Exhibit 10.1





Exhibit 10.1




 





THE BON-TON DEPARTMENT STORES, INC.,




and




THE ELDER-BEERMAN STORES CORP.,




as Borrowers




SECOND LIEN LOAN AND SECURITY AGREEMENT




Dated as of November 18, 2009




$75,000,000




EACH OF THE OTHER OBLIGORS PARTY HERETO,




THE FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME,




as Lenders




and




SANKATY ADVISORS, LLC,




as Agent




BANC OF AMERICA SECURITIES LLC,




as Lead Arranger and Bookrunner




GB MERCHANT PARTNERS, LLC,




as Collateral Agent




GA CAPITAL, LLC,




as Documentation Agent




and




BANK OF AMERICA, N.A.,




as Co-Documentation Agent




 




 


 









 





TABLE OF CONTENTS



	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION
	 	 	1	 
	1.1. Definitions
	 	 	1	 
	1.2. Accounting Terms
	 	 	29	 
	1.3. Certain Matters of Construction
	 	 	29	 
	1.4. [Reserved]
	 	 	29	 
	1.5. Certifications
	 	 	30	 
	1.6. Times of Day
	 	 	30	 
	SECTION 2. TERM LOAN FACILITY
	 	 	30	 
	2.1. Commitment
	 	 	30	 
	2.1.1. Term Loans
	 	 	30	 
	2.1.2. Notes
	 	 	30	 
	2.1.3. Use of Proceeds
	 	 	30	 
	2.1.4. OID
	 	 	30	 
	2.1.5. [Reserved]
	 	 	30	 
	SECTION 3. INTEREST, FEES AND CHARGES
	 	 	30	 
	3.1. Interest
	 	 	30	 
	3.1.1. Rates and Payment of Interest
	 	 	30	 
	3.1.2. Application of Adjusted LIBOR to Outstanding Term Loans
	 	 	31	 
	3.1.3. Interest Periods
	 	 	31	 
	3.1.4. Interest Rate Not Ascertainable
	 	 	32	 
	3.2. Reserved
	 	 	32	 
	3.3. Computation of Interest, Fees, Yield Protection
	 	 	32	 
	3.4. Reimbursement Obligations
	 	 	32	 
	3.5. Illegality
	 	 	32	 
	3.6. Increased Costs
	 	 	33	 
	3.7. Capital Adequacy
	 	 	34	 
	3.8. Mitigation
	 	 	34	 
	3.9. Funding Losses
	 	 	34	 
	3.10. Maximum Interest
	 	 	34	 
	SECTION 4. LOAN ADMINISTRATION
	 	 	35	 
	4.1. Funding Term Loans
	 	 	35	 
	4.1.1. [Reserved]
	 	 	35	 






 


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	 	 	Page	 
	 
	 	 	 	 
	4.1.2. Fundings by Lenders
	 	 	35	 
	4.1.3. [Reserved]
	 	 	35	 
	4.1.4. Notices
	 	 	35	 
	4.2. Defaulting Lender
	 	 	35	 
	4.3. Number and Amount of LIBOR Term Loans; Determination of Rate
	 	 	36	 
	4.4. Borrower Agent
	 	 	36	 
	4.5. One Obligation
	 	 	36	 
	4.6. Effect of Termination
	 	 	36	 
	SECTION 5. PAYMENTS
	 	 	36	 
	5.1. General Payment Provisions
	 	 	36	 
	5.2. Repayment of Term Loans
	 	 	37	 
	5.2.1. Termination Date; Repayment in General
	 	 	37	 
	5.2.2. Mandatory Prepayments
	 	 	37	 
	5.2.3. Voluntary Prepayments
	 	 	37	 
	5.2.4. Prepayment Premium
	 	 	38	 
	5.3. Payment of Other Obligations
	 	 	38	 
	5.4. Marshaling; Payments Set Aside
	 	 	38	 
	5.5. Allocation of Payments
	 	 	38	 
	5.5.1. Pre- and Post-Default Allocation of Payments
	 	 	38	 
	5.5.2. [Reserved]
	 	 	38	 
	5.5.3. Erroneous Application
	 	 	39	 
	5.6. Application of Payments
	 	 	39	 
	5.7. Loan Account; Account Stated
	 	 	39	 
	5.7.1. Loan Account
	 	 	39	 
	5.7.2. Entries Binding
	 	 	39	 
	5.8. Taxes
	 	 	39	 
	5.9. Withholding Tax Exemption
	 	 	40	 
	5.10. Nature and Extent of Each Borrower’s Liability
	 	 	40	 
	5.10.1. Joint and Several Liability
	 	 	40	 
	5.10.2. Waivers
	 	 	41	 
	5.10.3. Extent of Liability; Contribution
	 	 	41	 
	5.10.4. Joint Enterprise
	 	 	42	 
	5.10.5. Subordination
	 	 	42	 






 


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(continued)




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	SECTION 6. CONDITIONS PRECEDENT
	 	 	42	 
	6.1. Conditions Precedent to Term Loans
	 	 	42	 
	6.2. [Reserved]
	 	 	45	 
	6.3. Limited Waiver of Conditions Precedent
	 	 	45	 
	SECTION 7. COLLATERAL
	 	 	45	 
	7.1. Grant of Security Interest
	 	 	45	 
	7.2. Lien on Deposit Accounts
	 	 	46	 
	7.2.1. Deposit Accounts
	 	 	46	 
	7.2.2. [Reserved]
	 	 	47	 
	7.3. Real Estate Collateral
	 	 	47	 
	7.4. Other Collateral
	 	 	47	 
	7.4.1. Commercial Tort Claims
	 	 	47	 
	7.4.2. Certain After-Acquired Collateral
	 	 	47	 
	7.5. No Assumption of Liability
	 	 	48	 
	7.6. Further Assurances
	 	 	48	 
	7.7. Foreign Subsidiary Stock
	 	 	48	 
	SECTION 8. COLLATERAL ADMINISTRATION
	 	 	48	 
	8.1. Borrowing Base Certificates
	 	 	48	 
	8.2. Administration of Accounts and Credit Card Receivables
	 	 	48	 
	8.2.1. Credit Card Notifications; Records
	 	 	48	 
	8.2.2. Account Verification
	 	 	49	 
	8.2.3. Maintenance of Dominion Accounts
	 	 	49	 
	8.2.4. Proceeds of Collateral
	 	 	49	 
	8.3. Administration of Inventory
	 	 	49	 
	8.3.1. Records and Reports of Inventory
	 	 	49	 
	8.3.2. Returns of Inventory
	 	 	49	 
	8.3.3. Acquisition, Sale and Maintenance
	 	 	50	 
	8.4. Administration of Equipment
	 	 	50	 
	8.4.1. Records and Schedules of Equipment
	 	 	50	 
	8.4.2. Dispositions of Equipment
	 	 	50	 
	8.4.3. Condition of Equipment
	 	 	50	 






 


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(continued)




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	8.5. Administration of Deposit Accounts
	 	 	50	 
	8.6. General Provisions
	 	 	51	 
	8.6.1. Location of Collateral
	 	 	51	 
	8.6.2. Insurance of Collateral; Condemnation Proceeds
	 	 	51	 
	8.6.3. Protection of Collateral
	 	 	52	 
	8.6.4. Defense of Title to Collateral
	 	 	52	 
	8.7. Power of Attorney
	 	 	52	 
	SECTION 9. REPRESENTATIONS AND WARRANTIES
	 	 	53	 
	9.1. General Representations and Warranties
	 	 	53	 
	9.1.1. Organization and Qualification
	 	 	53	 
	9.1.2. Power and Authority
	 	 	53	 
	9.1.3. Enforceability
	 	 	53	 
	9.1.4. Capital Structure
	 	 	53	 
	9.1.5. Corporate Names; Locations
	 	 	53	 
	9.1.6. Title to Properties; Priority of Liens
	 	 	54	 
	9.1.7. Security Documents
	 	 	54	 
	9.1.8. Financial Statements
	 	 	54	 
	9.1.9. Surety Obligations
	 	 	54	 
	9.1.10. Taxes
	 	 	54	 
	9.1.11. Brokers
	 	 	54	 
	9.1.12. Intellectual Property
	 	 	54	 
	9.1.13. Governmental Approvals
	 	 	55	 
	9.1.14. Compliance with Laws
	 	 	55	 
	9.1.15. Compliance with Environmental Laws
	 	 	55	 
	9.1.16. Burdensome Contracts
	 	 	55	 
	9.1.17. Litigation
	 	 	55	 
	9.1.18. Insurance
	 	 	55	 
	9.1.19. No Defaults
	 	 	55	 
	9.1.20. ERISA
	 	 	55	 
	9.1.21. Trade Relations
	 	 	56	 
	9.1.22. Labor Relations
	 	 	56	 
	9.1.23. Not a Regulated Entity
	 	 	56	 






 


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(continued)




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	9.1.24. Margin Stock
	 	 	56	 
	9.1.25. Plan Assets
	 	 	56	 
	9.1.26. Complete Disclosure
	 	 	56	 
	9.1.27. Anti-Terrorism
	 	 	56	 
	SECTION 10. COVENANTS AND CONTINUING AGREEMENTS
	 	 	57	 
	10.1. Affirmative Covenants
	 	 	57	 
	10.1.1. Inspections; Appraisals
	 	 	57	 
	10.1.2. Financial and Other Information
	 	 	57	 
	10.1.3. Notices
	 	 	60	 
	10.1.4. Storage Agreements
	 	 	61	 
	10.1.5. Compliance with Laws; Organic Documents; Material Contracts
	 	 	61	 
	10.1.6. Taxes
	 	 	61	 
	10.1.7. Insurance
	 	 	61	 
	10.1.8. Licenses
	 	 	61	 
	10.1.9. Future Subsidiaries
	 	 	61	 
	10.1.10. Lien Waivers
	 	 	62	 
	10.1.11. Preservation of Existence
	 	 	62	 
	10.1.12. Maintenance of Properties
	 	 	62	 
	10.1.13. Books and Records
	 	 	62	 
	10.1.14. Operation and Maintenance Plan
	 	 	62	 
	10.2. Negative Covenants
	 	 	62	 
	10.2.1. Permitted Debt
	 	 	62	 
	10.2.2. Permitted Liens
	 	 	64	 
	10.2.3. Cash Accumulation
	 	 	66	 
	10.2.4. Distributions; Upstream Payments
	 	 	66	 
	10.2.5. Restricted Investments
	 	 	67	 
	10.2.6. Disposition of Assets
	 	 	67	 
	10.2.7. Loans
	 	 	67	 
	10.2.8. Restrictions on Payment of Certain Debt
	 	 	67	 
	10.2.9. Fundamental Changes
	 	 	67	 
	10.2.10. Subsidiaries
	 	 	68	 
	10.2.11. Organic Documents
	 	 	68	 






 


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(continued)




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	10.2.12. Tax Consolidation
	 	 	68	 
	10.2.13. Accounting Changes
	 	 	68	 
	10.2.14. Restrictive Agreements
	 	 	68	 
	10.2.15. Hedging Agreements
	 	 	68	 
	10.2.16. Conduct of Business
	 	 	68	 
	10.2.17. Affiliate Transactions
	 	 	68	 
	10.2.18. Plans
	 	 	69	 
	10.2.19. Amendments to Certain Material Contracts
	 	 	69	 
	10.2.20. No Speculative Transactions
	 	 	69	 
	10.2.21. Passive Company Status
	 	 	69	 
	10.2.22. General Partner
	 	 	69	 
	10.2.23. Sale-Leaseback Transactions
	 	 	69	 
	10.2.24. Debt under Senior Note Debt Documents
	 	 	69	 
	10.2.25. Use of Proceeds
	 	 	70	 
	10.2.26. Amendments to First Lien Debt Documents
	 	 	70	 
	10.2.27. Acquisition of Debt
	 	 	70	 
	10.2.28. No Inconsistent Agreements
	 	 	70	 
	10.2.29. Stay, Extension and Usury Laws
	 	 	70	 
	10.3. Financial Covenants
	 	 	71	 
	10.3.1. Excess Availability
	 	 	71	 
	10.3.2. Capital Expenditures
	 	 	71	 
	SECTION 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT
	 	 	71	 
	11.1. Events of Default
	 	 	71	 
	11.2. Remedies upon Default
	 	 	73	 
	11.3. License
	 	 	73	 
	11.4. Setoff
	 	 	74	 
	11.5. Remedies Cumulative; No Waiver
	 	 	74	 
	11.5.1. Cumulative Rights
	 	 	74	 
	11.5.2. Waivers
	 	 	74	 
	SECTION 12. AGENT
	 	 	74	 
	12.1. Appointment, Authority and Duties of Agent
	 	 	74	 
	12.1.1. Appointment and Authority
	 	 	74	 






 


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	 	 	Page	 
	 
	 	 	 	 
	12.1.2. Duties
	 	 	75	 
	12.1.3. Agent Professionals
	 	 	75	 
	12.1.4. Instructions of Required Lenders
	 	 	75	 
	12.1.5. Collateral Agent
	 	 	75	 
	12.1.6. No Fiduciary Relationship
	 	 	75	 
	12.2. Agreements Regarding Collateral and Field Examination Reports
	 	 	75	 
	12.2.1. Lien Releases; Care of Collateral
	 	 	75	 
	12.2.2. Possession of Collateral
	 	 	76	 
	12.2.3. Reports
	 	 	76	 
	12.3. Reliance By Agent
	 	 	76	 
	12.4. Action Upon Default
	 	 	76	 
	12.5. Ratable Sharing
	 	 	76	 
	12.6. Indemnification of Agent Indemnitees
	 	 	77	 
	12.6.1. INDEMNIFICATION
	 	 	77	 
	12.6.2. Proceedings
	 	 	77	 
	12.7. Limitation on Responsibilities of Agent
	 	 	77	 
	12.8. Successor Agent
	 	 	78	 
	12.8.1. Resignation; Successor Agent
	 	 	78	 
	12.8.2. Separate Collateral Agent
	 	 	78	 
	12.9. Due Diligence and Non-Reliance
	 	 	78	 
	12.10. Replacement of Certain Lenders
	 	 	79	 
	12.11. Remittance of Payments and Collections
	 	 	79	 
	12.11.1. Remittances Generally
	 	 	79	 
	12.11.2. Failure to Pay
	 	 	79	 
	12.11.3. Recovery of Payments
	 	 	79	 
	12.12. Agent in its Individual Capacity
	 	 	80	 
	12.13. Agent Titles
	 	 	80	 
	12.14. No Third Party Beneficiaries
	 	 	80	 
	12.15. [Reserved]
	 	 	80	 
	12.16. Intercreditor Agreement
	 	 	80	 
	SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
	 	 	80	 
	13.1. Successors and Assigns
	 	 	80	 






 


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(continued)




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	13.2. Assignments
	 	 	80	 
	13.2.1. Assignments by Lenders
	 	 	80	 
	13.2.2. Register
	 	 	81	 
	13.2.3. Certain Pledges
	 	 	81	 
	13.2.4. Electronic Execution of Assignments
	 	 	81	 
	13.3. Participations
	 	 	82	 
	13.3.1. Participations
	 	 	82	 
	13.3.2. Limitations upon Participant Rights
	 	 	82	 
	13.4. Tax Treatment
	 	 	82	 
	13.5. Representation of Lenders
	 	 	82	 
	SECTION 14. MISCELLANEOUS
	 	 	83	 
	14.1. Consents, Amendments and Waivers
	 	 	83	 
	14.1.1. Amendment
	 	 	83	 
	14.1.2. Limitations
	 	 	83	 
	14.1.3. Payment for Consents
	 	 	83	 
	14.1.4. Defaulting Lender Limited Rights
	 	 	83	 
	14.1.5. Amendment to First Lien Debt Documents
	 	 	84	 
	14.2. Indemnity
	 	 	84	 
	14.3. Notices and Communications
	 	 	85	 
	14.3.1. Notice Address
	 	 	85	 
	14.3.2. Electronic Communications; Voice Mail
	 	 	85	 
	14.3.3. Non-Conforming Communications
	 	 	85	 
	14.4. Performance of Borrowers’ Obligations
	 	 	85	 
	14.5. Credit Inquiries
	 	 	86	 
	14.6. Severability
	 	 	86	 
	14.7. Cumulative Effect; Conflict of Terms
	 	 	86	 
	14.8. Counterparts; Facsimile Signatures
	 	 	86	 
	14.9. Entire Agreement
	 	 	86	 
	14.10. Obligations of Lenders
	 	 	86	 
	14.11. Confidentiality
	 	 	86	 
	14.12. GOVERNING LAW
	 	 	87	 






 


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	 	 	Page	 
	 
	 	 	 	 
	14.13. Consent to Forum
	 	 	87	 
	14.13.1. Forum
	 	 	87	 
	14.14. Waivers by Borrowers
	 	 	87	 
	14.15. Patriot Act Notice
	 	 	88	 
	14.16. Survival of Representations and Warranties
	 	 	88	 
	14.17. No Advisory or Fiduciary Responsibility
	 	 	88	 
	14.18. Intercreditor Agreement Prevails
	 	 	88	 





 


ix









 





LIST OF EXHIBITS AND SCHEDULES




	 	 	 
	Exhibit A Term Note

	 	 
	Exhibit B Form of Borrowing Base Certificate
	 	 
	Exhibit C Assignment and Assumption Agreement
	 	 
	Exhibit D Compliance Certificate
	 	 
	Exhibit E Credit Card Notification
	 	 
	Exhibit F Guaranty
	 	 






	 	 	 	 	 	 	 
	Schedule 1.1(a)
	 	Commitments of Lenders	 	 	 	 
	Schedule 1.1(b)
	 	Restricted Investments Existing on the Closing Date	 	 	 	 
	Schedule 1.1(c)
	 	[Reserved]	 	 	 	 
	Schedule 2.3.2
	 	[Reserved]	 	 	 	 
	Schedule 7.1(c)
	 	Commercial Tort Claims	 	 	 	 
	Schedule 7.2.1
	 	Secondary Operating Deposit Accounts	 	 	 	 
	Schedule 7.3
	 	Mortgaged Real Estate	 	 	 	 
	Schedule 8.2.1
	 	Existing Credit Card Arrangements	 	 	 	 
	Schedule 8.5
	 	Deposit Accounts	 	 	 	 
	Schedule 8.5(a)
	 	Excluded Deposit and Disbursement Accounts	 	 	 	 
	Schedule 8.5(b)
	 	Excluded Trust Accounts	 	 	 	 
	Schedule 8.6.1
	 	Chief Executive Offices and other Business Locations	 	 	 	 
	Schedule 9.1.4
	 	Names and Capital Structure	 	 	 	 
	Schedule 9.1.5
	 	Former Corporate Names and Trade Names	 	 	 	 
	Schedule 9.1.12
	 	Intellectual Property	 	 	 	 
	Schedule 9.1.15
	 	Environmental Matters	 	 	 	 
	Schedule 9.1.16
	 	Restrictive Agreements	 	 	 	 
	Schedule 9.1.17
	 	Litigation	 	 	 	 
	Schedule 9.1.22
	 	Labor Contracts	 	 	 	 
	Schedule 10.2.1
	 	Existing Debt	 	 	 	 
	Schedule 10.2.2
	 	Existing Liens	 	 	 	 
	Schedule 10.2.2(c)
	 	Existing Tax Liens	 	 	 	 
	Schedule 10.2.17
	 	Existing Affiliate Transactions	 	 	 	 







 


 









 







SECOND LIEN LOAN AND SECURITY AGREEMENT




THIS SECOND LIEN LOAN AND SECURITY AGREEMENT (this “Loan Agreement” or
“Agreement”) is dated as of November 18, 2009, among THE BON-TON DEPARTMENT STORES, INC.
(“Bon-Ton”), a Pennsylvania corporation and THE ELDER-BEERMAN STORES CORP., an Ohio
corporation (“Elder-Beerman” and together with Bon-Ton, collectively, the
“Borrowers”), Borrowers”), each of the other Obligors party hereto, the financial
institutions party to this Loan Agreement from time to time as lenders (collectively,
“Lenders”), and SANKATY ADVISORS, LLC, a Delaware limited liability company
(“Sankaty”), as administrative agent for the Lenders (“Agent”), with GB MERCHANT
PARTNERS, LLC, a Delaware limited liability company (“GB Merchant Partners”), as collateral
agent for the Lenders (“Collateral Agent”) and GA CAPITAL, LLC, a Delaware limited
liability company (“GA Capital”), as documentation agent for the Lenders
(“Documentation 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 Loan 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, in each
case, in form and substance reasonably satisfactory to First Lien Agent (and, following the
Bank Loan Termination Date, Agent).




