EXHIBIT 10.2
 
THE BON-TON DEPARTMENT STORES, INC.,
HERBERGER’S DEPARTMENT STORES, LLC,
PARISIAN, INC., and
THE ELDER-BEERMAN STORES CORP.,
as Borrowers
LOAN AND SECURITY AGREEMENT
Dated as of March 6, 2006
$1,000,000,000
CERTAIN FINANCIAL INSTITUTIONS,
as Lenders
and
BANK OF AMERICA, N.A.,
as Agent
BANC OF AMERICA SECURITIES LLC and
GE CAPITAL MARKETS, INC.,
as Co-Lead Arrangers and Joint Book Runners
GENERAL ELECTRIC CAPITAL CORPORATION and
CITICORP NORTH AMERICA, INC.,
as Co-Syndication Agents
WELLS FARGO RETAIL FINANCE, LLC and
JPMORGAN CHASE BANK, N.A.,
as Co-Documentation Agents
 

 

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                  Page
SECTION 1.
  DEFINITIONS; RULES OF CONSTRUCTION   1
1.1.
  Definitions   1
1.2.
  Accounting Terms   29
1.3.
  Certain Matters of Construction   29
SECTION 2.
  CREDIT FACILITIES   30
2.1.
  Commitment   30
 
  2.1.1. Loans   30
 
  2.1.2. Notes   30
 
  2.1.3. Use of Proceeds   30
 
  2.1.4. Overadvances   30
 
  2.1.5. Protective Advances   31
2.2.
  Voluntary Reduction or Termination of Commitments   31
 
  2.2.1. Voluntary Reduction or Termination of Tranche A Revolver Commitments  
31
 
  2.2.2. Voluntary Reduction or Termination of Tranche A-1 Revolver Commitments
  32
2.3.
  Letter of Credit Facility   32
 
  2.3.1. Issuance of Letters of Credit   32
 
  2.3.2. Reimbursement; Participations   34
 
  2.3.3. Cash Collateral   35
SECTION 3.
  INTEREST, FEES AND CHARGES   35
3.1.
  Interest   35
 
  3.1.1. Rates and Payment of Interest   35
 
  3.1.2. Application of Adjusted LIBOR to Outstanding Loans   36
 
  3.1.3. Interest Periods   36
 
  3.1.4. Interest Rate Not Ascertainable   36
3.2.
  Fees   37
 
  3.2.1. Unused Line Fee   37
 
  3.2.2. LC Facility Fees   37
 
  3.2.3. Agent Fees   37
3.3.
  Computation of Interest, Fees, Yield Protection   37
3.4.
  Reimbursement Obligations   37
3.5.
  Illegality   38

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TABLE OF CONTENTS
(continued)

                  Page
3.6.
  Increased Costs   38
3.7.
  Capital Adequacy   39
3.8.
  Mitigation   39
3.9.
  Funding Losses   40
3.10.
  Maximum Interest   40
SECTION 4.
  LOAN ADMINISTRATION   40
4.1.
  Manner of Borrowing and Funding Loans   40
 
  4.1.1. Notice of Borrowing   40
 
  4.1.2. Fundings by Lenders   41
 
  4.1.3. Swingline Loans; Settlement   41
 
  4.1.4. Notices   42
4.2.
  Defaulting Lender   42
4.3.
  Number and Amount of LIBOR Loans; Determination of Rate   42
4.4.
  Borrower Agent   42
4.5.
  One Obligation   43
4.6.
  Effect of Termination   43
SECTION 5.
  PAYMENTS   43
5.1.
  General Payment Provisions   43
5.2.
  Repayment of Loans   43
5.3.
  Payment of Other Obligations   44
5.4.
  Marshaling; Payments Set Aside   44
5.5.
  Allocation of Payments   44
 
  5.5.1. Pre-Default Allocation of Payments   44
 
  5.5.2. Post-Default Allocation of Payments   45
 
  5.5.3. Erroneous Application   46
5.6.
  Application of Payments   46
5.7.
  Loan Account; Account Stated   46
 
  5.7.1. Loan Account   46
 
  5.7.2. Entries Binding   46
5.8.
  Taxes   46
5.9.
  Withholding Tax Exemption   47
5.10.
  Nature and Extent of Each Borrower’s Liability   47

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TABLE OF CONTENTS
(continued)

                  Page
 
  5.10.1. Joint and Several Liability   47
 
  5.10.2. Waivers   48
 
  5.10.3. Extent of Liability; Contribution   48
 
  5.10.4. Joint Enterprise   49
 
  5.10.5. Subordination   49
SECTION 6.
  CONDITIONS PRECEDENT   49
6.1.
  Conditions Precedent to Initial Loans   49
6.2.
  Conditions Precedent to All Credit Extensions   53
6.3.
  Limited Waiver of Conditions Precedent   53
SECTION 7.
  COLLATERAL   53
7.1.
  Grant of Security Interest   53
7.2.
  Lien on Deposit Accounts; Cash Collateral   54
 
  7.2.1. Deposit Accounts   54
 
  7.2.2. Cash Collateral   55
 
  7.2.3. Credit Card Notifications   55
7.3.
  Real Estate Collateral   55
7.4.
  Other Collateral   55
 
  7.4.1. Commercial Tort Claims   55
 
  7.4.2. Certain After-Acquired Collateral   56
7.5.
  No Assumption of Liability   56
7.6.
  Further Assurances   56
7.7.
  Foreign Subsidiary Stock   56
SECTION 8.
  COLLATERAL ADMINISTRATION   56
8.1.
  Borrowing Base Certificates   56
8.2.
  Administration of Accounts   56
 
  8.2.1. Intentionally Omitted   56
 
  8.2.2. Account Verification   56
 
  8.2.3. Maintenance of Dominion Account   57
 
  8.2.4. Proceeds of Collateral   57
8.3.
  Administration of Inventory   57
 
  8.3.1. Records and Reports of Inventory   57
 
  8.3.2. Returns of Inventory   57

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TABLE OF CONTENTS
(continued)

                  Page
 
  8.3.3. Acquisition, Sale and Maintenance   57
8.4.
  Administration of Equipment   57
 
  8.4.1. Records and Schedules of Equipment   57
 
  8.4.2. Dispositions of Equipment   58
 
  8.4.3. Condition of Equipment   58
8.5.
  Administration of Deposit Accounts   58
8.6.
  General Provisions   58
 
  8.6.1. Location of Collateral   58
 
  8.6.2. Insurance of Collateral; Condemnation Proceeds   58
 
  8.6.3. Protection of Collateral   59
 
  8.6.4. Defense of Title to Collateral   59
8.7.
  Power of Attorney   59
SECTION 9.
  REPRESENTATIONS AND WARRANTIES   60
9.1.
  General Representations and Warranties   60
 
  9.1.1. Organization and Qualification   60
 
  9.1.2. Power and Authority   60
 
  9.1.3. Enforceability   60
 
  9.1.4. Capital Structure   60
 
  9.1.5. Corporate Names; Locations   60
 
  9.1.6. Title to Properties; Priority of Liens   60
 
  9.1.7. Security Documents   61
 
  9.1.8. Financial Statements   61
 
  9.1.9. Surety Obligations   61
 
  9.1.10. Taxes   61
 
  9.1.11. Brokers   61
 
  9.1.12. Intellectual Property   61
 
  9.1.13. Governmental Approvals   61
 
  9.1.14. Compliance with Laws   61
 
  9.1.15. Compliance with Environmental Laws   62
 
  9.1.16. Burdensome Contracts   62
 
  9.1.17. Litigation   62
 
  9.1.18. Insurance   62

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TABLE OF CONTENTS
(continued)

                  Page
 
  9.1.19. No Defaults   62
 
  9.1.20. ERISA   62
 
  9.1.21. Trade Relations   62
 
  9.1.22. Labor Relations   62
 
  9.1.23. Intentionally Omitted   62
 
  9.1.24. Margin Stock   63
 
  9.1.25. Plan Assets   63
 
  9.1.26. Complete Disclosure   63
SECTION 10.
  COVENANTS AND CONTINUING AGREEMENTS   63
10.1.
  Affirmative Covenants   63
 
  10.1.1. Inspections; Appraisals   63
 
  10.1.2. Financial and Other Information   64
 
  10.1.3. Notices   66
 
  10.1.4. Landlord and Storage Agreements   66
 
  10.1.5. Compliance with Laws; Organic Documents; Material Contracts   66
 
  10.1.6. Taxes   67
 
  10.1.7. Insurance   67
 
  10.1.8. Licenses   67
 
  10.1.9. Future Subsidiaries   67
 
  10.1.10. Intentionally Omitted   67
 
  10.1.11. Preservation of Existence   67
 
  10.1.12. Maintenance of Properties   67
 
  10.1.13. Books and Records   67
 
  10.1.14. Operation and Maintenance Plan   67
10.2.
  Negative Covenants   68
 
  10.2.1. Permitted Debt   68
 
  10.2.2. Permitted Liens   69
 
  10.2.3. Capital Expenditures   70
 
  10.2.4. Distributions; Upstream Payments   71
 
  10.2.5. Restricted Investments   71
 
  10.2.6. Disposition of Assets   71
 
  10.2.7. Loans   71

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TABLE OF CONTENTS
(continued)

                  Page
 
  10.2.8. Restrictions on Payment of Certain Debt   71
 
  10.2.9. Fundamental Changes   71
 
  10.2.10. Subsidiaries   72
 
  10.2.11. Organic Documents   72
 
  10.2.12. Tax Consolidation   72
 
  10.2.13. Accounting Changes   72
 
  10.2.14. Restrictive Agreements   72
 
  10.2.15. Hedging Agreements   72
 
  10.2.16. Conduct of Business   72
 
  10.2.17. Affiliate Transactions   72
 
  10.2.18. Plans   72
 
  10.2.19. Amendments to Certain Material Contracts   72
 
  10.2.20. No Speculative Transactions   73
 
  10.2.21. Passive Company Status   73
 
  10.2.22. General Partner   73
 
  10.2.23. Sale-Leaseback Transactions   73
 
  10.2.24. Indebtedness under Senior Note Debt Documents   73
10.3.
  Financial Covenants   73
 
  10.3.1. Excess Availability   73
SECTION 11.
  EVENTS OF DEFAULT; REMEDIES ON DEFAULT   73
11.1.
  Events of Default   73
11.2.
  Remedies upon Default   75
11.3.
  License   76
11.4.
  Setoff   76
11.5.
  Remedies Cumulative; No Waiver   76
 
  11.5.1. Cumulative Rights   76
 
  11.5.2. Waivers   76
SECTION 12.
  AGENT   76
 
  12.1. Appointment, Authority and Duties of Agent   76
 
  12.1.2. Duties   77
 
  12.1.3. Agent Professionals   77
 
  12.1.4. Instructions of Required Lenders   77

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TABLE OF CONTENTS
(continued)

                  Page
12.2.
  Agreements Regarding Collateral and Field Examination Reports   77
 
  12.2.1. Lien Releases; Care of Collateral   78
 
  12.2.2. Possession of Collateral   78
 
  12.2.3. Reports   78
12.3.
  Reliance By Agent   78
12.4.
  Action Upon Default   78
12.5.
  Ratable Sharing   78
12.6.
  Indemnification of Agent Indemnitees   79
 
  12.6.1. INDEMNIFICATION   79
 
  12.6.2. Proceedings   79
12.7.
  Limitation on Responsibilities of Agent   79
12.8.
  Successor Agent and Co-Agents   80
 
  12.8.1. Resignation; Successor Agent   80
 
  12.8.2. Separate Collateral Agent   80
12.9.
  Due Diligence and Non-Reliance   80
12.10.
  Replacement of Certain Lenders   81
12.11.
  Remittance of Payments and Collections   81
 
  12.11.1. Remittances Generally   81
 
  12.11.2. Failure to Pay   81
 
  12.11.3. Recovery of Payments   81
12.12.
  Agent in its Individual Capacity   81
12.13.
  Agent Titles   82
12.14.
  No Third Party Beneficiaries   82
12.15.
  Mortgage Intercreditor Agreement   82
SECTION 13.
  BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS   82
13.1.
  Successors and Assigns   82
13.2.
  Assignments   82
 
  13.2.1. Assignments by Lenders   82
 
  13.2.2. Register   83
 
  13.2.3. Certain Pledges   84
 
  13.2.4. Electronic Execution of Assignments   84
 
  13.3. Participations   84

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TABLE OF CONTENTS
(continued)

                  Page
 
  13.3.2. Limitations upon Participant Rights   84
13.4.
  Tax Treatment   84
13.5.
  Representation of Lenders   85
SECTION 14.
  MISCELLANEOUS   85
14.1.
  Consents, Amendments and Waivers   85
 
  14.1.1. Amendment   85
 
  14.1.2. Limitations   85
 
  14.1.3. Payment for Consents   85
14.2.
  Indemnity   86
14.3.
  Notices and Communications   86
 
  14.3.1. Notice Address   86
 
  14.3.2. Electronic Communications; Voice Mail   87
 
  14.3.3. Non-Conforming Communications   87
14.4.
  Performance of Borrowers’ Obligations   87
14.5.
  Credit Inquiries   87
14.6.
  Severability   87
14.7.
  Cumulative Effect; Conflict of Terms   87
14.8.
  Counterparts; Facsimile Signatures   88
14.9.
  Entire Agreement   88
14.10.
  Obligations of Lenders   88
14.11.
  Confidentiality   88
14.12.
  GOVERNING LAW   88
14.13.
  Consent to Forum   89
 
  14.13.1. Forum   89
14.14.
  Waivers by Borrowers   89
14.15.
  Patriot Act Notice   89
14.16.
  Resignation as Issuing Bank or Provider of Swingline Loans after Assignment  
89

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LIST OF EXHIBITS AND SCHEDULES

     
Exhibit A
  Tranche A Revolver Note
Exhibit B
  Tranche A-1 Revolver Note
Exhibit C
  Assignment and Assumption Agreement
Exhibit D
  Compliance Certificate
Exhibit E
  Credit Card Notification

     
Schedule 1.1(a)
  Commitments of Lenders
Schedule 1.1(b)
  Leased Properties of the Business as of the Closing Date
Schedule 1.1(c)
  Restricted Investments Existing on the Closing Date
Schedule 2.3.2
  Existing Letters of Credit
Schedule 6.1(n)
  Closing Date Pro Forma Leverage Ratio
Schedule 7.1
  Excluded Real Estate
Schedule 7.3
  Mortgaged Real Estate
Schedule 8.5
  Deposit Accounts
Schedule 8.5(a)
  Store Deposit Accounts for Post-Closing Account Control Agreements
Schedule 8.5(b)
  Excluded Deposit Accounts
Schedule 8.5(c)
  Excluded Trust Accounts
Schedule 8.6.1
  Business Locations
Schedule 9.1.4
  Names and Capital Structure
Schedule 9.1.5
  Former Names and Companies
Schedule 9.1.12
  Patents, Trademarks, Copyrights and Licenses
Schedule 9.1.15
  Environmental Matters
Schedule 9.1.16
  Restrictive Agreements
Schedule 9.1.17
  Litigation
Schedule 9.1.19
  Pension Plans
Schedule 9.1.22
  Labor Contracts
Schedule 10.2.1
  Existing Debt
Schedule 10.2.2
  Existing Liens
Schedule 10.2.17
  Existing Affiliate Transactions

 

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LOAN AND SECURITY AGREEMENT
     THIS LOAN AND SECURITY AGREEMENT (the “Loan Agreement”) is dated as of
March 6, 2006, among THE BON-TON DEPARTMENT STORES, INC. (“Bon-Ton”), a
Pennsylvania corporation, HERBERGER’S DEPARTMENT STORES, LLC, (“Herberger’s”), a
Minnesota limited liability company, PARISIAN, INC. (“Parisian”), an Alabama
corporation, and THE ELDER-BEERMAN STORES CORP. (“Elder-Beerman” and together
with Bon-Ton, Herberger’s and Parisian, collectively, the “Borrowers”), an Ohio
corporation, the financial institutions party to this Agreement from time to
time as lenders (collectively, “Lenders”), and BANK OF AMERICA, N.A., a national
banking association, as agent for the Lenders (“Agent”).
R E C I T A L S:
     Borrowers have requested that Lenders make available a credit facility, to
be used by Borrowers to finance their mutual and collective business enterprise.
Lenders are willing to provide such credit facility on the terms and conditions
set forth in this Agreement.
     NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties
agree as follows:
SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION
     1.1. Definitions. As used herein, the following terms have the meanings set
forth below:
     Account — as defined in the UCC, including all rights to payment for goods
sold or leased, or for services rendered.
     Account Control Agreements — each deposit account control agreement and
other bank account control agreement required pursuant to Section 7.2.1 or
Section 8.5.
     Account Debtor — a Person who is obligated under an Account, Chattel Paper
or General Intangible.
     Acquisition — the purchase by the Parent from Saks Incorporated of 100% of
the equity interests in Herberger’s and Parisian, and of the Business, pursuant
to the Purchase Agreement.
     Acquisition Documents - the Purchase Agreement and all other material
documents executed between or among the Obligors and Saks Incorporated in
connection with the Acquisition, including, without limitation each of the
following documents, each of which is dated as of the date hereof unless
otherwise indicated (a) the “including, without limitation, that certain Amended
and Restated Plan of Reorganization, dated as of February 23, 2006, among Saks
Incorporated, Carson Pirie Holdings, Inc., CP Holdings Virginia, LLC, Parisian
Virginia, LLC, McRae’s, Inc., McRae’s of Alabama, Inc., McRae’s Stores Services,
Inc., Saks Distribution Centers, Inc., McRIL, LLC, North Park Fixtures, Inc. and
Parisian, Inc. and all exhibits thereto, (b) the Agreement and Plan of Merger
between Parisian, Inc. and Parisian Virginia, LLC, (c) the Agreement and Plan of
Merger between Carson Pirie Holdings, Inc. and CP Holdings Virginia, LLC,
(d) the Agreement and Plan of Merger between Parisian, Inc. and Carson Pirie
Holdings, Inc., (e) the Distribution Agreement between McRae’s of Alabama, Inc.
and McRae’s Inc., (f) the Distribution Agreement between North Park Fixtures,
Inc. and McRae’s Inc., (g) the Distribution Agreement between McRIL, LLC and
McRae’s Inc., (h) the Contribution Agreement between McRae’s Inc. and McRae’s of
Alabama, Inc., (i) the Contribution Agreement between McRae’s Inc. and McRae’s
Stores Services, Inc., (j) the Contribution Agreement between McRae’s Inc. and
North Park Fixtures, Inc., (k) the Plan of Liquidation among Saks Incorporated,
Parisian, Inc.

 

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and McRae’s Inc., (l) the Contribution Agreement between Parisian, Inc. and
McRae’s of Alabama, Inc. and (m) the Contribution Agreement between Parisian,
Inc. and McRae’s Stores Services, Inc.
     Adjusted LIBOR — for any Interest Period, with respect to LIBOR Loans, the
per annum rate of interest (rounded upward, if necessary, to the nearest 1/8th
of 1%) appearing on Telerate Page 3750, or if such page is unavailable, the
Reuters Screen LIBO Page (or any successor page of either, as applicable), as
the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; provided,
however, if the Reuters Screen LIBO Page is used and more than one rate is shown
on such page, the applicable rate shall be the arithmetic mean thereof. If for
any reason none of the foregoing rates is available, the Offshore Base Rate
shall be the rate per annum determined by Agent as the rate of interest at which
Dollar deposits in the approximate amount of the applicable LIBOR Loan would be
offered to major banks in the offshore Dollar market at or about 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period. If the Board of Governors shall
impose a Reserve Percentage with respect to LIBOR deposits, then Adjusted LIBOR
shall equal the amount determined above, divided by (1 minus the Reserve
Percentage).
     Affiliate — with respect to any Person, another Person (a) who directly, or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with such first Person; (b) who beneficially owns 10% or
more of the voting securities or any class of Equity Interests of such first
Person; (c) at least 10% of whose voting securities or any class of Equity
Interests is beneficially owned, directly or indirectly, by such first Person;
or (d) who is an officer, director, partner or managing member of such first
Person. “Control” means the possession, directly or indirectly, of the power to
direct or cause direction of the management and policies of a Person, whether
through ownership of Equity Interests, by contract or otherwise.
     Agent Indemnitees — Agent and its officers, directors, employees,
Affiliates, agents, advisors and attorneys.
     Agent Professionals — attorneys, accountants, appraisers, auditors,
business valuation experts, environmental engineers or consultants, turnaround
consultants, and other professionals and experts retained by Agent.
     Allocable Amount — as defined in Section 5.10.3.
     Anti-Terrorism Laws — any laws relating to terrorism or money laundering,
including the Patriot Act.
     Applicable Law — all laws, rules, regulations and governmental guidelines
applicable to the Person, conduct, transaction, agreement or matter in question,
including all applicable statutory law, common law and equitable principles, and
all provisions of constitutions, treaties, statutes, rules, regulations, orders
and decrees of Governmental Authorities.
     Applicable Margin — with respect to any Type of Loan, the margin set forth
below, as determined by the average daily Excess Availability during the Fiscal
Quarter of the Parent most recently then ended:

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                                                              LIBOR   LIBOR  
Base Rate   Base Rate                 Tranche A   Tranche A-1   Tranche A  
Tranche A-1         Average Excess   Revolver   Revolver   Revolver   Revolver  
Unused Line Level   Availability   Loans   Loans   Loans   Loans   Fee
I
    > $400,000,000       1.00 %     2.75 %     0 %     1.25 %     0.30 %
II
    £ $400,000,000       1.25 %     3.00 %     0 %     1.50 %     0.25 %
 
  but
                                       
 
    > $250,000,000                                          
III
    £ $250,000,000       1.50 %     3.25 %     0 %     1.75 %     0.25 %
 
  but
                                       
 
    > $100,000,000                                          
IV
    £ $100,000,000       1.75 %     3.50 %     0.25 %     2.00 %     0.25 %

Until October 31, 2006, margins shall be determined as if Level III were
applicable. Thereafter, the margins shall be subject to increase or decrease on
a quarterly basis. Not more than ten (10) Business Days after the first day of
each Fiscal Quarter, the Agent shall determine the Applicable Rate for such
Fiscal Quarter (which shall be effective as of the first Business Day of such
Fiscal Quarter) based on the average daily Excess Availability for the prior
Fiscal Quarter.
     Appraised Value — with respect to any Eligible Real Estate the fair market
value of such Eligible Real Estate as determined pursuant to the most recent
appraisal received by Agent from an independent third-party appraiser acceptable
to Required Lenders, pursuant to Section 10.1.1(b).
     Approved Fund — any Person (other than a natural person) that is engaged in
making, holding or investing in extensions of credit in its ordinary course of
business and is administered or managed by a Lender, an entity that administers
or manages a Lender, or an Affiliate of either.
     Approved Shipper — any reputable and creditworthy shipper or freight
forwarder transporting finished goods Inventory to a Borrower’s Distribution
Center.
     Asset Disposition — a sale, lease, license, consignment, transfer or other
disposition of Property of an Obligor, including a disposition of Property in
connection with a sale-leaseback transaction or synthetic lease; provided,
however, that in no event shall a termination of a lease be deemed to be an
Asset Disposition.
     Assignee Group — two or more Eligible Assignees that are Affiliates of one
another or two or more Approved Funds managed by the same investment advisor.
     Assignment and Assumption Agreement — an assignment and assumption
agreement between a Lender and Eligible Assignee, in the form of Exhibit C.
     Availability Reserve — the sum (without duplication) of (a) the Inventory
Reserve; (b) the Rent and Charges Reserve; (c) the Bank Product Reserve; (d) the
aggregate amount of liabilities secured by Liens upon Collateral that are senior
to Agent’s Liens (but imposition of any such reserve shall not waive an Event of
Default arising therefrom); and (e) such additional reserves, in such amounts
and with respect to such matters (including, without limitation, reserves which
Agent may establish from time to time, in its reasonable exercise of its credit
judgment, as being appropriate to reflect impediments to the Agent’s ability to
realize the full value of the Collateral in a liquidation) as Agent in its
reasonable exercise of its credit judgment discretion may elect to impose from
time to time.

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     Bank of America — Bank of America, N.A., a national banking association,
and its successors and assigns.
     Bank of America Indemnitees — Bank of America and its officers, directors,
employees, Affiliates, agents, advisors and attorneys.
     Bank Product — any of the following products, services or facilities
extended to Parent or any Subsidiary by any Lender or any of its Affiliates:
(a) Cash Management Services; (b) products under Hedging Agreements;
(c) commercial credit card and merchant card services extended to Parent or such
Subsidiary; and (d) leases and other banking products or services as may be
requested by Parent or any Subsidiary, other than Letters of Credit; provided,
however, that for any of the foregoing to be included as an “Obligation” for
purposes of a distribution under Section 5.5.1 or Section 5.5.2, the applicable
bank product provider and Obligor must have previously provided written notice
to Agent of (i) the existence of such Bank Product, (ii) the maximum dollar
amount of obligations arising thereunder to be included as a Bank Product
Reserve (“Bank Product Amount”), and (iii) the methodology to be used by such
parties in determining the Bank Product Debt owing from time to time. The Bank
Product Amount may be changed from time to time upon written notice to Agent by
the Secured Party and Obligor.
     Bank Product Amount — as defined in the definition of Bank Product.
     Bank Product Debt — Debt and other obligations of an Obligor relating to
Bank Products.
     Bank Product Reserve — the aggregate amount of reserves established by
Agent from time to time, in consultation with the Borrower Agent, in respect of
Bank Product Debt.
     Bankruptcy Code — Title 11 of the United States Code.
     Base Rate — the rate of interest announced by Bank of America from time to
time as its prime rate. Such rate is a reference rate only and Bank of America
may make loans or other extensions of credit at, above or below it. Any change
in the prime rate announced by Bank of America shall take effect at the opening
of business on the effective date specified in the public announcement of the
change.
     Base Rate Loan — any Loan that bears interest based on the Base Rate.
     Base Rate Tranche A Revolver Loan — a Tranche A Revolver Loan that bears
interest at the Base Rate plus the Applicable Margin for Base Rate Tranche A
Revolver Loans.
     Base Rate Tranche A-1 Revolver Loan — a Tranche A-1 Revolver Loan that
bears interest at the Base Rate plus the Applicable Margin for Base Rate Tranche
A-1 Revolver Loans.
     Board of Directors — (a) with respect to a corporation, the board of
directors of the corporation or, except in the context of the definitions of
“Change of Control” and “Continuing Directors,” a duly authorized committee
thereof; (b) with respect to a partnership, the Board of Directors of the
general partner of the partnership or, if the partnership has more than one
general partner, the managing general partner of the partnership; and (c) with
respect to any other Person, the board or committee of such Person serving a
similar function.
     Board of Governors — the Board of Governors of the Federal Reserve System.
     Bon-Ton Existing Lender — General Electric Capital Corporation, as
administrative agent and L/C issuer.

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     Bon-Ton Payoff Letter — a letter, in form and substance reasonably
satisfactory to Agent, from the Bon-Ton Existing Lender to Agent respecting the
amount necessary to repay in full all of the obligations of the Obligors owing
to the Bon-Ton Existing Lender and obtain a release of all of the Liens existing
in favor of the Bon-Ton Existing Lender in and to the assets of the Obligors and
stating that such Liens shall be released upon receipt of such amount.
     Borrowed Money — with respect to any Obligor, without duplication, its
(a) Debt that (i) arises from the lending of money by any Person to such
Obligor, (ii) is evidenced by notes, drafts, bonds, debentures, credit documents
or similar instruments, (iii) accrues interest or is a type upon which interest
charges are customarily paid (excluding trade payables owing in the Ordinary
Course of Business), or (iv) was issued or assumed as full or partial payment
for Property; (b) Capital Leases; (c) reimbursement obligations with respect to
letters of credit; and (d) guaranties of any Debt of the foregoing types owing
by another Person.
     Borrower Account — a special account established by Borrowers, at Bank of
America, Wachovia Bank, N.A. or another bank reasonably acceptable to Agent,
subject to a control agreement in favor of Agent, for the benefit of the
Lenders, in form and substance reasonably satisfactory to Agent.
     Borrower Agent — as defined in Section 4.4.
     Borrowing — a group of Loans of one Type that are made on the same day or
are converted into Loans of one Type on the same day.
     Borrowing Base Certificate — a certificate, in form and substance
reasonably satisfactory to Agent, by which Borrowers certify calculation of the
Tranche A Borrowing Base and the Tranche A-1 Borrowing Base.
     Business — the retail store business conducted by Herberger’s and Parisian
under the tradenames Carson Pirie Scott, Younkers, Herberger’s, Boston Store and
Bergner’s.
     Business Day — any day (a) excluding Saturday, Sunday and any other day on
which banks are permitted to be closed under the laws of the State of New York
and (b) when used with reference to a LIBOR Loan, also excluding any day on
which banks do not conduct dealings in Dollar deposits on the London interbank
market.
     Business Existing Lender — Bank of America.
     Business Payoff Letter — a letter, in form and substance reasonably
satisfactory to Agent, from the Business Existing Lender to Agent respecting the
amount necessary to repay in full all of the obligations of the Business owing
to the Business Existing Lender and obtain a release of all of the Liens
existing in favor of the Business Existing Lender in and to the assets of the
Business and stating that such Liens shall be released upon receipt of such
amount.
     Capital Adequacy Regulation — any law, rule, regulation, guideline, request
or directive of any central bank or other Governmental Authority, whether or not
having the force of law, regarding capital adequacy of a bank or any Person
controlling a bank.
     Capital Expenditures — all liabilities incurred, expenditures made or
payments due (whether or not made) by Parent or any Subsidiary for the
acquisition of any fixed assets, or any improvements, replacements,
substitutions or additions thereto with a useful life of more than one year,
including the principal portion of Capital Leases.
     Capital Lease — any lease that is required to be capitalized for financial
reporting purposes

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in accordance with GAAP.
     Capital Stock — (a) in the case of a corporation, corporate stock; (b) in
the case of an association or other business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
     Cash Collateral — cash, and any interest or other income earned thereon,
that is delivered to Agent to Cash Collateralize any Obligations.
     Cash Collateral Account — a demand deposit, money market or other account
established by Agent at such financial institution as Agent may select in its
discretion, which account shall be subject to Agent’s Liens for the benefit of
Secured Parties.
     Cash Collateralize — the delivery of cash to Agent, as security for the
payment of Obligations, in an amount equal to (a) with respect to LC
Obligations, 105% of the aggregate LC Obligations, and (b) with respect to any
inchoate or contingent Obligations (including Obligations arising under Bank
Products), Agent’s good faith estimate of the amount due or to become due,
including all fees and other amounts relating to such Obligations. “Cash
Collateralization” has a correlative meaning.
     Cash Equivalents — (a) marketable obligations issued or unconditionally
guaranteed by, and backed by the full faith and credit of, the United States
government, maturing within 12 months of the date of acquisition;
(b) certificates of deposit, time deposits and bankers’ acceptances maturing
within 12 months of the date of acquisition, and overnight bank deposits, in
each case which are issued by a commercial bank organized under the laws of the
United States or any state or district thereof, rated A-1 (or better) by S&P or
P-1 (or better) by Moody’s at the time of acquisition, and (unless issued by a
Lender) not subject to offset rights; (c) repurchase obligations with a term of
not more than 30 days for underlying investments of the types described in
clauses (a) and (b) entered into with any bank meeting the qualifications
specified in clause (b); (d) commercial paper rated A-1 (or better) by S&P or
P-1 (or better) by Moody’s, and maturing within nine months of the date of
acquisition; and (e) shares of any money market fund that has substantially all
of its assets invested continuously in the types of investments referred to
above, has net assets of at least $500,000,000 and has the highest rating
obtainable from either Moody’s or S&P.
     Cash Management Services — any services provided from time to time by any
Lender or any of its Affiliates to Parent or any Subsidiary in connection with
operating, collections, payroll, trust, or other depository or disbursement
accounts, including automatic clearinghouse, controlled disbursement,
depository, electronic funds transfer, information reporting, lockbox, stop
payment, overdraft and/or wire transfer services.
     CERCLA — the Comprehensive Environmental Response Compensation and
Liability Act (42 U.S.C. § 9601 et seq.).
     Change of Control- means the occurrence of any of the following: (a) the
direct or indirect sale, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related transactions,
of all or substantially all of the properties or assets of the Parent and the
other Obligors, taken as a whole, to any “person” (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934); (b) the adoption by
the shareholders of Parent of a plan relating to the liquidation or dissolution
of the Parent; (c) the

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Parent (by way of a report or any other filing pursuant to Section 13(d) of the
Securities Exchange Act of 1934, proxy, vote, written notice or otherwise)
becomes aware of the acquisition by any “person” or “group” (within the meaning
of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934,
or any successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of
Rule 13d-5(b)(1) under the Securities Exchange Act of 1934, or any successor
provision), other than the Permitted Holders, in a single transaction or in a
series of related transactions, by way of merger, consolidation or other
business combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, or any successor
provision) of 50% or more of the total voting power of the Voting Stock of the
Parent; (d) the first day on which a majority of the members of the Board of
Directors of the Parent are not Continuing Directors; (e) the Parent
consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Parent, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Parent or such other Person is converted into or exchanged for cash, securities
or other property, other than any such transaction where (A) the Voting Stock of
the Parent outstanding immediately prior to such transaction is converted into
or exchanged for Voting Stock (other than Disqualified Stock) of the surviving
or transferee Person constituting a majority of the voting power of the
outstanding shares of such Voting Stock of such surviving or transferee Person
(immediately after giving effect to such issuance) and (B) immediately after
such transaction, no “person” or “group” (as such terms are used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934) other than a Permitted
Holder becomes, directly or indirectly, the Beneficial Owner of 50% or more of
the voting power of the Voting Stock of the surviving or transferee Person or
(f) the failure of (x) Bon-Ton to be a wholly-owned direct Subsidiary of the
Parent or (y) the failure of any other Borrower to be a wholly-owned indirect
Subsidiary of the Parent.
     Chattel Paper — as defined in the UCC.
     Claims — as defined in Section 14.2.
     Closing Date — as defined in Section 6.1.
     Collateral — all Property described in Section 7.1, all Property described
in any Security Documents as security for any Obligations, and all other
Property that now or hereafter secures (or is intended to secure) any
Obligations.
     Commercial Tort Claim — as defined in the UCC.
     Commitment — for any Lender, the aggregate amount of such Lender’s Tranche
A Revolver Commitment and Tranche A-1 Revolver Commitment. “Commitments” means
the aggregate amount of all Tranche A Revolver Commitments and Tranche A-1
Revolver Commitments.
     Commitment Letter — that certain commitment letter, dated October 29, 2005
between the Parent, the Agent, Banc of America Bridge LLC and Banc of America
Securities LLC.
     Commitment Termination Date — the earliest to occur of (a) the Termination
Date; (b) the date on which Borrowers terminate the Commitments pursuant to
Section 2.2; or (c) the date on which the Commitments are terminated pursuant to
Section 11.2.
     Compliance Certificate — a certificate, in the form of Exhibit D hereto, by
which Borrowers certify compliance with Section 10.3 and calculate the
applicable Level for the Applicable Margin.

