and (ii) reasonable
and necessary relocation expenses of such employees (including home mortgage
financing for relocated employees);

(e) stock or obligations issued to any Borrower or Guarantor by any Person (or
the representative of such Person) in respect of Indebtedness of such Person
owing to such Borrower or Guarantor in connection with the insolvency,
bankruptcy, receivership or reorganization of such Person or a composition or
readjustment of the debts of such Person; provided, that, the original of any
such stock or instrument evidencing such obligations shall be promptly delivered
to Administrative Agent, upon Administrative Agent’s request, together with such
stock power, assignment or endorsement by such Borrower or Guarantor as
Administrative Agent may request;

(f) obligations of Account Debtors to any Borrower or Guarantor arising from
Accounts which are past due evidenced by a promissory note made by such Account
Debtor payable to such Borrower or Guarantor; provided, that, promptly upon the
receipt of the original of any such promissory note or other instrument, the
principal face amount of which, when aggregated with the principal face amount
of all other such promissory notes and instruments received by any Borrower or
Guarantor, exceed $1,000,000 in the aggregate, each such promissory note or
instrument shall be endorsed to the order of Administrative Agent by such
Borrower or Guarantor and promptly delivered to Administrative Agent as so
endorsed;

(g) loans by a Borrower to another Borrower, or loans by a Borrower to a
Guarantor, or loans by a Guarantor to a Borrower or another Guarantor after the
date hereof, provided, that,

(i) as to all of such loans, (A) the Indebtedness arising pursuant to any such
loan shall not be evidenced by a promissory note or other instrument, unless the
single original of such note or other instrument is promptly delivered to
Administrative Agent upon its request to hold as part of the Collateral, with
such endorsement and/or assignment by the payee of such

 

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note or other instrument as Administrative Agent may require, and (B) as of the
date of any such loan and after giving effect thereto, the Borrower or Guarantor
making such loan shall be Solvent,

(ii) as to loans by a Guarantor to a Borrower, (A) the Indebtedness arising
pursuant to such loan shall be subject to, and subordinate in right of payment
to, the right of Administrative Agent and Lenders to receive the prior final
payment and satisfaction in full of all of the Obligations on terms and
conditions acceptable to Administrative Agent, (B) promptly upon Administrative
Agent’s request, Administrative Agent shall have received a subordination
agreement, in form and substance satisfactory to Administrative Agent, providing
for the terms of the subordination in right of payment of such Indebtedness of
such Borrower to the prior final payment and satisfaction in full of all of the
Obligations, duly authorized, executed and delivered by such Guarantor and such
Borrower, and (C) such Borrower shall not, directly or indirectly make, or be
required to make, any payments in respect of such Indebtedness prior to the end
of the then current term of this Agreement;

(iii) as to loans by a Borrower to a Guarantor, (A) the proceeds of any such
loans shall only be used by such Guarantor either (1) for the payment of taxes
or other actual and necessary reasonable operating expenses of such Guarantor,
provided, that, the aggregate amount of all such loans in any fiscal year shall
not exceed $1,000,000 or (2) for the making of a contemporaneous loan to another
Borrower, provided, that, the proceeds of any such loan by a Borrower to a
Guarantor shall be paid directly to the Borrower that is to receive the proceeds
of the loan from the Guarantor, (B) the Indebtedness arising pursuant to any
such loan shall not be evidenced by a promissory note or other instrument,
unless the single original of such note or other instrument is promptly
delivered to Administrative Agent upon its request to hold as part of the
Collateral, with such endorsement and/or assignment by the payee of such note or
other instrument as Administrative Agent may require, (C) as of the date of any
such loan and after giving effect thereto, the Borrower making such loan shall
be Solvent, and (D) as of the date of any such loan and after giving effect
thereto, no Default or Event of Default shall exist or have occurred and be
continuing;

(h) loans of money or property (other than Collateral) after the date hereof by
any Borrower or Guarantor to any customers of any Borrower or Guarantor
consistent with the current practices of Borrowers and Guarantors as of the date
hereof (and including advances to customers that are repaid through the purchase
of goods by such customers in the ordinary course of the business of Borrowers
and Guarantors consistent with the current practices of Borrowers and Guarantors
as of the date hereof); provided, that, as to any such loans, each of the
following conditions is satisfied as determined by Administrative Agent:

(i) as of the date of any such loan, and in each case after giving effect
thereto, no Default or Event of Default shall exist or have occurred,

(ii) as of the date of any such loan, and in each case after giving effect
thereto, the Excess Availability shall have been not less than fifteen
(15%) percent of the Borrowing Base for each of the immediately preceding ten
(10) consecutive days and as of the date of any such loan and after giving
effect thereto, the Excess Availability shall be not less than fifteen
(15%) percent of the Borrowing Base,

 

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(iii) the Person receiving such loan shall be engaged in a business related,
ancillary or complementary to the business of Borrowers permitted in this
Agreement,

(iv) the original of any promissory note or other instrument evidencing the
Indebtedness arising pursuant to such loans shall be delivered, or caused to be
delivered, to Administrative Agent, at Administrative Agent’s option, together
with an appropriate endorsement, in form and substance satisfactory to
Administrative Agent,

(v) Administrative Agent shall have received (A) with respect to any such loan
in an amount equal to or greater than $2,500,000, not less than two (2) Business
Days’ prior written notice thereof setting forth in reasonable detail the nature
and terms thereof, (B) true, correct and complete copies of all agreements,
documents and instruments relating thereto and (C) such other information with
respect thereto as Administrative Agent may request, including a report once
each month on the outstanding balance of all such loans and advances and
including the then outstanding amount of the existing loans and advances by
Borrowers to third parties made prior to the date hereof set forth on Schedule
9.10 to the Information Certificate;

(i) loans of money or property (other than Collateral) not otherwise provided
for in this Agreement, after the date hereof, by any Borrower or Guarantor to
any Person (other than to a Borrower or Guarantor or any of their Affiliates),
including construction loans for stores or other facilities owned or supplied by
a Borrower or a Guarantor; provided, that, as to any such loans, each of the
following conditions is satisfied as determined by Administrative Agent:

(i) as of the date of any such loan, and in each case after giving effect
thereto, no Default or Event of Default shall exist or have occurred,

(ii) as of the date of any such loan, and after giving effect thereto, the
Excess Availability shall have been not less than twenty-five percent (25%) of
the Borrowing Base for each of immediately preceding ten (10) consecutive days
and as of the date of any such loan and after giving effect thereto, the Excess
Availability shall be not less than twenty-five percent (25%) of the Borrowing
Base,

(iii) if requested by Administrative Agent, the payments (including payments
evidenced by any note or instrument, which shall be endorsed to Administrative
Agent) and the rights under any documents or instruments evidencing such loan
shall be collaterally assigned by such Borrower or Guarantor to Administrative
Agent pursuant to an agreement, in form and substance reasonably satisfactory to
Administrative Agent, executed by such Borrower or Guarantor and acknowledged by
the Person receiving such loan, and

(iv) the aggregate principal amount of all such loans under this subsection
(i) shall not exceed $12,000,000 outstanding at any one time,

(j) the purchase by any Borrower or Guarantor of all or a substantial part of
the assets or Capital Stock of any Person located in the United States or
investment after the date hereof by a Borrower or Guarantor by capital
contribution in any Person (other than a Borrower or Guarantor), provided, that,
each of the following conditions is satisfied as determined by Administrative
Agent in good faith;

 

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(i) as of the date of such purchase or investment and after giving effect
thereto, no Default or Event of Default shall exist or have occurred and be
continuing,

(ii) as of the date of any such acquisition or investment and the making of any
payment in connection with such acquisition or investment and after giving
effect thereto, either (A) (1) the aggregate amount of the Excess Availability
of Borrowers shall be greater than an amount equal to twenty-five (25%) percent
of the Borrowing Base and (2) the pro forma projected aggregate amount of the
Excess Availability of Borrowers (subject to the receipt of such certificates or
information as Administrative Agent may require to confirm such projections)
shall be greater than an amount equal to twenty-five (25%) percent of the
Borrowing Base for the first six (6) months after the date of any such
acquisition or investment and the making of any payment in respect thereof, or
(B) (1) the aggregate amount of the Excess Availability of Borrowers shall be
greater than twenty (20%) percent of the Borrowing Base, (2) the pro forma
projected aggregate amount of the Excess Availability of Borrowers (subject to
the receipt of such certificates or information as Administrative Agent may
require to confirm such projections) shall be greater than twenty (20%) of the
Borrowing Base for the first six (6) months after the date of any such
acquisition or investment and the making of any payment in respect thereof and
(3) the Fixed Charge Coverage Ratio of Borrowers (on a combined basis) for the
most recently ended twelve (12) month period for which Administrative Agent has
received financial statements of Borrowers shall be greater than 1.00 to 1:00.,

(iii) Intentionally deleted,

(iv) Administrative Agent shall have received not less than ten (10) Business
Days’ prior written notice of the proposed acquisition or any investment in
excess of $2,500,000 and such information with respect thereto as Administrative
Agent may reasonably request, including (A) the proposed date and amount of the
acquisition or investment, (B) a list and description of the assets or Capital
Stock to be acquired, or the investment to be made and (C) the total purchase
price for the assets or Capital Stock to be purchased (and the terms of payment
of such purchase price) or the total amount of such investment (and the terms of
the payment for such investment) and the consideration to be received in
exchange for such investment,

(v) promptly upon Administrative Agent’s request, the Borrower or Guarantor
purchasing such assets or Capital Stock, or making such investment, shall
deliver, or cause to be delivered to Administrative Agent, true, correct and
complete copies of all agreements, documents and instruments relating to such
acquisition or investment,

(vi) the assets or Capital Stock being acquired, or investment made, by any
Borrower or Guarantor shall be substantially consistent with, and related to,
the business of such Borrower or Guarantor permitted in this Agreement,

(vii) in the case of an investment by capital contribution, at Administrative
Agent’s option, the original stock certificate or other instrument evidencing
such capital contribution (or such other evidence as may be issued in the case
of a limited liability company) shall be promptly delivered to Administrative
Agent, together with such stock power, assignment or endorsement as
Administrative Agent may request, and promptly upon Administrative Agent’s
request, the Borrower or Guarantor making such investment shall execute and
deliver to

 

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Administrative Agent a pledge and security agreement, in form and substance
satisfactory to Administrative Agent, granting to Administrative Agent a first
priority pledge of, security interest in and lien upon all of the issued and
outstanding shares of such stock or other instrument or interest (and in the
case of a limited liability company take such other actions as Administrative
Agent shall require with respect to Administrative Agent’s security interests
therein),

(viii) the assets, Capital Stock or other consideration acquired by any Borrower
or Guarantor pursuant to such purchase or investment shall be free and clear of
any security interest, mortgage, pledge, lien, charge or other encumbrance
(other than those permitted in this Agreement) and Lender shall have received
evidence satisfactory to it of the same,

(ix) the acquisition by any Borrower or Guarantor of such assets or Capital
Stock, or the making of such investment, shall not violate any law or regulation
or any order or decree of any court or Governmental Authority in any material
respect and shall not and will not conflict with or result in the breach of, or
constitute a default in any respect under, any material agreement, document or
instrument to which such Borrower, or Guarantor or any Affiliate is a party or
may be bound, or result in the creation or imposition of, or the obligation to
grant, any lien, charge or encumbrance upon any of the property of such
Borrower, or Guarantor or any Affiliate or violate any provision of the
certificate of incorporation, by-laws, certificate of formation, operating
agreement or other organizational documentation of such Borrower or Guarantor,

(x) such purchase or investment shall be in a bona fide arms’ length transaction
with a person that is not an Affiliate of any Borrower or Guarantor,

(xi) no Borrower or Guarantor shall become obligated with respect to any
Indebtedness, nor any of its property become subject to any security interest or
lien, pursuant to such acquisition or investment unless such Borrower or
Guarantor could incur such Indebtedness or create such security interest or lien
hereunder or under the other Financing Agreements,

(xii) Administrative Agent shall have received, in form and substance
satisfactory to Administrative Agent, (A) evidence that Administrative Agent has
valid and perfected security interests in and liens upon all purchased assets to
the extent such assets constitute Collateral hereunder, (B) UCC financing
statements (or other similar registrations required in any foreign
jurisdiction), (C) all Collateral Access Agreements and other consents, waivers,
acknowledgments and other agreements from third persons which Administrative
Agent may reasonably deem necessary or desirable in order to permit, protect and
perfect its security interests in and liens upon the assets purchased, (D) the
agreement of the seller consenting to the collateral assignment by the Borrower
or Guarantor purchasing such assets of all rights and remedies and claims for
damages of such Borrower or Guarantor relating to the Collateral under the
agreements, documents and instruments relating to such acquisition and (E) such
other agreements, documents and instruments as Administrative Agent may request
in connection therewith,

(xiii) in no event shall any Accounts, Inventory, Equipment, Real Property or
Prescription Files so acquired by any Borrower pursuant to such acquisition be
deemed Eligible

 

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Accounts, Eligible Inventory, Eligible Equipment, Eligible Real Property or
Eligible Prescription Files, respectively, unless and until Administrative Agent
shall have conducted a field examination with respect thereto (and at
Administrative Agent’s option, at Borrowers’ expense, obtained an appraisal of
such Inventory, Equipment, Real Property or Prescription Files by an appraiser
reasonably acceptable to Administrative Agent and in form, scope and methodology
reasonably acceptable to Administrative Agent and addressed to Administrative
Agent and upon which Administrative Agent is expressly permitted to rely, which
appraisal shall be in addition to any appraisals which Administrative Agent may
obtain pursuant to its rights under Sections 7.3 or 7.4 hereof) and then only to
the extent the criteria for Eligible Accounts, Eligible Inventory, Eligible
Equipment, Eligible Real Property or Eligible Prescription Files set forth
herein are satisfied with respect thereto in accordance with this Agreement (or
such other or additional criteria as Administrative Agent may, at its option,
establish with respect thereto in accordance with this Agreement and subject to
such Reserves as Administrative Agent may establish in accordance with this
Agreement), and upon the request of Administrative Agent, the Accounts,
Inventory, Equipment, Real Property or Prescription Files acquired by such
Borrower or Guarantor pursuant to such acquisition shall at all times after such
acquisition be separately identified and reported (until they are added to
Parent’s existing systems, policies and procedures) to Administrative Agent in a
manner satisfactory to Administrative Agent;

(k) the loans and advances set forth on Schedule 9.10 to the Information
Certificate; provided, that, as to such loans and advances, (i) Borrowers and
Guarantors shall not, directly or indirectly, amend, modify, alter or change the
terms of such loans and advances or any agreement, document or instrument
related thereto, except that so long as no Default or Event of Default shall
exist or have occurred, Borrowers and Guarantors may amend such terms to:
(A) extend the term thereof for up to an additional twelve (12) months from the
current term thereof or such longer period as Administrative Agent may agree,
(B) increase the amount or frequency of the payments required from the payee
thereunder, (C) obtain any collateral in respect of such loans, or (D) otherwise
make the terms thereof more favorable to Borrowers and Guarantors and
(ii) Borrowers and Guarantors shall furnish to Administrative Agent all notices
or demands in connection with such loans and advances either received by any
Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be;

(l) investments in the ordinary course of business of Borrowers not otherwise
permitted in Section 9.10 hereof, provided, that, the aggregate amount of all
such investments shall not exceed $1,000,000 in any fiscal year; and

(m) the purchase or repurchase by Parent of Indebtedness evidenced by the
Convertible Notes to the extent permitted in Section 9.9(m)(iv) hereof.

9.11 Dividends and Redemptions. Each Borrower and Guarantor shall not, directly
or indirectly, declare or pay any dividends on account of any shares of class of
any Capital Stock of such Borrower or Guarantor now or hereafter outstanding, or
set aside or otherwise deposit or invest any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
Capital Stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except that:

 

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(a) any Borrower or Guarantor may declare and pay such dividends or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
Capital Stock for consideration in the form of shares of common stock (so long
as after giving effect thereto no Change of Control or other Default or Event of
Default shall exist or occur);

(b) Borrowers and Guarantors may pay dividends to the extent permitted in
Section 9.12 below;

(c) any Subsidiary of a Borrower or Guarantor may pay dividends to a Borrower;

(d) Borrowers and Guarantors may repurchase Capital Stock consisting of common
stock held by employees pursuant to any employee stock ownership plan thereof
upon the termination, retirement or death of any such employee in accordance
with the provisions of such plan, provided, that, as to any such repurchase,
each of the following conditions is satisfied: (i) as of the date of the payment
for such repurchase and after giving effect thereto, no Default or Event of
Default shall exist or have occurred and be continuing, (ii) such repurchase
shall be paid with funds legally available therefor, (iii) such repurchase shall
not violate any law or regulation or the terms of any indenture, agreement or
undertaking to which such Borrower or Guarantor is a party or by which such
Borrower or Guarantor or its or their property are bound, and (iv) the aggregate
amount of all payments for such repurchases in any calendar year shall not
exceed $500,000;

(e) Parent may from time to time purchase shares of its Capital Stock to make
available to employees (i) participating in the Associate Stock Purchase Plan of
Parent who have elected to purchase such shares in accordance with such plan
that are to be paid for by such employees with payroll deductions (at a price
and otherwise on terms specified in the plan) but not to exceed a maximum of
$25,000 for each participating employee and (ii) as performance bonuses included
in the compensation for such employees in the ordinary course of the business of
Borrowers and Guarantors, provided, that, the aggregate amount of all payments
for such purchases of shares for such purpose in any calendar year shall not
exceed $1,000,000; and

(f) Parent may pay cash dividends and distributions, from legally available
funds therefor, to its stockholders and repurchase any shares of its Capital
Stock now or hereafter outstanding; provided, that, at the time of payment of
each such dividend, distribution or repurchase and after giving effect to the
payment thereof: (i) no Default or Event of Default exists or has occurred and
is continuing, or would occur or exist after giving effect to such payment,
(ii) such dividend, distribution or repurchase is not in violation of applicable
law or any other agreement to which Parent is a party or by which Parent is
bound and (iii) as of the date of any such payment and after giving effect
thereto, either (A) (1) the aggregate amount of the Excess Availability of
Borrowers shall be greater than an amount equal to twenty-five (25%) percent of
the Borrowing Base and (2) the pro forma projected aggregate amount of the
Excess Availability of Borrowers (subject to the receipt of such certificates or
information as Administrative Agent may require to confirm such projection)
shall be greater than an amount equal to twenty-five (25%) percent of the
Borrowing Base for the first six (6) months after such

 

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payment, or (B) (1) the aggregate amount of the Excess Availability of Borrowers
shall be greater than an amount equal to twenty (20%) percent of the Borrowing
Base, (2) the pro forma projected aggregate amount of the Excess Availability of
Borrowers (subject to the receipt of such certificates or information as
Administrative Agent may require to confirm such projection) shall be greater
than an amount equal to twenty (20%) percent of the Borrowing Base for the first
six (6) months after such payment and (3) the Fixed Charge Coverage Ratio of
Borrowers (on a combined basis) for the most recently ended twelve (12) month
period for which Administrative Agent has received financial statements of
Borrowers shall be greater than 1.00 to 1:00.

9.12 Transactions with Affiliates. Each Borrower and Guarantor shall not,
directly or indirectly:

(a) purchase, acquire or lease any property from, or sell, transfer or lease any
property to, any officer, director or other Affiliate of such Borrower or
Guarantor, except in the ordinary course of and pursuant to the reasonable
requirements of such Borrower’s or Guarantor’s business (as the case may be) and
upon fair and reasonable terms no less favorable to such Borrower or Guarantor
than such Borrower or Guarantor would obtain in a comparable arm’s length
transaction with an unaffiliated person, provided that one Borrower may make
sales of goods, or render services, to another Borrower on terms more favorable
to the Borrower purchasing such goods or receiving the benefit of such services
than it would to a person that is not an Affiliate in the ordinary course of
business and consistent with the current practices of Borrowers as of the date
hereof, provided further that, Parent may make charitable contributions to an
Affiliate that is a foundation qualified under Section501(c)(3) of the Code so
long as each of the following conditions is satisfied: (i) as of the date of any
such charitable contribution and after giving effect thereto, no Default or
Event of Default shall exist or have occurred and be continuing and (ii) the
aggregate amount of all such charitable contributions made in any calendar year
shall not exceed $2,500,000; or

(b) make any payments (whether by dividend, loan or otherwise) of management,
consulting or other fees for management or similar services, or of any
Indebtedness owing to any officer, employee, shareholder, director or any other
Affiliate of such Borrower or Guarantor, except reasonable compensation to
officers, employees and directors for services rendered to such Borrower or
Guarantor in the ordinary course of business.

9.13 Compliance with ERISA. Each Borrower and Guarantor shall, and shall cause
each of its ERISA Affiliates, to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
Federal and State law; (b) cause each Plan which is qualified under
Section 401(a) of the Code to maintain such qualification; (c) not terminate any
of such Plans so as to incur any material liability to the Pension Benefit
Guaranty Corporation; (d) not allow or suffer to exist any non-exempt prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject such Borrower, Guarantor or such ERISA Affiliate to a material tax
or penalty or other liability on non-exempt prohibited transactions imposed
under Section 4975 of the Code or ERISA; (e) make all required contributions to
any Plan which it is obligated to pay under Section 302 of ERISA, Section 412 of
the Code or the terms of such Plan; (f) not allow or suffer to exist any
accumulated funding deficiency, whether or not waived, with respect to any such
Plan; or (g) allow or suffer to exist any occurrence of a reportable event or
any other event or condition which presents a material

 

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risk of termination by the Pension Benefit Guaranty Corporation of any such Plan
that is a single employer plan, which termination could result in any material
liability to the Pension Benefit Guaranty Corporation; except, in each case
referred to in subsections (a) through (g) above, to the extent that failure to
do so has not resulted in or could not reasonably be expected to have a Material
Adverse Effect.

9.14 End of Fiscal Years; Fiscal Quarters. Each Borrower and Guarantor shall,
for financial reporting purposes, cause its, and each of its Subsidiaries’
(a) fiscal years to end on the dates for the end of each such fiscal year set
forth on Schedule 9.14 hereto and (b) fiscal quarters to end on the dates for
the end of each such fiscal quarter set forth in Schedule 9.14 hereto.

9.15 Credit Card Agreements. Each Borrower shall (a) observe and perform all
material terms, covenants, conditions and provisions of the Credit Card
Agreements to be observed and performed by it at the times set forth therein;
and (b) at all times maintain in full force and effect the Credit Card
Agreements and not terminate, cancel, surrender, modify, amend, waive or release
any of the Credit Card Agreements, or consent to or permit to occur any of the
foregoing; except, that, (i) any Borrower may terminate or cancel any of the
Credit Card Agreements in the ordinary course of the business of such Borrower;
provided, that, such Borrower shall give Administrative Agent not less than
fifteen (15) days prior written notice of its intention to so terminate or
cancel any of the Credit Card Agreements; (d) not enter into any new Credit Card
Agreements with any new Credit Card Issuer unless (i) Administrative Agent shall
have received not less than thirty (30) days prior written notice of the
intention of such Borrower to enter into such agreement (together with such
other information with respect thereto as Administrative Agent may request) and
(ii) such Borrower delivers, or causes to be delivered to Administrative Agent,
a Credit Card Acknowledgment in favor of Administrative Agent, (e) give
Administrative Agent immediate written notice of any Credit Card Agreement
entered into by such Borrower after the date hereof, together with a true,
correct and complete copy thereof and such other information with respect
thereto as Administrative Agent may request; and (f) furnish to Administrative
Agent, promptly upon the request of Administrative Agent, such information and
evidence as Administrative Agent may require from time to time concerning the
observance, performance and compliance by such Borrower or the other party or
parties thereto with the terms, covenants or provisions of the Credit Card
Agreements.

9.16 Change in Business. Each Borrower and Guarantor shall not engage in any
business other than the business of such Borrower or Guarantor on the date
hereof and any business reasonably related, ancillary or complimentary to the
business in which such Borrower or Guarantor is engaged on the date hereof.

9.17 Limitation of Restrictions Affecting Subsidiaries. Each Borrower and
Guarantor shall not, directly, or indirectly, create or otherwise cause or
suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or
make other distributions or pay any Indebtedness owed to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or
advances to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (c) transfer any of its properties or assets to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; or (d) create, incur,
assume or suffer to exist any lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, other than encumbrances and
restrictions

 

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arising under (i) applicable law, (ii) this Agreement, (iii) the documents
governing the Qualified Debt Offering (if applicable), (iv) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor,
(v) customary restrictions on dispositions of real property interests found in
reciprocal easement agreements of such Borrower or Guarantor or any Subsidiary
of such Borrower or Guarantor, (vi) any agreement relating to permitted
Indebtedness incurred by a Subsidiary of such Borrower or Guarantor prior to the
date on which such Subsidiary was acquired by such Borrower or such Guarantor
and outstanding on such acquisition date, and (vii) the extension or
continuation of contractual obligations in existence on the date hereof;
provided, that, any such encumbrances or restrictions contained in such
extension or continuation are no less favorable to Administrative Agent and
Lenders than those encumbrances and restrictions under or pursuant to the
contractual obligations so extended or continued.

9.18 Intentionally deleted.

9.19 Intentionally deleted.

9.20 Minimum Excess Availability. The aggregate amount of the Excess
Availability (without giving effect to Qualified Cash) of Borrowers shall at all
times be equal to or greater than an amount equal to ten (10%) percent of the
Borrowing Base.

9.21 License Agreements.

(a) With respect to a License Agreement (which consitutues a Material Contract)
applicable to Intellectual Property that is owned by a third party and licensed
to a Borrower or Guarantor and that is affixed to or otherwise used in
connection with the manufacture, sale or distribution of any Inventory (other
than an off-the-shelf product with a shrink wrap license), each Borrower and
Guarantor shall (i) give Administrative Agent not less than ninety (90) days
prior written notice of its intention to not renew or to terminate, cancel,
surrender or release its rights under any such License Agreement, or to amend
any such License Agreement or related arrangements to limit the scope of the
right of such Borrower or Guarantor to use the Intellectual Property subject to
such License Agreement in any material respect, either with respect to product,
territory, term or otherwise, or to increase in any material respect the amounts
to be paid by such Borrower or Guarantor thereunder or in connection therewith
(and Administrative Agent may establish such Reserves as a result of any of the
foregoing as Administrative Agent may reasonably determine), (ii) give
Administrative Agent prompt written notice of any such License Agreement entered
into by such Borrower or Guarantor after the date hereof, or any material
amendment to any such License Agreement existing on the date hereof, in each
case together with a true, correct and complete copy thereof and such other
information with respect thereto as Administrative Agent may in good faith
request, (iii) give Administrative Agent prompt written notice of any material
breach of any obligation, or any default, by the third party that is the
licensor or by the Borrower or Guarantor that is the licensee or any other party
under any such License Agreement, and deliver to Administrative Agent (promptly
upon the receipt thereof by such Borrower or Guarantor in the case of a notice
to such Borrower or Guarantor and concurrently with the sending thereof in the
case of a notice from such Borrower or Guarantor) a copy of each notice of
default and any other notice received or delivered by such Borrower or Guarantor
in connection with any such a License Agreement that relates to the scope of the
right, or the continuation of the right, of such Borrower or Guarantor to use
the Intellectual Property subject to such License Agreement or the amounts
required to be paid thereunder.

 

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(b) With respect to a License Agreement (which consitutues a Material Contract)
applicable to Intellectual Property that is owned by a third party and licensed
to a Borrower or Guarantor and that is affixed to or otherwise used in
connection with the manufacture, sale or distribution of any Inventory (other
than an off-the-shelf product with a shrink wrap license), at any time an Event
of Default shall exist or have occurred and be continuing or if after giving
effect to any Reserves, or the reduction in the applicable Borrowing Base as a
result of Eligible Inventory using such licensed Intellectual Property ceasing
to be Eligible Inventory, the aggregate amount of the Excess Availability of
Borrowers is less than $5,000,000, Administrative Agent shall have, and is
hereby granted, the irrevocable right and authority, at its option, to renew or
extend the term of such License Agreement, whether in its own name and behalf,
or in the name and behalf of a designee or nominee of Administrative Agent or in
the name and behalf of such Borrower or Guarantor, subject to and in accordance
with the terms of such License Agreement. Administrative Agent may, but shall
not be required to, perform any or all of such obligations of such Borrower or
Guarantor under any of the License Agreements, including, but not limited to,
the payment of any or all sums due from such Borrower or Guarantor thereunder.
Any sums so paid by Administrative Agent shall constitute part of the
Obligations.

9.22 Agricultural Products.

(a) Each Borrower shall at all times comply in all material respects with all
existing and future Food Security Act Notices during their periods of
effectiveness under the Food Security Act, including, without limitation,
directions to make payments to the Farm Products Seller by issuing payment
instruments directly to the secured party with respect to any assets of the Farm
Products Seller or jointly payable to the Farm Products Seller and any secured
party with respect to the assets of such Farm Products Seller, as specified in
the Food Security Act Notice, so as to terminate or release the security
interest in any Farm Products maintained by such Farm Products Seller or any
secured party with respect to the assets of such Farm Products Seller under the
Food Security Act.

(b) Each Borrower shall take all other actions as may be reasonably required, if
any, to ensure that any perishable agricultural commodity (in whatever form) or
other Farm Products are purchased free and clear of any security interest, lien
or other claims in favor of any Farm Products Seller or any secured party with
respect to the assets of any Farm Products Seller.

(c) Each Borrower shall promptly notify Administrative Agent in writing after
receipt by or on behalf of such Borrower of any Food Security Act Notice or
amendment to a previous Food Security Act Notice, and including any notice from
any Farm Products Seller of the intention of such Farm Products Seller to
preserve the benefits of any trust applicable to any assets of any Borrower or
Guarantor under the provisions of the PSA, PACA or any other statute and such
Borrower shall promptly provide Administrative Agent with a true, correct and
complete copy of such Food Security Act Notice or amendment, as the case may be,
and other information delivered to or on behalf of such Borrower pursuant to the
Food Security Act.

 

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(d) In the event any Borrower receives a Food Security Act Notice, such Borrower
shall pay the related invoice within the payment terms specified therein and
notify Administrative Agent of such receipt; provided,, that, such invoice may
remain unpaid if, and only so long as (i) appropriate legal or administrative
action has been commenced in good faith and is being diligently pursued or
defended by such Borrower, (ii) adequate reserves with respect to such contest
are maintained on the books of such Borrower, in accordance with GAAP,
(iii) Administrative Agent shall have established a Reserve in an amount at
least equal to the amount claimed to be due by such vendor under the relevant
invoice, (iv) such Borrower shall promptly pay or discharge such contested
invoice and all additional charges, interest, penalties and expenses, if any,
and shall deliver to Administrative Agent evidence reasonably acceptable to
Administrative Agent of such payment, if such contest is terminated or
discontinued adversely to Borrower or the conditions set forth in this
Section 9.21(d) are no longer met.

(e) Each Borrower shall obtain Administrative Agent’s written consent prior to
purchasing any Farm Products from a Person who produces such Farm Products in a
state with a central filing system certified by the United States Secretary of
Agriculture, and in the event that such Borrower receives such consent, such
Borrower shall immediately register, as a buyer, with the Secretary of State of
such state (or the designated system operator). Each Borrower shall forward
promptly to Administrative Agent a copy of such registration as well as a copy
of all relevant portions of the master list periodically distributed by any such
Secretary of State (or the designated system operator). Each Borrower shall
comply with any payment of obligations in connection with the purchase of any
Farm Products imposed by a secured party as a condition of the waiver or release
of a security interest effective under the Food Security Act or other applicable
law whether or not as a result of direct notice or the filing under any
applicable central filing system. Each Borrower shall also provide to
Administrative Agent not later than the fifth (5th) day of each month, true and
correct copies of all state filings recorded in any such central filing system
in respect of a Person from whom a Borrower has purchased Farm Products within
the preceding twelve (12) months.

9.23 After Acquired Real Property. If any Borrower or Guarantor hereafter
acquires any Real Property, fixtures or any other property that is of the kind
or nature described in the Mortgages and such Real Property, fixtures or other
property is adjacent to, contiguous with or necessary or related to or used in
connection with any Real Property then subject to a Mortgage, or if such Real
Property is not adjacent to, contiguous with or related to or used in connection
with such Real Property, then if such Real Property, fixtures or other property
at any location (or series of adjacent, contiguous or related locations, and
regardless of the number of parcels) has a fair market value in an amount equal
to or greater than $1,000,000 (or if a Default or Event of Default exists, then
regardless of the fair market value of such assets), without limiting any other
rights of Administrative Agent or any Lender, or duties or obligations of any
Borrower or Guarantor, promptly upon Administrative Agent’s request, such
Borrower or Guarantor shall execute and deliver to Administrative Agent a
mortgage, deed of trust or deed to secure debt, as Administrative Agent may
determine, in form and substance substantially similar to the Mortgages and as
to any provisions relating to specific state laws satisfactory to Administrative
Agent and in form appropriate for recording in the real estate records of the
jurisdiction in which such Real Property or other property is located granting
to Administrative Agent a first and only lien and mortgage on and security
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(except as such Borrower or Guarantor would otherwise be permitted to incur
hereunder or under the Mortgages or as otherwise consented to in writing by
Administrative Agent) and such other agreements, documents and instruments as
Administrative Agent may require in connection therewith.

9.24 Costs and Expenses. Borrowers and Guarantors shall pay to Administrative
Agent on demand all costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
syndication, administration, collection, liquidation, enforcement and defense of
the Obligations, Administrative Agent’s rights in the Collateral, this
Agreement, the other Financing Agreements and all other documents related hereto
or thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including: (a) all costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) costs and expenses and fees for insurance premiums,
environmental audits, title insurance premiums, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees (including
OFAC/PEP searches), costs and expenses of remitting loan proceeds, collecting
checks and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Administrative Agent’s customary charges and fees with
respect thereto; (c) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (d) costs and expenses of
preserving and protecting the Collateral; (e) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Administrative Agent, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Administrative Agent or any Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (f) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Administrative
Agent during the course of periodic field examinations of the Collateral and
such Borrower’s or Guarantor’s operations, plus a per diem charge at
Administrative Agent’s then standard rate for Administrative Agent’s examiners
in the field and office (which rate as of the date hereof is $800 per person per
day), provided, that, so long as at the time such field examination is conducted
(i) no Default or Event of Default shall exist or have occurred and be
continuing and (ii) Excess Availability is equal to or greater than an amount
equal to twenty (20%) percent of the Borrowing Base, Borrowers and Guarantors
shall not be required to pay such costs, expenses and pier diem charges for more
than one (1) such field examination in any twelve (12) month period (and any
field examinations conducted at such time as a Default or Event of Default shall
exist or have occurred and be continuing or at such time when Excess
Availability is less than an amount equal to twenty (20%) percent of the
Borrowing Base shall not be deemed to constitute a field examination for
purposes of such limitation); and (g) the reasonable fees and disbursements of
counsel (including legal assistants) to Administrative Agent in connection with
any of the foregoing.

9.25 Foreign Assets Control Regulations, Etc. None of the requesting or
borrowing of the Loans or the requesting or issuance, extension or renewal of
any Letter of Credit Accommodations or the use of the proceeds of any thereof
will violate the Trading With the

 

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Enemy Act (50 U.S.C. §1 et seq., as amended) (the “Trading With the Enemy Act”)
or any of the foreign assets control regulations of the United States Treasury
Department (31 C.F.R., Subtitle B, Chapter V, as amended) (the “Foreign Assets
Control Regulations”) or any enabling legislation or executive order relating
thereto (including, but not limited to (a) Executive order 13224 of
September 21, 2001 Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079
(2001)) (the “Executive Order”) and (b) the Patriot Act. Neither any Borrower
nor any of its Subsidiaries or other Affiliates is or will become a Sanctioned
Entity or Sanctioned Person as described in the Executive Order, the Trading
with the Enemy Act or the Foreign Assets Control Regulations or engages or will
engage in any dealings or transactions, or be otherwise associated, with any
such Sanctioned Entity or Sanctioned Person. No part of the proceeds of the
Loans made hereunder will be used by any Borrower or Guarantor or any of their
Affiliates, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

9.26 Formation of Subsidiaries. At the time that any Borrower or Guarantor forms
any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary
after the date hereof, Lead Borrower shall (a) within ten (10) days of such
formation or acquisition (or such later date as permitted by Administrative
Agent in its sole discretion) cause any such new Subsidiary to provide to
Administrative Agent a Joinder Agreement, together with a joinder to the
Guarantee or any other security document (including mortgages with respect to
any Real Property owned in fee of such new Subsidiary with a fair market value
of at least $1,000,000), as well as appropriate financing statements (and with
respect to all property subject to a mortgage, fixture filings), all in form and
substance reasonably satisfactory to Administrative Agent (including being
sufficient to grant Administrative Agent a first priority Lien (subject to liens
permitted under Section 9.8 herein) in and to the assets of such newly formed or
acquired Subsidiary); provided, that, such joinders and security documents shall
not be required to be provided to Adminstrative Agent with respect to any
Subsidiary of Borrowers that is a controlled foreign corporation if providing
such documents would result in material adverse tax consequences, (b) within ten
(10) days of such formation or acquisition (or such later date as permitted by
Administrative Agent in its sole discretion) provide to Administrative Agent a
pledge agreement and appropriate certificates and powers or financing
statements, pledging all of the direct or beneficial ownership interest in such
new Subsidiary reasonably satisfactory to Agent; provided, that, only sixty-five
(65%) percent of the total outstanding voting Capital Stock of any Subsidiary of
any Borrower that is a controlled foreign corporation (and none of the Capital
Stock of any Subsidiary of such controlled foreign corporation) shall be
required to be pledged if pledging a greater amount would result in adverse tax
consequences or the costs to the Borrowers of providing such pledge or
perfecting the security interests created thereby are unreasonably excessive (as
determined by Administrative Agent in consultation with Lead Borrower) in
relation to the benefits of Administrative Agent and the Lenders of the security
or guarantee afforded thereby (which pledge, if reasonably requested by
Administrative Agent, shall be governed by the laws of the jurisdiction of such
Subsidiary), and (c) within ten (10) days of such formation or acquisition (or
such later date as permitted by Administrative Agent in its sole discretion)
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opinions of counsel reasonably satisfactory to Administrative Agent, which in
its opinion is appropriate with respect to the execution and delivery of the
applicable documentation referred to above (including policies of title
insurance or other documentation with respect to all Real Property owned in fee
and subject to a mortgage). Any document, agreement, or instrument executed or
issued pursuant to this Section 9.26 shall be a Financing Agreement.