Account Debtor — a Person who is obligated under an Account, Chattel Paper or
General Intangible.




Adjusted LIBOR — for any Interest Period, with respect to the LIBOR Term Loan,
the per annum rate of interest (rounded upward, if necessary, to the nearest 1/16th of 1%)
equal to the highest of (a) the rate per annum equal to the British Bankers Association
LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available
source providing quotations of BBA LIBOR as designated by Agent from time to time) at
approximately 11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period)
with a term equivalent to such Interest Period, (b) the rate determined in accordance with
clause (a) of this sentence calculated based on an Interest Period of three months and (c)
3.00%. If such rate is not available at such time for any reason, then “Adjusted LIBOR” for
such Interest Period shall be the rate per annum (rounded upward, if necessary, to the
nearest 1/16th of 1%) equal to the highest of (a) the rate determined by Agent to be the
rate at which deposits in Dollars for delivery on the first day of such Interest Period in
same day funds in the approximate amount of the LIBOR Loan being made, continued or
converted by Bank of America and with a term equivalent to such Interest Period would be
offered by Bank of America’s London Branch to major banks in the London interbank eurodollar
market at their request at approximately 11:00 a.m. (London time) two Business Days prior to
the
commencement of such Interest Period), (b) the rate determined in accordance with
clause (a) of this sentence calculated based on an Interest Period of three months and (c)
3.00%.


 


 









 






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 — as defined in the Preamble.




Agent Indemnitees — Agent and its Related Parties.




Agent Parties — as defined in Section 10.1.2.




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 — means 12.75%.




Approved Fund — any Fund that is administered or managed by (a) a Lender, (b)
an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or
manages a Lender.




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, substantially in the form of Exhibit C.




Available Basket Amount — means, on any date of determination, an amount equal
to the result of (i) net cash proceeds actually received by an Obligor from the issuance of
any Equity Interests (or capital contributions in respect of Equity Interests held in an
Obligor) after the Closing Date (“net equity issuance proceeds”), minus (ii)
such net equity issuance proceeds which have been utilized by the Obligors and their
Subsidiaries to make Investments.


 


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Bank of America — Bank of America, N.A., a national banking association, and
its successors and permitted assigns.




Bank Product Debt — as defined in the First Lien Loan Agreement.




Bankruptcy Code — Title 11 of the United States Code, as amended and in effect.




Bank Loan Termination Date — as defined in the Intercreditor Agreement.




Base Rate — for any day, a fluctuating rate per annum equal to the highest of
(a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for
such day as publicly announced from time to time by Bank of America as its “prime rate,” (c)
the Adjusted LIBOR (without giving effect to clause (c) of such definition) for a one-month
Interest Period in effect for such day (or if such day is not a Business Day, the
immediately preceding Business Day) and (d) 3.00%. Any change in the Base Rate due to a
change in any of the foregoing shall take effect at the opening of business on the day
specified in the public announcement of such change. In the event the Base Rate is changed
from time to time hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal to such
change in the Base Rate.




Base Rate Term Loan — a Term Loan to the extent the interest rate is calculated
by reference to the Base Rate plus the Applicable Margin.




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 — as defined in the Preamble.




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 or another bank reasonably acceptable to First Lien Agent (and, following the Bank
Loan Termination Date, Agent), subject to a control agreement in favor of First Lien Agent,
for the benefit of the First Lien Lenders (and, following the Bank Loan Termination Date,
Lenders), in form and substance reasonably satisfactory to First Lien Agent (and, following
the Bank Loan Termination Date, Agent).




Borrower Agent — as defined in Section 4.4.




Borrowing Base Certificate — as defined in the First Lien Loan Agreement, in
the form of Exhibit B hereto.


 


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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 Term Loan, also excluding any day on which banks do not
conduct dealings in Dollar deposits on the London interbank market.




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, in each case
that are required to be capitalized for financial reporting purposes in accordance with
GAAP.




Capital Lease — any lease that is required to be capitalized for financial
reporting purposes 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 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 or
a First Lien 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.




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 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


 


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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 (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, or any successor provision) 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.




Collateral Agent — as defined in the Preamble.




Commercial Tort Claim — as defined in the UCC.




Commitment — for any Lender, the aggregate principal amount of such Lender’s
Term Loan Commitment. “Commitments” means the aggregate principal amount of all
Term Loan Commitments.




Compliance Certificate — a certificate, substantially in the form of Exhibit D
hereto, by which Borrowers certify compliance with Section 10.3.




Consolidated EBITDA — for any period prior to the Restatement Date, as defined
in the First Lien Loan Agreement as in effect on the date hereof, and for any period on or
after the Restatement Date, 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 of the Parent and its Subsidiaries for such period, (iii) depreciation and
amortization expense, (iv) all cash proceeds of business interruption insurance received by
the Obligors to the extent not included in Consolidated Net Income, (v) non-cash losses in
respect to obligations under Hedging Agreements, (vi) cost


 


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savings in connection with any
Permitted Acquisition to the extent (A) actually realized, (B) projected or anticipated and permitted or required under Regulation S-K under the
Securities Laws or Regulation S-X under the Securities Laws or (C) reasonably expected to be
realized (and, in the case of clause (c), reasonably approved by the Agent as such) within
the next four (4) Fiscal Quarters after such Permitted Acquisition is effected;
provided that all such cost savings shall be set forth in an officer’s certificate
from a Senior Officer of the Borrowers in reasonable detail describing and quantifying such
cost savings, (vii) non-cash impairment charges, asset write-offs or charges due to the
disposal of long-lived assets under GAAP to the extent such impairment charge, asset
write-off or charge reduced Consolidated Net Income, (viii) the cumulative non-cash effect
of accounting changes to the extent such changes result in a reduction of Consolidated Net
Income, (ix) any non-cash losses, expenses or charges reducing Consolidated Net Income,
excluding any non-cash charge that, in the ordinary course of business, results in an
accrual of a reserve for cash charges in any future period, (x) expenses reducing
Consolidated Net Income incurred to the extent reimbursed in cash by indemnification
provisions in any agreement in connection with any Permitted Acquisition and such reimbursed
amount was not included within the calculation of Consolidated Net Income, (xi) non-cash
losses recognized and expenses incurred in connection with the effect of currency and
exchange rate fluctuations on intercompany balances and other balance sheet items, and (xii)
other non-recurring or unusual expenses of the Obligors and their Subsidiaries which are
allowed in accordance with GAAP to be classified as non-recurring or unusual expenses to the
extent reducing such Consolidated Net Income; provided that such expenses shall not
exceed $20,000,000 in any period of four consecutive fiscal quarters 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, (ii) all non-cash items increasing Consolidated Net Income for such period,
(iii) amounts paid in cash in respect of non-cash charges which were added back to
Consolidated EBITDA in a prior period and (iv) other non-recurring or unusual income of the
Obligors and their Subsidiaries which are allowed in accordance with GAAP to be classified
as non-recurring or unusual income to the extent increasing such Consolidated Net Income and
in excess of $20,000,000 in any period of four consecutive fiscal quarters.




Consolidated Fixed Charges — for any period, for the Parent and its
Subsidiaries on a consolidated basis, the sum of cash payments made or required to be made
on a pro forma basis for (a) all scheduled permanent principal payments, interest, premium
payments, debt discount, fees (excluding any fees incurred in connection with the closing of
the First Lien Debt Documents or the Loan Documents), 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
determined 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 determined in accordance with
GAAP.




Consolidated Fixed Charge Coverage Ratio — as of any date of determination, the
ratio of (a) the result of (i) Consolidated EBITDA for the four prior fiscal quarter period
ending on such date, minus (ii) Capital Expenditures (net of landlord or vendor
contributions for Capital Expenditures) for such period (but not less than zero), minus
(iii) cash Federal, state, local or foreign income taxes (net of tax refunds in cash) of the
Parent and its Subsidiaries paid for such period (but not less than zero), to (b)
Consolidated Fixed Charges for such period.




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.


 


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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 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; provided that “Contingent Obligation” shall not include any product
warranties given in the ordinary course of business. 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.




Convertible Note Debt — unsecured Debt of Bon-Ton and any other Obligor which
may be convertible, exercisable or exchangeable for or into Capital Stock of Bon-Ton or any
other Obligor (other than Disqualified Stock).




Convertible Note Debt Documents — all agreements, instruments and documents
from time to time executed in favor of all or any of the holders of the Convertible Note
Debt.




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 Issuer — collectively (x) MasterCard International, Inc., Visa,
U.S.A., Inc., Visa International and American Express, World Financial Network National Bank
and Discover and (y) HSBC, as issuer of the Borrowers’ private label credit card program and
any replacement thereof that is reasonably acceptable to First Lien Agent (and, following
the Bank Loan Termination Date, Agent).




Credit Card Notification — as defined in Section 6.1(p).




Credit Card Processor — any Person that acts as a credit card clearinghouse or
processor with respect to any sales transactions involving credit card purchases by
customers using credit cards issued by any Credit Card Issuer.




Credit Card Receivables — collectively, all present and future rights of
Obligors to payment from (a) any Credit Card Issuer or Credit Card Processor arising from
sales of goods or rendition of services to customers who have purchased such goods or
services using a credit or debit card and (b) any Credit Card Issuer or Credit Card
Processor in connection with the sale or transfer of Accounts arising pursuant to the sale
of goods or rendition of services to customers who have purchased such goods or services
using a credit card or a debit card, including, but not limited to, all amounts at any time
due or to become due from any Credit Card Issuer or Credit
Card Processor under the Credit Card Notifications or otherwise.


 


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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 in respect of
Disqualified Stock; and (h) all Guarantees of such Person in respect of any of the
foregoing. For all purposes hereof, the Debt 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 Debt 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.




Defaulting Lender — any Lender that (a) has failed to pay over to any Agent or
any other Lender any other amount required to be paid by it hereunder within one Business
Day of the date when due unless the subject of a good faith dispute or unless such failure
has been cured or (b) has been deemed insolvent or become the subject of an Insolvency
Proceeding.




Deposit Account — as defined in the UCC.




Disqualified Institution — a business competitor of the Borrowers and their
Subsidiaries identified by the Borrower Agent in its reasonable discretion and in writing to
the Agent from time to time, and their known Affiliates.




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 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 six
months 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 six months after the
Termination Date.


 


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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 —  as defined in the First Lien Loan Agreement.




Document — as defined in the UCC.




Documentation Agent — as defined in Preamble.




Dollars — lawful money of the United States.




Dominion Account — each special account established by Borrowers at Bank of
America or another bank reasonably acceptable to First Lien Agent (and, following the Bank
Loan Termination Date, Agent), over which First Lien Agent (and, following the Bank Loan
Termination Date, Agent) has exclusive control (subject to the Intercreditor Agreement) 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 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
$500,000,000, 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, any Person;
provided that notwithstanding the foregoing, “Eligible Assignee” shall not include
(i) any Obligor or any Affiliate or Subsidiary of any Obligor and (ii) on and after the
Restatement Date, any Disqualified Institution who is identified by the Borrower Agent as
such prior to an assignment.




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 Obligors with respect to any Real
Estate subject to a Mortgage, pursuant to which Obligors 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
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.


 


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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 Availability Trigger Event — prior to the Bank Loan Termination Date,
the first date on which Excess Availability for five (5) consecutive days is less than the
greater of (i) $77,000,000 or (ii) 15% of the lesser of (x) the Tranche A Revolver
Commitments, plus the Tranche A-1 Revolver Commitments or (y) the Tranche A
Borrowing Base, plus the Tranche A-1 Borrowing Base.




Excess Availability Trigger Period — any period (a) commencing upon the
occurrence of a Excess Availability Trigger Event and (b) ending on the date that Excess
Availability for a period of ninety (90) consecutive calendar days exceeds the greater of
(i) $77,000,000 or (ii) 15% of the lesser of (x) the Tranche A Revolver Commitments,
plus the Tranche A-1 Revolver Commitments or (y) the Tranche A Borrowing Base,
plus the Tranche A-1 Borrowing Base.




Excluded Tax — Tax on the net income or gross receipts of a Lender or any
franchise or capital stock tax.




Extraordinary Expenses — all reasonable and documented out-of-pocket costs,
expenses or advances that Agent, Collateral Agent or Documentation 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, 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


 


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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; or (f) negotiation and documentation of any
modification, waiver, workout, restructuring or forbearance with respect to any Loan
Documents or Obligations. Such costs, expenses and advances include transfer fees, taxes,
storage fees, insurance costs, permit fees, utility reservation and standby fees, legal
fees, financial advisor 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.




Federal Funds Rate — for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day; provided that
(a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward,
if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on
such transactions as reasonably determined by the Agent.




First Lien Affiliate — with respect to any First Lien Lender or First Lien
Agent, another Person who directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such First Lien Lender or the
First Lien Agent, as the case may be.




First Lien Agent — the agent under the First Lien Debt Documents, and its
successors and permitted assigns in such capacity.




First Lien Debt — Priority Bank Debt (as defined in the Intercreditor
Agreement).




First Lien Lenders — the lenders under the First Lien Debt Documents, and their
successors and permitted assigns.




First Lien Loan Agreement — the Loan and Security Agreement, dated as of March
6, 2006, by and among the Borrowers, the Guarantors, the First Lien Agent, the First Lien
Lenders and each other party thereto, as amended by that certain Amendment No. 1 to Loan and
Security Agreement dated as of November 20, 2007, as further amended by that certain
Amendment No. 2 to Loan and Security Agreement dated as of November 18, 2009, as it may be
further amended, restated, supplemented, modified, renewed, replaced or Refinanced in whole
or in part from time to time and any other agreement extending the maturity of,
consolidating, otherwise renewing, replacing or Refinancing all or any portion of the Debt
under the First Lien Debt Documents or all or any portion of the amounts owed under any
other agreement that itself is the First Lien Loan Agreement hereunder and whether by the
same or any other agent, lender or group of lenders and whether or not increasing the amount
of Debt under the First Lien Debt Documents that may be incurred thereunder, in each case in
a manner not inconsistent with the Intercreditor Agreement.




First Lien Debt Documents — collectively, the First Lien Loan Agreement and
each of the other documents (including, without limitation, all guaranties and security
documents), agreements, instruments, filings and certificates from time to time executed in
favor of the First Lien Agent and/or the First Lien Lenders, as any of the same may be
amended, restated,
supplemented, modified, renewed, replaced or Refinanced in whole or in part from time
to time, in each case in a manner not inconsistent with the Intercreditor Agreement.


 


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First Lien Refinancing — means no later than January 6, 2011, either (i) the
maturity date of the First Lien Loan Agreement is extended to a date no earlier than three
and one-half (3.5) years from the Restatement Date or (ii) the First Lien Loan Agreement is
Refinanced in full, in a manner not inconsistent with the Intercreditor Agreement or on
terms and conditions reasonably satisfactory to all Lenders.




Fiscal Quarter — each successive period of thirteen weeks, commencing on the
first day of a Fiscal Year.




Fiscal Total Stores — in respect of any Fiscal Year, an amount of Stores equal
to the sum of (x) the aggregate number of Stores open on the first Business Day of such
Fiscal Year, plus (y) the aggregate number of Stores acquired or opened during such 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 Obligor located at a parcel of Real Estate subject to a Mortgage.




FLSA — the Fair Labor Standards Act of 1938, as amended.




Force Majeure — an event or force beyond the reasonable control of the
Obligors, including, without limitation, acts of God, acts of public enemy, terrorism, wars,
riots and civil disturbances, explosions, epidemics, natural disasters, fires, vandalism,
strikes, lock-outs or other labor difficulties, embargoes, shortages or unavailability of
materials, supplies, labor, equipment or systems, or fuel or energy shortage.




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 the Obligors.




Full Payment — with respect to any Obligations, the full and indefeasible cash
payment thereof (other than contingent indemnification Obligations with respect to which no
claim has been asserted in writing), including any interest, fees and other charges accruing
during an Insolvency Proceeding (whether or not allowed in the proceeding).




Fund — any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of its activities.




GAAP — generally accepted accounting principles in the United States in effect
from time
to time.


 


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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, contract rights 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) the Bon-Ton Giftco, Inc., (c) The
Bon-Ton Stores of Lancaster, Inc., (d) The Bon-Ton Trade, LLC, (e) Carson Pirie Scott II,
Inc., (f) Bon-Ton Distribution, Inc., (g) McRIL, 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,
substantially in the form of Exhibit F hereto.




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.




Indemnitees — Agent Indemnitees and Lender Indemnitees.




Initial Lenders — means each of (i) the Initial Sankaty Lenders until such time
as the Initial Sankaty Lenders, collectively, beneficially own (which shall for the purposes
of this definition include voting and economic interests) less than 70% of the amount of the
Term Loans initially held by such Initial Sankaty Lenders (without giving effect to any
prepayments) either as provided on Schedule 1.1(a) as of the Closing Date or as acquired by
way of assignment within 5 Business Days after the Closing Date, (ii) the Initial GB
Merchant Partners Lenders until such time as the Initial GB Merchant Partners Lenders,
collectively, beneficially own (which shall for the purposes of this definition include
voting and economic interests) less than 70% of the amount of the Term Loans initially held
by such Initial GB Merchant Partners Lenders (without giving effect to any prepayments)
either as provided on Schedule 1.1(a) as of the Closing Date or as acquired by way of
assignment within 5 Business Days after the Closing Date and (iii) the Initial Stone Tower
Lenders until such time as the Initial Stone Tower Lenders, collectively, beneficially own
(which shall for the purposes of this definition include voting and economic interests) less
than 70% of the amount of the Term Loans initially held by such Initial Stone Tower Lenders
(without giving effect to any prepayments) either as provided on Schedule 1.1(a)
as of the Closing Date or as acquired by way of assignment within 5 Business Days after
the Closing Date.