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     Consolidated EBITDA — for any period, for the Parent and its Subsidiaries
on a consolidated basis, an amount equal to Consolidated Net Income for such
period plus (a) the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Fixed Charges for such period,
(ii) the provision for Federal, state, local and foreign income taxes payable by
the Parent and its Subsidiaries for such period, (iii) depreciation and
amortization expense and (iv) other non-recurring expenses of the Borrower and
its Subsidiaries reducing such Consolidated Net Income which do not represent a
cash item in such period or any future period and minus (b) the following to the
extent included in calculating such Consolidated Net Income: (i) Federal, state,
local and foreign income tax credits of the Parent and its Subsidiaries for such
period and (ii) all non-cash items increasing Consolidated Net Income for such
period.
     Consolidated Fixed Charges — for any period, for the Parent and its
Subsidiaries on a consolidated basis, the sum of (a) all scheduled permanent
principal payments, interest, premium payments, debt discount, fees, charges and
related expenses of the Parent and its Subsidiaries in connection with Borrowed
Money (including capitalized interest) or in connection with the deferred
purchase price of assets, in each case to the extent treated as interest in
accordance with GAAP and (b) the portion of rent expense of the Parent and its
Subsidiaries with respect to such period under capital leases that is treated as
interest in accordance with GAAP.
     Consolidated Fixed Charge Coverage Ratio — as of any date of determination,
the ratio of (a) Consolidated EBITDA for the period of the four prior fiscal
quarters ending on such date to (b) Consolidated Fixed Charges for such period.
     Consolidated Funded Indebtedness means, as of any date of determination,
for the Parent and its Subsidiaries on a consolidated basis, the sum of (a) the
outstanding principal amount of all obligations, whether current or long-term,
for borrowed money (including Obligations hereunder) and all obligations
evidenced by bonds, debentures, notes, loan agreements or other similar
instruments, (b) all purchase money Indebtedness, (c) all direct obligations
arising under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments, (d) all
obligations in respect of the deferred purchase price of property or services
(other than trade accounts payable in the ordinary course of business),
(e) attributable indebtedness in respect of capital leases and synthetic lease
obligations, (f) without duplication, all Guarantees with respect to outstanding
Indebtedness of the types specified in clauses (a) through (e) above of Persons
other than the Borrower or any Subsidiary, and (g) all Indebtedness of the types
referred to in clauses (a) through (f) above of any partnership or joint venture
(other than a joint venture that is itself a corporation or limited liability
company) in which the Borrower or a Subsidiary is a general partner or joint
venturer, unless such Indebtedness is expressly made non-recourse to the
Borrower or such Subsidiary.
     Consolidated Net Income — for any period, for the Parent and its
Subsidiaries on a consolidated basis, the net income of the Parent and its
Subsidiaries (excluding extraordinary gains and extraordinary losses, in each
case determined in accordance with GAAP) for that period.
     Contingent Obligation — any obligation of a Person arising from a guaranty,
indemnity or other assurance of payment or performance of any Debt, lease,
dividend or other obligation (“primary obligations”) of another obligor
(“primary obligor”) in any manner, whether directly or indirectly, including any
obligation of such Person under any (a) guaranty, endorsement, co-making or sale
with recourse of an obligation of a primary obligor; (b) obligation to make
take-or-pay or similar payments regardless of nonperformance by any other party
to an agreement; and (c) arrangement (i) to purchase any primary obligation or
security therefor, (ii) to supply funds for the purchase or payment of any
primary obligation, (iii) to maintain or assure working capital, equity capital,
net worth or solvency of the primary obligor, (iv) to purchase Property or
services

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for the purpose of assuring the ability of the primary obligor to perform a
primary obligation, or (v) otherwise to assure or hold harmless the holder of
any primary obligation against loss in respect thereof. The amount of any
Contingent Obligation shall be deemed to be the stated or determinable amount of
the primary obligation (or, if less, the maximum amount for which such Person
may be liable under the instrument evidencing the Contingent Obligation) or, if
not stated or determinable, the maximum reasonably anticipated liability with
respect thereto.
     Continuing Directors — as of any date of determination, those members of
the Board of Directors of the Parent, each of whom: (1) was a member of such
Board of Directors on the Closing Date; or (2) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
     Copyright Security Agreements — each memorandum of grant of security
interest in copyrights or other copyright security agreement pursuant to which
an Obligor grants to Agent, for the benefit of Secured Parties, a Lien on such
Obligor’s interests in copyrights, as security for the Obligations.
     Credit Card Notification — as defined in Section 6.1(p).
     CWA — the Clean Water Act (33 U.S.C. §§ 1251 et seq.).
     Debt — as applied to any Person, without duplication, whether or not
included as indebtedness or liabilities in accordance with GAAP (a) all
obligations of such Person for borrowed money and all obligations of such Person
evidenced by bonds, debentures, notes, loan agreements or other similar
instruments; (b) all direct or contingent obligations of such Person arising
under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments; (c) net
obligations of such Person under any Hedging Agreement; (d) all obligations of
such Person to pay the deferred purchase price of property or services (other
than trade accounts payable in the ordinary course of business);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including indebtedness arising
under conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited in
recourse; (f) capital leases and synthetic lease obligations; (g) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any equity interest in such Person or any other
Person, valued, in the case of a redeemable preferred interest, at the greater
of its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends; and (h) all Guarantees of such Person in respect of any of the
foregoing. For all purposes hereof, the Indebtedness of any Person shall include
the Debt of any partnership or joint venture (other than a joint venture that is
itself a corporation or limited liability company) in which such Person is a
general partner or a joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person.
     Default — an event or condition that, with the lapse of time or giving of
notice, would constitute an Event of Default.
     Default Rate — for any Obligation (including, to the extent permitted by
law, interest not paid when due), 2% plus the interest rate otherwise applicable
thereto.
     Deposit Account — as defined in the UCC.
     Disqualified Stock - any Capital Stock that, by its terms (or by the terms
of any security into which it is convertible, or for which it is exchangeable,
in each case at the option of the

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holder thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is one year after the Termination Date. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Parent to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Parent may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
Section 10.2.4. The term “Disqualified Stock” shall also include any options,
warrants or other rights that are convertible into Disqualified Stock or that
are redeemable at the option of the holder, or required to be redeemed, prior to
the date that is one year after the Termination Date.
     Distribution — any declaration or payment of a distribution, interest or
dividend on any Equity Interest (other than payment-in-kind); any distribution,
advance or repayment of Debt to a holder of Equity Interests; or any purchase,
redemption, or other acquisition or retirement for value of any Equity Interest.
     Distribution Center — the warehouse and distribution facilities operated by
the Borrowers and located at 3585 S. Church Street, Whitehall, Pennsylvania,
1340 East Dayton-Yellow Springs Road, Fairborn, Ohio, 210 S.E. Shurfine Drive,
Ankey, Iowa, 1300 N. Quincy Street, Green Bay, Wisconsin, 4650 Shepard Trial,
Rockford, Illinois and 1835 Jefferson Avenue, Naperville, Illinois.
     Document — as defined in the UCC.
     Dollars — lawful money of the United States.
     Dominion Account — a special account established by Borrowers at Bank of
America or another bank acceptable to Agent, over which Agent has exclusive
control for withdrawal purposes.
     Eligible Assignee — a Person that is (a) a Lender, U.S.-based Affiliate of
a Lender or Approved Fund; (b) any other financial institution approved by Agent
(such approval not to be unreasonably withheld or delayed) and, so long as no
Event of Default under Section 11.1(a) or Section 11.1(k) has occurred and is
continuing, Borrower Agent (which approval by Borrower Agent shall not be
unreasonably withheld or delayed, and shall be deemed given if no objection is
made within two Business Days after notice of the proposed assignment), that is
organized under the laws of the United States or any state or district thereof,
has total assets in excess of $5 billion, extends asset-based lending facilities
in its ordinary course of business and whose becoming an assignee would not
constitute a prohibited transaction under Section 4975 of ERISA or any other
Applicable Law; and (c) during any Event of Default under Section 11.1(a) or
Section 11.1(k), any Person acceptable to Agent in its discretion; provided that
notwithstanding the foregoing, “Eligible Assignee” shall not include any Obligor
or any Affiliate or Subsidiary of any Obligor.
     Eligible Inventory — Inventory owned by a Borrower that Agent, in its
reasonable credit judgment, deems, based on (i) the most recent Borrowing Base
Certificate delivered to Agent, (ii) the salability, at retail, of such
Inventory (valued at the lower of cost or market), (iii) such other factors as
affect the marketability of such Inventory and (iv) other information available
to Agent, in its reasonable credit judgment, to be “Eligible Inventory” for
purposes of this Agreement. Without limiting the foregoing, no Inventory shall
be Eligible Inventory unless (a) it is finished goods and not work-in-process,
raw materials, packaging or shipping materials, labels, samples,

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display items, bags, replacement parts or manufacturing supplies; (b) it is not
held on consignment; (c) it is in new and saleable condition and is not damaged,
defective, shopworn or otherwise unfit for sale; (d) it is not slow-moving,
obsolete or unmerchantable, and does not constitute returned to vendor or
repossessed goods; (e) to the knowledge of the Obligors it meets all standards
imposed by any Governmental Authority, and does not constitute hazardous
materials under any Environmental Law; (f) it conforms with the covenants and
representations herein and in the other Loan Documents; (g) it is (unless such
Inventory constitutes Eligible L/C Inventory) subject to Agent’s duly perfected,
first priority Lien, and is free and clear from all Liens or rights of any
person (including, without limitation, the rights of any purchaser that has made
progress payments and the rights of any surety that has issued a bond to assure
such Borrower’s performance with respect to the Inventory) except (x) Agent and
the Lenders and (y) Liens permitted pursuant to clauses (c) — (x) of
Section 10.2.2, so long as (other than with respect to Liens permitted pursuant
to clauses (u) or (x) of Section 10.2.2) such Liens are junior to the Liens
granted to Agent and the Lenders; (h) it is within the continental United
States, is not in transit except between locations of Borrowers where such
locations are in compliance with the provisions of clause (k) below (unless such
Inventory constitutes Eligible In-Transit Inventory or Eligible L/C Inventory)
and is not consigned to any Person; (i) it is not subject to any warehouse
receipt or negotiable Document unless such document has been delivered to the
Agent or other Persons acceptable to it with all necessary endorsements free and
clear of all Liens other than Liens in Agent’s favor; (j) if it has a value
exceeding $500,000 in the aggregate, it is not subject to any License or other
arrangement that restricts such Borrower’s or Agent’s right to dispose of such
Inventory, unless Agent has received an appropriate Lien Waiver; (k) it is not
located on leased premises or in the possession of a warehouseman, processor,
repairman, mechanic, shipper, freight forwarder or other Person unless the
lessor or such Person has delivered a Lien Waiver or an appropriate Rent and
Charges Reserve has been established; provided that, with respect to the
properties listed on Schedule 1.1(b), no Lien Waiver shall be required and no
Rent and Charges Reserve shall be established until the date that is ninety
(90) days after the Closing Date; (l) it is reflected in the details of the
current inventory stock ledger of the applicable Borrower; (m) it is of a type
held for sale in the ordinary course of such Borrower’s business; (n) the
representations or warranties pertaining to Inventory set forth in this
Agreement and the other Loan Documents are true as to such Inventory; (o) it
does not consist of any costs associated with advertising load or unearned
discounts; and (p) it is covered by casualty insurance reasonably acceptable to
Agent.
     Eligible In-Transit Inventory — without duplication of other Eligible
Inventory, all finished goods Inventory (valued at the lower of cost or market)
owned by Borrowers, not covered by Letters of Credit, which Inventory is in
transit to one of the Borrower’s facilities and which Inventory (a) is owned by
a Borrower and either (i) has been paid for with a draw of an Eligible Trade L/C
by a Borrower or (ii) payment for which is not yet due and has not yet been paid
for by a Borrower but which is located at one of Borrowers’ distribution
facilities and has not yet been recorded on a Borrower’s inventory stock ledger
in the ordinary course; (b) is fully insured; (c) is subject to a first priority
security interest in and Lien upon such goods in favor of Agent (except for any
possessory Lien upon such goods in the possession of a freight carrier or
shipping company securing only the freight charges for the transportation of
such goods to such Borrower); (d) is evidenced or deliverable pursuant to
Documents that have been delivered to Agent or an agent acting on its behalf or
designating Agent as consignee; and (e) is otherwise “Eligible Inventory”
hereunder.
     Eligible L/C Inventory — without duplication of other Eligible Inventory,
all finished goods Inventory (valued at the lower of cost or market) covered by
an Eligible Trade L/C issued for the account of a Borrower, which inventory
(a) meets all of the requirements for Eligible Inventory and (b) will be
Eligible In-Transit Inventory upon a draw of the subject Eligible Trade Letter
of Credit.

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     Eligible Machinery and Equipment — Equipment, Fixtures and owned furniture
as determined from time to time pursuant to an appraisal acceptable to Agent or
which is otherwise deemed eligible by the Agent, in its reasonable credit
judgment. Without limiting the foregoing, no Equipment, Fixtures or owned
furniture shall be Eligible Machinery and Equipment unless (a) such asset is
subject to Agent’s duly perfected, first priority Lien, and no other Lien except
Liens permitted pursuant to clauses (c) — (x) of Section 10.2.2, so long as
(other than with respect to Liens permitted pursuant to clauses (u) or (x) of
Section 10.2.2) such Liens are junior to the Liens granted to Agent and the
Lenders; (b) such asset is located on premises leased, owned or operated by a
Borrower referenced on Schedule 8.6.1; (c) such asset is not located on leased
premises or in the possession of a warehouseman, processor, repairman, mechanic,
shipper, freight forwarder or other Person, unless the lessor or such Person has
delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been
established provided that, with respect to the properties listed on
Schedule 1.1(b), no Lien Waiver shall be required and no Rent and Charges
Reserve shall be established until the date that is ninety (90) days after the
Closing Date; and (d) such asset is Equipment, Fixtures or furniture which does
not in any way fail to meet or violates in any material respect any warranty,
representation or covenant contained in this Agreement or any other Loan
Document.
     Eligible Real Estate — Real Estate owned by a Borrower described on
Schedule 7.3 and which Agent, in its discretion, deems to be Eligible Real
Estate. Without limiting the generality of the foregoing, no Real Estate shall
be Eligible Real Estate unless: (a) it is located in the United States; (b) it
is subject to Agent’s duly perfected, first priority Lien, and no other Lien
except Permitted Liens (other than Liens permitted pursuant to clause (b),
(i) and clause (y) of Section 10.2.2); (c) it is subject to a title insurance
policy reasonably acceptable to Agent and Agent has received title searches,
reasonably acceptable to it, with respect to such Real Estate; (d) it has been
appraised by a third party appraiser reasonably acceptable to Agent; (e) Agent
has received an environmental site assessment of such Real Estate reasonably
acceptable to Agent, which such environmental site assessment shall include
Phase I reports and, if requested by Agent, Phase II reports; (f) if requested
by Agent, Agent has received estoppel agreements reasonably acceptable to Agent,
from ground lessors; (g) Agent has received all other Related Real Estate
Documents requested by it with respect to such Real Estate and such Related Real
Estate Documents are reasonably satisfactory to Agent and (h) such Real Estate
is improved by fully constructed buildings occupied by a Borrower or a
Guarantor.
     Eligible Trade L/C — any Letter of Credit issued in compliance with Section
2.3.1(e) for payment of the purchase price of finished good Inventory which will
be Eligible In-Transit Inventory upon presentation of a draft under such Letter
of Credit.
     Enforcement Action — any rightful action to enforce any Obligations or Loan
Documents or to realize upon any Collateral (whether by judicial action,
self-help, notification of Account Debtors, exercise of setoff or recoupment, or
otherwise).
     Environmental Agreement — each agreement of Borrowers with respect to any
Real Estate subject to a Mortgage, pursuant to which Borrowers agree to
indemnify and hold harmless Agent and Lenders from liability under any
Environmental Laws, except for liability caused by any actions of Agent or the
Lenders which are in violation of the Environmental Laws.
     Environmental Laws — all Applicable Laws (including all programs, permits
and guidance promulgated by regulatory agencies), relating to public health (but
excluding occupational safety and health, to the extent regulated by OSHA) or
the protection or pollution of the environment, including CERCLA, RCRA and CWA.
     Environmental Notice — a notice (whether written or oral) from any
Governmental

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Authority or other Person of any possible noncompliance with, investigation of a
possible violation of, litigation relating to, or potential fine or liability
under any Environmental Law, or with respect to any Environmental Release,
environmental pollution or hazardous materials, including any complaint,
summons, citation, order, claim, demand or request for correction, remediation
or otherwise.
     Environmental Release — a release as defined in CERCLA or under any other
Environmental Law.
     Equipment — as defined in the UCC, including all machinery, apparatus,
equipment, fittings, furniture, fixtures, motor vehicles and other tangible
personal Property (other than Inventory), and all parts, accessories and special
tools therefor, and accessions thereto and, in any event, including all such
Person’s machinery and equipment, including processing equipment, conveyors,
machine tools, data processing and computer equipment including embedded
software and peripheral equipment and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a
part of real property, together with all additions and accessions thereto,
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.
     Equity Interest — the interest of any (a) shareholder in a corporation, (b)
partner in a partnership (whether general, limited, limited liability or joint
venture), (c) member in a limited liability company, or (d) other Person having
any other form of equity security or ownership interest.
     ERISA — the Employee Retirement Income Security Act of 1974.
     Event of Default — as defined in Section 11.
     Excess Availability — determined as of any date, the amount of Tranche A
Excess Availability plus the amount of Tranche A-1 Excess Availability.
     Excess Cash Flow — without duplication, with respect to any Fiscal Year of
the Parent and its Subsidiaries, Consolidated Net Income plus (a) depreciation,
amortization and other non-cash charges and Interest Expense to the extent
deducted in determining Consolidated Net Income, minus (b) Capital Expenditures
during such Fiscal Year (excluding the financed portion thereof), minus
(c) Interest Expense paid or accrued (excluding any original issue discount,
interest paid in kind or amortized debt discount, to the extent included in
determining Interest Expense) and scheduled principal payments paid or payable
in respect of Consolidated Funded Debt, plus or minus (as the case may be), (d)
extraordinary gains or losses which are cash items not included in the
calculation of Consolidated Net Income, minus (e) mandatory permanent
prepayments of the Loans pursuant to Section 5.2, plus (f) taxes deducted in
determining Consolidated Net Income to the extent not paid for in cash.
     Excluded Tax — Tax on the net income or gross receipts of a Lender or any
franchise or capital stock tax.
     Extraordinary Expenses — all reasonable costs, expenses or advances that
Agent may incur during a Default or Event of Default, or during the pendency of
an Insolvency Proceeding of an Obligor, including those relating to (a) any
audit, inspection, repossession, storage, repair,

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appraisal, insurance, manufacture, preparation or advertising for sale, sale,
collection, or other preservation of or realization upon any Collateral; (b) any
action, arbitration or other proceeding (whether instituted by or against Agent,
any Lender, any Obligor, any representative of creditors of an Obligor or any
other Person) in any way relating to any Collateral (including the validity,
perfection, priority or avoidability of Agent’s Liens with respect to any
Collateral), Loan Documents or Obligations, including any lender liability or
other Claims; (c) the exercise, protection or enforcement of any rights or
remedies of Agent in, or the monitoring of, any Insolvency Proceeding;
(d) settlement or satisfaction of any taxes, charges or Liens with respect to
any Collateral; (e) any Enforcement Action; (f) negotiation and documentation of
any modification, waiver, workout, restructuring or forbearance with respect to
any Loan Documents or Obligations; or (g) Protective Advances. Such costs,
expenses and advances include transfer fees, taxes, storage fees, insurance
costs, permit fees, utility reservation and standby fees, legal fees, appraisal
fees, brokers’ fees and commissions, auctioneers’ fees and commissions,
accountants’ fees, environmental study fees, wages and salaries paid to
employees of any Obligor or independent contractors in liquidating any
Collateral, and travel expenses.
     Fee Letter — the fee letter agreement between Agent, Banc of America
Securities LLC, Banc of America Bridge LLC and the Parent.
     Fiscal Quarter — each successive period of three months, commencing on the
first day of a Fiscal Year.
     Fiscal Year — the fiscal year of Parent and Subsidiaries, for accounting
and tax purposes, which is the 52 or 53 week period ending on the Saturday
nearer January 31 of each calendar year (e.g., a reference to fiscal 2004 is a
reference to the fiscal year ended January 29, 2005).
     Fixtures — as such term is defined in the UCC, now owned or hereafter
acquired by any Borrower located at a parcel of Real Estate subject to a
Mortgage.
     FLSA — the Fair Labor Standards Act of 1938.
     Foreign Lender — any Lender that is organized under the laws of a
jurisdiction other than the laws of the United States, or any state or district
thereof.
     Foreign Plan — any employee benefit plan or arrangement maintained or
contributed to by any Obligor or Subsidiary that is not subject to the laws of
the United States, or any employee benefit plan or arrangement mandated by a
government other than the United States for employees of any Obligor or
Subsidiary.
     Foreign Subsidiary — a Subsidiary that is a “controlled foreign
corporation” under Section 957 of the Internal Revenue Code, such that a
guaranty by such Subsidiary of the Obligations or a Lien on the assets of such
Subsidiary to secure the Obligations would result in tax liability to Borrowers.
     Full Payment — with respect to any Obligations, (a) the full and
indefeasible cash payment thereof, including any interest, fees and other
charges accruing during an Insolvency Proceeding (whether or not allowed in the
proceeding); (b) if such Obligations are LC Obligations or inchoate or
contingent in nature, Cash Collateralization thereof (or delivery of a standby
letter of credit acceptable to Agent in its discretion, in the amount of
required Cash Collateral); and (c) a release of any Claims of Obligors against
Agent, Lenders and Issuing Bank arising on or before the payment date. No Loans
shall be deemed to have been paid in full until all Commitments related to such
Loans have expired or been terminated.
     GAAP — generally accepted accounting principles in the United States in
effect from time

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to time.
     General Intangibles — as defined in the UCC, including choses in action,
causes of action, company or other business records, inventions, blueprints,
designs, patents, patent applications, trademarks, trademark applications, trade
names, trade secrets, service marks, goodwill, brand names, copyrights,
registrations, licenses, franchises, customer lists, permits, tax refund claims,
computer programs, operational manuals, internet addresses and domain names,
insurance refunds and premium rebates, all rights to indemnification, and all
other intangible Property of any kind.
     Goods — as defined in the UCC.
     Governmental Approvals — all authorizations, consents, approvals, licenses
and exemptions of, registrations and filings with, and required reports to, all
Governmental Authorities.
     Governmental Authority — any federal, state, municipal, foreign or other
governmental department, agency, commission, board, bureau, court, tribunal,
instrumentality, political subdivision, or other entity or officer exercising
executive, legislative, judicial, regulatory or administrative functions for or
pertaining to any government or court, in each case whether associated with the
United States, a state, district or territory thereof, or a foreign entity or
government.
     Guarantor Payment — as defined in Section 5.10.3.
     Guarantors — each of (a) the Parent, (b) Holdings, (c) the Bon-Ton Giftco,
Inc., (d) The Bon-Ton Stores of Lancaster, Inc., (e) The Bon-Ton Trade Corp.,
(f) McRae’s, Inc., (g) Saks Distribution Centers, Inc., (h) McRIL, LLC,
(i) Elder-Beerman West Virginia, Inc., (j) Elder-Beerman Holdings, Inc.,
(k) Elder-Beerman Operations, LLC and each other Person who guarantees payment
or performance of any Obligations.
     Guaranty — each guaranty agreement executed by a Guarantor in favor of
Agent.
     Hedging Agreement — an agreement relating to any swap, cap, floor, collar,
option, forward, cross right or obligation, or combination thereof or similar
transaction, with respect to interest rate, foreign exchange, currency,
commodity, credit or equity risk.
     Holdings — The Bon-Ton Corp., a Delaware corporation and parent company of
Bon-Ton.
     Indemnitees — Agent Indemnitees, Lender Indemnitees, Issuing Bank
Indemnitees and Bank of America Indemnitees.
     Insolvency Proceeding — any case or proceeding commenced by or against a
Person under any state, federal or foreign law for, or any agreement of such
Person to, (a) the entry of an order for relief under the Bankruptcy Code, or
any other insolvency, debtor relief or debt adjustment law; (b) the appointment
of a receiver, trustee, liquidator, administrator, conservator or other
custodian for such Person or any part of its Property; or (c) an assignment or
trust mortgage for the benefit of creditors.
     Instrument — as defined in the UCC.
     Intellectual Property — all intellectual and similar Property of a Person,
including inventions, designs, patents, patent applications, copyrights,
trademarks, service marks, trade names, trade secrets, confidential or
proprietary information, customer lists, know-how, software

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and databases; all embodiments or fixations thereof and all related
documentation, registrations and franchises; all books and records describing or
used in connection with the foregoing; and all licenses or other rights to use
any of the foregoing.
     Intellectual Property Claim — any claim or assertion (whether in writing,
by suit or otherwise) that the Parent or any Subsidiary’s ownership, use,
marketing, sale or distribution of any Inventory, Equipment, Intellectual
Property or other Property violates another Person’s Intellectual Property.
     Interest Expense — with respect to any Person for any fiscal period,
interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including, in
any event, interest expense with respect to any Consolidated Funded Indebtedness
of such Person.
     Interest Period — as defined in Section 3.1.3.
     Interest Rate Contract — any interest rate swap, collar or cap agreement,
or other agreement or arrangement by Parent or any Subsidiary with a Lender that
is designed to protect against fluctuations in interest rates.
     Inventory — as defined in the UCC, including all goods intended for sale,
lease, display or demonstration; all work in process; and all raw materials, and
other materials and supplies of any kind that are or could be used in connection
with the manufacture, printing, packing, shipping, advertising, sale, lease or
furnishing of such goods, or otherwise used or consumed in such Person’s
business (but excluding Equipment).
     Inventory Reserve — reserves, established by Agent, based on the most
recent appraisal of Borrowers’ Inventory performed by an appraiser and on terms
reasonably satisfactory to Agent and the most recent commercial finance exam of
the Borrowers’ books and records performed by an examiner and on terms
reasonably satisfactory to Agent, to reflect factors that may negatively impact
the Value of Inventory, including change in salability, obsolescence,
seasonality, theft, shrinkage, damage, customer credit liabilities, imbalance,
change in composition or mix, markdowns, vendor chargebacks and with respect to
Eligible Inventory that has been subject to a Letter of Credit for a period in
excess of ninety (90) days.
     Investment — any (a) acquisition of all or substantially all assets of, or
any line of business or division of, a Person; (b) acquisition of record or
beneficial ownership of any Equity Interests of a Person; (c) any advance or
capital contribution to, guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or equity participation or interest in,
another Person, including any partnership or joint venture interest in such
other Person and any arrangement pursuant to which the investor guarantees Debt
of such other Person, or (d) other investment in a Person.
     Investment Property — as defined in the UCC.
     Issuing Bank — (a) Bank of America or an Affiliate of Bank of America, any
other Lender or an Affiliate of such Lender, and any other Person designated by
a Lender (and acceptable to the Borrower), in each case, in its capacity as
issuer of Letters of Credit hereunder, or any successor issuer of Letters of
Credit hereunder and (b) with respect to the Letters of Credit issued by such
issuer prior to the Closing Date and described on Schedule 2.3.2, and with
respect to any other Letters of Credit issued by such Issuing Bank, Wachovia
Bank, N.A. or the Business Existing Lender, as the case may be.
     Issuing Bank Indemnitees — Issuing Bank and its officers, directors,
employees, Affiliates,

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agents, advisors and attorneys.
     LC Application — an application by Borrower Agent to Issuing Bank for
issuance of a Letter of Credit, in form and substance reasonably satisfactory to
Issuing Bank.
     LC Conditions — the following conditions necessary for issuance of a Letter
of Credit: (a) each of the conditions set forth in Section 6; (b) after giving
effect to such issuance, total LC Obligations do not exceed the Letter of Credit
Subline, no Tranche A Overadvance or Tranche A-1 Overadvance exists and, if no
Tranche A Revolver Loans are outstanding, the LC Obligations do not exceed the
Tranche A Borrowing Base (without giving effect to the LC Reserve for purposes
of this calculation); (c) the expiration date of such Letter of Credit is (i) no
more than 365 days from issuance, in the case of standby Letters of Credit,
(ii) no more than 180 days from issuance, in the case of documentary Letters of
Credit, and (iii) at least 20 Business Days prior to the Termination Date;
(d) the Letter of Credit and payments thereunder are denominated in Dollars; and
(e) the form of the proposed Letter of Credit is reasonably satisfactory to
Agent and Issuing Bank in their discretion.
     LC Documents — all documents, instruments and agreements (including LC
Requests and LC Applications) delivered by Borrowers or any other Person to
Issuing Bank or Agent in connection with issuance, amendment or renewal of, or
payment under, any Letter of Credit.
     LC Guaranty — a guaranty issued by an Issuing Bank to another Person in
connection with the issuance by such other Person of Letters of Credit
hereunder.
     LC Obligations — the sum (without duplication) of (a) all amounts owing by
Borrowers for any drawings under Letters of Credit (including in respect of any
payment made by Issuing Bank under any LC Guaranty); (b) the aggregate undrawn
amount of all outstanding Letters of Credit; and (c) all fees and other amounts
owing with respect to Letters of Credit.
     LC Request — a request for issuance of a Letter of Credit, to be provided
by Borrower Agent to Issuing Bank, in form reasonably satisfactory to Agent and
Issuing Bank.
     LC Reserve — the aggregate of all LC Obligations, other than (a) those that
have been Cash Collateralized and (b) if no Default or Event of Default exists,
those constituting charges owing to the Issuing Bank.
     Lender Indemnitees — Lenders and their officers, directors, employees,
Affiliates, agents, advisors and attorneys.
     Lenders — as defined in the preamble to this Agreement, including the
Tranche A Lenders, the Tranche A-1 Lenders, Agent in its capacity as a provider
of Swingline Loans and any other Person who hereafter becomes a “Lender”
pursuant to an Assignment and Assumption Agreement.
     Letter of Credit — any standby or documentary letter of credit issued by
Issuing Bank for the account of a Borrower, or any indemnity, guarantee,
exposure transmittal memorandum or similar form of credit support issued by
Agent or Issuing Bank for the benefit of a Borrower.
     Letter-of-Credit Right — as defined in the UCC.
     Letter of Credit Subline — $150,000,000.
     LIBOR Loan — each set of LIBOR Tranche A Revolver Loans or LIBOR Tranche
A-1 Revolver Loans having a common length and commencement of Interest Period.

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     LIBOR Tranche A Revolver Loan — a Tranche A Revolver Loan that bears
interest at Adjusted LIBOR plus the Applicable Margin for LIBOR Tranche A
Revolver Loans.
     LIBOR Tranche A-1 Revolver Loan — a Tranche A-1 Revolver Loan that bears
interest at Adjusted LIBOR plus the Applicable Margin for LIBOR Tranche A-1
Revolver Loans.
     License — any license or agreement under which an Obligor is authorized to
use Intellectual Property in connection with any manufacture, marketing,
distribution or disposition of Collateral, any use of Property or any other
conduct of its business.
     Licensor — any Person from whom an Obligor obtains the right to use any
Intellectual Property.
     Lien — any Person’s interest in Property securing an obligation owed to, or
a claim by, such Person, whether such interest is based on common law, statute
or contract, including liens, security interests, pledges, hypothecations,
statutory trusts, reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Property.
     Lien Waiver — an agreement, in form and substance reasonably satisfactory
to Agent, by which (a) for any material Collateral located on leased premises,
the lessor waives or subordinates any Lien it may have on the Collateral, and
agrees to permit Agent to enter upon the premises and remove the Collateral or
to use the premises to store or dispose of the Collateral; (b) for any
Collateral held by a warehouseman, processor, shipper or freight forwarder, such
Person waives or subordinates any Lien it may have on the Collateral, agrees to
hold any Documents in its possession relating to the Collateral as agent for
Agent, and agrees to deliver the Collateral to Agent upon request; (c) for any
Collateral held by a repairman, mechanic or bailee, such Person acknowledges
Agent’s Lien, waives or subordinates any Lien it may have on the Collateral, and
agrees to deliver the Collateral to Agent upon request; and (d) for any
Collateral subject to a Licensor’s Intellectual Property rights, the Licensor
grants to Agent the right, vis-à-vis such Licensor, to enforce Agent’s Liens
with respect to the Collateral, including the right to dispose of it with the
benefit of the Intellectual Property, whether or not a default exists under any
applicable License.
     Loan — a Tranche A Revolver Loan or Tranche A-1 Revolver Loan.
     Loan Account — the loan account established by each Lender on its books
pursuant to Section 5.7.
     Loan Documents — this Agreement, Other Agreements and Security Documents.
     Loan Year — each calendar year commencing on the Closing Date and on each
anniversary of the Closing Date.
     Machinery and Equipment Amount — on any date of determination, an amount
equal to 75% of the NRV Percentage of Eligible Machinery and Equipment.
     Margin Stock — as defined in Regulation U of the Board of Governors.
     Master Lease Agreement — collectively, (i) Master Lease dated as of
March 6, 2006 between Bonstores Realty One, LLC, a Delaware limited liability
company, as landlord, and Herberger’s Department Stores, LLC, a Minnesota
limited liability company, as tenant, (ii) Master Lease dated as of March 6,
2006 between Bonstores Realty One, LLC, a Delaware limited liability company, as
landlord, and McRae’s, Inc., a Mississippi corporation, as tenant, (iii)

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Master Lease dated as of March 6, 2006 between Bonstores Realty One, LLC, a
Delaware limited liability company, as landlord, and McRIL, LLC, a Virginia
limited liability company, as tenant, (iv) Master Lease dated as of March 6,
2006 between Bonstores Realty One, LLC, a Delaware limited liability company, as
landlord, and Parisian, Inc., an Alabama corporation, as tenant, (v) Master
Lease dated as of March 6, 2006 between Bonstores Realty One, LLC, a Delaware
limited liability company, as landlord, and Saks Distribution Centers, Inc., an
Illinois corporation, as tenant, (vi) Master Lease dated as of March 6, 2006
between Bonstores Realty One, LLC, a Delaware limited liability company, as
landlord, and The Elder-Beerman Stores, Corp., an Ohio corporation, as tenant,
(vii) Master Lease dated as of March 6, 2006 between Bonstores Realty Two, LLC,
a Delaware limited liability company, as landlord, and McRae’s, Inc., a
Mississippi corporation, as tenant, (viii) Master Lease dated as of March 6,
2006 between Bonstores Realty Two, LLC, a Delaware limited liability company, as
landlord, and McRIL, LLC, a Virginia limited liability company, as tenant,
(ix) Master Lease dated as of March 6, 2006 between Bonstores Realty Two, LLC, a
Delaware limited liability company, as landlord, and Parisian, Inc., an Alabama
corporation, as tenant, and (x) such other leases and subleases as may be
entered into between an SPE and an Obligor from time to time.
     Material Adverse Effect — the effect of any event or circumstance occurring
after October 29, 2005 (except for general economic or political conditions or
conditions generally applicable to the department store industry, or terrorist
events or wars) that, taken alone or in conjunction with other events or
circumstances, has or could be reasonably expected to have a material adverse
effect on: (a) the business, operations, liabilities (actual or contingent),
Properties, or condition (financial or otherwise) of the Borrowers considered as
a whole, or the value of the Collateral, taken as a whole, the enforceability of
any Loan Documents, or on the validity or priority of Agent’s Liens on any
Collateral; (b) the ability of the Obligors taken as a whole to perform any
obligations under the Loan Documents, including repayment of any Obligations; or
(c) the ability of Agent or any Lender to enforce or collect the Obligations or
to realize upon the Collateral.
     Material Contract — any agreement or arrangement to which Parent or a
Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a
material contract under the Securities Exchange Act of 1934, (b) for which
breach, termination, nonperformance or failure to renew could reasonably be
expected to have a Material Adverse Effect, (c) that is an Acquisition Document,
(d) that relates to the Mortgage Loan Debt, the Senior Note Debt, or other Debt
in an aggregate amount of $5,000,000 or more.
     Moody’s — Moody’s Investors Service, Inc., and its successors.
     Mortgage — each mortgage, deed of trust or deed to secure debt pursuant to
which an Obligor grants to Agent, for the benefit of Secured Parties, Liens upon
the Real Estate owned by such Obligor, as security for the Obligations.
     Mortgage Intercreditor Agreement — the Intercreditor Agreement, dated as of
the date hereof, by and among the Mortgage Loan Lender and Agent.
     Mortgage Loan Debt — (a) the Debt of SPE in an aggregate principal amount
not to exceed $260,000,000, represented by the Mortgage Loan Debt Documents,
(b) the Debt evidenced by each guaranty of a Master Lease, executed by the
Parent in favor of the Mortgage Loan Lender, as in effect on the date hereof and
(c) the Debt evidenced by each Exceptions to Non-Recourse Guaranty, entered into
on the date hereof, by the Parent in favor of the Mortgage Loan Lender, as in
effect on the date hereof.
     Mortgage Loan Debt Documents — the (a) Loan Agreement (the “Bonstores One

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Agreement”), dated as of the date hereof, between Bonstores Realty One, LLC and
the Mortgage Loan Lender, (b) the Loan Agreement (the “Bonstores Two
Agreement”), dated as of the date hereof, between Bonstores Realty Two, LLC and
the Mortgage Loan Lender, (c) each of the Loan Documents (as defined in the
Bonstores One Agreement), (d) each of the Loan Documents (as defined in the
Bonstores Two Agreement), (e) each Master Lease and (f) each guaranty of a
Master Lease by the Parent in favor of the Mortgage Loan Lender.
     Mortgage Loan Lender — Bank of America, N.A., in its capacity as indenture
trustee under the Mortgage Loan Debt Documents.
     Multiemployer Plan — any employee benefit plan or arrangement described in
Section 4001(a)(3) of ERISA that is maintained or contributed to by any Obligor
or Subsidiary.
     Net Proceeds — with respect to an Asset Disposition, proceeds (including,
when received, any deferred or escrowed payments) received by Parent or a
Subsidiary in cash from such disposition, net of (a) reasonable and customary
costs and expenses actually incurred in connection therewith, including legal
fees and sales commissions; (b) amounts applied to repayment of Debt secured by
a Permitted Lien senior to Agent’s Liens on Collateral sold; (c) taxes due as a
result of, or in connection with, such Asset Disposition; and (d) reserves for
indemnities, until such reserves are no longer needed.
     Notes — each Tranche A Revolver Note, Tranche A-1 Revolver Note or other
promissory note executed by a Borrower to evidence any Obligations.
     Notice of Borrowing — a Notice of Borrowing to be provided by Borrower
Agent to request the funding of a Borrowing of Loans, in form reasonably
satisfactory to Agent.
     Notice of Conversion/Continuation — a Notice of Conversion/Continuation to
be provided by Borrower Agent to request a conversion or continuation of any
Loans as LIBOR Loans, in form satisfactory to Agent.
     NRV Percentage — the net recovery value of Inventory, Equipment, Fixtures
or owned furniture, as the case may be of each Borrower, expressed as a
percentage (which in the case of Inventory shall be a 12 month average recovery
value), expected to be realized at an orderly, negotiated sale held within a
reasonable period of time, net of all liquidation expenses, as determined from
the most recent appraisal of Borrowers’ Inventory, Equipment, Fixtures and owned
furniture performed by an appraiser and on terms reasonably satisfactory to
Agent.
     Obligations — all (a) principal of and premium, if any, on the Loans,
(b) LC Obligations and other obligations of Obligors with respect to Letters of
Credit, (c) interest, expenses, fees and other sums payable by Obligors under
Loan Documents, (d) obligations of Obligors under any indemnity for Claims,
(e) Extraordinary Expenses, (f) Bank Product Debt, and (g) other Debts,
obligations and liabilities of any kind owing by Obligors pursuant to the Loan
Documents, whether now existing or hereafter arising, whether evidenced by a
note or other writing, whether allowed in any Insolvency Proceeding, whether
arising from an extension of credit, issuance of a letter of credit, acceptance,
loan, guaranty, indemnification or otherwise, and whether direct or indirect,
absolute or contingent, due or to become due, primary or secondary, or joint or
several.
     Obligor — each Borrower, Guarantor, or other Person that is liable for
payment of any Obligations or that has granted a Lien in favor of Agent on its
assets to secure any Obligations.
     Ordinary Course of Business — the ordinary course of business of Parent or
any Subsidiary, consistent with past practices and undertaken in good faith.