9.27 Further Assurances. At the request of Administrative Agent at any time and
from time to time, Borrowers and Guarantors shall, at their expense, duly
execute and deliver, or cause to be duly executed and delivered, such further
agreements, documents and instruments, and do or cause to be done such further
acts as may be necessary or proper to evidence, perfect, maintain and enforce
the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Financing Agreements. Administrative Agent may at any time and from time
to time request a certificate from an officer of any Borrower or Guarantor
representing that all conditions precedent to the making of Loans and providing
Letter of Credit Accommodations contained herein are satisfied. In the event of
such request by Administrative Agent, Administrative Agent and Lenders may, at
Administrative Agent’s option, cease to make any further Loans or provide any
further Letter of Credit Accommodations until Administrative Agent has received
such certificate and, in addition, Administrative Agent has determined that such
conditions are satisfied.

SECTION 10. EVENTS OF DEFAULT AND REMEDIES

10.1 Events of Default. The occurrence or existence of any one or more of the
following events are referred to herein individually as an “Event of Default”,
and collectively as “Events of Default”:

(a) (i) any Borrower fails to pay any of the Obligations within three
(3) Business Days of the date when due or (ii) any Borrower or Obligor fails to
perform any of the covenants contained in Sections 9.2, 9.3, 9.4, 9.13, 9.14,
9.15, 9.16, 9.17, 9.21, 9.22 and 9.23 of this Agreement and such failure shall
continue for ten (10) days; provided, that, such ten (10) day period shall not
apply in the case of: (A) any failure to observe any such covenant which is not
capable of being cured at all or within such ten (10) day period or which has
been the subject of a prior failure within a six (6) month period or (B) an
intentional breach by any Borrower or Obligor of any such covenant or (iii) any
Borrower or Obligor fails to perform any of the terms, covenants, conditions or
provisions contained in this Agreement other than those described in Sections
10.1(a)(i) and 10.1(a)(ii) above;

(b) any representation, warranty or statement of fact made by any Borrower or
Guarantor to Administrative Agent in this Agreement, the other Financing
Agreements or any other written agreement, schedule, confirmatory assignment or
otherwise delivered in connection with this Agreement or any of the other
Financing Agreements shall when made or deemed made be false or misleading in
any material respect;

(c) any Obligor revokes or terminates or purports to revoke or terminate prior
to the stated expiration any guarantee, endorsement or other agreement of such
party in favor of Administrative Agent or any Lender other than termination as a
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(d) any judgment for the payment of money is rendered against any Borrower or
Obligor in excess of $25,000,000 in any one case or in the aggregate (to the
extent not covered by insurance as to which the insurer has been notified of the
potential claim and does not dispute or decline such coverage) and shall remain
unsatisfied, undischarged or unvacated for a period in excess of thirty
(30) consecutive days during which execution shall not be effectively stayed, or
any judgment other than for the payment of money, or an injunction, attachment,
garnishment or execution is rendered against any Borrower or Obligor or any of
the Collateral having a value in excess of $25,000,000;

(e) any Borrower or Obligor makes an assignment for the benefit of creditors;

(f) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at law or in equity) is
filed against any Borrower or Obligor or all or any material part of the
properties of Borrowers (taken as a whole) and such petition or application is
not dismissed within forty-five (45) days after the date of its filing or any
Borrower or Obligor shall file any answer admitting or not contesting such
petition or application or indicates its consent to, acquiescence in or approval
of, any such action or proceeding or the relief requested is granted sooner;

(g) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at a law or equity) is
filed by any Borrower or Obligor or for all or any material part of the
properties of Borrowers (taken as a whole);

(h) any default by any Borrower or any Obligor under any agreement, document or
instrument relating to any Indebtedness for borrowed money owing to any person
other than Lenders, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lenders, in any
case in an amount in excess of $10,000,000, which default continues for more
than the applicable cure period, if any, with respect thereto and is not waived
in writing, or any default by any Borrower or any Obligor under any Material
Contract (including, without limitation, any of the Credit Card Agreements),
which default continues for more than the applicable cure period, if any, with
respect thereto which default has or could reasonably be expected to have a
Material Adverse Effect, or any Credit Card Issuer or Credit Card Processor
withholds payment of amounts otherwise payable to a Borrower to fund a reserve
account or otherwise hold as collateral, or shall require a Borrower to pay
funds into a reserve account or for such Credit Card Issuer or Credit Card
Processor to otherwise hold as collateral, or any Borrower shall provide a
letter of credit, guarantee, indemnity or similar instrument to or in favor of
such Credit Card Issuer or Credit Card Processor such that in the aggregate all
of such funds in the reserve account, other amounts held as collateral and the
amount of such letters of credit, guarantees, indemnities or similar instruments
shall exceed $5,000,000;

(i) (x) any Credit Card Issuer from whom sales made by Borrowers and Guarantors
through credit cards issued by such person or persons exceeded five (5%) percent
of the

 

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aggregate retail sales of Borrowers and Guarantors in the preceding Fiscal Year
or (y) any Credit Card Processors from whom sales made by Borrowers and
Guarantors that are processed or serviced through such person or persons
exceeded five (5%) percent of the aggregate retail sales of Borrowers and
Guarantors in the preceding Fiscal Year, shall in either case, send written
notice to any Borrower that it is ceasing to make or suspending payments to any
Borrower of amounts due or to become due to any Borrower or shall cease or
suspend such payments, or shall send written notice to any Borrower that it is
terminating its arrangements with any Borrower or such arrangements shall
terminate as a result of any event of default under such arrangements, which
continues for more than the applicable cure period, if any, with respect
thereto, unless such Borrower shall have entered into arrangements with another
Credit Card Issuer or Credit Card Processor, as the case may be, within sixty
(60) days after the date of any such notice;

(j) any material provision hereof or of any of the other Financing Agreements
shall for any reason cease to be valid, binding and enforceable with respect to
any party hereto or thereto (other than Administrative Agent) in accordance with
its terms, or any such party shall challenge the enforceability hereof or
thereof, or shall assert in writing, or take any action or fail to take any
action based on the assertion that any provision hereof or of any of the other
Financing Agreements has ceased to be or is otherwise not valid, binding or
enforceable in accordance with its terms, or any security interest provided for
herein or in any of the other Financing Agreements shall cease to be a valid and
perfected first priority security interest in any of the Collateral purported to
be subject thereto having a value in excess of $5,000,000 (except as otherwise
permitted herein or therein);

(k) an ERISA Event shall occur which results in or could reasonably be expected
to have a Material Adverse Effect;

(l) any Change of Control;

(m) the indictment by any Governmental Authority, of any Borrower or Obligor of
which any Borrower, Obligor or Administrative Agent receives notice, in either
case, as to which there is a reasonable possibility of an adverse determination,
in the good faith determination of Administrative Agent, under any criminal
statute, or commencement of criminal or civil proceedings against such Borrower
or Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of (i) any of the Collateral having a
value in excess of $10,000,000 or (ii) any other property of any Borrower or
Guarantor which is necessary or material to the conduct of its business;

(n) any event shall occur as a result of which (i) operations are suspended or
terminated for thirty (30) days or more at any facility of a Borrower used in
generating more than thirty (30%) percent of the consolidated revenues of
Borrowers for the immediately preceding fiscal year, to the extent not covered
by insurance as to which the insurer has been notified of the potential claim
and does not dispute or decline such coverage (but for this purpose a sale of a
facility in accordance with the terms hereof shall not be deemed to be a
suspension or termination of operations at such facility), (ii) any law,
regulation, order, judgement or decree of any Governmental Authority shall
exist, or any action, suit, investigation, litigation or proceeding shall be
pending or threatened in writing in any court or before any arbitrator or
Governmental Authority that could reasonably be expected to result in the loss
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conduct any portion of the business that accounted for more than thirty (30%) of
the revenues of Parent and it Subsidiaries (taken as a whole) in the immediately
preceding fiscal year, or (iii) the loss, suspension, revocation or failure to
renew any Permit now held or hereafter acquired by a Borrower required in
connection with the sale or distribution of goods the sale of which gave rise to
revenues of more than thirty (30%) percent in the immediately preceding fiscal
year;

(o) there shall be an event of default under any of the other Financing
Agreements; or

(p) the conversion by Parent of any of the Convertible Notes to cash, and either
(i) as of the date of any such payment and after giving effect thereto, the
aggregate amount of the Excess Availability of Borrowers for any of the
immediately preceding ten (10) consecutive days shall have been less than
$25,000,000 or (ii) as of the date of any such payment and after giving effect
thereto, the aggregate amount of the Excess Availability of Borrowers is less
than $25,000,000.

10.2 Remedies.

(a) At any time an Event of Default exists or has occurred and is continuing,
Administrative Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Administrative Agent and Lenders hereunder, under
any of the other Financing Agreements, the UCC or other applicable law, are
cumulative, not exclusive and enforceable, in Administrative Agent’s discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Borrower or
Obligor of this Agreement or any of the other Financing Agreements. Subject to
Section 12 hereof, Administrative Agent may, and at the direction of the
Required Lenders shall, at any time or times, proceed directly against any
Borrower or Obligor to collect the Obligations without prior recourse to the
Collateral.

(b) Without limiting the generality of the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Administrative Agent may, at
its option and shall upon the direction of the Required Lenders, (i) upon notice
to Lead Borrower, accelerate the payment of all Obligations and demand immediate
payment thereof to Administrative Agent for itself and the benefit of Lenders
(provided, that, upon the occurrence of any Event of Default described in
Sections 10.1(f) and 10.1(g), all Obligations shall automatically become
immediately due and payable), and (ii) terminate the Commitments and this
Agreement (provided, that, upon the occurrence of any Event of Default described
in Sections 10.1(f) and 10.1(g), the Commitments and any other obligation of the
Administrative Agent or a Lender hereunder shall automatically terminate).

(c) Without limiting the foregoing, at any time an Event of Default exists or
has occurred and is continuing, Administrative Agent may, in its discretion, and
upon the direction of the Required Lenders, shall (i) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
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possession of the Collateral or complete processing, manufacturing and repair of
all or any portion of the Collateral, (ii) require any Borrower or Obligor, at
Borrowers’ expense, to assemble and make available to Administrative Agent any
part or all of the Collateral at any place and time designated by Administrative
Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (iv) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting the
sale, foreclosure or other disposition thereof or for any other purpose,
(v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto, public or
private sales at any exchange, broker’s board, at any office of Administrative
Agent or elsewhere) at such prices or terms as Administrative Agent may deem
reasonable, for cash, upon credit or for future delivery, with the
Administrative Agent having the right to purchase the whole or any part of the
Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of any Borrower or Obligor, which right or equity
of redemption is hereby expressly waived and released by Borrowers and Obligors
and/or (vi) terminate this Agreement. If any of the Collateral is sold or leased
by Administrative Agent upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Administrative Agent. If notice of disposition of
Collateral is required by law, ten (10) days prior notice by Administrative
Agent to Lead Borrower designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral is
to be made, shall be deemed to be reasonable notice thereof and Borrowers and
Obligors waive any other notice. In the event Administrative Agent institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, each Borrower and Obligor waives the posting of any bond
which might otherwise be required. At any time an Event of Default exists or has
occurred and is continuing, upon Administrative Agent’s request, Borrowers will
either, as Administrative Agent shall specify, furnish cash collateral to the
issuer to be used to secure and fund Administrative Agent’s reimbursement
obligations to the issuer in connection with any Letter of Credit Accommodations
or furnish cash collateral to Administrative Agent for the Letter of Credit
Accommodations. Such cash collateral shall be in the amount equal to one hundred
five (105%) percent of the amount of the Letter of Credit Accommodations plus
the amount of any expenses payable or to become payable in connection therewith
through the end of the latest expiration date of such Letter of Credit
Accommodations.

(d) At any time or times that an Event of Default exists or has occurred and is
continuing, Administrative Agent may, in its discretion, enforce the rights of
any Borrower or Obligor against any Account Debtor, secondary obligor or other
obligor in respect of any of the Accounts or other Receivables. Without limiting
the generality of the foregoing, Administrative Agent may, in its discretion, at
such time or times (i) notify any or all Account Debtors, secondary obligors or
other obligors in respect thereof that the Receivables have been assigned to
Administrative Agent and that Administrative Agent has a security interest
therein and Administrative Agent may direct any or all accounts debtors,
secondary obligors and other obligors to make payment of Receivables directly to
Administrative Agent, (ii) extend the time of payment of, compromise, settle or
adjust for cash, credit, return of merchandise or otherwise, and upon any terms
or conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the Account Debtor or any secondary
obligors or other obligors in respect thereof without affecting any of the
Obligations, (iii) demand, collect or

 

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enforce payment of any Receivables or such other obligations, but without any
duty to do so, and Administrative Agent and Lenders shall not be liable for any
failure to collect or enforce the payment thereof nor for the negligence of its
agents or attorneys with respect thereto and (iv) take whatever other action
Administrative Agent may deem necessary or desirable for the protection of its
interests and the interests of Lenders. At any time that an Event of Default
exists or has occurred and is continuing, at Administrative Agent’s request, all
invoices and statements sent to any Account Debtor shall state that the Accounts
and such other obligations have been assigned to Administrative Agent and are
payable directly and only to Administrative Agent and Borrowers and Obligors
shall deliver to Administrative Agent such originals of documents evidencing the
sale and delivery of goods or the performance of services giving rise to any
Accounts as Administrative Agent may require. In the event any Account Debtor
returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrowers shall, upon Administrative Agent’s request, hold the
returned Inventory in trust for Administrative Agent, segregate all returned
Inventory from all of its other property, dispose of the returned Inventory
solely according to Administrative Agent’s instructions, and not issue any
credits, discounts or allowances with respect thereto without Administrative
Agent’s prior written consent.

(e) To the extent that applicable law imposes duties on Administrative Agent or
any Lender to exercise remedies in a commercially reasonable manner (which
duties cannot be waived under such law), each Borrower and Guarantor
acknowledges and agrees that it is not commercially unreasonable for
Administrative Agent or any Lender (i) to fail to incur expenses reasonably
deemed significant by Administrative Agent or any Lender to prepare Collateral
for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain consents of any
Governmental Authority or other third party for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against Account Debtors, secondary obligors or other persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (iv) to exercise collection remedies against Account Debtors
and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
persons, whether or not in the same business as any Borrower or Guarantor, for
expressions of interest in acquiring all or any portion of the Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the collateral is of a specialized nature,
(viii) to dispose of Collateral by utilizing Internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capability of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, (xi) to purchase insurance or credit
enhancements to insure Administrative Agent or Lenders against risks of loss,
collection or disposition of Collateral or to provide to Administrative Agent or
Lenders a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by Administrative Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Administrative Agent in the collection or disposition of
any of the Collateral. Each Borrower and Guarantor acknowledges that the

 

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purpose of this Section is to provide non-exhaustive indications of what actions
or omissions by Administrative Agent or any Lender would not be commercially
unreasonable in the exercise by Administrative Agent or any Lender of remedies
against the Collateral and that other actions or omissions by Administrative
Agent or any Lender shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section. Without limitation of the
foregoing, nothing contained in this Section shall be construed to grant any
rights to any Borrower or Guarantor or to impose any duties on Administrative
Agent or Lenders that would not have been granted or imposed by this Agreement
or by applicable law in the absence of this Section.

(f) For the purpose of enabling Administrative Agent to exercise the rights and
remedies hereunder, each Borrower and Obligor hereby grants to Administrative
Agent, to the extent assignable, an irrevocable, non-exclusive license
(exercisable at any time an Event of Default shall exist or have occurred and
for so long as the same is continuing) without payment of royalty or other
compensation to any Borrower or Obligor, to use, assign, license or sublicense
any of the trademarks, service-marks, trade names, business names, trade styles,
designs, logos and other source of business identifiers and other Intellectual
Property and general intangibles now owned or hereafter acquired by any Borrower
or Obligor, wherever the same maybe located, including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof.

(g) At any time an Event of Default shall exist or have occurred and for so long
as the same is continuing, Administrative Agent may apply the cash proceeds of
Collateral actually received by Administrative Agent from any sale, lease,
foreclosure or other disposition of the Collateral to payment of the
Obligations, in whole or in part and in accordance with the terms hereof,
whether or not then due. Borrowers and Guarantors shall remain liable to
Administrative Agent and Lenders for the payment of any deficiency with interest
at the highest rate provided for herein and all costs and expenses of collection
or enforcement, including attorneys’ fees and expenses.

(h) Without limiting the foregoing, upon the occurrence of a Default or an Event
of Default, (i) Administrative Agent and Lenders may, at Administrative Agent’s
option, and upon the occurrence of an Event of Default at the direction of the
Required Lenders, Administrative Agent and Lenders shall, without notice,
(A) cease making Loans or arranging for Letter of Credit Accommodations or
reduce the lending formulas or amounts of Loans and Letter of Credit
Accommodations available to Borrowers and/or (B) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Administrative Agent and Lenders to Borrowers and (ii) Administrative
Agent may, at its option, establish such Reserves as Administrative Agent
determines, without limitation or restriction, notwithstanding anything to the
contrary contained herein.

 

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SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

(a) The validity, interpretation and enforcement of this Agreement and the other
Financing Agreements (except as otherwise provided therein) and any dispute
arising out of the relationship between the parties hereto, whether in contract,
tort, equity or otherwise, shall be governed by the internal laws of the State
of Illinois but excluding any principles of conflicts of law or other rule of
law that would cause the application of the law of any jurisdiction other than
the laws of the State of Illinois.

(b) Borrowers, Guarantors, Administrative Agent and Lenders irrevocably consent
and submit to the non-exclusive jurisdiction of the Circuit Court of Cook
County, Illinois and the United States District Court for the Northern District
of Illinois, whichever Administrative Agent may elect, and waive any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Agreement or any of the other Financing Agreements or
in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Administrative Agent and
Lenders shall have the right to bring any action or proceeding against any
Borrower or Guarantor or its or their property in the courts of any other
jurisdiction which Administrative Agent deems necessary or appropriate in order
to realize on the Collateral or to otherwise enforce its rights against any
Borrower or Guarantor or its or their property).

(c) Each Borrower and Guarantor hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth
herein and service so made shall be deemed to be completed five (5) days after
the same shall have been so deposited in the U.S. mails, or, at Administrative
Agent’s option, by service upon any Borrower or Guarantor in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, such Borrower or Guarantor shall appear in answer to such process,
failing which such Borrower or Guarantor shall be deemed in default and judgment
may be entered by Administrative Agent against such Borrower or Guarantor for
the amount of the claim and other relief requested.

(d) BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS,
GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER MAY FILE AN

 

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ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.

(e) Administrative Agent, Lenders and the other Secured Parties shall not have
any liability to any Borrower or Guarantor (whether in tort, contract, equity or
otherwise) for losses suffered by such Borrower or Guarantor in connection with,
arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, except to the extent resulting from the gross negligence or
willful misconduct of Administrative Agent or a Secured Party as determined by a
final and non-appealable judgment or court order binding on Administrative
Agent, such Lender or other Secured Party. In any such litigation,
Administrative Agent, Lenders and the other Secured Parties shall be entitled to
the benefit of the rebuttable presumption that it acted in good faith and with
the exercise of ordinary care in the performance by it of the terms of this
Agreement. Each Borrower and Guarantor: (i) certifies that neither
Administrative Agent, any Lender nor any representative, agent or attorney
acting for or on behalf of Administrative Agent or any Lender has represented,
expressly or otherwise, that Administrative Agent and Lenders would not, in the
event of litigation, seek to enforce any of the waivers provided for in this
Agreement or any of the other Financing Agreements and (ii) acknowledges that in
entering into this Agreement and the other Financing Agreements, Administrative
Agent and Lenders are relying upon, among other things, the waivers and
certifications set forth in this Section 11.1 and elsewhere herein and therein.

11.2 Waiver of Notices. Each Borrower and Guarantor hereby expressly waives
demand, presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and chattel paper, included in or evidencing
any of the Obligations or the Collateral, and any and all other demands and
notices of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for herein.
No notice to or demand on any Borrower or Guarantor which Administrative Agent
or any Lender may elect to give shall entitle such Borrower or Guarantor to any
other or further notice or demand to which such Borrower or Guarantor is not
otherwise entitled in the same, similar or other circumstances.

11.3 Amendments and Waivers.

(a) Neither this Agreement nor any other Financing Agreement nor any terms
hereof or thereof may be amended, waived, discharged or terminated unless such
amendment, waiver, discharge or termination is in writing signed by
Administrative Agent and the Required Lenders or at Administrative Agent’s
option, by Administrative Agent with the authorization of the Required Lenders,
and as to amendments to any of the Financing Agreements (other than with respect
to any provision of Section 12 hereof), by Lead Borrower (for itself and the
other Borrowers); except, that, no such amendment, waiver, discharge or
termination shall:

(i) reduce the interest rate or any fees or extend the time of payment of
principal, interest or any fees or reduce the principal amount of any Loan or
Letter of Credit Accommodations, in each case without the consent of each Lender
(including any Defaulting Lender) directly affected thereby,

 

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(ii) increase the Commitment of any Lender over the amount thereof then in
effect or provided hereunder, in each case without the consent of the Lender
(including any Defaulting Lender) directly affected thereby,

(iii) release any Collateral (except as expressly required hereunder or under
any of the other Financing Agreements or applicable law and except as permitted
under Section 12.11(b) hereof) or release of any Guarantor, without the consent
of Administrative Agent and all of Lenders,

(iv) reduce any percentage specified in the definition of Required Lenders,
without the consent of Administrative Agent and all of Lenders,

(v) consent to the assignment or transfer by any Borrower or Guarantor of any of
their rights and obligations under this Agreement, without the consent of
Administrative Agent and all of Lenders,

(vi) agree to the subordination of (A) any of the Obligations or (B) other than
liens in and on the Qualified Debt Priority Collateral (as provided for in the
Qualified Debt Intercreditor Agreement), any lien or security interest in favor
of Agent for the benefit of Lenders, without the consent of Agent and the all of
Lenders,

(vii) amend, modify or waive any terms of Section 6.4(a) hereof or this
Section 11.3 hereof, without the consent of Administrative Agent and all of
Lenders, or

(viii) increase the advance rates constituting part of the Borrowing Base,
without the consent of Administrative Agent and all of Lenders.

(b) Administrative Agent and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its or their
rights, powers and/or remedies unless such waiver shall be in writing and signed
as provided herein. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Administrative Agent or any Lender
of any right, power and/or remedy on any one occasion shall not be construed as
a bar to or waiver of any such right, power and/or remedy which Administrative
Agent or any Lender would otherwise have on any future occasion, whether similar
in kind or otherwise.

(c) Notwithstanding anything to the contrary contained in Section 11.3(a) above,
in connection with any amendment, waiver, discharge or termination, in the event
that any Lender whose consent thereto is required shall fail to consent or fail
to consent in a timely manner (such Lender being referred to herein as a
“Non-Consenting Lender”), but the consent of any other Lenders to such
amendment, waiver, discharge or termination that is required are obtained, if
any, then Wells and Parent shall have the right, but not the obligation, at any
time thereafter, and upon the exercise by Wells or Parent of such right, such
Non-Consenting Lender shall have the obligation, to sell, assign and transfer to
Wells or such Eligible Transferee as Wells may specify after consultation with
Lead Borrower, the Commitment of such Non-Consenting Lender and all rights and
interests of such Non-Consenting Lender pursuant thereto. Wells or Parent shall
provide the Non-Consenting Lender with prior written notice of its intent to
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under this Section, which notice shall specify on date on which such purchase
and sale shall occur. Such purchase and sale shall be pursuant to the terms of
an Assignment and Acceptance (whether or not executed by the Non-Consenting
Lender), except that on the date of such purchase and sale, Wells, or such
Eligible Transferee specified by Wells after consultation with Lead Borrower,
shall pay to the Non-Consenting Lender (except as Wells and such Non-Consenting
Lender may otherwise agree) the amount equal to: (i) the principal balance of
the Loans held by the Non-Consenting Lender outstanding as of the close of
business on the business day immediately preceding the effective date of such
purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest
and fees payable to the Non-Consenting Lender to the effective date of the
purchase (but in no event shall the Non-Consenting Lender be deemed entitled to
any early termination fee), minus (iii) the amount of the closing fee received
by the Non-Consenting Lender pursuant to the terms hereof or of any of the other
Financing Agreements multiplied by the fraction, the numerator of which is the
number of months remaining in the then current term of the Credit Facility and
the denominator of which is the number of months in the then current term
thereof. Such purchase and sale shall be effective on the date of the payment of
such amount to the Non-Consenting Lender and the Commitment of the
Non-Consenting Lender shall terminate on such date.

(d) The consent of Administrative Agent shall be required for any amendment,
waiver or consent affecting the rights or duties of Administrative Agent
hereunder or under any of the other Financing Agreements, in addition to the
consent of the Lenders otherwise required by this Section and the exercise by
Administrative Agent of any of its rights hereunder with respect to Reserves or
Eligible Accounts, Eligible Inventory, Eligible Credit Card Receivables,
Eligible Equipment, Eligible Prescription Files or Eligible Real Property shall
not be deemed an amendment to the advance rates provided for in this
Section 11.3.

(e) The consent of Administrative Agent and each Bank Product Provider that is
providing any Bank Products and has outstanding any such Bank Products at such
time that are secured hereunder shall be required for any amendment, waiver or
consent to the priority of payment of Obligations arising under or pursuant to
any Bank Products as set forth in Section 6.4(a) hereof. In no event shall the
consent or approval of any Bank Product Provider be required for any amendment,
waiver or consent under this Agreement or the other Financing Agreements, except
as provided in the immediately preceding sentence.

11.4 Waiver of Counterclaims. Each Borrower and Guarantor waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.

11.5 Indemnification. Each Borrower and Guarantor shall, jointly and severally,
indemnify and hold Administrative Agent and each Lender, and its officers,
directors, agents, employees, advisors and counsel and their respective
Affiliates (each such person being an “Indemnitee”), harmless from and against
any and all losses, claims, damages, liabilities, costs or expenses (including
attorneys’ fees and expenses) imposed on, incurred by or asserted against any of
them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
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proceeding related to any of the transactions contemplated hereby or any act,
omission, event or transaction related or attendant thereto, including amounts
paid in settlement, court costs, and the fees and expenses of counsel except
that Borrowers and Guarantors shall not have any obligation under this
Section 11.5 to indemnify an Indemnitee with respect to a matter covered hereby
to the extent resulting from the gross negligence or wilful misconduct of such
Indemnitee as determined pursuant to a final, non-appealable order of a court of
competent jurisdiction (but without limiting the obligations of Borrowers or
Guarantors as to any other Indemnitee). To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrowers and Guarantors shall pay
the maximum portion which it is permitted to pay under applicable law to
Administrative Agent and Lenders in satisfaction of indemnified matters under
this Section. To the extent permitted by applicable law, no Borrower or
Guarantor shall assert, and each Borrower and Guarantor hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any of
the other Financing Agreements or any undertaking or transaction contemplated
hereby. All amounts due under this Section shall be payable upon demand. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.

SECTION 12. THE AGENT1

12.1 Appointment, Powers and Immunities. Each Lender irrevocably designates,
appoints and authorizes Wells to act as Administrative Agent hereunder and under
the other Financing Agreements with such powers as are specifically delegated to
Administrative Agent by the terms of this Agreement and of the other Financing
Agreements, together with such other powers as are reasonably incidental
thereto. Administrative Agent (a) shall have no duties or responsibilities
except those expressly set forth in this Agreement and in the other Financing
Agreements, and shall not by reason of this Agreement or any other Financing
Agreement be a trustee or fiduciary for any Lender; (b) shall not be responsible
to Lenders for any recitals, statements, representations or warranties contained
in this Agreement or in any of the other Financing Agreements, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Financing Agreement, or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Financing Agreement or any other document referred
to or provided for herein or therein or for any failure by any Borrower or any
Obligor or any other Person to perform any of its obligations hereunder or
thereunder; and (c) shall not be responsible to Lenders for any action taken or
omitted to be taken by it hereunder or under any other Financing Agreement or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction. Without limiting the generality
of the foregoing or any of the other rights and duties of Administrative Agent
provided for herein or in the other Financing Agreements, each Lender hereby
specifically irrevocably authorizes and directs Administrative Agent to enter
into, if applicable, the Qualified

 

 

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This Section under review by the Wells Fargo syndication group for current
market needs.

 

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Debt Intercreditor Agreement on behalf of such Lender and acknowledges and
agrees that such Lender shall be bound thereby and subject to all of the terms
and conditions thereof, deemed to make all representations and warranties made
by a Revolving Lender (or comparable term as defined therein) as to itself and
Administrative Agent shall be irrevocably authorized to take such actions as are
provided for on behalf of such Lender thereunder. Administrative 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
in good faith. Administrative Agent may deem and treat the payee of any note as
the holder thereof for all purposes hereof unless and until the assignment
thereof pursuant to an agreement (if and to the extent permitted herein) in form
and substance satisfactory to Administrative Agent shall have been delivered to
and acknowledged by Administrative Agent.

12.2 Reliance by Administrative Agent. Administrative Agent shall be entitled to
rely upon any certification, notice or other communication (including any
thereof by telephone, telecopy, telex, 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 and other experts selected by Administrative Agent. As
to any matters not expressly provided for by this Agreement or any other
Financing Agreement, Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, hereunder or thereunder in accordance
with instructions given by the Required Lenders or all of Lenders as is required
in such circumstance, and such instructions of such Administrative Agents and
any action taken or failure to act pursuant thereto shall be binding on all
Lenders.

12.3 Events of Default.

(a) Administrative Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or an Event of Default or other failure of a condition
precedent to the Loans and Letter of Credit Accommodations hereunder, unless and
until Administrative Agent has received written notice from a Lender, or a
Borrower specifying such Event of Default or any unfulfilled condition
precedent, and stating that such notice is a “Notice of Default or Failure of
Condition”. In the event that Administrative Agent receives such a Notice of
Default or Failure of Condition, Administrative Agent shall give prompt notice
thereof to the Lenders. Administrative Agent shall (subject to Section 12.7)
take such action with respect to any such Event of Default or failure of
condition precedent as shall be directed by the Required Lenders; provided,
that, unless and until Administrative Agent shall have received such directions,
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to or by reason of such Event of
Default or failure of condition precedent, as it shall deem advisable in the
best interest of Lenders. Without limiting the foregoing, and notwithstanding
the existence or occurrence and continuance of an Event of Default or any other
failure to satisfy any of the conditions precedent set forth in Section 4 of
this Agreement to the contrary, Administrative Agent may, but shall have no
obligation to, continue to make Loans and issue or cause to be issued Letter of
Credit Accommodations for the ratable account and risk of Lenders from time to
time if Administrative Agent believes making such Loans or issuing or causing to
be issued such Letter of Credit Accommodations is in the best interests of
Lenders.

 

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(b) Except with the prior written consent of Administrative Agent, no Lender may
assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against any Borrower or
Obligor or any of the Collateral or other property of any Borrower or Obligor.

12.4 Wells in its Individual Capacity. With respect to its Commitment and the
Loans made and Letter of Credit Accommodations issued or caused to be issued by
it (and any successor acting as Administrative Agent), so long as Wells shall be
a Lender hereunder, it shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not acting as
Administrative Agent, and the term “Lender” or “Lenders” shall, unless the
context otherwise indicates, include Wells in its individual capacity as Lender
hereunder. Wells (and any successor acting as Administrative Agent) and its
Affiliates may (without having to account therefor to any Lender) lend money to,
make investments in and generally engage in any kind of business with Borrowers
(and any of its Subsidiaries or Affiliates) as if it were not acting as
Administrative Agent, and Wells and its Affiliates may accept fees and other
consideration from any Borrower or Guarantor and any of its Subsidiaries and
Affiliates for services in connection with this Agreement or otherwise without
having to account for the same to Lenders.

12.5 Indemnification. Lenders agree to indemnify Administrative Agent (to the
extent not reimbursed by Borrowers hereunder and without limiting any
obligations of Borrowers hereunder) ratably, in accordance with their Pro Rata
Shares, for any and all claims of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against Administrative Agent (including by
any Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Financing Agreement or
any other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including the costs and expenses
that Administrative Agent is obligated to pay hereunder) or the enforcement of
any of the terms hereof or thereof or of any such other documents, provided,
that, no Lender shall be liable for any of the foregoing to the extent it arises
from the gross negligence or willful misconduct of the party to be indemnified
as determined by a final non-appealable judgment of a court of competent
jurisdiction. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.

12.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender agrees
that it has, independently and without reliance on Administrative Agent or other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrowers and Obligors and has made
its own decision to enter into this Agreement and that it will, independently
and without reliance upon Administrative Agent or any other Lender, 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 Financing Agreements. Administrative
Agent shall not be required to keep itself informed as to the performance or
observance by any Borrower or Obligor of any term or provision of this Agreement
or any of the other Financing Agreements or any other document referred to or
provided for herein or therein or to inspect the properties or books of any
Borrower or Obligor. Administrative Agent will use reasonable efforts to provide
Lenders with any

 

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information received by Administrative Agent from any Borrower or Obligor which
is required to be provided to Lenders or deemed to be requested by Lenders
hereunder and with a copy of any Notice of Default or Failure of Condition
received by Administrative Agent from any Borrower or any Lender; provided,
that, Administrative Agent shall not be liable to any Lender for any failure to
do so, except to the extent that such failure is attributable to Administrative
Agent’s own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Except for
notices, reports and other documents expressly required to be furnished to
Lenders by Administrative Agent hereunder, Administrative Agent shall not have
any duty or responsibility to provide any Lender with any other credit or other
information concerning the affairs, financial condition or business of any
Borrower or Obligor that may come into the possession of Administrative Agent.

12.7 Failure to Act. Except for action expressly required of Administrative
Agent hereunder and under the other Financing Agreements, Administrative 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
from Lenders of their indemnification obligations under Section 12.5 hereof
against any and all liability and expense that may be incurred by it by reason
of taking or continuing to take any such action.

12.8 Additional Loans. Administrative Agent shall not make any Loans or provide
any Letter of Credit Accommodations to any Borrower on behalf of Lenders
intentionally and with actual knowledge that such Loans or Letter of Credit
Accommodations would cause the aggregate amount of the total outstanding Loans
and Letter of Credit Accommodations to such Borrower to exceed the Borrowing
Base of such Borrower, without the prior consent of all Lenders, except, that,
Administrative Agent may make such additional Loans or provide such additional
Letter of Credit Accommodations on behalf of Lenders, intentionally and with
actual knowledge that such Loans or Letter of Credit Accommodations will cause
the total outstanding Loans and Letter of Credit Accommodations to such Borrower
to exceed the Borrowing Base of such Borrower, as Administrative Agent may deem
necessary or advisable in its discretion, provided, that: (a) the total
principal amount of the additional Loans or additional Letter of Credit
Accommodations to any Borrower which Administrative Agent may make or provide
after obtaining such actual knowledge that the aggregate principal amount of the
Loans equal or exceed the Borrowing Base, plus the amount of Special
Administrative Agent Advances made pursuant to Section 12.11(a)(ii) hereof then
outstanding, shall not exceed $5,000,000 and shall not cause the total principal
amount of the Loans and Letter of Credit Accommodations to exceed the Maximum
Credit and (b) no such additional Loan or Letter of Credit Accommodation shall
be outstanding more than ninety (90) days after the date such additional Loan or
Letter of Credit Accommodation is made or issued (as the case may be), except as
the Required Lenders may otherwise agree. Each Lender shall be obligated to pay
Administrative Agent the amount of its Pro Rata Share of any such additional
Loans or Letter of Credit Accommodations.