 


-13-









 






Initial GB Merchant Partners Lenders — means 1903 Onshore Funding, LLC and its
Affiliates which control, are controlled by, or are under common control with 1903 Onshore
Funding, LLC.




Initial Sankaty Lenders — means Sankaty Credit Opportunities II, L.P., Sankaty
Credit Opportunities III, L.P., Sankaty Credit Opportunities IV, L.P., Sankaty Credit
Opportunities (Offshore Master) IV, L.P. and their respective Affiliates which control, are
controlled by, or are under common control with any of the foregoing.




Initial Stone Tower Lenders — means Stone Tower Credit Funding I Ltd. and its
Affiliates which control, are controlled by, or are under common control with Stone Tower
Credit Funding I Ltd. (which includes, without limitation, for the avoidance of doubt, Stone
Tower Debt Advisors, LLC).




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 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.




Intercreditor Agreement — the intercreditor agreement by and among Agent, the
First Lien Agent, each of the Borrowers and the Guarantors, dated as of November 18, 2009,
as it may be amended, restated, supplemented or otherwise modified from time to time.




Interest Period — as defined in Section 3.1.3.




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).


 


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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. For purposes of the Loan Documents, on or after the
Restatement Date the outstanding amount of any Investment made by any Person at any time
shall be calculated as the excess of the initial amount of such Investment made by such
Person (including the fair market value of all property transferred by such Person as part
of such Investment) over all returns of principal or capital thereof received in
cash on or prior to such time by such Person (including all cash dividends, cash
distributions and cash repayments of Debt received by such Person).




Investment Property — as defined in the UCC.




IRC — means the Internal Revenue Code of 1986, as amended, and any successor
thereto.




Landlord Lien State — (i) the states of Washington, Virginia, Pennsylvania and
(ii) such other state(s) or jurisdictions in which a landlord’s claim for rent or other
obligations has priority over the Lien of Agent in any of the Collateral.




Large Inventory Location — any distribution center (including each Distribution
Center), warehouse, cross-docking station or storage facility at which Inventory is located.




Lender Indemnitees — Lenders and their officers, directors, employees,
Affiliates, agents, advisors and attorneys.




Lenders — as defined in the preamble to this Loan Agreement, including any
other Person who hereafter becomes a “Lender” pursuant to an Assignment and Assumption
Agreement.




Letter-of-Credit Right — as defined in the UCC.




LIBOR Term Loan — a Term Loan to the extent the interest rate is calculated by
a reference to Adjusted LIBOR plus the Applicable Margin.




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
First Lien Agent (or, following the Bank Loan Termination Date, 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 First Lien Agent (and, following the
Bank Loan Termination Date, 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, customs broker 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 First Lien Agent (and, following the Bank
Loan Termination Date, Agent), and agrees to
deliver the Collateral to First Lien Agent (and, following the Bank Loan Termination
Date, 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 First Lien Agent (and, following the
Bank Loan Termination Date, Agent) upon request; and (d) for any Collateral subject to a
Licensor’s Intellectual Property rights, the Licensor grants to First Lien Agent (and,
following the Bank Loan Termination Date, Agent) the right, vis-à-vis such Licensor, to
enforce Liens of Agent and First Lien Agent 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.


 


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Loan Account — the loan account established by each Lender on its books
pursuant to Section 5.7.




Loan Agreement — as defined in the Preamble.




Loan Documents — this Loan Agreement, Other Agreements and Security Documents.




Loan Year — each calendar year commencing on the Closing Date and on each
anniversary of the Closing Date.




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 Bon-Ton, as successor by merger to Herberger’s Department Stores, LLC, a Minnesota
limited liability company, as tenant, as it may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the Loan Documents, (ii) Master
Lease dated as of March 6, 2006 between Bonstores Realty One, LLC, a Delaware limited
liability company, as landlord, and Carson Pirie Scott II, Inc., formerly known as McRae’s,
Inc., a Mississippi corporation, as tenant, as it may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the Loan Documents, (iii) 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, as it may be amended, restated, supplemented or otherwise modified from time to time
in accordance with the Loan Documents, (iv) Master Lease dated as of March 6, 2006 between
Bonstores Realty One, LLC, a Delaware limited liability company, as landlord, and Bon-Ton,
as successor by merger to Parisian, Inc., an Alabama corporation, as tenant, as it may be
amended, restated, supplemented or otherwise modified from time to time in accordance with
the Loan Documents, (v) Master Lease dated as of March 6, 2006 currently between Bonstores
Realty One, LLC, a Delaware limited liability company, as landlord, and Bon-Ton
Distribution, Inc., formerly known as Saks Distribution Centers, Inc., an Illinois
corporation, as tenant, as it may be amended, restated, supplemented or otherwise modified
from time to time in accordance with the Loan Documents, (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, as it may be
amended, restated, supplemented or otherwise modified from time to time in accordance with
the Loan Documents, (vii) Master Lease dated as of March 6, 2006 between Bonstores Realty
Two, LLC, a Delaware limited liability company, as landlord, and Carson Pirie Scott II,
Inc., formerly known as McRae’s, Inc., a Mississippi corporation, as tenant, as it may be
amended, restated, supplemented or otherwise modified from time to time in accordance with
the Loan Documents, (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, as it may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the Loan Documents, (ix) Master
Lease dated as of March 6, 2006 between
Bonstores Realty Two, LLC, a Delaware limited liability company, as landlord, and
Bon-Ton, as successor by merger to Parisian, Inc., an Alabama corporation, as tenant, as it
may be amended, restated, supplemented or otherwise modified from time to time in accordance
with the Loan Documents and (x) such other leases and subleases as may be entered into
between an SPE and an Obligor from time to time.


 


-16-









 






Material Adverse Effect — the effect of any event or circumstance occurring
after January 31, 2009 (except for general economic or political conditions or conditions
generally applicable to the department store industry, or terrorist events or wars) that,
taken as a whole, has or could be reasonably expected to have a material adverse effect on:
(a) the business, operations, liabilities (actual or contingent), Properties, or financial
condition of the Obligors and their Subsidiaries 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 rights or remedies 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, or (c) that relates to the Mortgage Loan Debt, the Senior Note Debt, the Debt under
the First Lien Debt Documents, the Convertible Note Debt or other Debt in an aggregate
principal amount of $5,750,000 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 Loan Debt — (a) the Debt of SPEs 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 Agreement, executed by the Parent in favor of
the Mortgage Loan Lender, as in effect on the date hereof and as may be further amended,
restated, supplemented or otherwise modified from time to time in accordance with the Loan
Documents and (c) the Debt evidenced by each Exceptions to Non-Recourse Guaranty, entered
into on the March 6, 2006, by the Parent in favor of the Mortgage Loan Lender, as in effect
on the date hereof and as may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with the Loan Documents.




Mortgage Loan Debt Documents — the (a) Loan Agreement (the “Bonstores One
Agreement”), dated as of March 6, 2006, as amended on May 4, 2006, and as it may be
further amended, restated, supplemented or otherwise modified from time to time in
accordance with the Loan Documents, between Bonstores Realty One, LLC and the Mortgage Loan
Lender, (b) the Loan Agreement (the “Bonstores Two Agreement”), dated as of March 6,
2006, as amended on May 4, 2006, and as it may be further amended, restated, supplemented or
otherwise modified from time to time in accordance with the Loan Documents, 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 Agreement and (f) each guaranty of a Master
Lease Agreement by the Parent in favor of the Mortgage Loan Lender.




Mortgage Loan Lender — Bank of America, in its capacity as indenture trustee
under the Mortgage Loan Debt Documents.


 


-17-









 






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; (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 Term Note or other promissory note executed by a Borrower to
evidence any Obligations.




Notice of Conversion/Continuation — a Notice of Conversion/Continuation to be
provided by Borrower Agent to request a conversion or continuation of any Term Loans as
LIBOR Term Loans, in form reasonably satisfactory to Agent.




Obligations — all (a) principal of and premium, if any, on the Term Loans, (b)
interest, expenses, fees and other sums payable by Obligors under Loan Documents, (c)
obligations of Obligors under any indemnity for Claims, (d) Extraordinary Expenses and (e)
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.




OFAC — has the meaning specified in Section 9.1.27.




OID — has the meaning specified in Section 2.1.4.




Ordinary Course of Business — the ordinary course of business of Parent or any
Subsidiary, consistent with past practices and undertaken in good faith.




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, as amended.




Other Agreement — each Note, Guaranty, Lien Waiver, Real Estate Related
Document, Compliance Certificate, the Intercreditor Agreement, the Perfection Certificate,
the Post-Closing Agreement, financial statement or report delivered hereunder, or other
document, instrument or agreement (other than this Loan 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.




Parent — The Bon-Ton Stores, Inc., a Pennsylvania corporation and parent
company of
Bon-Ton.


 


-18-









 






Participant — as defined in Section 13.3.1.




Passive Company — collectively, 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., 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 an
Obligor, including those constituting proceeds of any Collateral.




Perfection Certificate — that certain Perfection Certificate dated as of the
date hereof, and delivered by the Obligors to Agent.




Permitted Acquisition — any acquisition by any Obligor, whether by purchase,
merger or otherwise, of all or substantially all of the assets of, the Equity Interests of,
or a business line or unit or a division of, any Person; provided that:




(i) immediately prior to, and after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing or would result therefrom;




(ii) all transactions in connection therewith shall be consummated, in all material
respects, in accordance with all applicable laws and in conformity with all applicable
Governmental Approvals;




(iii) such acquisition shall be consensual and shall have been approved by the Board of
Directors of such Person;




(iv) in the case of the acquisition of Equity Interests, the issuer of such Equity
Interests shall become a Subsidiary of the applicable Obligor immediately after consummation
of the applicable transaction, and such Obligor shall have taken, or caused to be taken, as
of the date such Person becomes a Subsidiary of such Obligor, the actions set forth in
Section 10.1.9;




(v) Prior to the Bank Loan Termination Date, Excess Availability on the date of the
making of such acquisition on a pro forma basis after giving effect to such acquisition, and
projected Excess Availability on a pro forma basis for the upcoming twelve month period
(after giving effect to such acquisition) is, in each case, greater than or equal to 17% of
the lesser of (A) the Tranche A Revolver Commitments, plus the Tranche A-1 Revolver
Commitments or (B) the Tranche A Borrowing Base, plus the Tranche A-1 Borrowing
Base;




(vi) Prior to the Bank Loan Termination Date, except if such acquisition is made within
180 days of an equity issuance and solely with the cash proceeds in an aggregate amount not
to exceed the Available Basket Amount then in effect, as of the monthly fiscal period most
recently then ended, the Consolidated Fixed Charge Coverage Ratio (on a pro forma trailing
12 fiscal month basis, giving effect to the making of such acquisition, and any Debt under
the First Lien Debt Documents incurred in connection therewith, determined as though such
acquisition
and such Debt under the First Lien Debt Documents had been incurred on the first day of
the twelve (12) fiscal month period ended prior to such acquisition) is not less than 0.85
to 1.00;


 


-19-









 






(vii) any Person or assets or division as acquired in accordance herewith shall be in
same business or lines of business in which the Borrowers and/or their Subsidiaries are
engaged as of the Closing Date or a line of business reasonably related or incidental
thereto; and




(viii) the Borrower Agent shall have delivered to Agent not less than then (10) days
prior to the consummation of such acquisition a certificate, in form and substance
reasonably satisfactory to Agent, from a Senior Officer of the Borrower Agent certifying
that the conditions set forth in clauses (i) through (vii) above are satisfied (which
certificate shall attach supporting projections, information and calculations with respect
to the requirements set forth in clause (v) and (vi) above (all based on projections of the
financial performance of the Obligors believed to be fair and reasonable at the time made)).




Permitted Asset Disposition — as long as no Default or Event of Default exists
or would result therefrom, and, if so required pursuant to Section 5.2, all Net Proceeds are
remitted to Agent (in accordance with Section 5.2 and the Intercreditor Agreement) for
application to the Obligations pursuant to Section 5.5, 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 value
or book value (whichever is more) of $575,000 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 $3,500,000 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 other Obligor, (e) the sale or other disposition of Cash
Equivalents, (f) dispositions of accounts receivable (other than Credit Card Receivables) in
connection with the compromise, settlement or collection thereof in the Ordinary Course of
Business or in bankruptcy or similar proceedings (it being understood that customary
chargebacks and offsets, discounts, allowances and credits by Credit Card Processors made in
the ordinary course of business shall not constitute a disposition of a Credit Card
Receivable for the purposes of this clause (f)), (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 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 and (y) the Obligors receive, at the
consummation of such Asset Disposition, gross proceeds, in cash, from such sale in an amount
not less than 70% of the appraised value of such Real Estate, as set forth in the most
recent appraisal provided to the First Lien Agent (and, following the Bank Loan Termination
Date, Agent), (m) the disposition by Borrower Agent of 100% of the membership interests in
Bonstores Realty One, LLC to Bonstores Holdings One, LLC, (n) the disposition by Borrower
Agent of 100% of the membership interests in Bonstores Realty Two, LLC to Bonstores Holdings
Two, LLC, (o) a Permitted Store Closure, (p) a sale or other disposition of any property in
connection with any transaction covered by, but not prohibited by, Section 10.2.23, (q) a
disposition of assets acquired in a Permitted Acquisition so long as (i) such disposition is
consummated within 180 days after the consummation of such Permitted Acquisition and (ii)
such assets do not constitute Inventory or Accounts; and (r) a transfer of condemned
property as a result of the exercise of “eminent domain” or other similar policies to the
respective Governmental Authority or agency that has condemned the same (whether by deed in
lieu of condemnation or otherwise), and transfers of properties that have been subject to a
casualty to the
respective insurer of such property as part of an insurance settlement;
provided that clauses (o) through (r) shall only apply after the Restatement Date.


 


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Permitted Business — any business conducted or proposed to be conducted 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 $1,150,000 or less at any time.




Permitted Distribution — prior to the Restatement Date, as defined in the First
Lien Loan Agreement as in effect on the date hereof, and on and after the Restatement Date,
(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 Distribution, (ii) prior to the Bank Loan Termination
Date, Excess Availability on the date of the making of such Distribution on a pro forma
basis after giving effect to such Distribution, and projected Excess Availability on a pro
forma basis for the upcoming twelve month period (after giving effect to such Distribution)
is, in each case, greater than or equal to 21% of the lesser of (A) the Tranche A Revolver
Commitments, plus the Tranche A-1 Revolver Commitments or (B) the Tranche A
Borrowing Base, plus the Tranche A-1 Borrowing Base, (iii) prior to the Bank Loan
Termination Date, as of the monthly fiscal period most recently then ended, the Consolidated
Fixed Charge Coverage Ratio (on a pro forma trailing 12 fiscal month basis, giving effect to
the making of such Distribution, and Debt under the First Lien Debt Documents incurred in
connection therewith, determined as though such Distribution and Debt under the First Lien
Debt Documents had been incurred occurred on the first day of the twelve (12) fiscal month
period ended prior to such Distribution) is not less than 1.10 to 1.00 and (iv) the
Borrowers shall have provided the Agent with a certificate not less than ten (10) days prior
to the making of such Permitted Distribution executed by a Senior Officer, evidencing
compliance, after giving effect to such Distribution, with the requirements set forth in
clauses (i) through (iii) above (which certificate shall attach supporting projections,
information and calculations with respect to the requirements set forth in clauses (ii) and
(iii) above (all based on projections of the financial performance of the Obligors believed
to be fair and reasonable at the time made)), (b) dividends by the Parent or redemptions or
repurchases of equity securities of the Parent in an aggregate amount not to exceed (x)
$5,750,000 in any fiscal year of the Parent or (y) $23,000,000 during the term of this Loan
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,
(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 other 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
exceed $3,450,000, (e) a repurchase of capital stock deemed to occur upon the cashless
exercise of stock options and warrants, and (f) distributions to Parent to enable Parent to
pay, and which are used by Parent to pay, customary and reasonable costs and expenses of an
offering of securities of Parent so long as the Parent reimburses the applicable Obligor
promptly upon the consummation of such offering.


 


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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 $28,750,000 at any time.




Permitted Store Closures — the closure or liquidation of a Store by the
Borrowers or any Subsidiary; provided that (a) neither the Borrowers nor any of
their Subsidiaries shall close or liquidate, as of any date of determination, in any Fiscal
Year (x) Stores representing more than 10% of the Fiscal Total Stores for such Fiscal Year
(this clause (x) determined by the result of (i) the sum of (A) the number of Stores closed
or liquidated during such Fiscal Year, plus (B) the number of Stores that Borrowers or its
Subsidiaries intend to close on or about such date of determination during such Fiscal Year,
divided by (ii) Fiscal Total Stores for such Fiscal Year) and (y) Stores representing more
than 25% of the Total Stores (this clause (y) determined by the result of (i) the sum of (A)
the number of Stores closed or liquidated since the Closing Date plus (B) the number of
Stores that the Borrowers or its Subsidiaries intend to close on or about such date of
determination, divided by (ii) Total Stores) and (b) if the number of Stores that the
Borrowers or their Subsidiaries intend to close or liquidate on any date of determination in
a Fiscal Year when aggregated with the number of Stores closed or liquidated by the
Borrowers or their Subsidiaries prior to such date within the same Fiscal Year exceed twenty
(20) Stores, then all such Stores that are being closed or liquidated on such date plus any
Stores closed or liquidated on any date thereafter in the same Fiscal Year shall be closed
or liquidated by a liquidator or under the supervision of a consultant (such liquidator or
consultant shall be reasonably acceptable to the Agent) and pursuant to liquidation or
consulting arrangements reasonably acceptable to Agent. For purposes of this defined term
and any other defined term included herein, Store relocations shall be ignored.




Person — any individual, corporation, limited liability company, partnership,
joint venture,
joint stock company, land trust, business trust, unincorporated organization,
Governmental Authority or other entity.


 


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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.




Post-Closing Agreement — means that certain letter agreement dated as of the
Closing Date among Agent and the Obligors setting forth any applicable conditions reasonably
required by Lenders to be fulfilled by Obligors, as applicable, subsequent to the Closing
Date in time periods as set forth therein, as amended, restated, supplemented or otherwise
modified from time to time.




Priority Lien Agent — as defined in the Intercreditor Agreement.




Pro Rata — (a) with respect to any Lender, a percentage (expressed as a
decimal, rounded to the ninth decimal place) determined by dividing the outstanding
principal amount of such Lender’s Term Loan by the aggregate outstanding principal amount of
all Term 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 reasonably be expected to 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 reasonable 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.