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     Organic Documents — with respect to any Person, its charter, certificate or
articles of incorporation, bylaws, articles of organization, limited liability
agreement, operating agreement, members agreement, shareholders agreement,
partnership agreement, certificate of partnership, certificate of formation,
voting trust agreement, or similar agreement or instrument governing the
formation or operation of such Person.
     OSHA — the Occupational Safety and Hazard Act of 1970.
     Other Agreement — each Note, LC Document, LC Guaranty, Fee Letter, Lien
Waiver, Real Estate Related Document, Borrowing Base Certificate, Compliance
Certificate, financial statement or report delivered hereunder, or other
document, instrument or agreement (other than this Agreement or a Security
Document) now or hereafter delivered by an Obligor or other Person to Agent or a
Lender in connection with any transactions relating hereto.
     Overadvance Loan — a Base Rate Tranche A Revolver Loan made when a Tranche
A Overadvance exists or is caused by the funding of a Tranche A Revolver Loan.
     Parent — The Bon-Ton Stores, Inc., a Pennsylvania corporation and parent
company of Holdings.
     Participant — as defined in Section 13.3.1.
     Passive Company — collectively, The Bon-Ton Properties-Irondequoit G.P.,
Inc., The Bon-Ton Properties- Eastview G.P., Inc., The Bon-Ton Properties-
Marketplace G.P., Inc., The Bon-Ton Properties- Greece Ridge G.P., Inc., Capital
City Commons Realty, Inc., The Bon-Ton Properties- Irondequoit L.P., The Bon-Ton
Properties- Eastview L.P., The Bon-Ton Properties- Marketplace L.P., and The
Bon-Ton Properties- Greece Ridge L.P.
     Patriot Act — the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub.
L. No. 107-56, 115 Stat. 272 (2001).
     Payment Intangible — as defined in the UCC.
     Payment Item — each check, draft or other item of payment payable to a
Borrower, including those constituting proceeds of any Collateral.
     Permitted Asset Disposition — as long as no Default or Event of Default
exists and, if so required pursuant to Section 5.2, all Net Proceeds are
remitted to Agent, an Asset Disposition that is (a) a sale of Inventory or
Equipment in the Ordinary Course of Business; (b) a disposition of Equipment so
long as (x) the Equipment subject to such disposition has a fair market or book
value (whichever is more) of $500,000 or less and (y) all Equipment disposed of
pursuant to this clause (b) in the aggregate during any fiscal year of the
Parent has a fair market or book value (whichever is more) of $3,000,000 or
less, (c) a disposition of Equipment or Inventory that is obsolete,
unmerchantable or otherwise unsalable in the Ordinary Course of Business,
(d) the licensing of intellectual property to third Persons on reasonable and
customary terms in the ordinary course of business consistent with past
practice; provided that such licensing does not materially interfere with the
business of the Parent or any Obligor, (e) the sale or other disposition of Cash
Equivalents, (f) dispositions of accounts receivable in connection with the
compromise, settlement or collection thereof in the ordinary course of business
or in bankruptcy or similar proceedings, (g) any Permitted Distribution, (h) any
Investment which is not a Restricted Investment, (i) the unwinding of any
Hedging Agreements, (j) subleases entered into in the ordinary course of
business of any Obligor, (k) the disposition of any Real Estate which, pursuant
to Section 7.3, is not required to be subject to a Mortgage hereunder, (l) the
disposition of any

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Real Estate which is required to be subject to a Mortgage hereunder, so long as
(x) no Default or Event of Default has occurred and is continuing or would
result therefrom, (y) the Obligors receive, at the consummation of such Asset
Disposition, gross proceeds, in cash, from such sale in an amount not less than
the appraised value of such Real Estate, as set forth in the most recent
appraisal provided to the Agent and (z) contemporaneously with the closing of
such Asset Disposition, 100% of the cash Net Proceeds therefrom are applied to
prepay the Loans, (m) the disposition by Borrower Agent of 100% of the
membership interests in Bonstores Realty One, LLC to Bonstores Holdings One, LLC
and (n) the disposition by Borrower Agent of 100% of the membership interests in
Bonstores Realty Two, LLC to Bonstores Holdings Two, LLC.
     Permitted Business — any business conducted or proposed to be conducted (as
described in that certain offering memorandum, dated March 2, 2006, and relating
to the Senior Note Debt) by the Parent and the other Obligors on the Closing
Date and other businesses reasonably related or ancillary thereto.
     Permitted Contingent Obligations — Contingent Obligations (a) arising from
endorsements of Payment Items for collection or deposit in the Ordinary Course
of Business; (b) arising from Hedging Agreements permitted hereunder;
(c) existing on the Closing Date, and any extension or renewal thereof that does
not increase the amount of such Contingent Obligation when extended or renewed;
(d) incurred in the Ordinary Course of Business with respect to surety, appeal
or performance bonds, or other similar obligations; (e) arising from customary
indemnification obligations in favor of purchasers in connection with
dispositions of Equipment permitted hereunder; (f) arising under the Loan
Documents; or (g) in an aggregate amount of $1,000,000 or less at any time.
     Permitted Distribution — (a) a dividend by the Parent or redemption or
repurchase of equity securities of the Parent so long as (i) no Default or Event
of Default shall have occurred and be continuing or would result after giving
effect to any such payment, (ii) Excess Availability on the date of the making
of (and after giving effect to) such dividend, redemption or repurchase is
greater than or equal to $125,000,000, (iii) Excess Cash Flow for the period of
four fiscal quarters then ended is at least $20,000,000, (iv) the aggregate
amount of such Permitted Distributions shall not in the aggregate exceed fifty
percent (50%) Excess Cash Flow for the period of four fiscal quarters then
ended, (v) as of the monthly fiscal period most recently then ended, the
Consolidated Fixed Charge Coverage Ratio (calculated on a pro forma basis giving
effect to the making of such Permitted Distribution) is not less than 1.5:1.0,
and (vi) the Borrowers shall have provided the Agent with a certificate not less
than then (10) days prior to the making of such Permitted Distribution executed
by a Senior Officer, evidencing compliance, after giving effect to such
Permitted Distribution, with the requirements set forth in clauses (i), (ii),
(iii), (iv) and (v) above, (b) dividends by the Parent or redemptions or
repurchases of equity securities of the Parent in an aggregate amount not to
exceed (x) $4,000,000 in any fiscal year of the Parent or (y) $15,000,000 during
the term of this Agreement, (c) the purchase, repurchase, redemption,
acquisition or retirement for value of any capital stock of the Parent upon the
exercise of warrants, options or similar rights if such capital stock
constitutes all or a portion of the exercise price or is surrendered in
connection with satisfying any federal or state income tax obligation incurred
in connection with such exercise; provided that no cash payment in respect of
such purchase, repurchase, redemption, acquisition, retirement or exercise shall
be made by any Obligor and (d) so long as no Default has occurred and is
continuing or would result therefrom, payments to Parent to permit Parent, and
which are used by Parent, to redeem equity interests of Parent held by any
current or former employee, officer, director or consultant of Parent (or any
Obligor) or their respective estates, spouses, former spouses or family members
pursuant to the terms of any employee equity subscription agreement, stock
option agreement or similar agreement entered into in the ordinary course of
business; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired equity interests in any fiscal year will not

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exceed $3,000,000.
     Permitted Holders- (1) Tim Grumbacher and his immediate family members (as
defined by the National Association of Security Dealers Automatic Quotation
system listing requirements) or the spouses and former spouses (including widows
and widowers), heirs or lineal descendants of any of the foregoing; (2) an
estate, trust (including a revocable trust, declaration of trust or a voting
trust), guardianship, other legal representative relationship or custodianship
for the primary benefit of one or more individuals described in clause (1) above
or controlled by one or more individuals described in clause (1) above; (3) a
corporation, partnership, limited liability company, foundation, charitable
organization or other entity if a majority of the voting power and, if
applicable, a majority of the value of the equity ownership of such corporation,
partnership, limited liability company, foundation, charitable organization or
other entity is directly or indirectly owned by or for the primary benefit of
one or more individuals or entities described in clauses (1) or (2) above; (4) a
corporation, partnership, limited liability company, foundation, charitable
organization or other entity controlled directly or indirectly by one or more
individuals or entities described in clauses (1), (2) or (3) above; and (5) any
“person” (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, or any successor provision) acting on behalf of
the Parent as underwriter pursuant to an offering that is temporarily holding
securities in connection with such offering.
     Permitted Lien — as defined in Section 10.2.2.
     Permitted Purchase Money Debt — Purchase Money Debt of Parent and
Subsidiaries that is unsecured or secured only by a Purchase Money Lien, as long
as the aggregate principal amount does not exceed $25,000,000 at any time and
its incurrence does not violate Section 10.2.3.
     Person — any individual, corporation, limited liability company,
partnership, joint venture, joint stock company, land trust, business trust,
unincorporated organization, Governmental Authority or other entity.
     Plan — an employee pension benefit plan that is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the
Internal Revenue Code and that is either (a) maintained by Parent or Subsidiary
for employees or (b) maintained pursuant to a collective bargaining agreement,
or other arrangement under which more than one employer makes contributions and
to which Parent or Subsidiary is making or accruing an obligation to make
contributions or has within the preceding five years made or accrued such
contributions.
     Pledge Agreement — each pledge agreement pursuant to which an Obligor
pledges to Agent, for the benefit of Secured Parties, such Obligor’s equity
interests, as security for the Obligations.
     Pro Rata – (a) with respect to any Tranche A Lender, a percentage
(expressed as a decimal, rounded to the ninth decimal place) determined
(i) while the Tranche A Revolver Commitments are outstanding, by dividing the
amount of such Tranche A Lender’s Tranche A Revolver Commitment by the aggregate
amount of all Tranche A Revolver Commitments; and (ii) at any other time, by
dividing the amount of such Tranche A Lender’s Tranche A Revolver Loans and LC
Obligations by the aggregate amount of all outstanding Tranche A Revolver Loans
and LC Obligations and (b) with respect to any Tranche A-1 Lender, a percentage
(expressed as a decimal, rounded to the ninth decimal place) determined
(i) while the Tranche A-1 Revolver Commitments are outstanding, by dividing the
amount of such Tranche A-1 Lender’s Tranche A-1 Revolver Commitment by the
aggregate amount of all Tranche A-1 Revolver Commitments; and (ii) at any other
time, by dividing the amount of such Tranche A-1 Lender’s Tranche A-1

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Revolver Loans by the aggregate amount of all outstanding Tranche A-1 Revolver
Loans.
     Properly Contested — with respect to any obligation of an Obligor, (a) the
obligation is subject to a bona fide dispute regarding amount or the Obligor’s
liability to pay; (b) the obligation is being properly contested in good faith
by appropriate proceedings promptly instituted and diligently pursued;
(c) appropriate reserves have been established in accordance with GAAP;
(d) non-payment could not have a Material Adverse Effect, nor result in
forfeiture or sale of any assets of the Obligor; (e) no Lien is imposed on
assets of the Obligor, unless bonded and stayed to the satisfaction of Agent;
and (f) if the obligation results from entry of a judgment or other order, such
judgment or order is stayed pending appeal or other judicial review.
     Property — any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
     Protective Advances — as defined in Section 2.1.5.
     Purchase Agreement — that certain Purchase Agreement, dated as of
October 29, 2005, by and between Saks Incorporated and the Parent.
     Purchase Money Debt — (a) Debt (other than the Obligations) for payment of
any of the purchase price of fixed assets; (b) Debt (other than the Obligations)
incurred within 10 days before or after acquisition of any fixed assets, for the
purpose of financing any of the purchase price thereof; and (c) any renewals,
extensions or refinancings (but not increases) thereof.
     Purchase Money Lien — a Lien that secures Purchase Money Debt, encumbering
only the fixed assets acquired with such Debt, and any proceeds thereof, and
constituting a Capital Lease, a purchase money security interest under the UCC
or a purchase money mortgage.
     RCRA — the Resource Conservation and Recovery Act (42 U.S.C. §§
6991-6991i).
     Real Estate — all right, title and interest (whether as owner, lessor or
lessee) in any real Property or any buildings, structures, parking areas or
other improvements thereon.
     Register — as defined in Section 13.2.2.
     Refinancing Conditions — the following conditions for Refinancing Debt:
(a) it is in an aggregate principal amount that does not exceed the principal
amount of the Debt being extended, renewed or refinanced; (b) it has a final
maturity no sooner than, a weighted average life no less than, and an interest
rate no greater than 100 basis points above the interest rate of the Debt being
refinanced, the Debt being extended, renewed or refinanced; (c) it is
subordinated to the Obligations at least to the same extent as the Debt being
extended, renewed or refinanced; (d) the representations, covenants and defaults
applicable to it are no less favorable to Parent and the Subsidiaries than those
applicable to the Debt being extended, renewed or refinanced; (e) no additional
Lien is granted to secure it; (f) no additional Person is obligated on such
Debt; and (g) upon giving effect to it, no Default or Event of Default exists.
     Refinancing Debt — Borrowed Money that is the result of an extension,
renewal or refinancing of Debt permitted under Section 10.2.1 (b), (c), (d), or
(e).
     Reimbursement Date — as defined in Section 2.3.2.
     Related Parties — with respect to any Person, such Person’s Affiliates and
the partners, directors, officers, employees, agents and advisors of such Person
and of such Person’s Affiliates.

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     Related Real Estate Documents — with respect to any Real Estate subject to
a Mortgage, the following, in form and substance reasonably satisfactory to
Agent and received by Agent for review at least 15 days prior to the effective
date of the Mortgage (or such shorter length of time acceptable to Agent in its
reasonable discretion): (a) a mortgagee title policy (or binder therefor)
covering Agent’s interest under the Mortgage, in a form and amount and by an
insurer reasonably acceptable to Agent, which must be fully paid on such
effective date; (b) such assignments of leases, rents, estoppel letters,
attornment agreements, consents, waivers and releases as Agent may require with
respect to other Persons having an interest in the Real Estate; (c) a current,
as-built survey of the Real Estate, containing a metes-and-bounds property
description and flood plain certification, and certified by a licensed surveyor
reasonably acceptable to Agent; (d) flood insurance in an amount, with
endorsements and by an insurer reasonably acceptable to Agent, if the Real
Estate is within a flood plain; (e) a current appraisal of the Real Estate,
prepared by an appraiser reasonably acceptable to Agent, and in form and
substance satisfactory to Required Lenders; (f) a Phase I (and to the extent
appropriate, Phase II) environmental assessment report, prepared by an
environmental consulting firm reasonably satisfactory to Agent, and accompanied
by such reports, certificates, studies or data as Agent may reasonably require,
which shall all be in form and substance reasonably satisfactory to Agent; and
(g) an Environmental Agreement and such other documents, instruments or
agreements as Agent may reasonably require with respect to any environmental
risks regarding the Real Estate.
     Rent and Charges Reserve — the aggregate of (a) all past due rent and other
amounts owing by an Obligor to any landlord, warehouseman, processor, repairman,
mechanic, shipper, freight forwarder or other Person who possesses any
Collateral or could assert a Lien on any Collateral; and (b) a reserve at least
equal to three months rent and other charges that could be payable to any such
Person, unless it has executed a Lien Waiver.
     Report — as defined in Section 12.2.3.
     Reportable Event — any event set forth in Section 4043(b) of ERISA.
     Required Lenders — Lenders (subject to Section 4.2) having (a) Commitments
in excess of 50% of the aggregate Commitments; and (b) if the Commitments have
terminated, Loans and LC Obligations in excess of 50% of all outstanding Loans
and LC Obligations.
     Reserve Percentage — the reserve percentage (expressed as a decimal,
rounded upward to the nearest 1/8th of 1%) applicable to member banks under
regulations issued from time to time by the Board of Governors for determining
the maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as “Eurocurrency liabilities”).
     Restricted Investment — any Investment by Parent or Subsidiary, other than
(a) Investments in Subsidiaries to the extent existing on the Closing Date and
Investments in any Borrower or Guarantor; (b) Cash Equivalents that are subject
to Agent’s Lien and control, pursuant to documentation in form and substance
reasonably satisfactory to Agent; (c) loans and advances permitted under
Section 10.2.7, (d) investments held by Borrowers comprised of notes payable, or
stock or other securities issued by Account Debtors to any Borrower pursuant to
negotiated agreements with respect to settlement of such Account Debtor’s
Accounts in the ordinary course of business consistent with past practice,
(e) any Investment made as a result of the receipt of non-cash consideration
from an Permitted Asset Disposition, (f) Investments evidenced by Hedging
Agreements which are otherwise permitted to be entered into pursuant to Section
10.2.15, (g) stock, obligations or securities received in connection with the
bankruptcy or reorganization of, or settlement of delinquent accounts and
disputes with, customers and suppliers, in each case in the ordinary course of
business or received in satisfaction of judgment,

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(h) advances to customers or suppliers in the ordinary course of business that
are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses
or deposits on the balance sheet of any Obligor and endorsements for collection
or deposit arising in the ordinary course of business, (i) commission, payroll,
travel and similar advances to officers and employees of any Obligor so long as
such advances are otherwise permitted under Section 10.2.7, (j) Investments
consisting of the licensing or contribution of intellectual property in the
ordinary course of business, (k) Investments of up to $2,000,000 in The Bon-Ton
Properties Irondequoit, L.P. so long as the proceeds of such Investments are
applied to repay the Debt secured by the owned Real Property of such entity,
(l) Investments described on Schedule 1.1(c) and (m) the Investments on the
Closing Date of certain Real Property by the Obligors into the SPEs, as such
Investments are contemplated by the Mortgage Loan Debt Documents.
     Restrictive Agreement — an agreement (other than a Loan Document) that
conditions or restricts the right of any Borrower, Subsidiary or other Obligor
to incur or repay Borrowed Money, to grant Liens on any assets, to declare or
make Distributions, to modify, extend or renew any agreement evidencing Borrowed
Money, or to repay any intercompany Debt.
     Royalties — all royalties, fees, expense reimbursement and other amounts
payable by Parent or any Subsidiary under a License.
     S&P — Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and its successors.
     Sarbanes-Oxley — the Sarbanes-Oxley Act of 2002.
     Securities Laws — the Securities Act of 1933, the Securities Exchange Act
of 1934, Sarbanes-Oxley and the applicable accounting and auditing principles,
rules, standards and practices promulgated, approved or incorporated by the SEC
or the Public Company Accounting Oversight Board, as each of the foregoing may
be amended and in effect on any applicable date hereunder.
     Secured Parties — Agent, Issuing Bank, Lenders and providers of Bank
Products.
     Security Documents — this Agreement, the Guaranties, Pledge Agreements,
Mortgages, Trademark Security Agreements, the Copyright Security Agreements, the
Account Control Agreements and all other documents, instruments and agreements
now or hereafter securing (or given with the intent to secure) any Obligations.
     Senior Note Debt — the unsecured Debt of Bon-Ton in an aggregate principal
amount not to exceed $510,000,000, represented by the Senior Note Debt
Documents.
     Senior Note Debt Documents — the Senior Note Indenture, the 10.25% senior
notes issued by the Parent in connection therewith, and all other instruments
and documents from time to time executed in favor of all or any of the holders
of the Senior Note Debt.
     Senior Note Indenture — the Senior Note Indenture, dated as of the date
hereof, by and among Bon-Ton and The Bank of New York, as trustee.
     Senior Officer — the chairman of the board, president, chief executive
officer, treasurer or chief financial officer of a Borrower or, if the context
requires, an Obligor.
     Settlement Report — a report delivered by Agent to Lenders summarizing the
Loans and participations in LC Obligations outstanding as of a given settlement
date, allocated to Lenders on a Pro Rata basis in accordance with their
Commitments.

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     Software — as defined in the UCC.
     Solvent — as to any Person, such Person (a) owns Property whose Fair
Salable Value is greater than the amount required to pay all of its debts
(including contingent, subordinated, unmatured and unliquidated liabilities);
(b) owns Property whose present Fair Salable Value (as defined below) is greater
than the probable total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of such Person as they become absolute
and matured; (c) is able to pay all of its debts as they mature; (d) has capital
that is not unreasonably small for its business and is sufficient to carry on
its business and transactions and all business and transactions in which it is
about to engage; (e) is not “insolvent” within the meaning of Section 101(32) of
the Bankruptcy Code; and (f) has not incurred (by way of assumption or
otherwise) any obligations or liabilities (contingent or otherwise) under any
Loan Documents, or made any conveyance in connection therewith, with actual
intent to hinder, delay or defraud either present or future creditors of such
Person or any of its Affiliates. “Fair Salable Value” means the amount that
could be obtained for assets within a reasonable time, either through collection
or through sale under ordinary selling conditions by a capable and diligent
seller to an interested buyer who is willing (but under no compulsion) to
purchase.
     SPE — collectively, Bonstores Realty One, LLC, a Delaware limited liability
company (“BROLLC”); Bonstores Holdings One, LLC, a Delaware limited liability
company and the sole member of BROLLC; Bonstores Realty Two, LLC, a Delaware
limited liability company (“BRTLLC”); and Bonstores Holdings Two, LLC, a
Delaware limited liability company and the sole member of BRTLLC, each a special
purpose entity and a borrower of the Mortgage Loan Debt.
     Statutory Reserves — the percentage (expressed as a decimal) established by
the Board of Governors as the then stated maximum rate for all reserves
(including those imposed by Regulation D of the Board of Governors, all basic,
emergency, supplemental or other marginal reserve requirements, and any
transitional adjustments or other scheduled changes in reserve requirements)
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency Liabilities (or any successor category of liabilities under
Regulation D).
     Subsidiary — any entity at least 50% of whose voting securities or Equity
Interests is owned by any Obligor or any combination of Obligors (including
indirect ownership by an Obligor through other entities in which such Obligor
directly or indirectly owns 50% of the voting securities or Equity Interests).
     Supporting Obligation — as defined in the UCC.
     Swingline Loan — any Borrowing of Base Rate Tranche A Revolver Loans funded
with Agent’s funds, until such Borrowing is settled among Lenders pursuant to
Section 4.1.3.
     Taxes — any taxes, levies, imposts, duties, fees, assessments, deductions,
withholdings or other charges of whatever nature, including income, receipts,
excise, property, sales, use, transfer, license, payroll, withholding, social
security, franchise, intangibles, stamp or recording taxes imposed by any
Governmental Authority, and all interest, penalties and similar liabilities
relating thereto.
     Termination Date — March 6, 2011.
     Trademark Security Agreements — each trademark collateral security and
pledge agreement or other trademark security agreement pursuant to which an
Obligor grants to Agent, for the benefit of Secured Parties, a Lien on such
Obligor’s interests in trademarks, as security for

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the Obligations.
     Tranche A Borrowing Base — on any date of determination, an amount equal to
the lesser of (a) the aggregate amount of Tranche A Revolver Commitments, minus
the LC Reserve and (b) the sum of (i) the Tranche A Inventory Formula Amount,
plus (ii) the Tranche A Fixed Asset Availability Amount, minus (iii) the
Availability Reserve, minus (iv) the LC Reserve.
     Tranche A Excess Availability — determined as of any date, the amount that
Borrowers are entitled to borrow as Tranche A Revolver Loans, being the Tranche
A Borrowing Base minus the principal balance of all Tranche A Revolver Loans.
     Tranche A Fixed Asset Availability Amount. — the lesser of (x) $75,000,000
minus the Tranche A-1 Real Estate Amount and (y) the Machinery and Equipment
Amount plus the Tranche A Real Estate Amount.
     Tranche A Inventory Formula Amount — (a) at all times on or prior to the
first anniversary of the Closing Date, 90% of the NRV Percentage of the Value of
Eligible Inventory, (b) at all times after the first anniversary of the Closing
Date but on or prior to August 31, 2007, 87.5% of the NRV Percentage of the
Value of Eligible Inventory and (c) at all times after August 31, 2007, 85% of
the NRV Percentage of the Value of Eligible Inventory.
     Tranche A Lenders – the Lenders indicated on Schedule 1.1(a) as Lenders of
Tranche A Revolver Loans, Agent in its capacity as a provider of Swingline Loans
and any other Person who hereafter becomes a “Tranche A Lender” pursuant to an
Assignment and Assumption Agreement.
     Tranche A Overadvance — as defined in Section 2.1.4.
     Tranche A Real Estate Amount — at any date of determination, 50% of the
Appraised Value of Eligible Real Estate.
     Tranche A Revolver Commitment — for any Tranche A Lender, its obligation to
make Tranche A Revolver Loans and to participate in LC Obligations up to the
maximum principal amount shown on Schedule 1.1(a), or as specified hereafter in
the most recent Assignment and Assumption Agreement to which it is a party.
“Tranche A Revolver Commitments” means the aggregate amount of such commitments
of all Lenders.
     Tranche A Revolver Loan – (a) a Loan made pursuant to Section 2.1.1(a),
(b) any Swingline Loan, (c) any Overadvance Loan deemed by Agent to be a Tranche
A Revolver Loan or (d) any Protective Advance deemed by Agent to be a Tranche A
Revolver Loan.
     Tranche A Revolver Note — a promissory note to be executed by Borrowers in
favor of a Lender in the form of Exhibit A, which shall be in the amount of such
Lender’s Tranche A Revolver Commitment and shall evidence the Tranche A Revolver
Loans made by such Lender.
     Tranche A-1 Borrowing Base — on any date of determination, an amount equal
to the lesser of (a) the aggregate amount of Tranche A-1 Revolver Commitments
and (b) the sum of (i) the Tranche A-1 Inventory Formula Amount, plus (ii) the
lesser of (x) $75,000,000 and (y) the Tranche A-1 Real Estate Amount, minus
(iii) the Availability Reserve (to the extent the Availability Reserve is not
deducted from the Tranche A Borrowing Base).
     Tranche A-1 Excess Availability — determined as of any date, the amount
that Borrowers are entitled to borrow as Tranche A-1 Revolver Loans, being the
Tranche A-1 Borrowing Base minus the principal balance of all Tranche A-1
Revolver Loans.

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     Tranche A-1 Inventory Formula Amount – on any date of determination, 10% of
the NRV Percentage of the Value of Eligible Inventory.
     Tranche A-1 Lenders – the Lenders indicated on Schedule 1.1(a) as Lenders
of Tranche A-1 Revolver Loans and any other Person who hereafter becomes a
“Tranche A-1 Lender” pursuant to an Assignment and Assumption Agreement.
     Tranche A-1 Overadvance — as defined in Section 2.1.4.
     Tranche A-1 Real Estate Amount — at any date of determination, 10% of the
Appraised Value of Eligible Real Estate.
     Tranche A-1 Revolver Commitment — for any Lender, its obligation to make
Tranche A-1 Revolver Loans up to the maximum principal amount shown on
Schedule 1.1(a), or as specified hereafter in the most recent Assignment and
Assumption Agreement to which it is a party. “Tranche A-1 Revolver Commitments”
means the aggregate amount of such commitments of all Lenders.
     Tranche A-1 Revolver Loan — (a) a Loan made pursuant to Section 2.1.1(b),
(b) any Overadvance Loan deemed by Agent to be a Tranche A-1 Revolver Loan or
(c) any Protective Advance deemed by Agent to be Tranche A-1 Revolver Loan.
     Tranche A-1 Revolver Note — a promissory note to be executed by Borrowers
in favor of a Lender in the form of Exhibit B, which shall be in the amount of
such Lender’s Tranche A-1 Revolver Commitment and shall evidence the Tranche A-1
Revolver Loans made by such Lender.
     Transferee — any actual or potential Eligible Assignee, Participant or
other Person acquiring an interest in any Obligations.
     Trigger Event — as defined in Section 5.6.
     Type — any type of a Loan (i.e., Base Rate Loan or LIBOR Loan) that has the
same interest option and, in the case of LIBOR Loans, the same Interest Period.
     UCC — the Uniform Commercial Code as in effect in the State of New York or,
when the laws of any other jurisdiction govern the perfection or enforcement of
any Lien, the Uniform Commercial Code of such jurisdiction.
     Upstream Payment — a Distribution by a Subsidiary or any Obligor to any
Obligor.
     Value — for Inventory, its value determined on the basis of the lower of
cost or market, calculated on a first-in, first-out basis.
     Voting Stock - of any Person as of any date means the capital stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
     1.2. Accounting Terms. Under the Loan Documents (except as otherwise
specified herein), all accounting terms shall be interpreted, all accounting
determinations shall be made, and all financial statements shall be prepared, in
accordance with GAAP applied on a basis consistent with the most recent audited
financial statements of Parent delivered to Agent before the Closing Date and
using the same inventory valuation method as used in such financial statements,
except for any change required or permitted by GAAP if Parent and Borrowers’
certified public accountants concur in such change, the

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change is disclosed to Agent, and Section 10.3 is amended in a manner reasonably
satisfactory to Required Lenders to take into account the effects of the change.
     1.3. Certain Matters of Construction. The terms “herein,” “hereof,”
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time from
a specified date to a later specified date, “from” means “from and including,”
and “to” and “until” each mean “to but excluding.” The terms “including” and
“include” shall mean “including, without limitation” and, for purposes of each
Loan Document, the parties agree that the rule of ejusdem generis shall not be
applicable to limit any provision. Section titles appear as a matter of
convenience only and shall not affect the interpretation of any Loan Document.
All references to (a) laws or statutes include all related rules, regulations,
interpretations, amendments and successor provisions; (b) any document,
instrument or agreement include any amendments, waivers and other modifications,
extensions or renewals (to the extent permitted by the Loan Documents); (c) any
section means, unless the context otherwise requires, a section of this
Agreement; (d) any exhibits or schedules mean, unless the context otherwise
requires, exhibits and schedules attached hereto, which are hereby incorporated
by reference; (e) any Person include successors and assigns; (f) time of day
means time of day at Agent’s notice address under Section 14.3.1; or
(g) discretion of Agent, Issuing Bank or any Lender means the sole and absolute
discretion of such Person. All calculations of Value, fundings of Loans,
issuances of Letters of Credit and payments of Obligations shall be in Dollars
and, unless the context otherwise requires, all determinations (including
calculations of Tranche A Borrowing Base, Tranche A-1 Borrowing Base and
financial covenants) made from time to time under the Loan Documents shall be
made in light of the circumstances existing at such time. Tranche A Borrowing
Base and Tranche A-1 Borrowing Base calculations shall be consistent with
historical methods of valuation and calculation, and otherwise reasonably
satisfactory to Agent (and not necessarily calculated in accordance with GAAP).
Borrowers shall have the burden of establishing any alleged negligence,
misconduct or lack of good faith by Agent, Issuing Bank or any Lender under any
Loan Documents. No provision of any Loan Documents shall be construed against
any party by reason of such party having, or being deemed to have, drafted the
provision. Whenever the phrase “to the best of Borrowers’ knowledge” or words of
similar import are used in any Loan Documents, it means actual knowledge of a
Senior Officer.
SECTION 2. CREDIT FACILITIES
     2.1. Commitment.
          2.1.1. Loans. (a) Tranche A Revolver Loans. Each Tranche A Lender
agrees, severally on a Pro Rata basis up to its Tranche A Revolver Commitment,
on the terms set forth herein, to make Tranche A Revolver Loans to Borrowers
from time to time through the Commitment Termination Date. The Tranche A
Revolver Loans may be repaid and reborrowed as provided herein. The Borrowers
shall not request, and the Tranche A Lenders shall not advance any Tranche A
Revolver Loans (other than (i) Swingline Loans as provided in Section 4.1.3 and
(ii) Tranche A Revolver Loans used to reimburse a draw on a Letter of Credit as
provided in Section 2.3.2) at any time when there exists any Tranche A-1 Excess
Availability. Other than as set forth in Section 2.1.4 and in Section 2.1.5, the
Tranche A Lenders shall not have any obligation to honor a request for a Tranche
A Revolver Loan if (i) the unpaid balance of Tranche A Revolver Loans
outstanding at such time (including the requested Tranche A Revolver Loan) would
exceed the Tranche A Borrowing Base or (ii) the unpaid balance of all Loans
outstanding at such time (including the requested Loan) would exceed Excess
Availability.
          (b) Tranche A-1 Revolver Loans. Each Tranche A-1 Lender agrees,
severally on a Pro Rata basis up to its Tranche A-1 Revolver Commitment, on the
terms set forth herein, to make Tranche A-1 Revolver Loans to Borrowers from
time to time through the Commitment Termination Date. The Tranche A-1 Revolver
Loans may be repaid and reborrowed as provided herein. In no event shall the
Tranche A-1 Lenders have any obligation to honor a request for a Tranche A-1
Revolver Loan if (i) the

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unpaid balance of Tranche A-1 Revolver Loans outstanding at such time (including
the requested Tranche A-1 Revolver Loan) would exceed the Tranche A-1 Borrowing
Base or (ii) the unpaid balance of all Loans outstanding at such time (including
the requested Loan) would exceed Excess Availability.
          (c) Tranche A Borrowing Base and Tranche A-1 Borrowing Base. The
Tranche A Borrowing Base and the Tranche A-1 Borrowing Base shall be determined
from time to time by Agent by reference to the most recent Borrowing Base
Certificate delivered by the Borrowers. The Agent may from time to time
establish and modify the Availability Reserve.
          2.1.2. Notes. The Loans made by each Lender and interest accruing
thereon shall be evidenced by the records of Agent and such Lender. At the
request of any Lender, Borrowers shall deliver a Tranche A Revolver Note and/or
a Tranche A-1 Revolver Note, as applicable, to such Lender.
          2.1.3. Use of Proceeds. The proceeds of Loans shall be used by
Borrowers solely (a) to satisfy existing Debt; (b) to finance a portion of the
Acquisition, (c) to pay fees and transaction expenses associated with the
closing of this credit facility and with the Acquisition; (d) to pay Obligations
in accordance with this Agreement; and (e) for working capital and other lawful
corporate purposes of Borrowers, which purposes shall include, without
limitation, the making of loans to Affiliates of the Borrowers, capital
expenditures, acquisitions and distributions, so long as each of the foregoing
does not violate the terms of this Agreement.
          2.1.4. Overadvances. If the aggregate Tranche A Revolver Loans exceed
the Tranche A Borrowing Base (“Tranche A Overadvance”) at any time, the excess
amount shall be payable by Borrowers on demand by Agent or the Required Lenders,
but all such Loans shall nevertheless constitute Obligations secured by the
Collateral and entitled to all benefits of the Loan Documents. If the aggregate
Tranche A-1 Revolver Loans exceed the Tranche A-1 Borrowing Base (“Tranche A-1
Overadvance”) at any time, the excess amount shall be, so long as there are no
Tranche A Revolver Loans and no Letters of Credit outstanding, payable by
Borrowers on demand by Agent or the Required Lenders, but all such Loans shall
nevertheless constitute Obligations secured by the Collateral and entitled to
all benefits of the Loan Documents. Unless its authority has been revoked in
writing by Required Lenders, Agent may require the Tranche A Lenders to honor
requests for Overadvance Loans and to forbear from requiring Borrowers to cure a
Tranche A Overadvance so long as, at the time of the making of a Tranche A
Overadvance (a) Overadvance Loans have not been outstanding for more than ninety
(90) total days in the preceding 365 day period and (b) the aggregate amount of
all Overadvance Loans and Protective Advances are not known by Agent to exceed
5% of the Tranche A Borrowing Base plus 5% of the Tranche A-1 Borrowing Base. In
no event shall Overadvance Loans be required that would cause (x) the
outstanding Loans and LC Obligations to exceed the aggregate Commitments or
(y) the outstanding Tranche A Revolver Loans and LC Obligations to exceed the
Tranche A Revolver Commitments. Any funding of an Overadvance Loan or sufferance
of a Tranche A Overadvance shall not constitute a waiver by Agent or Lenders of
the Event of Default caused thereby. Overadvance Loans shall be funded as Base
Rate Tranche A Revolver Loans. In no event shall any Borrower or other Obligor
be deemed a beneficiary of this Section nor authorized to enforce any of its
terms. Each Tranche A Lender shall participate in each Overadvance Loan on a Pro
Rata basis.
          2.1.5. Protective Advances. Agent shall be authorized, in its
discretion, at any time that a Default or Event of Default exists or any
conditions in Section 6.2 are not satisfied to make Loans (“Protective
Advances”) (so long as at the time of the making of any Protective Advance,
Protective Advances which constitute Overadvance Loans have not been outstanding
for more than ninety (90) total days in the preceding 365 day period) up to an
aggregate amount equal to (i) 5% of the Tranche A Borrowing Base plus 5% of the
Tranche A-1 Borrowing Base minus (ii) the aggregate amount of all Overadvance
Loans, if Agent deems such Loans necessary or desirable to (a) preserve or
protect any Collateral, or to enhance the collectibility or repayment of
Obligations; or (b) pay any other amounts chargeable to Obligors under any Loan
Documents, including costs, fees and expenses. All Protective

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Advances shall be Obligations, secured by the Collateral, and shall be treated
for all purposes as Extraordinary Expenses. Protective Advances shall be funded
as Base Rate Tranche A Revolver Loans. Each Tranche A Lender shall participate
in each Protective Advance on a Pro Rata basis. In no event shall Protective
Advances be made where the making of such Protective Advances would cause
(x) the outstanding Loans and LC Obligations to exceed the aggregate Commitments
or (y) the outstanding Tranche A Revolver Loans and LC Obligations to exceed the
Tranche A Revolver Commitments.
     2.2. Voluntary Reduction or Termination of Commitments.
          2.2.1. Voluntary Reduction or Termination of Tranche A Revolver
Commitments.
          (a) The Tranche A Revolver Commitments shall terminate on the
Termination Date, unless sooner terminated in accordance with this Agreement.
Upon at least 45 days prior written notice to Agent at any time, Borrowers may,
at their option, terminate the Tranche A Revolver Commitments. Any notice of
termination given by Borrowers shall be irrevocable. On the termination date
specified in such notice of termination, Borrowers shall make payment in full,
in cash, of Tranche A Revolver Loans and all interest thereon and all
Obligations due and owing to the Agent or any Tranche A Lender, in its capacity
as a Tranche A Lender.
          (b) Borrowers may permanently reduce the Tranche A Revolver
Commitments, on a Pro Rata basis for each Tranche A Lender, from time to time
upon written notice to Agent, which notice shall specify the amount of the
reduction, shall be irrevocable once given, shall be given at least five
Business Days prior to the requested reduction date. Each reduction shall be in
a minimum amount of $10,000,000, or an increment of $1,000,000 in excess
thereof.
          2.2.2. Voluntary Reduction or Termination of Tranche A-1 Revolver
Commitments.
          (a) The Tranche A-1 Revolver Commitments shall terminate on the
Termination Date, unless sooner terminated in accordance with this Agreement.
Upon at least 45 days prior written notice to Agent, Borrowers may, at their
option, terminate the Tranche A-1 Revolver Commitments so long as the Borrower
has (i) certified in writing (pursuant to a certificate signed on its behalf by
a Senior Officer) that there are no Tranche A Revolver Loans or LC Obligations
outstanding as of the date of such notice or the date of such termination,
(ii) certified in writing that Tranche A Excess Availability is greater than or
equal to twenty-five percent (25%) of the Tranche A Borrowing Base,
(iii) certified in writing that no Default or Event of Default exists or would
result from such termination and (iv) has provided Agent with a Borrowing Base
Certificate, in form and substance reasonably satisfactory to Agent,
demonstrating that average Tranche A Excess Availability for the twelve-month
period following such termination, calculated on a pro forma basis after giving
effect to such termination, will be greater than or equal to twenty-five percent
(25%) of the Tranche A Borrowing Base. Any notice of termination given by
Borrowers shall be irrevocable. On the termination date specified in such notice
of termination, Borrowers shall make payment in full, in cash of Tranche A-1
Revolver Loans and all interest thereon and all Obligations due and owing to the
Agent or any Tranche A-1 Lender, in its capacity as a Tranche A-1 Lender.
          (b) Borrowers may permanently reduce the Tranche A-1 Revolver
Commitments, on a Pro Rata basis for each Tranche A-1 Lender, upon at least
15 days prior written notice to Agent, so long as a Senior Officer of the
Borrower has (i) certified in writing that there are no Tranche A Revolver Loans
or LC Obligations outstanding as of the date of such notice or the date of such
reduction, (ii) certified in writing that Tranche A Excess Availability is
greater than or equal to twenty-five percent (25%) of the Tranche A Borrowing
Base, (iii) certified in writing that no Default or Event of Default exists or
would result from such reduction and (iv) has provided Agent with a Borrowing
Base Certificate, in form and substance reasonably satisfactory to Agent,
demonstrating that average Tranche A Excess Availability for the twelve-month
period following such reduction, calculated on a pro forma basis after giving
effect to

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such reduction, will be greater than or equal to twenty-five percent (25%) of
the Tranche A Borrowing Base. Any such notice of reduction shall specify the
amount of the reduction, shall be irrevocable once given, shall be given at
least five Business Days prior to the requested reduction date. Each reduction
shall be in a minimum amount of $5,000,000, or an increment of $1,000,000 in
excess thereof.
     2.3. Letter of Credit Facility.
          2.3.1. Issuance of Letters of Credit. Issuing Bank agrees to issue or
cause the issuance of Letters of Credit from time to time until 30 days prior to
the Termination Date (or until the date of termination of the Tranche A Revolver
Commitments, if earlier), on the terms set forth herein, including the
following:
          (a) Each Borrower acknowledges that Issuing Bank’s willingness to
issue or cause the issuance of any Letter of Credit is conditioned upon Issuing
Bank’s receipt of a LC Application with respect to the requested Letter of
Credit, as well as such other instruments and agreements as Issuing Bank may
customarily require for issuance of a letter of credit of similar type and
amount. Issuing Bank shall have no obligation to issue any Letter of Credit
unless (i) Issuing Bank receives a LC Request and LC Application at least three
Business Days prior to the requested date of issuance; and (ii) each LC
Condition is satisfied. If Issuing Bank receives written notice from a Tranche A
Lender at least one Business Day before issuance of a Letter of Credit that any
LC Condition has not been satisfied, Issuing Bank shall have no obligation to
issue the requested Letter of Credit (or any other) until such LC Condition is
satisfied or until Required Lenders have waived such condition in accordance
with this Agreement. Prior to receipt of any such notice, Issuing Bank shall not
be deemed to have knowledge of any failure of LC Conditions.
          (b) Letters of Credit may be requested by a Borrower only (i) to
support obligations of such Borrower incurred in the Ordinary Course of
Business; or (ii) for other purposes as Agent and Lenders may approve from time
to time in writing. The renewal or extension of any Letter of Credit shall be
treated as the issuance of a new Letter of Credit, except that delivery of a new
LC Application shall be required at the discretion of Issuing Bank.
          (c) Borrowers assume all risks of the acts, omissions or misuses of
any Letter of Credit by the beneficiary. In connection with issuance of any
Letter of Credit, none of Agent, Issuing Bank or any Lender shall be responsible
for the existence, character, quality, quantity, condition, packing, value or
delivery of any goods purported to be represented by any Documents; any
differences or variation in the character, quality, quantity, condition,
packing, value or delivery of any goods from that expressed in any Documents;
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
Documents or of any endorsements thereon; the time, place, manner or order in
which shipment of goods is made; partial or incomplete shipment of, or failure
to ship, any goods referred to in a Letter of Credit or Documents; any deviation
from instructions, delay, default or fraud by any shipper or other Person in
connection with any goods, shipment or delivery; any breach of contract between
a shipper or vendor and a Borrower; errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail, cable, telegraph, telex,
telecopy, e-mail, telephone or otherwise; errors in interpretation of technical
terms; the misapplication by a beneficiary of any Letter of Credit or the
proceeds thereof; or any consequences arising from causes beyond the control of
Issuing Bank, Agent or any Lender, including any act or omission of a
Governmental Authority. The rights and remedies of Issuing Bank under the Loan
Documents shall be cumulative. Issuing Bank shall be fully subrogated to the
rights and remedies of each beneficiary whose claims against Borrowers are
discharged with proceeds of any Letter of Credit.
          (d) In connection with its administration of and enforcement of rights
or remedies under any Letters of Credit or LC Documents, Issuing Bank shall be
entitled to act, and shall be fully protected in acting, upon any certification,
notice or other communication in whatever form believed by Issuing Bank, in good
faith, to be genuine and correct and to have been signed, sent or made by a
proper

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Person. Issuing Bank may consult with and employ legal counsel, accountants and
other experts to advise it concerning its obligations, rights and remedies, and
shall be entitled to act upon, and shall be fully protected in any action taken
in good faith reliance upon, any advice given by such experts. Issuing Bank may
employ agents and attorneys-in-fact in connection with any matter relating to
Letters of Credit or LC Documents, and shall not be liable for the negligence or
misconduct of any such agents or attorneys-in-fact selected with reasonable
care.
          (e) Agent shall have no obligation to approve any request for a
commercial Letter of Credit for the purchase of finished goods unless each of
the following documents are required as conditions to any draw thereon, and for
such commercial Letter of Credit to constitute an Eligible Trade L/C, such
documents being in the possession of Agent (either directly or through its
agent) must be conditions to any draw thereon (except that Agent may waive any
one or more of the following conditions):
     (i) the original Eligible Trade L/C, if only one draw is permitted
thereunder or if multiple draws are permitted and the subject draw is the final
draw thereunder;
     (ii) an inspection certificate in form reasonably acceptable to Agent, in
its discretion, executed by a Borrower’s employee or agent at the point of
origin of the finished goods;
     (iii) a commercial invoice with respect to the purchase order(s) against
which such finished goods are being delivered and a packaging list with respect
to such goods;
     (iv) a non-negotiable ocean bill of lading, freight forwarders cargo
receipt, a house bill of lading or a copy of an airway bill of lading issued by
an Approved Shipper with respect to the finished goods being shipped and
providing for the delivery thereof to a Borrower; and
     (v) a certificate of origin or other documents of title with respect to
such Inventory.
          (f) The parties hereto agree that each outstanding letter of credit
described on Schedule 2.3.2 and issued by the Wachovia Bank, N.A. or the
Existing Business Lender, as the case may be shall be deemed to be a Letter of
Credit issued pursuant to this Agreement.
          (g) Each Issuing Bank shall promptly notify the Agent of the issuance
of, and provide Agent with a copy of, each Letter of Credit issued hereunder.
          2.3.2. Reimbursement; Participations.
          (a) If Issuing Bank honors any request for payment under a Letter of
Credit or, if applicable a LC Guaranty with respect to a Letter of Credit,
Borrowers shall pay to Issuing Bank, on the same day (“Reimbursement Date”), the
amount paid by Issuing Bank under such Letter of Credit or, if applicable, under
a LC Guaranty with respect to such Letter of Credit, together with interest at
the interest rate for Base Rate Tranche A Revolver Loans from the Reimbursement
Date until payment by Borrowers. The obligation of Borrowers to reimburse
Issuing Bank for any payment made under a Letter of Credit or LC Guaranty shall
be absolute, unconditional, irrevocable, and joint and several, and shall be
paid without regard to any lack of validity or enforceability of any Letter of
Credit or the existence of any claim, setoff, defense or other right that
Borrowers may have at any time against the beneficiary. Whether or not Borrower
Agent submits a Notice of Borrowing, Borrowers shall be deemed to have requested
a Borrowing of Base Rate Tranche A Revolver Loans in an amount necessary to pay
all amounts due Issuing Bank on any Reimbursement Date and each Tranche A Lender
agrees to fund its Pro Rata share of such Borrowing whether or not the Tranche A
Commitments have terminated, a Tranche A Overadvance exists or is created
thereby, or the conditions in Section 6 are satisfied.