12.9 Concerning the Collateral and the Related Financing Agreements. Each Lender
authorizes and directs Administrative Agent to enter into this Agreement and the
other Financing Agreements. Each Lender agrees that any action taken by
Administrative Agent or Required Lenders in accordance with the terms of this
Agreement or the other Financing Agreements and the exercise by Administrative
Agent or Required Lenders of their respective powers set forth therein or
herein, together with such other powers that are reasonably incidental thereto,
shall be binding upon all of the Lenders.

 

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12.10 Field Audit, Examination Reports and other Information; Disclaimer by
Lenders. By signing this Agreement, each Lender:

(a) is deemed to have requested that Administrative Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report and report with respect to the Borrowing Base prepared or received by
Administrative Agent (each field audit or examination report and report with
respect to the Borrowing Base being referred to herein as a “Report” and
collectively, “Reports”), appraisal and financial statements;

(b) expressly agrees and acknowledges that Administrative Agent (i) does not
make any representation or warranty as to the accuracy of any Report, appraisal
or financial statement or (ii) shall not be liable for any information contained
in any Report, appraisal or financial statement;

(c) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that Administrative Agent or any other party performing
any audit or examination will inspect only specific information regarding
Borrowers and Guarantors and will rely significantly upon Borrowers’ and
Guarantors’ books and records, as well as on representations of Borrowers’ and
Guarantors’ personnel; and

(d) agrees to keep all Reports confidential and strictly for its internal use in
accordance with the terms of Section 13.5 hereof, and not to distribute or use
any Report in any other manner.

12.11 Collateral Matters.

(a) Administrative Agent may, at its option, from time to time, at any time on
or after an Event of Default and for so long as the same is continuing or upon
any other failure of a condition precedent to the Loans and Letter of Credit
Accommodations hereunder, make such disbursements and advances (“Special
Administrative Agent Advances”) which Administrative Agent, in its sole
discretion, (i) deems necessary or desirable either to preserve or protect the
Collateral or any portion thereof or (ii) to enhance the likelihood or maximize
the amount of repayment by Borrowers and Guarantors of the Loans and other
Obligations, provided, that, the aggregate principal amount of the Special
Administrative Agent Advances pursuant to this clause (ii), plus the then
outstanding principal amount of the additional Loans and Letter of Credit
Accommodations which Administrative Agent may make or provide as set forth in
Section 12.8 hereof, shall not exceed the aggregate amount of $5,000,000 or
(iii) to pay any other amount chargeable to any Borrower or Guarantor pursuant
to the terms of this Agreement or any of the other Financing Agreements
consisting of (A) costs, fees and expenses and (B) payments to any issuer of
Letter of Credit Accommodations. Special Administrative Agent Advances shall be
repayable on demand and together with all interest thereon shall constitute
Obligations secured by the Collateral. Special Administrative Agent Advances
shall not constitute Loans but shall otherwise constitute Obligations hereunder.
Interest on Special Administrative Agent Advances shall be payable at the
Interest Rate then applicable to Prime Rate Loans and shall be payable on

 

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demand. Without limitation of its obligations pursuant to Section 6.10, each
Lender agrees that it shall make available to Administrative Agent, upon
Administrative Agent’s demand, in immediately available funds, the amount equal
to such Lender’s Pro Rata Share of each such Special Administrative Agent
Advance. If such funds are not made available to Administrative Agent by such
Lender, such Lender shall be deemed a Defaulting Lender and Administrative Agent
shall be entitled to recover such funds, on demand from such Lender together
with interest thereon for each day from the date such payment was due until the
date such amount is paid to Administrative Agent at the Federal Funds Rate for
each day during such period (as published by the Federal Reserve Bank of New
York or at Administrative Agent’s option based on the arithmetic mean determined
by Administrative Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of the three leading brokers of Federal funds transactions in New York City
selected by Administrative Agent) and if such amounts are not paid within three
(3) days of Administrative Agent’s demand, at the highest Interest Rate provided
for in Section 3.1 hereof applicable to Prime Rate Loans.

(b) Lenders hereby irrevocably authorize Administrative Agent, at its option and
in its discretion to release any security interest in, mortgage or lien upon,
any of the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to the
extent required under Section 13.1 below, or (ii) constituting property being
sold or disposed of if Lead Borrower or any Borrower or Guarantor certifies to
Administrative Agent that the sale or disposition is made in compliance with
Section 9.7 hereof (and Administrative Agent may rely conclusively on any such
certificate, without further inquiry), or (iii) constituting property in which
any Borrower or Guarantor did not own an interest at the time the security
interest, mortgage or lien was granted or at any time thereafter, or (iv) having
a value in the aggregate in any twelve (12) month period of less than
$5,000,000, and to the extent Administrative Agent may release its security
interest in and lien upon any such Collateral pursuant to the sale or other
disposition thereof, such sale or other disposition shall be deemed consented to
by Lenders, or (v) if required or permitted under any other terms hereof or of
any of the other Financing Agreements, including any intercreditor agreement, or
(vi) approved, authorized or ratified in writing by all of Lenders. Except as
provided above, Administrative Agent will not release any security interest in,
mortgage or lien upon, any of the Collateral without the prior written
authorization of all of Lenders. Upon request by Administrative Agent at any
time, Lenders will promptly confirm in writing Administrative Agent’s authority
to release particular types or items of Collateral pursuant to this Section.

(c) Without in any manner limiting Administrative Agent’s authority to act
without any specific or further authorization or consent by the Required
Lenders, each Lender agrees to confirm in writing, upon request by
Administrative Agent, the authority to release Collateral conferred upon
Administrative Agent under this Section. Administrative Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Administrative Agent upon any Collateral to the extent set forth
above; provided, that, (i) Administrative Agent shall not be required to execute
any such document on terms which, in Administrative Agent’s opinion, would
expose Administrative Agent to liability or create any obligations or entail any

 

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consequence other than the release of such security interest, mortgage or liens
without recourse or warranty and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any security interest, mortgage
or lien upon (or obligations of any Borrower or Guarantor in respect of) the
Collateral retained by such Borrower or Guarantor.

(d) Administrative Agent shall have no obligation whatsoever to any Lender or
any other Person to investigate, confirm or assure that the Collateral exists or
is owned by any Borrower or Guarantor or is cared for, protected or insured or
has been encumbered, or that any particular items of Collateral meet the
eligibility criteria applicable in respect of the Loans or Letter of Credit
Accommodations hereunder, or whether any particular reserves are appropriate, or
that the liens and security interests granted to Administrative Agent pursuant
hereto or any of the Financing Agreements or otherwise have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Administrative Agent in this Agreement or in any of the other Financing
Agreements, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Administrative Agent may act in any
manner it may deem appropriate, in its discretion, given Administrative Agent’s
own interest in the Collateral as a Lender and that Administrative Agent shall
have no duty or liability whatsoever to any other Lender.

12.12 Agency for Perfection. Each Lender hereby appoints Administrative Agent
and each other Lender as agent and bailee for the purpose of perfecting the
security interests in and liens upon the Collateral of Administrative Agent in
assets which, in accordance with Article 9 of the UCC can be perfected only by
possession (or where the security interest of a secured party with possession
has priority over the security interest of another secured party) and
Administrative Agent and each Lender hereby acknowledges that it holds
possession of any such Collateral for the benefit of Administrative Agent as
secured party. Should any Lender obtain possession of any such Collateral, such
Lender shall notify Administrative Agent thereof, and, promptly upon
Administrative Agent’s request therefor shall deliver such Collateral to
Administrative Agent or in accordance with Administrative Agent’s instructions.

12.13 Successor Administrative Agent. Administrative Agent may resign as
Administrative Agent upon thirty (30) days’ notice to Lenders and Parent. If
Administrative Agent resigns under this Agreement, the Required Lenders shall
appoint from among the Lenders a successor agent for Lenders. If no successor
agent is appointed prior to the effective date of the resignation of
Administrative Agent, Administrative Agent may appoint, after consulting with
Lenders and Parent, a successor agent from among Lenders. Upon the acceptance by
the Lender so selected of its appointment as successor agent hereunder, such
successor agent shall succeed to all of the rights, powers and duties of the
retiring Administrative Agent and the term “Administrative Agent” as used herein
and in the other Financing Agreements shall mean such successor agent and the
retiring Administrative Agent’s appointment, powers and duties as Administrative
Agent shall be terminated. After any retiring Administrative Agent’s resignation
hereunder as Administrative Agent, the provisions of this Section 12 shall inure
to its benefit as to any actions taken or omitted by it while it was
Administrative Agent under this Agreement. If no successor agent has accepted
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Administrative Agent by the date which is thirty (30) days after the date of a
retiring Administrative Agent’s notice of resignation, the retiring
Administrative Agent’s resignation shall nonetheless thereupon become effective
and Lenders shall perform all of the duties of Administrative Agent hereunder
until such time, if any, as the Required Lenders appoint a successor agent as
provided for above.

12.14 Co-Administrative Agent. Administrative Agent may at any time and from
time to time determine that a Lender may, in addition, be a “Co-Administrative
Agent”, “Co-Documentation Agent” or similar designation hereunder and enter into
an agreement with such Lender to have it so identified for purposes of this
Agreement. Administrative Agent shall provide written notice to Lead Borrower of
any such agreement. Any Lender that is so designated as a Co-Administrative
Agent, Co-Documentation Agent or such similar designation by Administrative
Agent shall have no right, power, obligation, liability, responsibility or duty
under this Agreement or any of the other Financing Agreements other than those
applicable to all Lenders as such. Without limiting the foregoing, the Lenders
so identified shall not have or be deemed to have any fiduciary relationship
with any Lender and no Lender shall be deemed to have relied, nor shall any
Lender rely, on a Lender so identified as a Co-Administrative Agent,
Co-Documentation Agent or such similar designation in deciding to enter into
this Agreement or in taking or not taking action hereunder.

SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS

13.1 Term.

(a) THIS AGREEMENT AND THE OTHER FINANCING AGREEMENTS SHALL BECOME EFFECTIVE AS
OF THE DATE SET FORTH ON THE FIRST PAGE HEREOF AND SHALL CONTINUE IN FULL FORCE
AND EFFECT FOR A TERM ENDING ON JUNE 8, 2017 (THE “RENEWAL DATE”). In addition,
Borrowers may terminate this Agreement at any time upon ten (10) days prior
written notice to Administrative Agent (which notice shall be irrevocable) and
Administrative Agent may, at its option, and shall at the direction of Required
Lenders, terminate this Agreement at any time on or after an Event of Default.
Upon the Renewal Date or any other effective date of termination of the
Financing Agreements, Borrowers shall pay to Administrative Agent all
outstanding and unpaid Obligations and shall furnish cash collateral to
Administrative Agent (or at Administrative Agent’s option, a letter of credit
issued for the account of Borrowers and at Borrowers’ expense, in form and
substance satisfactory to Administrative Agent, by an issuer acceptable to
Administrative Agent and payable to Administrative Agent as beneficiary) in such
amounts as Administrative Agent determines are reasonably necessary to secure
Administrative Agent and Lenders from loss, cost, damage or expense, including
attorneys’ fees and expenses, in connection with any contingent Obligations,
including issued and outstanding Letter of Credit Accommodations and checks or
other payments provisionally credited to the Obligations and/or as to which
Administrative Agent or any Lender has not yet received final and indefeasible
payment and any continuing obligations of Administrative Agent or any Lender
pursuant to any Deposit Account Control Agreement (contingent or otherwise) and
for any of the Obligations, arising under or in connection with any Bank
Products in such amounts as the Bank Product Provider may require (unless such
Obligations arising under or in connection with any Bank Products are paid in
full in cash and terminated in a manner satisfactory to the Bank Product

 

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Provider). The amount of such cash collateral (or letter of credit, as
Administrative Agent may determine) as to any Letter of Credit Accommodations
shall be in the amount equal to one hundred five (105%) percent of the amount of
the Letter of Credit Accommodations plus the amount of any expenses payable or
to become payable in connection therewith through the end of the latest
expiration date of such Letter of Credit Accommodations. Such payments in
respect of the Obligations and cash collateral shall be remitted by wire
transfer in Federal funds to the Administrative Agent Payment Account or such
other bank account of Administrative Agent, as Administrative Agent may, in its
discretion, designate in writing to Lead Borrower for such purpose. Interest
shall be due until and including the next Business Day, if the amounts so paid
by Borrowers to the Administrative Agent Payment Account or other bank account
designated by Administrative Agent are received in such bank account later than
12:00 noon, Boston time.

(b) No termination of this Agreement or the other Financing Agreements shall
relieve or discharge any Borrower or Guarantor of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Administrative Agent’s continuing security interest in the Collateral and the
rights and remedies of Administrative Agent and Lenders hereunder, under the
other Financing Agreements and applicable law, shall remain in effect until all
such Obligations have been fully and finally discharged and paid. Accordingly,
each Borrower and Guarantor waives any rights it may have under the UCC to
demand the filing of termination statements with respect to the Collateral and
Administrative Agent shall not be required to send such termination statements
to Borrowers or Guarantors, or to file them with any filing office, in each
case, unless and until this Agreement shall have been terminated in accordance
with its terms and all Obligations paid and satisfied in full in immediately
available funds.

(c) Intentionally deleted.

(d) Intentionally deleted.

13.2 Interpretative Provisions.

(a) All terms used herein which are defined in Article 1, Article 8 or Article 9
of the UCC shall have the meanings given therein unless otherwise defined in
this Agreement.

(b) All references to the plural herein shall also mean the singular and to the
singular shall also mean the plural unless the context otherwise requires.

(c) All references to any Borrower, Guarantor, Administrative Agent and Lenders
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns.

(d) The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not any particular provision of this Agreement and as this Agreement
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

 

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(e) The word “including” when used in this Agreement shall mean “including,
without limitation” and the word “will” when used in this Agreement shall be
construed to have the same meaning and effect as the word “shall”.

(f) An Event of Default shall exist or continue or be continuing until such
Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Administrative Agent, if such Event of Default is capable
of being cured as determined by Administrative Agent.

(g) All references to the term “good faith” used herein when applicable to
Administrative Agent or any Lender shall mean, notwithstanding anything to the
contrary contained herein or in the UCC, honesty in fact in the conduct or
transaction concerned and the observance of reasonable commercial standards of
fair dealing based on how an asset-based lender with similar rights providing a
credit facility of the type set forth herein would act in similar circumstances
at the time with the information then available to it. Borrowers and Guarantors
shall have the burden of proving any lack of good faith on the part of
Administrative Agent or any Lender alleged by any Borrower or Guarantor at any
time.

(h) Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given in accordance with
GAAP, and all financial computations hereunder shall be computed unless
otherwise specifically provided herein, in accordance with GAAP as consistently
applied and using the same method for inventory valuation as used in the
preparation of the financial statements of Parent most recently received by
Administrative Agent prior to the date hereof or such other method as may be
acceptable to Administrative Agent. Notwithstanding anything to the contrary
contained in GAAP or any interpretations or other pronouncements by the
Financial Accounting Standards Board or otherwise, the term “unqualified
opinion” as used herein to refer to opinions or reports provided by accountants
shall mean an opinion or report that is not only unqualified (other than by
reason of an exception as to consistency related to new accounting
pronouncements or method change under GAAP) but also does not include any
explanation, supplemental comment or other comment or note concerning the
ability of the applicable person to continue as a going concern. If at any time
any change in GAAP would affect the computation of any financial ratio,
requirement or other provision set forth in any Financing Agreement, and either
the Lead Borrower or the Required Lenders shall so request, the Administrative
Agent, the Lenders and the Lead Borrower shall negotiate in good faith to amend
such ratio, requirement or other provision to preserve the original intent
thereof in light of such change in GAAP (subject to the approval of the Required
Lenders); provided, that, until so amended, (i) such ratio, requirement or other
provision shall continue to be computed in accordance with GAAP prior to such
change therein and (ii) the Lead Borrower shall provide to the Administrative
Agent and the Lenders financial statements and other documents required under
this Agreement or as reasonably requested hereunder setting forth a
reconciliation between calculations of such ratio, requirement or other
provision made before and after giving effect to such change in GAAP.

(i) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including”, the words “to” and
“until” each mean “to but excluding” and the word “through” means “to and
including”.

 

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(j) Unless otherwise expressly provided herein, (i) references herein to any
agreement, document or instrument shall be deemed to include all subsequent
amendments, modifications, supplements, extensions, renewals, restatements or
replacements with respect thereto, but only to the extent the same are not
prohibited by the terms hereof or of any other Financing Agreement, and
(ii) references to any statute or regulation are to be construed as including
all statutory and regulatory provisions consolidating, amending, replacing,
recodifying, supplementing or interpreting the statute or regulation.

(k) The captions and headings of this Agreement are for convenience of reference
only and shall not affect the interpretation of this Agreement.

(l) This Agreement and other Financing Agreements may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.

(m) This Agreement and the other Financing Agreements are the result of
negotiations among and have been reviewed by counsel to Administrative Agent and
the other parties, and are the products of all parties. Accordingly, this
Agreement and the other Financing Agreements shall not be construed against
Administrative Agent or Lenders merely because of Administrative Agent’s or any
Lender’s involvement in their preparation.

13.3 Notices. All notices, requests and demands hereunder shall be in writing
and deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next Business Day, one
(1) Business Day after sending; and if by certified mail, return receipt
requested, five (5) days after mailing. All notices, requests and demands upon
the parties are to be given to the following addresses (or to such other address
as any party may designate by notice in accordance with this Section):

 

If to any Borrower or Guarantor:

  

Spartan Stores, Inc.

850 76th St. SW

P.O. Box 8700

Grand Rapids, Michigan 49518-8700

Attention: Mr. David Staples

Telephone No.: 616-878-8315

Telecopy No.: 616-878-2775

with a copy to:

  

Warner Norcross & Judd LLP

111 Lyon St., N.W., Suite 900

Grand Rapids, Michigan 49501-3487

Attention: Mr. Mark J. Wassink

Telephone No.: 616-752-2189

Telecopy No.: 616-222-2189

 

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If to Administrative Agent:

  

Wells Fargo Capital Finance, LLC

One Boston Place

18th Floor

Boston, Massachusetts 02108

Attention: Portfolio Administrator - Spartan

Telephone No.: 617-854-7283

Telecopy No.: 855-461-3726

13.4 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

13.5 Confidentiality.

(a) Administrative Agent and each Lender shall use all reasonable efforts to
keep confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any material
non-public information supplied to it by any Borrower pursuant to this
Agreement, provided, that, nothing contained herein shall limit the disclosure
of any such information: (i) to the extent required by statute, rule,
regulation, subpoena or court order, (ii) to bank examiners and other
regulators, auditors and/or accountants, in connection with any litigation to
which Administrative Agent or such Lender is a party or as may be requested or
required by any Governmental Authority, (iii) to any Lender (or its agents or
other representatives) or Participant (or prospective Lender or Participant) or
to any Affiliate of any Lender ,so long as such Lender (or its agents or other
representatives) or Participant (or prospective Lender or Participant) or
Affiliate shall have been instructed to treat such information as confidential
in accordance with this Section 13.5, or (iv) to counsel for Administrative
Agent or any Lender or Participant (or prospective Lender or Participant).

(b) In the event that Administrative Agent or any Lender receives a request or
demand to disclose any confidential information pursuant to any subpoena or
court order, Administrative Agent or such Lender, as the case may be, agrees
(i) to the extent permitted by applicable law or if permitted by applicable law,
to the extent Administrative Agent or such Lender determines in good faith that
it will not create any risk of liability to Administrative Agent or such Lender,
Administrative Agent or such Lender will promptly notify Lead Borrower of such
request so that Lead Borrower may seek a protective order or other appropriate
relief or remedy and (ii) if disclosure of such information is required,
disclose such information and, subject to reimbursement by Borrowers of
Administrative Agent’s or such Lender’s expenses, cooperate with Lead Borrower
in the reasonable efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to such portion of the disclosed
information which Lead Borrower so designates, to the extent permitted by
applicable law or if permitted by applicable law, to the extent Administrative
Agent or such Lender determines in good faith that it will not create any risk
of liability to Administrative Agent or such Lender.

(c) In no event shall this Section 13.5 or any other provision of this
Agreement, any of the other Financing Agreements or applicable law be deemed:
(i) to apply to or restrict

 

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disclosure of information that has been or is made public by any Borrower,
Guarantor or any third party or otherwise becomes generally available to the
public other than as a result of a disclosure in violation hereof, (ii) to apply
to or restrict disclosure of information that was or becomes available to
Administrative Agent or any Lender (or any Affiliate of any Lender) on a
non-confidential basis from a person other than a Borrower or Guarantor,
(iii) to require Administrative Agent or any Lender to return any materials
furnished by a Borrower or Guarantor to Administrative Agent or a Lender or
prevent Administrative Agent or a Lender from responding to routine
informational requests in accordance with the Code of Ethics for the Exchange of
Credit Information promulgated by The Robert Morris Associates or other
applicable industry standards relating to the exchange of credit information.
The obligations of Administrative Agent and Lenders under this Section 13.5
shall supersede and replace the obligations of Administrative Agent and Lenders
under any confidentiality letter signed prior to the date hereof.

(d) Notwithstanding anything to the contrary set forth herein or in any of the
other Financing Agreements or any other written or oral understanding or
agreement, (i) any obligations of confidentiality contained herein, in any of
the other Financing Agreements or any such other understanding or agreement do
not apply and have not applied from the commencement of discussions between the
parties to the tax treatment and tax structure of the transactions contemplated
herein (and any related transactions or arrangements), and (ii) each party (and
each of its employees, representatives, or other agents) may disclose to any and
all persons the tax treatment and tax structuring of the transactions
contemplated herein and all materials of any kind (including opinions or other
tax analyses) that are provided to such party relating to such tax treatment and
tax structure, all within the meaning of Treasury Regulation Section 1.6011-4;
provided, that, each party recognizes that the privilege that it may, in its
discretion, maintain with respect to the confidentiality of a communication
relating to the transactions contemplated herein, including a confidential
communication with its attorney or a confidential communication with a federally
authorized tax practitioner under Section 7525 of the Internal Revenue Code, is
not intended to be affected by the foregoing. Borrowers and Guarantors do not
intend to treat the Loans and related transactions as being a “reportable
transaction” (within the meaning of Treasury Regulation Section 1.6011-4). In
the event Borrowers or Guarantors determine to take any action inconsistent with
such intention, it will promptly notify Administrative Agent thereof. Each
Borrower and Guarantor acknowledges that one or more of Lenders may treat its
Loans as part of a transaction that is subject to Treasury Regulation
Section 1.6011-4 or Section 301.6112-1, and the Administrative Agent and such
Lender or Lenders, as applicable, may file such IRS forms or maintain such lists
and other records as they may determine is required by such Treasury
Regulations.

13.6 Successors. This Agreement, the other Financing Agreements and any other
document referred to herein or therein shall be binding upon and inure to the
benefit of and be enforceable by Administrative Agent, Lenders, Borrowers,
Guarantors and their respective successors and assigns, except that Borrower may
not assign its rights under this Agreement, the other Financing Agreements and
any other document referred to herein or therein without the prior written
consent of Administrative Agent and Lenders. Any such purported assignment
without such express prior written consent shall be void. No Lender may assign
its rights and obligations under this Agreement without the prior written
consent of Administrative Agent,

 

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except as provided in Section 13.7 below. The terms and provisions of this
Agreement and the other Financing Agreements are for the purpose of defining the
relative rights and obligations of Borrowers, Guarantors, Administrative Agent
and Lenders with respect to the transactions contemplated hereby and there shall
be no third party beneficiaries of any of the terms and provisions of this
Agreement or any of the other Financing Agreements.

13.7 Assignments; Participations.

(a) Each Lender may, with the prior written consent of Administrative Agent and
after consultation with Lead Borrower (which consent of Administrative Agent
shall not be required in connection with an assignment to a Person that is a
Lender or an Affiliate (other than individuals) of a Lender so long as no
Default or Event of Default exists at the time of such assignment), assign all
or, if less than all, a portion equal to at least $5,000,000 in the aggregate
for the assigning Lender, of such rights and obligations under this Agreement to
one or more Eligible Transferees (but not including for this purpose any
assignments in the form of a participation), each of which assignees shall
become a party to this Agreement as a Lender by execution of an Assignment and
Acceptance; provided, that, (i) such transfer or assignment will not be
effective until recorded by Administrative Agent on the Register and
(ii) Administrative Agent shall have received for its sole account payment of a
processing fee from the assigning Lender or the assignee in the amount of
$5,000.

(b) Intentionally deleted.

(c) Administrative Agent shall maintain a register of the names and addresses of
Lenders, their Commitments and the principal amount of their Loans (the
“Register”). Administrative Agent shall also maintain a copy of each Assignment
and Acceptance delivered to and accepted by it and shall modify the Register to
give effect to each Assignment and Acceptance. The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and any
Borrowers, Guarantors, Administrative Agent and Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by Lead Borrower
and any Lender at any reasonable time and from time to time upon reasonable
prior notice.

(d) Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, the assignee
thereunder shall be a party hereto and to the other Financing Agreements and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and obligations
(including, without limitation, the obligation to participate in Letter of
Credit Accommodations) of a Lender hereunder and thereunder and the assigning
Lender shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement.

(e) By execution and delivery of an Assignment and Acceptance, the assignor and
assignee thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and Acceptance,
the assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements,

 

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warranties or representations made in or in connection with this Agreement or
any of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Financing Agreements furnished pursuant hereto, (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower, Obligor or any of their
Subsidiaries or the performance or observance by any Borrower or Obligor of any
of the Obligations; (iii) such assignee confirms that it has received a copy of
this Agreement and the other Financing Agreements, together with such other
documents and information it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance, (iv) such
assignee will, independently and without reliance upon the assigning Lender,
Administrative Agent and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Financing
Agreements, (v) such assignee appoints and authorizes Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Financing Agreements as are delegated to Administrative
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto, and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement and the other Financing Agreements are required to be
performed by it as a Lender. Administrative Agent and Lenders may furnish any
information concerning any Borrower or Obligor in the possession of
Administrative Agent or any Lender from time to time to assignees and
Participants.

(f) Each Lender may sell participations to one or more banks or other entities
in or to all or a portion of its rights and obligations under this Agreement and
the other Financing Agreements (including, without limitation, all or a portion
of its Commitments and the Loans owing to it and its participation in the Letter
of Credit Accommodations, without the consent of Administrative Agent or the
other Lenders); provided, that, (i) such Lender’s obligations under this
Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Guarantors, the other Lenders and Administrative
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender’s rights and obligations under this Agreement and the other
Financing Agreements, and (iii) the Participant shall not have any rights under
this Agreement or any of the other Financing Agreements (the Participant’s
rights against such Lender in respect of such participation to be those set
forth in the agreement executed by such Lender in favor of the Participant
relating thereto) and all amounts payable by any Borrower or Guarantor hereunder
shall be determined as if such Lender had not sold such participation.

(g) Nothing in this Agreement shall prevent or prohibit any Lender from pledging
its Loans hereunder to a Federal Reserve Bank in support of borrowings made by
such Lenders from such Federal Reserve Bank; provided, that, no such pledge
shall release such Lender from any of its obligations hereunder or substitute
any such pledgee for such Lender as a party hereto.

(h) Borrowers and Guarantors shall assist Administrative Agent or any Lender
permitted to sell assignments or participations under this Section 13.7 in a
manner reasonably necessary in order to enable or effect any such assignment or
participation, including (but not

 

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limited to) the execution and delivery of any and all agreements, notes and
other documents and instruments as shall be requested and the delivery of
informational materials, appraisals or other documents for, and the
participation of relevant management in meetings and conference calls with,
potential Lenders or Participants. Borrowers shall certify the correctness,
completeness and accuracy, in all material respects, of all descriptions of
Borrowers and Guarantors and their affairs provided, prepared or reviewed by any
Borrower or Guarantor that are contained in any selling materials and all other
information provided by it and included in such materials.

13.8 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.

13.9 Patriot Act. Each Lender subject to the Patriot Act hereby notifies each
Borrower and Guarantor that pursuant to the requirements of the Patriot Act, it
is required to obtain, verify and record information that identifies each person
or corporation who opens an account and/or enters into a business relationship
with it, which information includes the name and address of Borrower and
Guarantor and other information that will allow such Lender to identify such
person in accordance with the Patriot Act and any other applicable law. Borrower
and Guarantor are hereby advised that any Loans or Letters of Credit
Accommodations hereunder are subject to satisfactory results of such
verification. In addition, if Administrative Agent is required by law or
regulation or internal policies to do so, it shall have the right to
periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and customary
individual background checks for Borrower and Guarantor and (b) OFAC/PEP
searches and customary individual background checks for the senior management
and key principals of Borrower and Guarantor, and Borrower and Guarantor agree
to cooperate in respect of the conduct of such searches and further agree that
Borrower shall pay to Administrative Agent on demand the reasonable costs and
charges for such searches.

13.10 Counterparts, Etc. This Agreement or any of the other Financing Agreements
may be executed in any number of counterparts, each of which shall be an
original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.

 

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IN WITNESS WHEREOF, Administrative Agent, Lenders, Borrowers and Guarantors have
caused these presents to be duly executed as of the day and year first above
written.

 

AGENT     BORROWERS

WELLS FARGO CAPITAL FINANCE, LLC,

successor by merger to Wachovia Capital

Finance Corporation (Central), f/k/a Congress

Financial Corporation (Central), as

Administrative Agent

    SPARTAN STORES, INC.     By:  

 

    Title:  

 

By:       Title:    

 

   

SPARTAN STORES DISTRIBUTION, LLC

MARKET DEVELOPMENT, LLC

SPARTAN STORES ASSOCIATES, LLC

FAMILY FARE, LLC

MSFC, LLC

SEAWAY FOOD TOWN, INC.

THE PHARM OF MICHIGAN, INC.

VALLEY FARM DISTRIBUTING CO.

GRUBER’S REAL ESTATE LLC

PREVO’S FAMILY MARKETS, INC.

CUSTER PHARMACY, INC.

SPARTAN PROPERTIES MANAGEMENT, INC.

SPARTAN STORES FUEL, LLC

 

    By:  

 

    Title:  

 

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LENDERS

 

WELLS FARGO CAPITAL FINANCE, LLC,

successor by merger to Wachovia Capital

Finance Corporation (Central), f/k/a Congress

Financial Corporation (Central)

By:     Title:    

 

2

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EXHIBIT A

TO

LOAN AND SECURITY AGREEMENT

ASSIGNMENT AND ACCEPTANCE AGREEMENT

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”)
dated as of                         , 20         is made between
                         (the “Assignor”) and                          (the
“Assignee”).

W I T N E S S E T H:

WHEREAS, Wells Fargo Capital Finance, LLC , successor by merger to Wachovia
Capital Finance Corporation, formerly known as Congress Financial Corporation
(Central), in its capacity as agent pursuant to the Loan Agreement (as
hereinafter defined) acting for and on behalf of the financial institutions
which are parties thereto as lenders (in such capacity, “Administrative Agent”),
and the financial institutions which are parties to the Loan Agreement as
lenders (individually, each a “Lender” and collectively, “Lenders”) have entered
or are about to enter into financing arrangements pursuant to which
Administrative Agent and Lenders may make loans and advances and provide other
financial accommodations to                     ,                     ,
                    , and                      (collectively, “Borrowers”) as
set forth in the Loan and Security Agreement, dated December 23, 2003, by and
among Borrowers, certain of their affiliates, Administrative Agent and Lenders
(as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, the “Loan Agreement”), and the other
agreements, documents and instruments referred to therein or at any time
executed and/or delivered in connection therewith or related thereto (all of the
foregoing, together with the Loan Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, being collectively referred to herein as the “Financing Agreements”);

WHEREAS, as provided under the Loan Agreement, Assignor committed to making
Loans (the “Committed Loans”) to Borrowers in an aggregate amount not to exceed
$                         (the “Commitment”);

WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights and
obligations of Assignor under the Loan Agreement in respect of its Commitment in
an amount equal to $                         (the “Assigned Commitment Amount”)
on the terms and subject to the conditions set forth herein and Assignee wishes
to accept assignment of such rights and to assume such obligations from Assignor
on such terms and subject to such conditions;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:

1.    Assignment and Acceptance.

(a) Subject to the terms and conditions of this Assignment and Acceptance,
Assignor hereby sells, transfers and assigns to Assignee, and Assignee hereby
purchases, assumes and undertakes from Assignor, without recourse and without
representation or warranty

 

A-1

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(except as provided in this Assignment and Acceptance) an interest in (i) the
Commitment and each of the Committed Loans of Assignor and (ii) all related
rights, benefits, obligations, liabilities and indemnities of the Assignor under
and in connection with the Loan Agreement and the other Financing Agreements, so
that after giving effect thereto, the Commitment of Assignee shall be as set
forth below and the Pro Rata Share of Assignee shall be              (    %)
percent.

(b) With effect on and after the Effective Date (as defined in Section 5
hereof), Assignee shall be a party to the Loan Agreement and succeed to all of
the rights and be obligated to perform all of the obligations of a Lender under
the Loan Agreement, including the requirements concerning confidentiality and
the payment of indemnification, with a Commitment in an amount equal to the
Assigned Commitment Amount. Assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Agreement
are required to be performed by it as a Lender. It is the intent of the parties
hereto that the Commitment of Assignor shall, as of the Effective Date, be
reduced by an amount equal to the Assigned Commitment Amount and Assignor shall
relinquish its rights and be released from its obligations under the Loan
Agreement to the extent such obligations have been assumed by Assignee;
provided, that, Assignor shall not relinquish its rights under Sections 2.1,
6.4, 6.8 and 6.9 of the Loan Agreement to the extent such rights relate to the
time prior to the Effective Date.

(c) After giving effect to the assignment and assumption set forth herein, on
the Effective Date Assignee’s Commitment will be $                    .

(d) After giving effect to the assignment and assumption set forth herein, on
the Effective Date Assignor’s Commitment will be $                     (as such
amount may be further reduced by any other assignments by Assignor on or after
the date hereof).

2. Payments.

(a) As consideration for the sale, assignment and transfer contemplated in
Section 1 hereof, Assignee shall pay to Assignor on the Effective Date in
immediately available funds an amount equal to $                    ,
representing Assignee’s Pro Rata Share of the principal amount of all Committed
Loans.

(b) Assignee shall pay to Administrative Agent the processing fee in the amount
specified in Section 13.7(a) of the Loan Agreement.

3. Reallocation of Payments. Any interest, fees and other payments accrued to
the Effective Date with respect to the Commitment, Committed Loans and
outstanding Letter of Credit Accommodations shall be for the account of
Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Commitment Amount shall be for the
account of Assignee. Each of Assignor and Assignee agrees that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.

4. Independent Credit Decision. Assignee acknowledges that it has received a
copy of the Loan Agreement and the Schedules and Exhibits thereto, together with
copies of the most

 

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recent financial statements of              and its Subsidiaries, and such other
documents and information as it has deemed appropriate to make its own credit
and legal analysis and decision to enter into this Assignment and Acceptance and
agrees that it will, independently and without reliance upon Assignor,
Administrative Agent or any Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit and
legal decisions in taking or not taking action under the Loan Agreement.

5. Effective Date; Notices.

(a) As between Assignor and Assignee, the effective date for this Assignment and
Acceptance shall be             , 200     (the “Effective Date”); provided,
that, the following conditions precedent have been satisfied on or before the
Effective Date:

(i) this Assignment and Acceptance shall be executed and delivered by Assignor
and Assignee;

(ii) the consent of Administrative Agent as required for an effective assignment
of the Assigned Commitment Amount by Assignor to Assignee shall have been duly
obtained and shall be in full force and effect as of the Effective Date;

(iii) written notice of such assignment, together with payment instructions,
addresses and related information with respect to Assignee, shall have been
given to Lead Borrower and Administrative Agent;

(iv) Assignee shall pay to Assignor all amounts due to Assignor under this
Assignment and Acceptance; and

(v) the processing fee referred to in Section 2(b) hereof shall have been paid
to Administrative Agent.

(b) Promptly following the execution of this Assignment and Acceptance, Assignor
shall deliver to Lead Borrower and Administrative Agent for acknowledgment by
Administrative Agent, a Notice of Assignment in the form attached hereto as
Schedule 1.

[6. Administrative Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT]

(a) Assignee hereby appoints and authorizes Assignor in its capacity as
Administrative Agent to take such action as agent on its behalf to exercise such
powers under the Loan Agreement as are delegated to Administrative Agent by
Lenders pursuant to the terms of the Loan Agreement.

(b) Assignee shall assume no duties or obligations held by Assignor in its
capacity as Administrative Agent under the Loan Agreement.]