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; (c) Capital Leases and (d) 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.


 


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Refinance — in respect of any Debt, to refinance, extend, renew, defease,
supplement, replace or repay such Debt, or to issue other Debt in exchange or replacement
for such Debt, in whole or in part, whether with the same or different lenders, arrangers or
agents, “Refinanced” and “Refinancing” shall have correlative meanings.




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, plus the amount of any premiums required to be paid
thereon, accrued interest and reasonable fees and expenses associated therewith; (b) it has
a final maturity no sooner than, a weighted average life no less than, and an interest rate
on market terms for the type of Debt being refinanced, extended, or renewed; (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
on market terms for the type of Debt being extended, renewed or refinanced; (e) no
additional Lien is granted to secure it (other than to secure the additional Debt permitted
to be incurred pursuant to clause (a) of this definition); provided that with
respect to any extension, renewal or refinancing of the Senior Note Debt, Liens may be
granted to the holders thereof so long as such Liens are permitted under Section 10.2.2(s);
(f) no additional Person is obligated on such Debt; provided that with respect to
any extension, renewal or refinancing of the Senior Note Debt, any Obligor may be obligated
in respect thereof; 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,
replacement, renewal or refinancing of Debt permitted under Section 10.2.1 (b), (c), (d),
(e), (i), (p), (u) or (v).




Register — as defined in Section 13.2.2.




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, trustees, attorneys and advisors of such
Person and of such Person’s Affiliates.




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 (provided that (i) any insurer,
and (ii) any title or survey exception (and any endorsement or affirmative insurance with
respect thereto), and any other matter relating to the form and substance of a title policy,
previously deemed satisfactory by the First Lien Agent with respect to its first lien shall
also be deemed so acceptable to Agent and the Required Lenders), 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 (provided that any such
survey (and any exceptions thereon) and any other matter relating to the form and substance
of a survey, previously deemed satisfactory by the First Lien Agent with respect to its
first lien shall also be deemed so acceptable to Agent and the Required Lenders); (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
reasonably satisfactory to Required Lenders


 


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(and provided that any stated fair market value
for the applicable Real Estate in any appraisal dated within the last year shall be deemed satisfactory); (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. If, prior to the Bank Loan Termination
Date, any Related Real Estate Document delivered pursuant to part (b), (d), (e), (f), or (g)
above is satisfactory to or approved by the First Lien Agent as to form and substance and/or
the applicable third party that prepared the policy, report or appraisal or issued the
policy, it shall be deemed so satisfactory or approved to Agent and the Required Lenders.
Notwithstanding anything herein to the contrary, if any Related Real Estate Document is
waived by First Lien Agent, it shall be deemed waived by Agent and the Required Lenders.




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 an aggregate
outstanding principal amount of Term Loans in excess of 50% of the aggregate principal
amount of all outstanding Term Loans; provided that the portion of the Term Loans
held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders; provided, further that in no event shall
any Obligor, or Affiliate of an Obligor, be a “Lender” for purposes of this definition or
otherwise.




Restatement Date — means the first date on which the First Lien Loan Agreement
is amended and restated in the form of the Proposed Restated Revolving Credit Agreement (as
defined in the Intercreditor Agreement) including any changes thereto which would otherwise
be permitted by the Intercreditor Agreement.




Restricted Investment — any Investment by Parent or a Subsidiary, other than
(a) (i) Investments in Subsidiaries to the extent existing on the Closing Date and (ii)
Investments in any Borrower or Guarantor; (b) Cash Equivalents that are subject to Agent’s
Lien and Priority Lien Agent’s 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 the Obligors comprised of notes payable, or stock or other securities
issued by Account Debtors to any Obligor 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, (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) Permitted Acquisitions, (l) Investments
described on Schedule 1.1(b) and modifications and replacements thereof so long as the
amount of such Investment does not increase, (m) Investments resulting from deposits
referred to herein in


 


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Sections 10.2.2(e), (m) and (p), and other deposits made in the
ordinary course of business securing obligations or performance under real estate or personal property leases, (n) other Investments (not
constituting the acquisition of all or substantially all of the assets of, or the Equity
Interests of, or a business line or unit or a division of, any Person) made within 180 days
of an equity issuance and made solely with the cash proceeds of such equity issuance in an
aggregate amount not to exceed the Available Basket Amount then in effect so long as (i) no
Default or Event of Default shall have occurred and be continuing immediately prior to
making such Investment and after giving effect thereto and (ii) prior to the Bank Loan
Termination Date, Excess Availability on the date of the making of such Investment on a pro
forma basis after giving effect to such Investment, and projected Excess Availability on a
pro forma basis for the upcoming twelve month period (after giving effect to such
Investment) is, in each case, greater than or equal to 17% of the lesser of (A) the Tranche
A Revolver Commitments, plus the Tranche A-1 Revolver Commitments or (B) the Tranche
A Borrowing Base, plus the Tranche A-1 Borrowing Base and (o) Investments in any
Subsidiary that is not an Obligor in an amount not to exceed $1,150,000 at any time
outstanding; provided that clauses (k), (m), (n) and (o) shall only apply on and
after the Restatement Date.




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.




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, as amended and in effect.




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, Collateral Agent, Documentation Agent and Lenders.




Security Documents — this Loan Agreement, 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, as any
of the same may be amended, restated, supplemented, modified, renewed, replaced or
Refinanced in whole or in part from time to time, in each case in a manner not inconsistent
with the Loan Documents.




Senior Note Indenture — the Senior Note Indenture, dated as of March 6, 2006,
by and among Bon-Ton and The Bank of New York, as trustee, as it may be amended, restated,
supplemented, modified, renewed, replaced or Refinanced in whole or in part from time to
time and any other agreement extending the maturity of, consolidating, otherwise renewing,
replacing or Refinancing all or any portion of the Debt under the Senior Note Debt Documents
or all or any portion of the amounts owed under any other agreement that itself is the
Senior Note Indenture
hereunder and whether by the same or any other agent, lender or group of lenders and
whether or not increasing the amount of Debt under the Senior Note Debt Documents that may
be incurred thereunder, in each case in a manner not inconsistent with the Loan Documents.


 


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Senior Officer — the chairman of the board, president, chief executive officer,
treasurer, member manager or chief financial officer of a Borrower or, if the context
requires, an Obligor.




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. For the purposes of this
definition, any right of contribution of such Person existing by law, contract or otherwise
shall be deemed an asset of such Person.




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.




Store — any retail department store operated by the Parent or any of its
Subsidiaries.




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.




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 — (a) March 6, 2011 if a First Lien Refinancing has not
occurred or (b) November 18, 2013 if a First Lien Refinancing has occurred.




Term Loan — a loan made pursuant to Section 2.1.1 and “Term Loans” shall mean
each such loan.


 


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Term Loan Commitment — for any Lender, its obligation to make Term 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. “Term Loan
Commitments means the aggregate amount of such commitments of all Lenders. On the
Closing Date, the Term Loan Commitments are $75,000,000.




Term Note — a promissory note to be executed by Borrowers in favor of a Lender
substantially in the form of Exhibit A, which shall be in the amount of such Lender’s Term
Loan Commitment and shall evidence the Term Loans made by such Lender.




Total Stores — as to any date of determination, an amount equal to the sum of
(x) the aggregate number of Stores open on the Closing Date plus (y) the aggregate number of
Stores acquired or opened through such date of determination.




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 the Obligations.




Tranche A Borrowing Base — as defined in the First Lien Loan Agreement on the
date hereof, together with any amendments permitted by the Intercreditor Agreement.




Tranche A Excess Availability — as defined in the First Lien Loan Agreement on
the date hereof, together with any amendments permitted by the Intercreditor Agreement.




Tranche A Real Estate Amount — as defined in the First Lien Loan Agreement on
the date hereof, together with any amendments permitted by the Intercreditor Agreement.




Tranche A Revolver Commitments — as defined in the First Lien Loan Agreement on
the date hereof, together with any amendments permitted by the Intercreditor Agreement.




Tranche A-1 Borrowing Base — as defined in the First Lien Loan Agreement on the
date hereof, together with any amendments permitted by the Intercreditor Agreement.




Tranche A-1 Excess Availability — as defined in the First Lien Loan Agreement
on the date hereof, together with any amendments permitted by the Intercreditor Agreement.




Tranche A-1 Real Estate Amount — as defined in the First Lien Loan Agreement on
the date hereof, together with any amendments permitted by the Intercreditor Agreement.




Tranche A-1 Revolver Commitments — as defined in the First Lien Loan Agreement
on the date hereof, together with any amendments permitted by the Intercreditor Agreement.




Transferee — any actual or potential Eligible Assignee, Participant or other
Person acquiring an interest in any Obligations.




Trigger Event — any date on which (a) an Event of Default occurs or (b) an
Excess Availability Trigger Event occurs.




Trigger Event Period — any period (a) commencing upon the occurrence of a
Trigger Event and (ii) ending on a Trigger Event Termination Date.


 


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Trigger Event Termination Date — any date during a Trigger Event Period on
which (a) with respect to a Trigger Event resulting from the occurrence of an Event of
Default, all Events of
Default have been waived or remedied in accordance with the terms of the Loan Documents
or (b) with respect to an Excess Availability Trigger Event, Excess Availability for a
period of ninety (90) consecutive calendar days exceeds the greater of (i) $77,000,000 or
(ii) 15% of the lesser of (x) the Tranche A Revolver Commitments, plus the Tranche
A-1 Revolver Commitments or (y) the Tranche A Borrowing Base, plus the Tranche A-1
Borrowing Base; provided, however, that in no event shall a Trigger Event
Termination Date be deemed to have occurred (and a Trigger Event Period may not end) more
than two (2) times during any period of twelve (12) consecutive months.




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.




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 change is disclosed to Agent, and Section 10.3 is
amended in a manner that preserves the original intent thereof in light of such change in GAAP.



1.3. Certain Matters of Construction. The terms “herein,” “hereof,” “hereunder” and
other words of similar import refer to this Loan 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 Loan 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 or any Lender means the sole and absolute
discretion of such Person. Fundings of Term Loans and payments of Obligations shall be in Dollars
and, unless the context otherwise requires, all determinations (including financial covenants) made
from time to time under the Loan Documents shall be made in light of the circumstances existing at
such time. Borrowers shall have the burden of establishing any alleged negligence, misconduct or
lack of good faith by Agent 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.



1.4. [Reserved].


 


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1.5. Certifications. All certifications and other statements made by any officer,
director or employee of an Obligor pursuant to any Loan Document are and will be made on the behalf
of such Obligor and not in such officer’s, director’s or employee’s individual capacity.



1.6. Times of Day. Unless otherwise specified, all references herein to times of day
shall be references to Eastern time (daylight or standard, as applicable).



	 	 	 
	SECTION 2.

	 	TERM LOAN FACILITY






2.1. Commitment.



2.1.1. Term Loans. Each Lender agrees, severally on a Pro Rata basis up to its Term
Loan Commitment, on the terms set forth herein, to make a Term Loan to Borrowers on the Closing
Date in the Term Loan Commitment amounts (and in each case subject to the OID) as provided on
Schedule 1.1.(a). The Term Loans may be repaid as provided herein, but may not be reborrowed.



2.1.2. Notes. The Term 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 Term Note to such Lender.



2.1.3. Use of Proceeds. The proceeds of Term Loans shall be used by Borrowers solely
(a) to satisfy existing Debt and other obligations under the First Lien Loan Agreement and the
related documents; (b) to pay fees and transaction expenses associated with the closing of this
credit facility; and (c) for working capital and other lawful corporate purposes of the Obligors
and their Subsidiaries, 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 Loan Agreement.



2.1.4. OID. Borrowers and the Lenders hereby agree (i) that the Term Loans are debt
for federal income tax purposes, (ii) that the Term Loans made by each Lender constitute a single
debt instrument for purposes of Section 1271 through 1275 of the IRC and the Treasury Regulations
thereunder (pursuant to Treasury Regulations Section 1.1275-2(c)), that such debt instrument is
issued with original issue discount (“OID”), and that such debt instrument is described in Treasury
Regulations 1.1272-1(c)(2) and therefore is governed by the rules set out in Treasury Regulations
Section 1.1272-1(c), including Section 1.1272-1(c)(5), and is not governed by the rules set out in
Treasury Regulations Section 1.1275-4, (iii) that any calculation by the Borrowers regarding the
amount of OID for any accrual period on the Term Loans shall be subject to review and approval of
the Agent (not to be unreasonably withheld or delayed), and (iv) to adhere to this Agreement for
federal income tax purposes and not to take any action or file any tax return, report or
declaration inconsistent herewith (including with respect to the amount of OID on the Term Loans as
determined in accordance with the preceding clause (iii)). The inclusion of this Section 2.1.4 is
not an admission by any Lender that it is subject to United States taxation.



2.1.5. [Reserved].



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 a Base Rate Term Loan, at the Base Rate in
effect from time to time, plus the Applicable Margin for Base Rate Term Loans; (ii) if a LIBOR Term
Loan, at Adjusted LIBOR for the applicable Interest Period, plus the Applicable Margin for LIBOR
Term
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.


 


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(b) During any Event of Default, at the election of the Agent or the Required Lenders,
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 Term Loans shall be due and payable in arrears, (i) with respect
to each Base Rate Term Loan, on the first day of each Fiscal Quarter, (ii) with respect to each
LIBOR Term Loan, on the last day of its Interest Period; provided that if any Interest
Period for a LIBOR Term Loan exceeds three months, interest accrued on such LIBOR Term Loan shall
also be due and payable on the respective dates that fall every three months after the beginning of
such Interest Period, and (iii) on any date of prepayment, with respect to the principal amount of
Term Loans being prepaid. 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 Term 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 Term Loan to, or to continue
any LIBOR Term Loan at the end of its Interest Period as, a LIBOR Term Loan. Borrowers may on any
Business Day, subject to delivery of a Notice of Conversion/Continuation, elect to convert any
portion of the LIBOR Term Loans to a Base Rate Term Loan. During any Default or Event of Default,
Agent may (and shall at the direction of Required Lenders) declare that no Term Loan may be
converted or continued as a LIBOR Term Loan.



(b) Whenever Borrowers desire to convert or continue Term Loans as LIBOR Term 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 end of the then current Interest Period. Promptly after receiving any
such notice, Agent shall notify each Lender, as applicable, thereof. Each Notice of
Conversion/Continuation shall be irrevocable, and shall provide that the aggregate principal amount
of Term Loans to be converted or continued, 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 Term Loans, Borrowers shall have failed to deliver a Notice of
Conversion/Continuation, they shall be deemed to have elected an Interest Period of one month.



3.1.3. Interest Periods. In connection with the making (on the Closing Date),
conversion or continuation of any LIBOR Term 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 Term 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.


 


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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 Term Loans shall bear interest at the Base Rate then in effect,
plus the Applicable Margin for Base Rate Term Loans.




3.2. Reserved.



3.3. Computation of Interest, Fees, Yield Protection. All computations of interest
for Base Rate Term 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 reasonable and documented legal fees of one
outside counsel, one local counsel in each relevant jurisdiction (as determined by the Agent in its
reasonable discretion), one special or regulatory counsel in respect of each matter (as reasonably
required by the Agent) and conflict of interest counsel (as determined by the Agent in its
reasonable discretion), accounting, appraisal, consulting and other reasonable and documented fees,
out-of-pocket costs and expenses incurred by it in connection with (a) syndication, 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 (but limited to legal fees of
one outside counsel for all Lenders, one local counsel in each relevant jurisdiction (as determined
by the Lenders in their reasonable discretion), one special or regulatory counsel in respect of
each matter (as reasonably required by the Lenders) and conflict of interest counsel (as determined
by the any Lender in its reasonable discretion)) during an Event of Default in connection with the
enforcement or preservation of any rights under this Loan 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 Term Loan or (b) a Lender determines
that the making or continuance of a LIBOR Term 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 Term Loans will not thereafter be made by such Lender, whereupon any request for a LIBOR
Term Loan from such Lender shall be deemed to be a request for a Base Rate Term 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) require that all outstanding LIBOR Term Loans
made by such Lender be converted to Base Rate Term Loans immediately, in which event all
outstanding LIBOR Term Loans of such Lender shall be immediately converted to Base Rate Term Loans.


 


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3.6. Increased Costs. If, by reason of (a) the introduction of or any change 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:




(i) a Lender shall be subject to any Tax with respect to any LIBOR Term Loan, or a
change shall result in the basis of taxation of any payment to a Lender with respect to its
LIBOR Term Loans or its obligation to make LIBOR Term Loans (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 Term Loans or obligation to make LIBOR Term Loans 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 Term Loans (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 or maintaining LIBOR Term Loans,
then (A) the Lender shall promptly notify Borrowers and Agent of such event; (B) such Lender’s
obligation to make or maintain LIBOR Term Loans shall be immediately suspended, until each
condition giving rise to such suspension no longer exists; and (C) such Lender shall make a Base
Rate Term Loan as part of any requested conversion to LIBOR Term Loans as a result of delivery of a
Notice of Conversion/Continuation, which Base Rate Term Loan shall, for all purposes, be considered
part of such request.



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 Term 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 may obtain, at Borrowers’ expense, a
replacement Lender (“Replacement Lender”) for the Affected Lender, which Replacement Lender
must be an Eligible Assignee. 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 Term
Loans to such Replacement Lender for an amount equal to the principal balance of all Term 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 Loan 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 Term 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 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.


 


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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 Term
Loans 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 its Term Loans through another office, as long as use of
such measures would not adversely affect the Lender’s Term 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
conversion to or continuation of, a LIBOR Term Loan does not occur on the date specified therefor
in a Notice of Conversion/Continuation (whether or not withdrawn), (b) any repayment or conversion
of a LIBOR Term Loan occurs on a day other than the end of its Interest Period, or (c) Borrowers
fail to repay a LIBOR Term 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, but excluding any loss of
profits in connection therewith. Lenders shall not be required to purchase Dollar deposits in the
London interbank market or any other offshore Dollar market to fund any LIBOR Term Loan, but the
provisions hereof shall be deemed to apply as if each Lender had purchased such deposits to fund
its LIBOR Term 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 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.


 


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SECTION 4. LOAN ADMINISTRATION




4.1. Funding Term Loans.




4.1.1. [Reserved].




(a) [Reserved].



4.1.2. Fundings by Lenders. Each Lender shall timely honor its Term Loan Commitment
by funding its Pro Rata share of the Term Loan. Each Lender shall fund to Agent such Lender’s Pro
Rata share of the Term Loan to the account specified by Agent in immediately available funds on the
Closing Date. Subject to its receipt of such amounts from Lenders, Agent shall disburse the
proceeds of the Term Loan as directed by Borrower Agent. If a Lender’s share of the Term Loan 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. If any Lender makes available to the Agent funds for any Term Loan to be made
by such Lender as provided in this Loan Agreement, and such funds are not made available to the
Borrowers by the Agent because the conditions to the credit extension set forth in Section 6 are
not satisfied or waived in accordance with the terms hereof, the Agent shall return such funds (in
like funds as received from such Lender) to such Lender, without interest.