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          (b) Upon issuance of a Letter of Credit, each Tranche A Lender shall
be deemed to have irrevocably and unconditionally purchased from Issuing Bank,
without recourse or warranty, an undivided Pro Rata interest and participation
in all LC Obligations relating to the Letter of Credit. If Issuing Bank makes
any payment under a Letter of Credit or a LC Guaranty and Borrowers do not
reimburse such payment on the Reimbursement Date, Agent shall promptly notify
Lenders and each Tranche A Lender shall promptly (within one Business Day) and
unconditionally pay to Agent, for the benefit of Issuing Bank, such Tranche A
Lender’s Pro Rata share of such payment. Upon request by a Tranche A Lender,
Issuing Bank shall furnish copies of any Letters of Credit and LC Documents in
its possession at such time.
          (c) The obligation of each Tranche A Lender to make payments to Agent
for the account of Issuing Bank in connection with Issuing Bank’s payment under
a Letter of Credit or LC Guaranty shall be absolute, unconditional and
irrevocable, not subject to any counterclaim, setoff, qualification or exception
whatsoever, and shall be made in accordance with this Agreement under all
circumstances, irrespective of any lack of validity or unenforceability of any
Loan Documents; any draft, certificate or other document presented under a
Letter of Credit having been determined to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect; or the existence of any setoff or defense that any Obligor may
have with respect to any Obligations. Issuing Bank does not assume any
responsibility for any failure or delay in performance or any breach by any
Borrower or other Person of any obligations under any LC Documents. Issuing Bank
does not make to Lenders any express or implied warranty, representation or
guaranty with respect to the Collateral, LC Documents or any Obligor. Issuing
Bank shall not be responsible to any Lender for any recitals, statements,
information, representations or warranties contained in, or for the execution,
validity, genuineness, effectiveness or enforceability of any LC Documents; the
validity, genuineness, enforceability, collectibility, value or sufficiency of
any Collateral or the perfection of any Lien therein; or the assets,
liabilities, financial condition, results of operations, business,
creditworthiness or legal status of any Obligor.
          (d) No Issuing Bank Indemnitee shall be liable to any Lender or other
Person for any action taken or omitted to be taken in connection with any LC
Documents except as a result of its actual gross negligence or willful
misconduct. Issuing Bank shall not have any liability to any Lender if Issuing
Bank refrains from any action under any Letter of Credit or LC Documents until
it receives written instructions from Required Lenders.
          2.3.3. Cash Collateral. If any LC Obligations, whether or not then due
or payable, shall for any reason be outstanding at any time (a) that an Event of
Default exists, (b) that Tranche A Excess Availability is less than zero,
(c) after the date on which the Tranche A Revolver Commitment has been
terminated, or (d) within five Business Days prior to the Termination Date, then
Borrowers shall, at Issuing Bank’s or Agent’s request, pay to Issuing Bank the
amount of all outstanding LC Obligations and Cash Collateralize all outstanding
Letters of Credit. If Borrowers fail to Cash Collateralize outstanding Letters
of Credit as required herein, Tranche A Lenders may (and shall upon direction of
Agent) advance, as Base Rate Tranche A Revolver Loans, the amount of the Cash
Collateral required (whether or not the Commitments have terminated, any Tranche
A Overadvance or Tranche A-1 Overadvance exists, or the conditions in Section 6
are satisfied).
SECTION 3. INTEREST, FEES AND CHARGES
     3.1. Interest.
          3.1.1. Rates and Payment of Interest.
          (a) The Obligations shall bear interest (i) if Base Rate Tranche A
Revolver Loan, at the Base Rate in effect from time to time, plus the Applicable
Margin for Base Rate Tranche A Revolver

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Loans; (ii) if a Base Rate Tranche A-1 Revolver Loan, at the Base Rate in effect
from time to time, plus the Applicable Margin for Base Rate Tranche A-1 Revolver
Loans; (iii) if a LIBOR Tranche A Revolver Loan, at Adjusted LIBOR for the
applicable Interest Period, plus the Applicable Margin for LIBOR Tranche A
Revolver Loans; (iv) if a LIBOR Tranche A-1 Revolver Loan, at Adjusted LIBOR for
the applicable Interest Period, plus the Applicable Margin for LIBOR Tranche A-1
Revolver Loans; and (v) if any other Obligation (including, to the extent
permitted by law, interest not paid when due), at the Base Rate in effect from
time to time, plus the Applicable Margin for Base Rate Tranche A-1 Revolver
Loans. Interest shall accrue from the date the Loan is advanced or the
Obligation is incurred or payable, until paid by Borrowers. If a Loan is repaid
on the same day made, one day’s interest shall accrue.
          (b) During any Event of Default Obligations shall bear interest at the
Default Rate. Each Borrower acknowledges that the cost, expense and risk to
Agent and each Lender due to an Event of Default are difficult to ascertain and
that the Default Rate is a fair and reasonable estimate to compensate Agent and
Lenders for such added cost, expense and risk.
          (c) Interest accrued on the Loans shall be due and payable in arrears,
(i) with respect to each Base Rate Loan, on the first day of each month,
(ii) with respect to each LIBOR Loan, on the last day of its Interest Period;
provided that if any Interest Period for a LIBOR Loan exceeds three months,
interest accrued on such LIBOR Loan shall also be due and payable on the
respective dates that fall every three months after the beginning of such
Interest Period, (iii) on any date of prepayment, with respect to the principal
amount of Loans being prepaid; and (iv) with respect to any termination or
reduction of the Tranche A Revolver Commitments or the Tranche A-1 Revolver
Commitments, on the date of such termination or reduction with respect to the
principal amount of Loans where the commitment to make such Loans is being
terminated. Interest accrued on any other Obligations shall be due and payable
as provided in the Loan Documents and, if no payment date is specified, shall be
due and payable on demand. Notwithstanding the foregoing, interest accrued at
the Default Rate shall be due and payable on demand.
          3.1.2. Application of Adjusted LIBOR to Outstanding Loans.
          (a) Borrowers may on any Business Day, subject to delivery of a Notice
of Conversion/Continuation, elect to convert any portion of the Base Rate
Tranche A Revolver Loans to, or to continue any LIBOR Tranche A Revolver Loan at
the end of its Interest Period as, a LIBOR Tranche A Revolver Loan. Borrowers
may on any Business Day, subject to delivery of a Notice of
Conversion/Continuation, elect to convert any portion of the Base Rate Tranche
A-1 Revolver Loans to, or to continue any LIBOR Tranche A-1 Revolver Loan at the
end of its Interest Period as, a LIBOR Tranche A-1 Revolver Loan. During any
Default or Event of Default, Agent may (and shall at the direction of Required
Lenders) declare that no Loan may be made, converted or continued as a Tranche A
LIBOR Revolver Loan. During any Default or Event of Default, Agent may (and
shall at the direction of Required Lenders) declare that no Loan may be made,
converted or continued as a Tranche A-1 LIBOR Revolver Loan.
          (b) Whenever Borrowers desire to convert or continue Loans as LIBOR
Loans, Borrower Agent shall give Agent a Notice of Conversion/Continuation, no
later than 11:00 a.m. at least three Business Days before the requested
conversion or continuation date. Promptly after receiving any such notice, Agent
shall notify each Tranche A Lender or Tranche A-1 Lender, as applicable,
thereof. Each Notice of Conversion/Continuation shall be irrevocable, and shall
specify the aggregate principal amount of Loans to be converted or continued,
the conversion or continuation date (which shall be a Business Day), and the
duration of the Interest Period (which shall be deemed to be one month if not
specified). If, upon the expiration of any Interest Period in respect of any
LIBOR Tranche A Revolver Loans, Borrowers shall have failed to deliver a Notice
of Conversion/Continuation, they shall be deemed to have elected to convert such
Loans into Base Rate Tranche A Revolver Loans. If, upon the expiration of any
Interest Period in respect of any LIBOR Tranche A-1 Revolver Loans, Borrowers
shall have failed

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to deliver a Notice of Conversion/Continuation, they shall be deemed to have
elected to convert such Loans into Base Rate Tranche A-1 Revolver Loans.
          3.1.3. Interest Periods. In connection with the making, conversion or
continuation of any LIBOR Loans, Borrowers shall select an interest period
(“Interest Period”) to apply, which interest period shall be one, two, three or
six months; provided, however, that:
          (a) the Interest Period shall commence on the date the Loan is made or
continued as, or converted into, a LIBOR Loan, and shall expire on the
numerically corresponding day in the calendar month at its end;
          (b) if any Interest Period commences on a day for which there is no
corresponding day in the calendar month at its end or if such corresponding day
falls after the last Business Day of such month, then the Interest Period shall
expire on the last Business Day of such month; and if any Interest Period would
expire on a day that is not a Business Day, the period shall expire on the next
Business Day; and
          (c) no Interest Period shall extend beyond the Termination Date.
          3.1.4. Interest Rate Not Ascertainable. If Agent shall determine that
on any date for determining Adjusted LIBOR, due to any circumstance affecting
the London interbank market, adequate and fair means do not exist for
ascertaining such rate on the basis provided herein, then Agent shall
immediately notify Borrowers of such determination. Until Agent notifies
Borrowers that such circumstance no longer exists, the obligation of Lenders to
make LIBOR Loans shall be suspended, and no further Loans may be converted into
or continued as LIBOR Loans.
     3.2. Fees.
          3.2.1. Unused Line Fee. Borrowers shall pay to Agent (i) for the Pro
Rata benefit of the Tranche A Lenders, a fee equal to Applicable Margin then in
effect for the Unused Line Fee per annum times the amount by which the Tranche A
Revolver Commitments exceed the average daily balance of Tranche A Revolver
Loans and stated amount of Letters of Credit during any month and (ii) for the
Pro Rata benefit of the Tranche A-1 Lenders, a fee equal to Applicable Margin
then in effect for the Unused Line Fee per annum times the amount by which the
Tranche A-1 Revolver Commitments exceed the average daily balance of Tranche A-1
Revolver Loans during any month. The fees payable under this Section 3.2.1 shall
be payable in arrears, on the first day of each month and on the Commitment
Termination Date.
          3.2.2. LC Facility Fees. Borrowers shall pay (a) to Agent, for the Pro
Rata benefit of the Tranche A Lenders, a fee equal to the Applicable Margin in
effect for LIBOR Tranche A Revolver Loans times the average daily stated amount
of Letters of Credit, which fee shall be payable monthly in arrears, on the
first day of each month; (b) to each Issuing Bank, a fronting fee, for the
account of such Issuing Bank, with respect to each Letter of Credit issued by
such Issuing Bank in the amount agreed to between such Issuing Bank and the
Borrower Agent, which fee shall be payable upon issuance of the Letter of Credit
and on each anniversary date of such issuance, and shall be payable on any
increase in stated amount made between any such dates; and (c) to Issuing Bank,
for its own account, all customary charges associated with the issuance,
amending, negotiating, payment, processing, transfer and administration of
Letters of Credit, which charges shall be paid as and when incurred. During an
Event of Default, the fee payable under clause (a) shall be increased by 2% per
annum.
          3.2.3. Agent Fees. In consideration of Agent’s syndication of the
Commitments and service as Agent hereunder, Parent and Borrowers shall pay to
Agent, for its own account, the fees described in the Fee Letter.

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     3.3. Computation of Interest, Fees, Yield Protection. All computations of
interest for Base Rate Loans shall be made on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed. All other computation of
interest, as well as fees and other charges calculated on a per annum basis,
shall be computed for the actual days elapsed, based on a year of 360 days. Each
determination by Agent of any interest, fees or interest rate hereunder shall be
final, conclusive and binding for all purposes, absent error. All fees shall be
fully earned when due and shall not be subject to rebate or refund, nor subject
to proration except as specifically provided herein. All fees payable under
Section 3.2 are compensation for services and are not, and shall not be deemed
to be, interest or any other charge for the use, forbearance or detention of
money. A certificate as to amounts payable by Borrowers under Section 3.4, 3.6,
3.7, 3.9 or 5.8, submitted to Borrowers by Agent or the affected Lender, as
applicable, shall be final, conclusive and binding for all purposes, absent
error.
     3.4. Reimbursement Obligations. Borrowers shall reimburse Agent for all
Extraordinary Expenses. Borrowers shall also reimburse Agent for all legal,
accounting, appraisal, consulting, and other fees, costs and expenses incurred
by it in connection with (a) negotiation and preparation of any Loan Documents,
including any amendment or other modification thereof; (b) administration of and
actions relating to any Collateral, Loan Documents and transactions contemplated
thereby, including any actions taken to perfect or maintain priority of Agent’s
Liens on any Collateral, to maintain any insurance required hereunder or to
verify Collateral; and (c) subject to the limits of Section 10.1.1(b), each
inspection, audit or appraisal with respect to any Obligor or Collateral,
whether prepared by Agent’s personnel or a third party. Borrowers shall also
reimburse Lenders for all costs and expenses incurred by them during an Event of
Default in connection with the enforcement or preservation of any rights under
this Agreement or any of the other Loan Documents. All amounts reimbursable by
Borrowers under this Section 3.4 shall constitute Obligations secured by the
Collateral and shall be payable within ten Business Days after presentation by
Agent to Borrowers of a reasonably detailed itemization of such amounts.
     3.5. Illegality. Notwithstanding anything to the contrary herein, if
(a) any change in any law or interpretation thereof, made after the date hereof,
by any Governmental Authority makes it unlawful for a Lender to make or maintain
a LIBOR Loan or to maintain any Commitment with respect to LIBOR Loans or (b) a
Lender determines that the making or continuance of a LIBOR Loan has become
impracticable as a result of a circumstance that adversely affects the London
interbank market or the position of such Lender in such market, then such Lender
shall give notice thereof to Agent and Borrowers and may (i) declare that LIBOR
Loans will not thereafter be made by such Lender, whereupon (x) where such
Lender is a Tranche A Lender any request for a LIBOR Tranche A Revolver Loan
from such Lender shall be deemed to be a request for a Base Rate Tranche A
Revolver Loan and (y) where such Lender is a Tranche A-1 Lender any request for
a LIBOR Tranche A-1 Revolver Loan from such Lender shall be deemed to be a
request for a Base Rate Tranche A-1 Revolver Loan unless such Lender’s
declaration has been withdrawn (and it shall be withdrawn promptly upon
cessation of the circumstances described in clause (a) or (b) above); and/or
(ii) (x) where such Lender is a Tranche A Lender, require that all outstanding
LIBOR Tranche A Revolver Loans made by such Lender be converted to Base Rate
Tranche A Revolver Loans immediately, in which event all outstanding LIBOR
Tranche A Revolver Loans of such Lender shall be immediately converted to Base
Rate Tranche A Revolver Loans and (y) where such Lender is a Tranche A-1 Lender,
require that all outstanding LIBOR Tranche A-1 Revolver Loans made by such
Lender be converted to Base Rate Tranche A-1 Revolver Loans immediately, in
which event all outstanding LIBOR Tranche A-1 Revolver Loans of such Lender
shall be immediately converted to Base Rate Tranche A-1 Revolver Loans.
     3.6. Increased Costs. If, by reason of (a) the introduction of or any
change (including any change by way of imposition or increase of Statutory
Reserves or other reserve requirements) in any law or interpretation thereof, in
each case made after the date hereof, or (b) the compliance with any guideline
or request from any Governmental Authority or other Person exercising control
over banks or financial institutions generally (whether or not having the force
of law), promulgated after the date hereof:

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          (i) a Lender shall be subject to any Tax with respect to any LIBOR
Loan or Letter of Credit or its obligation to make LIBOR Loans, issue Letters of
Credit or participate in LC Obligations, or a change shall result in the basis
of taxation of any payment to a Lender with respect to its LIBOR Loans or its
obligation to make LIBOR Loans, issue Letters of Credit or participate in LC
Obligations (except for Excluded Taxes); or
          (ii) any reserve (including any imposed by the Board of Governors),
special deposits or similar requirement against assets of, deposits with or for
the account of, or credit extended by, a Lender shall be imposed or deemed
applicable, or any other condition affecting a Lender’s LIBOR Loans or
obligation to make LIBOR Loans, issue Letters of Credit or participate in LC
Obligations shall be imposed on such Lender or the London interbank market;
and as a result there shall be a material increase in the cost to such Lender of
agreeing to make or making, funding or maintaining LIBOR Loans, Letters of
Credit or participations in LC Obligations (except to the extent already
included in determination of Adjusted LIBOR), or there shall be a reduction in
the amount receivable by such Lender, then the Lender shall promptly notify
Borrowers and Agent of such event, and Borrowers shall, within five days
following demand therefor, pay such Lender the amount of such increased costs or
reduced amounts; provided, however, that such Lender shall repay to Borrowers
any amounts paid by Borrowers to such Lender under this Section 3.6 at any time
such Lender shall determine that such change or compliance was not applicable
to, or required by, such Lender.
     If a Lender determines that, because of circumstances described above or
any other circumstances arising hereafter affecting such Lender, the London
interbank market or the Lender’s position in such market, Adjusted LIBOR or its
Applicable Margin, as applicable, will not adequately and fairly reflect the
cost to such Lender of funding LIBOR Loans, issuing Letters of Credit or
participating in LC Obligations, then (A) the Lender shall promptly notify
Borrowers and Agent of such event; (B) such Lender’s obligation to make LIBOR
Loans, issue Letters of Credit or participate in LC Obligations shall be
immediately suspended, until each condition giving rise to such suspension no
longer exists; and (C) (x) where such Lender is a Tranche A Lender such Lender
shall make a Base Rate Tranche A Revolver Loan as part of any requested
Borrowing of LIBOR Tranche A Revolver Loans, which Base Rate Tranche A Revolver
Loan shall, for all purposes, be considered part of such Borrowing and (y) where
such Lender is a Tranche A-1 Lender such Lender shall make a Base Rate Tranche
A-1 Revolver Loan as part of any requested Borrowing of LIBOR Tranche A-1
Revolver Loans, which Base Rate Tranche A-1 Revolver Loan shall, for all
purposes, be considered part of such Borrowing.
     Within fifteen (15) days after receipt by Borrower Agent of written notice
and/or demand from any Lender (an “Affected Lender”) (i) stating that, pursuant
to Section 3.5, that such Lender can no longer make LIBOR Loans or
(ii) demanding payment of additional amounts or increased costs pursuant to
Section 3.6, Borrower Agent may, at its option, notify Agent and such Affected
Lender of its intention to replace the Affected Lender. So long as no Default or
Event of Default shall have occurred and be continuing, Borrower Agent, with the
consent of Agent, may obtain, at Borrowers’ expense, a replacement Lender
(“Replacement Lender”) for the Affected Lender, which Replacement Lender must be
(i) an Eligible Assignee and (ii) satisfactory to Agent. If Borrowers obtain a
Replacement Lender within ninety (90) days following notice of their intention
to do so, the Affected Lender must sell and assign its Loans and Commitments to
such Replacement Lender for an amount equal to the principal balance of all
Loans held by the Affected Lender and all accrued interest and fees with respect
thereto through the date of such sale; provided that Borrowers shall have
reimbursed such Affected Lender for the additional amounts or increased costs
that it is entitled to receive under this Agreement through the date of such
sale and assignment. Notwithstanding the foregoing, Borrowers shall not have the
right to obtain a Replacement Lender if the Affected Lender (i) in the case of a
notice under Section 3.5, rescinds its notice that it can no longer fund LIBOR
Loans or (ii) in the case of a demand under Section 3.6, rescinds its demand for
increased costs or additional amounts, within fifteen (15) days following its
receipt of Borrower Agent’s notice of intention to replace such Affected Lender.
Furthermore, if

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Borrower Agent gives a notice of intention to replace and do not so replace such
Affected Lender within ninety (90) days thereafter, Borrowers’ rights under this
paragraph as to such noticed replacement shall terminate.
     3.7. Capital Adequacy. If a Lender determines that any introduction of or
any change in a Capital Adequacy Regulation, any change in the interpretation or
administration of a Capital Adequacy Regulation by a Governmental Authority
charged with interpretation or administration thereof, or any compliance by such
Lender or any Person controlling such Lender with a Capital Adequacy Regulation,
in each case made after the date hereof, increases the amount of capital
required or expected to be maintained by such Lender or Person (taking into
consideration its capital adequacy policies and desired return on capital) as a
consequence of such Lender’s Commitments, Loans, participations in LC
Obligations or other obligations under the Loan Documents, then Borrowers shall,
within five days following demand therefor, pay such Lender an amount sufficient
to compensate for such increase. A Lender’s demand for payment shall set forth
the nature of the occurrence giving rise to such compensation and a calculation
of the amount to be paid. In determining such amount, the Lender may use any
reasonable averaging and attribution method.
     3.8. Mitigation. Each Lender agrees that, upon becoming aware that it is
subject to Section 3.5, 3.6, 3.7 or 5.8, it will take reasonable measures to
reduce Borrowers’ obligations under such Sections, including funding or
maintaining its Commitments or Loans through another office, as long as use of
such measures would not adversely affect the Lender’s Commitments, Loans,
business or interests, and would not be inconsistent with any applicable legal
or regulatory restriction.
     3.9. Funding Losses. If for any reason (other than default by a Lender)
(a) any Borrowing of, or conversion to or continuation of, a LIBOR Loan does not
occur on the date specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation (whether or not withdrawn), (b) any repayment or
conversion of a LIBOR Loan occurs on a day other than the end of its Interest
Period, or (c) Borrowers fail to repay a LIBOR Loan when required hereunder,
then Borrowers shall pay to Agent its customary administrative charge and to
each Lender all losses and expenses that it sustains as a consequence thereof,
including any loss or expense arising from liquidation or redeployment of funds
or from fees payable to terminate deposits of matching funds. Lenders shall not
be required to purchase Dollar deposits in the London interbank market or any
other offshore Dollar market to fund any LIBOR Loan, but the provisions hereof
shall be deemed to apply as if each Lender had purchased such deposits to fund
its LIBOR Loans.
     3.10. Maximum Interest. In no event shall interest, charges or other
amounts that are contracted for, charged or received by Agent and Lenders
pursuant to any Loan Documents and that are deemed interest under Applicable Law
(“interest”) exceed the highest rate permissible under Applicable Law (“maximum
rate”). If, in any month, any interest rate, absent the foregoing limitation,
would have exceeded the maximum rate, then the interest rate for that month
shall be the maximum rate and, if in a future month, that interest rate would
otherwise be less than the maximum rate, then the rate shall remain at the
maximum rate until the amount of interest actually paid equals the amount of
interest which would have accrued if it had not been limited by the maximum
rate. If, upon payment in full, in cash, of the Obligations, the total amount of
interest actually paid under the Loan Documents is less than the total amount of
interest that would, but for this Section 3.10, have accrued under the Loan
Documents, then Borrowers shall, to the extent permitted by Applicable Law, pay
to Agent, for the account of Lenders, (a) the lesser of (i) the amount of
interest that would have been charged if the maximum rate had been in effect at
all times, or (ii) the amount of interest that would have accrued had the
interest rate otherwise set forth in the Loan Documents been in effect, minus
(b) the amount of interest actually paid under the Loan Documents. If a court of
competent jurisdiction determines that Agent or any Lender has received interest
in excess of the maximum amount allowed under Applicable Law, such excess shall
be deemed received on account of, and shall automatically be applied to reduce,
Obligations other than interest (regardless of any erroneous application thereof
by Agent or any Lender), and upon payment in full, in

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cash of the Obligations, any balance shall be refunded to Borrowers. In
determining whether any excess interest has been charged or received by Agent or
any Lender, all interest at any time charged or received from Borrowers in
connection with the Loan Documents shall, to the extent permitted by Applicable
Law, be amortized, prorated, allocated and spread in equal parts throughout the
full term of the Obligations.
SECTION 4. LOAN ADMINISTRATION
     4.1. Manner of Borrowing and Funding Loans.
          4.1.1. Notice of Borrowing.
          (a) Whenever Borrowers desire funding of a Borrowing of Loans,
Borrower Agent shall give Agent a Notice of Borrowing. Such notice must be
received by Agent no later than 12:00 noon (i) on the Business Day of the
requested funding date, in the case of Base Rate Loans, and (ii) at least three
Business Days prior to the requested funding date, in the case of LIBOR Loans.
Notices received after 12:00 noon shall be deemed received on the next Business
Day. Each Notice of Borrowing shall be irrevocable and shall specify (A) the
principal amount of the Borrowing, (B) the requested funding date (which must be
a Business Day), (C) whether the Borrowing is to be made as Base Rate Tranche A
Revolver Loans, Base Rate Tranche A-1 Revolver Loans, LIBOR Tranche A Revolver
Loans or LIBOR Tranche A-1 Revolver Loans, and (D) in the case of LIBOR Loans,
the duration of the applicable Interest Period (which shall be deemed to be one
month if not specified).
          (b) Unless payment is otherwise timely made by Borrowers, the becoming
due of any Obligations (whether principal, interest, fees or other charges,
including Extraordinary Expenses, LC Obligations, Cash Collateral and Bank
Product Debt) shall be deemed to be a request for Base Rate Loans on the due
date, in the amount of such Obligations. Such Base Rate Loans shall be Base Rate
Tranche A-1 Revolver Loans so long as there is any Tranche A-1 Excess
Availability and thereafter shall be Base Rate Tranche A Revolver Loans.
          (c) If Borrowers establish a controlled disbursement account with
Agent or any Affiliate of Agent, then the presentation for payment of any check
or other item of payment drawn on such account at a time when there are
insufficient funds to cover it shall be deemed to be, on the date of such
presentation, in the amount of the check and items presented for payment, a
request for Base Rate Tranche A-1 Revolver Loans to the extent that there exists
sufficient Tranche A-1 Excess Availability therefore and thereafter shall be
deemed to be a request for Base Rate Tranche A Revolver Loans. The proceeds of
such Loans may be disbursed directly to the controlled disbursement account or
other appropriate account.
          4.1.2. Fundings by Lenders. Each Tranche A Lender shall timely honor
its Tranche A Revolver Commitment by funding its Pro Rata share of each
Borrowing of Tranche A Revolver Loans that is properly requested hereunder and
each Tranche A-1 Lender shall timely honor its Tranche A-1 Revolver Commitment
by funding its Pro Rata share of each Borrowing of Tranche A-1 Revolver Loans
that is properly requested hereunder. Except for Borrowings to be made as
Swingline Loans, Agent shall endeavor to notify Lenders of each Notice of
Borrowing (or deemed request for a Borrowing) by 12:00 noon on the proposed
funding date for Base Rate Loans or by 3:00 p.m. at least three Business Days
before any proposed funding of LIBOR Loans. Each Lender shall fund to Agent such
Lender’s Pro Rata share of the Borrowing to the account specified by Agent in
immediately available funds not later than 2:00 p.m. on the requested funding
date, unless Agent’s notice is received after the times provided above, in which
event Lender shall fund its Pro Rata share by 11:00 a.m. on the next Business
Day. Subject to its receipt of such amounts from Lenders, Agent shall disburse
the proceeds of the Loans as directed by Borrower Agent. Unless Agent shall have
received (in sufficient time to act) written notice from a Lender that it does
not intend to fund its Pro Rata share of a Borrowing, Agent may assume that such
Lender has deposited or promptly will deposit its share with Agent, and Agent
may disburse a corresponding amount

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to Borrowers. If a Lender’s share of any Borrowing is not in fact received by
Agent, then Borrowers agree to repay to Agent on demand the amount of such
share, together with interest thereon from the date disbursed until repaid, at
the rate applicable to such Borrowing.
          4.1.3. Swingline Loans; Settlement.
          (a) Agent shall (unless Agent has knowledge that the conditions set
forth in Section 6.2 have not been met) advance Swingline Loans to Borrowers out
of Agent’s own funds, up to an aggregate outstanding amount of $75,000,000,
unless the funding is specifically required to be made by all Lenders hereunder.
Each Swingline Loan shall constitute a Base Rate Tranche A Revolver Loan for all
purposes, except that payments thereon shall be made to Agent for its own
account. The obligation of Borrowers to repay Swingline Loans shall be evidenced
by the records of Agent and need not be evidenced by any promissory note.
          (b) To facilitate administration of the Loans, Tranche A Lenders and
Agent agree (which agreement is solely among them, and not for the benefit of or
enforceable by any Borrower) that settlement among them with respect to
Swingline Loans and other Tranche A Revolver Loans may take place periodically
on a date determined from time to time by Agent, which shall occur at least once
every week. On each settlement date, settlement shall be made with each Lender
in accordance with the Settlement Report delivered by Agent to Tranche A
Lenders. Between settlement dates, Agent may in its discretion apply payments on
Loans to Swingline Loans, regardless of any designation by Borrower or any
provision herein to the contrary. Each Tranche A Lender’s obligation to make
settlements with Agent is absolute and unconditional, without offset,
counterclaim or other defense, and whether or not the Tranche A Commitments have
terminated, a Tranche A Overadvance exists, or the conditions in Section 6 are
satisfied. If, due to an Insolvency Proceeding with respect to a Borrower or
otherwise, any Swingline Loan may not be settled among Tranche A Lenders
hereunder, then each Tranche A Lender shall be deemed to have purchased from
Agent a Pro Rata participation in each unpaid Swingline Loan and shall transfer
the amount of such participation to Agent, in immediately available funds,
within one Business Day after Agent’s request therefor.
          4.1.4. Notices. Each Borrower authorizes Agent and Lenders to extend,
convert or continue Loans, effect selections of interest rates, and transfer
funds to or on behalf of Borrowers based on telephonic or other e-mailed,
electronic or internet-based instructions in form, in each case, acceptable to
the Agent and the Borrowers. Borrowers shall confirm each such request by prompt
delivery to Agent of a Notice of Borrowing or Notice of Conversion/Continuation,
if applicable, but if it differs in any material respect from the action taken
by Agent or Lenders, the records of Agent and Lenders shall govern. Neither
Agent nor any Lender shall have any liability for any loss suffered by a
Borrower as a result of Agent or any Lender acting upon its understanding of
telephonic or other e-mailed, electronic or internet-based instructions in form,
in each case, reasonably acceptable to the Agent and the Borrowers, from a
person believed in good faith by Agent or any Lender to be a person authorized
to give such instructions on a Borrower’s behalf.
     4.2. Defaulting Lender. If a Lender fails to make any payment to Agent that
is required hereunder, Agent may (but shall not be required to), in its
discretion, retain payments that would otherwise be made to such defaulting
Lender hereunder, apply the payments to such Lender’s defaulted obligations or
readvance the funds to Borrowers in accordance with this Agreement. The failure
of any Lender to fund a Loan or to make a payment in respect of a LC Obligation
shall not relieve any other Lender of its obligations hereunder, and no Lender
shall be responsible for default by another Lender. Lenders and Agent agree
(which agreement is solely among them, and not for the benefit of or enforceable
by any Borrower) that, solely for purposes of determining a defaulting Lender’s
right to vote on matters relating to the Loan Documents and to share in
payments, fees and Collateral proceeds thereunder, a defaulting Lender shall not
be deemed to be a “Lender” until all its defaulted obligations have been cured.

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     4.3. Number and Amount of LIBOR Loans; Determination of Rate. For ease of
administration, all LIBOR Tranche A Revolver Loans having the same length and
beginning date of their Interest Periods shall be aggregated together, and such
Loans shall be allocated among Tranche A Lenders on a Pro Rata basis and all
LIBOR Tranche A-1 Revolver Loans having the same length and beginning date of
their Interest Periods shall be aggregated together, and such Loans shall be
allocated among Tranche A-1 Lenders on a Pro Rata basis. No more than ten LIBOR
Tranche A Revolver Loans and LIBOR Tranche A-1 Revolver Loans, in the aggregate,
may be outstanding at any time, and each aggregate LIBOR Loan when made,
continued or converted shall be in a minimum amount of $10,000,000, or an
increment of $1,000,000 in excess thereof. Upon determining Adjusted LIBOR for
any Interest Period requested by Borrowers, Agent shall promptly notify
Borrowers thereof by telephone or electronically and, if requested by Borrowers,
shall confirm any telephonic notice in writing.
     4.4. Borrower Agent. Each Borrower hereby designates Bon-Ton (“Borrower
Agent”) as its representative and agent for all purposes under the Loan
Documents, including requests for Loans and Letters of Credit, designation of
interest rates, delivery or receipt of communications with Agent, Issuing Bank
or any Lender, preparation and delivery of Borrowing Base Certificates and
financial reports, receipt and payment of Obligations, requests for waivers,
amendments or other accommodations, actions under the Loan Documents (including
in respect of compliance with covenants), and all other dealings with Agent,
Issuing Bank or any Lender. Borrower Agent hereby accepts such appointment.
Agent and Lenders shall be entitled to rely upon, and shall be fully protected
in relying upon, any notice or communication (including any notice of borrowing)
delivered by Borrower Agent on behalf of any Borrower. Agent and Lenders may
give any notice or communication with a Borrower hereunder to Borrower Agent on
behalf of such Borrower. Agent shall have the right, in its discretion, to deal
exclusively with Borrower Agent for any or all purposes under the Loan
Documents. Each Borrower agrees that any notice, election, communication,
representation, agreement or undertaking made on its behalf by Borrower Agent
shall be binding upon and enforceable against it.
     4.5. One Obligation. The Loans, LC Obligations and other Obligations shall
constitute one general obligation of Borrowers and (unless otherwise expressly
provided in any Loan Document) shall be secured by Agent’s Lien upon all
Collateral; provided, however, that Agent and each Lender shall be deemed to be
a creditor of, and the holder of a separate claim against, each Borrower to the
extent of any Obligations jointly or severally owed by such Borrower.
     4.6. Effect of Termination. On the effective date of any termination of the
Commitments, all Obligations shall be immediately due and payable, and any
Lender may terminate its and its Affiliates’ Bank Products (including, with the
consent of Agent, any Cash Management Services). All undertakings of Borrowers
contained in the Loan Documents shall survive any termination, and Agent shall
retain its Liens in the Collateral and all of its rights and remedies under the
Loan Documents until the occurrence of payment in full, in cash of all accrued
and unpaid principal, interest and fees, and any other Obligations then due and
owing, the payment of any appropriate collateral deposits in connection with
other Obligations and the occurrence of the Commitment Termination Date.
Notwithstanding such payment in full, in cash, of all accrued and unpaid
principal, interest and fees, and any other Obligations then due and owing, the
payment of any appropriate collateral deposits in connection with other
Obligations and the occurrence of the Commitment Termination Date, Agent shall
not be required to terminate its Liens in any Collateral unless, with respect to
any damages Agent may incur as a result of the dishonor or return of Payment
Items applied to Obligations, Agent receives (a) a written agreement, executed
by Borrowers and any Person whose advances are used in whole or in part to
satisfy the Obligations, indemnifying Agent and Lenders from any such damages;
or (b) such Cash Collateral as Agent, in its discretion, deems necessary to
protect against any such damages. The provisions of Sections 2.3, 3.4, 3.6, 3.7,
3.9, 5.4, 5.8, 12, and 14.2, and the obligation of each Obligor and Lender with
respect to each indemnity given by it in any Loan Document, shall survive Full
Payment of the Obligations and any release relating to this credit facility.