7. Withholding Tax. Assignee (a) represents and warrants to Assignor,
Administrative Agent and Borrowers that under applicable law and treaties no tax
will be required to be withheld by Assignee, Administrative Agent or Borrowers
with respect to any payments to be made to Assignee hereunder or under any of
the Financing Agreements, (b)

 

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agrees to furnish (if it is organized under the laws of any jurisdiction other
than the United States or any State thereof) to Administrative Agent and
Borrowers prior to the time that Administrative Agent or Borrowers are required
to make any payment of principal, interest or fees hereunder, duplicate executed
originals of either U.S. Internal Revenue Service Form W-8BEN or W-8ECI, as
applicable (wherein Assignee claims entitlement to the benefits of a tax treaty
that provides for a complete exemption from U.S. federal income withholding tax
on all payments hereunder) and agrees to provide new such Forms upon the
expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments thereto, duly
executed and completed by Assignee, and (c) agrees to comply with all applicable
U.S. laws and regulations with regard to such withholding tax exemption.

8. Representations and Warranties.

(a) Assignor represents and warrants that (i) it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any security interest, lien, encumbrance or other adverse
claim, (ii) it is duly organized and existing and it has the full power and
authority to take, and has taken, all action necessary to execute and deliver
this Assignment and Acceptance and any other documents required or permitted to
be executed or delivered by it in connection with this Assignment and Acceptance
and to fulfill its obligations hereunder, (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Loan Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance, and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignor, enforceable against Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights and to general equitable principles.

(b) Assignor makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with the Loan Agreement or any of the other Financing Agreements or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement or any other instrument or document furnished
pursuant thereto. Assignor makes no representation or warranty in connection
with, and assumes no responsibility with respect to, the solvency, financial
condition or statements of Borrowers, Guarantors or any of their respective
Affiliates, or the performance or observance by Borrowers, Guarantors or any
other Person, of any of its respective obligations under the Loan Agreement or
any other instrument or document furnished in connection therewith.

(c) Assignee represents and warrants that (i) it is duly organized and existing
and it has full power and authority to take, and has taken, all action necessary
to execute and deliver this Assignment and Acceptance and any other documents
required or permitted to be executed or delivered by it in connection with this
Assignment and Acceptance, and to fulfill its obligations hereunder, (ii) no
notices to, or consents, authorizations or approvals of, any Person

 

A-4

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are required (other than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance, and apart from any
agreements or undertakings or filings required by the Loan Agreement, no further
action by, or notice to, or filing with, any Person is required of it for such
execution, delivery or performance; and (iii) this Assignment and Acceptance has
been duly executed and delivered by it and constitutes the legal, valid and
binding obligation of Assignee, enforceable against Assignee in accordance with
the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors’ rights to general equitable principles.

9. [Intercreditor Agreement. [INCLUDE ONLY IF QUALIFIED DEBT INTERCREDITOR
AGREEMENT HAS BEEN ENTERED INTO] Assignee acknowledges and agrees that it has
received a copy of the Qualified Debt Intercreditor Agreement and that it shall
be bound by the terms thereof as a Lender as such term is defined therein and
hereby shall be deemed to make all representations and warranties made by a
Lender thereunder. Without limiting any other rights or authorization of
Administrative Agent, Assignee hereby specifically authorizes Administrative
Agent to take such actions as are provided for to be taken by it under the terms
of the Qualified Debt Intercreditor Agreement on behalf of Assignee as a
Lender.]

10. Further Assurances. Assignor and Assignee each hereby agree to execute and
deliver such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to Borrowers or Administrative Agent, which may be
required in connection with the assignment and assumption contemplated hereby.

11. Miscellaneous.

(a) Any amendment or waiver of any provision of this Assignment and Acceptance
shall be in writing and signed by the parties hereto. No failure or delay by
either party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof and any waiver of any breach of the provisions of
this Assignment and Acceptance shall be without prejudice to any rights with
respect to any other for further breach thereof.

(b) All payments made hereunder shall be made without any set-off or
counterclaim.

(c) Assignor and Assignee shall each pay its own costs and expenses incurred in
connection with the negotiation, preparation, execution and performance of this
Assignment and Acceptance.

(d) This Assignment and Acceptance may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF                         . Assignor and
Assignee each irrevocably submits to the non-exclusive

 

A-5

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jurisdiction of any State or Federal court sitting in                         
County,                          over any suit, action or proceeding arising out
of or relating to this Assignment and Acceptance and irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
such                          State or Federal court. Each party to this
Assignment and Acceptance hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding.

(f) ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT
AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING AGREEMENTS OR ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).

IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and
Acceptance to be executed and delivered by their duly authorized officers as of
the date first above written.

 

[ASSIGNOR] By:     Title:    

 

[ASSIGNEE] By:     Title:    

 

A-6

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SCHEDULE 1

NOTICE OF ASSIGNMENT AND ACCEPTANCE

        , 20        

 

                                                     

                                                     

                                                     

Attn.:                                            

Re:                                                 

Ladies and Gentlemen:

Wells Fargo Capital Finance, LLC, successor by merger to Wachovia Capital
Finance Corporation, formerly known as Congress Financial Corporation (Central),
in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined)
acting for and on behalf of the financial institutions which are parties thereto
as lenders (in such capacity, “Administrative Agent”), and the financial
institutions which are parties to the Loan Agreement as lenders (individually,
each a “Lender” and collectively, “Lenders”) have entered or are about to enter
into financing arrangements pursuant to which Administrative Agent and Lenders
may make loans and advances and provide other financial accommodations to
                    ,                     ,                     , and
                     (collectively, “Borrowers”) as set forth in the Loan and
Security Agreement, dated December 23, 2003, by and among Borrowers, certain of
their affiliates, Administrative Agent and Lenders (as the same now exists or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, the “Loan Agreement”), and the other agreements, documents and
instruments referred to therein or at any time executed and/or delivered in
connection therewith or related thereto (all of the foregoing, together with the
Loan Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the “Financing Agreements”). Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Loan Agreement.

1. We hereby give you notice of, and request your consent to, the assignment by
                                     (the “Assignor”) to
                                     (the “Assignee”) such that after giving
effect to the assignment Assignee shall have an interest equal to
                         (__%) percent of the total Commitments pursuant to the
Assignment and Acceptance Agreement attached hereto (the “Assignment and
Acceptance”). We understand that the Assignor’s Commitment shall be reduced by
$                        , as the same may be further reduced by other
assignments on or after the date hereof.

2. Assignee agrees that, upon receiving the consent of Administrative Agent to
such assignment, Assignee will be bound by the terms of the Loan Agreement as
fully and to the same extent as if the Assignee were the Lender originally
holding such interest under the Loan Agreement.

3. The following administrative details apply to Assignee:

 

A-7

--------------------------------------------------------------------------------

 

(A)   Notice address:

       

         Assignee name:

         

         Address:

                   

         Attention:

         

         Telephone:

         

         Telecopier:

         

(B)   Payment instructions:

       

         Account No.

         

         At:

                             

         Reference:

         

         Attention:

       

4. You are entitled to rely upon the representations, warranties and covenants
of each of Assignor and Assignee contained in the Assignment and Acceptance.

 

A-8

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of Assignment
and Acceptance to be executed by their respective duly authorized officials,
officers or agents as of the date first above mentioned.

 

Very truly yours, [NAME OF ASSIGNOR] By:     Title:    

 

[NAME OF ASSIGNEE] By:     Title:    

 

ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO: WELLS FARGO CAPITAL FINANCE, LLC,
successor by merger to Wachovia Capital Finance Corporation (Central), f/k/a
Congress Financial Corporation (Central), as Administrative Agent By:     Title:
   

 

A-9

--------------------------------------------------------------------------------

EXHIBIT B

TO

LOAN AND SECURITY AGREEMENT

[1Borrowing Base Certificate]

000’s omitted

Date:                           , 20__

Number:                                

Pursuant to the Loan and Security Agreement by and among Wells Fargo Capital
Finance, LLC , successor by merger to Wachovia Capital Finance Corporation,
formerly known as Congress Financial Corporation (Central), as agent
(“Administrative Agent”), the parties thereto as lenders (“Lenders”), Spartan
Stores, Inc. and certain of its subsidiaries, as amended (the “Loan Agreement”),
each hereby certifies to Administrative Agent and Lenders, as of the above date,
as follows:

 

Wells Fargo Capital Finance              CONSOLIDATING BORROWING
BASE CERTIFICATE  

Revised 6/11/12

 

Pursuant to the Loan and Security Agreement between Wells Fargo Retail Finance
(“Lender”)

and the undersigned (“Borrowers”), and any amendments thereto (the “Loan
Agreement”), Borrowers hereby certify to Lender, as of the date below, as
follows:

     

As Of Date: May 26, 2012

     51746 3620    51747 3620     

 

        

Report Number:

     2sk01    2sk02     

 

Spartan

A/C#___________

  

  

 

 

                  

Spartan Retail Stores

   Spartan
Distribution    CONSOLIDATED  

 

1 

Current form of Borrowing Base Certificate to be attached.

 

B-1

--------------------------------------------------------------------------------

$XXX,XX,X $XXX,XX,X $XXX,XX,X $XXX,XX,X Accounts Receivable Availability
Calculation:    Prescription A/R     Trade A/R        

1

   Accounts Receivable       

2

   New Billings: Sales       

3

   Misc Debits       

4

   Less: Credit Memos       

5

   Less: Invoices Paid Per Collection: (GROSS)             

 

 

   

 

 

   

 

 

 

6

   Ending Accounts Rec       

7

   Less: Ineligible Accounts             

 

 

   

 

 

   

 

 

 

8

   Eligible Accounts Receivable       

9

   Accounts Receivable advance rate (%)      90 %      85 %      85 %       

 

 

   

 

 

   

 

 

 

10

   Accounts Receivable Availabiltiy             

 

 

   

 

 

   

 

 

 

Other Receivables

      

11

   Credit Card AR (net avail)       

12

   Advance Rate      90 %        90 %       

 

 

   

 

 

   

 

 

 

13

   Credit Card-Availability             

 

 

   

 

 

   

 

 

 

14

   Weekend Sales       

15

   Advance Rate        85 %      85 %       

 

 

   

 

 

   

 

 

 

16

   Weekend Sales-Availability             

 

 

   

 

 

   

 

 

 

17

   GRAND TOTAL AVAIL- A/R TRADE & A/R OTHERS             

 

 

   

 

 

   

 

 

 

Inventory Availability Calculation

      

18

   Beginning Inventory       

19

   Purchases       

 

B-2

--------------------------------------------------------------------------------

$XXX,XX,X $XXX,XX,X $XXX,XX,X $XXX,XX,X

20

   Sales               

 

  

 

  

 

21

   Ending Inventory         

21a

   Transfer at Liquidation         

22

   Less: Ineligibles               

 

  

 

  

 

23

   Eligible Inventory         

24

   Inventory Advance Rate (90% of Appraisal NOLV)               

 

  

 

  

 

25

   Gross Inventory Availability (before sublimit)         

26

   Inventory Sublimit               

 

  

 

  

 

27

   NET INVENTORY -AVAILABILITY               

 

  

 

  

 

Other Sources

        

28

   Prescription Files $50MM up to 85% of sublimit appraised value         

29

   Real Estate (60% of appraisal) up to 25% of Borrowing Base         

30

   M&E (85% of FLV)         

31

   Total Collateral Availability (before Reserves)         

32

   Required Risk Estimate Reserve per WF RETECHS Phase 1 ESA Review         

33

   Gift Cards & Certificates         

34

   PACA Liens         

35

   Sales, Cigarettes & Tobacco Tax         

36

   Book Overdraft         

37

   Other         

38

   Total Reserves (sum of lines 32-37)                     

 

 

B-3

--------------------------------------------------------------------------------

$XXX,XX,X $XXX,XX,X $XXX,XX,X $XXX,XX,X

39

   Total Collateral Availability after Reserves (line 31-38)         

40

   Maximum Credit               

 

 

    

 

 

    

 

41

   Borrowing Base (lesser of line 39 and 40)               

 

 

    

 

 

    

 

   USES:         

42

   Loan Balance - Revolver         

43

   Outstanding LC         

44

   AP Past Due         

45

   Other               

 

 

    

 

 

    

 

   TOTAL USES      0.00         0.00            

 

 

    

 

 

    

 

46

   EXCESS AVAILABILITY         

47

   Minimum Excess Availability per 9.20 of Loan Agreement (10% of Line 41)      
  

48

   Excess / (Deficit) Over Covenant         

49

   Qualified Cash         

50

   Excess Availability for Pricing/Hurdles/Triggers         

As of the date of this Certificate, no Event of Default exists or has occurred
and is continuing. Each Borrower acknowledges that the Loans and Letter of
Credit Accommodations by Administrative Agent and Lenders to Borrowers are based
upon the reliance of Administrative Agent and Lenders on the information
contained herein and all representations and warranties with respect to Accounts
and Inventory in the Loan Agreement are applicable to the Accounts and Inventory
included in this Certificate. The reliance by Administrative Agent and Lenders
on this Certificate should not be deemed to limit the right of Administrative
Agent to establish or revise criteria of eligibility or Reserves or otherwise
limit, impair, or affect in any manner the rights of Administrative Agent under
the Loan Agreement. In the event of any conflict between the determination of
Administrative Agent of the amount of the Loans and Letter of Credit
Accommodations available to Borrowers in accordance with the terms of the Loan
Agreement and the determination by Borrowers of such amounts, the determination
of Administrative Agent shall govern. All capitalized terms used in this
Certificate shall have the meaning assigned to them in the Loan Agreement.

 

B-4

--------------------------------------------------------------------------------

SPARTAN STORES, INC. (for itself and its Subsidiaries) By:     Title:    

 

B-5

--------------------------------------------------------------------------------

EXHIBIT C

INFORMATION CERTIFICATE

OF

SPARTAN STORES, INC. AND ITS SUBSIDIARIES

Dated: June 8, 2012

Wells Fargo Capital Finance, LLC

For itself and as Administrative Agent

One Boston Place

Boston, Massachusetts 02108

In connection with certain financing provided or to be provided by Wells Fargo
Capital Finance, LLC and certain other lenders (collectively, “Lenders”) and for
whom Wells Fargo Capital Finance, LLC will be acting as agent (in such capacity,
“Agent”), each of the undersigned (individually, a “Company” and, collectively,
the “Companies”) jointly and severally represents and warrants to Agent and
Lenders the following information about it, its organizational structure and
other matters of interest to Agent and Lenders:

 

1. The full and exact name of each Company as set forth in its certificate of
incorporation (or its certificate of formation or other organizational document
filed with the applicable state governmental authority, as the case may be) is
as follows:

 

  •  

Spartan Stores, Inc.

 

  •  

Spartan Stores Distribution, LLC

 

  •  

Market Development, LLC

 

  •  

Family Fare, LLC

 

  •  

Prevo’s Family Markets, Inc.

 

  •  

Spartan Stores Associates, LLC

 

  •  

MSFC, LLC

 

  •  

Seaway Food Town, Inc.

 

  •  

The Pharm of Michigan, Inc.

 

  •  

Spartan Properties Management, Inc.

 

  •  

Valley Farm Distributing Co.

 

  •  

Gruber’s Real Estate, LLC

 

  •  

Custer Pharmacy, Inc.

 

  •  

Spartan Stores Fuel, LLC

 

2. Each Company uses and owns the following trade name(s) in the operation of
its business (e.g. billing, advertising, etc.; note: do not include names which
are product names only):

 

C-1

--------------------------------------------------------------------------------

Company

 

Trade Names

1. SPARTAN STORES, INC.  

Assumed names under which business is conducted:

ProActive Consulting Services*

One Source Processing (in IN)*

Innovative Warehousing Solutions (in IN)*

2. SPARTAN STORES DISTRIBUTION, LLC

 

  None 3. MARKET DEVELOPMENT, LLC  

Assumed names under which business is conducted:

Jefferson Square (in IN)*

Market Street Plaza (in IN)*

 

* The Companies listed above have assumed name filings for the indicated assumed
names, but are not currently conducting business under such assumed names.

 

C-2

--------------------------------------------------------------------------------

4. FAMILY FARE, LLC  

Assumed names under which business is conducted:

Family Fare Trucking

Felpausch Food Center

Family Fare Pharmacy #1904

Family Fare Pharmacy #1992

VG’s Pharmacy #1920

VG’s Pharmacy #1921

VG’s Pharmacy #1922

VG’s Pharmacy #1923

VG’s Pharmacy #1925

VG’s Pharmacy #1926

VG’s Pharmacy #1927

VG’s Pharmacy #1928

VG’s Pharmacy #1929

VG’s Pharmacy #1930

VG’s Pharmacy #1931

VG’s Pharmacy #1932

VG’s Pharmacy #1933

VG’s Pharmacy #1934

VG’s Pharmacy #1937

Foodland Markets of Oakland County

Foodland Markets

Atlas Super Markets

Atlas Foodland

VG’s Food Center of Fenton

V.G.’s Food Center, Inc.

V.G.’s Food Center

Zoo Crew Kid’s Club

Glen’s Pharmacy #1519

VG’s Pharmacy #1936

Glen’s Pharmacy #1524

Family Fare Pharmacy #1972

V.G.’s Food & Pharmacy

Spartan Stores Pharmacy

D&W Pharmacy

D&W Fresh Market

Glen’s Pharmacy

Glen’s Markets

Family Fare Pharmacy

Family Fare Supermarket

Valu Land

VG’s Pharmacy

Dolven Pharmacy

 

C-3

--------------------------------------------------------------------------------

5. PREVO’S FAMILY MARKETS, INC.  

Assumed names under which business is conducted:

Felpausch Food Center

Family Fare Pharmacy #1994

Family Fare Pharmacy #1990

Family Fare Pharmacy #1980

Family Fare Pharmacy #1975

Family Fare Pharmacy #1979

Glen’s Pharmacy #647

Family Fare Pharmacy #1579

Prevo’s Pharmacy

Prevo’s Family Markets

D&W Pharmacy

D&W Fresh Market

Glen’s Pharmacy

Glen’s Markets

Family Fare Pharmacy

Family Fare Supermarket

Valu Land

6. SPARTAN STORES ASSOCIATES, LLC  

None

 

7. MSFC, LLC  

None

 

8. SEAWAY FOOD TOWN, INC.  

Assumed names under which business is conducted:

The Pharm (in OH)

9. THE PHARM OF MICHIGAN, INC.  

Assumed names under which business is conducted:

The Pharm (in MI)

10. SPARTAN PROPERTIES MANAGEMENT, INC.  

None

 

11. VALLEY FARM DISTRIBUTING CO.  

Assumed names under which business is conducted:

VFD (in MI, OH and PA)

Valley Farm Foods (in OH)

12. GRUBER’S REAL ESTATE, LLC  

None

 

13. CUSTER PHARMACY, INC.  

None

 

14. SPARTAN STORES FUEL, LLC  

Assumed names under which business is conducted:

Glen’s Quick Stop

Family Fare Quick Stop

D&W Quick Stop

VG’s Quick Stop

Felpausch Quick Stop

 

C-4

--------------------------------------------------------------------------------

3. Each Company is a registered organization of the following type (for example,
corporation, limited partnership, limited liability company, etc.):

 

Company

  

Type

Spartan Stores, Inc.    Corporation Spartan Stores Distribution, LLC    Limited
Liability Company Market Development, LLC    Limited Liability Company Family
Fare, LLC    Limited Liability Company Prevo’s Family Markets, Inc.   
Corporation Spartan Stores Associates, LLC    Limited Liability Company MSFC,
LLC    Limited Liability Company Seaway Food Town, Inc.    Corporation The Pharm
of Michigan, Inc.    Corporation Spartan Properties Management, Inc.   
Corporation Valley Farm Distributing Co.    Corporation Gruber’s Real Estate,
LLC    Limited Liability Company Custer Pharmacy, Inc.    Corporation Spartan
Stores Fuel, LLC    Limited Liability Company

 

4. Each Company was organized on the date indicated for such company below,
under the laws of the State indicated below for such Company, and each Company
is in good standing under the laws of such State.

 

Company

  

Date of

Organization

  

Jurisdiction of

Organization

Spartan Stores, Inc.    4/16/1918    Michigan Spartan Stores Distribution, LLC
   2/5/2002      Michigan Market Development, LLC    2/24/1959    Michigan
Family Fare, LLC    2/6/2002      Michigan Prevo’s Family Markets, Inc.   
4/14/1997    Michigan Spartan Stores Associates, LLC    4/15/1997    Michigan
MSFC, LLC    7/11/2002    Michigan Seaway Food Town, Inc.    3/31/2000   
Michigan The Pharm of Michigan, Inc.    2/19/1997    Michigan Spartan Properties
Management, Inc.    9/8/1955      Ohio         Valley Farm Distributing Co.   
1/13/1975    Ohio         Gruber’s Real Estate, LLC    3/21/2003    Michigan
Custer Pharmacy, Inc.    7/31/1979    Michigan Spartan Stores Fuel, LLC   
5/25/2004    Michigan

 

C-5

--------------------------------------------------------------------------------

5. The organizational identification number of each Company issued by its
jurisdiction of organization is as set forth below (or if none is issued by the
jurisdiction of organization indicate “none”):

 

Company                ID No.

Spartan Stores, Inc.

   MI CID# 185-372

Spartan Stores Distribution, LLC

   MI CID# B6570D

Market Development, LLC

   MI CID# 127-119

Family Fare, LLC

   MI CID# B7667D

Prevo’s Family Markets, Inc.

   MI CID# 465-210

Spartan Stores Associates, LLC

   MI CID# B11742

MSFC, LLC

   MI CID# B1384F

Seaway Food Town, Inc.

   MI CID# 35789A

The Pharm of Michigan, Inc.

   MI CID# 453-903

Spartan Properties Management, Inc.

   OH CID# 249604

Valley Farm Distributing Co.

   OH CID# 462075

Gruber’s Real Estate, LLC

   MI CID# B8183H

Custer Pharmacy, Inc.

   MI CID# 171-810

Spartan Stores Fuel, LLC

   MI CID# B7123Q

 

6. The Federal Employer Identification Number of each Company is as follows:

 

•   Spartan Stores, Inc.

   EIN# 38-0593940

•   Spartan Stores Distribution, LLC

   EIN# 75-2997653

•   Seaway Food Town, Inc.

   EIN# 38-3534161

•   Family Fare, LLC

   EIN# 38-2750461

•   MSFC, LLC

   EIN# 32-0023733

•   Prevo’s Family Markets, Inc.

   EIN# 38-3345860

•   Spartan Stores Associates, LLC

   EIN# 38-3346484

•   Market Development, LLC

   EIN# 38-1615193

•   Gruber’s Real Estate, LLC

   EIN# 13-4244494

•   Custer Pharmacy, Inc.

   EIN# 38-2269201

•   Spartan Properties Management, Inc.

   EIN# 34-4457803

•   The Pharm of Michigan, Inc.

   EIN# 31-1501291

•   Valley Farm Distributing Co.

   EIN# 34-1165412

•   Spartan Stores Fuel, LLC

   EIN# 43-2051981

 

C-6

--------------------------------------------------------------------------------

7. Each Company is duly qualified and authorized to transact business as a
foreign organization in the following states and is in good standing in such
states:

 

1. SPARTAN STORES, INC.

Jurisdiction of Incorporation: Michigan

Jurisdiction(s) of Foreign Qualification: Ohio

 

2. SPARTAN STORES DISTRIBUTION, LLC

Jurisdiction of Formation: Michigan

Jurisdiction(s) of Foreign Qualification: Indiana and Ohio

 

3. MARKET DEVELOPMENT, LLC

Jurisdiction of Incorporation: Michigan

Jurisdiction(s) of Foreign Qualification: Indiana

 

4. FAMILY FARE, LLC

Jurisdiction of Formation: Michigan

Jurisdiction(s) of Foreign Qualification: None

 

5. PREVO’S FAMILY MARKETS, INC.

Jurisdiction of Incorporation: Michigan

Jurisdiction(s) of Foreign Qualification: None

 

6. SPARTAN STORES ASSOCIATES, LLC

Jurisdiction of Formation: Michigan

Jurisdiction(s) of Foreign Qualification: Indiana, Ohio and Pennsylvania
(Spartan Stores Associates, LLC plans to withdraw from Pennsylvania)

 

7. MSFC, LLC

Jurisdiction of Formation: Michigan

Jurisdiction(s) of Foreign Qualification: None

 

C-7

--------------------------------------------------------------------------------

8. SEAWAY FOOD TOWN, INC.

Jurisdiction of Incorporation: Michigan

Jurisdiction(s) of Foreign Qualification: Ohio

 

9. THE PHARM OF MICHIGAN, INC.

Jurisdiction of Incorporation: Michigan

Jurisdiction(s) of Foreign Qualification: None

 

10. SPARTAN PROPERTIES MANAGEMENT, INC.

Jurisdiction of Incorporation: Ohio

Jurisdiction(s) of Foreign Qualification: None

 

11. VALLEY FARM DISTRIBUTING CO.

Jurisdiction of Incorporation: Ohio

Jurisdiction(s) of Foreign Qualification: Michigan

 

12. GRUBER’S REAL ESTATE, LLC

Jurisdiction of Formation: Michigan

Jurisdiction(s) of Foreign Qualification: None

 

13. CUSTER PHARMACY, INC.

Jurisdiction of Incorporation: Michigan

Jurisdiction(s) of Foreign Qualification: None

 

14. SPARTAN STORES FUEL, LLC

Jurisdiction of Incorporation: Michigan

Jurisdiction(s) of Foreign Qualification: None

 

C-8

--------------------------------------------------------------------------------

8. Since the date of five (5) years prior to the date hereof, the name of each
Company as set forth in its organizational documentation as filed of record with
the applicable state authority has been changed as follows:

 

Company

  

Date of Change

  

Prior Name

Spartan Stores, Inc.    No changes    Spartan Stores Distribution, LLC    No
changes    Market Development, LLC    2012    Market Development Corporation
Family Fare, LLC    No changes    Prevo’s Family Markets, Inc.    No changes   
Spartan Stores Associates, LLC    No changes    MSFC, LLC    No changes   
Seaway Food Town, Inc.    No changes    The Pharm of Michigan, Inc.    No
changes    Spartan Properties Management, Inc.    No changes    Valley Farm
Distributing Co.    No changes    Gruber’s Real Estate, LLC    No changes   
Custer Pharmacy, Inc.    No changes    Spartan Stores Fuel, LLC    No changes   

 

9. Since the date of five (5) years prior to the date hereof,

(a) the following Companies have made or entered into the following mergers or
acquisitions with a purchase price in excess of $2,500,000:

 

  (i) On June 15, 2007, Spartan Stores, Inc. (acting through Family Fare, LLC,
Prevo’s Family Markets, Inc., MSFC, LLC, and Spartan Stores Fuel, LLC) acquired
certain assets and assumed certain liabilities related to 20 retail grocery
stores, two fuel centers and three convenience stores from G&R Felpausch Company
and its affiliated companies.

 

C-9

--------------------------------------------------------------------------------

  (ii) On December 29, 2008, Spartan Stores, Inc. (acting through Family Fare,
LLC) acquired certain assets and assumed certain liabilities related to 17
retail grocery stores from VG’s Food Center, Inc. and VG’s Pharmacy, Inc., and

(b) the Companies have made or entered into mergers and acquisitions (i) with
other Persons with a purchase price of less than $2,500,000, or (ii) with one or
more of the other Companies, all as previously disclosed to the Agent.

 

10. The chief executive office and mailing address of each Company is located at
the address indicated for such Company on Schedule 8.2 hereto.

Schedule 8.2 attached

 

11. The books and records of each Company pertaining to accounts, contract
rights, inventory, and other assets are located at the addresses indicated for
such Company on Schedule 8.2 hereto.

Schedule 8.2 attached

 

12. Each Company has other places of business and/or maintains inventory or
other assets not in transit as permitted under Section 7.3(c) of the Agreement
only at the addresses (indicate whether locations are owned, leased or operated
by third parties and if leased or operated by third parties, their name and
address) indicated for such Company on Schedule 8.2 hereto.

Schedule 8.2 attached

 

13. The places of business or other locations of any assets not in transit as
permitted under Section 7.3(c) of the Agreement that were used by each Company
during the last four (4) months other than those listed above are as indicated
for such Company on Schedule 8.2 hereto.

 

  1.1 Schedule 8.2 attached

 

14. Each Company’s assets are owned and held free and clear of liens, mortgages,
pledges, security interests, encumbrances or charges except as set forth on
Schedule 8.4 hereto or as permitted under Section 9.8 of the Agreement.

 

  1.2 Schedule 8.4 attached

 

15. There are no judgments or litigation pending by or against any Company, its
subsidiaries and/or affiliates or any of its officers/principals, which if
adversely determined has or could reasonably be expected to have a Material
Adverse Effect (as defined in the Agreement), except as set forth on Schedule
8.6 hereto.

 

C-10

--------------------------------------------------------------------------------

[Schedule 8.6 is not material to an understanding of the Agreement and has been
omitted.]

 

16. Each Company is in compliance with all environmental laws applicable to its
business or operations to the extent required by Section 8.8 of the Agreement,
except as set forth on Schedule 8.8 hereto.

[Schedule 8.10 is not material to an understanding of the Agreement and has been
omitted.]

 

17. No Company has any deposit accounts, investment accounts, securities account
or similar accounts with any bank, savings and loan or other financial
institution, except as set forth on Schedule 8.10 hereto for the purposes and of
the types indicated therein.

[Schedule 8.10 is not material to an understanding of the Agreement and has been
omitted.]

 

18. No Company owns or licenses any trademarks, patents, copyrights or other
intellectual property, except as set forth on Schedule 8.11 hereto or as
described below (indicate type of intellectual property and whether owned or
licensed, registration number, date of registration, and, if licensed, the name
and address of the licensor).

Schedule 8.11 attached

Prevo’s Family Markets, Inc. licenses its trademarks to Spartan Stores
Distribution, LLC pursuant to the Nonexclusive Trademark License Agreement dated
April 1, 2002.

See attached list of owned copyright registrations contained in Schedule 8.11.
The Companies also own numerous works of authorship in which they own a
copyright. Also, the Companies license a copyright in all of the software
licenses.

The Companies have processes that may be protected as trade secrets, and own
unregistered trademarks, trade names and service marks.

The Companies license certain intellectual property from time to time in the
ordinary course of business.

 

19. Each Company is affiliated with, or has ownership in, the corporations
(including subsidiaries) and other organizations set forth on Schedule 8.12
hereto.

 

C-11

--------------------------------------------------------------------------------

Schedule 8.12 attached

 

20. The names of the stockholders (or members or partners, including general
partners and limited partners) of each Company and their holdings are as set
forth on Schedule 8.12 hereto (if stock or other interests are widely held
indicate only holders owning 10% or more of the voting stock or other
interests).

Schedule 8.12 attached

Spartan Stores, Inc.’s common stock is widely held and is traded on NASDAQ.
There are no 10% shareholders of Spartan Stores, Inc.

 

21. No Company is a party to or bound by an collective bargaining or similar
agreement with any union, labor organization or other bargaining agent except as
set forth on Schedule 8.13 hereto (indicate date of agreement, parties to
agreement, description of employees covered, and date of termination).

Schedule 8.13 attached

 

22. No Company is a party to or bound by any “Material Contract” (as defined in
the Agreement) except as set forth on Schedule 8.15 hereto.

[Schedule 8.15 is not material to an understanding of the Agreement and has been
omitted.]

 

23. No Company has any “Indebtedness” (as defined in the Agreement) except as
set forth on Schedule 9.9 hereto or as permitted under Section 9.9 of the
Agreement.

 

  1.3 Schedule 9.9 attached

 

24. No Company has made any loans or advances or otherwise become liable for the
obligations of any others, except as set forth on Schedule 9.10 hereto, or as
permitted under Section 9.10 of the Agreement.

 

  1.4 [Schedule 9.10 is not material to an understanding of the Agreement and
has been omitted.]

 

25. No Company has any chattel paper (whether tangible or electronic) or
instruments as of the date hereof, except as follows:

None

 

C-12

--------------------------------------------------------------------------------

26. No Company has any commercial tort claims in excess of $1,000,000, except as
follows:

None

 

27. Except as provided below, there is no provision in the certificate of
incorporation, certificate of formation, articles of organization, by-laws or
operating agreement of any Company (as applicable) or the other organizational
documents of such Company, or in the laws of the State of its organization,
requiring any vote or consent of it shareholders, members or other holders of
the equity interests therein to borrow or to authorize the mortgage or pledge of
or creation of a security interest in any assets of such Company or any
subsidiary. Except as provided below, such power is vested exclusively in its
Board of Directors (or in the case of a limited partnership, the general partner
or in the case of a limited liability company, the manager).

Spartan Stores, Inc. is the sole member of Spartan Stores Distribution, LLC;
Seaway Food Town, Inc. is the sole member of Gruber’s Real Estate, LLC, Spartan
Stores Fuel, LLC, and Family Fare, LLC; Prevo’s Family Markets, Inc. is the sole
member of MSFC, LLC; therefore, the vote or consent of Spartan Stores, Inc.,
Seaway Food Town, Inc. or Family Fare, LLC, as the sole member of such entities,
as applicable, is required to borrow, mortgage, pledge or create a security
interest in the assets of the applicable entity.

 

C-13

--------------------------------------------------------------------------------

28. The officers of each Company and their respective titles are as follows:

 

Company

  

Title

  

Name

    

Spartan Stores, Inc.

  

President & CEO: Dennis Eidson

Executive Vice President Retail Operations: Theodore Adornato

Vice President Information Technology: David deS.Couch

Executive Vice President, General Counsel and Secretary: Alex J. DeYonker

Executive Vice President Merchandising and Marketing: Alan Hartline

Executive Vice President Wholesale Operations: Derek Jones

Executive Vice President & CFO: David M. Staples

Vice President Finance: Thomas A. Van Hall

 

Other Vice Presidents:

Vice President Real Estate: David J. Belock, Jr.

Divisional Vice President Retail Operations South: Bruce Emery

Vice President Human Resources: Jerry Jones

Divisional Vice President Retail Operations East: Brian Haaraoja

Divisional Vice President Retail Operations North: Mark Lamberies

Vice President Supply Chain: Lach McKinnon

Vice President Corporate Affairs: Jeanne Norcross

Vice President Center Store Merchandising: Larry Pierce

Vice President Fresh Merchandising: Scott Ruth

Vice President Marketing: Ken Thewes

Vice President Operational Finance: Francis Wong

Spartan Stores Distribution, LLC   

Single Member Entity: Spartan Stores, Inc.

President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President Supply Chain: Derek Jones

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

Seaway Food Town, Inc.

  

President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

Family Fare, LLC

  

Single Member Entity: Seaway Food Town, Inc.

President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

Assistant Secretary: Michael J. Gallagher

 

C-14

--------------------------------------------------------------------------------

MSFC, LLC

  

Single Member Entity: Prevo’s Family Markets, Inc.

President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

   Prevo’s Family Markets, Inc.   

President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

Assistant Secretary: Michael J. Gallagher

   Spartan Stores Associates, LLC   

Multi Member Entity: Spartan Stores, Inc. – 99%; The Pharm of Michigan, Inc. –
1%

President: Dennis Eidson

Vice President Human Resources: Jerry Jones

Vice President Real Estate: David J. Belock, Jr.

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

   Market Development, LLC   

Multi Member Entity: Spartan Stores, Inc. – 99%; The Pharm of Michigan, Inc. –
1%

President and Treasurer: David M. Staples

Vice President Real Estate and Construction: David J. Belock, Jr.

Vice President Real Estate: Clifford C. Sasfy

Vice President, Secretary and Resident Agent: Alex J. DeYonker

   Gruber’s Real Estate, LLC   

Single Member Entity: Seaway Food Town, Inc.

President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

   Custer Pharmacy, Inc.   

President: Dennis Eidson

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

   Spartan Properties Management, Inc.   

President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

   The Pharm of Michigan, Inc.   

President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

   Valley Farm Distributing Co.   

President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President: Derek Jones

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

  

 

C-15

--------------------------------------------------------------------------------

Spartan Stores Fuel, LLC

  

Single Member Entity: Seaway Food Town, Inc.

President: Theodore Adornato

Vice President: Dennis Eidson

Vice President Real Estate: David J. Belock, Jr.

Vice President and Treasurer: David M. Staples

Vice President, Secretary and Resident Agent: Alex J. DeYonker

  

The following will have signatory powers as to all transactions of each Company
with Agent and Lenders:

For Spartan Stores, Inc.:

President and CEO – Dennis Eidson

Executive Vice President and CFO – David M. Staples

Vice President Finance – Thomas A. VanHall

Executive Vice President, General Counsel and Secretary – Alex J. DeYonker

Corporate Treasurer – Bill Jacobs

For each other Company:

Each of the President, Treasurer or Secretary for each other Company as
identified above.

 

29. The members of the Board of Directors of each Company (or, if the Company is
a limited partnership, the general partner or, if the Company is a limited
liability company, the managers) are:

 

Company

  

Directors

Spartan Stores, Inc.

  

Craig C. Sturken, Chairman

M. Shân Atkins

Wendy A. Beck

Dennis Eidson

Dr. Frank Gambino

Yvonne R. Jackson

Frederick Morganthall

Elizabeth A. Nickels

Timothy J. O’Donovan

Spartan Stores Distribution, LLC

   N/A

Seaway Food Town, Inc.