4.1.3. [Reserved].



4.1.4. Notices. Each Borrower authorizes Agent and Lenders to extend, convert or
continue Term 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 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 is a Defaulting Lender, 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 Loan Agreement. The failure of any Lender to fund a Loan
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 Term Loans; Determination of Rate. No more than three
LIBOR Term Loans, in the aggregate, may be outstanding at any time, and each aggregate LIBOR Term
Loan when continued or converted shall be in a minimum amount of $5,000,000, or an increment of
$1,000,000 in excess thereof.



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
designation of interest rates, delivery or receipt of communications with Agent or any Lender,
preparation and delivery of 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 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 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 Term Loans 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. 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 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 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 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. The provisions of Sections 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.



SECTION 5. PAYMENTS




5.1. General Payment Provisions. All payments of Obligations shall be made in
Dollars, without condition, deduction, 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 Term Loan prior to the end of its Interest Period
shall be accompanied by all amounts due under



 


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Section 3.9. Unless the Agent shall have received notice from the Borrower Agent prior to the time at
which any payment is due to the Agent for the account of the Lenders hereunder that the Borrowers
will not make such payment, the Agent may assume that the Borrowers have made such payment on such
date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders
the amount due. In such event, if the Borrowers have not in fact made such payment, then each of
the Lenders severally agrees to repay to the Agent forthwith on demand the amount so distributed to
such Lender in immediately available funds with interest thereon, for each day from and including
the date such amount is distributed to it but excluding the date of payment to the Agent, at the
greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking
industry rules on interbank compensation.




5.2. Repayment of Term Loans.



5.2.1. Termination Date; Repayment in General. The Term Loans shall be due and
payable in full on the Termination Date, unless payment is sooner required hereunder. The Term
Loans may be prepaid in accordance with Section 5.2.4 and Section 5.5.




5.2.2. Mandatory Prepayments.



(a) On and after the Restatement Date, net of any amounts used to pay down and reduce Debt
(whether or not accompanied by any commitment reduction) under the First Lien Debt Documents, to
the extent permitted by Section 10.2.8 of the First Lien Loan Agreement, the Term Loans
shall be prepaid as soon as practicable but no later than three (3) Business Days after (or at such
later time as provided in Section 10.2.8 of the First Lien Loan Agreement) the consummation
of any Asset Disposition (other than any Asset Disposition by any SPE or Passive Company) (x)
specified in clauses (l) through (r) of the definition of “Permitted Asset Disposition” or (y)
occurring after the commencement and during the continuation of a Trigger Event Period (or if a
Trigger Event would occur after giving effect to any such Asset Disposition), in each case, in an
amount equal to 100% of the Net Proceeds of such Asset Disposition, with such Net Proceeds to be
applied to the Obligations in accordance with Section 5.5 and subject to the premium referenced in
Section 5.2.4. The Term Loans shall also be prepaid in accordance with Section 8.6.



(b) Certain Other Mandatory Repayments of the Loans. On and after the Restatement
Date, net of any amounts used to pay down and reduce Debt (whether or not accompanied by any
commitment reduction) under the First Lien Debt Documents under Section 5.2.1 of the First
Lien Debt Documents, as soon as practicable but no later than three (3) Business Days after (i) a
store closing, going-out-of-business or similar sale by all of the Obligors of all or substantially
all of their retail operations or Inventory, (ii) a foreclosure by Agent of its Liens on a material
portion of the Collateral or (iii) a disposition of a material portion of the Collateral by Agent
as a result of the cessation of retail operations at all or substantially all Stores, excluding
Force Majeure or Ordinary Course of Business temporary closures, the Borrowers agree and
acknowledge that the Net Proceeds therefrom shall be applied, to the extent permitted by
Section 10.2.8 of the First Lien Loan Agreement, to Obligations in accordance with Section
5.5.



(c) Each prepayment made pursuant to this Section 5.2.2 shall be (a) accompanied by the
payment of accrued interest to the date of such payment on the amount prepaid, and (b) accompanied
by the premium provided in Section 5.2.4.



5.2.3. Voluntary Prepayments. Prior to the first anniversary of the Closing Date,
Borrowers may not prepay the principal of the Term Loan. On or after the first anniversary of the
Closing Date, Borrowers may, upon at least five (5) Business Days prior written notice to Agent,
prepay the principal of the Term Loan, in whole or in part subject to Section 5.2.4. Each
prepayment made pursuant to this Section 5.2.3 shall be (a) accompanied by the payment of accrued
interest to the date of such
payment on the amount prepaid, (b) accompanied by the premium provided in Section 5.2.4, and
(c) in an amount which is not less than $1,000,000 (or the remaining balance if less than
$1,000,000).


 


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5.2.4. Prepayment Premium. Any prepayments (a) made pursuant to Section 5.2.2 hereof
(whether before or after acceleration), if made prior to the first year anniversary of the Closing
Date, shall be accompanied by a make whole premium equal to the greater of (x) all remaining
interest that would have otherwise accrued through the first anniversary of the Closing Date on
such amount being prepaid and (y) five percent (5.00%) of such amount being prepaid and (b) made
pursuant to Section 5.2.2 or Section 5.2.3 hereof (whether before or after acceleration) shall be
accompanied by an additional premium equal to (x) five percent (5.00%) of the principal amount so
prepaid, with respect to prepayments made on or after the first anniversary of the Closing Date but
prior to the second anniversary of the Closing Date, (y) three percent (3.00%) of the principal
amount so prepaid, with respect to prepayments made on or after the second anniversary of the
Closing Date but prior to the third anniversary of the Closing Date. On or after the third
anniversary of the Closing Date, no premiums or penalties shall be payable pursuant to this Section
5.2.4 in connection with any prepayments of the Term Loans other than LIBOR breakage costs as
required under the terms of this Loan Agreement.



5.3. Payment of Other Obligations. Obligations other than Term Loans, including
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- and Post-Default Allocation of Payments. Notwithstanding anything herein
to the contrary but subject to the Intercreditor Agreement, at all times whether or not an 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 Obligations constituting fees owing to Lenders in their capacity as
Lenders;




(c) third, to all Obligations constituting interest then owing on Term Loans; and




(d) fourth, to all other Obligations owing to Lenders in their capacity as Lenders.



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. 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. [Reserved].


 


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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
commencement of a Trigger Event Period if prior to the Bank Loan Termination Date, the available
ledger balance in the main Dominion Account on each Business Day (to the extent practicable and
consistent with past practices) shall be transferred, by the Borrowers, to the Borrower Account on
the next Business Day (to the extent practicable and consistent with past practices). On each
Business Day after the commencement and during the continuation of a Trigger Event Period if prior
to the Bank Loan Termination Date, the available balance in the Dominion Accounts on such Business
Day shall be transferred, by the First Lien Agent (or, following the Bank Loan Termination Date,
Agent), to a Borrower Account at Bank of America (or, following the Bank Loan Termination Date,
such other applicable institution reasonably acceptable to Agent) and, subject to the Intercreditor
Agreement, shall be applied to the Obligations on the next Business Day. Each Obligor irrevocably
waives the right at all times after the commencement and during the continuation of a Trigger Event
Period to direct the application of any payments or Collateral proceeds, and agrees that, subject
to the Intercreditor Agreement, First Lien Agent (and, following the Bank Loan Termination Date,
Agent) (subject to Section 5.5.1) shall have the continuing, exclusive right to apply and reapply
same against the Obligations, in such manner as First Lien Agent (and, subject to the Intercreditor
Agreement) deems advisable, notwithstanding any entry by Agent in its records. If, as a result of
First Lien Agent’s (or Agent’s, as applicable) 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.




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 Term Loan. 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 demonstrable 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.


 


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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 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 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 Borrowers (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, Borrowers 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 manner as a its predecessor Agent, and shall be required to provide the
appropriate IRS Form W-8BEN or W-8ECI to the Borrowers 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, Borrowers
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 of 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 Loan 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.


 


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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 Term Loans. 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 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.


 


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(c) Nothing contained in this Section 5.10 shall limit the liability of any Borrower to pay
Term Loans made directly or indirectly to that Borrower (including Term Loans advanced to any other
Borrower and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower), 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.



SECTION 6. CONDITIONS PRECEDENT




6.1. Conditions Precedent to Term Loans. Lenders shall not be required to fund any
requested Term Loan, 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 of this Loan Agreement and the other Loan Document shall have been duly
executed and delivered to Agent by each of the signatories thereto, and each shall be in form and
substance reasonably satisfactory to the Agent and each of the Lenders, and each Obligor shall be
in compliance with all terms thereof.



(b) Agent and the Lenders shall be satisfied that the Security Documents shall be effective to
create in favor of the Agent a legal, valid and enforceable first priority (subject only to the
Liens securing the Debt under the First Lien Debt Documents and any other Permitted Liens entitled
to priority under Applicable Law) perfected 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 that such Liens are the only Liens upon the Collateral, except Permitted
Liens and Liens to be discharged on or prior to the Closing Date, (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 and each of
the Lenders, and (iv) a completed and fully executed perfection certificate in form and substance
reasonably satisfactory to Agent;




(c) [Reserved].




(d) [Reserved].


 


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(e) Agent shall have received a certificate, in form and substance reasonably satisfactory to
it and each of the Lenders, 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 Term Loans and transactions hereunder, (A) (x) Parent
and its Subsidiaries, on a consolidated basis, are Solvent and (y) each Borrower,
individually, 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) there is no action, suit, investigation or proceeding pending or, to the knowledge
of Parent or its Subsidiaries, threatened in writing in any court or before any arbitrator
or governmental authority that could reasonably be expected to have a Material Adverse
Effect;




(iii) all Term Loans made by the Lenders to the Borrowers hereunder are and shall
remain in full compliance with the Federal Reserve’s margin regulations; and




(iv) no law or regulation to which any Borrower is subject is applicable to the
transactions contemplated hereby which could reasonably be expected to have a Material
Adverse Effect on any Obligor or a Material Adverse Effect on the transactions contemplated
hereby.



(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.



(g) Agent shall have received a written opinion of Paul, Weiss, Rifkind, Wharton & Garrison
LLP, as well as any relevant local counsel to Obligors or Agent, in form and substance reasonably
satisfactory to Agent and each of the Lenders.



(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 Secured Parties, 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 and
each of the Lenders.




(j) [Reserved].



(k) Borrowers shall have paid all reasonable and documented fees and out-of-pocket expenses to
be paid to Agent and Lenders on the Closing Date (including, without limitation, all reasonable and
documented fees, out-of-pocket charges and disbursements of one outside counsel, one local counsel
in each relevant jurisdiction (as determined by the Agent in its reasonable discretion), one
special or regulatory counsel in respect of each matter (as reasonably required by the Agent)
and conflict of interest counsel (as determined by the Agent in its reasonable discretion),
accounting, appraisal, consulting and other reasonable and documented fees, out-of-pocket to the
extent invoiced prior to or on the Closing Date.


 


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(l) Agent shall have received copies of the First Lien Debt Documents, including, but not
limited to an amendment to the First Lien Loan Agreement permitting this Loan Agreement and all
certificates, opinions and other material documents delivered thereunder, 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 the Agent shall be
satisfied with the terms and conditions and provisions thereof.



(m) Agent and the Lenders shall have agreed to satisfactory intercreditor arrangements with
the First Lien Agent and Agent shall have received a fully executed Intercreditor Agreement in full
force and effect.



(n) 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.



(o) Agent shall have received a flow of funds, in form and substance reasonably satisfactory
to it.




(p) [Reserved].



(q) Agent shall have received evidence indicating that Excess Availability as of the Closing
Date, after giving effect to the transactions contemplated hereby, is not less than $210,000,000.




(r) [Reserved].



(s) Agent shall have received such other certificates, documents, agreements and information
in respect of any Obligor as Agent may reasonably request.




(t) No Default or Event of Default shall exist at the time of, or result from, such funding.



(u) The representations and warranties of each Obligor in the Loan Documents shall be true and
correct on the date of, and upon giving effect to, such funding (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 Loan Agreement).



(v) No Default or Event of Default (as each is defined in the First Lien Loan Agreement) shall
exist at the time of, or shall result from, the transactions contemplated hereunder.



(w) No event shall have occurred or circumstance exist that has or could reasonably be
expected to have a Material Adverse Effect.



For purposes of determining compliance with the conditions specified in this Section 6.1, each
Lender that has signed this Loan Agreement shall be deemed to have consented to, approved or
accepted or to be satisfied with, each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to a Lender unless the Agent shall have received
written notice from such Lender prior to the proposed Closing Date specifying its objection
thereto.


 


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6.2. [Reserved].



6.3. Limited Waiver of Conditions Precedent. If Agent or Lenders fund any Term Loans
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 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 of the following personal and fixture property, assets and
rights of such Obligor of every kind and nature, whether now owned or hereafter acquired or
arising, and wherever located:




(a) all Accounts and all Credit Card Receivables;




(b) all Chattel Paper, including electronic chattel paper;



(c) all Commercial Tort Claims, described on Schedule 7.1(c), as shall be amended from time to
time in accordance with Section 7.4.1;




(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; provided, however, that the grant
of security interest shall not include any intent-to-use application for a trademark that may be
deemed invalidated, canceled or abandoned due to the grant and/or enforcement of such security
interest unless and until such time that the grant and/or enforcement of the security interest will
not affect the status or validity of such trademark;



(g) all Goods, including Inventory, Equipment and Fixtures, excluding (i) any motor vehicles
and (ii) any Equipment 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 (or third priority Lien if the Debt under the First Lien Debt Documents is still
outstanding) on such Equipment;




(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;



(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-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;


 


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(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;



provided, however, that notwithstanding any of the other provisions set forth
herein, (A) solely with respect to assets other than Inventory, Accounts, and other assets of the
types that are not included in the Tranche A Borrowing Base or the Tranche A-1 Borrowing Base, this
Loan Agreement shall not constitute a grant of a security interest in, and “Collateral” shall not
include any property to the extent that a grant of security interest therein (x) is prohibited by
any requirements of law or (y) is prohibited by or constitutes a breach or default under or results
in the termination of or requires any consent not obtained under any contract, license, agreement,
instrument or other document evidencing or giving rise to such property or any applicable
shareholder or similar agreement, in the case of clause (x) and (y), solely to the extent such
prohibition or breach or default or requirement for consent is in effect and is enforceable under
Applicable Law, and (B) this Loan Agreement shall not constitute a grant of security interest in,
and “Collateral” shall not include, any equity interest in Bon-Ton or any SPE.




7.2. Lien on Deposit Accounts.



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 clauses (a) through (d) of Section
8.5) 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 commencement of a Trigger Event Period, each Obligor shall direct each bank or other
depository to deliver to the Borrower Account, on each Business Day (to the extent practicable and
consistent with past practices), all available balances in each Deposit Account maintained by such
Obligor with such depository (except for (a) those Deposit Accounts referred to in clauses (a)
through (d) of Section 8.5 and (b) those Deposit Accounts exclusively used as secondary operating
accounts and described on Schedule 7.2.1 (as may be updated with the reasonable approval of the
First Lien Agent (and, following the Bank Loan Termination Date, Agent) with respect to such
secondary operating accounts so long as the average account balances in such accounts described in
this clause (b) are in amounts consistent with the Ordinary Course of Business of the Obligors);
provided, however, that the Obligors may maintain an aggregate account balance in
local Deposit Accounts not to exceed $5,750 for each Store supported by such local Deposit Account
for petty cash and Store expense reimbursement purposes). At all times after the commencement and
during the continuation of a Trigger Event Period, the First Lien Agent (and, following the Bank
Loan Termination Date, Agent) shall direct each bank or other depository to deliver to a Borrower
Account at Bank of America on each Business Day, for application (subject to the Intercreditor
Agreement and Section 5.5) to the Obligations then outstanding, all available balances in each
Deposit Account maintained by any Obligor with such depository except for those Deposit Accounts
referred to in clauses (a) through (d) of Section 8.5 hereof. Each Obligor irrevocably appoints,
at all times after the commencement and during the continuation of a Trigger Event Period, First
Lien Agent (and, following the Bank Loan Termination Date, 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 commencement and during the continuation of a Trigger Event Period
to direct the application of any payments or Collateral proceeds, and agrees that First Lien Agent
(and, following the Bank Loan Termination Date, Agent) shall have the continuing, exclusive right
to apply and reapply, in each case subject to the Intercreditor Agreement and
Section 5.5, the same against the Obligations, in such manner as First Lien Agent (and,
following the Bank Loan Termination Date, Agent) deems advisable, notwithstanding any entry by
Agent in its records. If, as a result of First Lien Agent’s (or Agent’s, as applicable) 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.


 


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7.2.2. [Reserved].



7.3. Real Estate Collateral. The Obligations shall be secured by Mortgages upon (x)
all Real Estate owned by Obligors described on Schedule 7.3 and (y) all leasehold interests in 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 any fee ownership in any Real Estate after the
Closing Date (unless such Real Estate is encumbered by Permitted Purchase Money Debt, the terms of
which expressly prohibit a Lien on such Real Estate junior in priority to the applicable Purchase
Money Lien and to the Debt under the First Lien Debt Documents) having a value in excess of
$5,750,000 (or lesser amount only if a Mortgage covering such Real Estate is delivered to First
Lien Agent), such Obligor shall, within 60 days, execute, deliver and record a Mortgage sufficient
to create a first priority perfected Lien, subject to the Lien securing the Debt under the First
Lien Debt Documents (or, where such Real Estate is subject to Permitted Purchase Money Debt and the
documents evidencing such Debt permit Agent to hold a lien on such Real Estate junior in priority
to the applicable Purchase Money Lien and to the Debt under the First Lien Debt Documents, a Lien
so junior in priority) in favor of Agent on such Real Estate, and shall deliver all Related Real
Estate Documents. The Agent shall amend Schedule 7.3 to reflect thereon any Real Estate that
becomes subject to the requirements set forth in the preceding sentence after the Closing Date.




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 $115,000 prior to the Restatement Date or $1,150,000
on and after the Restatement Date) and, upon Agent’s request, shall promptly execute such documents
and take such actions as Agent deems appropriate (including amending Schedule 7.1(c)) to confer
upon Agent (for the benefit of Secured Parties) a duly perfected, first priority (subject to the
Lien securing the Debt under the First Lien Debt Documents and to other Permitted Liens entitled to
priority under Applicable Law) Lien upon such claim.