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SECTION 5. PAYMENTS
     5.1. General Payment Provisions. All payments of Obligations shall be made
in Dollars, without offset, counterclaim or defense of any kind, free of (and
without deduction for) any Taxes, and in immediately available funds, not later
than 2:00 p.m. on the due date. Any payment after such time shall be deemed made
on the next Business Day. Borrowers may, at the time of payment, specify to
Agent the Obligations to which such payment is to be applied, but Agent shall in
all events retain the right to apply such payment in such manner as Agent,
subject to the provisions hereof, may determine to be appropriate. If any
payment under the Loan Documents shall be stated to be due on a day other than a
Business Day, the due date shall be extended to the next Business Day and such
extension of time shall be included in any computation of interest and fees. Any
payment of a LIBOR Loan prior to the end of its Interest Period shall be
accompanied by all amounts due under Section 3.9. Any prepayment of the Tranche
A Revolver Loan shall be applied first to Base Rate Tranche A Revolver Loans and
then to LIBOR Tranche A Revolver Loans. Any prepayment of the Tranche A-1
Revolver Loan shall be applied first to Base Rate Tranche A-1 Revolver Loans and
then to LIBOR Tranche A-1 Revolver Loans.
     5.2. Repayment of Loans. The Loans shall be due and payable in full on the
Termination Date, unless payment is sooner required hereunder. The Loans may be
prepaid in accordance with Section 5.1 and Section 5.5. If (x) on or prior to
the occurrence of any Trigger Event, any Asset Disposition (other than any Asset
Disposition permitted pursuant to Section 10.2.6) is made or (y) after the
occurrence of any Trigger Event, any Asset Disposition (other than any Asset
Disposition by the SPE) is made, then the Net Proceeds of such Asset Disposition
shall be transferred to the main Dominion Account and shall be applied by Agent
to the Obligations in accordance with Section 5.5.
     5.3. Payment of Other Obligations. Obligations other than Loans, including
LC Obligations and Extraordinary Expenses, shall be paid by Borrowers as
provided in the Loan Documents or, if no payment date is specified, on demand.
     5.4. Marshaling; Payments Set Aside. None of Agent or Lenders shall be
under any obligation to marshal any assets in favor of any Obligor or against
any Obligations. If any Obligor makes a payment to Agent or Lenders, or if Agent
or any Lender receives payment from the proceeds of Collateral, exercise of
setoff or otherwise, and such payment is subsequently invalidated or required to
be repaid to a trustee, receiver or any other Person, then the Obligations
originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been received and any enforcement or setoff had not occurred.
     5.5. Allocation of Payments.
          5.5.1. Pre-Default Allocation of Payments. Notwithstanding anything
herein to the contrary, at all times when no Event of Default has occurred and
is continuing, all payments, whether arising from payments by Obligors,
realization on Collateral, setoff or otherwise, shall be allocated as follows:
          (a) first, to all costs and expenses, including Extraordinary
Expenses, owing to Agent;
          (b) second, to all amounts owing to Agent on Swingline Loans or
Protective Advances;
          (c) third, to all amounts owing to Issuing Bank on LC Obligations;
          (d) fourth, to all Obligations constituting fees owing to the Tranche
A Lenders in their capacity as Tranche A Lenders (excluding amounts relating to
Bank Products);

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          (e) fifth, to all Obligations constituting interest on Tranche A
Revolver Loans (excluding amounts relating to Bank Products);
          (f) sixth, to all other Obligations owing to the Tranche A Lenders in
their capacity as Tranche A Lenders, other than Bank Product Debt;
          (g) seventh, to all Obligations constituting fees owing to the Tranche
A-1 Lenders in their capacity as Tranche A-1 Lenders (excluding amounts relating
to Bank Products);
          (h) eighth, to all Obligations constituting interest on Tranche A-1
Revolver Loans (excluding amounts relating to Bank Products);
          (i) ninth, to all other Obligations owing to the Tranche A-1 Lenders
in their capacity as Tranche A-1 Lenders, other than Bank Product Debt;
          (j) tenth, to Bank Product Debt owing to the Lenders and their
Affiliates for which a Bank Product Reserve has been established; and
          (k) eleventh, to Bank Product Debt owing to the Lenders and their
Affiliates for which a Bank Product Reserve has not been established.
Amounts shall be applied to each category of Obligations set forth above until
Full Payment thereof and then to the next category. If amounts are insufficient
to satisfy a category, they shall be applied on a pro rata basis among the
Obligations in the category. Amounts distributed with respect to any Bank
Product Debt or LC Obligations shall be the lesser of the applicable LC
Obligations or Bank Product Amount last reported to Agent or the actual LC
Obligations or Bank Product Debt as calculated by the methodology reported to
Agent for determining the amount due. Agent shall have no obligation to
calculate the amount to be distributed with respect to any Bank Product Debt,
but may rely upon written notice of the amount (setting forth a reasonably
detailed calculation) from the Secured Party. In the absence of such notice,
Agent may assume the amount to be distributed is the Bank Product Amount last
reported to it. The allocations set forth in this Section 5.5.1 are solely to
determine the rights and priorities of Agent and Lenders as among themselves,
and may be changed by agreement among them without the consent of any Obligor.
          5.5.2. Post-Default Allocation of Payments. Notwithstanding anything
herein to the contrary, during an Event of Default, monies to be applied to the
Obligations, whether arising from payments by Obligors, realization on
Collateral, setoff or otherwise, shall be allocated as follows:
          (a) first, to all costs and expenses, including Extraordinary
Expenses, owing to Agent;
          (b) second, to all amounts owing to Agent on Swingline Loans or
Protective Advances;
          (c) third, to all amounts owing to Issuing Bank on LC Obligations;
          (d) fourth, to all Obligations constituting fees owing to the Tranche
A Lenders in their capacity as Tranche A Lenders (excluding amounts relating to
Bank Products);
          (e) fifth, to all Obligations constituting interest on Tranche A
Revolver Loans (excluding amounts relating to Bank Products);
          (f) sixth, to provide Cash Collateral for outstanding Letters of
Credit;

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          (g) seventh, to all other Obligations owing to the Tranche A Lenders
in their capacity as Tranche A Lenders, other than Bank Product Debt;
          (h) eighth, to all Obligations constituting fees owing to the Tranche
A-1 Lenders in their capacity as Tranche A-1 Lenders (excluding amounts relating
to Bank Products);
          (i) ninth, to all Obligations constituting interest on Tranche A-1
Revolver Loans (excluding amounts relating to Bank Products);
          (j) tenth, to all other Obligations owing to the Tranche A-1 Lenders
in their capacity as Tranche A-1 Lenders, other than Bank Product Debt;
          (k) eleventh, to Bank Product Debt owing to the Lenders and their
Affiliates for which a Bank Product Reserve has been established; and
          (l) twelfth, to Bank Product Debt owing to the Lenders and their
Affiliates for which a Bank Product Reserve has not been established.
Amounts shall be applied to each category of Obligations set forth above until
Full Payment thereof and then to the next category. If amounts are insufficient
to satisfy a category, they shall be applied on a pro rata basis among the
Obligations in the category. Amounts distributed with respect to any Bank
Product Debt or LC Obligations shall be the lesser of the applicable LC
Obligations or Bank Product Amount last reported to Agent or the actual LC
Obligations or Bank Product Debt as calculated by the methodology reported to
Agent for determining the amount due. Agent shall have no obligation to
calculate the amount to be distributed with respect to any Bank Product Debt,
but may rely upon written notice of the amount (setting forth a reasonably
detailed calculation) from the Secured Party. In the absence of such notice,
Agent may assume the amount to be distributed is the Bank Product Amount last
reported to it. The allocations set forth in this Section 5.5.2 are solely to
determine the rights and priorities of Agent and Lenders as among themselves,
and may be changed by agreement among them without the consent of any Obligor.
This Section 5.5.2 is not for the benefit of or enforceable by any Obligor.
          5.5.3. Erroneous Application. Agent shall not be liable for any
application of amounts made by it in error (unless it has been determined in a
final, non-appealable judgment by a court of competent jurisdiction that such
error was a result of the gross negligence or willful misconduct of Agent) and
if any such application is subsequently determined to have been made in error,
the sole recourse of any Lender or other Person to which such amount should have
been made in error (unless it has been determined in a final, non-appealable
judgment by a court of competent jurisdiction that such error was a result of
the gross negligence or willful misconduct of Agent) shall be to recover the
amount from the Person that actually received it (and, if such amount was
received by any Lender, such Lender hereby agrees to return it).
     5.6. Application of Payments. On each Business Day occurring prior to the
first date on which either (a) Excess Availability is below $75,000,000 or
(b) any Event of Default occurred (each, a “Trigger Event”), the ledger balance
in the main Dominion Account as of the end of such Business Day shall be
transferred, by the Borrowers, to the Borrower Account at the beginning of the
next Business Day. On each Business Day occurring after the occurrence of a
Trigger Event, the ledger balance in the main Dominion Account as of the end of
such Business Day shall be transferred, by the Agent, to a Borrower Account at
Bank of America, in the name of the Agent, and shall be applied to the
Obligations at the beginning of the next Business Day. Each Obligor irrevocably
waives the right at all times after the occurrence of a Trigger Event to direct
the application of any payments or Collateral proceeds, and agrees that Agent
(subject to Section 5.5.1 and Section 5.5.2, as applicable) shall have the
continuing, exclusive right to apply and reapply same against the Obligations,
in such manner as Agent deems advisable, notwithstanding any entry by Agent in
its records. If, as a result of Agent’s receipt of Payment Items or

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proceeds of Collateral, a credit balance exists, the balance shall not accrue
interest in favor of Obligors and shall be made available to Borrowers as long
as no Default or Event of Default exists.
     5.7. Loan Account; Account Stated.
          5.7.1. Loan Account. Agent shall maintain in accordance with its usual
and customary practices an account or accounts (“Loan Account”) evidencing the
Debt of Borrowers resulting from each Loan or issuance of a Letter of Credit
from time to time. Any failure of Agent to record anything in the Loan Account,
or any error in doing so, shall not limit or otherwise affect the obligation of
Borrowers to pay any amount owing hereunder. Agent may maintain a single Loan
Account in the name of Borrower Agent, and each Borrower confirms that such
arrangement shall have no effect on the joint and several character of its
liability for the Obligations.
          5.7.2. Entries Binding. Entries made in the Loan Account shall
constitute presumptive evidence of the information contained therein. If any
information contained in the Loan Account is provided to or inspected by any
Person, then such information shall be conclusive and binding on such Person for
all purposes absent manifest error, except to the extent such Person notifies
Agent in writing within 30 days after receipt or inspection that specific
information is subject to dispute.
     5.8. Taxes. If any Taxes (except Excluded Taxes) shall be payable by any
party due to the execution, delivery, issuance or recording of any Loan
Documents, or the creation or repayment of any Obligations, Borrowers shall pay
(and shall promptly reimburse Agent and Lenders for their payment of) all such
Taxes, including any interest and penalties thereon, and will indemnify and hold
harmless Indemnitees against all liability in connection therewith. If Borrowers
shall be required by Applicable Law to withhold or deduct any Taxes (except
Excluded Taxes) with respect to any sum payable under any Loan Documents,
(a) the sum payable to Agent or such Lender shall be increased as may be
necessary so that, after making all required withholding or deductions, Agent or
such Lender (as the case may be) receives an amount equal to the sum it would
have received had no such withholding or deductions been made; (b) Borrowers
shall make such withholding or deductions; and (c) Borrowers shall pay the full
amount withheld or deducted to the relevant taxing or other authority in
accordance with Applicable Law.
     5.9. Withholding Tax Exemption. At least five Business Days prior to the
first date for payment of interest or fees hereunder to a Foreign Lender, the
Foreign Lender shall deliver to Borrowers and Agent two duly completed copies of
IRS Form W-8BEN or W-8ECI (or any subsequent replacement or substitute form
therefor), certifying that such Lender can receive payment of Obligations
without deduction or withholding of any United States federal income taxes. Each
Foreign Lender shall deliver to Borrowers and Agent two additional copies of
such form before the preceding form expires or becomes obsolete or after the
occurrence of any event requiring a change in the form, as well as any
amendments, extensions or renewals thereof as may be reasonably requested by
Borrowers or Agent, in each case, certifying that the Foreign Lender can receive
payment of Obligations without deduction or withholding of any such taxes,
unless an event (including any change in treaty or law) has occurred that
renders such forms inapplicable or prevents the Foreign Lender from certifying
that it can receive payments without deduction or withholding of such taxes.
During any period that a Foreign Lender does not or is unable to establish that
it can receive payments without deduction or withholding of such taxes, other
than by reason of an event (including any change in treaty or law) that occurs
after it becomes a Lender, Agent may withhold taxes from payments to such
Foreign Lender at the applicable statutory and treaty rates, and Borrowers shall
not be required to pay any additional amounts under Section 5.8 or this
Section 5.9 as a result of such withholding. Each Lender or Agent that is
organized under the laws of the United States, or any state or district thereof
shall provide to the Borrower (and in the case of a Lender, to the Agent) two
duly executed copies of IRS Form W-9. In the event that any Lender or Agent does
not comply with the requirements of this Section 5.9, Borrower may withhold
taxes from payments to such Lender or Agent as required by applicable law. In
the event of the resignation or removal of the Agent pursuant to Section 12.8
hereunder, the successor Agent shall be subject to the provisions of this
Section 5.9 in the same

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manner as a its predecessor Agent, and shall be required to provide the
appropriate IRS Form W-8BEN or W-8ECI to the Borrower as required in this
Section 5.9. In the event that the successor Agent does not comply with the
requirements of this Section 5.9, Borrower may withhold taxes from payments to
such successor Agent as required by applicable law.
     5.10. Nature and Extent of Each Borrower’s Liability.
          5.10.1. Joint and Several Liability. Each Borrower agrees that it is
jointly and severally liable for, and absolutely and unconditionally guarantees
to Agent and Lenders the prompt payment and performance of, all Obligations and
all agreements under the Loan Documents. Each Borrower agrees that its guaranty
obligations hereunder constitute a continuing guaranty of payment and
performance and not of collection, that such obligations shall not be discharged
until Full Payment of the Obligations and that such obligations are absolute and
unconditional, irrespective of (a) the genuineness, validity, regularity,
enforceability, subordination or any future modification of, or change in, any
Obligations or Loan Document, or any other document, instrument or agreement to
which any Obligor is or may become a party or liable; (b) the absence of any
action to enforce this Agreement (including this Section 5.10.1) or any other
Loan Document, or any waiver, consent or indulgence of any kind by Agent or any
Lender with respect thereto; (c) the existence, value or condition of, or
failure to perfect a Lien or to preserve rights against, any security or
guaranty for the Obligations or any action, or the absence of any action, by
Agent or any Lender in respect thereof (including the release of any security or
guaranty); (d) the insolvency of any Obligor; (e) any election by Agent or any
Lender in an Insolvency Proceeding for the application of Section 1111(b)(2) of
the Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Borrower,
as debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise;
(g) the disallowance of any claims of Agent or any Lender against any Obligor
for the repayment of any Obligations under Section 502 of the Bankruptcy Code or
otherwise; or (h) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
except Full Payment of all Obligations.
          5.10.2. Waivers.
          (a) Each Borrower expressly waives all rights that it may have now or
in the future under any statute, at common law, in equity or otherwise, to
compel Agent or Lenders to marshal assets or to proceed against any Obligor,
other Person or security for the payment or performance of any Obligations
before, or as a condition to, proceeding against such Borrower. It is agreed
among each Borrower, Agent and Lenders that the provisions of this
Section 5.10.2 are of the essence of the transaction contemplated by the Loan
Documents and that, but for such provisions, Agent and Lenders would decline to
make Loans and issue Letters of Credit. Notwithstanding anything to the contrary
in any Loan Document, and except as set forth in Section 5.10.3, each Borrower
expressly waives all rights at law or in equity to subrogation, reimbursement,
exoneration, contribution, indemnification or set off, as well as all defenses
available to a surety, guarantor or accommodation co-obligor. Each Borrower
acknowledges that its guaranty pursuant to this Section 5.10.2 is necessary to
the conduct and promotion of its business, and can be expected to benefit such
business.
          (b) Agent and Lenders may, in their discretion, pursue such rights and
remedies as they deem appropriate, including realization upon Collateral or any
Real Estate by judicial foreclosure or non-judicial sale or enforcement, without
affecting any rights and remedies under this Section 5.10. If, in the exercise
of any rights or remedies, Agent or any Lender shall forfeit any of its rights
or remedies, including its right to enter a deficiency judgment against any
Borrower or any other Person, whether because of any applicable laws pertaining
to “election of remedies” or otherwise, each Borrower consents to such action by
Agent or such Lender and waives any claim based upon such action, even if the
action may result in loss of any rights of subrogation that any Borrower might
otherwise have had but for such action. Any election of remedies that results in
denial or impairment of the right of Agent or any Lender to seek a deficiency
judgment against any Borrower shall not impair any other Borrower’s obligation
to

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pay the full amount of the Obligations. Each Borrower waives all rights and
defenses arising out of an election of remedies, such as nonjudicial foreclosure
with respect to any security for the Obligations, even though that election of
remedies destroys such Borrower’s rights of subrogation against any other
Person. If Agent bids at any foreclosure or trustee’s sale or at any private
sale, Agent may bid all or a portion of the Obligations and the amount of such
bid need not be paid by Agent but shall be credited against the Obligations. The
amount of the successful bid at any such sale, whether Agent or any other Person
is the successful bidder, shall be conclusively deemed to be the fair market
value of the Collateral, and the difference between such bid amount and the
remaining balance of the Obligations shall be conclusively deemed to be the
amount of the Obligations guaranteed under this Section 5.10, notwithstanding
that any present or future law or court decision may have the effect of reducing
the amount of any deficiency claim to which Agent or any Lender might otherwise
be entitled but for such bidding at any such sale.
          5.10.3. Extent of Liability; Contribution.
          (a) Notwithstanding anything herein to the contrary, each Borrower’s
liability under this Section 5.10 shall be limited to the greater of (i) all
amounts for which such Borrower is primarily liable and (ii) such Borrower’s
Allocable Amount.
          (b) If any Borrower makes a payment under this Section 5.10 of any
Obligations (other than amounts for which such Borrower is primarily liable) (a
“Guarantor Payment”) that, taking into account all other Guarantor Payments
previously or concurrently made by any other Borrower, exceeds the amount that
such Borrower would otherwise have paid if each Borrower had paid the aggregate
Obligations satisfied by such Guarantor Payments in the same proportion that
such Borrower’s Allocable Amount bore to the total Allocable Amounts of all
Borrowers, then such Borrower shall be entitled to receive contribution and
indemnification payments from, and to be reimbursed by, each other Borrower for
the amount of such excess, pro rata based upon their respective Allocable
Amounts in effect immediately prior to such Guarantor Payment. The “Allocable
Amount” for any Borrower shall be the maximum amount that could then be
recovered from such Borrower under this Section 5.10 without rendering such
payment voidable or avoidable under Section 548 of the Bankruptcy Code or under
any applicable state fraudulent transfer or conveyance act, or similar statute
or common law.
          (c) Nothing contained in this Section 5.10 shall limit the liability
of any Borrower to pay Loans made directly or indirectly to that Borrower
(including Loans advanced to any other Borrower and then re-loaned or otherwise
transferred to, or for the benefit of, such Borrower), LC Obligations relating
to Letters of Credit issued to support such Borrower’s business, and all accrued
interest, fees, expenses and other related Obligations with respect thereto, for
which such Borrower shall be primarily liable for all purposes hereunder.
          5.10.4. Joint Enterprise. Each Borrower has requested that Agent and
Lenders make this credit facility available to Borrowers on a combined basis, in
order to finance Borrowers’ business most efficiently and economically.
Borrowers’ business is a mutual and collective enterprise, and Borrowers believe
that consolidation of their credit facility will enhance the borrowing power of
each Borrower and ease the administration of their relationship with Lenders,
all to the mutual advantage of Borrowers. Borrowers acknowledge and agree that
Agent’s and Lenders’ willingness to extend credit to Borrowers and to administer
the Collateral on a combined basis, as set forth herein, is done solely as an
accommodation to Borrowers and at Borrowers’ request.
          5.10.5. Subordination. Each Borrower hereby subordinates any claims,
including any right of payment, subrogation, contribution and indemnity, that it
may have at any time against any other Obligor, howsoever arising, to the Full
Payment of all Obligations.

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SECTION 6. CONDITIONS PRECEDENT
     6.1. Conditions Precedent to Initial Loans. In addition to the conditions
set forth in Section 6.2, Lenders shall not be required to fund any requested
Loan, issue any Letter of Credit, or otherwise extend credit to Borrowers
hereunder, until the date (“Closing Date”) that each of the following conditions
has been satisfied:
          (a) Notes shall have been executed by Borrowers and delivered to each
Lender that requests issuance of a Note. Each other Loan Document shall have
been duly executed and delivered to Agent by each of the signatories thereto,
and each Obligor shall be in compliance with all terms thereof.
          (b) Agent shall be satisfied that the Security Documents shall be
effective to create in favor of the Agent a legal, valid and enforceable first
priority security interest in and Lien upon the Collateral and shall have
received (i) evidence that all filings, recordings, deliveries of instruments
and other actions necessary or desirable in the commercially reasonable opinion
of Agent to protect and preserve such security interests shall have been duly
effected, (ii) UCC and Lien searches (and the equivalent thereof in all
applicable foreign jurisdictions) and other evidence reasonably satisfactory to
Agent (with such evidence to include, without limitation, the Bon-Ton Payoff
Letter and the Business Payoff Letter, together with UCC termination statements
and other documentation evidencing the termination by the Bon-Ton Existing
Lender and by the Business Existing Lender of each of its Liens in and to the
properties and assets of the Obligors) that such Liens are the only Liens upon
the Collateral, except Permitted Liens, (iii) evidence that the payment (or
evidence of provision for payment) of all filing and recording fees and taxes
due and payable in respect thereof has been made in form and substance
reasonably satisfactory to Agent, (iv) all Lien Waivers deemed necessary or
desirable in the commercially reasonable opinion of Agent with respect to real
property interests of the Obligors and their Subsidiaries included in the
Collateral and (v) a completed and fully executed perfection certificate in form
and substance reasonably satisfactory to Agent;
          (c) Agent shall have received the Related Real Estate Documents for
all Real Estate subject to a Mortgage.
          (d) Agent shall have received duly executed agreements establishing
each Dominion Account and related lockbox and the Borrower Account, each in form
and substance, and with financial institutions, satisfactory to Agent.
          (e) Agent shall have received a certificate, in form and substance
reasonably satisfactory to it, from the chief financial officer of each Borrower
(with such certification to be in such Person’s capacity as chief financial
officer of such Borrower and not in such Person’s individual capacity)
certifying that:
     (i) after giving effect to the initial Loans and transactions hereunder,
(A) Each of Parent, Holdings and the Borrowers is Solvent; (B) no Default or
Event of Default exists; (C) the representations and warranties set forth in
Section 9 are true and correct in all material respects; and (D) each Borrower
has complied in all material respects with all agreements and conditions to be
satisfied by it under the Loan Documents;
     (ii) the Acquisition has been consummated in accordance with the terms of
the Purchase Agreement and either (x) attaching copies of all governmental,
shareholder and third party consents (including, without limitation,
Hart-Scott-Rodino clearance), licenses and approvals required in connection with
the execution, delivery and performance by Parent, Holdings and each Borrower,
and the validity against such Obligor of the Acquisition Documents to which it
is a party, and such consents, licenses and approvals shall be in full force and
effect or (y) stating that no such consents, licenses or approvals are so
required and stating that all waiting

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periods applicable to the transactions contemplated hereby and by the
Acquisition Documents, including, without limitation, the applicable
Hart-Scott-Rodino waiting period, shall have expired or been terminated without
any action being taken by any authority that is reasonably likely to have a
material adverse effect on the Obligors, taken as a whole, or on the Business;
     (iii) there is no action, suit, investigation or proceeding pending or, to
the knowledge of Parent or its Subsidiaries, threatened in any court or before
any arbitrator or governmental authority that could reasonably be expected to
have a Material Adverse Effect;
     (iv) all Loans made by the Lenders to the Borrowers hereunder are and shall
remain in full compliance with the Federal Reserve’s margin regulations;
     (v) no law or regulation to which any Borrower is subject is applicable to
the transactions contemplated hereby or by the Acquisition Documents which could
reasonably be expected to have a Material Adverse Effect on any Obligor or a
Material Adverse Effect on the transactions contemplated hereby or by the
Acquisition Documents;
     (vi) Bon-Ton has received not less than $510,000,000 gross cash proceeds,
in the aggregate, of the Senior Notes; and
     (vii) SPE has received not less than $252,000,000 gross cash proceeds, in
the aggregate, from the issuance of the Mortgage Notes and distributed such
amount to Bon-Ton.
          (f) Agent shall have received a certificate of a duly authorized
officer of each Obligor (with such certification to be in such Person’s capacity
as an officer of such Obligor and not in such Person’s individual capacity),
certifying (i) that attached copies of such Obligor’s Organic Documents are true
and complete, and in full force and effect, without amendment except as shown,
(ii) that an attached copy of resolutions authorizing execution and delivery of
the Loan Documents is true and complete, and that such resolutions are in full
force and effect, were duly adopted, have not been amended, modified or revoked,
and constitute all resolutions adopted with respect to this credit facility, and
(iii) to the title, name and signature of each Person authorized to sign the
Loan Documents. Agent may conclusively rely on this certificate until it is
otherwise notified by the applicable Obligor in writing.
          (g) Agent shall have received a written opinion of Wolf, Block, Schorr
and Solis-Cohen LLP, as well as any local counsel to Obligors or Agent, in form
and substance reasonably satisfactory to Agent.
          (h) Agent shall have received copies of the charter documents of each
Obligor, certified as appropriate by the Secretary of State or another official
of such Obligor’s jurisdiction of organization. Agent shall have received good
standing or subsistence certificates, as applicable, for each Obligor, issued by
the Secretary of State or other appropriate official of such Obligor’s
jurisdiction of organization and each jurisdiction where such Obligor’s conduct
of business or ownership of Property necessitates qualification.
          (i) Agent shall (i) have received copies of policies of insurance,
(ii) be reasonably satisfied with the amount, types and terms and conditions of
all insurance maintained by the Obligors and their Subsidiaries, and (iii) have
received certificates of insurance with endorsements naming Agent, for the
benefit of the Lenders, as loss payee or additional insured, as applicable, with
respect to each insurance policy required to be maintained with respect to the
Collateral and otherwise in form and substance reasonably satisfactory to Agent.
          (j) Agent shall have completed its business, financial and legal due
diligence of Obligors, with results reasonably satisfactory to Agent and Agent
shall be satisfied that (i) all Pre-

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Commitment Information (as defined in the Commitment Letter) shall be complete
and correct in all material respects, and (ii) no Material Adverse Effect shall
have occurred since January 29, 2005.
          (k) Borrowers shall have paid all fees and expenses to be paid to
Agent and Lenders on the Closing Date (including, without limitation, all fees,
charges and disbursements of counsel, including local counsel, to Agent to the
extent invoiced prior to or on the Closing Date, plus such additional amounts of
such fees, charges and disbursements as shall constitute its reasonable estimate
of such fees, charges and disbursements incurred or to be incurred by it through
the closing proceedings (provided that such estimate shall not thereafter
preclude a final settling of accounts between the Borrowers and Agent)).
          (l) Agent shall have received copies of the following documents,
certified by a Senior Officer as complete and correct (with such certification
to be in such Person’s capacity a Senior Officer of an Obligor and not in such
Person’s individual capacity), and shall be satisfied (i) with the terms and
conditions and provisions thereof, (ii) that the Acquisition has been
consummated substantially in accordance with the terms of the Purchase
Agreement, with the terms of the Commitment Letter, with the terms described by
the Parent and the Borrowers to Agent, in writing, prior to the consummation of
such commitment letter, in compliance with applicable law and regulatory
approvals and otherwise on terms and conditions, including, without limitation,
terms and conditions pertaining to the payment of taxes, satisfactory to Agent,
(iii) that Bon-Ton received not less than $510,000,000 cash proceeds, in the
aggregate, from the advance of the Senior Notes and (iv) that SPE received not
less than $252,000,000 from the issuance of the Mortgage Notes and distributed
such amount to Bon-Ton.
     (i) the Acquisition Documents and all certificates, opinions and other
material documents delivered thereunder;
     (ii) the Senior Note Documents and all certificates, opinions and other
material documents delivered thereunder, including, without limitation, evidence
of reasonably acceptable ratings by Moody’s and S&P; and
     (iii) the Mortgage Loan Debt Documents and all certificates, opinions and
other material documents delivered thereunder.
          (m) Agent shall have received all inventory and asset appraisals,
commercial finance audits, field audits and such other reports, audits and other
information or certifications as it may reasonably request with respect to the
Collateral.
          (n) Agent shall have received, in form and substance reasonably
satisfactory to it, (i) audited consolidated income statements of Herberger’s
and Parisian and their Subsidiaries for the three fiscal years ended January 29,
2005, the audited consolidated balance sheets of Herberger’s and Parisian and
their Subsidiaries for the two fiscal years ended January 29, 2005, the
unaudited consolidated financial statements of Herberger’s and Parisian and
their Subsidiaries for any interim quarterly periods that have ended since
January 29, 2005 (other than for the fiscal quarter ending January 28, 2006) and
the comparable period for the prior year, each of which financial statements, in
the case of any annual or quarterly periods, shall meet the requirements of
Regulation S-X under the Securities Act of 1933, as amended, and all other
accounting rules and regulations of the SEC promulgated thereunder applicable to
a registration statement under such Act on Form S-1, (ii) pro forma financial
statements as to Bon-Ton and its Subsidiaries, giving effect to the Acquisition,
for the fiscal year ended January 29, 2005 and the period commencing with the
end of the fiscal year ended January 29, 2005 and ending with the most recently
completed quarter (other than the fiscal quarter ending January 28, 2006) and
the comparable period for the prior year, each of which financial statements, in
the case of any annual or quarterly periods, shall meet the requirements of
Regulation S-X under the Securities Act of 1933, as amended, and all other
accounting rules and regulations of the SEC promulgated thereunder applicable to
a registration

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     statement under such Act on Form S-1, (iii) internal unaudited financial
statements of the Parent and its Subsidiaries, on a consolidated basis for each
monthly period beginning with the month ended October 29, 2005 and the
comparable period for the prior year, within twelve business days of the month
then ended, (iv) on a basis substantially consistent with the quarterly format
of the internal income statements provided in Item 15.134 of the virtual data
room of Saks Incorporated, internal income statements of Herberger’s and
Parisian with respect to the Business, including the calculation of Business
EBITDA (as defined on Schedule 6.1(n)) (after the allocation of certain
corporate expenses and shared services) and a schedule of working capital of the
Business provided on page 3 of Item 15.098 of the virtual data room of Saks
Incorporated on a consolidated basis for each monthly period beginning with the
month ended October 29, 2005 and the comparable period for the prior year,
within twelve business days of the month then ended, (v) forecasts prepared by
management of the Parent and its Subsidiaries of balance sheets, income
statements and cash flow statements for each month for the first twelve months
following the Closing Date; provided that such forecasts shall also include the
quarter ending on the last Saturday of January, 2006, and for each year
commencing with the first fiscal year following the Closing Date and ending with
the fiscal year ending January, 2011; and (vi) a compliance certificate, in form
and substance reasonably satisfactory to Agent, evidencing that the Pro Forma
Leverage Ratio (as defined on Schedule 6.1(n)), based on financial statements
prepared in accordance with the provisions of this Section 6.1(n), for the
Calculation Period (as defined on Schedule 6.1(n)) was not greater than 4.75:1.0
and (vii) evidence that all pro forma financial statements and forecasts were
prepared in good faith on the basis of reasonable assumptions.
          (o) Agent shall have received a flow of funds, in form and substance
reasonably satisfactory to it, with respect to the Acquisition.
          (p) Agent shall have received copies of notifications, instructing
each of Mastercard, Visa, HSBC and each Obligor’s other credit card
clearinghouses and processors required by Agent to transfer all amounts owing by
such processor to an Obligor directly to the Borrower Account or other Deposit
Account acceptable to Agent and subject to control arrangements satisfactory to
Agent, with (x) such notifications (each, a “Credit Card Notification”) to be
substantially the form attached hereto as Exhibit E, or in such other form
reasonably acceptable to agent, (y) such notifications to be executed by each
relevant Obligor, sent to each such processor and (z) Agent to be satisfied that
the Obligors have exercised commercially reasonable efforts to obtain
acknowledgments of such Credit Card Notifications from such processors.
          (q) Agent shall have received a Borrowing Base Certificate indicating
that Excess Availability as of the Closing Date, after giving effect to the
transactions contemplated hereby, is not less than $160,000,000.
     6.2. Conditions Precedent to All Credit Extensions. Agent, Issuing Bank and
Lenders shall not be required to fund any Loans, arrange for issuance of any
Letters of Credit or grant any other accommodation to or for the benefit of
Borrowers, unless the following conditions are satisfied:
          (a) No Default or Event of Default shall exist at the time of, or
result from, such funding, issuance or grant;
          (b) The representations and warranties of each Obligor in the Loan
Documents shall be true and correct in all material respects on the date of, and
upon giving effect to, such funding, issuance or grant (except for
representations and warranties that expressly relate to an earlier date and
except for changes therein which do not cause a violation of this Agreement);
          (c) All conditions precedent in any other Loan Document shall be
satisfied;

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          (d) No event shall have occurred or circumstance exist that has or
could reasonably be expected to have a Material Adverse Effect; and
          (e) With respect to issuance of a Letter of Credit, the LC Conditions
shall be satisfied.
Each request (or deemed request) by Borrowers for funding of a Loan, issuance of
a Letter of Credit or grant of an accommodation shall constitute a
representation by Borrowers that the foregoing conditions are satisfied on the
date of such request and on the date of such funding, issuance or grant.
     6.3. Limited Waiver of Conditions Precedent. If Agent, Issuing Bank or
Lenders fund any Loans, arrange for issuance of any Letters of Credit or grant
any other accommodation when any conditions precedent are not satisfied
(regardless of whether the lack of satisfaction was known or unknown at the
time), it shall not operate as a waiver of (a) the right of Agent, Issuing Bank
and Lenders to insist upon satisfaction of all conditions precedent with respect
to any subsequent funding, issuance or grant; nor (b) any Default or Event of
Default due to such failure of conditions or otherwise.
SECTION 7. COLLATERAL
     7.1. Grant of Security Interest. To secure the prompt payment and
performance of all Obligations, each Obligor hereby grants to Agent, for the
benefit of Secured Parties, a continuing security interest in and Lien upon all
Property of such Obligor (other than the Real Estate described on Schedule 7.1
and leasehold interests in Real Estate (unless such leasehold interests are
described on Schedule 7.3)), including all of the following Property, whether
now owned or hereafter acquired, and wherever located:
          (a) all Accounts;
          (b) all Chattel Paper, including electronic chattel paper;
          (c) all Commercial Tort Claims;
          (d) all Deposit Accounts;
          (e) all Documents;
          (f) subject to the proviso to Section 7.1(m), all General Intangibles,
including Payment Intangibles, Software and Intellectual Property;
          (g) all Goods, including Inventory, Equipment and fixtures, excluding
(ii) any motor vehicles and (ii) any Equipment or Real Estate subject to
Purchase Money Liens securing Permitted Purchase Money Debt so long as the
documents evidencing such Permitted Purchase Money Debt expressly prohibit a
second priority lien on such Equipment or Real Estate, as the case may be;
          (h) all Instruments;
          (i) all Investment Property;
          (j) all Letter-of-Credit Rights;
          (k) all Supporting Obligations;
          (l) all monies, whether or not in the possession or under the control
of Agent, a Lender, or a bailee or Affiliate of Agent or a Lender, including any
Cash Collateral;

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          (m) all equity interests in any Subsidiary of such Obligor; provided
that such grant of security interest shall not extend to the partnership
interests in any of The Bon-Ton Properties- Irondequoit L.P., The Bon-Ton
Properties-Eastview L.P., The Bon-Ton Properties- Marketplace L.P., or The
Bon-Ton Properties- Greece Ridge L.P., to the extent that the grant of such
security interest would constitute or result in a breach or termination pursuant
to the terms of, or a default under, any lease, loan document, partnership
agreement or other organizational document of such limited partnership, so long
as such restrictive provision is enforceable under Applicable Law;
          (n) all accessions to, substitutions for, and all replacements,
products, and cash and non-cash proceeds of the foregoing, including proceeds of
and unearned premiums with respect to insurance policies, and claims against any
Person for loss, damage or destruction of any Collateral; and
          (o) all books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs and computer records)
pertaining to the foregoing.
     7.2. Lien on Deposit Accounts; Cash Collateral.
          7.2.1. Deposit Accounts. To further secure the prompt payment and
performance of all Obligations, each Obligor hereby grants to Agent, for the
benefit of Secured Parties, a continuing security interest in and Lien upon all
of such Obligor’s right, title and interest in and to each Deposit Account of
such Obligor (except for those referred to in clause (i) of the parenthetical
set forth in the second sentence of Section 8.5 hereof) and any deposits or
other sums at any time credited to any such Deposit Account, including any sums
in any blocked or lockbox accounts or in any accounts into which such sums are
swept. Prior to the occurrence of a Trigger Event, each Obligor shall direct
each bank or other depository to deliver to the Borrower Account, on each
Business Day, all available balances in each Deposit Account maintained by such
Obligor with such depository (except for (a) those referred to in clause (i) of
the parenthetical set forth in the second sentence of Section 8.5 hereof and
(b) those described on Schedule 8.5(b) hereto so long as, the average account
balances in such accounts described on Schedule 8.5(b) are in amounts consistent
with the ordinary course of business and past practices of the Obligors). At all
times after the occurrence of a Trigger Event, the Agent shall direct each bank
or other depository to deliver to a Borrower Account at Bank of America, in the
name of the Agent, on each Business Day, for application to the Obligations then
outstanding, all available balances in each Deposit Account maintained by any
Obligor with such depository. Each Obligor irrevocably appoints, at all times
after the occurrence of a Trigger Event, Agent as such Obligor’s attorney in
fact to collect such balances to the extent any such delivery is not so made.
Each Obligor waives the right at all times after the occurrence of a Trigger
Event to direct the application of any payments or Collateral proceeds, and
agrees that Agent shall have the continuing, exclusive right to apply and
reapply same against the Obligations, in such manner as Agent deems advisable,
notwithstanding any entry by Agent in its records. If, as a result of Agent’s
receipt of Payment Items or proceeds of Collateral, a credit balance exists, the
balance shall not accrue interest in favor of Obligors and shall be made
available to Borrowers as long as no Default or Event of Default exists.
          7.2.2. Cash Collateral. Any Cash Collateral may be invested, in
Agent’s discretion, in Cash Equivalents, but Agent shall have no duty to do so,
regardless of any agreement, understanding or course of dealing with any
Obligor, and shall have no responsibility for any investment or loss. Each
Obligor hereby grants to Agent, for the benefit of Secured Parties, a security
interest in all Cash Collateral held from time to time and all proceeds thereof,
as security for the Obligations, whether such Cash Collateral is held in the
Cash Collateral Account or elsewhere. Agent may apply Cash Collateral to the
payment of any Obligations, in such order as Agent may elect, as they become due
and payable. The Cash Collateral Account and all Cash Collateral shall be under
the sole dominion and control of Agent. No Obligor or other Person claiming
through or on behalf of any Obligor shall have any right to any Cash Collateral,
until payment in full, in cash of all Obligations and the occurrence of the
Commitment Termination Date.

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          7.2.3. Credit Card Notifications. The Obligors shall deliver to Agent
Credit Card Notifications instructing each of Mastercard, Visa, HSBC and each
Obligor’s other credit card clearinghouses and processors required by Agent to
transfer all amounts owing by such processor to an Obligor directly to the
Borrower Account or other Deposit Account acceptable to Agent and subject to
control arrangements satisfactory to Agent, with such notifications to be
executed by each relevant Obligor, sent to each such processor and with Agent to
be satisfied that the Obligors have exercised commercially reasonable efforts to
obtain acknowledgments of such Credit Card Notifications from such processors.
     7.3. Real Estate Collateral. The Obligations shall be secured by Mortgages
upon all Real Estate owned by Obligors (other than the Real Estate described on
Schedule 7.1 and leasehold interests in Real Estate (unless such leasehold
interests are described on Schedule 7.3)), including, without limitation, the
Real Estate described on Schedule 7.3. The Mortgages shall be duly recorded, at
Borrowers’ expense, in each office where such recording is required to
constitute a fully perfected Lien on the Real Estate covered thereby. If any
Obligor acquires Real Estate hereafter (unless such Real Estate is encumbered by
Permitted Purchase Money Debt, the terms of which expressly prohibit a second
priority Lien on such Real Estate) such Obligor shall, within 30 days, execute,
deliver and record a Mortgage sufficient to create a first priority Lien (or,
where such Real Estate is subject to Permitted Purchase Money Debt and the
documents evidencing such Debt permit Agent to hold a second priority lien on
such Real Estate, a second priority Lien) in favor of Agent on such Real Estate,
and shall deliver all Related Real Estate Documents; provided that this sentence
shall not be applicable to any leasehold interests in any Real Estate unless
such leasehold interests are described on Schedule 7.3).
     7.4. Other Collateral.
          7.4.1. Commercial Tort Claims. Obligors shall promptly notify Agent in
writing if Parent or any Subsidiary has a Commercial Tort Claim (other than, as
long as no Event of Default exists, a Commercial Tort Claim for less than
$100,000) and, upon Agent’s request, shall promptly execute such documents and
take such actions as Agent deems appropriate to confer upon Agent (for the
benefit of Secured Parties) a duly perfected, first priority Lien upon such
claim.
          7.4.2. Certain After-Acquired Collateral. Obligors shall promptly
notify Agent in writing if, after the Closing Date, Parent or any Subsidiary
obtains any interest in any Collateral consisting of Deposit Accounts, Chattel
Paper, Documents, Instruments, Intellectual Property, Investment Property or
Letter-of-Credit Rights and, upon Agent’s request, shall promptly execute such
documents and take such actions as Agent deems appropriate to effect Agent’s
duly perfected, first priority Lien upon such Collateral, including obtaining
any appropriate possession, control agreement or Lien Waiver. If any Collateral
is in the possession of a third party, at Agent’s request, Obligors shall obtain
an acknowledgment that such third party holds the Collateral for the benefit of
Agent.
     7.5. No Assumption of Liability. The Lien on Collateral granted hereunder
is given as security only and shall not subject Agent or any Lender to, or in
any way modify, any obligation or liability of the Obligors relating to any
Collateral.
     7.6. Further Assurances. Promptly upon request, Obligors shall deliver such
instruments, assignments, title certificates, or other documents or agreements,
and shall take such actions, as Agent deems appropriate under Applicable Law to
evidence or perfect its Lien on any Collateral, or otherwise to give effect to
the intent of this Agreement. Each Obligor authorizes Agent to file any
financing statement that indicates the Collateral as “all assets” or “all
personal property” of such Obligor, or words to similar effect, and ratifies any
action taken by Agent before the Closing Date to effect or perfect its Lien on
any Collateral.

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     7.7. Foreign Subsidiary Stock. Notwithstanding Section 7.1, the Collateral
shall include only 65% of the voting securities of any Foreign Subsidiary.
SECTION 8. COLLATERAL ADMINISTRATION
     8.1. Borrowing Base Certificates. The Borrowers shall deliver to the Agent
(and Agent shall promptly deliver same to Lenders) (i) at all times prior to the
occurrence of a Trigger Event, not later than the twelfth Business Day after the
immediately preceding fiscal month end, and at such other times as Agent may
request, a Borrowing Base Certificate prepared as of the close of business of
the previous month or such other date so requested by the Agent and (ii) at all
times after the occurrence of a Trigger Event, not later than the last Business
Day of each week, and at such other times as Agent may request, a Borrowing Base
Certificate prepared as of the close of business of the previous week or such
other date so requested by the Agent. All calculations of Tranche A Excess
Availability, Tranche A-1 Excess Availability and Excess Availability in any
Borrowing Base Certificate shall originally be made by Borrowers and certified
by a Senior Officer (with such certification to be in such Person’s capacity as
a Senior Officer of an Obligor and not in such Person’s individual capacity),
provided that Agent may from time to time review and adjust any such calculation
(a) to reflect its reasonable estimate of declines in value of any Collateral,
due to collections received in the Dominion Account or otherwise; (b) to adjust
advance rates to reflect changes in dilution, quality, mix and other factors
affecting Collateral; and (c) to the extent the calculation is not made in
accordance with this Agreement or does not accurately reflect the Availability
Reserve or the LC Reserve.
     8.2. Administration of Accounts.
          8.2.1. Intentionally Omitted.
          8.2.2. Account Verification. Whether or not a Default or Event of
Default exists, Agent shall have the right at any time, in the name of Agent,
any designee of Agent or any Obligor to verify the validity, amount or any other
matter relating to any Accounts of Obligors by mail, telephone or otherwise.
Obligors shall cooperate fully with Agent in an effort to facilitate and
promptly conclude any such verification process.
          8.2.3. Maintenance of Dominion Account. Obligors shall maintain
Dominion Accounts pursuant to lockbox or other arrangements reasonably
acceptable to Agent. Obligors shall obtain an agreement (in form and substance
reasonably satisfactory to Agent) from each lockbox servicer and Dominion
Account bank, establishing Agent’s control over and Lien in the lockbox or
Dominion Account, requiring immediate deposit of all remittances received in the
lockbox to a Dominion Account and, if such Dominion Account is not maintained
with Bank of America, directing, in accordance with Section 5.6, the account
bank to immediately transfer of all available funds in the Dominion Account to
the Borrower Account, and waiving offset rights of such servicer or bank against
any funds in the lockbox or Dominion Account, except offset rights for customary
administrative charges. Neither Agent nor Lenders assume any responsibility to
Obligors for any lockbox arrangement or Dominion Account, including any claim of
accord and satisfaction or release with respect to any Payment Items accepted by
any bank.
          8.2.4. Proceeds of Collateral. Obligors shall request in writing and
otherwise take all reasonable steps to ensure that all payments on Accounts or
otherwise relating to Collateral are made directly to a Dominion Account (or a
lockbox relating to a Dominion Account). If any Obligor or Subsidiary receives
cash or Payment Items with respect to any Collateral, it shall hold same in
trust for Agent and promptly (not later than the next Business Day) deposit same
into a Dominion Account.
     8.3. Administration of Inventory.