   Dennis Eidson

 

C-16

--------------------------------------------------------------------------------

Family Fare, LLC

  N/A

MSFC, LLC

  N/A

Prevo’s Family Markets, Inc.

  Dennis Eidson

Spartan Stores Associates, LLC

  Spartan Stores, Inc., Manager

Market Development, LLC

  Spartan Stores, Inc., Manager

Gruber’s Real Estate, LLC

  NA

Custer Pharmacy, Inc.

  Dennis Eidson

Spartan Properties Management, LLC

  Dennis Eidson

The Pharm of Michigan, Inc.

  Dennis Eidson

Valley Farm Distributing Co.

  Dennis Eidson

Spartan Stores Fuel, LLC

  N/A

 

30. At the present time, there are no delinquent taxes due in excess of $100,000
(including, but not limited to, all payroll taxes, personal property taxes, real
estate taxes or income taxes) except as follows:

 

Company

 

Taxes

None    

 

31. Certified Public Accountants for each Company is the firm of:

Name Deloitte & Touche LLP                                         
                                            

Address 700 Bridgewater Place 333 Bridge St
NW                                                     

Partner Handling Relationship Michael
Gaudino                                                     

Were statements uncertified for any fiscal year? NO
                                                 

As used herein the term “Agreement” shall mean the Loan and Security Agreement
dated December 23, 2003, by and among Agent and each Company, as the same now
exists or as may be amended, modified, supplemented, extended, renewed or
restated.

 

C-17

--------------------------------------------------------------------------------

Agent and Lenders shall be entitled to rely upon the foregoing in all respects
and each of the undersigned is duly authorized to execute and deliver this
Information Certificate on behalf of the Company for which he or she is signing.

 

    Very truly yours,

SPARTAN STORES, INC. (for itself and its subsidiaries)

      By:           Title:    

 

C-18

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

A. Company: Spartan Stores, Inc.

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th St SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

Address  

Owned/Leased/

Third Party

 

Name/Address of Lessor or

Third Party, as Applicable

850 76th St SW, P.O. Box 8700, Grand Rapids, MI 49518  

Owned by

MD

  Market Development, LLC

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-19

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

B. Company: Custer Pharmacy, Inc.

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

Address  

Owned/Leased/

Third Party

 

Name/Address of Lessor or

Third Party, as Applicable

850 76th Street SW, P.O. Box 8700, Grand Rapids, MI 49518  

Owned by MD

  Market Development, LLC

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-20

--------------------------------------------------------------------------------

SCHEDULE 8.2

to

INFORMATION CERTIFICATE

Locations

 

C. Company: Family Fare, LLC

1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

3. Locations of Inventory, Equipment and Other Assets

 

Address   

Owned/Leased/

Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

1148—28th St Wyoming, MI 49509    Leased    Citizens Bank 9479 Riley Zeeland, MI
49464    Leased    Riley, LLC 701 68th Street SW Grand Rapids, MI 49315   
Leased    Grand Rapids - NCR LLC 2275 Health Dr SW Wyoming, MI 49519    Leased
   MHV 5221 Cherry Avenue Hudsonville, MI 49426    Leased    Genzink
Investments, LLC 2245 84th Street Byron Center, MI 49315    Leased    84th St
Byron Center LLC 993 Butternut Drive Holland, MI 49424    Leased    Sundowner of
Holland LLC 1185 S. Washington Holland, MI 49423    Leased    Capital Retail,
LLC 6480 28th Avenue Hudsonville, MI 49426    Leased    Capital Retail, LLC 1225
Leonard NE Grand Rapids, MI 49505    Leased    Vanderkooy Land Co 6127 Kalamazoo
SE Kentwood, MI 49508    Leased    Daane’s Development Co 6370 Lake Michigan
Dr. Allendale, MI 49401    Leased    Capital Retail, LLC 4175 17 Mile Road Cedar
Springs, MI 49319    Leased    RBL Investments LLC 2755 Lake Michigan Dr Grand
Rapids, MI 49504    Leased    RBL Investments LLC 565 S State Street Sparta, MI
49345    Leased    Emmons Development Co 3561 W. Houghton Lake Drive Houghton,
MI 48629    Leased    Catt’s Realty Company 100 S Bradley Road Rogers City, MI
49779    Leased    Catt’s Realty Company 992 S. Main Cheboygan, MI 49721   
Leased    Catt’s Realty Company 2626 M-33 North Rose City, MI 48654    Leased   
Jack and Gladys Gifford R109 M-66 Charlevoix, MI 49720    Leased    Captain’s
Corner, LLC 617-619 N Williams Mancelona, MI 49659    Leased    Catt’s Realty
Company 305 N Morenci Mio, MI 48647    Leased    Catt’s Realty Company 2206
South M-76 West Branch, MI 48661    Leased    Catt’s Realty Company 829 W. Main
Street Gaylord, MI 49734    Leased    Catt’s Realty Company 2470 S. Grayling
Road Grayling, MI 49738    Leased    Grayling Mini Mall, LLC 1700 Wright Ave.
Alma, MI 48801    Leased    Bobenal Investments, Inc. 784 S. Cedar Street
Kalkaska, MI 49646    Leased    Catt’s Realty Company 240 South Lake Street East
Jordan, MI 49727    Leased    Catt’s Realty Company 5105 County Rd 612 Lewiston,
MI 49756    Leased    Catt’s Realty Company 409 N. 5th Street Roscommon, MI
49653    Leased    Frederick G Krauss 430 N. Lake Street Boyne City, MI 49712   
Leased    Catt’s Realty Company 10350 S Clare Ave Clare, MI 46817    Leased   
Chodaka, LLC

 

C-21

--------------------------------------------------------------------------------

5463 N. Huron Oscoda, MI 48750    Leased    Catt’s Realty Company 533 S Main
Street Standish, MI 48658    Leased    Standish Plaza Associates 1570 N. Clare
Harrison, MI 48625    Leased    Jade Pig Ventures 1190 N State Street Gladwin,
MI 48624    Leased    Ashcraft-Gladwin LLC 1163 US 31 North Petoskey, MI 49770
   Leased    KRW Associates 1305 Spring Street Petoskey, MI 49770    Leased   
Agree Realty Corporation 425 E. M-28 Munising , MI 49862    Leased    Catt’s
Realty Company 401 S Mill Road Marion, MI 49665    Leased    Kibby Company LLC
699 US 2 St. Ignace, MI 49781    Leased    Card&Card Investments 4284 I-75
Business Spur Ste. St. Marie, MI 49783    Leased    Diversified Development
Realty 2026 North Saginaw Midland, MI 48640    Leased    Nathan Leader 1116
Robbins Rd Grand Haven, MI 49417    Leased    DEG Development Co LLC 1830 Breton
Rd., SE Grand Rapids, MI 49506    Leased    Jade Pig Ventures 4325 Breton Rd
Kentwood, MI 49512    Leased    Jade Pig Ventures 1415 East Fulton St Grand
Rapids, MI 49503    Leased    RDD Holdings, LLC 525 Romence Rd. Portage, MI
49024    Leased    Romence Village, LLC 1965 Baldwin St. Jenison, MI 49428   
Leased    Northtown Center, Inc 2022 Apple Orchard Ave Grand Rapids, MI 49525   
Owned    Family Fare, LLC 25 and 45 E. Columbia Battle Creek, MI 49017    Leased
   Cole Real Estate Investments 2400 W. Grand River Howell, MI 48843    Leased
   B&S Development 18005 Silver Parkway Fenton, MI 48430    Leased    Centro
Properties 1520 W. Caro Caro, MI 48723    Leased    Central Real Estate Company
7300 Highland Waterford, MI 48327    Leased    Kosma Enterprises 20 E. Walton
Pontiac, MI 48340    Leased    Kosma Enterprises 710 S. Mill Clio, MI 48420   
Leased    Clio Enterprises, LLC 5080 Corunna Flint, MI 48532    Leased    JPM
2000-C10 Corunna Rd LLC 1390 N. Leroy Fenton, MI 48430    Leased    KMC
Associates, LLC 50820 Schoenherr Shelby Twp., MI 48315    Leased    Associates,
LLC 7461 N. Genesee Genesee, MI 48437    Leased    Tom Joubran Management LLC
8503 Davison Davison, MI 48423    Leased    RLJ Enterprises, LLC 9870 E. Grand
River Brighton, MI 48116    Leased    Centro Properties 1341 N. M-52 Owosso, MI
48867    Owned    Owned by MDC 4165 E. Court Burton, MI 48509    Leased   
Gateway Jackson, Inc 6764 S. River Marine City, MI 48039    Leased    First
Riverside Center Partners, LLC 40832 Ryan Sterling Hts., MI 48310    Leased   
Centro Properties, Inc 410 N. Marshall St. Coldwater, MI 49036    Leased   
Feldpausch Realty 3800 W Saginaw St Lansing, MI 48917    Leased    Gentilozzi
Real Estate Inc 1525 W. Michigan Ave. Battle Creek, MI 49017    Leased   
Urbandale, LLC 902 West State St. Hastings, MI 49058    Leased    Hastings
Associates, LLC 126 N. Broadway Hastings, MI 49058    Leased    Broadway/State
Association, LLC 1406 Eaton Albion, MI 49224    Leased    Albion Real Estate
Associates 293 S. Cochran Charlotte, MI 48813    Leased    Feldpausch Realty 810
W. Bellevue Leslie, MI 49251    Leased    Childs Shopping Plaza, LLC 463 44th St
SE Wyoming, MI 49548    Leased    Jade Pig Ventures 560 West Semionle Muskegon,
MI 49444    Leased    RCS Properties, LLC 3410 Remembrance Road Walker, MI 49534
   Leased    SDM Development Co, LLC 1315 Boyne Ave. Boyne City, MI 49712   
Leased    SIB Properties, LLC 5700 Beckley—Bldg. F Battle Creek, MI 49015   
Leased    Associate Realty, LLC 2105 W. Michigan Ave. Jackson, MI 49203   
Leased    Lake Jackson Realty, LLC 294 Highland Battle Creek, MI 49015    Leased
   Lake Jackson Realty, LLC 209 S Alloy Dr Fenton, MI 48430    Leased    RLJ
Enterprises, LLC 1778 84th St Byron Center, MI 49315    Owned    Family Fare,
LLC

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-22

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

D. Company: Gruber’s Real Estate, LLC

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

Address   

Owned/Leased/

Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

124 E. Front St., Adrian, MI 49221-1805

   Owned    Gruber’s Real Estate, LLC

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-23

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

E. Company: Market Development LLC

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

Address   

Owned/Leased/

Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

5539 US 10 Ludington, MI 49684    Owned    Market Development, LLC 850 76th St
SW, PO Box 8700, Grand Rapids, MI 49518    Owned    Market Development, LLC 537
76th St SW Byron Center, MI 49315    Leased    Vienna Holdings, LLC 1100 Hynes
Ave. SW Grand Rapids, MI 49507    Leased    Columbian 1200 Judd Ave SW Grand
Rapids, MI 49509    Leased    MI Natural Storage 7675 28th Avenue Jenison, MI
49428    Owned    Market Development, LLC 7683 28th Avenue Jenison, MI 49428   
Owned    Market Development, LLC 7691 28th Avenue Jenison, MI 49428    Owned   
Market Development, LLC 2845 Baldwin St Jenison, MI    Owned    Market
Development, LLC Lots 1&3 Plymouth, IN 46563    Owned    Market Development, LLC
4010 W Vienna Rd & 12079 N Jennings Rd Clio, MI    Owned    Market Development,
LLC Beecher Rd Flint, MI 48532    Owned    Market Development, LLC North Holly
Rd Grand Blanc, MI 49439    Owned    Market Development, LLC

The company also leases 5 sites in which it has subleasing arrangements with
certain of its grocery distribution customers. See Exhibit 1 below

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-24

--------------------------------------------------------------------------------

Exhibit 1 to MDC Properties

Properties leased by MDC which are subleased to certain Grocery Distribution
customers and others.

 

Tenant    Address    Lessor Busch’s, Inc.    12601 Grafton Road Carleton, MI   
Maurice & Hana, Inc./Fidelity Bank Plumb’s Inc.    33 East M-82 Newaygo, MI   
River Valley Dev. Co. LLC Harding’s Market    6330 S. Westnedge Portage, MI   
Village Green Properties LTD Busch’s, Inc.    565 East Michigan Saline, MI   
K&K Development Plumb’s Inc.    3251 East Colby Whitehall, MI    W. DeLano
Living Trust

 

C-25

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

F. Company: MSFC, LLC

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

Address   

        Owned/Leased/

        Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

850 76th Street SW, P.O. Box 8700,

Grand Rapids, MI 49518

         Owned by MD    Market Development, LLC

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-26

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

G. Company: The Pharm of Michigan, Inc.

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

Address   

        Owned/Leased/

        Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

850 76th Street SW, P.O. Box 8700, Grand Rapids, MI 49518          Owned by MD
   Market Development, LLC

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-27

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

H. Company: Prevo’s Family Markets, Inc.

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

Address   

Owned/Leased/

Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

1181 W. Randall St. Coopersville, MI 49404    Leased    Casemier Leasing Inc
5241 Northland Dr. Grand Rapids, MI 49505    Leased    Daane’s Development Co
4144 US 31 South Traverse City, MI 49684    Leased    DP Properties, LLC 905-15
E. 8th St Traverse City, MI 49684    Leased    DP Properties, LLC 1002 Forest
Ave. Frankfort, MI 49635    Leased    GDO Investments 305 S. Division Bellaire,
MI 49615    Leased    DP Properties, LLC 1057 US 31 South Highway Manistee, MI
49660    Leased    Cole GL Manistee, MI LLC 602 S. Mitchell Cadillac, MI 49604
   Leased    Cadillac Square Center, LLC 201 Marcell Dr Rockford, MI 49341   
Leased    Jade Pig Ventures 6425 28th St., SE Grand Rapids, MI 49546    Leased
   Centro Properties 50 Douglas Ave Holland, MI 49424    Leased    PDQ Holland
2103 Parkview Ave Kalamazoo, MI 49008    Leased    Jade Pig Ventures 2181
Wealthy St., SE Grand Rapids, MI 49506    Leased    Richard Geenen 9375 Cherry
Valley Ave. SE Caledonia, MI 49316    Leased    S&H Land Company 3960-66 44th
St., SW Grandville, MI 49418    Leased    Capital Retail, LLC 2900 Burlingame
Ave. SW Wyoming, MI 49509    Leased    JP Dermody, Inc. 720 S. Clinton Grand
Ledge, MI 48837    Leased    Eaton Ledges Realty, LLC 151 W. Grand River
Williamston, MI 48895    Owned by MD    Market Development, LLC 103 N. Grove—Box
206 Delton, MI 49046    Leased    Linda Sweet 56151 South M-51 Dowagiac, MI
49047    Leased    Murk Properties 1603 Capital NE Battle Creek, MI 49017   
Leased    Capital Square Associates 847 S. Kalamazoo Ave. Paw Paw, MI 49079   
Leased    Murk Properties 1411 S. Main Eaton Rapids, MI 48827    Leased    Eaton
Ledges Realty, LLC 1415 S. Main Eaton Rapids, MI 48827    Leased    Eaton Ledges
Realty, LLC 15900 W. Michigan Ave. Marshall, MI 49068    Leased    Rob Cohon 120
W. Prarie St. Vicksburg, MI 49097    Leased    Associates Realty, LLC 512 N.
Park St. Kalamazoo, MI 49007    Leased    Northside Assoc of Comm Development
425 Fuller Ave NE Grand Rapids, MI 49503    Leased    Alan Investment Group 2141
Parkview Ave Kalamazoo, MI 49008    Owned by MD    Market Development, LLC

 

C-28

--------------------------------------------------------------------------------

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-29

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

I. Company: Seaway Food Town, Inc.

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

Address   

Owned/Leased/

Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

1020 Ford St Maumee, OH 43537    Owned    Seaway Food Town, Inc. 800 Ford St
Maumee, OH 43537    Owned by SPM    Spartan Properties Management, Inc. 4223
South Ave Toledo, OH 43615    Owned by SPM    Spartan Properties Management,
Inc. 2527 Parkway Plaza Maumee, OH 43537    Leased    Detroit Ave Plaza, LLC 801
Dixie Highway Rossford, OH 43460    Owned by SPM    Spartan Properties
Management, Inc. 410 Wheeling St. Oregon, OH 43616    Owned by SPM    Spartan
Properties Management, Inc. Tracy Road & Arbor Dr, Northwood, OH 43619    Owned
by MD    Market Development, LLC

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-30

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

J. Company: Spartan Properties Management, Inc

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

 

Address   

Owned/Leased/

Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

850 76th Street SW, P.O. Box 8700, Grand Rapids, MI 49518    Owned by MD   
Market Development, LLC 4223 South Ave Toledo, OH 43615    Owned    Spartan
Properties Management, Inc. 801 Dixie Highway Rossford, OH 43460    Owned   
Spartan Properties Management, Inc. 410 Wheeling St, Oregon, OH 43616    Owned
   Spartan Properties Management, Inc. 800 Ford St., Maumee, OH 43537    Owned
   Spartan Properties Management, Inc.

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-31

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

K. Company: Spartan Stores Associates, LLC

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

 

 

Address

  

        Owned/Leased/

        Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

850 76th Street SW

P.O. Box 8700

Grand Rapids, MI 49518

         Owned by MD    Market Development, LLC

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-32

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

L. Company: Spartan Stores Distribution, LLC

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

 

 

Address   

Owned/Leased/

Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

850 76th St SW, P.O. Box 8700, Grand Rapids, MI 49518    Owned by MD    Market
Development, LLC 537 76th St, Grand Rapids, MI 49315    Leased    Vienna
Holdings, LLC *1200 Judd Ave SW, Grand Rapids, MI 49509    Third Party   
Michigan Natural Storage Co 1100 Hynes Ave SW, Grand Rapids, MI 49507    Third
Party    Columbian

 

* Third party warehouse used from time to time to store frozen turkeys and/or
other seasonal items.

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-33

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

M. Company: Spartan Stores Fuel, LLC

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

Address   

Owned/Leased/

Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

1713 N Clare Ave Harrison, MI 48625    Leased    Jade Pig Ventures 1035 US 31
South Manistee, MI 49660    Leased    Anchor Manistee, LLC 6799 Cascade Road
Grand Rapids, MI 49546    Leased    Cascade Rd Retail Center 7250 Highland Road
Waterford, MI 48327    Leased    Kosma Enterprises 2260 Gezon Pkwy Wyoming, MI
49519    Leased    MHV, LLC 1600 28th SW Wyoming, MI 49509    Owned    Spartan
Stores Fuel, LLC 600 S State St Sparta, MI 49345    Leased    Armock
Development, LLC 56145 South M51 Dowagiac, MI 49047    Leased    Murk Properties
2755 Lake Michigan Dr Grand Rapids, MI 49504    Leased    RBL Investments LLC
916 West State St. Hastings, MI 49058    Leased    Hastings Associates, LLC
18005 Silver Parkway Fenton, MI 48430    Leased    Centro NP Holdings 2392 W.
Grand River Ave. Howell, MI 48843    Leased    B&S Development 3260 96th Ave
Zeeland, MI 49464    Leased    Riley, LLC 7599 Clyde Park Byron Center, MI 49315
   Owned    Spartan Stores Fuel, LLC 1149 South Washington Ave Holland, MI 49423
   Leased    Bittersweet of Kentucky, Inc 2285 84th Street Byron Center, MI
49315    Leased    84th St Maier, LLC 997 Butternut Dr Holland, MI 49424   
Owned    Spartan Stores Fuel, LLC 835 W. Main Street Gaylord, MI 49734    Leased
   Catt’s Realty Company 6380 Lake Michigan Allendale, MI 49401    Leased   
Allendale Shopping Center LLC 4177 17 Mile Road Cedar Springs, MI 49319   
Leased    RBL Investments LLC 2760 Port Sheldon Rd Jenison, MI 49428    Owned   
Spartan Stores Fuel, LLC 1201 Leonard St., NE Grand Rapids, MI 49505    Leased
   Vanderkooy Land Co 9441 Cherry Valley Ave. SE Caledonia, MI 49316    Leased
   S&H Land Company 1810 Breton Rd SE Grand Rapids, MI 49506    Leased    R&A
LLC 1163 N. US Hwy 31 Petoskey, MI 49770    Leased    Koffman-McEntee LLC 1690
Wright Avenue Alma, MI 48801    Leased    NT Petro, LLC 1415 S. Main Eaton
Rapids, MI 48827    Leased    Eaton Ledges Realty, LLC 25 East Columbia Battle
Creek, MI 49015    Leased    Anchor Lakeview, LLC

 

C-34

--------------------------------------------------------------------------------

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-35

--------------------------------------------------------------------------------

SCHEDULE 8.2

TO

INFORMATION CERTIFICATE

Locations

 

N. Company: Valley Farm Distributing Co

 

  1. Chief Executive Office

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  2. Location of Books and Records

850 76th Street SW

P.O. Box 8700

Grand Rapids, Michigan 49518

 

  3. Locations of Inventory, Equipment and Other Assets

 

        Address   

        Owned/Leased/

        Third Party

  

Name/Address of Lessor or

Third Party, as Applicable

850 76th Street SW

PO Box 8700

Grand Rapids, Michigan 49518

         Owned by MD    Market Development, LLC

 

  4. Locations of Assets in Prior 4 Months not Listed Above

N/A

 

C-36

--------------------------------------------------------------------------------

SCHEDULE 8.4

TO

INFORMATION CERTIFICATE

Existing Liens

DEBTOR NAME: SPARTAN STORES, INC.

 

      

FILINGS

  

SECURED PARTY

  

COLLATERAL

  1.      

Date:             7/31/1974

Doc. #           A506614

Amended       4/4/1983

Continued in 1979 - 2009

   General Electric Co. Lighting Business Group    Inventory of electric lamps
or light bulbs sold or consigned to the debtor. Accounts receivable, contract
rights, chattel paper and any other right to the payment of money and security
therefore, arising from the sale, consignment or other transfer by the debtor of
the said inventory.   2.      

Date:             5/10/2002

Doc. #           37548C

Amended      3/8/2012

Continued in 2007 & 2012

   General Electric Capital Corp., as Lessor    Leased equipment: 3 2002
forklifts model SC4010-30.   3.      

Date:             12/12/2003

Doc. #           2003236890-7

Amended      07/18/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor.   4.      

Date:              07/03/2006

Doc. #            2006117884-6

Continued in 2011

   General Electrical Capital Corporation    Leased equipment: 19 2007 utility
model N-2765 Reefer Trailers. Includes serial numbers.   5.      

Date:              01/04/2007

Doc. #            2007002620-2

Amended       12/01/2011

Continued in 2011

   General Electrical Capital Corporation    Leased equipment: multiple 2006
forklifts. Includes serial numbers.   6.      

Date:              01/12/2007

Doc. #           2007007510-4

Amended      10/26/2011

Continued in 2011

   General Electrical Capital Corporation    Leased equipment: 8 2006 forklifts.
Includes serial numbers.       7.      

Date:              01/30/2007

Doc. #           2007017129-7

Amended      10/18/2011

Continued in 2011

   General Electrical Capital Corporation    Leased equipment: 34 2006 forklifts
and 59 third post options attached.   8.      

Date:         05/31/2007

Doc. #       2007086341-0

   IOS Capital    Leased equipment pursuant to Master Lease.   9.      

Date:         06/15/2007

Doc. #       200705470-4

   IOS Capital    Leased equipment pursuant to Master Lease.   10.      

Date:         07/02/2007

Doc. #       2007104763-7

   IBM Credit LLC    Equipment and software.   11.      

Date:         08/28/2007

Doc. #       2007135390-3

   IBM Credit LLC    Equipment and software.

 

C-37

--------------------------------------------------------------------------------

      

FILINGS

  

SECURED PARTY

  

COLLATERAL

  12.      

Date:         09/14/2007

Doc. #       2007144714-2

   IKON Financial Services    Leased equipment pursuant to Master Lease.   13.
     

Date:         09/20/2007

Doc. #       2007148072-4

   IBM Credit LLC    Equipment and software.   14.      

Date:         09/28/2007

Doc. #       2007152471-6

   IBM Credit LLC    Equipment and software.   15.      

Date:         10/01/2007

Doc. #       2007154125-5

   IBM Credit LLC    Equipment and software.   16.      

Date:         10/18/2007

Doc. #       2007163917-5

   IBM Credit LLC    Equipment and software.   17.      

Date:         11/20/2007

Doc. #       2007181628-4

   IKON Financial Services    Leased equipment pursuant to Master Lease.   18.
     

Date:         12/31/2007

Doc. #       2007203529-1

   IBM Credit LLC    Equipment and software.   19.      

Date:         01/22/2008

Doc. #       2008011570-8

   General Electric Capital Corporation    6 2002 forklifts.   20.      

Date:         03/14/2008

Doc. #       2008041002-1

   IBM Credit LLC    Equipment and software.   21.      

Date:         07/24/2008

Doc. #       2008117438-5

   IKON Financial Services    Leased equipment pursuant to Master Lease.   22.
     

Date:         11/03/2008

Doc. #       2008169072-1

   IKON Financial Services    Leased equipment pursuant to Master Lease.   23.
     

Date:         01/05/2009

Doc. #       2009001166-1

   IBM Credit LLC    Equipment and software.   24.      

Date:         03/11/2009

Doc. #       2009037097-6

   IKON Financial Services    Leased equipment pursuant to Master Lease.   25.
     

Date:         05/28/2010

Doc. #       2010074011-4

   IKON Financial Services    Leased equipment pursuant to Master Lease.   26.
     

Date:         07/01/2010

Doc. #       2010090900-9

   IBM Credit LLC    Equipment and software.   27.      

Date:         07/08/2010

Doc. #       2010092805-9

   IBM Credit LLC    Equipment and software.   28.      

Date:         10/01/2010

Doc. #       2010131847-5

   IBM Credit LLC    Equipment and software.   29.      

Date:         10/21/2010

Doc. #       2010141221-1

   IKON Financial Services    Leased equipment pursuant to Master Lease.   * 30.
     

Date:         01/31/2011

Doc. #       2011014111-6

   The Village at Knapp’s Crossing, LLC    All property, equipment,
improvements, and inventory ever located on the Leased Premises at 3327 Knapp
St. NE, together with any replacements or additions thereto, general intangible
assets and accounts receivable.   31.      

Date:         09/06/2011

Doc. #       2011126837-9

   General Electric Credit Corporation of Tennessee    Leased equipment:
multiple Deka lift truck batteries.   32.      

Date:         10/03/2011

Doc. #       2011139053-2

   IBM Credit LLC    Equipment and software.

 

C-38

--------------------------------------------------------------------------------

      

FILINGS

  

SECURED PARTY

  

COLLATERAL

  33.      

Date:         01/03/2012

Doc. #       2012000828-1

   IBM Credit LLC    Equipment and software.     34.      

Date:         04/24/2012

Doc. #       2012060595-8

   IBM Credit LLC    Equipment and software.

 

* This filing was improper and fraudulent. The Companies are taking actions to
terminate the filing.

DEBTOR NAME: SPARTAN STORES DISTRIBUTION, LLC

 

      

FILINGS

  

SECURED PARTY

  

COLLATERAL

  1.      

Date:             12/12/2003

Doc. #           2003236888-2

Amended      07/18/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor.   2.      

Date:             08/03/2007

Doc. #           2007121798-1

Assignment  10/30/2007

Continued in 2012

   Bank of America Leasing & Capital, LLC    Leased equipment pursuant to Master
Lease: of all present and future goods, including but not limited to 7
Scrubber-Sweepers.   3.      

Date:            10/03/2007

Doc. #          2007155910-1

Assignment 11/26/2007

   Bank of America Leasing & Capital, LLC    Leased equipment pursuant to Master
Lease: of all present and future goods, including but not limited to 8 Walkie
Stackers.   *   4.      

Date:         02/25/2008

Doc. #       2008029763-7

   Continental Paper Grading Co.    Debtor grants to Secured Party a 1st
position priority purchase money security interest and lien in the Purchase
Money Collateral: all Financed Equipment and other personal property now or
acquired by Debtor from CPG, including all Inventory, Equipment and Good sold to
or for the benefit of Supplier. Financed Equipment means all equipment for Waste
Paper handling financed by Secured Party on Exhibit B.   5.      

Date:         10/13/2009

Doc. #       2009146523-3

   US Bancorp    For informational purposes only: 1 C6000VP CWM00156BW bus.   6.
     

Date:             06/02/2010

Doc. #          2010075381-8

Assignment 08/23/2010

   Banc of America Leasing & Capital, LLC    Leased equipment pursuant to Master
Lease: of all present and future goods, including but not limited to 4 forklifts
and related equipment.

 

* Debt paid off. The Companies will terminate this filing.

 

C-39

--------------------------------------------------------------------------------

DEBTOR NAME: SPARTAN STORES ASSOCIATES, LLC

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/12/2003

Doc. #           2003236887-0

Amended       07/18/2008

Continued in 2008

  

Wachovia Capital Finance Corporation

Congress Financial Corporation

   All existing or acquired property and assets of Debtor.

DEBTOR NAME: MSFC, LLC

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/12/2003

Doc. #           2003236883-2

Amended      03/12/2008

Amended      07/18/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor. Amended to delete collateral sold to purchaser of the retail
grocery store.

DEBTOR NAME: MARKET DEVELOPMENT, LLC

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/12/2003

Doc. #           2003236882-0

Amended      07/18/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor.

DEBTOR NAME: SEAWAY FOOD TOWN, INC.

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/12/2003

Doc. #           2003236885-6

Amended      09/13/2007

                      05/19/2008

                      07/09/2008

                      07/18/2008

                      08/20/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor. Amended to delete collateral sold to purchasers of the retail
grocery and/or drug stores.

DEBTOR NAME: CUSTER PHARMACY, INC.

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/12/2003

Doc. #           2003236876-7

Amended      07/18/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor.

 

C-40

--------------------------------------------------------------------------------

DEBTOR NAME: GRUBER’S REAL ESTATE, LLC

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/12/2003

Doc. #           2003236879-3

Amended      07/18/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor.

DEBTOR NAME: SPARTAN PROPERTIES MANAGEMENT, INC.

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/11/2003

Doc. #           200334900022

Amended       01/12/2006

Amended       01/13/2006

Collateral Amendment

                      05/19/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor. Amended to delete collateral sold to purchasers of retail
stores.

DEBTOR NAME: SPARTAN STORES FUEL, LLC

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             07/01/2004

Doc. #           2004134457-8

Amended      02/11/2009

Continued in 2009

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor. 2.   

Date:             07/17/2007

Doc. #           2007112513-8

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 3.   

Date:             07/17/2007

Doc. #           2007112516-4

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 4.   

Date:             07/17/2007

Doc. #           2007112517-6

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 5.   

Date:             07/17/2007

Doc. #           2007112519-0

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 6.   

Date:             07/17/2007

Doc. #           2007112520-3

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 7.   

Date:             07/17/2007

Doc. #           2007112521-5

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 8.   

Date:             07/17/2007

Doc. #           2007112522-7

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 9.   

Date:             07/17/2007

Doc. #           2007112525-3

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 10.   

Date:             10/31/2007

Doc. #           2007170682-5

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 11.   

Date:             10/31/2007

Doc. #           2007170683-7

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment.

 

C-41

--------------------------------------------------------------------------------

12.   

Date:             11/20/2007

Doc. #           2007181830-3

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 13.   

Date:             07/11/2008

Doc. #           2008110371-6

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 14.   

Date:             09/30/2009

Doc. #           2009139968-6

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 15.   

Date:             09/30/2009

Doc. #           2009139969-8

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 16.   

Date:             09/30/2009

Doc. #           2009139970-1

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 17.   

Date:             09/30/2009

Doc. #           2009139971-3

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 18.   

Date:             09/30/2009

Doc. #           2009139972-5

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 19.   

Date:             11/09/2009

Doc. #           2009160224-7

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 20.   

Date:             03/25/2010

Doc. #           2010040440-3

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment. 21.   

Date:             07/01/2010

Doc. #           2010090348-7

   S. Abraham & Sons, Inc.    Coffee machinery and related equipment.

DEBTOR NAME: THE PHARM OF MICHIGAN, INC.

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/12/2003

Doc. #          2003236891-9

Amended      04/29/2008

Amended      05/19/2008

Amended      07/18/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor. Amended to delete collateral sold to purchasers of retail drug
stores.

DEBTOR NAME: VALLEY FARM DISTRIBUTING CO.

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/11/2003

Doc. #200334900024

Amended      07/18/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor.

 

C-42

--------------------------------------------------------------------------------

DEBTOR NAME: FAMILY FARE, LLC

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/12/2003

Doc. #           2003236877-9

Amended      09/13/2007

Amended      02/26/2008

Amended      04/29/2008

Amended      07/18/2008

Amended      12/22/2008

Amended      09/29/2009

Amended      11/30/2009

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor. Amended to delete collateral sold to purchasers of retail
stores.

DEBTOR NAME: PREVO’S FAMILY MARKETS, INC.

 

    

FILINGS

  

SECURED PARTY

  

COLLATERAL

1.   

Date:             12/12/2003

Doc. #           2003236884-4

Amended       02/11/2008

Amended       07/18/2008

Continued in 2008

   Wachovia Capital Finance Corporation    All existing or acquired property and
assets of Debtor. Amended to delete collateral sold to purchasers of retail
stores. 2.   

Date:             11/05/2008

Doc. #           2008170252-6

   Wachovia Capital Finance Corporation    All facilities, fixtures, machinery,
appliances, furniture, equipment and other property located at 151 West Grand
River Avenue, Williamston, Michigan 48895.

 

C-43

--------------------------------------------------------------------------------

SCHEDULE 8.11

TO

INFORMATION CERTIFICATE

Intellectual Property

Trademarks

 

Buckeye Discount,

Inc.

                              Country/State    Trademark    Status    Class(es)
   Appl. No.   

Appl.

Date

   Reg. No.   

Reg.

Date

  

Next

Renewal

Due

Ohio

   THE PHARM    Registered             RN64615    Aug-20-1997    Aug-20-2017

Family Fare, LLC

                        Country/State    Trademark    Status    Class(es)   
Appl. No.    Appl. Date    Reg. No.    Reg. Date    Next Renewal
Due

United States

   FAMILY FARE    Registered    35    78/501152    Oct-18-2004    3505264   
Sep-23-2008    Sep-23-2018

United States

   FAMILY FARE    Registered    35    75/564923    Oct-6-1998    2445517   
Apr-24-2001    Apr-24-2021

United States

   TREATING YOU LIKE FAMILY    Registered    42    74/456443    Nov-4-1993   
1866083    Dec-6-1994    Dec-6-2014

Prevo’s Family

                       

 

C-44

--------------------------------------------------------------------------------

Markets, Inc.                               Country/State    Trademark    Status
   Class(es)    Appl.
No.    Appl.
Date    Reg. No.   

Reg.