7.4.2. Certain After-Acquired Collateral. Obligors shall promptly (or, in the case of
Intellectual Property, within 20 Business Days after the first day of each Fiscal Quarter) 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 that is registered or subject to a pending application for registration, Investment
Property or Letter-of-Credit Rights which has not yet been perfected and, upon Agent’s reasonable
request, shall, subject to the Intercreditor Agreement, promptly execute such documents and take
such actions as Agent deems reasonably appropriate (including amending Schedule 7.1(c)) to effect
Agent’s duly perfected, first priority (subject to the Lien securing the Debt under the First Lien
Debt Documents and to other Permitted Liens entitled to priority under Applicable Law) Lien upon
such Collateral, including obtaining any appropriate possession, control agreement or Lien Waiver
to the extent required by Section 10.1.10, subject to the Intercreditor Agreement. If any
Collateral is in the possession of a third party, at First Lien Agent’s (and, following the Bank
Loan Termination Date, Agent’s) request, Obligors shall use commercially reasonable efforts to
obtain an acknowledgment that such third party holds the Collateral for the benefit of First Lien
Agent (and, following the Bank Loan Termination Date, Agent). Notwithstanding the foregoing, if
any additional notifications are required to be delivered to First Lien
Agent under Section 7.4.2 of the First Lien Loan Agreement, such notification shall be
required hereunder.


 


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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 reasonably deems appropriate under Applicable Law to evidence or perfect its Lien
on any Collateral, or otherwise to give effect to the intent of this Loan 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.



7.7. Foreign Subsidiary Stock. Notwithstanding Section 7.1, the Collateral shall
include only 65% of the voting securities of any first tier Foreign Subsidiary.



SECTION 8. COLLATERAL ADMINISTRATION




8.1. Borrowing Base Certificates. The Borrowers shall deliver to the Agent and the
Collateral Agent (and Agent shall promptly deliver same to Lenders) (i) at all times prior to the
commencement of a Trigger Event Period, not later than the twelfth (12th) Business Day after the
immediately preceding fiscal month end, and at such other times as First Lien Agent may reasonably
request, a Borrowing Base Certificate prepared as of the close of business of the previous month or
such other date so requested by the First Lien Agent and (ii) at all times (x) after the
commencement and during the continuation of a Trigger Event Period or (y) during the periods from
and including the fiscal month of October of any fiscal year through and including the Friday of
the second fiscal week of January of such fiscal year, not later than the last Business Day of each
week, and at such other times as First Lien 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
First Lien Agent, with such weekly Borrowing Base Certificates (other than those coinciding with a
month end) updated for purchases and sales of Inventory (as defined in the First Lien Loan
Agreement) from the prior week in a manner consistent with the past practices of the Obligors and
reasonably approved by the First Lien 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).




8.2. Administration of Accounts and Credit Card Receivables.



8.2.1. Credit Card Notifications; Records. Schedule 8.2.1 sets forth, as of
the Closing Date, all arrangements to which any Obligor is a party with respect to the payment to
any Obligor of the proceeds of credit card charges for sales by such Obligor. Following the Bank
Loan Termination Date, the Obligors shall deliver to Agent Credit Card Notifications instructing
each of their Credit Card Issuers or Credit Card Processors to transfer all amounts owing by such
processor or issuer to an Obligor directly to the Borrower Account or a Dominion Account, with such
Credit Card Notifications to be executed by each relevant Obligor and accompanied by evidence that
such Credit Card Notifications have been received by such Credit Card Issuers or Credit Card
Processors. Following the Bank Loan Termination Date, the Obligors shall exercise commercially
reasonable efforts to obtain acknowledgments to such Credit Card Notifications from each of the
Credit Card Issuers and Credit Card Processors. Each Obligor shall keep accurate and complete
records of its Credit Card Receivables, and shall submit to Agent Credit Card Receivables reports,
including all additions and reductions (cash and non-cash) with respect to
Credit Card Receivables of the Obligors in each case accompanied by such supporting detail and
documentation as shall be reasonably requested by First Lien Agent (or, following the Bank Loan
Termination Date, Agent), in form reasonably satisfactory to First Lien Agent (or, following the
Bank Loan Termination Date, Agent), on such periodic basis as First Lien Agent (or, following the
Bank Loan Termination Date, Agent) may request.


 


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8.2.2. Account Verification. Following the Bank Loan Termination Date, 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 Accounts. Subject to the Intercreditor Agreement,
Obligors shall maintain Dominion Accounts pursuant to lockbox or other arrangements reasonably
acceptable to First Lien Agent (and, following the Bank Loan Termination Date, Agent). Obligors
shall obtain an agreement (in form and substance reasonably satisfactory to First Lien Agent (and,
following the Bank Loan Termination Date, Agent)) from each lockbox servicer and Dominion Account
bank, establishing First Lien Agent’s (and, following the Bank Loan Termination Date, Agent’s)
control over and Lien in the lockboxes or Dominion Accounts, 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
transfer at the end of each Business Day available funds in the Dominion Accounts to the Borrower
Account consistent with past practice, and waiving offset rights of such servicer or bank against
any funds in the lockboxes or Dominion Accounts, except offset rights for customary administrative
charges. Neither Agent nor Lenders assume any responsibility to Obligors for any lockbox
arrangement or Dominion Accounts, 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 Priority Lien Agent subject to the Intercreditor Agreement, and promptly (not
later than the next Business Day) deposit same into a Dominion Account.




8.3. Administration of Inventory.



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 submitted to First Lien Agent (or, following the Bank
Loan Termination Date, Agent). Each Obligor shall conduct a physical inventory at least once per
calendar year (and on a more frequent basis if requested by First Lien Agent (or, following the
Bank Loan Termination Date, 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
First Lien Agent (and, following the Bank Loan Termination Date, Agent) may request. First Lien
Agent (and, following the Bank Loan Termination date, 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 exists or would result therefrom.




 


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8.3.3. Acquisition, Sale and Maintenance. 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 First Lien Agent (or,
following the Bank Loan Termination Date, Agent) may request, a current schedule thereof, in form
reasonably satisfactory to Priority Lien Agent. Promptly upon request, Obligors shall deliver to
First Lien Agent (or, following the Bank Loan Termination Date, 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 (other than Permitted 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.



8.5. Administration of Deposit Accounts. Schedule 8.5 sets forth all Deposit Accounts
maintained by Obligors as of the Closing Date (or, after any update to such Schedule 8.5 in
accordance with the last sentence of this Section 8.5, as of the date of such amendment). Each
Obligor shall take all actions necessary to establish First Lien Agent’s (and, following the Bank
Loan Termination Date, Agent’s) control (pursuant to an Account Control Agreement) of each Deposit
Account other than:



(a) each Deposit Account exclusively used for payroll, payroll taxes or employee benefits set
forth on Schedule 8.5(a) or any replacement account exclusively used for payroll, payroll taxes or
employee benefits;



(b) each disbursement account of the Obligors as set forth on Schedule 8.5(a) or any
replacement disbursement account that is reasonably acceptable to First Lien Agent (and, following
the Bank Loan Termination Date, Agent);



(c) each trust account listed on Schedule 8.5(b) maintained at U.S. Bank, N.A. (or any
replacement account thereof) so long as the average account balance in the accounts described in
this clause (c) is in an amount consistent with the ordinary course of business and past practices
of the Obligors and, in any event, does not exceed (x) at any time other than during a Trigger
Event Period, $11,500,000 in the aggregate or (y) after the commencement and during the
continuation of a Trigger Event Period, $2,300,000 in the aggregate; and


 


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(d) each Deposit Account, other than those described in clauses (a) through (d) above,
containing not more than $86,000 at any time; provided that the aggregate amount contained
in all such accounts under this clause (d) shall not exceed $863,000 at any time; provided,
however, that not later than ten (10) Business Days after the commencement of the first Trigger Event Period to
occur after the Closing Date, the Obligors shall either (i) take all actions necessary to establish
the First Lien Agent’s (and, following the Bank Loan Termination Date, Agent’s) control of each
such Deposit Account referred to in this clause (d) or (ii) close the Deposit Accounts referred in
this clause (d) and transfer all balances and all related deposit activity to a deposit account
over which the First Lien Agent’s (and, following the Bank Loan Termination Date, Agent’s) control
has already been established.



Each Obligor shall be the sole account holder of each Deposit Account and shall not allow any other
Person (other than First Lien Agent (and, following the Bank Loan Termination Date, Agent)) to have
control over a Deposit Account. Each Obligor shall promptly notify Agent of any opening or closing
of a Deposit Account and, at the request of Agent, will amend Schedule 8.5 (and Schedule 8.5(a) or
Schedule 8.5(b), if applicable) to reflect the 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 $575,000, 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 $575,000 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 as are reasonably satisfactory to Agent. On and after
the Restatement Date, prior to the Bank Loan Termination Date, all proceeds under each policy shall
be payable to First Lien Agent, and following the Bank Loan Termination Date (or prior to the Bank
Loan Termination Date if receipt of such proceeds is waived, forgiven or postponed by more than 10
Business Days by the First Lien Agent or First Lien Lenders), all proceeds under each policy shall
be payable to Agent for the benefit of the Lenders; provided the foregoing shall in no way
limit or impair the Agents rights as an additional insured under such policies. 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 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, First Lien Agent (and, following the Bank
Loan Termination Date, 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. Subject to the Intercreditor
Agreement, while no Event of Default exists, Obligors may settle, adjust or compromise any
insurance claim, as long as the proceeds are delivered to First Lien Agent (and, following the Bank
Loan Termination Date, Agent). Subject to the Intercreditor Agreement, if an Event of Default
exists, only First Lien Agent (and, following the Bank Loan Termination Date, Agent) shall be
authorized to settle, adjust and compromise such claims.


 


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(b) On and after the Restatement Date, prior to the Bank Loan Termination Date, 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 First Lien Agent to pay First Lien
Debt, and following the Bank Loan Termination Date (or prior to the Bank Loan Termination Date
if receipt of such proceeds is waived, forgiven or postponed by more than 10 Business Days by the
First Lien Agent or First Lien Lenders), any such proceeds and awards shall be paid to Agent for
the benefit of the Lenders to be applied, to the extent permitted by Section 10.2.8 of the First
Lien Loan Agreement in accordance with Section 5.5.



(c) If requested by Obligors in writing within 30 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 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 First Lien Agent (and, following the
Bank Loan Termination Date, 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 prior to the
Restatement Date or $5,750,000 on and after the Restatement Date. On and after the Restatement
Date, following the Bank Loan Termination Date (or prior to the Bank Loan Termination Date if
receipt of such proceeds is waived, forgiven or postponed by more than 10 Business Days by the
First Lien Agent or First Lien Lenders), 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, to
the extent permitted by Section 10.2.8 of the First Lien Loan Agreement, by the Agent, to the
Obligations in accordance with Section 5.5.



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) or, until the Bank Loan Termination Date, First Lien
Agent as such Obligor’s true and lawful attorney (and agent-in-fact) for the purposes provided in
this Section 8.7. First Lien Agent or First Lien Agent’s designee (or, following the Bank Loan
Termination Date, Agent or Agent’s designee), may, during the continuation of an Event of Default,
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 First Lien Agent’s (and, following the Bank Loan Termination
Date, Agent’s) possession or control; and


 


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(b) (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 First
Lien Agent (and, following the Bank Loan Termination Date, 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 First Lien Agent (and, following the Bank Loan Termination Date, 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 First Lien Agent (and, following the Bank Loan Termination Date, Agent)
deems reasonably 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 Loan Agreement and to make available the Term Loans, 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.



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 as of the date hereof, for each
Obligor and Subsidiary (other than the Parent), its name, its jurisdiction of organization, its
duly authorized and validly 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 and First Lien 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 (other than the Parent) or Subsidiary.



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 as of the date hereof are shown on Schedule 8.6.1.


 


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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 Liens securing the Debt under the
First Lien Debt Documents and any other 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 (subject
to the Liens securing the Debt under the First Lien Debt Documents and any other Permitted Liens
entitled to priority under Applicable Law) Liens.



9.1.7. Security Documents. The Security Documents are effective to create in favor of
the Agent a legal, valid, perfected and enforceable first priority (subject to the Liens securing
the Debt under the First Lien Debt Documents and any other Permitted Liens entitled to priority
under Applicable Law) 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 31, 2009
there have been no changes in the financial condition of any Obligor or Subsidiary that, alone or
in the aggregate, could reasonably be expected to have a Material Adverse Effect. Both before and
after giving effect to the Term Loans to be made on the Closing Date and the payment of transaction
costs in connection with the foregoing, Parent and its Subsidiaries, on a consolidated basis, are
Solvent and each Borrower, individually, 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 is not prohibited hereunder.



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.


 


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9.1.13. Governmental Approvals. Each Obligor and Subsidiary has, is in compliance
with, and is in good standing with respect to, all material 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. Since the Closing Date, except as
disclosed on Schedule 9.1.15 or as could not reasonably be expected to have a Material Adverse
Effect, (a) 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, (b) no Obligor or Subsidiary has received any Environmental Notice, (c) 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, and (d) 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 in writing against any Obligor or
Subsidiary, or any of their businesses, operations, Properties or conditions, that (a) relate to
any Loan Documents or transactions contemplated thereby; (b) as of the Closing Date, could
reasonably be expected to result in damages or penalties in excess of $10,000,000 (net of insurance
proceeds which Borrowers reasonably believe will cover such claim or claims), or (c) 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.



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 Default or Event of Default has occurred and is continuing.
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.


 


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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 $115,000 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. Not a Regulated Entity. No Obligor is (a) required to be registered as an
“investment company” within the meaning of the Investment Company Act of 1940, as amended; or (b)
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 Term Loan proceeds 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 Loan Agreement nor the funding of any
Term 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 Loan Document 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 in light of the circumstances under which they were delivered.



9.1.27. Anti-Terrorism. No Obligor appears on any list of “Specially Designated
Nationals” or other list of known or suspected terrorists that has been generated by the Office of
Foreign Assets Control of the United States Department of Treasury (“OFAC”), nor is any
Obligor a citizen or resident of any country that is subject to embargo or trade sanctions enforced
by OFAC, or otherwise is a Person (i) whose property or interest in property is blocked or subject
to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property
and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66
Fed. Reg. 49079 (2001)), (ii) who engages in any dealings or transactions prohibited by Section 2
of such executive order, or, to its knowledge, is otherwise associated with any such person in any
manner violative of Section 2, or (iii) subject to the limitations or prohibitions under any other
OFAC regulation or executive order.


 


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SECTION 10. COVENANTS AND CONTINUING AGREEMENTS




10.1. Affirmative Covenants. For so long as any Obligations are outstanding, each
Obligor shall, and shall cause each Subsidiary to:



10.1.1. Inspections; Appraisals. (a) Permit First Lien Agent (and, after the
occurrence and during the continuance of an Event of Default, 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. 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. The Agent shall provide the Collateral Agent with all final
Collateral appraisals and audit reports promptly after the Agent’s receipt thereof.
Notwithstanding anything contrary in this Section 10.1.1(a), so long as no Event of Default is
continuing, Agent shall have no right to conduct, any visit, appraisal, inspection, assessment or
audit.



(b) Reimburse Agent for all reasonable and documented out-of-pocket 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, (x) other than those times
described in clause (y), following the Bank Loan Termination Date, up to twice per Loan Year or (y)
at all times during a continuation of an Excess Availability Trigger Period and for a period of
twelve (12) calendar months following the end of any such Excess Availability Trigger Period, up to
three times per Loan Year; (ii) appraisals of Inventory (x) other than those times described in
clause (y), following the Bank Loan Termination Date, up to twice per Loan Year or (y) at all times
during a continuation of an Excess Availability Trigger Period and for a period of twelve (12)
calendar months following the end of any such Excess Availability Trigger Period, up to three times
per Loan Year; (iii) appraisals of Eligible Real Estate (as defined in the First Lien Loan
Agreement), in form and detail reasonably satisfactory to First Lien Agent (or, following the Bank
Loan Termination Date, Agent), (x) at all times other than those described in clause (y), following
the Bank Loan Termination Date, once per Loan Year if so requested by First Lien Agent (or,
following the Bank Loan Termination Date, Agent) or (y) at all times during a continuation of an
Excess Availability Trigger Period and for a period of twelve (12) calendar months following the
end of any such Excess Availability Trigger Period, twice per Loan Year if so requested by Agent;
and (iv) following the Bank Loan Termination Date, environmental assessment reports as Agent deems
appropriate in its reasonable discretion, with respect to the Eligible Real Estate (as defined in
the First Lien Loan Agreement) of the Obligors; provided, however, that (x) during
an Event of Default, the Agent may conduct any examinations and appraisals in its reasonable
discretion without regard to any such limits and (y) if any examination or appraisal is initiated
during an Event of Default, all reasonable and documented out-of-pocket charges, costs and expenses
therefor shall be reimbursed by Obligors without regard to such limits. 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 in connection with the foregoing, and shall pay the standard charges of
Agent’s internal appraisal group. Subject to the following sentence, 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. For the avoidance of doubt, this Section
10.1.1(b) is subject to the limitations referenced in Section 10.1.1(a).



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 detail and prepared in accordance with GAAP, audited and accompanied by
(i) a certification (without qualification as to scope or “going concern” (or similar)
qualification) 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 shall set forth in comparative form corresponding figures for the preceding
Fiscal Year and other information reasonably acceptable to Agent;


 


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(b) within 45 days after the end of each fiscal quarter (but within 60 days after the last
fiscal quarter of each 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 SPEs and Passive Companies, setting
forth in comparative form corresponding figures for the preceding Fiscal Year as well as the
applicable projections for such period delivered under Section 10.1.2(f) and certified by the
Borrower Agent pursuant to a certificate signed on behalf of Borrower Agent by a Senior Officer of
the Borrower Agent (with such certification to be in such Person’s capacity as a Senior 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 as well as the applicable projections for such period
delivered under Section 10.1.2(f) and certified by a Senior Officer (with such certification to be
in such Person’s capacity as a Senior 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 a Senior Officer of Borrower Agent (with such certification to be in such Person’s
capacity as a Senior 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 45 days after the beginning of the then current Fiscal Year, projections of
Obligors’ consolidated balance sheets, results of operations, cash flow and Availability for the
current Fiscal Year and the next two Fiscal Years, year by year, and for the current Fiscal Year,
month by month;



(g) at Agent’s request, a listing of the Obligors’ consolidated 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 and to the extent such information is not available on the SEC’s or the Parent’s
website;


 


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(i) promptly after the sending or filing thereof, copies of any annual report to be filed in
connection with each Plan or Foreign Plan;



(j) promptly upon the consummation of the transactions relating to the Restatement Date or the
Convertible Note Debt or any Refinancing Debt, copies certified by a Senior Officer as complete and
correct copies (with such certification to be in such Person’s capacity a Senior Officer of an
Obligor and not in such Person’s individual capacity) of the documents for the transactions
relating to the Restatement Date or of the Convertible Note Debt Documents or the documents
relating to the Refinancing Debt, as the case may be;



(k) promptly (x) upon delivery thereof, copies of all documents and materials of a material
financial nature provided to any other creditor of any Obligor or any Subsidiary and (y) upon
receipt thereof, copies of all material notices or information or material non-ordinary course
correspondence received from, or on behalf of, any other creditor of any Obligor or any Subsidiary
(including, without limitation, any default or similar notices);



(l) 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



(m) within (i) 15 days after the end of each Fiscal Quarter, a detailed summary of all Hedging
Agreements, and (ii) 45 days after the end of each Fiscal Quarter, a detailed summary of Bank
Products (as defined in the First Lien Loan Agreement) and any other bank products that constitute
Obligations obtained by the Obligors then outstanding (assuming such agreements were terminated on
the date of each summary) which shall include, but not be limited to, the amount, interest rate,
counterparty institution, and mark to market exposure for each such product.