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          8.3.1. Records and Reports of Inventory. Each Obligor shall keep
accurate and complete records of its Inventory, including costs and daily
withdrawals and additions, and shall submit to Agent inventory reports in form
reasonably satisfactory to Agent, on such periodic basis as Agent may request.
Each Obligor shall conduct a physical inventory at least once per calendar year
(and on a more frequent basis if requested by Agent when an Event of Default
exists) and periodic cycle counts consistent with historical practices, and
shall provide to Agent a report based on each such inventory and count promptly
upon completion thereof, together with such supporting information as Agent may
request. Agent may participate in and observe each inventory or physical count.
          8.3.2. Returns of Inventory. No Obligor shall return any Inventory to
a supplier, vendor or other Person, whether for cash, credit or otherwise,
unless (a) such return is in the Ordinary Course of Business and (b) no Event of
Default, Tranche A Overadvance or Tranche A-1 Overadvance exists or would result
therefrom.
          8.3.3. Acquisition, Sale and Maintenance. No Obligor shall acquire or
accept any Inventory which is part of the Borrowing Base on consignment or
approval. No Obligor shall sell any Inventory on consignment or approval.
Obligors shall use, store and maintain all Inventory with reasonable care and
caution, in accordance with applicable standards of any insurance and in
conformity with all Applicable Law, and shall make current rent payments (within
applicable grace periods provided for in leases) at all locations where any
Collateral is located.
     8.4. Administration of Equipment.
          8.4.1. Records and Schedules of Equipment. Each Obligor shall keep
accurate and complete records of its Equipment, including kind, quality,
quantity, cost, acquisitions and dispositions thereof, and shall submit to
Agent, on such periodic basis as Agent may request, a current schedule thereof,
in form satisfactory to Agent. Promptly upon request, Obligors shall deliver to
Agent evidence of their ownership or interests in any Equipment.
          8.4.2. Dispositions of Equipment. No Obligor shall sell, lease or
otherwise dispose of any Equipment, without the prior written consent of Agent,
other than (a) a Permitted Asset Disposition; and (b) replacement of Equipment
that is worn, damaged or obsolete with Equipment of like function and value, if
the replacement Equipment is acquired substantially contemporaneously with such
disposition and is free of Liens.
          8.4.3. Condition of Equipment. The Equipment is in good operating
condition and repair, and all necessary replacements and repairs have been made
so that the value and operating efficiency of the Equipment is preserved at all
times, reasonable wear and tear excepted. Except where failure to do so would
not reasonably be expected to result in a Material Adverse Effect, each Obligor
shall ensure that the Equipment is mechanically and structurally sound, and
capable of performing the functions for which it was designed, in accordance
with the manufacturer’s published and recommended specifications. No Obligor
shall permit any Equipment to become affixed to real Property unless any
landlord or mortgagee delivers a Lien Waiver or similar instrument.
     8.5. Administration of Deposit Accounts. Schedule 8.5 sets forth all
Deposit Accounts maintained by Obligors, including all Dominion Accounts and the
Borrower Account. Each Obligor shall take all actions necessary to establish
Agent’s control of each such Deposit Account (other than (i) an account
exclusively used for payroll, payroll taxes or employee benefits, (ii) an
account containing not more that $50,000 at any time; provided that the
aggregate amounts contained in all such accounts permitted by this part
(ii) shall not exceed $500,000 at any time or (iii) the accounts listed on
Schedule 8.5(c) maintained at Wachovia Bank, N.A so long as, the average account
balances in such accounts described in this clause (iii) are in amounts
consistent with the ordinary course of business and past practices of the
Obligors); provided that with respect to the Deposit Accounts listed on
Schedule 8.5(a)

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such control arrangements shall not be required to be in place until the date
that is 90 (ninety) days after the Closing Date. Each Obligor shall be the sole
account holder of each Deposit Account, other than the Borrower Account, and
shall not allow any other Person (other than Agent) to have control over a
Deposit Account, other than the Borrower Account, over which the Obligors may
exercise control, or any Property deposited therein. Each Obligor shall promptly
notify Agent of any opening or closing of a Deposit Account and, with the
consent of Agent, will amend Schedule 8.5 to reflect same.
     8.6. General Provisions.
          8.6.1. Location of Collateral. All tangible items of Collateral, other
than (i) tangible inventory having an aggregate value of no more than $500,000,
and (ii) Inventory in transit, shall at all times be kept by Obligors at the
business locations set forth in Schedule 8.6.1, except that Obligors may
(a) make sales or other dispositions of Collateral in accordance with
Section 10.2.6; and (b) move Collateral to another location in the United
States, so long as, if such Collateral has an aggregate value of more than
$500,000 the Borrower Agent has provided Agent with 30 Business Days prior
written notice thereof.
          8.6.2. Insurance of Collateral; Condemnation Proceeds.
          (a) Each Obligor shall maintain insurance with respect to the
Collateral, covering casualty, hazard, public liability, theft, malicious
mischief, and such other risks, in such amounts, with such endorsements, and
with such insurers (rated A or better by A.M. Best Rating Guide) as are
reasonably satisfactory to Agent. All proceeds under each policy shall be
payable to Agent. From time to time upon request, Obligors shall deliver to
Agent the originals or certified copies of its insurance policies and updated
flood plain searches. Unless Agent shall agree otherwise, each policy shall
include reasonably satisfactory endorsements (i) showing Agent as sole loss
payee or additional insured, as appropriate; (ii) requiring 30 days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever; and (iii) specifying that the interest of Agent shall not be
impaired or invalidated by any act or neglect of any Obligor or the owner of the
Property, nor by the occupation of the premises for purposes more hazardous than
are permitted by the policy. If any Obligor fails to provide and pay for such
insurance, Agent may, at its option, but shall not be required to, procure the
insurance and charge Obligors therefor. Each Obligor agrees to deliver to Agent,
promptly as rendered, copies of all reports made to insurance companies. While
no Event of Default exists, Obligors may settle, adjust or compromise any
insurance claim, as long as the proceeds are delivered to Agent. If an Event of
Default exists, only Agent shall be authorized to settle, adjust and compromise
such claims.
          (b) Any proceeds of insurance (other than proceeds from workers’
compensation or D&O insurance) and any awards arising from condemnation of any
Collateral shall be paid to Agent.
          (c) If requested by Obligors in writing within 15 days after Agent’s
receipt of any insurance proceeds or condemnation awards relating to any loss or
destruction of Equipment or Real Estate, Obligors may use such proceeds or
awards to repair or replace such Equipment or Real Estate (and until so used,
the proceeds shall, at the Borrower’s election be held by Agent as Cash
Collateral) as long as (i) no Default or Event of Default exists; (ii) such
repair or replacement is promptly undertaken and concluded, in accordance with
plans reasonably satisfactory to Agent; (iii) replacement buildings are
constructed on the sites of the original casualties (or in close proximity
thereto) and are of comparable size, quality and utility to the destroyed
buildings; (iv) the repaired or replaced Property is free of Liens, other than
Permitted Liens; (v) Obligors comply with disbursement procedures for such
repair or replacement as Agent may reasonably require; and (vi) the aggregate
amount of such proceeds or awards from any single casualty or condemnation does
not exceed $2,000,000. Any such proceeds or awards not applied to repair or
replace such Equipment or Real Estate in accordance with this Section 8.6.2(c)
shall be applied, by the Agent, to the Obligations in accordance with
Section 5.5.

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          8.6.3. Protection of Collateral. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping any Collateral, all
Taxes (other than Excluded Taxes) payable with respect to any Collateral
(including any sale thereof), and all other payments required to be made by
Agent to any Person to realize upon any Collateral, shall be borne and paid by
Obligors. Agent shall not be liable or responsible in any way for the
safekeeping of any Collateral, for any loss or damage thereto (except for
reasonable care in its custody while Collateral is in Agent’s actual
possession), for any diminution in the value thereof, or for any act or default
of any warehouseman, carrier, forwarding agency or other Person whatsoever, but
the same shall be at Obligors’ sole risk.
          8.6.4. Defense of Title to Collateral. Each Obligor shall at all times
defend its title to Collateral and Agent’s Liens therein against all Persons,
claims and demands whatsoever, except Permitted Liens.
     8.7. Power of Attorney. Each Obligor hereby irrevocably constitutes and
appoints Agent (and all Persons designated by Agent) as such Obligor’s true and
lawful attorney (and agent-in-fact) for the purposes provided in this
Section 8.7. Agent, or Agent’s designee, may, without notice and in either its
or an Obligor’s name, but at the cost and expense of Obligors:
          (a) Endorse an Obligor’s name on any Payment Item or other proceeds of
Collateral (including proceeds of insurance) that come into Agent’s possession
or control; and
          (b) During an Event of Default, (i) notify any Account Debtors of the
assignment of their Accounts, demand and enforce payment of Accounts, by legal
proceedings or otherwise, and generally exercise any rights and remedies with
respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or
release any Accounts or other Collateral, or any legal proceedings brought to
collect Accounts or Collateral; (iii) sell or assign any Accounts and other
Collateral upon such terms, for such amounts and at such times as Agent deems
advisable; (iv) take control, in any manner, of any proceeds of Collateral;
(v) prepare, file and sign an Obligor’s name to a proof of claim or other
document in a bankruptcy of an Account Debtor, or to any notice, assignment or
satisfaction of Lien or similar document; (vi) receive, open and dispose of mail
addressed to an Obligor, and notify postal authorities to change the address for
delivery thereof to such address as Agent may designate; (vii) endorse any
Chattel Paper, Document, Instrument, invoice, freight bill, bill of lading, or
similar document or agreement relating to any Accounts, Inventory or other
Collateral; (viii) use an Obligor’s stationery and sign its name to
verifications of Accounts and notices to Account Debtors; (ix) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to any Collateral; (x) make and adjust
claims under policies of insurance; (xi) take any action as may be necessary or
appropriate to obtain payment under any letter of credit or banker’s acceptance
for which an Obligor is a beneficiary; and (xii) take all other actions as Agent
deems appropriate to fulfill any Obligor’s obligations under the Loan Documents.
SECTION 9. REPRESENTATIONS AND WARRANTIES
     9.1. General Representations and Warranties. To induce Agent and Lenders to
enter into this Agreement and to make available the Commitments, Loans and
Letters of Credit, each Obligor represents and warrants that:
          9.1.1. Organization and Qualification. Each Obligor and Subsidiary is
duly organized, validly existing and in good standing or subsisting, as
applicable under the laws of the jurisdiction of its organization. Each Obligor
and Subsidiary is duly qualified, authorized to do business and in good standing
as a foreign corporation in each jurisdiction where failure to be so qualified
could reasonably be expected to have a Material Adverse Effect.

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          9.1.2. Power and Authority. Each Obligor is duly authorized to
execute, deliver and perform its Loan Documents. The execution, delivery and
performance of the Loan Documents by each Obligor have been duly authorized by
all necessary action, and do not (a) require any consent or approval of any
holders of Equity Interests of any Obligor, other than those already obtained;
(b) contravene the Organic Documents of any Obligor; (c) violate or cause a
material default under any Applicable Law or Material Contract; or (d) result in
or require the imposition of any Lien (other than Permitted Liens and Liens
granted hereunder) on any Property of any Obligor.
          9.1.3. Enforceability. Each Loan Document is a legal, valid and
binding obligation of each Obligor party thereto, enforceable against each
Obligor in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally and by general equitable principles.
          9.1.4. Capital Structure. Schedule 9.1.4 shows, for each Obligor and
Subsidiary (other than the Parent), its name, its jurisdiction of organization,
its authorized and issued Equity Interests, the holders of its Equity Interests,
and all agreements binding on such holders with respect to their Equity
Interests. Each Obligor has good title to its Equity Interests in its
Subsidiaries, subject only to Agent’s Lien, and all such Equity Interests are
duly issued, fully paid and non-assessable. There are no outstanding options to
purchase, warrants, subscription rights, agreements to issue or sell,
convertible interests, phantom rights or powers of attorney relating to any
Equity Interests of any Obligor or Subsidiary (other than the Parent).
          9.1.5. Corporate Names; Locations. During the five years preceding the
Closing Date, except as shown on Schedule 9.1.5, no Obligor or Subsidiary has
been known as or used any corporate, fictitious or trade names, has been the
surviving corporation of a merger or combination, or has acquired any
substantial part of the assets of any Person. The chief executive offices and
other places of business of Obligors and Subsidiaries are shown on
Schedule 8.6.1.
          9.1.6. Title to Properties; Priority of Liens. Each Obligor and
Subsidiary has good and marketable title to (or valid leasehold interests in)
all of its Real Estate, and good title to all of its personal Property,
including all Property reflected in any financial statements delivered to Agent
or Lenders, in each case free of Liens except Permitted Liens. Each Obligor and
Subsidiary has paid and discharged all lawful claims that, if unpaid, could
become a Lien on its Properties, other than Permitted Liens. All Liens of Agent
in the Collateral are duly perfected, first priority Liens, subject only to
Permitted Liens that are expressly allowed to have priority over Agent’s Liens.
          9.1.7. Security Documents. The Security Documents are effective to
create in favor of the Agent a legal, valid and enforceable first priority
security interest in and Lien upon the Collateral.
          9.1.8. Financial Statements. The consolidated and, if applicable,
combined balance sheets, and related statements of income, cash flow and
shareholder’s equity, of Obligors and Subsidiaries that have been and are
hereafter delivered to Agent and Lenders, pursuant to Section 6.1(n) or
otherwise, are prepared in accordance with GAAP, and fairly present the
financial positions and results of operations of Obligors and Subsidiaries at
the dates and for the periods indicated, subject, in the case of interim
statements, to normal year-end adjustments. All projections delivered from time
to time to Agent and Lenders have been prepared in good faith, based on
reasonable assumptions in light of the circumstances at such time. Since
January 29, 2005 there has been no change in the condition, financial or
otherwise, of any Obligor or Subsidiary that could reasonably be expected to
have a Material Adverse Effect. Each Obligor and Subsidiary is Solvent.
          9.1.9. Surety Obligations. No Obligor or Subsidiary is obligated as
surety or indemnitor under any bond or other contract that assures payment or
performance of any obligation of any Person, except as permitted hereunder.

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          9.1.10. Taxes. Each Obligor and Subsidiary has filed all material
federal, state and local tax returns and other reports that it is required by
law to file, and has paid, or made provision for the payment of, all Taxes upon
it, its income and its Properties that are due and payable, except to the extent
being Properly Contested. The provision for Taxes on the books of each Obligor
and Subsidiary is adequate for all years not closed by applicable statutes, and
for its current Fiscal Year.
          9.1.11. Brokers. There are no brokerage commissions, finder’s fees or
investment banking fees payable in connection with any transactions contemplated
by the Loan Documents.
          9.1.12. Intellectual Property. Each Obligor and Subsidiary owns or has
the lawful right to use all Intellectual Property necessary for the conduct of
its business, without conflict with any rights of others. There is no pending
or, to any Obligor’s knowledge, threatened material Intellectual Property Claim
with respect to any Obligor, any Subsidiary or any of their Property (including
any Intellectual Property). All Intellectual Property registered with the U.S.
Patent and Trademark Office which is owned by any Obligor or Subsidiary is shown
on Schedule 9.1.12.
          9.1.13. Governmental Approvals. Each Obligor and Subsidiary has, is in
compliance with, and is in good standing with respect to, all Governmental
Approvals necessary to conduct its business and to own, lease and operate its
Properties. All necessary material import, export or other licenses, permits or
certificates for the import or handling of any goods or other Collateral have
been procured and are in effect, and Obligors and Subsidiaries have complied
with all foreign and domestic laws with respect to the shipment and importation
of any goods or Collateral, except where noncompliance could not reasonably be
expected to have a Material Adverse Effect.
          9.1.14. Compliance with Laws. Each Obligor and Subsidiary has duly
complied, and its Properties and business operations are in compliance, in all
material respects with all Applicable Law, except where noncompliance could not
reasonably be expected to have a Material Adverse Effect. There have been no
citations, notices or orders of material noncompliance issued to any Obligor or
Subsidiary under any Applicable Law.
          9.1.15. Compliance with Environmental Laws. Except as disclosed on
Schedule 9.1.15, no Obligor’s or Subsidiary’s past or present operations, Real
Estate or other Properties are subject to any federal, state or local
investigation to determine whether any remedial action is needed to address any
environmental pollution, hazardous material or environmental clean-up. No
Obligor or Subsidiary has received any Environmental Notice. No Obligor or
Subsidiary has any material contingent liability with respect to any
Environmental Release, environmental pollution or hazardous material on any Real
Estate now or previously owned, leased or operated by it. The representations
and warranties contained in the Environmental Agreement are true and correct in
all material respects on the Closing Date.
          9.1.16. Burdensome Contracts. No Obligor or Subsidiary is a party or
subject to any contract, agreement or charter restriction that could reasonably
be expected to have a Material Adverse Effect. No Obligor or Subsidiary is party
or subject to any material Restrictive Agreement, except as shown on
Schedule 9.1.16, none of which prohibit the execution or delivery of any Loan
Documents by an Obligor nor the performance by an Obligor of any obligations
thereunder.
          9.1.17. Litigation. Except as shown on Schedule 9.1.17, there are no
proceedings or investigations pending or, to any Obligor’s knowledge, threatened
against any Obligor or Subsidiary, or any of their businesses, operations,
Properties, prospects or conditions, that (a) relate to any Loan Documents or
transactions contemplated thereby; or (b) could reasonably be expected to have a
Material Adverse Effect if determined adversely to any Obligor or Subsidiary. No
Obligor or Subsidiary is in default with respect to any order, injunction or
judgment of any Governmental Authority.

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          9.1.18. Insurance. The properties of the Obligor and its Subsidiaries
are insured with financially sound and reputable insurance companies not
Affiliates of the Obligor, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar businesses
and owning similar properties in localities where the Obligor or the applicable
Subsidiary operates.
          9.1.19. No Defaults. No event or circumstance has occurred or exists
as of the date of this Agreement that constitutes a Default or Event of Default.
No Obligor or Subsidiary is in default, and no event or circumstance has
occurred or exists that with the passage of time or giving of notice would
constitute a default, under any Material Contract or in the payment of any
Borrowed Money. There is no basis upon which any party (other than an Obligor or
Subsidiary) could terminate a Material Contract prior to its scheduled
termination date.
          9.1.20. ERISA. No Obligor or Subsidiary has any Multiemployer Plan or
Foreign Plan.
          9.1.21. Trade Relations. There exists no actual or threatened
termination, limitation or modification of any business relationship between any
Obligor or Subsidiary and any customer or supplier, or any group of customers or
suppliers, who individually or in the aggregate are material to the business of
such Obligor or Subsidiary. There exists no condition or circumstance that could
reasonably be expected to impair the ability of any Obligor or Subsidiary to
conduct its business at any time hereafter in substantially the same manner as
conducted on the Closing Date.
          9.1.22. Labor Relations. Except as described on Schedule 9.1.22, no
Obligor or Subsidiary is party to or bound by any (a) management agreement,
(b) consulting agreement where the aggregate obligations of such Obligor or
Subsidiary thereunder are in excess of $100,000 or (c) collective bargaining
agreement. There are no material grievances, disputes or controversies with any
union or other organization of any Obligor’s or Subsidiary’s employees, or, to
any Obligor’s knowledge, any asserted or threatened strikes, work stoppages or
demands for collective bargaining.
          9.1.23. Intentionally Omitted.
          9.1.24. Not a Regulated Entity. No Obligor is (a) an “investment
company” or a “person directly or indirectly controlled by or acting on behalf
of an investment company” within the meaning of the Investment Company Act of
1940; (b) a “holding company,” a “subsidiary company” of a “holding company,” or
an “affiliate” of either, within the meaning of the Public Utility Holding
Company Act of 1935; or (c) subject to regulation under the Federal Power Act,
the Interstate Commerce Act, any public utilities code or any other Applicable
Law regarding its authority to incur Debt.
          9.1.24. Margin Stock. No Obligor or Subsidiary is engaged, principally
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying any Margin Stock. No Loan proceeds or
Letters of Credit will be used by Obligors to purchase or carry, or to reduce or
refinance any Debt incurred to purchase or carry, any Margin Stock or for any
related purpose governed by Regulations T, U or X of the Board of Governors.
          9.1.25. Plan Assets. No Obligor is an entity deemed to hold “plan
assets” within the meaning of 29 C.F.R. §2510.3-101 of any “employee benefit
plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA
or any “plan” (within the meaning of Section 4975 of the Internal Revenue Code),
and neither the execution of this Agreement nor the funding of any Loans gives
rise to a prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code.
          9.1.26. Complete Disclosure. No (x) Loan Document or (y) information
provided by or on behalf of any Obligor and included in the confidential
information memorandum, dated January 2006,

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and delivered to the Lenders in connection with the syndication of the
Commitments, contains any untrue statement of a material fact, nor fails to
disclose any material fact necessary to make the statements contained therein
not materially misleading.
SECTION 10. COVENANTS AND CONTINUING AGREEMENTS
     10.1. Affirmative Covenants. For so long as any Commitments or Obligations
are outstanding, each Obligor shall, and shall cause each Subsidiary to:
          10.1.1. Inspections; Appraisals. (a) Permit Agent from time to time,
subject (except when a Default or Event of Default exists) to reasonable notice
and normal business hours, to visit and inspect the Properties of any Obligor,
inspect, audit and make extracts from any Obligor’s books and records, and
discuss with its officers, employees, agents, advisors and independent
accountants such Obligor’s business, financial condition, assets, prospects and
results of operations. Lenders may participate in any such visit or inspection,
at their own expense. Neither Agent nor any Lender shall have any duty to any
Obligor to make any inspection, nor to share any results of any inspection,
appraisal or report with any Obligor. To the extent any appraisal or other
information is shared by Agent or a Lender with any Obligor, such Obligor
acknowledges that it was prepared by Agent and Lenders for their purposes and
Obligors shall not be entitled to rely upon it.
          (b) Reimburse Agent for all charges, costs and expenses of Agent in
connection with (i) examinations of any Obligor’s books and records or any other
financial or Collateral matters as Agent deems appropriate, up to (x) at all
times prior to the first date on which Excess Availability is below
$125,000,000, twice per Loan Year and (y) at all times thereafter until such
time as such Excess Availability is $125,000,000 or more for thirty consecutive
days, four times per Loan Year; (ii) appraisals of Inventory (x) at all times
prior to the first date on which Excess Availability is below $125,000,000, once
per Loan Year, and (y) at all times thereafter, until such time as such Excess
Availability is $125,000,000 or more for thirty consecutive days, twice per Loan
Year; (iii) appraisals of Eligible Machinery and Equipment and Eligible Real
Estate, in form and detail reasonably satisfactory to Agent, once per Loan Year
if so requested by Agent or the Required Lenders; and (iv) environmental
assessment reports as Agent deems appropriate in its reasonable discretion, with
respect to the Eligible Real Estate of the Obligors; provided that if an
examination or appraisal is initiated during an Event of Default, all charges,
costs and expenses therefor shall be reimbursed by Obligors without regard to
such limits. Subject to the foregoing, Obligors shall pay Agent’s then standard
charges for each day that an employee of Agent or its Affiliates is engaged in
any examination activities, and shall pay the standard charges of Agent’s
internal appraisal group. This Section shall not be construed to limit Agent’s
right to conduct examinations or to obtain appraisals at any time in its
discretion, nor to use third parties for such purposes.
          10.1.2. Financial and Other Information. Keep adequate records and
books of account with respect to its business activities, in which proper
entries are made in accordance with GAAP reflecting all financial transactions;
and furnish to Agent and Lenders:
          (a) within 90 days after the close of each Fiscal Year, balance sheets
as of the end of such Fiscal Year and the related statements of income, cash
flow and shareholders’ equity for such Fiscal Year, on a consolidated basis for
Obligors and Subsidiaries, which consolidated statements shall all be in
reasonable detailed and prepared in accordance with GAAP, audited and
accompanied by (i) a certification (without qualification as to scope, “going
concern” or similar items) by a firm of independent certified public accountants
of recognized standing selected by Borrowers and reasonably acceptable to Agent
(with the Agent hereby acknowledging and agreeing that each of
PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte & Touche are
acceptable), which certification shall be prepared in accordance with GAAP and
applicable Securities Laws and (ii) an attestation report of such certified
public accountants as to the Obligors’ internal controls pursuant to Section 404
of Sarbanes-Oxley, and

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shall set forth in comparative form corresponding figures for the preceding
Fiscal Year and other information reasonably acceptable to Agent;
          (b) within 45 days after the end of each fiscal quarter (but within
60 days after the last fiscal quarter in a Fiscal Year), unaudited balance
sheets as of the end of such fiscal quarter and the related statements of income
and cash flow for such fiscal quarter and for the portion of the Fiscal Year
then elapsed, on a (i) consolidated basis for Obligors and Subsidiaries and (ii)
combined basis for Obligors and Subsidiaries other than the SPE, setting forth
in comparative form corresponding figures for the preceding Fiscal Year and
certified by the Borrower Agent pursuant to a certificate signed on behalf of
Borrower Agent by its chief financial officer (with such certification to be in
such Person’s capacity as chief financial officer of such Obligor and not in
such Person’s individual capacity) as prepared in accordance with GAAP and
fairly presenting the financial position and results of operations for such
quarterly period, subject to normal year-end adjustments and the absence of
footnotes;
          (c) within 30 days after the end of each month (but within 60 days
after the last month in a Fiscal Year), unaudited balance sheets as of the end
of such month and the related statements of income and cash flow for such month
and for the portion of the Fiscal Year then elapsed, on a consolidated basis for
Parent and Subsidiaries, setting forth in comparative form corresponding figures
for the preceding Fiscal Year and certified by the chief financial officer (with
such certification to be in such Person’s capacity as chief financial officer of
such Obligor and not in such Person’s individual capacity) of Borrower Agent as
prepared in accordance with GAAP and fairly presenting the financial position
and results of operations for such month and period, subject to normal year-end
adjustments and the absence of footnotes;
          (d) concurrently with delivery of financial statements under clauses
(a) and (b) above, or more frequently if requested by Agent while an Event of
Default exists, a Compliance Certificate executed by the chief financial officer
of Borrower Agent (with such certification to be in such Person’s capacity as
chief financial officer of Borrower Agent and not in such Person’s individual
capacity);
          (e) concurrently with delivery of financial statements under clause
(a) above, and otherwise promptly after the request by Agent, copies of any
detailed audit reports or management letters submitted to the board of directors
(or the audit committee of the board of directors) of any Obligor by independent
accountants in connection with the accounts or books of any Obligor or any
Subsidiary, or any audit of any of them;
          (f) not later than 30 days prior to the end of each Fiscal Year,
projections of Obligors’ consolidated balance sheets, results of operations,
cash flow and Availability for the next three Fiscal Years, year by year, and
for the next Fiscal Year, month by month;
          (g) at Agent’s request, a listing of each Obligor’s trade payables,
specifying the trade creditor and balance due, and a detailed trade payable
aging;
          (h) promptly after the sending or filing thereof, copies of any proxy
statements, financial statements or reports that any Obligor has made generally
available to its shareholders; copies of any regular, periodic and special
reports or registration statements or prospectuses that any Obligor files with
the Securities and Exchange Commission or any other Governmental Authority, or
any securities exchange; and copies of any press releases or other statements
made available by an Obligor to the public concerning material changes to or
developments in the business of such Obligor, if an to the extent such
information is not available on the SEC’s or the Parent’s website;
          (i) promptly after the sending or filing thereof, copies of any annual
report to be filed in connection with each Plan or Foreign Plan;

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          (j) promptly upon delivery thereof, copies of all documents and
materials of a material financial nature or otherwise provided to any other
creditor of any Obligor or any Subsidiary;
          (k) promptly upon request therefor, all information pertaining to the
Obligors and their Subsidiaries reasonably requested by any Lender in order for
such Lender to comply with the provisions of the Patriot Act; and
          (l) such other reports and information (financial or otherwise) as
Agent may request from time to time in connection with any Collateral or any
Obligor’s or Subsidiary’s financial condition or business.
     Documents required to be delivered pursuant to Section 10.1.2(a) or
Section 10.1.2(b) (to the extent any such documents are included in materials
otherwise filed with the Securities and Exchange Commission) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date (i) on which the applicable Borrower posts such documents, or provides
a link thereto on such Borrower’s website on the Internet at the website address
indicated in writing to Agent and Lenders by the Borrower Agent; or (ii) on
which such documents are posted on the Borrower’s behalf on an Internet or
intranet website, if any, to which each Lender and Agent have access (whether a
commercial, third-party website or whether sponsored by Agent); provided that:
(i) such Borrower shall deliver paper copies of such documents to Agent or any
Lender that requests such Borrower to deliver such paper copies until a written
request to cease delivering paper copies is given by Agent or such Lender and
(ii) such Borrower shall notify Agent and each Lender (by telecopier or
electronic mail) of the posting of any such documents and provide to Agent by
electronic mail electronic versions (i.e., soft copies) of such documents.
Notwithstanding anything contained herein, in every instance the Borrowers shall
be required to provide paper copies of the Compliance Certificates to Agent and
the Lenders. Except for such Compliance Certificates, Agent shall have no
obligation to request the delivery or to maintain copies of the documents
referred to above, and in any event shall have no responsibility to monitor
compliance by the Borrowers with any such request for delivery, and each Lender
shall be solely responsible for requesting delivery to it or maintaining its
copies of such documents.
     The Obligors hereby acknowledge that (a) Agent and/or Banc of America
Securities LLC will make available to the Lenders and the Issuing Bank materials
and/or information provided by or on behalf of the Obligors hereunder
(collectively, “Borrower Materials”) by posting the Borrower Materials on
IntraLinks or another similar electronic system (the “Platform”) and (b) certain
of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to
receive material non-public information with respect to the Obligors or their
securities) (each, a “Public Lender”). The Obligors hereby agree that (w) all
Borrower Materials that are to be made available to Public Lenders shall be
clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that
the word “PUBLIC” shall appear prominently on the first page thereof; (x) by
marking Borrower Materials “PUBLIC,” the Obligors shall be deemed to have
authorized the Agent, the Banc of America Securities LLC, the Issuing Bank and
the Lenders to treat such Borrower Materials as not containing any material
non-public information with respect to the Obligors or their securities for
purposes of United States Federal and state securities laws (provided, however,
that to the extent such Borrower Materials constitute Information, they shall be
treated as set forth in Section 14.11); (y) all Borrower Materials marked
“PUBLIC” are permitted to be made available through a portion of the Platform
designated “Public Investor;” and (z) Agent and Banc of America Securities LLC
shall be entitled to treat any Borrower Materials that are not marked “PUBLIC”
as being suitable only for posting on a portion of the Platform not designated
“Public Investor.”
          10.1.3. Notices. Notify Agent and Lenders in writing, promptly after
any Senior Officer of the Parent or the Borrower Agent obtaining knowledge
thereof, of any of the following that affects an Obligor: (a) the threat or
commencement of any proceeding or investigation, whether or not covered by
insurance, reasonably likely to result in a Material Adverse Effect; (b) any
material pending or threatened labor dispute, strike or walkout, or the
expiration of any material labor contract; (c) any material default

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under or termination of a Material Contract; (d) the existence of any Default or
Event of Default; (e) any judgment in an amount exceeding $1,000,000; (f) the
assertion of any Intellectual Property Claim, if an adverse resolution is
reasonably likely to result in a Material Adverse Effect; (g) any violation or
asserted violation of any Applicable Law (including ERISA, OSHA, FLSA, or any
Environmental Laws), if an adverse resolution is reasonably likely to result in
a Material Adverse Effect; (h) any material Environmental Release by an Obligor
or on any Property owned, leased or occupied by an Obligor; or receipt of any
Environmental Notice; (i) the discharge of or any withdrawal or resignation by
Obligors’ independent accountants; or (j) any opening of a new office or place
of business where Collateral with a fair market value of $500,000 or more will
be located, at least 30 days prior to such opening.
          10.1.4. Landlord and Storage Agreements. Upon request, provide Agent
with copies of all existing agreements, and promptly after execution thereof
provide Agent upon request with copies of all future agreements, between an
Obligor and any landlord, warehouseman, processor, shipper, bailee or other
Person that owns any premises at which any Collateral having an aggregate value
of more than $500,000 may be kept or that otherwise may possess or handle any
Collateral.
          10.1.5. Compliance with Laws; Organic Documents; Material Contracts.
Comply (a) with all Applicable Laws, including ERISA, Environmental Laws, FLSA,
OSHA, Anti-Terrorism Laws, and laws regarding collection and payment of Taxes,
and maintain all Governmental Approvals necessary to the ownership of its
Properties or conduct of its business, unless failure to comply or maintain
could not reasonably be expected to have a Material Adverse Effect, (b) with all
Organic Documents unless failure to comply therewith would not (x) be reasonably
expected to have a Material Adverse Effect and (y) be reasonably expected to
have a materially adverse effect on the Agent or any Lender and (c) with all of
its Material Contracts except in each case where the failure to comply therewith
could not reasonably be expected to have a Material Adverse Effect. Without
limiting the generality of the foregoing, if any material Environmental Release
occurs at or on any Properties of any Obligor or Subsidiary, it shall act
promptly and diligently to investigate and report to Agent and all appropriate
Governmental Authorities the extent of, and to make appropriate remedial action
to eliminate, such Environmental Release, whether or not directed to do so by
any Governmental Authority.
          10.1.6. Taxes. Pay and discharge all Taxes prior to the date on which
they become delinquent or penalties attach, unless such Taxes are being Properly
Contested.
          10.1.7. Insurance. In addition to the insurance required hereunder
with respect to Collateral, maintain insurance with insurers (rated A or better
by Best Rating Guide) reasonably satisfactory to Agent, with respect to the
Properties, business and business interruption of Obligors and Subsidiaries of
such type (including product liability, workers’ compensation, larceny,
embezzlement, or other criminal misappropriation insurance), in each case, in
such amounts, and with such coverages and deductibles as are customary for
companies similarly situated.
          10.1.8. Licenses. Keep each License affecting any Collateral
(including the manufacture, distribution or disposition of Inventory) or any
other material Property of Obligors and Subsidiaries in full force and effect,
if the failure to maintain such license is reasonably likely to result in a
Material Adverse Effect.
          10.1.9. Future Subsidiaries. Promptly notify Agent upon any Person
becoming a Subsidiary and, unless such Person is a Foreign Subsidiary or SPE,
cause it to guaranty the Obligations in a manner reasonably satisfactory to
Agent, and to execute and deliver such documents, instruments and agreements and
to take such other actions as Agent shall require to evidence and perfect a
first priority Lien in favor of Agent (for the benefit of Secured Parties) on
all assets of such Person, including delivery of such legal opinions, in form
and substance reasonably satisfactory to Agent, as it shall deem appropriate.