Date

   Next Renewal
Due

Indiana

   SPARTAN BRAND PRODUCTS MAKE MEALTIME EASY AND DESIGN    Registered    35   
      5010-375OA    Apr-25-1996    Apr-23-2016

Michigan

   APPLE MARKET AND DESIGN    Registered    101          M01-426    Jan-29-1997
   Jan-29-2017

Michigan

   APPLE MARKET BRINGING THE FRESHEST FOOD TO YOUR NEIGHBORHOOD AND DESIGN   
Registered    101          M01-425    Jan-29-1997    Jan-29-2017

Michigan

   SPARTAN    Registered    51          M02-460    Sep-1-2000    Sep-1-2020

Michigan

   SPARTAN BRAND PRODUCTS MAKE MEALTIME EASY AND DESIGN    Registered    101   
      M00-931    Jun-3-1996    Jun-3-2016

Michigan

   SPARTAN STORES    Registered    52          M30-031    May-11-1979   
May-11-2019

Michigan

   SPARTAN STORES    Registered    101          M75-070    Oct-12-1989   
Oct-12-2019

Michigan

   SPARTAN STORES    Registered    37          M30-031    May-11-1979   
May-11-2019

Michigan

   SPARTAN STORES    Registered    46          M30-031    May-11-1979   
May-11-2019

Michigan

   VG’S    Registered    35          M03529    Nov-27-2000    Nov-27-2020

Michigan

   VG’S ZOO CREW KID’S CLUB    Registered    35          M03533    Nov-27-2000
   Nov-27-2020

Ohio

   SPARTAN    Registered             TM8930    Apr-10-1980    Apr-10-2020

 

C-45

--------------------------------------------------------------------------------

Ohio

   SPARTAN    Registered             TM8926    Apr-10-1980    Apr-10-2020

Ohio

   SPARTAN    Registered             TM8927    Apr-10-1980    Apr-10-2020

Ohio

   SPARTAN    Registered             TM8929    Apr-10-1980    Apr-10-2020

Ohio

   SPARTAN BRAND PRODUCTS MAKE MEALTIME EASY AND DESIGN    Registered    35   
      69519    Mar-25-1996    Mar-25-2016

United States

   A NICER PLACE TO BE    Registered    42    75/067390    Mar-4-1996    2052385
   Apr-15-1997    Apr-15-2017

United States

   CLOSER. FASTER. FRIENDLIER.    Registered    35    77/205724    Jun-14-2007
   3362190    Jan-1-2008    Jan-1-2018

United States

   D & W    Registered    42    75/067384    Mar-4-1996    2172182   
Jul-14-1998    Jul-14-2018

United States

   D & W    Registered    35    77/156318    Apr-13-2007    3368138   
Jan-15-2008    Jan-15-2018

United States

   DELUXE CHOICE    Registered    29    85144112    Oct-4-2010    4029869   
Sep-20-2011    Sep-20-2021

United States

   DR. SPARK    Pending    32    85594267    Apr-11-2012         

United States

   EASY CHOICE NETWORK    Registered    36    74/165905    May-13-1991   
1747907    Jan-19-1993    Jan-19-2023

United States

   EAT WELL FOR LIFE    Registered    43    77613936    Nov-13-2008    3783308
   May-4-2010    May-4-2020

United States

   ESSENTIALS EXPRESS    Registered    35    78/853610    Apr-4-2006    3370651
   Jan-15-2008    Jan-15-2018

United States

   FELPAUSCH    Registered    35    77/209306    Jun-19-2007    3362194   
Jan-1-2008    Jan-1-2018

United States

   FRESH OR FREE    Registered    35    78/527680    Dec-6-2004    3003125   
Sep-27-2005    Sep-27-2015

United States

   FROM CONCEPT TO REALITY    Registered    37, 42    73/799832    May-15-1989
   1594552    May-1-1990    May-1-2020

 

C-46

--------------------------------------------------------------------------------

United States

   GLEN’S    Registered    35    78/501151    Oct-18-2004    3028375   
Dec-13-2005    Dec-13-2015

United States

   GOLDEN CHIPS    Registered    30    77919026    Jan-25-2010    3901914   
Jan-4-2011    Jan-4-2021

United States

   GREAT MEALS START HERE    Registered    35    77519193    Jul-10-2008   
3702869    Oct-27-2009    Oct-27-2019

United States

   GROCERIES FOR LESS EVERY DAY    Pending    35    85578089    Mar-23-2012   
     

United States

   INDULGENT CREATIONS    Pending    30    85553495    Feb-27-2012         

United States

   JOE DOES COFFEE    Pending    30, 35    85518045    Jan-17-2012         

United States

   MICHIGAN’S BEST    Registered    35    77791115    Jul-28-2009    3720400   
Dec-1-2009    Dec-1-2019

United States

   MICHIGAN’S BEST (Stylized)    Registered    35    77791113    Jul-28-2009   
3769563    Mar-30-2010    Mar-30-2020

United States

   MOUNTAIN PULSE    Pending    32    85594271    Apr-11-2012         

United States

   SOOO JUICY    Pending    32    85164999    Oct-29-2010         

United States

   SPARTAN    Registered    1, 4, 16, 21, 29, 30, 32    78/563785    Feb-9-2005
   3067847    Mar-14-2006    Mar-14-2016

United States

   SPARTAN EST. 1953 and Design    Registered    16, 29, 30, 32    78563769   
Feb-9-2005    3095219    May-23-2006    May-23-2016

United States

   SPARTAN STORES    Registered    35    78/562885    Feb-8-2005    3054876   
Jan-31-2006    Jan-31-2016

 

C-47

--------------------------------------------------------------------------------

United States    Spartan Stores Logo    Registered 35    78563773    Feb-9-2005
   3054939    Jan-31-2006    Jan-31-2016 United States    STEPS UP IN YOUR
NEIGHBORHOOD    Registered 35, 36    77/119486    Mar-1-2007    3402702   
Mar-25-2008    Mar-25-2018 United States    THE PHARM and Design   
Registered 3, 5, 21    75005243    Oct-13-1995    2006090    Oct-8-1996   
Oct-8-2016 United States    TO YOUR GOOD LIFE    Registered 44    78/626417   
May-10-2005    3160786    Oct-17-2006    Oct-17-2016 United States   
TREATING YOU LIKE FAMILY    Registered 42    74/456443    Nov-4-1993    1866083
   Dec-6-1994    Dec-6-2014 United States    VALU LAND    Registered 35   
85157799    Oct-21-2010    4029895    Sep-20-2011    Sep-20-2021 United States
   VALU LAND GROCERIES FOR LESS EVERY DAY!    Pending 35    85580951   
Mar-27-2012          United States    VG’S    Registered 35    77/613888   
Nov-13-2008    3638936    Jun-16-2009    Jun-16-2019 United States    VIDEOTIME
   Registered 41    77/215466    Jun-26-2007    3362200    Jan-1-2008   
Jan-1-2018 United States    WELLNESS CLUES    Registered 44    77613915   
Nov-13-2008    3743760    Feb-2-2010    Feb-2-2020 United States    YES   
Registered 35    77652363    Jan-20-2009    3700283    Oct-20-2009   
Oct-20-2019 United States    YES (Stylized)    Registered 35    77652361   
Jan-20-2009    3679071    Sep-8-2009    Sep-8-2019 United States   
YES = SAVINGS + REWARDS (Stylized)    Registered 35    77702048    Mar-30-2009
   3695734    Oct-13-2009    Oct-13-2019

 

C-48

--------------------------------------------------------------------------------

United States    YES IS MORE    Pending    35    85556364    Feb-29-2012      
  

United States

   yes is more.    Pending    35    85556337    Feb-29-2012         

United States

   YES YOU EARN & SAVE    Registered    35    77747209    May-29-2009    3736425
   Jan-12-2010    Jan-12-2020

United States

   YOU’RE IN THE GLEN’S NEIGHBORHOOD    Registered    35    78/408827   
Apr-27-2004    3177820    Nov-28-2006    Nov-28-2016

Seaway Food

Town, Inc.

                                   Country/State    Trademark    Status   
Class(es)    Appl. No.   

Appl.

Date

   Reg. No.   

Reg.

Date

  

Next

Renewal

Due

United States    SHOO THE FLU and Design    Registered    42    74486208   
Feb-3-1994    1901027    Jun-20-1995    Jun-20-2015

Michigan

   THE PHARM    Registered             M89-059    Mar-5-1997    Aug-21-2017

Michigan

   YOU CAN COUNT ON US    Registered             M53-082    Feb-15-1994   
Feb-15-2014

United States

   FOOD TOWN SUPERMARKETS (Stylized)    Registered    35    76/451995   
Sep-23-2002    3641539    Jun-23-2009    Jun-23-2019 Ohio    VALLEY FARM FOODS
   Registered             24394    Apr-21-2008    Apr-21-2018

 

C-49

--------------------------------------------------------------------------------

The Pharm of

Michigan, Inc.

                                   Country/State    Trademark    Status   
Class(es)    Appl. No.    Appl. Date    Reg. No.    Reg. Date    Next Renewal
Due United States    THE PHARM and Design    Registered    3, 5, 21    75005243
   Oct-13-1995    2006090    Oct-8-1996    Oct-8-2016 United States    EZ4YOU   
Registered    35    78148002    Jul-26-2002    2781907    Nov-11-2003   
Nov-11-2013

 

C-50

--------------------------------------------------------------------------------

Domain Name

 

Domain Name    Owner    Next Renewal Due

spartanstores.us

   Spartan Stores    April 23, 2017

Patent

 

Country    Status    Appl. No.    Appl. Date    Patent No.    Grant Date   
Title

United States

   Filed    12/582412    10/20/2009          METHOD OF VALIDATING A DISCOUNT
OFFER

Licenses

The Companies license Intellectual Property to and from other Companies from
time to time. The Companies license Intellectual Property from other Persons
from time to time in the ordinary course of business. The Companies also license
owned Intellectual Property to other Persons from time to time in the ordinary
course of business.

 

C-51

--------------------------------------------------------------------------------

SCHEDULE 8.12

TO

INFORMATION CERTIFICATE

Subsidiaries; Affiliates; Investments

 

A. Subsidiaries (More than 50% owned by Company indicated)

 

Company

  

Subsidiary

   Jurisdiction of
Incorporation    Percentage
Owned   Spartan Stores, Inc.    Spartan Stores Distribution, LLC    Michigan   
  100    Spartan Stores, Inc.    Market Development, LLC    Michigan      99   
Spartan Stores, Inc.    Seaway Food Town, Inc.    Michigan      100    Spartan
Stores, Inc.    Spartan Stores Associates, LLC    Michigan      99    Family
Fare, LLC    Prevo’s Family Markets, Inc.    Michigan      100    Prevo’s Family
Markets, Inc.    MSFC, LLC    Michigan      100    Seaway Food Town, Inc.   
Spartan Properties Management, Inc.    Ohio      100    Seaway Food Town, Inc.
   Valley Farm Distributing Co.    Ohio      100    Seaway Food Town, Inc.   
Custer Pharmacy, Inc.    Michigan      100    Seaway Food Town, Inc.    Gruber’s
Real Estate, LLC    Michigan      100    Seaway Food Town, Inc.    The Pharm of
Michigan, Inc.    Michigan      100    Seaway Food Town, Inc.    Family Fare,
LLC    Michigan      100    Seaway Food Town, Inc.    Spartan Stores Fuel, LLC
   Michigan      100   

 

C-52

--------------------------------------------------------------------------------

B. Affiliates (Less than 50% Owned by Company)

 

Company

  

Affiliate

   Jurisdiction of
Incorporation    Percentage
Owned

None

        

 

C. Affiliates (Subject to common ownership with Company)

 

Company

  

Affiliate

   Jurisdiction of
Incorporation   

Parent

   Percentage
Owned Prevo’s Family Markets, Inc.    Market Development, LLC    Michigan   
Spartan Stores, Inc.    1 Prevo’s Family Markets, Inc.    Spartan Stores
Associates, LLC    Michigan    Spartan Stores, Inc.    1

 

D. Shareholders of Spartan Stores, Inc. with more than 10%

None.

 

Company

  

Shareholders

   Jurisdiction of
Incorporation*    Percentage
Owned

None

        

 

* If shareholders are individuals, indicate “N/A”.

 

C-53

--------------------------------------------------------------------------------

SCHEDULE 8.13

TO

INFORMATION CERTIFICATE

Labor Matters

1. Spartan Stores, Inc., and General Teamsters Local Union No. 406 have an
existing collective bargaining agreement that expires on October 13, 2012.

 

C-54

--------------------------------------------------------------------------------

SCHEDULE 9.9

TO

INFORMATION CERTIFICATE

Existing Indebtedness

 

1. Direct Debt

Capital Leases

 

Company

  

Name/Address

of Payee

   Principal Balance
as of 3/31/2012      Nature of Debt    Term

Spartan Stores Distribution, LLC

   IBM Credit, LLC    $ 150,000       Capital Lease    Septemeber 2012

Family Fare, LLC

   IBM Credit, LLC    $ 21,522       Capital Lease    June 2012

Prevos Family Markets, Inc.

   IBM Credit, LLC    $ 26,294       Capital Lease    June 2012

MSFC, LLC

   IBM Credit, LLC    $ 317       Capital Lease    June 2012

Spartan Stores Fuel, LLC

   IBM Credit, LLC    $ 2,647       Capital Lease    June 2012

Family Fare, LLC

   DDR Michigan II LLC    $ 307,851       Capital Lease    March 2013

Family Fare, LLC

   Script Pro    $ 149,521       Capital Lease    March 2015

Family Fare, LLC

   IBM Credit, LLC    $ 478,362       Capital Lease    March 2014

 

C-55

--------------------------------------------------------------------------------

Family Fare, LLC

   GE Capital    $ 2,066         Capital Lease       August 2012

Prevos Family Markets, Inc.

   GE Capital    $ 11,757         Capital Lease       August 2012

Prevos Family Markets, Inc.

   DP Properties, LLC    $ 2,223,024         Capital Lease       September 2032

Family Fare, LLC

   Allendale Shopping Center, LLC    $ 3,149,753         Capital Lease      
June 2022

Family Fare, LLC

   Capital Retail, LLC    $ 2,713,673         Capital Lease       September 2030

Family Fare, LLC

   MHV Grocery, LLC    $ 3,444,602         Capital Lease       April 2032

Family Fare, LLC

   Anchor Manistee, LLC    $ 3,351,526         Capital Lease       July 2029

Family Fare, LLC

   Daane’s Development    $ 3,869,619         Capital Lease       September 2029

Prevos Family Markets, Inc.

   Murk Properties    $ 1,988,562         Capital Lease       October 2018

Prevos Family Markets, Inc.

   Murk Properties    $ 555,653         Capital Lease       November 2013

Family Fare, LLC

   New Plan Excel Realty    $ 3,043,651         Capital Lease       June 2016

Family Fare, LLC

   Gateway Jackson    $ 219,315         Capital Lease       February 2014

Family Fare, LLC

   Riverside Center Properties, LLC    $ 1,514,415         Capital Lease      
February 2023

Family Fare, LLC

   Centro Properties, LLC    $ 1,314,169         Capital Lease       May 2017

 

C-56

--------------------------------------------------------------------------------

Family Fare, LLC

   Jade Pig Ventures    $ 3,618,290       Capital Lease    November 2018

Family Fare, LLC

   Lake Jackson Realty, LLC    $ 3,957,478       Capital Lease    September 2030

Prevos Family Markets, Inc.

   Jade Pig Ventures    $ 5,378,119       Capital Lease    January 2020

Prevos Family Markets, Inc.

   Jade Pig Ventures    $ 2,781,448       Capital Lease    November 2018

Family Fare, LLC

   Romence Village, LLC    $ 4,178,163       Capital Lease    January 2020

Family Fare, LLC

   Jade Pig Ventures    $ 110,420       Capital Lease    February 2014         
  

Other Debt

 

Family Fare, LLC

   Catt’s Realty Company    $   60,632       Loans from
landlord for
improvements    June 2020

Family Fare, LLC

   Catt’s Realty Company    $ 66,492       Loans from
landlord for
improvements    June 2020

Family Fare, LLC

   Catt’s Realty Company    $ 30,814       Loans from
landlord for
improvements    June 2020

 

C-57

--------------------------------------------------------------------------------

Family Fare, LLC

   Universal Land Company    $     14,761       Loans from landlord for
improvements    April 2014

Family Fare, LLC

   Universal Land Company    $ 44,800       Loans from landlord for improvements
   June 2020

Family Fare, LLC

   Standish Plaza Associates    $ 27,188       Loans from landlord for
improvements    July 2018

Family Fare, LLC

   84th Street Byron Center, LLC    $ 24,626       Loans from landlord for
improvements    June 2014

Family Fare, LLC

   Ashcraft-Gladwin, LLC    $ 18,961       Loans from landlord for improvements
   July 2018

 

C-58

--------------------------------------------------------------------------------

EXHIBIT D

TO

LOAN AND SECURITY AGREEMENT

Form of Financial Statements

Spartan Stores, Inc. and Subsidiaries

Consolidated Balance Sheets

($000s)

 

XXXXXXXXX XXXXXXXXX XXXXXXXXX      

 

  

 

  

 

ASSETS

        

Current assets

        

Cash and cash equivalents

        

Accounts receivable, net

        

Intercompany accounts receivable

        

Inventories

        

Prepaid expenses and other current assets

        

Deferred taxes on income

        

Property and equipment held for sale

           

 

  

 

  

 

Total current assets

        

Other assets

        

Goodwill, net

        

Deferred taxes on income

        

Other, net

           

 

  

 

  

 

Total other assets

        

Property and equipment

        

Land and improvements

        

Buildings and improvements

        

Equipment

        

Total property and equipment

           

 

  

 

  

 

Less accumulated depreciation and amortization

           

 

  

 

  

 

Net property and equipment

        

Total assets

           

 

  

 

  

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

        

Current liabilities

        

Accounts payable

        

Intercompany accounts payable

        

Accrued payroll and benefits

        

Other accrued expenses

        

Current portion of restructuring costs

        

Current maturities of long-term debt

        

Total current liabilities

           

 

  

 

  

 

Other long-term liabilities

        

Restructuring costs

        

Deferred taxes

        

Postretirement benefits

        

 

D-1

--------------------------------------------------------------------------------

Spartan Stores, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

(Unaudited)

($000s)

 

XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXXX      Shares
Outstanding    Common
Stock    Deferred
Stock-Based
Compensation    Accumulated
Other
Comprehensive
Income (Loss)    Retained
Earnings    Total

Balance—March 27, 2010

                 

Comprehensive earnings, net of tax:

                 

Net earnings for fiscal 2011

                 

Change in fair value of interest rate swap

                 

Minimum pension liability adjustment

                 

Remeasurment of pension liability

                 

Pension curtailment income

                                   

 

Total comprehensive earnings

                 

Dividends ($.20 per share)

                 

Repurchase of equity component of convertible debt, net of tax

                 

Stock-based employee compensation

                 

Issuances of common stock and related tax benefit on stock option exercises

                 

Issuances of restricted stock and related tax benefit

                 

Cancellations of restricted stock

                    

 

  

 

  

 

  

 

  

 

  

 

Balance—March 26, 2011

                 

Net earnings for fiscal 2012

                 

Change in fair value of interest rate swap

                 

Minimum pension liability adjustment

                 

Remeasurment of pension liability

                 

SWAP Termination

                                   

 

Total comprehensive earnings

                 

Dividends ($.26 per share)

                 

Share repurchase

                 

Stock-based employee compensation

                 

Issuances of common stock and related tax benefit on stock option exercises

                 

Issuances of restricted stock and related tax benefit

                 

Cancellations of restricted stock

                    

 

  

 

  

 

  

 

  

 

  

 

Balance—March 31, 2012

                 

Net earnings for fiscal 2013

                 

Change in fair value of interest rate swap

                 

Minimum pension liability adjustment

                 

Remeasurment of pension liability

                 

SWAP Termination

                                   

 

Total comprehensive earnings

                 

Dividends ($.24 per share)

                 

Share repurchase

                 

Stock-based employee compensation

                 

Issuances of common stock and related tax benefit on stock option exercises

                 

Issuances of restricted stock and related tax benefit

                 

Cancellations of restricted stock

                    

 

  

 

  

 

  

 

  

 

  

 

April 28, 2012

                    

 

  

 

  

 

  

 

  

 

  

 

 

D-2

--------------------------------------------------------------------------------

Spartan Stores, Inc. and Subsidiaries

Consolidated Statements of Cash Flow

(Unaudited)

($ 000s)

 

XXXXXXX XXXXXXX     

 

        

 

  

 

Cash flows from operating activities

     

Net earnings

     

Loss from discontinued operations, net of tax

        

 

  

 

Earnings from continuing operations

     

Adjustments to reconcile net earnings to net cash provided by operating
activities:

     

Non-cash restructuring, asset impairment and other

     

Non-cash convertible debt interest

     

Depreciation and amortization

     

LIFO Income—Warehouse Consolidation

     

LIFO (income) / expense

     

Postretirement benefits expense

     

Deferred taxes on income

     

Stock-based compensation expense

     

Excess tax benefit on stock compensation

     

Gain on repurchase of convertible notes

     

(Gain) / loss on disposal of assets

     

Other, net

     

Changes in operating assets and liabilities:

     

Accounts receivable

     

Inventories

     

Prepaid expenses and other assets

     

Accounts payable

     

Accrued payroll and benefits

     

Postretirement benefits payments

     

Other accrued expenses and other liabilities

        

 

  

 

Net cash provided by operating activities

     

Cash flows from investing activities

     

Purchases of property and equipment

     

Proceeds from the sale of assets

     

Other

        

 

  

 

Net cash used in investing activities

     

Cash flows from financing activities

     

Net proceeds from (payments on) revolver

     

Share repurchase

     

Repurchase of convertible notes

     

Repayment of other long-term debt

     

Excess tax benefit on stock compensation

     

Proceeds from sale of common stock

     

Dividends paid

        

 

  

 

Net cash used in financing activities

        

 

  

 

Discontinued operations:

     

Net cash used in operating activities

     

Net cash used in investing activities

     

Net cash used in financing activities

        

 

  

 

Net cash used in discontinued operations

        

 

  

 

Net (decrease) increase in cash and cash equivalents

     

Cash and cash equivalents at beginning of period

        

 

  

 

Cash and cash equivalents at end of period

        

 

  

 

 

D-3

--------------------------------------------------------------------------------

Spartan Stores, Inc.

Consolidating Balance Sheets

April 28, 2012

 

     Consolidated    Eliminations    Distribution
Segment    Retail
Segment    Discontinued
Operations

ASSETS

              

Current assets

              

Cash and cash equivalents

              

Accounts receivable

              

Intercompany accounts receivable

              

Inventories

              

Prepaid expenses and other current assets

              

Deferred taxes on income

              

Property and equipment held for sale

              

Total current assets

                 

 

  

 

  

 

  

 

  

 

Other assets

              

Goodwill

              

Deferred taxes on income

              

Other

              

Total other assets

                 

 

  

 

  

 

  

 

  

 

Property and equipment

              

Land and improvements

              

Buildings and improvements

              

Equipment

              

Total property and equipment

                 

 

  

 

  

 

  

 

  

 

Less accumulated depreciation and amortization

                 

 

  

 

  

 

  

 

  

 

Net property and equipment

                 

 

  

 

  

 

  

 

  

 

Total assets

                 

 

  

 

  

 

  

 

  

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

              

Current liabilities

              

Accounts payable

              

Intercompany accounts payable

              

Accrued payroll and benefits

              

Other accrued expenses

              

Current portion of restructuring costs

              

Current maturities of long-term debt

                 

 

  

 

  

 

  

 

  

 

Total current liabilities

              

Other long-term liabilities

              

Restructuring costs

              

Deferred taxes

              

Postretirement benefits

              

Long-term debt

              

Shareholders’ equity

              

Common stock

              

Additional paid-in capital

              

Deferred stock-based compensation

              

Accumulated other comprehensive loss

              

Retained earnings (accumulated deficit)

                 

 

  

 

  

 

  

 

  

 

Total shareholders’ equity

                 

 

  

 

  

 

  

 

  

 

Total liabilities and shareholders’ equity

                 

 

  

 

  

 

  

 

  

 

Total Assets—Segment Detail

Total assets per balance sheet

Add: Distribution / Retail Intercompany Elims

Subtract: Intercompany balances per Other Assets

Intercompany A/R

Transfer elims to Grocery Distribution

 

D-4

--------------------------------------------------------------------------------

     Consolidated    Eliminations    Distribution
Segment    Retail
Segment    Discontinued
Operations

Net sales

              

Cost of sales

              

Cost of goods sold

              

Center store shrink

              

Market gains

              

LIFO expense

                 

 

  

 

  

 

  

 

  

 

Cost of sales

                 

 

  

 

  

 

  

 

  

 

Gross margin

              

Operating expenses

              

Warehousing

              

Store labor

              

SBT expense

              

Other selling, general and administrative

              

Restructuring, asset impairment and other

              

Depreciation and amortization

              

Loss on disposal of assets

                 

 

  

 

  

 

  

 

  

 

Total operating expenses

              

Operating earnings

              

Non-operating expense (income)

              

Interest expense

              

Non-cash convertible debt interest

              

Interest income

              

Royalty expense (income)

              

Intercompany leasing mark-up

              

Other, net

                 

 

  

 

  

 

  

 

  

 

Total non-operating expense, net

                 

 

  

 

  

 

  

 

  

 

Earnings (loss) before income taxes and other Income taxes

              

Michigan BIT

              

Michigan GRT

              

Michigan credits

              

Ohio state tax

              

Federal

                 

 

  

 

  

 

  

 

  

 

Total income taxes

                 

 

  

 

  

 

  

 

  

 

Earnings (loss) from continuing operations

              

Earnings (loss) from discontinued operations

                 

 

  

 

  

 

  

 

  

 

Net earnings (loss)

                 

 

  

 

  

 

  

 

  

 

Effective tax rate

 

D-5

--------------------------------------------------------------------------------

EXHIBIT E

TO

LOAN AND SECURITY AGREEMENT

Compliance Certificate

 

To: Wells Fargo Capital Finance, LLC,

            as Administrative Agent

One Boston Place

Boston, Masschusetts 02108

Ladies and Gentlemen:

I hereby certify to you pursuant to Section 9.6 of the Loan Agreement (as
defined below) as follows:

1. I am the duly elected Chief Financial Officer of             , a             
corporation,             , a              corporation and             , a
             corporation (collectively, “Borrowers”). Capitalized terms used
herein without definition shall have the meanings given to such terms in the
Loan and Security Agreement, dated December 23, 2003, by and among Wells Fargo
Capital Finance, LLC , successor by merger to Wachovia Capital Finance
Corporation, formerly known as Congress Financial Corporation (Central), as
agent for the financial institutions party thereto as lenders (in such capacity,
“Administrative Agent”) and the financial institutions party thereto as lenders
(collectively, “Lenders”), Borrowers and certain of their affiliates (as such
Loan and Security Agreement is amended, modified or supplemented, from time to
time, the “Loan Agreement”).

2. I have reviewed the terms of the Loan Agreement, and have made, or have
caused to be made under my supervision, a review in reasonable detail of the
transactions and the financial condition of Borrowers and Guarantors, during the
immediately preceding fiscal four (4) week period.

3. The review described in Section 2 above did not disclose the existence during
or at the end of such fiscal four (4) week period, and I have no knowledge of
the existence and continuance on the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Schedule I attached hereto. Described on Schedule I attached hereto are the
exceptions, if any, to this Section 3 listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
any Borrower or Guarantor has taken, is taking, or proposes to take with respect
to such condition or event.

4. I further certify that, based on the review described in Section 2 above, no
Borrower or Guarantor has at any time during or at the end of the immediately
preceding fiscal four (4) week period, except as specifically described on
Schedule II attached hereto or as permitted by the Loan Agreement, done any of
the following:

 

E-1

--------------------------------------------------------------------------------

  (a) Changed its respective corporate name, or transacted business under any
trade name, style, or fictitious name, other than those previously described to
you and set forth in the Financing Agreements.

 

  (b) Changed the location of its chief executive office, changed its
jurisdiction of incorporation, changed its type of organization or changed the
location of or disposed of any of its properties or assets (other than pursuant
to the sale of Inventory in the ordinary course of its business or as otherwise
permitted by Section 9.7 of the Loan Agreement), or established any new asset
locations.

 

  (c) Materially adversely changed the terms upon which it sells goods
(including sales on consignment) or provides services.

 

  (d) Permitted or suffered to exist any security interest in or liens on any of
its properties, whether real or personal, other than as specifically permitted
in the Financing Agreements.

5. Attached hereto as Schedule III are the calculations used in determining
whether Borrowers and Guarantors are in compliance with the covenant set forth
in Section 9.20 of the Loan Agreement for such fiscal period.

6. The foregoing certifications are made and delivered this day of             ,
20__.

 

Very truly yours,   By:     Title:    

 

E-2

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EXHIBIT F

TO

LOAN AND SECURITY AGREEMENT

Commitments

 

Lender

   Commitment  

Wells Fargo Capital Finance, LLC

   $ 77,500,000   

Bank of America, N.A.

   $ 40,000,000   

Fifth Third Bank

   $ 32,500,000   

PNC Bank, N.A.

   $ 25,000,000   

US Bank, National Association

   $ 25,000,000      

 

 

 

Total

   $ 200,000,000      

 

 

 

 

F-1

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SCHEDULE 1.26

TO

LOAN AND SECURITY AGREEMENT

DESCRIPTION OF NOTES

We issued the notes under an indenture, dated as of May 30, 2007, between us and
The Bank of New York Trust Company, N.A., as trustee. Each holder of notes may
request a copy of the indenture from us at the address set forth under “Where
You Can Find More Information.”

The following description is a summary of the material provisions of the notes
and the indenture and does not purport to be complete. This summary is subject
to and is qualified by reference to all the provisions of the notes and the
indenture, including the definitions of certain terms used in the indenture.
Wherever particular provisions or defined terms of the indenture or the notes
are referred to, these provisions or defined terms are incorporated into this
prospectus by reference. We urge holders of notes to read the indenture and the
notes because they, and not this description, define the rights of each holder
of notes.

As used in this section, “Description of Notes,” references to “Spartan Stores,”
the “Company,” “we,” “us” and “our” refer only to Spartan Stores, Inc. and do
not include its subsidiaries, and references to “you” and “holder” refer to each
registered holder of notes.

General

On May 30, 2007, we sold in a private offering $110,000,000 in aggregate
principal amount of 3.375% convertible senior notes due 2027 to the initial
purchasers for resale to qualified institutional buyers within the meaning of
Rule 144A under the Securities Act.

The notes will mature on May 15, 2027 unless earlier converted, redeemed or
repurchased. Each holder of notes has the option, subject to certain
qualifications and the satisfaction of certain conditions, to convert its notes
into cash and shares, if any, of our common stock at an initial conversion rate
of 28.0310 shares per $1,000 principal amount of notes. This is equivalent to an
initial conversion price of approximately $35.67 per share of common stock. The
conversion rate is subject to adjustment if certain events occur.

Upon a surrender of a holder’s notes for conversion, unless we have previously
exercised our option to satisfy all of our future conversion obligations
entirely in common stock as described below under “— Conversion Rights — Option
to Irrevocably Elect to Satisfy Future Conversion Obligations in Common Stock,”
we will deliver cash equal to the lesser of the aggregate principal amount of
notes to be converted and our total conversion obligation. We will deliver
shares of our common stock in respect of the remainder, if any, of our
conversion obligation, as described below under “— Conversion Rights — Payment
Upon Conversion.” If we deliver common stock upon conversion of a note, a holder
will not receive fractional shares but a cash payment to account for any such
fractional share, as described below. A holder will not receive any cash payment
for interest (or contingent interest, additional interest or additional amounts,
if any) accrued and unpaid to the conversion date except under the limited
circumstances described below.

The notes are our senior, unsecured obligations and rank equal in right of
payment to all of our existing and future unsecured and unsubordinated
indebtedness. The notes are issuable only in denominations of $1,000 principal
amount and integral multiples thereof. References to “a note” or “each note” in
this prospectus refer to $1,000 principal amount of the notes.

As used in this prospectus, “business day” means any day, other than a Saturday
or Sunday, that is neither a legal holiday nor a day on which commercial banks
are authorized or required by law, regulation or executive order to close in New
York City.

Any reference to “common stock” means our common stock, no par value.

 

S-1

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Each holder and beneficial owner of the notes, by acquiring or holding the notes
(or a beneficial interest therein), will be deemed to have agreed in the
indenture, for U.S. federal income tax purposes, to treat the notes as
“contingent payment debt instruments” and to be bound by our application of the
U.S. Treasury regulations that govern contingent payment debt instruments,
including our determination that the rate at which interest will be deemed to
accrue for U.S. federal income tax purposes will be 8.25% per annum, compounded
semi-annually, which is the comparable yield, or the rate at which we would have
borrowed senior debt on a non-contingent, nonconvertible basis at the original
issue date of the notes. Accordingly, each holder will be required to accrue
interest on a constant yield to maturity basis at that rate, with the result
that a holder will recognize taxable income significantly in excess of cash
received while the notes are outstanding. See “U.S. Federal Income Tax
Considerations.” YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE TAX
TREATMENT OF AN INVESTMENT IN THE NOTES AND WHETHER AN INVESTMENT IN THE
NOTES IS ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND YOUR PARTICULAR
TAX SITUATION.

Interest and Contingent Interest

The notes bear interest at a rate of 3.375% per year. In addition, we will pay
contingent interest to holders of notes during the period commencing May 20,
2012 and ending on November 14, 2012 and for any six-month period thereafter,
from and including an interest payment date up to, but excluding, the next
interest payment date, if the average contingent interest trading price (as
defined below) per $1,000 principal amount of the notes for the
five-consecutive-trading-day period ending on the third trading day (as defined
below) immediately preceding the first day of such interest period equals 120%
or more of the principal amount of the notes.

During any interest period in which contingent interest shall be payable, the
contingent interest payable per $1,000 principal amount of the notes will equal
0.25% per annum of the average contingent interest trading price of $1,000
principal amount of notes during the five-consecutive-trading-day period ending
on the third trading day immediately preceding the first day of the applicable
interest period used to determine whether contingent interest must be paid.

For so long as the notes are held in book-entry only form, interest (including
contingent interest, additional interest and additional amounts, if any) will be
payable on each interest payment date to the person in whose name a given note
is registered at the close of business on the business day before the interest
payment date (each, a “record date”). In the event that the notes do not remain
in book-entry only form or are not in the form of a global certificate, we will
have the right to select record dates, which will be at least one business day
before an interest payment date. Interest will be calculated on the basis of a
360-day year consisting of twelve 30-day months and will accrue from May 30,
2007 or from the most recent date to which interest has been paid or duly
provided for. We will pay interest (including contingent interest, additional
interest and additional amounts, if any) semi-annually, in arrears on May 15 and
November 15 of each year, commencing on November 15, 2007.

Contingent interest, if any, will accrue from and including the first day of any
relevant interest period to but excluding, and be payable on, the interest
payment date at the end of such interest period to holders of notes as of the
record date relating to such interest payment date. In the event of any
determination that holders will be entitled to receive contingent interest with
respect to an interest period, we will promptly (i) issue a press release and
use our reasonable efforts to post such information on our website or otherwise
publicly disclose this information or (ii) provide notice to the holders of
notes in a manner contemplated by the indenture, including through the
facilities of DTC.

“Contingent interest trading price” means, on any date of determination, the
average of the secondary market bid quotations per note obtained by the trustee
for $5,000,000 aggregate principal amount of the notes at approximately
3:30 p.m., New York City time, on the determination date from three independent
nationally recognized securities dealers we select, provided that:

 

  •  

if three such bids cannot reasonably be obtained by the trustee, but two such
bids are obtained, then the average of the two bids shall be used, and

 

  •  

if only one such bid can reasonably be obtained by the trustee, this one bid
shall be used;

 

S-2

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provided further that if no bids are received or, in our reasonable judgment,
the bid quotations are not indicative of the secondary market value of the
notes, then the contingent interest trading price of the notes on such date of
determination will be (a) the applicable conversion rate (as defined below) of
the notes multiplied by (b) the closing sale price of our common stock on such
determination date.

Upon conversion of a note, a holder will not receive any cash payment of
interest (including contingent interest, additional interest and additional
amounts, if any) unless, as described below, such conversion occurs after the
close of business on a record date and prior to the opening of business on the
interest payment date to which that record date relates or such conversion
occurs during a registration default as described under “— Registration Rights”
below. If we deliver common stock upon surrender of a note for conversion, we
will not issue fractional shares of common stock. Instead, we will pay cash in
lieu of fractional shares based on the closing sale price of the common stock on
the trading day immediately prior to the conversion date. Our delivery to a
holder of the full amount of cash and common stock, if any, as described below
under “— Conversion Rights — Payment upon Conversion,” together with any cash
payment for any fractional share, will be deemed to satisfy our obligation to
pay:

 

  •  

the principal amount of the note; and

 

  •  

accrued but unpaid interest (including contingent interest, additional interest
and additional amounts, if any) to but excluding the conversion date.

As a result, accrued but unpaid interest (including contingent interest,
additional interest and additional amounts, if any) up to but excluding the
conversion date will be deemed to be paid in full rather than cancelled,
extinguished or forfeited. For a general discussion of the U.S. federal income
tax treatment upon receipt of our common stock upon conversion, see
“U.S. Federal Income Tax Considerations.”

Notwithstanding the preceding paragraph, if notes are converted after the close
of business on a record date but prior to the opening of business on the
interest payment date to which that record date relates, holders of such notes
at the close of business on the record date will receive the interest (including
contingent interest, additional interest and additional amounts, if any) payable
on the notes on such interest payment date notwithstanding the conversion. Such
notes, upon surrender for conversion, must be accompanied by funds equal to the
amount of interest (including contingent interest, additional interest and
additional amounts, if any) payable on the notes so converted on the next
succeeding interest payment date. However, no such payment need be made:

 

  •  

in connection with any conversion following the record date immediately
preceding the maturity date;

 

  •  

if we have specified a redemption date that is after a record date and on or
prior to the corresponding interest payment date;

 

  •  

if we have specified a fundamental change purchase date that is after a record
date and on or prior to the corresponding interest payment date;

 

  •  

if a scheduled repurchase date occurs after a record date and on or prior to the
corresponding interest payment date; or

 

  •  

to the extent of any overdue interest (including overdue contingent interest,
additional interest and additional amounts, if any) if the same exists at the
time of conversion with respect to such note.

In addition, notwithstanding the previous paragraph, we will pay, on the stated
maturity, accrued and unpaid interest to but excluding such stated maturity on
any notes surrendered for conversion on or after April 12, 2027 to a converting
holder.

If any interest payment date, maturity date, redemption date or repurchase date
(including upon the occurrence of a fundamental change, as described below)
falls on a day that is not a business day, then the required payment will be
made on the next succeeding business day with the same force and effect as if
made on the date that

 

S-3

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the payment was due, and no additional interest will accrue on that payment for
the period from and after the interest payment date, maturity date, redemption
date or repurchase date, as the case may be, to that next succeeding business
day.