(n) 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
Borrowers’ 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.


 


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The Obligors hereby acknowledge that (a) Agent will make available to the Lenders materials
and/or information provided by or on behalf of the Obligors hereunder (collectively, “Borrower
Materials”) 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 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 to
the Public Lenders; and (z) Agent and Lenders shall be entitled to treat any Borrower Materials
that are not marked “PUBLIC” as being suitable for Public Lenders.



THE AGENT PARTIES DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS, AND
EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY
OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE
DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS. In no event shall
the Agent or any of its Related Parties (collectively, the “Agent Parties”) have any
liability to any Borrower, any Lender or any other Person for losses, claims, damages, liabilities
or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrowers’ or
the Agent’s transmission of Borrower Materials through the internet, except to the extent that such
losses, claims, damages, liabilities or expenses are determined by a court of competent
jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Agent or such Related Party; provided, however, that in
no event shall the Agent or any of its Related Parties have any liability to any Borrower, any
Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as
opposed to direct or actual damages).



10.1.3. Notices. Notify Agent and Lenders in writing promptly (but in any event, with
respect to clauses (k) and (l) below, within five (5) Business Days) 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 (in writing) 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 (in writing) labor dispute, strike or walkout, or the expiration
of any material labor contract; (c) any material default under or termination of a Material
Contract; (d) the existence of any Default or Event of Default; (e) any judgment in an amount
exceeding $5,750,000; (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 material Environmental Notice; (i) the discharge of or any withdrawal or
resignation by Obligors’ independent accountants; (j) any opening of a new office, place of
business or Distribution Center where Collateral with a fair market value of $2,300,000 or more
will be located, at least 30 days prior to such opening, (k) any “default” or “event of default”
under any First Lien Debt Documents, Mortgage Loan Debt Documents, Senior Note Debt Documents or
Convertible Note Debt Documents, as the case may be, or (l) any waiver, consent, amendment, or
permanent prepayment or permanent commitment reduction (and the amount thereof), pursuant to the
First Lien Debt Documents, Mortgage Loan Debt Documents, Senior Note Debt Documents or Convertible
Note Debt Documents, as the case may be).


 


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10.1.4. 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 warehouseman, processor, shipper, bailee, customs
broker or other Person (other than store landlords) that owns any premises at which any Collateral
having an aggregate value of more than $575,000 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 (a) prior to the Restatement Date, all Taxes, and
(b) on and after the Restatement Date, all material Taxes, in each case 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 reasonably satisfactory to First Lien Agent (and,
following the Bank Loan Termination Date, 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 on the date such Person becomes a Subsidiary, unless such Person is a Foreign
Subsidiary, SPE or Passive Company, cause it to guaranty the Obligations by executing a Guaranty in
favor of the Agent, and to execute and deliver such documents, instruments and agreements and to
take such other actions as Agent shall reasonably require to evidence and perfect a first priority
(subject only to Liens securing Debt under the First Lien Debt Documents and any other Permitted
Liens entitled to priority under Applicable Law) Lien in favor of Agent (for the benefit of Secured
Parties) on all assets of such Person constituting Collateral (provided that perfection of
any such Lien shall be required to the same extent required by this Loan Agreement on the Closing
Date), 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. Lien Waivers. (A) Prior to the Bank Loan Termination Date, shall deliver
Lien Waivers for each of the Obligor’s leased locations that constitute a Large Inventory Location
and for each of the Obligor’s leased locations in a Landlord Lien State; provided that
notwithstanding anything to the contrary contained in this Loan Agreement (including any of the
components of the defined term “Lien Waiver”) or any other Loan Document, the covenant contained in
this Section 10.1.10 shall be deemed satisfied if any Obligor or any Subsidiary of any Obligor
mails to the lessor, warehouseman, processor,
shipper, customs broker, freight forwarder, repairman, mechanic, bailee, or Licensor, as
applicable, a Lien Waiver substantially in the form reasonably acceptable to the First Lien Agent,
whether or not such Persons agree to countersign such Lien Waiver; provided further
that none of the Obligors shall be required to expend any money, or perform any other obligation
other than administrative and ministerial tasks such as coordinating signatures to the extent such
form of Lien Waiver is acceptable in substantially the form delivered by the Obligors to the
landlord or such other form that is approved by the First Lien Agent and the obligation to mail
such Lien Waiver, as explicitly set forth in this Section 10.1.10, and (B) following the Bank Loan
Termination Date, use commercially reasonable efforts to deliver Lien Waivers for each of the
Obligor’s leased locations that constitutes a Large Inventory Location and for each of the
Obligor’s leased locations in a Landlord Lien State.



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 First Lien Agent (or, following the Bank Loan Termination Date, 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 First Lien Agent
(or, following the Bank Loan Termination Date, Agent), prepared by an environmental consultant
reasonably acceptable to First Lien Agent (or, following the Bank Loan Termination Date, Agent).
Without limiting the generality of the preceding sentence, First Lien Agent (or, following the Bank
Loan Termination Date, Agent) may require (a) periodic notices or reports regarding matters
addressed by the operation and maintenance program to First Lien Agent (or, following the Bank Loan
Termination Date, Agent) in form, substance and at such intervals as First Lien Agent (or,
following the Bank Loan Termination Date, 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 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;


 


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(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 Term 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;




(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) $5,750,000 minus (y) the then outstanding principal amount of Permitted Purchase Money
Debt in excess of $23,000,000;



(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) Debt under the First Lien Debt Documents;



(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 Debt 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 Agreement;



(p) Convertible Note Debt in an aggregate principal amount not to exceed $115,000,000;
provided that (i) (I) if the Convertible Note Debt is incurred by Parent and not incurred
or guaranteed by any other Obligor, the final maturity of such Debt shall not occur prior to June
30, 2013 and (II) if the Convertible Note Debt is incurred or guaranteed by any Obligor other than
Parent, the final maturity of such Debt shall not occur prior to May 18, 2014, (ii) (I) if the
Convertible Note Debt is incurred by Parent and not incurred or guaranteed by any other Obligor,
there shall be no scheduled amortization or mandatory prepayments or mandatory repayments of such
Debt prior to June 30, 2013 and (II) if the Convertible Note Debt is incurred or guaranteed by any
Obligor other than Parent, there shall be no scheduled amortization or mandatory prepayments or
mandatory repayments of such Debt prior to May 18, 2014, (iii) 100% of the net proceeds from the issuance of such Debt is
applied to the repayment of the Debt under the First Lien Debt Documents, (iv) both before and
after giving effect to the Convertible Debt Documents, no Default or Event of Default shall exist,
and (v) prior to the consummation of any Convertible Note Debt transaction, Agent shall have
received an officer’s certificate (in form and substance reasonably satisfactory to Agent) from a
Senior Officer of the Borrowers certifying that the conditions set forth in this clause (p) are
satisfied;


 


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(q) unsecured Debt owed to sellers constituting consideration for Permitted Acquisitions on
terms and conditions reasonably acceptable to Agent;



(r) unsecured Debt consisting of earn-out obligations in connection with any Permitted
Acquisition;



(s) Debt of a Person or Debt attaching to assets of a Person that, in either case, becomes a
Subsidiary of a Borrower after the date hereof as the result of a Permitted Acquisition,
provided that such Debt existed at the time such Person became a Subsidiary or at the time
such assets were acquired and, in each case, was not created in anticipation thereof;




(t) Debt in respect of deferred compensation incurred in the ordinary course of business;



(u) Debt incurred in connection with any sale or disposition of any property in connection
with any transaction covered by, but not prohibited by, Section 10.2.23; and



(v) Debt owing to any insurance company in connection with the financing of any insurance
premiums permitted by such insurance company in the ordinary course of business;



provided, however, that clauses (p) through (v) above shall only apply on and after
the Restatement Date.



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 (provided that such
Liens shall not, for the avoidance of doubt, secure the Debt permitted pursuant to Sections
10.2.1(p) and (r));



(c) (i) Liens for Taxes not yet due or being Properly Contested, (ii) Liens for Taxes that are
set forth in Schedule 10.2.2(c); provided that such Taxes (and the Liens in respect
thereof) are satisfied or are being Properly Contested no later than the date that is 90 days after
the Closing Date and (iii) other Liens for Taxes in an aggregate amount not to exceed $575,000;
provided that such Taxes (and the Liens in respect thereof) are satisfied or are being
Properly Contested no later than the date that is 90 days after a Senior Officer of a Borrower
becomes aware of such Liens;



(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 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;


 


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(f) Liens arising by virtue of a judgment or judicial order against any Obligor or Subsidiary,
or any Property of an Obligor or Subsidiary not giving rise to an Event of Default;



(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) (x) Liens securing Debt under the First Lien Debt Documents including, without limitation,
any Bank Product Debt; provided that such Liens are subject to, and have the priority set
forth in, the Intercreditor Agreement in all respects and (y) Liens on the assets of any SPE
securing the Mortgage Loan Debt and the Refinancing Debt of 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 (i) any Accounts or Inventory or (ii) 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 Debt), leases, or other similar obligations arising in the
ordinary course of business;



(n) survey exceptions, encumbrances, easements or reservations of, or rights of others 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, including any interest of a Licensor in any License;



(r) Liens arising from UCC financing statements regarding operating leases or consignments;


 


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(s) Liens securing Refinancing Debt of the Senior Note Debt; provided that any such Liens are
(i) limited to the collateral securing the Obligations and do not extend to any other assets of the
Parent and its Subsidiaries and (ii) expressly subordinated to the Liens securing the Obligations
and subject to an intercreditor agreement, in form and substance and on terms and conditions,
reasonably acceptable to Agent and the Collateral Agents, and such intercreditor agreement is in
full force and effect;



(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;



(y) existing Liens shown on Schedule 10.2.2 and Liens securing Refinancing Debt in respect
thereof; and



(z) on and after the Restatement Date, 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 (i) materially interfere with the business of the
Parent or any other Obligor or (ii) interfere with the Agent’s liens or security interests or the
Agent’s right to dispose of any Collateral subject to such Intellectual Property.



10.2.3. Cash Accumulation. After the Restatement Date, permit, for a period exceeding
five (5) consecutive Business Days, cash or Cash Equivalents in an aggregate amount in excess of
$75,000,000 (other than (a) cash and Cash Equivalents reasonably necessary for the Obligors and
their Subsidiaries to satisfy the current liabilities incurred by them in the ordinary course of
their business and without acceleration of the satisfaction of such current liabilities and (b) so
long as no Trigger Event Period exists, proceeds from the issuance of Equity Interests of the
Obligors for a period of 180 days after the receipt by the Obligors thereof) to accumulate and be
maintained in the Deposit Accounts and investment accounts of the Obligors; provided,
however, that the Obligors’ obligations under this Section 10.2.3 shall be suspended if and
for so long as there are no Loans (as defined in the First Lien Loan Agreement) outstanding.



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 and First Lien Debt 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.


 


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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 any SPE or Passive Company), 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 of any Obligor 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; (d) loans or other extensions of credit from Obligor to Obligor
so long as (x) each Borrower is Solvent and (y) Parent and its Subsidiaries, on a consolidated
basis, are Solvent, in each case, at the time of any such loan; (e) loans or other extensions of
credit by any Obligor to any Subsidiary that is not an Obligor in an amount not to exceed
$1,150,000 at any time outstanding; and (f) loans or other extensions of credit by any Subsidiary
that is not an Obligor to any Obligor; provided, clauses (d) through (f) shall only apply
on and after the Restatement Date.



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 to
(i) any Debt that is not permitted to be made by Section 10.2.8 of the First Lien Loan Agreement
prior to the Restatement Date or (ii) the Senior Note Debt, the Mortgage Loan Debt, the Convertible
Note Debt and Refinancing Debt of any of the Senior Note Debt and the Mortgage Loan Debt and the
Convertible Note Debt (in each case whether before or after the Restatement Date) other than under
this clause (ii) (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 (whether voluntary or mandatory, or a prepayment,
redemption, retirement, defeasance or acquisition) of the Senior Note Debt, the Mortgage Loan Debt
and the Convertible Note Debt derived solely from Refinancing Debt which meets the Refinancing
Condition, (d) other payments (whether voluntary or mandatory, or a prepayment, redemption,
retirement, defeasance or acquisition) of Senior Note Debt, the Mortgage Loan Debt and the
Convertible Note Debt and Refinancing Debt of the Senior Note Debt, the Convertible Note Debt and
the Mortgage Loan Debt, 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) at any time prior to the
Bank Loan Termination Date, Excess Availability on the date of the making of such payment on a pro
forma basis after giving effect to such payment, and projected Excess Availability on a pro forma
basis for the upcoming twelve month period (after giving effect to such payment) is, in each case,
greater than or equal to 21% of the lesser of (x) the Tranche A Revolver Commitments plus
the Tranche A-1 Revolver Commitments or (y) the Tranche A Borrowing Base, plus the Tranche
A-1 Borrowing Base, (iii) at any time prior to the Bank Loan Termination Date, as of the monthly
fiscal period most recently then ended, the Consolidated Fixed Charge Coverage Ratio (on a pro
forma trailing 12 fiscal month basis, giving effect to the making of such payment, and any Debt
under the First Lien Debt Documents incurred in connection therewith, determined as though such
payment and Debt under the First Lien Debt Documents had been incurred on the first day of the
twelve (12) fiscal month period ended prior to such payment) is not less than 0.90 to 1.00, and
(iv) 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) and (d)(iii) 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 (i) for mergers or consolidations of (x) an Obligor
with another Obligor or (y) a Subsidiary that is not an Obligor with any other Subsidiary that is
not an Obligor, (ii) for liquidation or dissolution of any non-Obligor Subsidiary of the Borrowers,
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,
100% of the Capital Stock or other equity securities held by such dissolving Subsidiary are
transferred to an Obligor, (iii) for liquidation or dissolution of any Obligor (other than any
Borrower) on terms and conditions reasonably acceptable to Agent or (iv) to affect the transactions
otherwise permitted pursuant to Section 10.2.5; 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.


 


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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.



10.2.14. Restrictive Agreements. Other than any conditions or restrictions in respect
to Distributions by the Parent, 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; (d) Restrictive Agreements contained in documents evidencing Refinancing Debt
of the Senior Note Debt; (e) Restrictive Agreements contained in documents evidencing Refinancing
Debt of the Debt under the First Lien Debt Documents; (f) Restrictive Agreements contained in
documents evidencing the Convertible Note Debt or Refinancing Debt of the Convertible Note Debt, in
each case that are no more restrictive than the Restrictive Agreements contained in the documents
evidencing the Debt under the First Lien Debt Documents; and (g) customary restrictions entered
into in the ordinary course of business in asset sale agreements, sale-leaseback agreements, stock
sale agreements and other similar agreements limiting the transfer of the assets subject thereto
pending the consummation of the sale provided therein; provided that clauses (e), (f) and
(g) shall not apply prior to the Restatement Date.



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 entered into prior
to the Closing Date, as shown on Schedule 10.2.17 or as thereafter amended or replaced in any
manner, that, taken as a whole, is not more adverse to the interests of the Lenders in any material
respect than such agreement as it was in effect on the date hereof; (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.


 


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10.2.18. Plans. Become party to any Multiemployer Plan or Foreign Plan.



10.2.19. Amendments to Certain Material Contracts. Except in connection with any
Refinancing Debt permitted hereunder, change, waive or amend any agreement or arrangement to which
Parent or a Subsidiary is party that relates to any Mortgage Loan Debt Document, the Convertible
Note Debt Document or any Senior Note Debt Document if such change, waiver 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 (a) prior to the Restatement Date unless permitted by Section 10.2.23 of the
First Lien Loan Agreement as in effect on the date hereof and (b) on and after the Restatement
Date, involving any of its assets other than (x) any such transaction entered into by any SPE or
Passive Company where such transaction involves only the assets of such SPE or Passive Company and
(y) such transactions involving assets of the Obligors with a fair market value of not more than
$90,000,000 in the aggregate; provided that, in the case of clause (y), (a) the terms and
conditions of any such transaction shall be reasonably acceptable to Agent; (b) the Net Proceeds
received from such sale are not less than 70% of the most recent appraised value of such assets;
and (c) simultaneously with the consummation of any such transaction the Obligors shall (i) deliver
to First Lien Agent (or, following the Bank Loan Termination Date, Agent) a Lien Waiver (or, prior
to the Bank Loan Termination Date, First Lien Agent shall take an appropriate Rent and Charges
Reserve (as defined in the First Lien Loan Agreement)), (ii) adjust the Tranche A Borrowing Base
and the Tranche A-1 Borrowing Base to reflect the sale of Eligible Real Estate (as defined in the
First Lien Loan Agreement) included therein, if any, and (iii) apply proceeds from such transaction
to the prepayment of the Term Loans to the extent required by Section 5.2.



10.2.24. Debt under Senior Note Debt Documents. Incur any Indebtedness (as defined in
the Senior Note Indenture), other than (i) the Obligations, (ii) the Mortgage Loan Debt and any
Refinancing Debt of the Mortgage Loan Debt, (iii) the Debt under the First Lien Debt Documents and
any Refinancing Debt of the Debt under the First Lien Debt Documents and (iv) the Convertible Note
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.


 


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10.2.25. Use of Proceeds. The proceeds of Term Loans shall not be used by Borrowers,
whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or
carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund indebtedness originally incurred for such purpose.



10.2.26. Amendments to First Lien Debt Documents. Agree to any modification to or
amendment of, or consent to or obtain any waiver or forbearance with respect to any First Lien Debt
Document except as permitted by the Intercreditor Agreement. Notwithstanding anything contained in
this Loan Agreement to the contrary, any amendment to, or amendment and restatement of, any First
Lien Debt Document, in the form of the Proposed Restated Revolving Credit Documents (as defined in
the Intercreditor Agreement), including any changes thereto which are permitted by the terms of the
Intercreditor Agreement shall not be prohibited by this Section 10.2.26 or otherwise under this
Loan Agreement or any other Loan Document, execution and delivery thereof by any Obligor shall not
require the consent or approval of Agent or any Lender.