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          10.1.10. Intentionally Omitted.
          10.1.11. Preservation of Existence. Preserve, renew and maintain in
full force and effect its legal existence and good standing under the laws of
the jurisdiction of its organization except in a transaction permitted by
Section 10.2.6 or Section 10.2.9.
          10.1.12. Maintenance of Properties. Maintain, preserve and protect all
of its material properties and equipment necessary in the operation of its
business in working order and condition, ordinary wear and tear excepted and
make all necessary repairs thereto and renewals and replacements thereof except
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
          10.1.13. Books and Records. Maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all material financial transactions and
matters involving the assets and business of such Obligors or such Subsidiary,
as the case may be.
          10.1.14. Operation and Maintenance Plan. If recommended by any
environmental report furnished to the Agent and if required by applicable
Environmental Law with respect to any individual parcel of Real Estate, the
Obligors shall establish and comply with an operations and maintenance program
with respect to such individual parcel of Real Estate, in form and substance
reasonably acceptable to Agent, prepared by an environmental consultant
reasonably acceptable to Agent. Without limiting the generality of the preceding
sentence, Agent may require (a) periodic notices or reports regarding matters
addressed by the operation and maintenance program to Agent in form, substance
and at such intervals as Agent may reasonably require, (b) and amendment to such
operations and maintenance program reasonably required to address changing
circumstances or applicable laws, (c) access to such parcel of Real Estate,
subject to Section 10.1.1, to review and assess the environmental condition of
such parcel and Obligors’ compliance with such operations and maintenance
program, and (d) variation of the operations and maintenance program reasonably
required in response to the reports provided by any such consultants, as
required by applicable Environmental Law.
     10.2. Negative Covenants. For so long as any Commitments or Obligations are
outstanding, each Obligor shall not, and shall cause each Subsidiary not to:
          10.2.1. Permitted Debt. Create, incur, guarantee or suffer to exist
any Debt, except:
          (a) the Obligations;
          (b) the Mortgage Loan Debt;
          (c) the Senior Note Debt;
          (d) Permitted Purchase Money Debt;
          (e) Borrowed Money (other than the Obligations, Mortgage Loan Debt,
the Senior Note Debt and Permitted Purchase Money Debt), but only to the extent
outstanding on the Closing Date, not satisfied with proceeds of the initial
Loans and set forth on Schedule 10.2.1;
          (f) Bank Product Debt; provided that with respect to such Bank Product
Debt in respect of Hedging Agreements, such Obligor is otherwise permitted to
enter into such Hedging Agreement pursuant to Section 10.2.15;
          (g) Permitted Contingent Obligations;

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          (h) Refinancing Debt as long as each Refinancing Condition is
satisfied;
          (i) Debt that is not included in any of the preceding clauses of this
Section 10.2.1, is not secured by a Lien and the principal amount thereof does
not exceed, in the aggregate at any time (x) $5,000,000 minus (y) the then
outstanding principal amount of Permitted Purchase Money Debt in excess of
$20,000,000;
          (j) the guarantee by any Obligor of Debt of another Obligor so long as
such Debt was otherwise permitted to be incurred under this Section 10.2.1;
          (k) Intentionally Omitted;
          (l) the incurrence by any Obligor of Debt arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or guarantees or letters of credit, surety bonds or performance
bonds securing any obligations of any other Obligor pursuant to such agreements,
in any case incurred in connection with the disposition of any business, assets
or capital stock of any Obligor (other than guarantees of Debt incurred by any
Person acquiring all or any portion of such business, assets or capital stock of
such Obligor for the purpose of financing such acquisition), so long as the
principal amount does not exceed the gross proceeds actually received by any
Obligor in connection with such disposition;
          (m) the incurrence by any Obligor of Debt arising from the honoring by
a bank or other financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of business, provided,
however, that such Indebtedness is extinguished within five Business Days of its
Incurrence;
          (n) Debt in respect of loans permitted to be made pursuant to
Section 10.2.7;
          (o) an unsecured guarantee by any Obligor of the obligations of any
other Obligor, as tenant, under any Master Lease; and
          (p) the incurrence by any Obligor and/or any Subsidiary of
non-interest bearing Debt in an aggregate amount not to exceed $12,000,000, with
the proceeds of such Debt to be used to construct and make leasehold
improvements to a new store to be located at the Hawthorne Shopping Center in
Vernon Hills, Illinois and leased by one of the Obligors, with the documents
evidencing such Debt to be in form and substance satisfactory to the Agent in
its reasonable discretion.
          10.2.2. Permitted Liens. Create or suffer to exist any Lien upon any
of its Property, except the following (collectively, “Permitted Liens”):
          (a) Liens in favor of Agent;
          (b) Purchase Money Liens securing Permitted Purchase Money Debt;
          (c) Liens for Taxes not yet due or being Properly Contested;
          (d) statutory Liens (other than Liens for Taxes or imposed under
ERISA) arising in the Ordinary Course of Business, but only if (i) payment of
the obligations secured thereby is not yet due or is being Properly Contested,
and (ii) such Liens do not materially impair the value or use of the Property or
materially impair operation of the business of any Obligor or Subsidiary;
          (e) Liens incurred or deposits made in the Ordinary Course of Business
to secure the performance of tenders, bids, leases, contracts (except those
relating to Borrowed Money), statutory

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obligations and other similar obligations, or arising as a result of progress
payments under government contracts, as long as such Liens are at all times
junior to Agent’s Liens;
          (f) Liens arising by virtue of a judgment or judicial order against
any Obligor or Subsidiary, or any Property of an Obligor or Subsidiary, as long
as such Liens are (i) in existence for less than 20 consecutive days or being
Properly Contested, and (ii) at all times junior to Agent’s Liens;
          (g) easements, rights-of-way, restrictions, covenants or other
agreements of record, and other similar charges or encumbrances on Real Estate,
that do not secure any monetary obligation and do not interfere with the
Ordinary Course of Business;
          (h) normal and customary rights of setoff upon deposits in favor of
depository institutions, and Liens of a collecting bank on Payment Items in the
course of collection;
          (i) Liens on the assets of SPE securing the Mortgage Loan Debt;
          (j) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with any Obligor; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation and
do not extend to any assets other than those of the Person merged into or
consolidated with such Obligor;
          (k) Liens on property existing at the time of acquisition thereof by
any Obligor, provided that such Liens were in existence prior to the
contemplation of such acquisition and do not extend to any property other than
the property so acquired by such Obligor;
          (l) Liens incurred or deposits made in the ordinary course of business
in connection with worker’s compensation, unemployment insurance or other social
security obligations;
          (m) Liens, deposits or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of Indebtedness),
leases, or other similar obligations arising in the ordinary course of business;
          (n) survey exceptions, encumbrances, easements or reservations of, or
rights of other for, rights of way, zoning or other restrictions as to the use
of properties, and defects in title which, in the case of any of the foregoing,
were not incurred or created to secure the payment of Debt, and which in the
aggregate do no materially adversely affect the value of such properties or
materially impair the use for the purposes of which such properties are held by
any Obligor;
          (o) judgment and attachment Liens not giving rise to an Event of
Default and notices of lis pendens and associated rights related to litigation
being contested in good faith by appropriate proceedings and for which adequate
reserves have been made;
          (p) Liens, deposits or pledges to secure public or statutory
obligations, surety, stay, appeal, indemnity, performance or other similar bonds
or obligations; and Liens, deposits or pledges in lieu of such bonds or
obligations, or to secure such bonds or obligations, or to secure letters of
credit in lieu of or supporting the payment of such bonds or obligations;
          (q) any interest or title of a lessor, licensor or sublicensor in the
property subject to any lease, license or sublicense;
          (r) Liens arising from precautionary UCC financing statements
regarding operating leases or consignments;

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          (s) Liens on the leasehold improvements to the store located at the
Hawthorne Shopping Center in Vernon Hills, Illinois, which Liens shall secure
the Debt permitted pursuant to Section 10.2.1(p).
          (t) Liens for assessments and governmental charges not yet delinquent
or being contested in good faith and for which adequate reserves have been
established to the extent required by GAAP;
          (u) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s
and other like Liens imposed by law, arising in the ordinary course of business
and securing obligations that are not overdue by more than 30 days or are being
Properly Contested;
          (v) deposits in the ordinary course of business to secure liability to
insurance carriers;
          (w) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods in the ordinary course of business;
          (x) Liens (i) of a collection bank arising under Section 4-210 of the
Uniform Commercial Code on items in the course of collection, (ii) attaching to
commodity trading accounts or other commodity brokerage amounts incurred in the
ordinary course of business and (iii) in favor of banking institutions arising
as a matter of law encumbering deposits (including the right of set-off) and
which are within the general parameters customary in the banking industry; and
          (y) existing Liens shown on Schedule 10.2.2 and Liens securing
Refinancing Debt in respect thereof.
          10.2.3. Capital Expenditures. Make Capital Expenditures (other than
Capital Expenditures made with insurance proceeds) in excess of (a) $125,000,000
plus (b) $125,000,000 minus the amount of Capital Expenditures (other than
Capital Expenditures made with insurance proceeds) actually made in the Fiscal
Year most recently then ended, in the aggregate during any Fiscal Year.
          10.2.4. Distributions; Upstream Payments. Declare or make any
Distributions, except (i) Upstream Payments or (ii) Permitted Distributions; or
create or suffer to exist any encumbrance or restriction on the ability of a
Subsidiary to make any Upstream Payment, except for restrictions (a) under the
Loan Documents, (b) under Applicable Law, (c) in effect on the Closing Date as
shown on Schedule 9.1.16 and (d) as set forth in documents evidencing
Refinancing Debt with respect to the documents described on Schedule 9.1.16.
          10.2.5. Restricted Investments. Make any Restricted Investment.
          10.2.6. Disposition of Assets. Make any Asset Disposition (other than
any Asset Disposition by the SPE), except a Permitted Asset Disposition, a
disposition of Equipment under Section 8.4.2, or a transfer of Property by any
Obligor to another Obligor.
          10.2.7. Loans. Make any loans or other extensions of credit to any
Person, except (a) advances to an officer or employee for salary, travel
expenses, relocation expenses, commissions and similar items in the Ordinary
Course of Business; (b) prepaid expenses and extensions of trade credit made in
the Ordinary Course of Business; (c) deposits with financial institutions
permitted hereunder; and (d) as long as no Default or Event of Default exists,
intercompany loans by an Obligor to another Obligor.
          10.2.8. Restrictions on Payment of Certain Debt. Make any payments
(whether voluntary or mandatory, or a prepayment, redemption, retirement,
defeasance or acquisition) with respect

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to the Senior Note Debt, the Mortgage Loan Debt and Refinancing Debt of the
Senior Note Debt and the Mortgage Loan Debt other than (a) payments of interest,
fees and expenses due in the ordinary course, (b) regularly scheduled principal
payments with respect to the Mortgage Loan Debt and Refinancing Debt of the
Mortgage Loan Debt, (c) payments of the Senior Note Debt and Mortgage Loan Debt
derived solely from Refinancing Debt which meets the Refinancing Condition and
(d) other payments of Senior Note Debt, Mortgage Loan Debt and Refinancing Debt
of the Senior Note Debt and the Mortgage Loan Debt, so long as (i) where such
payment is not made with proceeds of an offering of the equity securities of the
Parent (A) no Default or Event of Default shall have occurred and be continuing
or would result after giving effect to any such payment, (B) Excess Availability
on the date of the making of such payment, and projected Excess Availability for
the upcoming twelve month period is, in each case, greater than or equal to
$200,000,000, (C) as of the monthly fiscal period most recently then ended, the
Consolidated Fixed Charge Coverage Ratio (consolidated on a pro forma basis
giving effect to the making of such payment) is not less than 1.5:1.0, and
(D) the Borrowers shall have provided the Agent with a certificate not less than
then (10) days prior to the making of such payment executed by a Senior Officer,
evidencing compliance, on a pro forma basis, after giving effect to such
payment, with the requirements set forth in clauses (d)(i)(A), (d)(i)(B) and
(d)(i)(C) above) prior to its due date under the agreements evidencing such Debt
as in effect on the Closing Date (or as amended thereafter with the consent of
Agent) and (ii) where such payment is made with proceeds of an offering of the
equity securities of the Parent, (A) no Default or Event of Default shall have
occurred and be continuing or would result after giving effect to any such
payment, (B) Excess Availability on the date of the making of such payment, and
projected Excess Availability for the upcoming twelve month period is, in each
case, greater than or equal to $150,000,000 and (C) the Borrowers shall have
provided the Agent with a certificate not less than then (10) days prior to the
making of such payment executed by a Senior Officer, evidencing compliance, on a
pro forma basis, after giving effect to such payment, with the requirements set
forth in clauses (d)(ii)(A) and (d)(ii)(B) above).
          10.2.9. Fundamental Changes. (a) Merge, combine or consolidate with
any Person, or liquidate, wind up its affairs or dissolve itself, in each case
whether in a single transaction or in a series of related transactions, except
for (i) mergers or consolidations of an Obligor with another Obligor or
(ii) dissolutions of The Bon-Ton Trade Corp., The Bon-Ton Corp. and/or Capital
City Commons Realty, Inc., so as long as (x) the net assets of such Subsidiaries
remaining after payments to creditors are distributed to an Obligor and (y) in
any event, notwithstanding the preceding clause (x), 100% of the Capital Stock
or other equity securities held by such dissolving Subsidiary are transferred to
an Obligor; or (b) without fifteen (15) days prior written notice to the Agent,
change its name or conduct business under any fictitious name; change its tax,
charter or other organizational identification number; or change its form or
state of organization.
          10.2.10. Subsidiaries. Form or acquire any Subsidiary after the
Closing Date, except in accordance with Sections 10.1.9 and 10.2.5; or permit
any existing Subsidiary to issue any additional Equity Interests except
(a) director’s qualifying shares and (b) Equity Interests issued to an Obligor.
          10.2.11. Organic Documents. Amend, modify or otherwise change, in a
manner which would be materially adverse to any Lender, any of its Organic
Documents as in effect on the Closing Date.
          10.2.12. Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than Obligors and
Subsidiaries.
          10.2.13. Accounting Changes. Make any material change in accounting
treatment or reporting practices, except as required by GAAP and in accordance
with Section 1.2; or change its Fiscal Year.

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          10.2.14. Restrictive Agreements. Become a party to any Restrictive
Agreement, except (a) a Restrictive Agreement as in effect on the Closing Date
and shown on Schedule 9.1.16; (b) a Restrictive Agreement relating to secured
Debt permitted hereunder, if such restrictions apply only to the collateral for
such Debt; (c) customary provisions in leases and other contracts restricting
assignment thereof; and (d) Restrictive Agreements contained in documents
evidencing Refinancing Debt of the Senior Note Debt.
          10.2.15. Hedging Agreements. Enter into any Hedging Agreement, except
to hedge risks arising in the Ordinary Course of Business and not for
speculative purposes.
          10.2.16. Conduct of Business. Engage in any business other than
Permitted Businesses, except to such extent as would not be material to the
Obligors taken as a whole.
          10.2.17. Affiliate Transactions. Enter into or be party to any
transaction with an Affiliate, except (a) transactions contemplated by the Loan
Documents; (b) payment of reasonable compensation to officers and employees for
services actually rendered, and loans and advances permitted by Section 10.2.7;
(c) payment of customary directors’ fees and indemnities; (d) transactions
solely among Obligors; (e) transactions with Affiliates that were consummated
prior to the Closing Date, as shown on Schedule 10.2.17; (f) transactions
contemplated by the Mortgage Loan Debt Documents and (g) transactions with
Affiliates in the Ordinary Course of Business, upon fair and reasonable terms
fully disclosed to Agent and no less favorable than would be obtained in a
comparable arm’s-length transaction with a non-Affiliate.
          10.2.18. Plans. Become party to any Multiemployer Plan or Foreign
Plan.
          10.2.19. Amendments to Certain Material Contracts. Change, waive,
refinance or amend any agreement or arrangement to which Parent or a Subsidiary
is party that relates to any Mortgage Loan Debt Document or any Senior Note Debt
Document if such change, waiver, refinancing or amendment (i) increases the
principal balance of such Debt, or increases any required payment of principal
or interest; (ii) accelerates the date on which any installment of principal or
any interest is due, or adds any additional redemption, put or prepayment
provisions; (iii) shortens the final maturity date or otherwise accelerates
amortization; (iv) increases the interest rate; (v) increases or adds any fees
or charges; (vi) modifies any covenant in a manner or adds any representation,
covenant or default that is more onerous or restrictive in any material respect
for any Obligor or Subsidiary, or that is otherwise materially adverse to any
Obligor, any Subsidiary or Lenders; or (vii) could reasonably be considered to
be materially adverse to the Lenders.
          10.2.20. No Speculative Transactions. Engage in any transaction
involving commodity options, futures contracts or similar transactions, except
solely to hedge against fluctuations in the prices of commodities owned or
purchased by it and the values of foreign currencies receivable or payable by it
and interest swaps, caps or collars.
          10.2.21. Passive Company Status. Where such Obligor or such Subsidiary
is a Passive Company, engage in any trade or business or incur any Debt or
guaranteed Debt except for the trade or business in which it is engaged on the
Closing Date.
          10.2.22. General Partner. Be or become the general partner of any
partnership other than (a) a Passive Company and (b) any Subsidiary with nominal
assets; provided that notwithstanding anything to the contrary contained herein,
at no time may any assets (other than assets with a fair market value of nominal
amount) of any Obligor be transferred to any such Subsidiary described in this
clause (b).
          10.2.23. Sale-Leaseback Transactions. Engage in any sale-leaseback,
synthetic lease or similar transaction involving any of its assets other than
(x) any such transaction entered into by an SPE

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where such transaction involves only the assets of such SPE and (y) such
transactions involving assets of the Obligors with a fair market value of not
more than $15,000,000 in the aggregate; provided that (a) the terms and
conditions of any such transaction shall be reasonably acceptable to Agent; and
(b) simultaneously with the consummation of any such transaction the Obligors
shall (i) deliver to Agent a landlord consent in form and substance satisfactory
to Agent (or Agent shall take an appropriate Rent and Charges Reserve),
(ii) adjust the Tranche A Borrowing Base and the Tranche A-1 Borrowing Base to
reflect the sale of a Eligible Real Estate included therein, if any, and
(iii) apply proceeds from such transaction to the repayment of the Loans.
          10.2.24. Indebtedness under Senior Note Debt Documents. Incur any
Indebtedness (as defined in the Senior Note Indenture), other than (i) the
Obligations and (ii) the Mortgage Loan Debt, that at the time of the incurrence
thereof, or at any time thereafter, is Indebtedness (as defined in the Senior
Note Indenture) permitted to be incurred under the Senior Note Indenture as a
result of such Indebtedness (as defined in the Senior Note Indenture) being
permitted under Section 4.09(b)(1) of the Senior Note Indenture.
     10.3. Financial Covenants. For so long as any Commitments or Obligations
are outstanding, Borrowers shall:
          10.3.1. Excess Availability. Maintain Excess Availability, at all
times, of at least $75,000,000.
SECTION 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT
     11.1. Events of Default. Each of the following shall be an “Event of
Default” hereunder, if the same shall occur for any reason whatsoever, whether
voluntary or involuntary, by operation of law or otherwise:
          (a) Any Borrower fails to pay (i) any principal of the Loans when due
(whether at stated maturity, on demand, upon acceleration or otherwise) or
(ii) any interest on the Loans or any fee or any other amount (other than an
amount payable under clause (i) of this Article) payable under this Agreement or
any other Loan Document, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of one (1) Business Day;
          (b) (i) Any information contained in any Compliance Certificate or
Borrowing Base Certificate was untrue or incorrect in any material respect when
made or (ii) any representation or warranty made or delivered to Agent or any
Lender by any Obligor herein, in connection with any Loan Document or
transaction contemplated thereby, or in any written statement, report, financial
statement or certificate (other than a Borrowing Base Certificate or Compliance
Certificate) is untrue, incorrect or misleading in any material respect when
given or confirmed;
          (c) Any Obligor breaches or fails to perform any covenant contained in
Section 7.2 (other than inadvertent breaches of such covenant) or in
Sections 8.1, 8.2.3, 10.1.1, 10.1.2(a), 10.1.2(b), 10.1.2(c), 10.1.2(d),
10.1.2(e), 10.1.2(f), 10.2 or 10.3;
          (d) Any Obligor breaches or fails to perform any other covenant
contained in any Loan Documents, and such breach or failure is not cured within
30 days after a Senior Officer of such Obligor has knowledge thereof or receives
notice thereof from Agent, whichever is sooner; provided, however, that such
notice and opportunity to cure shall not apply if the breach or failure to
perform is not capable of being cured within such period;
          (e) Any Guarantor repudiates, revokes or attempts to revoke its
Guaranty; any Obligor denies or contests the validity or enforceability of any
Loan Documents or Obligations, or the

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perfection or priority of any Lien granted to Agent; or any Loan Document ceases
to be in full force or effect for any reason (other than a waiver or release by
Agent and Lenders);
          (f) Any (x) breach or default of an Obligor or any Subsidiary of an
Obligor occurs under any document, instrument or agreement to which it is a
party or by which it or any of its Properties is bound, relating to any Debt
(other than the Obligations) in excess of $5,000,000, if the maturity of or any
payment with respect to such Debt may be accelerated or demanded due to such
breach or (y) Debt (other than the Obligations) in excess of $5,000,000 of any
Obligor or any Subsidiary of any Obligor is required to be repaid, repurchased,
redeemed or defeased;
          (g) Any judgment or order for the payment of money is entered against
an Obligor in an amount that exceeds, individually or cumulatively with all
unsatisfied judgments or orders against all Obligors, $5,000,000 (net of any
insurance coverage therefor acknowledged in writing by the insurer), unless a
stay of enforcement of such judgment or order is in effect, by reason of a
pending appeal or otherwise;
          (h) (i) Any Obligor becomes unable or admits in writing its inability
or fails generally to pay its debts as they become due, or (ii) any writ or
warrant of attachment or execution or similar process is issued or levied
against all or any material part of the property of any Obligor and is not
released, vacated or fully bonded within 45 days after its issue or levy;
          (i) Any loss, theft, damage or destruction occurs with respect to any
Collateral if the amount not covered by insurance exceeds $5,000,000;
          (j) Any Obligor is enjoined, restrained or in any way prevented by any
Governmental Authority from conducting any material part of its business; any
Obligor suffers the loss, revocation or termination of any material license,
permit, lease or agreement necessary to its business; there is a cessation of
any material part of an Obligor’s business for a material period of time; any
material Collateral or Property of an Obligor is taken or impaired through
condemnation and such loss, revocation or termination is reasonably likely to
result in a Material Adverse Effect; any Obligor agrees to or commences any
liquidation, dissolution or winding up of its affairs; or any Obligor ceases to
be Solvent;
          (k) Any Insolvency Proceeding is commenced by any Obligor; an
Insolvency Proceeding is commenced against any Obligor and: such Obligor
consents to the institution of the proceeding against it, the petition
commencing the proceeding is not timely controverted by such Obligor, such
petition is not dismissed or stayed within 45 days after its filing, or an order
for relief is entered in the proceeding; a trustee (including an interim
trustee) is appointed to take possession of any substantial Property of or to
operate any of the business of any Obligor; or any Obligor makes an offer of
settlement, extension or composition to its unsecured creditors generally;
          (l) A Reportable Event occurs that constitutes grounds for termination
by the Pension Benefit Guaranty Corporation of any Multiemployer Plan or
appointment of a trustee for any Multiemployer Plan; any Multiemployer Plan is
terminated or any such trustee is requested or appointed; any Obligor is in
“default” (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from any withdrawal therefrom; or any event
similar to the foregoing occurs or exists with respect to a Foreign Plan, in
each case, where the liability associated with the foregoing is reasonably
expected to be in excess of $5,000,000;
          (m) Any Obligor is criminally indicted or convicted for (i) a felony
committed in the conduct of such Obligor’s business, or (ii) any state or
federal law (including the Controlled Substances Act, Money Laundering Control
Act of 1986 and Illegal Exportation of War Materials Act) that could lead to
forfeiture of any material Property or any Collateral; or

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          (n) A Change of Control occurs.
     11.2. Remedies upon Default. If an Event of Default described in
Section 11.1(k) occurs with respect to any Obligor, then to the extent permitted
by Applicable Law, all Obligations shall become automatically due and payable
and all Commitments shall terminate, without any action by Agent or notice of
any kind. In addition, or if any other Event of Default exists, Agent may in its
discretion (and shall upon written direction of Required Lenders) do any one or
more of the following from time to time:
          (a) declare any Obligations immediately due and payable, whereupon
they shall be due and payable without diligence, presentment, demand, protest or
notice of any kind, all of which are hereby waived by Obligors to the fullest
extent permitted by law;
          (b) terminate, reduce or condition any of the Commitments, or make any
adjustment to the Tranche A Borrowing Base or to the Tranche A-1 Borrowing Base;
          (c) require Obligors to Cash Collateralize LC Obligations, Bank
Product Debt and other Obligations that are contingent or not yet due and
payable, and, if Obligors fail promptly to deposit such Cash Collateral, Agent
may (and shall upon the direction of Required Lenders) advance the required Cash
Collateral as Tranche A Revolver Loans (whether or not an Overadvance exists or
is created thereby, or the conditions in Section 6 are satisfied); and
          (d) exercise any other rights or remedies afforded under any
agreement, by law, at equity or otherwise, including the rights and remedies of
a secured party under the UCC. Such rights and remedies include the rights to
(i) take possession of any Collateral; (ii) require Obligors to assemble
Collateral, at Borrowers’ expense, and make it available to Agent at a place
designated by Agent; (iii) enter any premises where Collateral is located and
store Collateral on such premises until sold (and if the premises are owned or
leased by an Obligor, Obligors agree not to charge for such storage); and
(iv) sell or otherwise dispose of any Collateral in its then condition, or after
any further manufacturing or processing thereof, at public or private sale, with
such notice as may be required by Applicable Law, in lots or in bulk, at such
locations, all as Agent, in its discretion, deems advisable. Each Obligor agrees
that 10 days notice of any proposed sale or other disposition of Collateral by
Agent shall be reasonable. Agent shall have the right to conduct such sales on
any Obligor’s premises, without charge, and such sales may be adjourned from
time to time in accordance with Applicable Law. Agent shall have the right to
sell, lease or otherwise dispose of any Collateral for cash, credit or any
combination thereof, and Agent may purchase any Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of the purchase
price, may set off the amount of such price against the Obligations.
     11.3. License. Agent is hereby granted an irrevocable, non-exclusive
license or other right to use, license or sub-license (without payment of
royalty or other compensation to any Person) any or all Intellectual Property of
Obligors, computer hardware and software, trade secrets, brochures, customer
lists, promotional and advertising materials, labels, packaging materials and
other Property, in advertising for sale, marketing, selling, collecting,
completing manufacture of, or otherwise exercising any rights or remedies with
respect to, any Collateral in each case after the occurrence, and during the
continuance, of an Event of Default.
     11.4. Setoff. Agent, Lenders and their Affiliates are each authorized by
Obligors at any time during an Event of Default, without notice to Obligors or
any other Person, to set off and to appropriate and apply any deposits (general
or special), funds, claims, obligations, liabilities or other Debt at any time
held or owing by Agent, any Lender or any such Affiliate to or for the account
of any Obligor against any Obligations, whether or not demand for payment of
such Obligation has been made, any Obligations have been declared due and
payable, are then due, or are contingent or unmatured, or the Collateral or any
guaranty or other security for the Obligations is adequate.

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     11.5. Remedies Cumulative; No Waiver.
          11.5.1. Cumulative Rights. All covenants, conditions, provisions,
warranties, guaranties, indemnities and other undertakings of Borrowers
contained in the Loan Documents are cumulative and not in derogation or
substitution of each other. In particular, the rights and remedies of Agent and
Lenders are cumulative, may be exercised at any time and from time to time,
concurrently or in any order, and shall not be exclusive of any other rights or
remedies that Agent and Lenders may have, whether under any agreement, by law,
at equity or otherwise.
          11.5.2. Waivers. The failure or delay of any party hereto to require
strict performance by any other party thereto with any terms of the Loan
Documents, or to exercise any rights or remedies with respect to Collateral or
otherwise, shall not operate as a waiver thereof nor as establishment of a
course of dealing. All rights and remedies shall continue in full force and
effect until the payment in full, in cash of all Obligations and the occurrence
of the Commitment Termination Date. No modification of any terms of any Loan
Documents (including any waiver thereof) shall be effective, unless such
modification is specifically provided in a writing directed to Borrowers and
executed by Borrowers and Agent or the requisite Lenders, and such modification
shall be applicable only to the matter specified. No waiver of any Default or
Event of Default shall constitute a waiver of any other Default or Event of
Default that may exist at such time, unless expressly stated. If Agent or any
Lender accepts performance by any Obligor under any Loan Documents in a manner
other than that specified therein, or during any Default or Event of Default, or
if Agent or any Lender shall delay or exercise any right or remedy under any
Loan Documents, such acceptance, delay or exercise shall not operate to waive
any Default or Event of Default nor to preclude exercise of any other right or
remedy. It is expressly acknowledged by Obligors that any failure to satisfy a
financial covenant on a measurement date shall not be cured or remedied by
satisfaction of such covenant on a subsequent date.
SECTION 12. AGENT
     12.1. Appointment, Authority and Duties of Agent
          12.1.1. Appointment and Authority. Each Lender appoints and designates
Bank of America as Agent hereunder. Agent may, and each Lender authorizes Agent
to, enter into all Loan Documents to which Agent is intended to be a party and
accept all Security Documents, for Agent’s benefit and the Pro Rata benefit of
Lenders. Each Lender agrees that any action taken by Agent or Required Lenders,
in accordance with the provisions of the Loan Documents, and the exercise by
Agent or Required Lenders of any rights or remedies set forth therein, together
with all other powers reasonably incidental thereto, shall be authorized and
binding upon all Lenders. Without limiting the generality of the foregoing,
Agent shall have the sole and exclusive authority to (a) act as the disbursing
and collecting agent for Lenders with respect to all payments and collections
arising in connection with the Loan Documents; (b) execute and deliver as Agent
each Loan Document, including any intercreditor or subordination agreement, and
accept delivery of each Loan Document from any Obligor or other Person; (c) act
as collateral agent for Secured Parties for purposes of perfecting and
administering Liens under the Loan Documents, and for all other purposes stated
therein; (d) manage, supervise or otherwise deal with Collateral; and
(e) exercise all rights and remedies given to Agent with respect to any
Collateral under the Loan Documents, Applicable Law or otherwise. The duties of
Agent shall be ministerial and administrative in nature, and Agent shall not
have a fiduciary relationship with any Lender, Secured Party, Participant or
other Person, by reason of any Loan Document or any transaction relating
thereto. Agent alone shall be authorized to determine whether any Equipment,
Machinery, fixtures, Real Estate or Inventory constitute Eligible Machinery and
Equipment, Eligible Real Estate or Eligible Inventory, as the case may be, or
whether to impose or release any reserve, which determinations and judgments, if
exercised in good faith, shall exonerate Agent from liability to any Lender or
other Person for any error in judgment.

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          12.1.2. Duties. Agent shall not have any duties except those expressly
set forth in the Loan Documents, nor be required to initiate or conduct any
Enforcement Action except to the extent directed to do so by Required Lenders
while an Event of Default exists. The conferral upon Agent of any right shall
not imply a duty on Agent’s part to exercise such right, unless instructed to do
so by Required Lenders in accordance with this Agreement.
          12.1.3. Agent Professionals. Agent may perform its duties through
agents and employees. Agent may consult with and employ Agent Professionals, and
shall be entitled to act upon, and shall be fully protected in any action taken
in good faith reliance upon, any advice given by an Agent Professional. Agent
shall not be responsible for the negligence or misconduct of any agents,
employees or Agent Professionals selected by it with reasonable care.
          12.1.4. Instructions of Required Lenders. The rights and remedies
conferred upon Agent under the Loan Documents may be exercised without the
necessity of joinder of any other party, unless required by Applicable Law.
Agent may request instructions from Required Lenders with respect to any act
(including the failure to act) in connection with any Loan Documents, and may
seek assurances to its satisfaction from Lenders of their indemnification
obligations under Section 12.6 against all Claims that could be incurred by
Agent in connection with any act. Agent shall be entitled to refrain from any
act until it has received such instructions or assurances, and Agent shall not
incur liability to any Person by reason of so refraining. Instructions of
Required Lenders shall be binding upon all Lenders, and no Lender shall have any
right of action whatsoever against Agent as a result of Agent acting or
refraining from acting in accordance with the instructions of Required Lenders.
Notwithstanding the foregoing, instructions by and consent of all Lenders shall
be required in the circumstances described in Section 14.1.1, and in no event
shall, and in no event shall Required Lenders, without the prior written consent
of each Lender, direct Agent to accelerate and demand payment of Loans held by
one Lender without accelerating and demanding payment of all other Loans, nor to
terminate the Commitments of one Lender without terminating the Commitments of
all Lenders. In no event shall Agent be required to take any action that, in its
opinion, is contrary to Applicable Law or any Loan Documents or could subject
any Agent Indemnitee to personal liability.
     12.2. Agreements Regarding Collateral and Field Examination Reports.
          12.2.1. Lien Releases; Care of Collateral. Lenders authorize Agent to
release any Lien with respect to any Collateral (a) the occurrence of both
payment, in full, in cash of the Obligations and the occurrence of the
Commitment Termination Date, (b) that is the subject of an Asset Disposition
which Borrowers certify in writing to Agent is a Permitted Asset Disposition or
a Lien which Borrowers certify is a Permitted Lien entitled to priority over
Agent’s Liens (and Agent may rely conclusively on any such certificate without
further inquiry), (c) that does not constitute a material part of the
Collateral, or (d) with the written consent of all Lenders. Agent shall have no
obligation whatsoever to any Lenders to assure that any Collateral exists or is
owned by an Obligor, or is cared for, protected, insured or encumbered, nor to
assure that Agent’s Liens have been properly created, perfected or enforced, or
are entitled to any particular priority, nor to exercise any duty of care with
respect to any Collateral.
          12.2.2. Possession of Collateral. Agent and Lenders appoint each other
Lender as agent for the purpose of perfecting Liens (for the benefit of Secured
Parties) in any Collateral that, under the UCC or other Applicable Law, can be
perfected by possession. If any Lender obtains possession of any such
Collateral, it shall notify Agent thereof and, promptly upon Agent’s request,
deliver such Collateral to Agent or otherwise deal with such Collateral in
accordance with Agent’s instructions.
          12.2.3. Reports. Agent shall promptly, upon receipt thereof, forward
to each Lender copies of the results of any field audit or other examination or
any appraisal prepared by or on behalf of Agent with respect to any Obligor or
Collateral (“Report”). Each Lender agrees (a) that neither Bank of America nor
Agent makes any representation or warranty as to the accuracy or completeness of
any

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Report, and shall not be liable for any information contained in or omitted from
any Report; (b) that the Reports are not intended to be comprehensive audits or
examinations, and that Agent or any other Person performing any audit or
examination will inspect only specific information regarding Obligations or the
Collateral and will rely significantly upon Obligors’ books and records as well
as upon representations of Obligors’ officers and employees; and (c) to keep all
Reports confidential and strictly for such Lender’s internal use, and not to
distribute any Report (or the contents thereof) to any Person (except to such
Lender’s Participants, attorneys and accountants) or use any Report in any
manner other than administration of the Loans and other Obligations. Each Lender
agrees to indemnify and hold harmless Agent and any other Person preparing a
Report from any action such Lender may take as a result of or any conclusion it
may draw from any Report, as well as any Claims arising in connection with any
third parties that obtain all or any part of a Report through such Lender.
     12.3. Reliance By Agent. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any certification, notice or other
communication (including those by telephone, telex, telegram, telecopy or
e-mail) believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person, and upon the advice and statements of Agent
Professionals.
     12.4. Action Upon Default. Agent shall not be deemed to have knowledge of
any Default or Event of Default unless it has received written notice from a
Lender or Borrower specifying the occurrence and nature thereof. If any Lender
acquires knowledge of a Default or Event of Default, it shall promptly notify
Agent and the other Lenders thereof in writing. Each Lender agrees that, except
as otherwise provided in any Loan Documents or with the written consent of Agent
and Required Lenders, it will not take any Enforcement Action, accelerate its
Obligations, or exercise any right that it might otherwise have under Applicable
Law to credit bid at foreclosure sales, UCC sales or other similar dispositions
of Collateral. Notwithstanding the foregoing, however, a Lender may take action
to preserve or enforce its rights against an Obligor where a deadline or
limitation period is applicable that would, absent such action, bar enforcement
of Obligations held by such Lender, including the filing of proofs of claim in
an Insolvency Proceeding.
     12.5. Ratable Sharing. If any Lender shall obtain any payment or reduction
of any Obligation, whether through set-off or otherwise, in excess of its share
of such Obligation, determined on a Pro Rata basis or in accordance with
Section 5.5, as applicable, such Lender shall forthwith purchase from Agent,
Issuing Bank and the other Lenders such participations in the affected
Obligation as are necessary to cause the purchasing Lender to share the excess
payment or reduction on a Pro Rata basis or in accordance with Section 5.5, as
applicable. If any of such payment or reduction is thereafter recovered from the
purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest.
12.6. Indemnification of Agent Indemnitees.
          12.6.1. INDEMNIFICATION. EACH LENDER SHALL INDEMNIFY AND HOLD HARMLESS
AGENT INDEMNITEES, TO THE EXTENT NOT REIMBURSED BY OBLIGORS (BUT WITHOUT
LIMITING THE INDEMNIFICATION OBLIGATIONS OF OBLIGORS UNDER ANY LOAN DOCUMENTS),
ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BE INCURRED BY OR ASSERTED
AGAINST ANY AGENT INDEMNITEE; PROVIDED THAT NO LENDER SHALL HAVE ANY OBLIGATION
TO INDEMNIFY OR HOLD HARMLESS THE AGENT INDEMNITEES FOR ANY CLAIM THAT IS
DETERMINED IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT
JURISDICTION TO RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY
AGENT INDEMNITEE. If Agent is sued by any receiver, trustee in bankruptcy,
debtor-in-possession or other Person for any alleged preference from an Obligor
or fraudulent transfer, then any monies paid by Agent in settlement or
satisfaction of such proceeding, together with all interest, costs and expenses
(including attorneys’ fees)

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incurred in the defense of same, shall be promptly reimbursed to Agent by
Lenders to the extent of each Lender’s Pro Rata share.
          12.6.2. Proceedings. Without limiting the generality of the foregoing,
if at any time (whether prior to or after the Commitment Termination Date) any
proceeding is brought against any Agent Indemnitees by an Obligor, or any Person
claiming through an Obligor, to recover damages for any act taken or omitted by
Agent in connection with any Obligations, Collateral, Loan Documents or matters
relating thereto, or otherwise to obtain any other relief of any kind on account
of any transaction relating to any Loan Documents, each Lender agrees to
indemnify and hold harmless Agent Indemnitees with respect thereto and to pay to
Agent Indemnitees such Lender’s Pro Rata share of any amount that any Agent
Indemnitee is required to pay under any judgment or other order entered in such
proceeding or by reason of any settlement, including all interest, costs and
expenses (including attorneys’ fees) incurred in defending same; provided that
no Lender shall be liable for payment of any such amount to the extent that is
determined in a final, non-appealable judgment by a court of competent
jurisdiction that such judgment, order or settlement resulted from any Agent
Indemnitees’ gross negligence or willful misconduct. In Agent’s discretion,
Agent may reserve for any such proceeding, and may satisfy any judgment, order
or settlement, from proceeds of Collateral prior to making any distributions of
Collateral proceeds to Lenders provided that it has not been determined in a
final, non-appealable judgment by a court of competent jurisdiction that such
judgment, order or settlement resulted from any Agent Indemnitees’ gross
negligence or willful misconduct.
     12.7. Limitation on Responsibilities of Agent. Agent shall not be liable to
Lenders for any action taken or omitted to be taken under the Loan Documents,
except for losses directly and solely caused by Agent’s gross negligence or
willful misconduct. Agent does not assume any responsibility for any failure or
delay in performance or any breach by any Obligor or Lender of any obligations
under the Loan Documents. Agent does not make to Lenders any express or implied
warranty, representation or guarantee with respect to any Obligations,
Collateral, Loan Documents or Obligor. No Agent Indemnitee shall be responsible
to Lenders for any recitals, statements, information, representations or
warranties contained in any Loan Documents; the execution, validity,
genuineness, effectiveness or enforceability of any Loan Documents; the
genuineness, enforceability, collectibility, value, sufficiency, location or
existence of any Collateral, or the validity, extent, perfection or priority of
any Lien therein; the validity, enforceability or collectibility of any
Obligations; or the assets, liabilities, financial condition, results of
operations, business, creditworthiness or legal status of any Obligor or Account
Debtor. No Agent Indemnitee shall have any obligation to any Lender to ascertain
or inquire into the existence of any Default or Event of Default, the observance
or performance by any Obligor of any terms of the Loan Documents, or the
satisfaction of any conditions precedent contained in any Loan Documents.
     12.8. Successor Agent and Co-Agents.
          12.8.1. Resignation; Successor Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving at least 30 days written notice thereof to Lenders and Borrowers. Upon
receipt of such notice, Required Lenders shall have the right to appoint a
successor Agent which shall be (a) a Lender or an Affiliate of a Lender; or
(b) a commercial bank that is organized under the laws of the United States or
any state or district thereof, has a combined capital surplus of at least
$200,000,000 and (provided no Default or Event of Default exists) is reasonably
acceptable to Borrowers. If no successor agent is appointed prior to the
effective date of the resignation of Agent, then Agent may appoint a successor
agent from among Lenders. Upon acceptance by a successor Agent of an appointment
to serve as Agent hereunder, such successor Agent shall thereupon succeed to and
become vested with all the powers and duties of the retiring Agent without
further act, and the retiring Agent shall be discharged from its duties and
obligations hereunder but shall continue to have the benefits of the
indemnification set forth in Sections 12.6 and 14.2. Notwithstanding any Agent’s
resignation, the provisions of this Section 12 shall continue in effect for its
benefit with respect to any actions taken or omitted to be taken by it while
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acquisition of the stock or assets of Bank of America shall continue to be Agent
hereunder without further act on the part of the parties hereto, unless such
successor resigns as provided above.
          12.8.2. Separate Collateral Agent. It is the intent of the parties
that there shall be no violation of any Applicable Law denying or restricting
the right of financial institutions to transact business in any jurisdiction. If
Agent believes that it may be limited in the exercise of any rights or remedies
under the Loan Documents due to any Applicable Law, Agent may appoint an
additional Person who is not so limited, as a separate collateral agent or
co-collateral agent. If Agent so appoints a collateral agent or co-collateral
agent, each right and remedy intended to be available to Agent under the Loan
Documents shall also be vested in such separate agent. Every covenant and
obligation necessary to the exercise thereof by such agent shall run to and be
enforceable by it as well as Agent. Lenders shall execute and deliver such
documents as Agent deems appropriate to vest any rights or remedies in such
agent. If any collateral agent or co-collateral agent shall die or dissolve,
become incapable of acting, resign or be removed, then all the rights and
remedies of such agent, to the extent permitted by Applicable Law, shall vest in
and be exercised by Agent until appointment of a new agent.
     12.9. Due Diligence and Non-Reliance. Each Lender acknowledges and agrees
that it has, independently and without reliance upon Agent or any other Lenders,
and based upon such documents, information and analyses as it has deemed
appropriate, made its own credit analysis of each Obligor and its own decision
to enter into this Agreement and to fund Loans and participate in LC Obligations
hereunder. Each Lender has made such inquiries concerning the Loan Documents,
the Collateral and each Obligor as such Lender feels necessary. Each Lender
further acknowledges and agrees that the other Lenders and Agent have made no
representations or warranties concerning any Obligor, any Collateral or the
legality, validity, sufficiency or enforceability of any Loan Documents or
Obligations. Each Lender will, independently and without reliance upon the other
Lenders or Agent, and based upon such financial statements, documents and
information as it deems appropriate at the time, continue to make and rely upon
its own credit decisions in making Loans and participating in LC Obligations,
and in taking or refraining from any action under any Loan Documents. Except for
notices, reports and other information expressly requested by a Lender, Agent
shall have no duty or responsibility to provide any Lender with any notices,
reports or certificates furnished to Agent by any Obligor or any credit or other
information concerning the affairs, financial condition, business or Properties
of any Obligor (or any of its Affiliates) which may come into possession of
Agent or any of Agent’s Affiliates.
     12.10. Replacement of Certain Lenders. In the event that any Lender
(a) fails to fund its Pro Rata share of any Loan or LC Obligation hereunder, and
such failure is not cured within two Business Days, (b) defaults in performing
any of its obligations under the Loan Documents, or (c) fails to give its
consent to any amendment, waiver or action for which consent of all Lenders was
required and Required Lenders consented, then, in addition to any other rights
and remedies that any Person may have, Agent may, by notice to such Lender
within 120 days after such event, require such Lender to assign all of its
rights and obligations under the Loan Documents to Eligible Assignee(s)
specified by Agent, pursuant to appropriate Assignment and Assumption
Agreement(s) and within 20 days after Agent’s notice. Agent is irrevocably
appointed as attorney-in-fact to execute any such Assignment and Assumption
Agreement if the Lender fails to execute same. Such Lender shall be entitled to
receive, in cash, concurrently with such assignment, all amounts owed to it
under the Loan Documents, including all principal, interest and fees through the
date of assignment (but excluding any prepayment charge).
     12.11. Remittance of Payments and Collections.
          12.11.1. Remittances Generally. All payments by any Lender to Agent
shall be made by the time and on the day set forth in this Agreement, in
immediately available funds. If no time for payment is specified or if payment
is due on demand by Agent and request for payment is made by Agent by 11:00 a.m.
on a Business Day, payment shall be made by Lender not later than 2:00 p.m. on
such day, and if request is made after 11:00 a.m., then payment shall be made by
11:00 a.m. on the next Business