Conversion Rights

General

Subject to the qualifications and the satisfaction of the conditions and during
the periods described below, holders will have the right to convert their notes
prior to the close of business on the business day immediately preceding the
maturity date, initially at a conversion rate of 28.0310 shares per $1,000
principal amount of notes, which is equivalent to an initial conversion price of
approximately $35.67 per share of common stock. Upon a surrender of a holder’s
notes for conversion, unless we have previously exercised our option to satisfy
all of our future conversion obligations entirely in common stock as described
below under “— Option to Irrevocably Elect to Satisfy Future Conversion
Obligations in Common Stock,” we will deliver cash equal to the lesser of the
aggregate principal amount of notes to be converted and our total conversion
obligation. We will deliver shares of our common stock in respect of the
remainder, if any, of our conversion obligation, as described below under
“— Payment Upon Conversion.”

The conversion rate in effect at any given time is referred to in this
prospectus as the “applicable conversion rate” and will be subject to
adjustments as described under “— Conversion Rate Adjustments,” but it will not
be adjusted for accrued interest. The “applicable conversion price” at any given
time is equal to the principal amount of a note divided by the applicable
conversion rate. Holders will be entitled to convert notes in denominations of
$1,000 principal amount or multiples thereof. Upon surrender of a note for
conversion, we will deliver cash and shares of our common stock, if any, as
described below under “— Payment upon Conversion.”

A holder may convert its notes in whole or in part only in the following
circumstances, which are described in more detail below, and to the following
extent:

 

  •  

upon satisfaction of the sale price condition;

 

  •  

upon satisfaction of the trading price condition;

 

  •  

if we have called notes for redemption, until the close of business one business
day prior to the redemption date for such notes;

 

  •  

at any time on or after February 15, 2027; or

 

  •  

upon the occurrence of specified corporate transactions.

Upon any determination by us that holders are or will be entitled to convert
their notes in accordance with the foregoing provisions, we will issue a press
release and publish the information on our website.

A holder that has submitted its notes for repurchase on a scheduled repurchase
date or upon a fundamental change may not subsequently convert those notes
unless it validly withdraws its repurchase notice on a timely basis as described
below under “— Repurchase Rights” or “— Repurchase of Notes by Us at Option of
Holder upon a Fundamental Change.”

If a holder converts notes, we will pay any documentary, stamp or similar issue
or transfer tax due on the issue of shares of our common stock upon the
conversion, unless the tax is due because a holder requests the shares to be
issued or delivered to another person, in which case that holder will pay that
tax.

Our ability to pay cash to holders upon conversion may be restricted by the loan
agreement governing our senior credit facility, limitations or prohibitions on
our ability to obtain funds for such payment through dividends from our
subsidiaries, the terms of our other then existing financing arrangements or
otherwise. See “Risk Factors — Risks Relating to this Offering — We may not be
able to repurchase the notes upon a fundamental change or upon the exercise of a
holder’s option to require us to repurchase the notes, or to pay cash upon
conversion of the notes.”

 

S-4

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Conversion upon Satisfaction of Sale Price Condition

A holder may surrender any or all of its notes for conversion during any fiscal
quarter after the fiscal quarter ending September 15, 2007 if the closing sale
price per share of our common stock for at least 20 trading days during the
30-consecutive-trading-day period ending on the last trading day of the previous
fiscal quarter is more than 130% of the applicable conversion price per share of
our common stock on such last trading day.

The “closing sale price” of our common stock on any date means the closing sale
price per share (or, if no closing sale price is reported, the average of the
bid and asked prices or, if more than one in either case, the average of the
average bid and the average asked prices) on such date as reported by The Nasdaq
Global Market or, if our common stock is not reported by The Nasdaq Global
Market, in composite transactions for the principal U.S. national or regional
securities exchange on which our common stock is traded. If our common stock is
not listed for trading on a U.S. national or regional securities exchange on the
relevant date, the closing sale price will be the last quoted bid price for our
common stock in the over-the-counter market on the relevant date as reported by
the National Quotation Bureau Incorporated or similar organization. If our
common stock is not so quoted, the closing sale price will be the average of the
mid-point of the last bid and asked prices for our common stock on the relevant
date from each of at least three independent nationally recognized investment
banking firms selected by us for this purpose.

A “trading day” is any day on which (i) there is no market disruption event (as
defined below) and (ii) The Nasdaq Global Market or, if our common stock is not
listed on The Nasdaq Global Market, the principal national securities exchange
on which our common stock is listed, admitted for trading or quoted, is open for
trading or, if the common stock is not so listed, admitted for trading or
quoted, any business day. A “trading day” only includes those days that have a
scheduled closing time of 4:00 p.m. (New York City time) or the then-standard
closing time for regular trading on the relevant exchange or trading system.

A “market disruption event” means the occurrence or existence for more than one
half-hour in the aggregate on any scheduled trading day for our common stock of
any suspension or limitation imposed on trading (by reason of movements in price
exceeding limits permitted by The Nasdaq Global Market or otherwise) in our
common stock or in any options, contracts or future contracts relating to our
common stock, and such suspension or limitation occurs or exists at any time
before 1:00 p.m. (New York City time) on such day.

We will determine daily whether the notes are convertible as a result of the
closing sale price of our common stock and will notify the trustee of such
determination.

Conversion upon Satisfaction of Trading Price Condition

A holder may surrender any or all of its notes for conversion during the five
business days immediately following any five-consecutive-trading day period in
which the trading price per $1,000 principal amount of the notes (as determined
following a request by a holder of the notes in accordance with the procedures
described below) for each day of that period was less than 98% of the product of
the closing sale price of our common stock and the applicable conversion rate of
the notes on each such day.

The “trading price” of the notes on any date of determination means the average
of the secondary market bid quotations per note obtained by the trustee for
$5,000,000 aggregate principal amount of the notes at approximately 3:30 p.m.,
New York City time, on the determination date from three independent nationally
recognized securities dealers we select, provided that:

 

  •  

if three such bids cannot reasonably be obtained by the trustee, but two such
bids are obtained, then the average of the two bids shall be used, and

 

  •  

if only one such bid can reasonably be obtained by the trustee, this one bid
shall be used;

 

S-5

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provided further that if no bids are received, then for purposes of determining
whether the trading price condition has been met the trading price per $1,000
principal amount of the notes will be deemed to be less than 98% of the product
of the closing sale price of our common stock and the applicable conversion rate
of the notes on that day.

The trustee will have no obligation to determine the trading price of the notes
as described in this section unless we have requested such determination; and we
shall have no obligation to make such request unless a holder provides us with
reasonable evidence that the trading price per $1,000 principal amount of notes
would be less than 98% of the product of the closing sale price of our common
stock and the applicable conversion rate of the notes on that day. At such time,
we will instruct the trustee to determine the trading price of the notes
beginning on the next trading day and on each successive trading day until the
trading price per $1,000 principal amount of notes is greater than or equal to
98% of the product of the closing price of our common stock and the applicable
conversion rate of the notes.

Conversion upon Notice of Redemption

Holders may surrender for conversion any or all of its notes called for
redemption at any time prior to the close of business one business day prior to
the redemption date for such notes, even if those notes are not otherwise
convertible at that time.

Conversion on or after February 15, 2027

A holder may surrender any or all of its notes for conversion at any time on or
after February 15, 2027 until the close of business on the business day
immediately preceding the maturity date.

Conversion upon Specified Corporate Transactions

Certain Distributions

If we elect to:

 

  •  

distribute to all or substantially all holders of our common stock certain
rights or warrants entitling them to purchase, for a period expiring within
60 days after the date of the distribution, shares of our common stock at less
than the closing sale price of a share of our common stock on the trading day
immediately preceding the announcement date of the distribution; or

 

  •  

distribute to all or substantially all holders of our common stock, assets
(including cash), debt securities or rights or warrants to purchase our
securities, which distribution has a per-share value as determined by our board
of directors exceeding 10% of the closing sale price of our common stock on the
trading day immediately preceding the announcement date for such distribution,

we must notify holders of notes at least 20 business days prior to the
ex-dividend date for such distribution. Once we have given such notice, holders
may surrender their notes for conversion at any time until the earlier of the
close of business on the business day immediately prior to the ex-dividend date
or any announcement that such distribution will not take place. No holder may
exercise this right to convert if the holder otherwise could participate in the
distribution without conversion. The “ex-dividend” date is the first date upon
which a sale of the common stock does not automatically transfer the right to
receive the relevant distribution from the seller of the common stock to its
buyer.

Fundamental Change Transactions

If a fundamental change occurs, regardless of whether a holder has the right to
put the notes as described under “— Repurchase of Notes by Us at Option of
Holder upon a Fundamental Change,” a holder may surrender notes for conversion
at any time from and including the effective date of the transaction until and
including the 30th business day following such effective date. We will notify
holders and the trustee at the same time we publicly announce such transaction
(but in no event less than five business days prior to the anticipated effective
date of such transaction).

 

S-6

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If a holder elects to convert its notes in connection with certain fundamental
change transactions described below under “— Make Whole Amount” the effective
date of which occurs prior to May 15, 2014, we will increase the applicable
conversion rate by a number of additional shares of our common stock as
described below under “— Make Whole Amount.”

If a transaction described above occurs, a holder may also have the right to
require us to repurchase all or a portion of its notes, as described under
“— Repurchase of Notes by Us at Option of Holder upon a Fundamental Change.”

Conversion Procedures

To convert a note, a holder must do each of the following:

 

  •  

complete and manually sign the conversion notice on the back of the note, or a
facsimile of the conversion notice, and deliver this notice to the conversion
agent, which notice will be irrevocable;

 

  •  

surrender the note to the conversion agent;

 

  •  

if required, furnish appropriate endorsements and transfer documents;

 

  •  

if required, pay all transfer or similar taxes; and

 

  •  

if required, pay funds equal to interest payable on the next interest payment
date.

The date a holder complies with these requirements is the “conversion date”
under the indenture. The notes will be deemed to have been converted immediately
prior to the close of business on the conversion date and the converting holder
will be treated as a shareholder of record of Spartan Stores as of that time. If
a holder’s interest is a beneficial interest in a global note, to convert, a
holder must comply with the last three requirements listed above and comply with
the depositary’s procedures for converting a beneficial interest in a global
note.

The conversion agent will initially be the trustee. The conversion agent will
convert the notes into cash and shares, if any, of common stock at an initial
conversion rate of 28.0310 shares per $1,000 principal amount of notes. A holder
may obtain copies of the required form of the conversion notice from the
conversion agent. Payments of cash and, if common stock is to be delivered, a
stock certificate or certificates will be delivered to the holder, or a
book-entry transfer through DTC will be made, for the number of shares of common
stock determined as set forth below under “— Payment upon Conversion.”

Payment upon Conversion

In connection with any conversion, we will satisfy our obligation to convert the
notes (the “conversion obligation”) by delivering to holders in respect of each
$1,000 aggregate principal amount of notes being converted a “settlement amount”
equal to the sum of the daily settlement amounts for each of the 20 consecutive
trading days in the cash settlement averaging period.

The “daily settlement amount” for each of the 20 consecutive trading days in the
cash settlement averaging period shall consist of:

 

  (1) cash equal to the lesser of $50 and the daily conversion value; and

 

  (2) to the extent the daily conversion value exceeds $50, a number of shares
equal to (A) the difference between the daily conversion value and $50 (such
difference being referred to as the “daily excess amount”), divided by (B) the
closing sale price of our common stock for such trading day (or the
consideration into which one share of our common stock has been converted or
exchanged in connection with certain corporate transactions).

We will not issue fractional shares of common stock upon conversion of the
notes. Instead, we will pay the cash value of such fractional shares based upon
the closing sale price of our common stock on the trading day

 

S-7

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immediately preceding the conversion date. Upon conversion of a note, a holder
will not receive any cash payment of interest (including contingent interest,
additional interest and additional amounts, if any) unless such conversion
occurs between a record date and the interest payment date to which that record
date relates. We will deliver the settlement amount on the third business day
following the expiration of the cash settlement averaging period.

The “daily conversion value” means, for each of the 20 consecutive trading days
during the cash settlement averaging period, one-twentieth (1/20th) of the
product of (1) the applicable conversion rate and (2) the closing sale price of
our common stock on such trading day.

The “cash settlement averaging period” with respect to any notes means the
20-consecutive-trading-day period beginning:

 

  •  

on the redemption date if prior to the relevant conversion date we have called
the notes that are being converted for redemption;

 

  •  

on the maturity date if the relevant conversion date is on or after April 12,
2027; and

 

  •  

on the second trading day after the relevant conversion date.

If a holder tenders notes for conversion and the daily conversion value is being
determined at a time when the notes are convertible into other property in
addition to or in lieu of our common stock, the settlement amount will be
determined based on the kind and amount of shares of stock, securities or other
property or assets (including cash or any combination thereof) that a holder of
a number of shares of our common stock equal to the conversion rate would have
owned or been entitled to receive in such transaction and the value thereof for
each applicable trading day during the cash settlement averaging period, as
described under “— Conversion Rate Adjustments.”

Option to Irrevocably Elect to Satisfy Future Conversion Obligations in Common
Stock

Notwithstanding the provisions described above under “— Payment upon
Conversion,” at any time on or prior to May 15, 2014 we may irrevocably elect,
in our sole discretion without the consent of the holders of notes, to satisfy
all of our future conversion obligations entirely in common stock (a “physical
settlement election”). If, in the future, we make a physical settlement
election, we will deliver to you, in respect of any notes that you convert after
that election, a number of shares equal to (i) the aggregate principal amount of
notes to be converted (ii) divided by $1,000 and (iii) multiplied by the
applicable conversion rate (which will include any increase to reflect any
additional shares which you may be entitled to receive as described under
“— Make-Whole Amount”). We will deliver such shares on the third business day
after the conversion date.

Although we have a right to elect physical settlement, we do not presently
intend to make that election.

Prior to making any physical settlement election, we may irrevocably elect to
waive our right to make any such election. Any such waiver would be effective
upon our delivery to the trustee of a notice that we are irrevocably waiving our
ability to make a physical settlement election at any time in the future with
respect to the notes. If we make a physical settlement election in the future,
that election will be irrevocable and our right to waive the ability to make a
physical settlement election will expire.

Conversion Rate Adjustments

The applicable conversion rate will be subject to adjustment, without
duplication, upon the occurrence of any of the following events:

(1) If we issue our common stock as a dividend or distribution on our common
stock, or if we effect a share split or share combination, the conversion rate
will be adjusted based on the following formula:

 

CR1  = CR0 ×   

OS1

   OS0

 

S-8

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where

CR0 = the conversion rate in effect immediately prior to the ex-dividend date
for such dividend or distribution, or the effective date of such share split or
share combination;

CR1 = the new conversion rate in effect immediately after the ex-dividend date
for such dividend or distribution, or the effective date of such share split or
share combination;

OS0 = the number of shares of our common stock outstanding immediately prior to
such ex-dividend date, or effective date; and

OS1 = the number of shares of our common stock outstanding immediately prior to
such ex- dividend date, or effective date but after giving effect to such
dividend, distribution, share split or share combination.

If any dividend or distribution described in this clause (1) is declared but not
so paid or made, the new conversion rate shall be readjusted to the conversion
rate that would then be in effect if such dividend or distribution had not been
declared.

(2) If we distribute to all, or substantially all, holders of our common stock
any rights, warrants or options entitling them for a period of not more than
60 days after the date of issuance thereof to subscribe for or purchase our
common stock at an exercise price per share of our common stock less than the
average of the closing sale prices of our common stock for each trading day in
the 10-consecutive-trading-day period ending on the trading day immediately
preceding the time of announcement of such issuance, the conversion rate will be
adjusted based on the following formula:

 

CR1  = CR0 ×   

(OS0 + X)

   (OS0 + Y)

where

CR0 = the conversion rate in effect immediately prior to the ex-dividend date
for such distribution;

CR1 = the new conversion rate in effect immediately after the ex-dividend date
for such distribution;

OS0 = the number of shares of our common stock outstanding immediately prior to
the ex-dividend date for such distribution;

X = the number of shares of our common stock issuable pursuant to such rights,
warrants or options; and

Y = the number of shares of our common stock equal to the quotient of (A) the
aggregate price payable to exercise such rights, warrants or options and (B) the
average of the closing sale prices of our common stock for each trading day in
the 10-consecutive-trading-day period ending on the trading day immediately
preceding the date of announcement for the issuance of such rights, warrants or
options.

For purposes of this clause (2), in determining whether any rights, warrants or
options entitle the holders to subscribe for or purchase our common stock at
less than the average of the closing sale prices for each trading day in the
applicable 10-consecutive-trading-day period, there shall be taken into account
any consideration we receive for such rights, warrants or options and any amount
payable on exercise thereof, with the value of such consideration, if other than
cash, to be determined by our board of directors. If any right, warrant or
option described in this clause (2) is not exercised prior to the expiration of
the exercisability thereof, the new conversion rate shall be readjusted to the
conversion rate that would then be in effect if such right, warrant or option
had not been so issued.

(3) If we distribute shares of our capital stock, evidences of indebtedness or
other assets or property to all, or substantially all, holders of our common
stock, excluding:

 

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(A) dividends, distributions, rights, warrants or options referred to in
clause (1) or (2) above;

(B) dividends or distributions paid exclusively in cash; and

(C) Spin-Offs described below in this clause (3),

then the conversion rate will be adjusted based on the following formula:

 

CR1 = CR0 ×   

        SP0            

   (SP0 - FMV)

where

CR0 = the conversion rate in effect immediately prior to the ex-dividend date
for such distribution;

CR1 = the new conversion rate in effect immediately after the ex-dividend date
for such distribution;

SP0 = the average of closing sale prices of our common stock for each trading
day in the 10-consecutive-trading-day period ending on the trading day
immediately preceding the ex-dividend date for such distribution; and

FMV = the fair market value (as determined in good faith by our board of
directors) of the shares of capital stock, evidences of indebtedness, assets or
property distributed with respect to each outstanding share of our common stock
on the earlier of the record date or the ex-dividend date for such distribution.

With respect to an adjustment pursuant to this clause (3), where there has been
a payment of a dividend or other distribution to all, or substantially all,
holders of our common stock of shares of capital stock of any class or series,
or similar equity interest, of or relating to our subsidiary or other business
unit (a “Spin-Off”), the conversion rate in effect immediately before the close
of business on the effective date of the Spin-Off will be adjusted based on the
following formula:

 

CR1  = CR0 ×   

(FMV0 + MP0)

            MP0

where

CR0 = the conversion rate in effect immediately prior to the effective date of
the Spin-Off;

CR1 = the new conversion rate after the Spin-Off;

FMV0 = the average of the closing sale prices of the capital stock or similar
equity interest distributed to holders of our common stock applicable to one
share of our common stock over the 10 consecutive trading days after, and
including, the effective date of the Spin-Off; and

MP0 = the average of the closing sale prices of our common stock over the 10
consecutive trading days after, and including, the effective date of the
Spin-Off.

An adjustment to the conversion rate made pursuant to the immediately preceding
paragraph will occur on the 10th trading day from, and including, the effective
date of the Spin-Off; provided that in respect of any conversion within the 10
trading days following, and including, the effective date of any Spin-Off,
references within this clause (3) to 10 trading days shall be deemed replaced
with such lesser number of trading days as have elapsed between the effective
date of such Spin-Off and the conversion date in determining the applicable
conversion rate.

 

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If any such dividend or distribution described in this clause (3) is declared
but not paid or made, the new conversion rate shall be readjusted to be the
conversion rate that would then be in effect if such dividend or distribution
had not been declared.

(4) If we make any cash dividend or distribution to all, or substantially all,
holders of our outstanding common stock, other than regular quarterly cash
dividends (without regard to the actual quarterly period in which paid) that do
not exceed $0.05 per share (the “reference dividend”), the conversion rate will
be adjusted based on the following formula:

 

CR1 = CR0 ×   

            SP0            

            (SP0 - C)

where

CR0 = the conversion rate in effect immediately prior to the ex-dividend date
for such distribution;

CR1 = the new conversion rate immediately after the ex-dividend date for such
distribution;

SP0 = the average of the closing sale prices of our common stock for each
trading day in the 10-consecutive-trading-day period ending on the trading day
immediately preceding the ex-dividend date for such distribution; and

C = the amount in cash per share that we distribute to holders of our common
stock in respect of the applicable quarterly period that exceeds the reference
dividend.

If any dividend or distribution described in this clause (4) is declared but not
so paid or made, the new conversion rate shall be readjusted to the conversion
rate that would then be in effect if such dividend or distribution had not been
declared.

The reference dividend amount is subject to adjustment in a manner inversely
proportional to adjustments to the conversion rate; provided that no adjustment
will be made to the reference dividend amount for any adjustment made to the
conversion rate under this clause (4).

Notwithstanding the foregoing, if an adjustment is required to be made under
this clause (4) as a result of a distribution that is not a regular quarterly
dividend, the reference dividend amount will be deemed to be zero.

(5) If we or any of our subsidiaries make a payment in respect of a tender offer
or exchange offer for our common stock, to the extent that the cash and value of
any other consideration included in the payment per share of our common stock
exceeds the closing sale price of a share of our common stock on the trading day
following the last date on which tenders or exchanges may be made pursuant to
such tender or exchange offer, the conversion rate will be adjusted based on the
following formula:

 

CR1  = CR0 ×   

(AC + (SP1 × OS1))

         (SP1 × OS0)

where

CR0 = the conversion rate in effect on the day immediately following the date
such tender or exchange offer expires;

CR1 = the new conversion rate in effect after such tender or exchange offer
expires;

AC = the aggregate value of all cash and any other consideration (as determined
by our board of directors) paid or payable for our common stock purchased in
such tender or exchange offer;

 

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OS0 = the number of shares of our common stock outstanding immediately prior to
the date such tender or exchange offer expires;

OS1 = the number of shares of our common stock outstanding immediately after the
date such tender or exchange offer expires (after giving effect to the purchase
or exchange of shares pursuant to such tender or exchange offer); and

SP1 = the average of the closing sale prices of our common stock for each
trading day in the 10-consecutive-trading-day period commencing on the trading
day following the date such tender or exchange offer expires.

The adjustment to the conversion rate under this clause (5) will occur on the
10th trading day from, and including, the trading day following the date such
tender or exchange offer expires; provided that in respect of any conversion
within 10 trading days immediately following, and including, the expiration date
of any tender or exchange offer, references within this clause (5) to 10 trading
days shall be deemed replaced with such lesser number of trading days as have
elapsed between the expiration date of such tender or exchange offer and the
conversion date in determining the applicable conversion rate.

In addition to these adjustments, we may in our sole discretion increase the
conversion rate as our board of directors deems advisable to avoid or diminish
any income tax to holders of our notes resulting from any dividend or
distribution of capital stock issuable upon conversion of the notes (or rights
to acquire capital stock) or from any event treated as such for income tax
purposes. We may also, from time to time, to the extent permitted by applicable
law, increase the conversion rate by any amount for any period of at least 20
business days if our board of directors has determined that such increase would
be in our best interests. If our board of directors makes that determination, it
will be conclusive. We will give holders of notes at least 15 days’ prior notice
of such an increase in the conversion rate. For a general discussion of the
U.S. federal income tax treatment of an adjustment to the conversion rate of the
notes, see “U.S. Federal Income Tax Considerations — U.S. Holders — Constructive
Dividends to Holders of Notes.”

To the extent that we have a rights plan in effect upon any conversion of the
notes into common stock, a holder will receive, in addition to the common stock,
the rights under the rights plan, unless, prior to any conversion, the rights
have separated from the common stock, in which case the conversion rate will be
adjusted at the time of separation as described in clause (3) above. A further
adjustment will occur as described in clause (3) above, if such rights become
exercisable to purchase different securities, evidences of indebtedness or
assets, subject to readjustment in the event of the expiration, termination or
redemption of such rights.

Following:

 

  •  

any reclassification of our common stock;

 

  •  

a consolidation, merger, binding share exchange or combination involving us; or

 

  •  

a conveyance, transfer, sale, lease or other disposition to another person or
entity of all or substantially all of our assets;

the settlement amount in respect of our conversion obligation will be computed
as set forth under “— Payment upon Conversion” above, based on the kind and
amount of shares of stock, securities, or other property or assets (including
cash or any combination thereof) that holders of our common stock are entitled
to receive in respect of each share of our common stock in such transaction (the
“reference property”) and reference property will be delivered in lieu of the
shares of our common stock that would have otherwise been deliverable upon
conversion. If holders of common stock would be entitled to elect the kind of
consideration for their common stock received in any transaction described in
the previous sentence, the consideration for common stock upon which the
reference property will be based will be determined based on the weighted
average of the kind and amount of consideration received by the holders of our
common stock that affirmatively make such an election. The determination of the
reference property will apply to all of the notes and we will notify the trustee
of the composition of the reference property promptly after it is determined.

 

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The applicable conversion rate will not be adjusted:

 

  •  

upon the issuance of any shares of our common stock pursuant to any present or
future plan providing for the reinvestment of dividends or interest payable on
our securities and the investment of additional optional amounts in shares of
our common stock under any plan;

 

  •  

upon the issuance of any shares of our common stock or options or rights to
purchase those shares pursuant to any present or future employee, director or
consultant benefit plan or program of or assumed by us or any of our
subsidiaries;

 

  •  

upon the issuance of any shares of our common stock pursuant to any option,
warrant, right or exercisable, exchangeable or convertible security not
outstanding as of the date the notes were first issued (unless explicitly
otherwise provided in this section, “— Conversion Rate Adjustments”);

 

  •  

for a change in the par value of the common stock; or

 

  •  

for accrued and unpaid interest (including contingent interest, additional
interest and additional amounts, if any).

Adjustments to the applicable conversion rate will be calculated to the nearest
1/10,000th of a share.

We will not take any action that would result in an adjustment pursuant to the
above provisions without complying with the shareholder approval rules of The
Nasdaq Global Market or any stock exchange on which our common stock is listed
at the relevant time.

Notwithstanding anything in this section, “— Conversion Rate Adjustments,” to
the contrary, we will not be required to adjust the conversion rate unless the
adjustment would result in a change of at least 1% of the conversion rate.
However, we will carry forward any adjustments that are less than 1% of the
conversion rate and make such carried forward adjustments, regardless of whether
the aggregate adjustment is less than 1%, upon any conversion of the notes.

Make-Whole Amount

If the effective date of a transaction described under clause (1) or (3) of the
definition of “fundamental change” occurs (regardless of whether the holder has
the right to require us to repurchase the notes) prior to May 15, 2014 and 10%
or more of the consideration for our common stock in the transaction consists of
consideration other than common stock that is traded or scheduled to be traded
immediately following such transaction on a U.S. national or regional securities
exchange (collectively, “Listed Common Equity”) and the notes are surrendered
for conversion in connection with such transaction, we will increase the
applicable conversion rate by a number of additional shares of our common stock
(the “additional shares”) as described below. We will notify holders at least
five business days prior to the anticipated effective date of any transaction
described in this paragraph.

A conversion of the notes will be deemed for these purposes to be “in connection
with” a given fundamental change if the related conversion notice is received by
the conversion agent during the period from and including the effective date of
the transaction until and including the 30th business day following such
effective date.

The number of additional shares will be determined by reference to the table
below, based on the date on which the transaction becomes effective (the
“effective date”) and the price (the “stock price”) paid per share of our common
stock in the transaction. If holders of our common stock receive only cash in
the transaction, the stock price will be the cash amount paid per share of our
common stock. Otherwise, the stock price will be the average of the closing sale
prices of our common stock on the five trading days immediately prior to but not
including the effective date of the transaction.

The stock prices set forth in the first row of the table below (i.e., column
headers) will be adjusted as of any date on which the conversion rate of the
notes is adjusted, as described above under “— Conversion Rate Adjustments.” The
adjusted stock prices will equal the stock prices applicable immediately prior
to such adjustment

 

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multiplied by a fraction, the numerator of which is the conversion rate
immediately prior to the adjustment giving rise to the stock price adjustment
and the denominator of which is the conversion rate as so adjusted. The number
of additional shares will be adjusted in the same manner as the conversion rate
as set forth under “— Conversion Rate Adjustments.”

The following table sets forth the stock price, effective date and number of
additional shares per $1,000 principal amount of notes:

 

    

Stock Price

 

Effective Date

   $26.04      $30.00      $35.67      $40.00      $45.00      $50.00     
$55.00      $60.00      $70.00      $80.00      $90.00      $100.00  

May 23, 2007

     10.3714         8.0190         5.7733         4.5865         3.7068        
2.9690         2.5072         2.0807         1.5533         1.2103        
0.9546         0.7760   

May 15, 2008

     10.3714         7.4357         5.1622         4.0190         3.1646        
2.4550         2.0399         1.6523         1.1947         0.9115        
0.7068         0.5650   

May 15, 2009

     10.3714         7.0923         4.7697         3.6440         2.8134        
2.1210         1.7454         1.3907         1.0604         0.7528        
0.5868         0.4660   

May 15, 2010

     10.3714         6.3823         4.0099         2.9565         2.1757        
1.5310         1.2363         0.9440         0.6476         0.4902        
0.3834         0.3060   

May 15, 2011

     10.3714         5.2057         2.6755         1.7440         1.0401        
0.5510         0.3890         0.2307         0.1319         0.0952        
0.0723         0.0570   

May 15, 2012

     10.3714         4.2257         0.2729         0.0000         0.0000        
0.0000         0.0000         0.0000         0.0000         0.0000        
0.0000         0.0000   

May 15, 2013

     10.3714         4.5857         0.1383         0.0000         0.0000        
0.0000         0.0000         0.0000         0.0000         0.0000        
0.0000         0.0000   

May 15, 2014

     10.3714         5.3023         0.0038         0.0000         0.0000        
0.0000         0.0000         0.0000         0.0000         0.0000        
0.0000         0.0000   

The maximum amount of additional shares is 10.3714 per $1,000 principal amount
of notes, subject to adjustment in the same manner as in the conversion rate as
set forth under “Description of Notes — Conversion Rights — Conversion Rate
Adjustments” and in no event will the number of additional shares of our common
stock issuable upon conversion as a result of a fundamental change exceed that
amount.

The exact stock prices and effective dates may not be set forth in the table
above, in which case:

 

  •  

If the stock price is between two stock prices in the table or the effective
date is between two effective dates in the table, the number of additional
shares will be determined by straight-line interpolation between the number of
additional shares set forth for the higher and lower stock prices and the two
effective dates, as applicable, based on a 365-day year.

 

  •  

If the stock price is in excess of $100.00 per share (subject to adjustment), no
additional shares will be added to the conversion rate.

 

  •  

If the stock price is less than $26.04 per share (subject to adjustment), no
additional shares will be added to the conversion rate.

Redemption at our Option

Prior to May 20, 2012, we will not have the right to redeem the notes. We will
have the right to redeem the notes in whole or in part, at any time or from time
to time, on or after May 20, 2012 upon not less than 30 nor more than 60 days
prior notice by mail, for a cash price equal to the percentage specified in the
table below of the principal amount of the notes to be redeemed plus any accrued
and unpaid interest (including contingent interest, additional interest and
additional amounts, if any) thereon up to, but not including, the redemption
date. If the redemption date is on a date that is after a record date and on or
prior to the corresponding interest payment date, we will pay the related
interest (including contingent interest, additional interest and additional
amounts, if any) to the person to whom principal is payable.

 

Period Commencing

   Redemption Price

May 20, 2012

   100.96%

May 15, 2013

   100.48%

May 15, 2014 and thereafter

   100.00%

 

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If we decide to redeem fewer than all of the outstanding notes, the trustee will
select the notes to be redeemed by lot, on a pro rata basis or by another method
the trustee considers appropriate. If the trustee selects a portion of a
holder’s notes for partial redemption and that holder converts a portion of the
same notes, the converted portion will be deemed first to be from the portion
selected for redemption. In the event of any redemption in part, we will not be
required to:

 

  •  

issue, register the transfer of or exchange any note during a period beginning
at the opening of business 15 days before any selection of notes for redemption
and ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all holders of notes to be
so redeemed, or

 

  •  

register the transfer of or exchange any note so selected for redemption, in
whole or in part, except the unredeemed portion of any note being redeemed in
part.

Repurchase Rights

Holders have the right to require us to repurchase their notes in whole or in
part on May 15, 2014, May 15, 2017 and May 15, 2022, each of which we refer to
as a “repurchase date.” We will be required to repurchase any outstanding notes
for which a holder delivers a written repurchase notice to the paying agent.
This notice must be delivered during the period beginning at the opening of
business on the date that is 20 business days prior to the relevant repurchase
date until the close of business on the second business day prior to the
repurchase date. If the repurchase notice is given and withdrawn during the
period, we will not be obligated to repurchase the notes covered by the notice
of withdrawal.

Our ability to repurchase notes for cash upon any repurchase date may be
restricted by the loan agreement governing our senior credit facility,
limitations or prohibitions on our ability to obtain funds for such repurchase
through dividends from our subsidiaries, the terms of our other then existing
financing arrangements or otherwise. See “Risk Factors — Risks Relating to this
Offering — We may not be able to repurchase the notes upon a fundamental change
or upon the exercise of a holder’s option to require us to repurchase the notes,
or to pay cash upon conversion of the notes.” No notes may be repurchased by us
at the option of holders if there has occurred and is continuing an event of
default with respect to the notes, other than a default in the payment of the
repurchase price with respect to the notes.

The repurchase price will be payable in cash and will be equal to 100% of the
principal amount of notes to be repurchased, plus accrued and unpaid interest
(including contingent interest, additional interest and additional amounts, if
any) on such repurchase date. If the repurchase date is on a date that is after
a record date and on or prior to the corresponding interest payment date, we
will pay the related interest (including contingent interest, additional
interest and additional amounts, if any) to the person to whom principal is
payable. To exercise this right, the holder must deliver a written notice to the
paying agent prior to the close of business on the second business day prior to
the repurchase date. The required repurchase notice shall state:

 

  •  

if certificated notes have been issued, the certificate number of the notes (or
if the notes are not certificated, the notice must comply with appropriate DTC
procedures);

 

  •  

the portion of the principal amount of notes to be repurchased, which portion
must be $1,000 or an integral multiple of $1,000; and

 

  •  

that we are to repurchase such notes pursuant to the applicable provisions of
the notes and the indenture.

A holder may withdraw any repurchase notice by delivering to the paying agent a
written notice of withdrawal prior to the close of business on the second
business day prior to the repurchase date. The notice of withdrawal shall state:

 

  •  

the principal amount being withdrawn;

 

  •  

the certificate numbers of the notes being withdrawn (or, if the notes are not
certificated, the notice must comply with appropriate DTC procedures); and

 

  •  

the principal amount of the notes, if any, that remain subject to the repurchase
notice.

 

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Our obligation to pay the repurchase price for a note for which a repurchase
notice has been delivered and not validly withdrawn is conditioned upon delivery
of the note, together with all necessary endorsements and compliance by the
holder with all DTC procedures, as applicable, to the paying agent at any time
after the delivery of such repurchase notice. Payment of the repurchase price
for such note will be made on the business day following the later of the
repurchase date or the satisfaction of the foregoing conditions. If the paying
agent holds money sufficient to pay the repurchase price of the note on the
business day following the repurchase date in accordance with the terms of the
indenture, then, from and including the repurchase date, interest (including
contingent interest, additional interest and additional amounts, if any) on such
note will cease to accrue and all other rights of the holder shall terminate,
other than the right to receive the repurchase price upon satisfaction of the
foregoing conditions.

In connection with any repurchase of notes at the option of a holder, we will:

 

  •  

to the extent applicable, comply with the provisions of Rule 13e-4, Rule 14e-1
and comply with any other tender offer rules under the Exchange Act that may
then be applicable; and

 

  •  

otherwise comply with all federal and state securities laws as necessary under
the indenture to effect a repurchase of notes by us at the option of a holder.

Repurchase of Notes by Us at Option of Holder upon a Fundamental Change

If a fundamental change, as defined below, occurs prior to May 15, 2014, each
holder will have the right on the fundamental change repurchase date to require
us to repurchase for cash all of its notes or any portion of those notes that is
equal to $1,000 in principal amount or integral multiples thereof, at a
fundamental change repurchase price equal to 100% of the principal amount of the
notes to be repurchased plus any accrued and unpaid interest (including
contingent interest, additional interest and additional amounts, if any) thereon
up to but not including the fundamental change repurchase date. If the
fundamental change repurchase date is on a date that is after a record date and
on or prior to the corresponding interest payment date, we will pay the related
interest (including contingent interest, additional interest and additional
amounts, if any) to the person to whom principal is payable.

Within 15 days after the occurrence of a fundamental change, we must give notice
to each holder and the trustee of each holder’s resulting repurchase right,
specifying the fundamental change repurchase date (which may be no earlier than
20 business days and no later than 30 business days after the date of such
notice) and the procedures that each holder must follow to require us to
repurchase its notes as described below. Simultaneously with providing such
notice, we will issue a press release and publish the information on our
website.