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Day. Payment by Agent to any Lender shall be made by wire transfer, in the type
of funds received by Agent. Any such payment shall be subject to Agent’s right
of offset for any amounts due from such Lender under the Loan Documents.
          12.11.2. Failure to Pay. If any Lender fails to pay any amount when
due by it to Agent pursuant to the terms hereof, such amount shall bear interest
from the due date until paid at the rate determined by Agent as customary in the
banking industry for interbank compensation. In no event shall Borrowers be
entitled to receive credit for any interest paid by a Lender to Agent.
          12.11.3. Recovery of Payments. If Agent pays any amount to a Lender in
the expectation that a related payment will be received by Agent from an Obligor
and such related payment is not received, then Agent may recover such amount
from each Lender that received it. If Agent determines at any time that an
amount received under any Loan Document must be returned to an Obligor or paid
to any other Person pursuant to Applicable Law or otherwise, then,
notwithstanding any other term of any Loan Document, Agent shall not be required
to distribute such amount to any Lender. If any amounts received and applied by
Agent to any Obligations are later required to be returned by Agent pursuant to
Applicable Law, Lenders shall pay to Agent, on demand, such Lender’s Pro Rata
share of the amounts required to be returned.
     12.12. Agent in its Individual Capacity. As a Lender, Bank of America shall
have the same rights and remedies under the other Loan Documents as any other
Lender, and the terms “Lenders,” and “Required Lenders” or any similar term
shall include Bank of America in its capacity as a Lender. Each of Bank of
America and its Affiliates may accept deposits from, maintain deposits or credit
balances for, invest in, lend money to, provide Bank Products to, act as trustee
under indentures of, serve as financial or other advisor to, and generally
engage in any kind of business with, Obligors and their Affiliates, as if Bank
of America were any other bank, without any duty to account therefor (including
any fees or other consideration received in connection therewith) to the other
Lenders. In their individual capacity, Bank of America and its Affiliates may
receive information regarding Obligors, their Affiliates and their Account
Debtors (including information subject to confidentiality obligations), and each
Lender agrees that Bank of America and its Affiliates shall be under no
obligation to provide such information to Lenders, if acquired in such
individual capacity and not as Agent hereunder.
     12.13. Agent Titles. Each Lender, other than Bank of America, that is
designated (on the cover page of this Agreement or otherwise) by Bank of America
as an “Agent” or “ Arranger” of any type shall not have any right, power,
responsibility or duty under any Loan Documents other than those applicable to
all Lenders, and shall in no event be deemed to have any fiduciary relationship
with any other Lender.
     12.14. No Third Party Beneficiaries. This Section 12 is an agreement solely
among Lenders and Agent, and does not confer any rights or benefits upon
Obligors or any other Person. As between Obligors and Agent, any action that
Agent may take under any Loan Documents shall be conclusively presumed to have
been authorized and directed by Lenders as herein provided.
     12.15. Mortgage Intercreditor Agreement. The Lenders hereby irrevocably
authorize the Agent to enter into the Mortgage Intercreditor Agreement and agree
to be bound by the provisions thereof.
SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
     13.1. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that no Obligor may assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of Agent and each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an Eligible
Assignee in accordance with the provisions of

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Section 13.2, (ii) by way of participation in accordance with the provisions of
Section 13.3 or (iii) by way of pledge or assignment of a security interest
subject to the restrictions of Sections 13.2.3 and 13.2.4 (and any other
attempted assignment or transfer by any party hereto shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby, Participants to the extent provided in subsection
(d) of this Section and, to the extent expressly contemplated hereby, the
Related Parties of each of Agent, the Issuing Bank and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.
     13.2. Assignments.
          13.2.1. Assignments by Lenders. Any Lender may at any time assign to
one or more Eligible Assignees all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Commitment and the Loans
(including for purposes of this Section 13.2.1, participations in LC Obligations
and in Swingline Loans) at the time owing to it); provided that:
          (i) except in the case of an assignment of the entire remaining amount
of the assigning Lender’s (a) Tranche A Revolver Commitment and Tranche A
Revolver Loans at the time owing to it or in the case of an assignment to a
Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender,
the aggregate amount of the Tranche A Revolver Commitment (which for this
purpose includes Tranche A Revolver Loans outstanding thereunder) or, if the
Tranche A Revolver Commitment is not then in effect, the principal outstanding
balance of the Tranche A Revolver Loans of the assigning Tranche A Lender
subject to each such assignment, determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to Agent or, if “Trade
Date” is specified in the Assignment and Assumption, as of the Trade Date, shall
not be less than $10,000,000 unless each of the Agent and, so long as no Event
of Default has occurred and is continuing, the Borrowers otherwise consent (each
such consent not to be unreasonably withheld or delayed) and (b) Tranche A-1
Revolver Commitment and Tranche A-1 Revolver Loans at the time owing to it or in
the case of an assignment to a Lender or an Affiliate of a Lender or an Approved
Fund with respect to a Lender, the aggregate amount of the Tranche A-1 Revolver
Commitment (which for this purpose includes Tranche A-1 Revolver Loans
outstanding thereunder) or, if the Tranche A-1 Revolver Commitment is not then
in effect, the principal outstanding balance of the Tranche A-1 Revolver Loans
of the assigning Tranche A-1 Lender subject to each such assignment, determined
as of the date the Assignment and Assumption with respect to such assignment is
delivered to Agent or, if “Trade Date” is specified in the Assignment and
Assumption, as of the Trade Date, shall not be less than (x) with respect to
each Tranche A-1 Lender party to this Agreement as of the Closing Date,
$1,000,000 and (y) with respect to all other Tranche A-1 Lenders, $5,000,000,
unless each of the Agent and, so long as no Event of Default has occurred and is
continuing, the Borrowers otherwise consent (each such consent not to be
unreasonably withheld or delayed); provided, however that concurrent assignments
to members of an Assignee Group and concurrent assignments from members of an
Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and
members of its Assignee Group) will be treated as a single assignment for
purposes of determining whether such applicable minimum amount has been met
under this Section 13.2.1(i);
          (ii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement with respect to the Loans or the Commitment assigned, except that
this clause (ii) shall not apply to rights in respect of Swingline Loans;
          (iii) any assignment of a Commitment must be approved by Agent, the
Issuing Bank and the provider of Swingline Loans (with each such approval not to
be unreasonably withheld or

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delayed) unless the Person that is the proposed assignee is itself a Lender
(whether or not the proposed assignee would otherwise qualify as an Eligible
Assignee); and
          (iv) the parties to each assignment shall execute and deliver to Agent
an Assignment and Assumption and a processing and recordation fee of $5,000.
     Subject to acceptance and recording thereof by Agent pursuant to
Section 13.2, from and after the effective date specified in each Assignment and
Assumption, the Eligible Assignee thereunder shall be a party to this Agreement
and, to the extent of the interest assigned by such Assignment and Assumption,
have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto) but shall continue to be entitled to the
benefits of Sections 3.4, 3.6, 3.7, 3.9, 5.8, 5.9 and 14.2 with respect to facts
and circumstances occurring prior to the effective date of such assignment. Upon
request, the Borrowers (at the Borrowers’ expense) shall execute and deliver a
Note to the assignee Lender. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this subsection shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section 13.3.
          13.2.2. Register. Agent, acting solely for this purpose as an agent of
the Borrowers, shall maintain at Agent’s office a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitments of, and principal amounts of the
Loans and LC Obligations owing to, each Lender pursuant to the terms hereof from
time to time (the “Register”). The entries in the Register shall be conclusive,
and the Borrowers, Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by each of the Borrowers and the
Issuing Bank at any reasonable time and from time to time upon reasonable prior
notice. In addition, at any time that a request for a consent for a material or
substantive change to the Loan Documents is pending, any Lender may request and
receive from Agent a copy of the Register.
          13.2.3. Certain Pledges. Nothing herein shall limit the right of a
Lender to pledge or assign any rights under the Loan Documents to (i) any
Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors and any Operating Circular
issued by such Federal Reserve Bank, or (ii) counterparties to swap agreements
relating to any Loans; provided that any payment by Borrowers to the assigning
Lender in respect of any Obligations assigned as described in this sentence
shall satisfy Borrowers’ obligations hereunder to the extent of such payment,
and no such assignment shall release the assigning Lender from its obligations
hereunder.
          13.2.4. Electronic Execution of Assignments. The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and Assumption
shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.
     13.3. Participations.
          13.3.1. Participations. Any Lender may at any time, without the
consent of, or notice to, the Borrowers or Agent, sell participations to any
Person (other than a natural person or any Obligor or

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any Affiliate or Subsidiary of any Obligor) (each, a “Participant”) in all or a
portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans (including such
Lender’s participations in LC Obligations and/or Swingline Loans) owing to it);
provided that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrowers, Agent,
the Lenders and the Issuing Bank shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described Section 14.1.1 that
affects such Participant. Subject to Section 13.3.2, the Obligors agree that
each Participant shall be entitled to the benefits of Sections 3.6, 3.9, 5.8 and
5.9 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 13.2. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 11.4 as though it
were a Lender, provided such Participant agrees to be subject to Section 5.5 as
though it were a Lender.
          13.3.2. Limitations upon Participant Rights. A Participant shall not
be entitled to receive any greater payment under Section 3.6, 5.8 or 5.9 than
the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Borrowers’ prior written consent. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 5.9 unless the Borrowers are notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrower, to comply with Section 5.9 as though it were a Lender.
     13.4. Tax Treatment. If any interest in a Loan Document is transferred to a
Transferee that is organized under the laws of any jurisdiction other than the
United States or any state or district thereof, the transferor Lender shall
cause such Transferee, concurrently with the effectiveness of such transfer, to
comply with the provisions of Section 5.9.
     13.5. Representation of Lenders. Each Lender represents and warrants to
each Borrower, Agent and other Lenders that none of the consideration used by it
to fund its Loans or to participate in any other transactions under this
Agreement constitutes for any purpose of ERISA or Section 4975 of the Internal
Revenue Code assets of any “plan” as defined in Section 3(3) of ERISA or
Section 4975 of the Internal Revenue Code and the interests of such Lender in
and under the Loan Documents shall not constitute plan assets under ERISA.
SECTION 14. MISCELLANEOUS
     14.1. Consents, Amendments and Waivers.
          14.1.1. Amendment. No modification of any Loan Document, including any
extension or amendment of a Loan Document or any waiver of a Default or Event of
Default, shall be effective without the prior written agreement of Agent, with
the consent of Required Lenders, and each Obligor party to such Loan Document;
provided, however, that
          (a) without the prior written consent of Agent, no modification shall
be effective with respect to any provision in a Loan Document that relates to
any rights, duties or discretion of Agent;
          (b) without the prior written consent of Issuing Bank, no modification
shall be effective with respect to any LC Obligations or Section 2.3;

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          (c) without the prior written consent of each affected Lender, no
modification shall be effective that would (i) increase the Commitment of such
Lender; or (ii) reduce the amount of, or waive or delay payment of, any
principal, interest, fees or other amounts payable to such Lender; and
          (d) without the prior written consent of all Lenders (except a
defaulting Lender as provided in Section 4.2), no modification shall be
effective that would (i) extend the Termination Date; (ii) alter Section 2.1.5,
Section 5.5, Section 7.1 (except to add Collateral), or Section 14.1.1;
(iii) amend the definitions of Tranche A Borrowing Base, Tranche A-1 Borrowing
Base (and the defined terms used, directly or indirectly, in such definitions),
Pro Rata or Required Lenders; (iv) increase any advance rate; (v) release all or
substantially all of the Collateral (excluding, if any Obligor or any Subsidiary
of any Obligor becomes a debtor under the federal Bankruptcy code, the release
of “cash collateral”, as defined in Section 363(a) of the federal Bankruptcy
Code pursuant to a cash collateral stipulation with the debtor approved by
Required Lenders); or (vi) release any Obligor from liability for any
Obligations, if such Obligor is Solvent at the time of the release.
          14.1.2. Limitations. The agreement of Borrowers shall not be necessary
to the effectiveness of any modification of a Loan Document that deals solely
with the rights and duties of Lenders, Agent and/or Issuing Bank as among
themselves. Only the consent of the parties to the Fee Letter or any agreement
relating to a Bank Product shall be required for any modification of such
agreement, and no Affiliate of a Lender that is party to a Bank Product
agreement shall have any other right to consent to or participate in any manner
in modification of any other Loan Document. The making of any Loans during the
existence of a Default or Event of Default shall not be deemed to constitute a
waiver of such Default or Event of Default, nor to establish a course of
dealing. Any waiver or consent granted by Lenders hereunder shall be effective
only if in writing, and then only in the specific instance and for the specific
purpose for which it is given.
          14.1.3. Payment for Consents. No Borrower will, directly or
indirectly, pay any remuneration or other thing of value, whether by way of
additional interest, fee or otherwise, to any Lender (in its capacity as a
Lender hereunder) as consideration for agreement by such Lender with any
modification of any Loan Documents, unless such remuneration or value is
concurrently paid, on the same terms, on a Pro Rata basis to all Lenders
providing their consent.
     14.2. Indemnity. EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE
INDEMNITEES AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, CLAIMS,
DAMAGES, PENALTIES, JUDGMENTS, PROCEEDINGS, COSTS AND EXPENSES OF ANY KIND
(INCLUDING REMEDIAL RESPONSE COSTS, REASONABLE ATTORNEYS’ FEES AND EXTRAORDINARY
EXPENSES) AT ANY TIME (INCLUDING AFTER FULL PAYMENT OF THE OBLIGATIONS,
RESIGNATION OR REPLACEMENT OF AGENT, OR REPLACEMENT OF ANY LENDER) INCURRED BY
OR ASSERTED AGAINST ANY INDEMNITEE IN ANY WAY RELATING TO (A) ANY LOAN DOCUMENTS
OR TRANSACTIONS RELATING THERETO, INCLUDING, WITHOUT LIMITATION, THE
ACQUISITION, (B) ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY ANY INDEMNITEE IN
CONNECTION WITH ANY LOAN DOCUMENTS, (C) THE EXISTENCE OR PERFECTION OF ANY
LIENS, OR REALIZATION UPON ANY COLLATERAL, (D) EXERCISE OF ANY RIGHTS OR
REMEDIES UNDER ANY LOAN DOCUMENTS OR APPLICABLE LAW, (E) FAILURE BY ANY OBLIGOR
TO PERFORM OR OBSERVE ANY TERMS OF ANY LOAN DOCUMENT, IN EACH CASE INCLUDING ALL
COSTS AND EXPENSES RELATING TO ANY INVESTIGATION, LITIGATION, ARBITRATION OR
OTHER PROCEEDING (INCLUDING AN INSOLVENCY PROCEEDING OR APPELLATE PROCEEDINGS),
WHETHER OR NOT THE APPLICABLE INDEMNITEE IS A PARTY THERETO, (F) ANY LOAN OR
LETTER OF CREDIT OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM (INCLUDING
ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF
CREDIT IF THE DOCUMENTS

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PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS
OF SUCH LETTER OF CREDIT), (G) ANY ACTUAL OR ALLEGED ENVIRONMENTAL RELEASE ON OR
FROM ANY PROPERTY OWNED OR OPERATED BY ANY BORROWER OR ANY OF ITS SUBSIDIARIES,
OR ANY LIABILITY IN CONNECTION WITH ANY ACTUAL OR ALLEGED VIOLATION OF ANY
ENVIRONMENTAL LAW RELATED IN ANY WAY TO ANY BORROWER OR ANY OF ITS SUBSIDIARIES,
OR (H) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING
RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY, WHETHER BROUGHT BY A THIRD PARTY OR BY A BORROWER OR ANY OTHER OBLIGOR
(HEREINAFTER, “CLAIMS”) THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY
INDEMNITEE, INCLUDING CLAIMS ARISING FROM THE NEGLIGENCE OF AN INDEMNITEE. In no
event shall any party to a Loan Document have any obligation thereunder to
indemnify or hold harmless an Indemnitee with respect to a Claim that is
determined in a final, non-appealable judgment by a court of competent
jurisdiction to result from the gross negligence or willful misconduct of such
Indemnitee. If any claim is made against any Indemnitee which may result in a
claim under this Section 14.2 against Borrowers, such Indemnitee or Agent shall
promptly send to Borrower Agent written notice thereof, and Borrower Agent shall
have the right, at its expense and with counsel reasonably satisfactory to
Agent, to defend such claim. Neither any Indemnitee nor any Borrower shall
settle any such claim without the consent of the other party, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, the failure
of such prompt notice shall not negate or impair the obligation of the Borrowers
under this Section 14.2, but shall give Borrowers the right to withhold against
any indemnity payment the amount of any actual damages incurred by Borrowers as
a result of the failure to give such prompt notice.
14.3. Notices and Communications.
          14.3.1. Notice Address. Subject to Section 4.1.4, all notices,
requests and other communications by or to a party hereto shall be in writing
and shall be given to any Borrower, at Borrower Agent’s address shown on the
signature pages hereof, and to any other Person at its address shown on the
signature pages hereof (or, in the case of a Person who becomes a Lender after
the Closing Date, at the address shown on its Assignment and Assumption
Agreement), or at such other address as a party may hereafter specify by notice
in accordance with this Section 14.3. Each such notice, request or other
communication shall be effective only (a) if given by facsimile transmission,
when transmitted to the applicable facsimile number, if confirmation of receipt
is received; (b) if given by mail, three Business Days after deposit in the U.S.
mail, with first-class postage pre-paid, addressed to the applicable address; or
(c) if given by personal delivery, when duly delivered to the notice address
with receipt acknowledged. Notwithstanding the foregoing, no notice to Agent
pursuant to Section 2.2, 2.3, 3.1.2 or 4.1.1 shall be effective until actually
received by the individual to whose attention at Agent such notice is required
to be sent. Any written notice, request or other communication that is not sent
in conformity with the foregoing provisions shall nevertheless be effective on
the date actually received by the noticed party. Any notice received by Borrower
Agent shall be deemed received by all Borrowers.
          14.3.2. Electronic Communications; Voice Mail. Electronic mail and
internet websites may be used only for routine communications, such as financial
statements, Borrowing Base Certificates and other information required by
Section 10.1.2, administrative matters, distribution of Loan Documents for
execution, and matters permitted under Section 4.1.4. Agent and Lenders make no
assurances as to the privacy and security of electronic communications.
Electronic and voice mail may not be used as effective notice under the Loan
Documents.
          14.3.3. Non-Conforming Communications. Agent and Lenders may rely upon
any notices purportedly given by or on behalf of any Borrower even if such
notices were not made in a manner specified herein, were incomplete or were not
confirmed, or if the terms thereof, as understood by the recipient, varied from
a later confirmation. Each Borrower shall indemnify and hold harmless each

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Indemnitee from any liabilities, losses, costs and expenses arising from any
telephonic communication purportedly given by or on behalf of a Borrower.
     14.4. Performance of Borrowers’ Obligations. Agent may, in its discretion
at any time and from time to time after the occurrence, and during the
continuance, of an Event of Default, at Borrowers’ expense, pay any amount or do
any act required of a Borrower under any Loan Documents or otherwise lawfully
requested by Agent to (a) enforce any Loan Documents or collect any Obligations;
(b) protect, insure, maintain or realize upon any Collateral; or (c) defend or
maintain the validity or priority of Agent’s Liens in any Collateral, including
any payment of a judgment, insurance premium, warehouse charge, finishing or
processing charge, or landlord claim, or any discharge of a Lien. All payments,
costs and expenses (including Extraordinary Expenses) of Agent under this
Section 14.4 shall be reimbursed to Agent by Borrowers, on demand, with interest
from the date incurred to the date of payment thereof at the Default Rate
applicable to Base Rate Tranche A-1 Revolver Loans. Any payment made or action
taken by Agent under this Section 14.4 shall be without prejudice to any right
to assert an Event of Default or to exercise any other rights or remedies under
the Loan Documents.
     14.5. Credit Inquiries. Each Obligor hereby authorizes Agent and Lenders
(but they shall have no obligation) to respond to usual and customary credit
inquiries from third parties concerning any Obligor or Subsidiary.
     14.6. Severability. Wherever possible, each provision of the Loan Documents
shall be interpreted in such manner as to be valid under Applicable Law. If any
provision is found to be invalid under Applicable Law, it shall be ineffective
only to the extent of such invalidity and the remaining provisions of the Loan
Documents shall remain in full force and effect.
     14.7. Cumulative Effect; Conflict of Terms. The provisions of the Loan
Documents are cumulative. The parties acknowledge that the Loan Documents may
use several different limitations, tests or measurements to regulate the same or
similar matters, and they agree that these are cumulative and that each must be
performed as provided. Except as otherwise specifically provided in another Loan
Document (by specific reference to the applicable provision of this Agreement),
if any provision contained herein is in direct conflict with any provision in
another Loan Document, the provision herein shall govern and control.
     14.8. Counterparts; Facsimile Signatures. Any Loan Document may be executed
in counterparts, each of which taken together shall constitute one instrument.
Loan Documents may be executed and delivered by facsimile, and they shall have
the same force and effect as manually signed originals. Agent may require
confirmation by a manually-signed original, but failure to request or deliver
same shall not limit the effectiveness of any facsimile signature.
     14.9. Entire Agreement. Time is of the essence of the Loan Documents. The
Loan Documents embody the entire understanding of the parties with respect to
the subject matter thereof and supersede all prior understandings regarding the
same subject matter.
     14.10. Obligations of Lenders. The obligations of each Lender hereunder are
several, and no Lender shall be responsible for the obligations or Commitments
of any other Lender. Amounts payable hereunder to each Lender shall be a
separate and independent debt, and each Lender shall be entitled, to the extent
not otherwise restricted hereunder, to protect and enforce its rights arising
out of the Loan Documents. It shall not be necessary for Agent or any other
Lender to be joined as an additional party in any proceeding for such purposes.
Nothing in this Agreement and no action of Agent or Lenders pursuant to the Loan
Documents shall be deemed to constitute Agent and Lenders to be a partnership,
association, joint venture or any other kind of entity, nor to constitute
control of any Obligor. Each Obligor acknowledges and agrees that in connection
with all aspects of any transaction contemplated by the Loan Documents,
Obligors, Agent, Issuing Bank and Lenders have an arms-length business
relationship that

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creates no fiduciary duty on the part of Agent, Issuing Bank or any Lender, and
each Obligor, Agent, Issuing Bank and Lender expressly disclaims any fiduciary
relationship.
     14.11. Confidentiality. During the term of this Agreement and for 12 months
thereafter, Agent and Lenders agree to take reasonable precautions to maintain
the confidentiality of any information that Obligors deliver to Agent and
Lenders and identify as confidential at the time of delivery, except that Agent
and any Lender may disclose such information (a) to their respective officers,
directors, employees, Affiliates and agents, including legal counsel, auditors
and other professional advisors; (b) to any party to the Loan Documents from
time to time; (c) pursuant to the order of any court or administrative agency;
(d) upon the request of any Governmental Authority exercising regulatory
authority over Agent or such Lender; (e) which ceases to be confidential, other
than by an act or omission of Agent or any Lender, or which becomes available to
Agent or any Lender on a nonconfidential basis; (f) to the extent reasonably
required in connection with any litigation relating to any Loan Documents or
transactions contemplated thereby, or otherwise as required by Applicable Law;
(g) to the extent reasonably required for the exercise of any rights or remedies
under the Loan Documents; (h) to any actual or proposed party to a Bank Product
or to any Transferee, as long as such Person agrees to be bound by the
provisions of this Section 14.11; (i) to the National Association of Insurance
Commissioners or any similar organization, or to any nationally recognized
rating agency that requires access to information about a Lender’s portfolio in
connection with ratings issued with respect to such Lender; (j) to any investor
or potential investor in an Approved Fund that is a Lender or Transferee, but
solely for use by such investor to evaluate an investment in such Approved Fund,
or to any manager, servicer or other Person in connection with its
administration of any such Approved Fund; or (k) with the consent of Borrowers.
Notwithstanding the foregoing, Agent and Lenders may issue and disseminate to
the public general information describing this credit facility, including the
names and addresses of Obligors and a general description of Obligors’
businesses, and may (so long as the Borrower Agent has previously reviewed and
approved the form of such advertisement or promotional materials) use Obligors’
names in advertising and other promotional materials.
     14.12. GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS
OTHERWISE SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
INCLUDING, WITHOUT LIMITATION, NEW YORK GENERAL OBLIGATIONS LAW SECTIONS 5-1401
AND 5-1402 (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).
     14.13. Consent to Forum.
          14.13.1. Forum. EACH BORROWER HEREBY CONSENTS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL COURT SITTING IN OR WITH JURISDICTION OVER THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY STATE COURT OF THE STATE OF NEW YORK
SITTING IN THE COUNTY OF MANHATTAN, IN ANY PROCEEDING OR DISPUTE RELATING IN ANY
WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE BROUGHT
BY IT SOLELY IN ANY SUCH COURT. EACH BORROWER IRREVOCABLY WAIVES ALL CLAIMS,
OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL OR
SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM. Nothing herein shall
limit the right of Agent or any Lender to bring proceedings against any Obligor
in any other court. Nothing in this Agreement shall be deemed to preclude
enforcement by Agent of any judgment or order obtained in any forum or
jurisdiction.
     14.14. Waivers by Borrowers. To the fullest extent permitted by Applicable
Law, each Borrower waives (a) the right to trial by jury (which Agent and each
Lender hereby also waives) in any proceeding, claim or counterclaim of any kind
relating in any way to any Loan Documents, Obligations or Collateral;
(b) presentment, demand, protest, notice of presentment, default, non-

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payment, maturity, release, compromise, settlement, extension or renewal of any
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Agent on which a Borrower may in any
way be liable, and hereby ratifies anything Agent may do in this regard;
(c) notice prior to taking possession or control of any Collateral; (d) any bond
or security that might be required by a court prior to allowing Agent to
exercise any rights or remedies; (e) the benefit of all valuation, appraisement
and exemption laws; (f) any claim against Agent or any Lender, on any theory of
liability, for special, indirect, consequential, exemplary or punitive damages
(as opposed to direct or actual damages) in any way relating to any Enforcement
Action, Obligations, Loan Documents or transactions relating thereto; and
(g) notice of acceptance hereof. Each Borrower acknowledges that the foregoing
waivers are a material inducement to Agent and Lenders entering into this
Agreement and that Agent and Lenders are relying upon the foregoing in their
dealings with Borrowers. Each Borrower has reviewed the foregoing waivers with
its legal counsel and has knowingly and voluntarily waived its jury trial and
other rights following consultation with legal counsel. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
     14.15. Patriot Act Notice. Agent and Lenders hereby notify Borrowers that
pursuant to the requirements of the Patriot Act, Agent and Lenders are required
to obtain, verify and record information that identifies each Borrower,
including its legal name, address, tax ID number and other information that will
allow Agent and Lenders to identify it in accordance with the Patriot Act. Agent
and Lenders will also require information regarding each personal guarantor, if
any, and may require information regarding Borrowers’ management and owners,
such as legal name, address, social security number and date of birth.
     14.16. Resignation as Issuing Bank or Provider of Swingline Loans after
Assignment. Notwithstanding anything to the contrary contained herein, if at any
time Bank of America assigns all of its Tranche A Revolver Commitment and
Tranche A Loans, Bank of America may, (i) upon 30 days’ notice to the Borrower
and the Lenders, resign as Issuing Bank and/or (ii) upon 30 days’ notice to the
Borrower, resign as provider of Swingline Loans. In the event of any such
resignation as Issuing Bank or provider of Swingline Loans, the Borrower shall
be entitled to appoint from among the Lenders a successor Issuing Bank or
provider of Swingline Loans; provided, however, that no failure by the Borrower
to appoint any such successor shall affect the resignation of Bank of America
Issuing Bank or provider of Swingline Loans, as the case may be. If Bank of
America resigns as Issuing Bank, it shall retain all the rights, powers,
privileges and duties of Issuing Bank hereunder with respect to all Letters of
Credit outstanding as of the effective date of its resignation as Issuing Bank
and all LC Obligations with respect thereto (including the right to require the
Lenders to make Base Rate Tranche A Revolver Loans or fund risk participations
in unreimbursed drawings of Letters of Credit. If Bank of America resigns as
provider of Swingline Loans, it shall retain all the rights of provider of
Swingline Loans provided for hereunder with respect to Swingline Loans made by
it and outstanding as of the effective date of such resignation, including the
right to require the Lenders to make Base Rate Tranche A Revolver Loans or fund
risk participations in outstanding Swingline Loans. Upon the appointment of a
successor Issuing Bank and/or provider of Swingline Loans, (a) such successor
shall succeed to and become vested with all of the rights, powers, privileges
and duties of the retiring Issuing Bank or provider of Swingline Loans, as the
case may be, and (b) the successor Issuing Bank shall issue letters of credit in
substitution for the Letters of Credit, if any, outstanding at the time of such
succession or make other arrangements satisfactory to Bank of America to
effectively assume the obligations of Bank of America with respect to such
Letters of Credit.
[Remainder of page intentionally left blank; signatures begin on following page]

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     IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date set forth above.

     
 
  BORROWERS:
 
   
 
  THE BON-TON DEPARTMENT STORES, INC.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Vice Chairman and Chief Administrative Officer
 
  Address: 2801 East Market Street, York, PA 17402
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240
 
   
 
  HERBERGER’S DEPARTMENT STORES, LLC
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Senior Vice President and Chief Administrative Officer
 
  Address: 331 West Wisconsin Avenue, Milwaukee, WI 53203
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240
 
   
 
  PARISIAN, INC.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Senior Vice President and Chief Administrative Officer
 
  Address: 331 West Wisconsin Avenue, Milwaukee, WI 53203
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240

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  THE ELDER-BEERMAN STORES CORP.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Vice Chairman and Chief Administrative Officer
 
  Address: 2801 East Market Street, York, PA 17402
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240

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     The following Persons are signatories to this Agreement in their capacity
as Obligors and not as Borrowers:

     
 
  OBLIGORS:
 
   
 
  THE BON-TON STORES, INC.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Vice Chairman and Chief Administrative Officer
 
  Address: 2801 East Market Street, York, PA 17402
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240
 
   
 
  THE BON-TON CORP.
 
   
 
       /S/ ROBERT E. STERN
 
   
 
   
 
  By: Robert E. Stern
 
  Title: President and Secretary
 
  Address: 300 Delaware Avenue, Suite 12122, Wilmington, DE 19801
 
   
 
            Attn: President
 
            Telecopy:(302) 652-8667
 
   
 
  THE BON-TON TRADE CORP.
 
   
 
       /S/ ROBERT E. STERN
 
   
 
   
 
  By: Robert E. Stern
 
  Title: President and Secretary
 
  Address: 300 Delaware Avenue, Suite 12122, Wilmington, DE 19801
 
   
 
            Attn: President
 
            Telecopy: (302) 652-8667

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  THE BON-TON STORES OF LANCASTER, INC.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Vice President and Chief Financial Officer
 
  Address: 2801 East Market Street, York, PA 17402
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240
 
   
 
  THE BON-TON GIFTCO, INC.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Vice President and Assistant Secretary
 
  Address: 2801 East Market Street, York, PA 17402
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240
 
   
 
  ELDER-BEERMAN WEST VIRGINIA, INC.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Vice Chairman and Chief Administrative Officer
 
  Address: 2801 East Market Street, York, PA 17402
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240

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  ELDER-BEERMAN HOLDINGS, INC.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Vice President
 
  Address: 2801 East Market Street, York, PA 17402
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240
 
   
 
  ELDER-BEERMAN OPERATIONS, LLC
 
  BY: The Elder-Beerman Stores Corp., its managing member
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Vice Chairman and Chief Administrative Officer
 
  Address: 2801 East Market Street, York, PA 17402
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240
 
   
 
  SAKS DISTRIBUTION CENTERS, INC.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Senior Vice President and Chief Administrative Officer
 
  Address: 331 West Wisconsin Avenue, Milwaukee, WI 53203
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240

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  MCRIL, LLC
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Senior Vice President and Chief Administrative Officer
 
  Address: 331 West Wisconsin Avenue, Milwaukee, WI 53203
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240
 
   
 
  MCRAE’S, INC.
 
   
 
       /S/ JAMES H. BAIREUTHER
 
   
 
   
 
  By: James H. Baireuther
 
  Title: Senior Vice President and Chief Administrative Officer
 
  Address: 331 West Wisconsin Avenue, Milwaukee, WI 53203
 
   
 
            Attn: Treasurer
 
            Telecopy: (717) 751-3240

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                  AGENT AND LENDERS:
 
                BANK OF AMERICA, N.A.,     as Agent and Lender
 
                By:        /S/ EDMUNDO KAHN          
 
                    Name: Edmundo Kahn         Title: Vice President
 
           
 
      Address:   335 Madison Avenue, 6th Floor
 
          New York, New York 10017
 
      Attn:   Edmundo Kahn
 
      Telecopy:   212-503-7340

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                  GENERAL ELECTRIC CAPITAL CORPORATION
 
                By:        /S/ CHARLES CHIODO                   Name: Charles
Chiodo         Title: Duly Authorized Signatory
 
           
 
      Address:   201 Merritt 7
 
          Norwalk, Connecticut 06851
 
      Attn:   Charles Chiodo
 
      Telecopy:   203-956-4002

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                      CITICORP NORTH AMERICA    
 
                    By:        /S/ MICHAEL M. SCHADT                  
 
      Name:   Michael M. Schadt    
 
      Title:   Director, Asset Based Finance    
 
               
 
      Address:   2 Penn’s Way, Suite 200    
 
          New Castle, Delaware 19720    
 
      Attn:   Timothy Singles    
 
      Telecopy:   212-994-0849    

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                      JPMORGAN CHASE BANK, N.A.    
 
                    By:        /S/ JAMES M. BARBATO                  
 
      Name:   James M. Barbato    
 
      Title:   Vice President    
 
               
 
      Address:   1 Chase Square, 25th Floor    
 
          Rochester, New York 14643    
 
      Attn:   James Barbato    
 
      Telecopy:   585-258-7440    

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                      WELLS FARGO RETAIL FINANCE, LLC    
 
                    By:        /S/ TIMOTHY R. TOBIN                  
 
      Name:   Timothy R. Tobin    
 
      Title:   Senior Vice President    
 
               
 
      Address:   One Boston Place, Suite 1800    
 
          Boston, Massachusetts 02108    
 
      Attn:   Cory Loftus    
 
      Telecopy:   617-523-4029    

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                      THE CIT GROUP/BUSINESS CREDIT, INC.    
 
                    By:         /S/ KEVIN R. MARCHETTI                  
 
      Name:   Kevin R. Marchetti    
 
      Title:   Assistant Vice President    
 
               
 
      Address:   1211 Avenue of the Americas    
 
          New York, New York 10036    
 
      Attn:   Matthew DeFranco    
 
      Telecopy:   212-536-1297    

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                      MERRILL LYNCH CAPITAL, A DIVISION OF MERRILL LYNCH
BUSINESS FINANCIAL SERVICES INC.    
 
                    By:         /S/ EDWARD SHUSTER                  
 
      Name:   Edward Shuster    
 
      Title:   Assistant Vice President    
 
               
 
      Address:   225 Liberty Street, 5th Floor    
 
          New York, New York 10281    
 
      Attn:   Edward Shuster    
 
      Telecopy:   212-236-0048    

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                      WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL)    
 
                    By:         /S/ LAURA DIXON                  
 
      Name:   Laura Dixon    
 
      Title:   VP    
 
               
 
      Address:   150 S. Wacker Dr., Suite 2200    
 
          Chicago, Illinois 60606    
 
      Attn:   Laura Dixon    
 
      Telecopy:   312-332-0424    

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                      LASALLE RETAIL FINANCE,A DIVISION OF LASALLE BUSINESS
CREDIT,LLC,AS
AGENT FOR LASALLE BANK MIDWEST NATIONAL ASSOCIATION    
 
                    By:         /S/ CRAIG G. NUTBROWN                  
 
      Name:   Craig G. Nutbrown    
 
      Title:   Vice President    
 
               
 
      Address:   25 Braintree Hill Office Park,    
 
          Suite 205    
 
          Braintree, Massachusetts 02184    
 
      Attn:   Daniel O’Rourke    
 
      Telecopy:   781-353-6101    

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                      CITIZENS BANK OF PENNSYLVANIA    
 
                    By:         /S/ DON CMAR                  
 
      Name:   Don Cmar    
 
      Title:   Vice President    
 
               
 
      Address:   Six PPG Place, Suite 820    
 
          Pittsburgh, Pennsylvania 15222    
 
      Attn:   Don Cmar    
 
      Telecopy:   412-391-2580    

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                      SIEMENS FINANCIAL SERVICES, INC.    
 
                    By:         /S/ FRANK AMODIO                  
 
      Name:   Frank Amodio    
 
      Title:   Vice President — Credit    
 
               
 
      Address:   170 Wood Ave South    
 
          Iselin, New Jersey 08830    
 
      Attn:   Sharon Rooney    
 
      Telecopy:   732-590-6648    

Signature Page to Loan and Security Agreement

 

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                      GMAC COMMERCIAL FINANCE LLC    
 
                    By:         /S/ DAVID GRABASKY                  
 
      Name:   David Grabosky    
 
      Title:   Vice President    
 
               
 
      Address:   444 s. Flower St., Suite 1300    
 
          Los Angeles, California 90071    
 
      Attn:   David Grabosky    
 
      Telecopy:   213-284-3612    

Signature Page to Loan and Security Agreement

 

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                      NATIONAL CITY BUSINESS CREDIT, INC.    
 
                    By:         /S/ JOE KWASNY                  
 
      Name:   Joe Kwasny    
 
      Title:   Director    
 
               
 
      Address:   1965 E. 6th Street, Suite 400    
 
          Locator #01-3049    
 
          Cleveland, Ohio 44114    
 
      Attn:   Katie DeGennaro    
 
      Telecopy:   216-222-9555    

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                      M & T BANK    
 
                    By:         /S/ PAMELA M.PASQUALINI                  
 
      Name:   Pamela M. Pasqualini    
 
      Title:   Vice President    
 
               
 
      Address:   25 South Charles St.    
 
          Baltimore, Maryland 21201    
 
      Attn:   Pamela Pasqualini    
 
      Telecopy:   410-244-4960    

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                      UBS LOAN FINANCE LLC    
 
                    By:        /S/ PAMELA OH                  
 
      Name:   Pamela Oh    
 
      Title:   Associate Director — Banking Products Services, US    
 
                    By:        /S/ JANICE L RANDOLPH                  
 
      Name:   Janice L. Randolph    
 
      Title:   Associate Director — Banking Products Services, US    
 
               
 
      Address:   677 Washington Blvd.    
 
          Stamford, Connecticut 06901    
 
      Attn:   Michael Reilly    
 
      Telecopy:   203-719-5259    

 

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                      SOVEREIGN BANK    
 
                    By:        /S/ JUDITH C.E. KELLY                  
 
      Name:   Judith C.E. Kelly    
 
      Title:   Senior Vice President    
 
               
 
      Address:   75 State Street    
 
          Boston, Massachusetts 02109    
 
      Attn:   Judith Kelly    
 
      Telecopy:   617-346-7330    

 

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                      HSBC BUSINESS CREDIT (USA) INC.    
 
                    By:        /S/ MATTHEW W. RICKERT                  
 
      Name:   Matthew W. Rickert    
 
      Title:   Assistant Vice President    
 
               
 
      Address:   452 5th Avenue    
 
          New York, New York 10018    
 
      Attn:   Matthew W. Rickert    
 
      Telecopy:   212-525-2520    

 

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                      PNC BANK, NATIONAL ASSOCIATION    
 
                    By:         /S/ DIANE M. SHAAK                  
 
      Name:   Diane M. Shaak    
 
      Title:   Vice President    
 
               
 
      Address:   Two Tower Center Blvd. 21st Floor    
 
          East Brunswick, New Jersey 08816    
 
      Attn:   Gurdatt Jagnanan    
 
      Telecopy:   732-220-3268    

 

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                      NORTH FORK BUSINESS CAPITAL CORPORATION    
 
                    By:        /S/ MICHAEL S. BURNS                  
 
      Name:   Michael S. Burns    
 
      Title:   Senior Vice President    
 
               
 
      Address:   275 Broadhollow Road    
 
          PO Box 8914    
 
          Melville, New York 11747    
 
      Attn:   Jason Rosenberg    
 
      Telecopy:   631-501-5524