The fundamental change repurchase notice given by a holder electing to require
us to repurchase its notes shall be given so as to be received by the paying
agent no later than the close of business on the second business day prior to
the fundamental change repurchase date and must state:

 

  •  

if certificated notes have been issued, the certificate numbers of the holder’s
notes to be delivered for repurchase (or, if the notes are not issued in
certificated form, the fundamental change repurchase notice must comply with
appropriate DTC procedures);

 

  •  

the portion of the principal amount of notes to be repurchased, which must be
$1,000 or an integral multiple thereof; and

 

  •  

that the notes are to be repurchased by us pursuant to the applicable provisions
of the indenture.

A holder may withdraw its fundamental change repurchase notice by delivering a
written notice of withdrawal to the paying agent prior to the close of business
on the second business day prior to the fundamental change repurchase date. The
notice of withdrawal shall state:

 

  •  

the principal amount of notes being withdrawn;

 

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  •  

if certificated notes have been issued, the certificate numbers of the notes
being withdrawn (or, if the notes are not issued in certificated form, the
notice of withdrawal must comply with appropriate DTC procedures); and

 

  •  

the principal amount of the notes, if any, that remain subject to the
fundamental change repurchase notice.

A “fundamental change” will be deemed to have occurred at such time after the
original issuance of the notes as:

 

  (1) a “person” or “group” (each within the meaning of Section 13(d)(3) of the
Exchange Act) files a Schedule TO or any schedule, form or report under the
Exchange Act disclosing that such person or group has become the direct or
indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of
shares of our common stock representing more than 50% of the total voting power
in the aggregate of classes of our capital stock entitled to vote generally in
the election of directors; or

 

  (2) the first day on which a majority of the members of our board of directors
does not consist of continuing directors; or

 

  (3) a consolidation, merger or binding share exchange, or any conveyance,
transfer, sale, lease or other disposition of all or substantially all of our
assets to another person, other than:

 

  •  

any transaction:

 

  (i) that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of our capital stock; and

 

  (ii) pursuant to which holders of our capital stock immediately prior to the
transaction have the entitlement to exercise, directly or indirectly, 50% or
more of the total voting power of all shares of capital stock entitled to vote
generally in elections of directors of the continuing or surviving or successor
person immediately after giving effect to such issuance; or

 

  •  

any consolidation, merger, share exchange, conveyance, transfer, sale, lease or
other disposition of assets or similar transaction solely for the purpose of
changing our jurisdiction of incorporation and resulting in a reclassification,
conversion or exchange of outstanding common stock, if at all, solely into
common stock, ordinary shares, American Depositary Shares or depositary receipts
or other certificates representing common equity interests of the surviving
entity or a direct or indirect parent of the surviving corporation; or

 

  •  

any consolidation or merger with or into any of our subsidiaries, so long as
such merger or consolidation is not part of a plan or a series of transactions
designed to or having the effect of merging or consolidating with any other
person; or

 

  (4) a termination of trading.

A “continuing director” means a director who either was a member of our board of
directors on the date of original issuance of the notes or who becomes a member
of our board of directors subsequent to that date and whose appointment,
election or nomination for election by our shareholders is duly approved by a
majority of the continuing directors on our board of directors at the time of
such approval, either by specific vote or by approval of the proxy statement
issued by us on behalf of the board of directors in which such individual is
named as nominee for director.

A “termination of trading” will be deemed to have occurred if our common stock
(or other common stock into which the notes are then convertible) is not listed
for trading on a U.S. national or regional securities exchange.

The definition of a fundamental change includes a phrase relating to the
conveyance, transfer, sale, lease or other disposition of “all or substantially
all” of our assets. There is no precise, established definition of the phrase
“substantially all” under applicable law. Accordingly, a holder’s ability to
require us to repurchase its notes as a result of a conveyance, transfer, sale,
lease or other disposition of less than all our assets may be uncertain.

 

S-17

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Notwithstanding the foregoing, a holder will not have the right to require us to
repurchase its notes upon a fundamental change described in clause (3) above if
more then 90% of the consideration in the transaction or transactions consists
of Listed Common Equity immediately following the relevant transaction or
transactions, and, as a result of the transaction or transactions, the notes
become convertible into that Listed Common Equity (including any rights attached
thereto).

Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders if an issuer tender offer occurs and may apply
if the repurchase right becomes exercisable to holders of notes. We will comply
with this rule and file a Schedule TO (or any similar schedule) to the extent
required at that time.

If the paying agent holds money sufficient to pay the fundamental change
repurchase price of the notes which holders have elected to require us to
repurchase on the business day following the fundamental change repurchase date
in accordance with the terms of the indenture, then, from and including the
fundamental change repurchase date, those notes will cease to be outstanding and
interest (including contingent interest, additional interest and additional
amounts, if any) on the notes will cease to accrue and all other rights of the
holders shall terminate, other than the right to receive the fundamental change
repurchase price upon satisfaction of the foregoing conditions.

The term “fundamental change” is limited to specified transactions and does not
include other events that might adversely affect our financial condition or
business operations. The foregoing provisions would not necessarily protect
holders of notes if highly leveraged or other transactions involving us occur
that may affect holders adversely. We could, in the future, enter into certain
transactions, including certain recapitalizations, that would not constitute a
fundamental change with respect to the fundamental change repurchase feature of
the notes but that would increase the amount of our (or our subsidiaries’)
outstanding indebtedness.

Our ability to repurchase notes for cash upon the occurrence of a fundamental
change may be restricted by the loan agreement governing our senior credit
facility, limitations or prohibitions on our ability to obtain funds for such
repurchase through dividends from our subsidiaries, the terms of our other then
existing financing arrangements or otherwise. See “Risk Factors — Risks Relating
to this Offering — We may not be able to repurchase the notes upon a fundamental
change or upon the exercise of a holder’s option to require us to repurchase the
notes, or to pay cash upon conversion of the notes.” No notes may be repurchased
by us at the option of holders upon a fundamental change if there has occurred
and is continuing an event of default with respect to the notes, other than a
default in payment of the fundamental change repurchase price with respect to
the notes.

The fundamental change repurchase feature of the notes may in certain
circumstances make it more difficult or discourage a takeover of our company.
The fundamental change repurchase feature, however, is not the result of our
knowledge of any specific effort:

 

  •  

to accumulate shares of our common stock;

 

  •  

to obtain control of us by means of a merger, tender offer solicitation or
otherwise; or

 

  •  

by management to adopt a series of anti-takeover provisions.

Instead, the fundamental change repurchase feature is a standard term contained
in securities similar to the notes.

Merger or Sale of Assets

The indenture provides that we may not consolidate with or merge with or into
any other person or convey, transfer or lease all or substantially all our
assets to another person, unless:

 

  •  

either we are the continuing corporation or the resulting, surviving or
transferee person (the “successor company”) will be a corporation organized and
existing under the laws of the United States of America,

 

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any State thereof or the District of Columbia (unless such corporation has
(1) agreed to make all payments due in respect of the notes without withholding
or deduction for, or on account of, any taxes, duties, assessments or other
governmental charges (except those imposed by the United States or any political
subdivision or taxing authority thereof or therein) unless required by
applicable law, in which case such corporation shall have agreed to pay such
additional amounts as shall be required so that the net amounts received and
retained by the holders of such notes after payment of all taxes (including
withholding taxes), duties, assessments or other governmental charges will be
equal to the amounts that such holders would have received and retained had no
such taxes (including withholding taxes), duties, assessments or other
governmental charges been imposed, (2) irrevocably and unconditionally consented
and submitted to the jurisdiction of any United States federal court or New York
state court, in each case located in the Borough of Manhattan, New York City, in
respect of any action, suit or proceeding against it arising out of or in
connection with the notes and the indenture and irrevocably and unconditionally
waived, to the fullest extent permitted by law, any objection to the laying of
venue in any such court or that any such action, suit or proceeding has been
brought in an inconvenient forum and (3) irrevocably appointed an agent in New
York City for service of process in any action, suit or proceeding referred to
in clause (2) above) and will expressly assume, by a supplemental indenture,
executed and delivered to the trustee, in form reasonably satisfactory to the
trustee, all of our obligations under the notes and the indenture;

 

  •  

if as a result of such transaction the notes become exchangeable into common
stock or other equity securities issued by a third party, such third party
assumes or fully and unconditionally guarantees all obligations under the notes
and the indenture;

 

  •  

immediately after giving effect to such transaction (and treating any
indebtedness which becomes an obligation of the successor company as a result of
such transaction as having been incurred by the successor company at the time of
such transaction), no default under the indenture shall have occurred and be
continuing; and

 

  •  

we shall have delivered to the trustee an officers’ certificate and an opinion
of counsel, each stating that the consolidation, merger, conveyance or transfer
or lease and such supplemental indenture (if any) comply with the indenture.

The successor company will succeed to, and be substituted for, and may exercise
every right and power of us under the indenture, but in the case of a lease of
all or substantially all our assets we will not be released from our obligations
in respect of the notes.

Events of Default; Notice and Waiver

The following will constitute events of default under the indenture:

 

  •  

a default in the payment of the principal amount, redemption price, repurchase
price or fundamental change repurchase price when due at maturity, upon
redemption, upon repurchase at the option of a holder upon a fundamental change
or on any other repurchase date or otherwise;

 

  •  

a default in the payment of any interest (including contingent interest,
additional interest and additional amounts, if any) on the notes when due and
such default continues for a period of 30 days past the applicable due date;

 

  •  

we fail to provide notice of the occurrence of a fundamental change as required
by the indenture;

 

  •  

a default in our obligation to deliver when due the settlement amount upon
conversion of the notes, together with cash in lieu thereof in respect of any
fractional shares, upon conversion of any notes;

 

  •  

the failure by us to perform or observe any of our other covenants in the
indenture or in the notes for 30 days after written notice to us from the
trustee or to us and the trustee from the holders of at least 25% in principal
amount of the outstanding notes has been received by us;

 

  •  

a failure to pay when due at maturity or a default that results in the
acceleration of any indebtedness for borrowed money of us or our subsidiaries in
an aggregate amount of $5.0 million or more;

 

S-19

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  •  

the failure by us or any of our subsidiaries to pay final judgments aggregating
in excess of $5.0 million, which judgments are not paid, discharged or stayed
for a period of 60 days from the dates such judgments are entered; and

 

  •  

certain events of bankruptcy, insolvency and reorganization of us or any of our
significant subsidiaries.

The foregoing will constitute events of default whatever the reason for any such
event of default and whether it is voluntary or involuntary or is effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.

If a default under the indenture occurs and is continuing and is known to the
trustee, the trustee must mail to each holder of the notes notice of the default
within 90 days after it occurs. The trustee may withhold notice to the holders
of notes of a default, except defaults in non-payment of principal or interest
(including contingent interest, additional interest and additional amounts, if
any) on the notes. However, the trustee must consider it to be in the interest
of the holders of notes to withhold this notice.

If an event of default (other than an event of default relating to certain
events of bankruptcy, insolvency or reorganization of us) occurs and continues,
the trustee or the holders of at least 25% in principal amount of the
outstanding notes may declare the principal and accrued and unpaid interest
(including contingent interest, additional interest and additional amounts, if
any) on the outstanding notes to be immediately due and payable. In case of
certain events of bankruptcy, insolvency or reorganization as described above,
the principal and accrued and unpaid interest (including contingent interest,
additional interest and additional amounts, if any) on the notes will
automatically become immediately due and payable. Under certain circumstances,
the holders of a majority in principal amount of the outstanding notes may
rescind such acceleration with respect to the notes and, as is discussed below,
waive certain past defaults.

Notwithstanding the foregoing, the sole remedy under the indenture for an event
of default relating to the failure to comply with our reporting obligations to
the trustee and the SEC, as set forth in the indenture, and for any failure to
comply with the requirements of Section 314(a)(1) of the Trust Indenture Act of
1939, as amended (the “Trust Indenture Act”), will, for the 365 days after the
occurrence of such an event of default, consist exclusively of the right to
receive additional interest on the notes at an annual rate equal to 0.50% of the
aggregate principal amount of the notes. Any such additional interest will be
payable in the same manner and on the same dates as the stated interest payable
on the notes. The additional interest will accrue on all outstanding notes from
and including the date on which an event of default relating to a failure to
comply with the reporting obligations described above first occurs to, but not
including, the 366th day thereafter (or, if applicable, the earlier date on
which the event of default relating to the reporting obligations is cured or
waived). If the event of default is continuing on the 366th day after an event
of default relating to a failure to comply with the reporting obligations
described above first occurs, the notes will be subject to acceleration as
provided above. The provisions of the indenture described in this paragraph will
not affect the rights of holders of notes in the event of the occurrence of any
other events of default.

The holders of a majority in principal amount of outstanding notes will have the
right to direct the time, method and place of any proceedings for any remedy
available to the trustee or of exercising any trust or power conferred on the
trustee, subject to limitations specified in the indenture. The trustee,
however, may refuse to follow any direction that conflicts with law or the
indenture or that the trustee determines is unduly prejudicial to the rights of
any other holder of the notes or that would involve the trustee in personal
liability. Prior to taking any action under the indenture, the trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.

The holders of a majority in principal amount of outstanding notes may waive any
past defaults under the indenture, except a default due to the non-payment of
principal or interest (including contingent interest, additional interest and
additional amounts, if any), a failure to deliver the settlement amount upon
conversion of notes, a default arising from our failure to repurchase any notes
when required pursuant to the terms of the indenture or a default in respect of
any covenant that cannot be amended without the consent of each holder affected.

 

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No holder of notes may pursue any remedy under the indenture, except in the case
of a default due to the non-payment of principal or interest (including
contingent interest, additional interest and additional amounts, if any), a
failure to deliver the settlement amount upon conversion of notes, a default
arising from our failure to repurchase any notes when required pursuant to the
terms of the indenture or a default in respect of any covenant that cannot be
amended without the consent of each holder affected unless:

 

  •  

the holder has given the trustee written notice of a default;

 

  •  

the holders of at least 25% in principal amount of outstanding notes make a
written request to the trustee to pursue the remedy;

 

  •  

the trustee does not receive an inconsistent direction from the holders of a
majority in principal amount of outstanding notes, and;

 

  •  

the trustee fails to comply with the request within 60 days after receipt of the
request and offer of indemnity.

The indenture will require us (i) every year to deliver to the trustee a
statement as to performance of our obligations under the indenture and as to any
default, and (ii) to deliver to the trustee prompt notice of any default.

Any default in respect of the notes would give rise to an event of default under
the loan agreement governing our senior credit facility if it extended beyond
any cure period applicable to that default under the indenture and would
probably give rise to an event of default under the agreements governing any
future financings.

Legal Defeasance and Covenant Defeasance

The indenture does not provide for any defeasance provisions with respect to the
notes.

Amendment and Modification

The consent of the holders of a majority in principal amount of the outstanding
notes (voting as a single class) is generally required to modify or amend
provisions of the indenture. However, a modification or amendment requires the
consent of the holder of each outstanding note affected by such modification or
amendment if it would:

 

  •  

reduce the principal amount of or change the stated maturity of any note;

 

  •  

reduce the rate or extend the time for payment of interest (including contingent
interest, additional interest and additional amounts, if any) on any note;

 

  •  

make any change that adversely affects the right to require us to repurchase a
note, reduce any amount payable upon repurchase of any note (including upon the
occurrence of a fundamental change) or change the time at which or circumstances
under which the notes may or shall be repurchased;

 

  •  

adversely change the terms upon which the notes may be redeemed;

 

  •  

impair the right to receive payment with respect to the notes or the right to
institute suit for the enforcement of any payment with respect to, or conversion
of, any note;

 

  •  

change the currency in which any note is payable;

 

  •  

impair the right of a holder to convert any note in accordance with its terms or
reduce the number of shares of common stock or amount of any other property
receivable upon conversion;

 

  •  

reduce the quorum or voting requirements under the indenture;

 

  •  

change our obligation to maintain an office or agency in the places and for the
purposes specified in the indenture;

 

S-21

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  •  

subject to specified exceptions, amend or modify certain of the provisions of
the indenture relating to amendment or modification or waiver of provisions of
the indenture; or

 

  •  

reduce the percentage of notes required for consent to any amendment or
modification of the indenture.

In addition, we and the trustee may modify certain provisions of the indenture
without the consent of the holders of notes, including to:

 

  •  

add guarantees with respect to the notes or secure the notes;

 

  •  

evidence the assumption of our obligations by a successor person under the
provisions of the indenture relating to consolidations, mergers and conveyances,
transfers and leases of assets;

 

  •  

surrender any of our rights or powers under the indenture;

 

  •  

add covenants or events of default for the benefit of the holders of notes;

 

  •  

cure any ambiguity or correct any inconsistency in the indenture, so long as
such action will not materially adversely affect the interests of the holders of
notes;

 

  •  

modify or amend the indenture to permit the qualification of the indenture or
any supplemental indenture under the Trust Indenture Act;

 

  •  

establish the forms or terms of the notes;

 

  •  

evidence the acceptance of appointment by a successor trustee;

 

  •  

provide for uncertificated notes in addition to or in place of certificated
notes; provided, however, that the uncertificated notes are issued in registered
form for purposes of Section 163(f) of the Code (as defined below under
“U.S. Federal Income Tax Considerations”) or in a manner such that the
uncertificated notes are described in Section 163(f)(2)(B) of the Code;

 

  •  

conform, as necessary, the indenture and the form or terms of the notes, to the
“Description of Notes” as set forth in this prospectus; and

 

  •  

make any other change to the indenture or forms or terms of the notes so long as
such change will not adversely affect the interests of the holders of notes.

Calculations in Respect of Notes

We will be responsible for making all calculations required under the notes,
unless otherwise set forth above. These calculations include, but are not
limited to, determinations of the market price of our common stock, the amount
of accrued interest (including contingent interest, additional interest and
additional amounts, if any) payable on the notes and the conversion price of the
notes. We will make all these calculations in good faith, and, absent manifest
error, our calculations will be final and binding on holders of notes. We will
provide a schedule of our calculations to the trustee, and the trustee is
entitled to rely upon the accuracy of our calculations without independent
verification. The trustee will forward our calculations to any holder of notes
upon the request of that holder.

Trustee

We have appointed The Bank of New York Trust Company, N.A., the trustee under
the indenture, as paying agent, note registrar and custodian for the notes. The
trustee or its affiliates may also provide banking and other services to us in
the ordinary course of their business.

 

S-22

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Notices

Except as otherwise described in this prospectus, notices to holders of notes
will be given by mail to the addresses as they appear in the security register.
Notices will be deemed to have been given on the date of mailing.

Governing Law

The notes and the indenture shall be governed by, and construed in accordance
with, the laws of the State of New York.

Registration Rights

We entered into a registration rights agreement with the initial purchasers
pursuant to which we have filed a shelf registration statement with the SEC
covering resales of the notes and the shares of our common stock, if any, issued
upon conversion of the notes. This prospectus is part of that registration
statement. In the registration rights agreement we agreed, for the benefit of
the holders of the notes and the common stock, if any, issued upon conversion of
the notes that we will, at our cost, use our commercially reasonable efforts to
keep the shelf registration statement effective until the earliest of:

 

  (1) the date when the holders of notes and holders of the common stock
issuable upon conversion of the notes are able to sell such notes and such
shares immediately without restriction pursuant to Rule 144(k) under the
Securities Act; or

 

  (2) the date when all of the notes and the common stock issuable upon
conversion thereof have been sold either pursuant to the shelf registration
statement or pursuant to Rule 144 under the Securities Act or any similar
provision then in force or the notes and the common stock issuable upon
conversion of the notes cease to be outstanding.

We may suspend the effectiveness of the shelf registration statement or the use
of the prospectus that is part of the shelf registration statement during
specified periods under certain circumstances relating to pending corporate
developments, public filings with the SEC and similar events. Any suspension
period may not exceed an aggregate of:

 

  •  

30 days in any 90-day period; or

 

  •  

90 days in any 360-day period.

We need not specify the nature of the event giving rise to a suspension in any
notice to holders of the notes of the existence of such a suspension. Each
holder, by its acceptance of the notes, has agreed to hold any communication by
us in response to a notice of a proposed sale in confidence.

Each of the following is a registration default:

 

  •  

we fail to name a holder that has supplied all of the required information in a
timely manner as a selling securityholder in the prospectus through a prospectus
supplement or file a post-effective amendment within the required time periods
as described below;

 

  •  

any post-effective amendment required to be filed as described below, if not
immediately effective upon filing, has not been declared effective prior to the
45th day following the date such post-effective amendment is required to be
filed; or

 

S-23

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  •  

at any time after the effectiveness of the shelf registration statement, the
registration statement ceases to be effective or is not usable and (1) we do not
cure the registration statement within 10 business days by a post-effective
amendment, prospectus supplement or report filed pursuant to the Exchange Act
(other than in the case of a suspension period described in the preceding
paragraph), (2) if applicable, we do not terminate the suspension period,
described in the preceding paragraph, by the 30th day in any 90-day period or
(3) a suspension period, when aggregated with other suspension periods during
any 360-day period, continues, unterminated, for more than 90 days.

If a registration default occurs, predetermined “additional amounts” will accrue
on the notes from and including the day following the registration default to
but excluding the earlier of (1) the day on which the registration default has
been cured and (2) the date the registration statement is no longer required to
be kept effective. The additional amounts will be paid to those entitled to
interest payments on such dates semiannually in arrears on each May 15 and
November 15 and will accrue at a rate per year equal to:

 

  •  

0.25% of the principal amount of a note to and including the 90th day following
such registration default; and

 

  •  

0.50% of the principal amount of a note from and including the 91st day
following such registration default.

In no event will additional amounts exceed 0.50% of the principal amount of a
note per year. If a holder converts some or all of its notes into common stock
when there exists a registration default with respect to the common stock, the
holder will not be entitled to receive additional amounts on such common stock.
If a registration default with respect to the common stock occurs after a holder
has converted its notes into common stock, that holder will not be entitled to
any compensation with respect to such common stock.

A holder who elects to sell securities pursuant to the shelf registration
statement will:

 

  •  

be required to be named as a selling security holder in the prospectus and to
deliver the related information to us;

 

  •  

be required to deliver a prospectus to purchasers;

 

  •  

be subject to the civil liability provisions under the Securities Act in
connection with any sales; and

 

  •  

be subject to the provisions of the registration rights agreement, including
indemnification provisions.

Under the registration rights agreement, we will:

 

  •  

pay all expenses of the shelf registration statement;

 

  •  

provide each holder of notes with copies of the prospectus;

 

  •  

notify holders when the shelf registration statement has become effective; and

 

  •  

take other reasonable actions as are required to permit unrestricted resales of
the notes and common stock issued upon conversion of the notes in accordance
with the terms and conditions of the registration rights agreement.

 

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Form, Denomination, Exchange, Registration and Transfer

The notes are issued:

 

  •  

in fully registered form;

 

  •  

without interest coupons; and

 

  •  

in denominations of $1,000 principal amount and integral multiples of $1,000.

We will maintain an office or agent in the Borough of Manhattan, New York City,
where a holder may present the notes for conversion, registration of transfer or
exchange for other denominations, which will initially be the Corporate
Trust Office of the trustee in New York City.

Payment and Paying Agent

We will maintain an office or agent in the Borough of Manhattan, New York City,
where we will pay the principal on the notes, which will initially be the
Corporate Trust Office of the trustee in New York City.

Payments on the notes represented by the global note referred to below will be
made to The Depository Trust Company, New York, New York, which is referred to
in this prospectus as DTC, or its nominee, as the case may be, as the registered
owner thereof, in immediately available funds. We expect that DTC or its
nominee, upon receipt of any payment on the notes represented by a global note,
will credit participants’ accounts with payments in amounts proportionate to
their respective beneficial interests in the global note as shown in the records
of DTC or its nominee. We also expect that payments by participants to owners of
beneficial interests in the global note held through such participants will be
governed by standing instructions and customary practice as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. The participants will be responsible for those
payments. Transfers between participants in DTC will be effected in accordance
with DTC’s rules and will be settled in immediately available funds.

Book-Entry Issue

We issued the notes in the form of one or more permanent global notes in
definitive, fully registered, book-entry form. The global notes are deposited
with or on behalf of DTC and registered in the name of Cede & Co., as nominee of
DTC.

DTC has advised us as follows:

 

  •  

DTC is a limited-purpose trust company organized under the New York Banking Law,
a “banking organization” within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a “clearing corporation” within the
meaning of the New York Uniform Commercial Code and a “clearing agency”
registered under Section 17A of the Exchange Act.

 

  •  

DTC holds securities that its participants deposit with DTC and facilitates the
settlement among participants of securities transactions, such as transfers and
pledges, in deposited securities, through electronic computerized book-entry
changes in participants’ accounts, thereby eliminating the need for physical
movement of securities certificates.

 

  •  

Direct participants include securities brokers and dealers, trust companies,
clearing corporations and other organizations.

 

  •  

DTC is owned by a number of its direct participants and by the New York Stock
Exchange, Inc., the American Stock Exchange LLC and the National Association of
Securities Dealers, Inc.

 

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  •  

Access to the DTC system is also available to others, such as securities brokers
and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a direct participant, either directly or indirectly.

 

  •  

The rules applicable to DTC and its participants are on file with the SEC.

We are providing the following descriptions of the operations and procedures of
DTC to the holders solely as a matter of convenience. These operations and
procedures are solely within the control of DTC and are subject to change by DTC
from time to time. None of us, the initial purchasers or the trustee takes any
responsibility for these operations or procedures, and each holder is urged to
contact DTC or its participants directly to discuss these matters.

We expect that, under procedures established by DTC, ownership of the notes will
be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC or its nominee, with respect to interests of
direct participants, and the records of direct and indirect participants, with
respect to interests of persons other than participants.

The laws of some jurisdictions require that purchasers of securities take
physical delivery of those securities in certificated form. Accordingly, the
ability to transfer interests in the notes represented by a global note to those
persons may be limited. In addition, because DTC can act only on behalf of its
participants, who in turn act on behalf of persons who hold interests through
participants, the ability of a person having an interest in notes represented by
a global note to pledge or transfer those interests to persons or entities that
do not participate in DTC’s system, or otherwise to take actions in respect of
such interest, may be affected by the lack of a physical certificated security
in respect of such interest.

So long as DTC or its nominee is the registered owner of a global note, DTC or
that nominee will be considered the sole owner and holder of the notes
represented by that global note for all purposes under the indenture and under
the notes. Except as provided below, owners of beneficial interests in a global
note will not be entitled to have notes represented by that global note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated notes and will not be considered the owners or holders
thereof under the indenture or under the notes for any purpose, including with
respect to the giving of any direction, instruction or approval to the trustee.
Accordingly, each person owning a beneficial interest in a global note must rely
on the procedures of DTC and, if that person is not a direct or indirect
participant, on the procedures of the participant through which that person owns
its interest, to exercise any rights of a holder of notes under the indenture or
the global note.

Notes represented by a global note will be exchangeable for registered
certificated notes with the same terms only if: (1) DTC is unwilling or unable
to continue as depositary or if DTC ceases to be a clearing agency registered
under the Exchange Act and a successor depositary is not appointed by us within
90 days; (2) we decide to discontinue use of the system of book-entry transfer
through DTC (or any successor depositary); or (3) an event default under the
indenture occurs and is continuing.

Neither we nor the trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of notes by DTC,
or for maintaining, supervising or reviewing any records of DTC relating to the
notes.

 

S-26

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SCHEDULE 8.9

TO

LOAN AND SECURITY AGREEMENT

None.

 

S-27

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SCHEDULE 8.16

TO

LOAN AND SECURITY AGREEMENT

Credit Card Agreements

 

1. Merchant Services Agreement between Discover Financial Services, Inc. and
Spartan Stores, Inc and certain of its subsidiaries.

 

2. Agreement for American Express Card Acceptance/Supermarket dated November 3,
2002 between American Express Travel Related Service Company, Inc. and Family
Fare.

 

3. Merchant Services Agreement between Spartan Stores, Inc. and Cybersource
Corporation dated January 31, 2011.

 

4. Bank Card Merchant Agreement and Marketing Agreement between Fifth Third Bank
(now Vantiv) and Spartan Stores, Inc. dated May 24, 2005.

 

S-28

--------------------------------------------------------------------------------

SCHEDULE 8.17

TO

LOAN AND SECURITY AGREEMENT

Business Associate Agreements

 

        Company   Other Party

  Family Fare, LLC

  Inmar/Prism

  Family Fare, LLC

  Inmar/Medturn

  Family Fare, LLC

  Shredit

  Family Fare, LLC

  Diabetic VIP

  Family Fare, LLC

  Emdeon (ERX)

  Family Fare, LLC

  Iomni

  Family Fare, LLC

  ScriptPro

  Family Fare, LLC

  MSN Pharmstaff

  Family Fare, LLC

  A-Line Staffing

  Family Fare, LLC

  Catalina

  Family Fare, LLC

  PLEIO (Patient drug adherence program)

  Family Fare, LLC

  ScriptSave (MSA)

  Family Fare, LLC

  Outcomes

  Family Fare, LLC

  Holland Hospital-CFGH

  Family Fare, LLC

  CPSI

  Family Fare, LLC

  McKesson Enterprise Pharmacy Services

  Family Fare, LLC

  EHIM

  Family Fare, LLC

  NHBP

Spartan Stores, Inc.

  ASR Health Benefits Corporation

Spartan Stores, Inc.

  EyeMed

Spartan Stores, Inc.

  Navitus

Spartan Stores, Inc.

  BASIC – COBRA Administration, Retiree Billing, HRA Plan Administration

Spartan Stores, Inc.

  Physicians Care Health Management

Spartan Stores, Inc.

  Cofinity

Spartan Stores, Inc.

  Physicians Care Network

Spartan Stores, Inc.

  HUB International Midwest

Spartan Stores, Inc.

  Nationwide

Spartan Stores, Inc.

  POWM

Spartan Stores, Inc.

  CIGNA

Spartan Stores, Inc.

  ATEB (IVR vendor)

Spartan Stores, Inc.

  Infowerks

Spartan Stores, Inc.

  AutoMed

Spartan Stores, Inc.

  Miller Johnson

Spartan Stores, Inc.

  Warner, Norcross and Judd, LLP

 

S-29

--------------------------------------------------------------------------------

SCHEDULE 8.18

TO

LOAN AND SECURITY AGREEMENT

Participation Agreements

 

        Company   Other Party

Family Fare, LLC

  Medco Health

Family Fare, LLC

  Argus Health Systems

Family Fare, LLC

  Priority Health

Family Fare, LLC

  MI Medicaid

Family Fare, LLC

  PCN Health Plus

Family Fare, LLC

  Caremark

Family Fare, LLC

  RX America PDP

Family Fare, LLC

  Ideal Scripts

Family Fare, LLC

  Pharmacare

Family Fare, LLC

  Navitus Employee Trust Fund

Family Fare, LLC

  Navitus Health Plan

Family Fare, LLC

  Express Scripts

Family Fare, LLC

  Express Scripts BSBS, MI

Family Fare, LLC

  Wellpoint Pharmacy Management

Family Fare, LLC

  Prescription Solutions MA-PD

Family Fare, LLC

  Humana MA-PD

Family Fare, LLC

  Humana Health Plan

Family Fare, LLC

  Aetna

Family Fare, LLC

  Catalyst RX

Family Fare, LLC

  WHP Health Initiatives

Family Fare, LLC

  EHIM

Family Fare, LLC

  CVS-RX America

Family Fare, LLC

  Meridian RX

Family Fare, LLC

  McKesson Coupon

Family Fare, LLC

  RX Options

Family Fare, LLC

  Family Wize

Family Fare, LLC

  Pharmacy Data Management Pharmacy Benefit Direct

Family Fare, LLC

  Stockton Group

Family Fare, LLC

  Great Lakes Health Plan

Family Fare, LLC

  SXC-Health Solutions

Family Fare, LLC

  ESI

Family Fare, LLC

  USMCA

Family Fare, LLC

  Restat

Family Fare, LLC

  Unite Networks of America

Family Fare, LLC

  Script Guide RX

Family Fare, LLC

  WBC Health Trans

Family Fare, LLC

  Prime Therapeutics

Family Fare, LLC

  BSBS of Illinois

Family Fare, LLC

  RX America Auto-Rx

 

S-30

--------------------------------------------------------------------------------

Family Fare, LLC

  Horizon-NPS

Family Fare, LLC

  Agelity

Family Fare, LLC

  Innoviant

Family Fare, LLC

  BCBS GA

Family Fare, LLC

  BCB-SC

Family Fare, LLC

  Scriptcare

Family Fare, LLC

  Scriptsave—Yes

Family Fare, LLC

  Benefit Admin System

Family Fare, LLC

  VA-E-Pharmacy

Family Fare, LLC

  Sav-Rx

Family Fare, LLC

  Healthtrans

Family Fare, LLC

  Data Rx Generic Use Plan

Family Fare, LLC

  Transaction Rx Network

Family Fare, LLC

  AMWINSRX

Family Fare, LLC

  RX Processing Service

Family Fare, LLC

  WHP Health Initiatives

Family Fare, LLC

  RX Processing Service

Family Fare, LLC

  National Prescription Administrators

Family Fare, LLC

  Script Card

Family Fare, LLC

  Physicians RX Care Discount

Family Fare, LLC

  Cypress Care

Family Fare, LLC

  Serve You

Family Fare, LLC

  Emerald Health Employees

Family Fare, LLC

  Kroger Prescription Program

Family Fare, LLC

  Together Health

Family Fare, LLC

  Third Party Solutions

Family Fare, LLC

  Script Solution

Family Fare, LLC

  UNG-AG

Family Fare, LLC

  Valu RX

Family Fare, LLC

  Scrip Ventures

 

S-31

--------------------------------------------------------------------------------

SCHEDULE 9.9(b)

TO

LOAN AND SECURITY AGREEMENT

List of Capital Leases, Equipment and Real Property

Excluded from Calculation of Purchase Money Indebtedness

Direct Debt

Capital Leases

 

Company

   Name/Address
of Payee    Principal Balance
as of 3/31/2012      Nature of Debt    Term

Spartan Stores Distribution, LLC

   IBM Credit, LLC    $ 150,000       Capital Lease    September 2012

Family Fare, LLC

   IBM Credit, LLC    $ 21,522       Capital Lease    June 2012

Prevos Family Markets, Inc.

   IBM Credit, LLC    $ 26,294       Capital Lease    June 2012

MSFC, LLC

   IBM Credit, LLC    $ 317       Capital Lease    June 2012

Spartan Stores Fuel, LLC

   IBM Credit, LLC    $ 2,647       Capital Lease    June 2012

Family Fare, LLC

   DDR Michigan II LLC    $ 307,851       Capital Lease    March 2013

Family Fare, LLC

   Script Pro    $ 149,521       Capital Lease    March 2015

Family Fare, LLC

   IBM Credit, LLC    $ 478,362       Capital Lease    March 2014

Family Fare, LLC

   GE Capital    $ 2,066       Capital Lease    August 2012

Prevos Family Markets, Inc.

   GE Capital    $ 11,757       Capital Lease    August 2012

Prevos Family Markets, Inc.

   DP Properties, LLC    $ 2,223,024       Capital Lease    September 2032

Family Fare, LLC

   Allendale Shopping
Center, LLC    $ 3,149,753       Capital Lease    June 2022

Family Fare, LLC

   Capital Retail, LLC    $ 2,713,673       Capital Lease    September 2030

Family Fare, LLC

   MHV Grocery, LLC    $ 3,444,602       Capital Lease    April 2032

Family Fare, LLC

   Anchor Manistee, LLC    $ 3,351,526       Capital Lease    July 2029

Family Fare, LLC

   Daane’s Development    $ 3,869,619       Capital Lease    September 2029

Prevos Family Markets, Inc.

   Murk Properties    $ 1,988,562       Capital Lease    October 2018

Prevos Family Markets, Inc.

   Murk Properties    $ 555,653       Capital Lease    November 2013

 

S-32

--------------------------------------------------------------------------------

Family Fare, LLC

   New Plan Excel Realty    $ 3,043,651       Capital Lease    June 2016

Family Fare, LLC

   Gateway Jackson    $ 219,315       Capital Lease    February 2014

Family Fare, LLC

   Riverside Center Properties,
LLC    $ 1,514,415       Capital Lease    February 2023

Family Fare, LLC

   Centro Properties, LLC    $ 1,314,169       Capital Lease    May 2017

Family Fare, LLC

   Jade Pig Ventures    $ 3,618,290       Capital Lease    November 2018

Family Fare, LLC

   Lake Jackson Realty, LLC    $ 3,957,478       Capital Lease    September 2030

Prevos Family Markets, Inc.

   Jade Pig Ventures    $ 5,378,119       Capital Lease    January 2020

Prevos Family Markets, Inc.

   Jade Pig Ventures    $ 2,781,448       Capital Lease    November 2018

Family Fare, LLC

   Romence Village, LLC    $ 4,178,163       Capital Lease    January 2020

Family Fare, LLC

   Jade Pig Ventures    $ 110,420       Capital Lease    February 2014

 

S-33