10.2.27. Acquisition of Debt. Purchase, redeem, prepay, tender for or otherwise
acquire, directly or indirectly, any of the outstanding Term Loans or First Lien Debt except (I)
upon the repurchase, redemption, tender or other acquisition of the Term Loans in full, (II) any
prepayment of the Term Loans in accordance with the terms of this Loan Agreement, (III) any
Refinancing, repurchase, redemption, tender or other acquisition of the First Lien Debt not
prohibited by the terms of the Intercreditor Agreement or (IV) any voluntary or mandatory
prepayment of the First Lien Debt not prohibited by this Loan Agreement. Obligors will promptly
cancel all Term Loans or First Lien Debt acquired by it or any of its Subsidiaries or Affiliates
which control, are controlled by, or are under common control with such Obligors pursuant to any
purchase, redemption, prepayment or tender for the Term Loans or First Lien Debt pursuant to any
provision of this Loan Agreement or otherwise and no Term Loans or First Lien Debt may be issued in
substitution or exchange for any such Term Loans or First Lien Debt. For the avoidance of doubt,
this Section 10.2.27 is not intended and shall not prevent Obligors from making (a) regularly
scheduled payments of principal and interest pursuant to the First Lien Loan Agreement, or (b) any
prepayments of Term Loans or Debt under the First Lien Loan Agreement not otherwise prohibited by
this Loan Agreement.



10.2.28. No Inconsistent Agreements. Except for entering into the Obligations under
(a) the Intercreditor Agreement and (b) the First Lien Loan Agreement with respect to prepayments
of principal, enter into any contractual obligation or enter into any amendment or other
modification to any currently existing contractual obligation, which by its terms restricts or
prohibits the ability of the Borrowers to pay the principal of or interest on the Term Loans or
prohibits the ability of the Obligors to fully satisfy all of the Obligations.



10.2.29. Stay, Extension and Usury Laws. Insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law
wherever enacted (to the extent that it may lawfully do so), now or at any time hereafter in force,
that may affect the covenants or the performance of its obligations under the Term Loans, this Loan
Agreement or the other Loan Documents, and each Obligor hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to Lenders, but shall suffer and permit
the execution of every such power as though no such law has been enacted.


 


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10.3. Financial Covenants. For so long as any Obligations are outstanding, Borrowers
shall:



10.3.1. Excess Availability. Only for so long as the First Lien Debt Documents remain
in effect, maintain Excess Availability, at all times, of at least $75,000,000; provided
that following the Restatement Date, at any time the Commitments (as defined in the First Lien Loan
Agreement) are greater than $700,000,000 as a result of an increase in the Commitments (as defined
in the First Lien Loan Agreement) under Section 2.4.1 of the First Lien Loan Agreement, such amount
shall be increased by an amount equal to the result of (a) $5,000,000 multiplied by (b) the
quotient of (i) the result of (x) the aggregate Commitments (as defined in the First Lien Loan
Agreement) at such time minus (y) $700,000,000 divided by (ii) $100,000,000.



10.3.2. Capital Expenditures. At any time prior to the Restatement Date, not make
Capital Expenditures (other than Capital Expenditures made with insurance proceeds) in excess of
(a) $150,000,000 plus (b) $150,000,000 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.



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 Term Loans when due (whether at stated
maturity, on demand, upon acceleration or otherwise) or (ii) any interest on the Term Loans or any
fee or any other amount (other than an amount payable under clause (i) of this Section) payable
under this Loan 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 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 (i) Section 7.2 (other
than inadvertent breaches of such covenant) of this Loan Agreement, (ii) 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), 10.1.3(k), 10.1.3(l),
10.2 or 10.3 of this Loan Agreement or (iii) any provision contained in the Intercreditor
Agreement;



(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 written 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 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 and Debt under the First Lien Debt
Documents) in excess of $5,750,000, 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 and Debt under
the First Lien Debt Documents) in excess of $5,750,000 of any Obligor or any Subsidiary of any
Obligor is required to be repaid, repurchased, redeemed or defeased;


 


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(g) Prior to the Restatement Date, any Event of Default under Section 11.1(g) of the First
Lien Loan Agreement, and on and after the Restatement Date, 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, $5,750,000 (other than amounts covered by
insurance for which the insurer thereof has not challenged such coverage), 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 60 days after its issue or levy (or prior to the
Restatement Date, 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 $5,750,000;



(j) Prior to the Restatement Date, any Event of Default under Section 11.2(j) of the First
Lien Loan Agreement, and on and after the Restatement Date, 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 and such loss, revocation or termination could
reasonably be expected to result in a Material Adverse Effect; there is a cessation of any material
part of an Obligor’s business for a material period of time not covered by business interruption
insurance; any material Collateral or Property of an Obligor is taken or impaired through
condemnation and such taking or impairment could reasonably be expected 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 60 days (or prior to the Restatement Date, 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 $5,750,000;



(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;


 


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(n) A Change of Control occurs;



(o) Any Default or Event of Default under Section 11.1(a) of the First Lien Loan Agreement as
in effect on the date hereof;



(p) the occurrence of any intentional Overadvance Loan (as defined in the First Lien Loan
Agreement on the date hereof, together with any amendments permitted by the Intercreditor
Agreement) made at the request of the Borrowers at a time when the making of such Loan would result
in an Overadvance Loan; provided, for the avoidance of doubt, that this clause (p) shall
not apply to Inadvertent Overadvances (as defined in the Intercreditor Agreement); or



(q) First Lien Agent or First Lien Lenders accelerate any portion of the Debt under the First
Lien Debt Documents.



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 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) [Reserved];




(c) [Reserved]; and



(d) subject to the Intercreditor Agreement, 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. Subject to the Intercreditor Agreement, 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. Subject to the Intercreditor Agreement, 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 (subject, in the case of trademarks owned by any Obligor,
to sufficient rights to quality control and inspection in favor of such Obligor to avoid the risk
of invalidation of said trademarks), computer hardware and software, trade secrets, brochures,
customer lists, promotional and advertising materials, labels, packaging materials and other
Property owned by any Obligor, 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.


 


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11.4. Setoff. To the extent permitted by the Intercreditor Agreement, 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.




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 (other than contingent
indemnification obligations) and the occurrence of the 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 Sankaty 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.


 


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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 Loan 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 Term Loans held by one Lender without accelerating
and demanding payment of all other Term Loans. 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.



12.1.5. Collateral Agent. Each Lender appoints and designates GB Merchant Partners as
a Collateral Agent hereunder.



12.1.6. No Fiduciary Relationship. The relationship between Agent and each of the
Lenders is that of an independent contractor. The use of the term “Agent” is for
convenience only and is used to describe, as a form of convention, the independent contractual
relationship between Agent and each of the Lenders. Nothing contained in this Loan Agreement nor
the other Loan Documents shall be construed to create an agency, trust or other fiduciary
relationship between Agent and any of the Lenders.




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 (other than unmatured Contingent Obligations) and the occurrence of the Termination
Date, (b) that is the subject of an Asset Disposition which Borrowers certify in writing to Agent
is a Permitted Asset Disposition (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.


 


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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 Agent makes no representation or warranty as to the accuracy or completeness of any
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 Term 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 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.


 


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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) 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 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, collectability, value, sufficiency, location or existence of any Collateral, or the
validity, extent, perfection or priority of any Lien therein; the validity, enforceability or
collectability 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.


 


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12.8. Successor Agent.



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 $500,000,000 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 Agent. Any successor by merger or 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 Loan Agreement and to fund Term Loans
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 Term Loans, 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.


 


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12.10. Replacement of Certain Lenders. In the event that (a) any Lender is a
Defaulting Lender, (b) if a Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 5.8 or 5.9, or (c) any
Lender fails to give its consent to any amendment, waiver or action for which consent of all
Lenders or all affected Lenders was required and Required Lenders have consented thereto, then, in
addition to any other rights and remedies that any Person may have, then the Borrower Agent may, at
its sole expense and effort, upon notice to
such Lender and the Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in, and consents required by, Section
13.2), all of its interests, rights and obligations under this Loan Agreement and the related Loan
Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that:




(a) the Borrowers shall have paid to the Agent any applicable assignment fee specified
in Section 13.2 (unless such fee has been waived by Agent);




(b) such Lender shall have received payment of an amount equal to the outstanding
principal of its Term Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents (including any amounts under
Section 3.9) from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or the Borrowers (in the case of all other amounts);




(c) in the case of any such assignment resulting from a claim for compensation under
Section 3.6 or payments required to be made pursuant to Section 5.8 or 5.9, such assignment
will result in a reduction in such compensation or payments thereafter; and




(d) such assignment does not conflict with applicable laws.



A Lender shall not be required to make any such assignment or delegation if, prior thereto, as
a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to
require such assignment and delegation cease to apply.




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 Loan 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 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.


 


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12.12. Agent in its Individual Capacity. As a Lender, Sankaty 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 Sankaty in its capacity as a Lender.



12.13. Agent Titles. Each Lender, other than Sankaty and GB Merchant Partners, that
is designated (on the cover page of this Loan Agreement or otherwise) as an “Agent” 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. [Reserved].



12.16. Intercreditor Agreement. The Lenders hereby irrevocably authorize the Agent to
enter into the 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 Loan 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 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 Loan
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 and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Loan 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 Loan Agreement
(including all or a portion of its Term 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 Term 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 principal
outstanding balance of the Term Loans of the assigning 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 $5,000,000 unless, so long as no
Event of Default has occurred and is continuing, the Borrowers otherwise consent (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); and




(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 Loan Agreement with respect to
the Term Loans assigned.


 


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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 Loan Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under this Loan Agreement
(provided, however, that notwithstanding the foregoing, any First Lien Agent, First
Lien Lender or any First Lien Affiliate who is an assignee shall be subject to Section 14.1.4) and
shall not be deemed to be a “Lender” for any such purpose), 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 Loan Agreement (and, in the case of an Assignment and Assumption
covering all of the assigning Lender’s rights and obligations under this Loan 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 Loan Agreement that does not comply with this subsection
shall be treated for purposes of this Loan 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 Term Loans 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 Loan Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by each of the Borrowers 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 Term 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.


 


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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 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 Loan Agreement (including all or a portion of
its Term Loans owing to it); provided that (i) such Lender’s obligations under this Loan
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 and Lenders
shall continue to deal solely and directly with such Lender in connection with such Lender’s rights
and obligations under this Loan 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 Loan Agreement and to approve any amendment, modification or waiver of any provision of this
Loan 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 (provided,
however, that notwithstanding the foregoing, any First Lien Agent, First Lien Lender or any
First Lien Affiliate who is a Participant shall be subject to Section 14.1.4) who is a Participant
shall not be entitled to vote on matters relating to the Loan Documents (including during any
Insolvency Proceeding of any Obligor) and shall not be deemed to be a “Lender” for any such
purpose). 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 Term Loans
or to participate in any other transactions under this Loan 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.


 


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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, the Required Lenders (or Agent acting at the
direction of the Required Lenders), and each Obligor party to such Loan Document; provided,
that



(a) without the prior written consent of (i) 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 and (ii) Collateral Agent, no modification shall be effective with respect to any provision
in a Loan Document that relates to any rights, duties or discretion of the Collateral Agent;




(b) [Reserved];



(c) without the prior written consent of each affected Lender, no modification shall be
effective that would (i) reduce the amount of, or waive or delay any scheduled payment of, any
principal, interest, fees or other amounts payable to such Lender or (ii) extend the Termination
Date;



(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) alter Section 5.5, Section 7.1
(except to add Collateral), Section 14.1.1; (ii) amend the definitions of Pro Rata or Required
Lenders; or (iii) 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 (iv) release any Obligor
from liability for any Obligations, if such Obligor is Solvent at the time of the release; and



(e) without the prior written consent of the Required Lenders and, at the time of the
effectiveness of such proposed modification, all remaining Initial Lenders (except a Defaulting
Lender as provided in Section 4.2), no modification shall be effective that would alter Section 8.1
or Section 10.3.



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, and/or Agent as among themselves. The making of any Term 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 (it being
understood and agreed that the payment of any amounts agreed among the Borrowers, BAS, the Agent
and any Lender or Increasing Lender participating in connection with an increase in the Term Loan
Commitments or the Term Loan Commitments under Section 2.4 shall not be subject to this Section
14.1.3).



14.1.4. Defaulting Lender Limited Rights. Notwithstanding anything to the contrary
herein, (i) no Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or consent hereunder and (ii) no First Lien Agent, First Lien Lender or First Lien Affiliate
who is an assignee of any rights and obligations under this Loan Agreement or a Participant shall
have any right to approve or disapprove any amendment, waiver or consent hereunder or shall be
entitled to vote on matters relating to the Loan Documents (including during any Insolvency
Proceeding or any Obligor) and shall not be deemed to be a “Lender” for any such purpose, except
that the Commitment of such Person may not be increased or extended without the consent of such
Person.


 


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14.1.5. Amendment to First Lien Debt Documents. If any amendment or modification to
the First Lien Debt Documents amends or modifies (X) clauses (v) or (vi) of the definition of
“Permitted Acquisition” or clauses (a)(i) or (a)(ii) of the definition of “Permitted Distribution”
contained in the First Lien Debt Documents the effect of which is more restrictive than the applicable provision as
in effect on the applicable date of determination or (Y) Sections 8.1, 8.2.1, 8.3.1 or 8.4.1 of the
First Lien Loan Agreement in a manner that affects the reporting of Collateral and the effect of
which is more restrictive than the applicable provision as in effect on the applicable date of
determination, or if any amendment or modification to the First Lien Loan Agreement or other First
Lien Debt Document adds an additional financial covenant therein, Borrowers acknowledge and agree
that this Loan Agreement or the other Loan Documents, as the case may be, shall be automatically
amended or modified to effect similar amendments or modifications (maintaining the same percentage
difference between such provisions in such First Lien Debt Document, on the one hand, and the
corresponding provisions in this Loan Agreement or such other Loan Document, on the other hand, to
the extent applicable) with respect to this Loan Agreement or such other Loan Documents, without
the need for any further action or consent by any Borrower or any other party. In furtherance of
the foregoing, the Borrowers shall permit the Agent and Lenders to document each such similar
amendment or modification to this Loan Agreement or such other Loan Document or insert a
corresponding new financial covenant in this Loan Agreement or such other Loan Document without any
need for any further action or consent by the Borrowers, but failure of Agent and Lenders to do so
shall in no way impair or limit the provisions of this Section 14.1.5. Notwithstanding the
foregoing for purposes of clarity, in the event that the Agent, in its reasonable judgment,
determines that such amendment or modification, as the case may be, relates to provisions of the
First Lien Debt Documents for which a corresponding amendment or modification of the Loan Documents
would not apply (e.g. availability or eligibility standards), such amendment or modification, as
the case may be, of the First Lien Debt Documents shall not be subject to the terms above in this
Section 14.1.5.



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 AND
DOCUMENTED ATTORNEYS’ FEES AND EXTRAORDINARY EXPENSES OF ONE OUTSIDE COUNSEL, ONE LOCAL COUNSEL IN
EACH RELEVANT JURISDICTION (AS DETERMINED BY THE AGENT IN ITS REASONABLE DISCRETION), ONE SPECIAL
OR REGULATORY COUNSEL IN RESPECT OF EACH MATTER (AS REASONABLY REQUIRED BY THE AGENT) AND CONFLICT
OF INTEREST COUNSEL (AS DETERMINED BY THE AGENT IN ITS REASONABLE DISCRETION)) 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 OR THE ADMINISTRATION OF THE LOAN
DOCUMENTS, (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
REASONABLE AND DOCUMENTED OUT-OF-POCKET 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 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 (G) 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



 


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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 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 Term 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.


 


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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 Loan
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 Loan 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 and Lenders have
an arms-length business relationship that creates no fiduciary duty on the part of Agent or any
Lender, and each Obligor, Agent and Lender expressly disclaims any fiduciary relationship.



14.11. Confidentiality. During the term of this Loan 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;


 


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(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 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; (i) 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 (j) 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 LOAN 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 Loan 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-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 Loan 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 Loan Agreement may be filed as a
written consent to a trial by the court.


 


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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. Survival of Representations and Warranties. All representations and warranties
made hereunder and in any other Loan Document or other document delivered pursuant hereto or
thereto or in connection herewith or therewith shall survive the execution and delivery hereof and
thereof. Such representations and warranties have been or will be relied upon by the Agent and
each Lender, regardless of any investigation made by the Agent or any Lender or on their behalf and
notwithstanding that the Agent or any Lender may have had notice or knowledge of any Default at the
time of any extension of credit hereunder, and shall continue in full force and effect as long as
any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of
Credit shall remain outstanding.



14.17. No Advisory or Fiduciary Responsibility. In connection with all aspects of
each transaction contemplated hereby (including in connection with any amendment, waiver or other
modification hereof or of any other Loan Document), each Borrower and each Guarantor acknowledges
and agrees that: (i) (A) the arranging and other services regarding this Loan Agreement provided by
the Agent are arm’s-length commercial transactions between the Borrowers and the Guarantors and
their respective Affiliates, on the one hand, and the Agent, on the other hand, (B) each Borrower
each Guarantor has consulted its own legal, accounting, regulatory and tax advisors to the extent
it has deemed appropriate, and (C) each Borrowers and each Guarantor is capable of evaluating, and
understands and accepts, the terms, risks and conditions of the transactions contemplated hereby
and by the other Loan Documents; and (ii) (A) the Agent is and has been acting solely as a
principal and, except as expressly agreed in writing by the relevant parties, has not been, is not,
and will not be acting as an advisor, agent or fiduciary for any Borrower, any Guarantor or any of
their respective Affiliates, or any other Person and (B) the Agent has no obligation to any
Borrower, any Guarantor or any of their respective Affiliates with respect to the transactions
contemplated hereby except those obligations expressly set forth herein and in the other Loan
Documents. To the fullest extent permitted by law, each Borrower and each Guarantor hereby waives
and releases any claims that it may have against the Agent with respect to any breach or alleged
breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated
hereby.



14.18. Intercreditor Agreement Prevails. Notwithstanding anything to the contrary
contained herein, all representations, warranties and covenants of the Obligors hereunder, and the
security interest granted to the Agent and the other Secured Parties and all other rights and
benefits granted to the Agent and the other Secured Parties hereunder, are expressly subject to the
terms and conditions of the Intercreditor Agreement.



[Remainder of page intentionally left blank]




 


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[Page intentionally left blank; signatures begin on following page]





 


 









 







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



	 	 	 	 	 
	 	BORROWERS:



THE BON-TON DEPARTMENT STORES, INC.

 
	 	/s/  Keith E. Plowman
 	 
	 	By:	 	     Keith E. Plowman 	 
	 	Title:  	 	Executive Vice President, Chief Financial
 Officer and Principal
Accounting Officer 	 



	 	 	 	 	 
	 

	 	Address:
	 	2801 East Market Street
	 

	 	 	 	York, PA 17402
	 

	 	Attn:
	 	Keith E. Plowman
	 

	 	Telecopy:
	 	(717) 751-3196






	 	 	 	 	 
	 	THE ELDER-BEERMAN STORES CORP.

 	 
	 	/s/  H. Todd Dissinger
 	 
	 	By:	 	     H. Todd Dissinger 	 
	 	Title:  	 	Vice President — Treasurer 	 



	 	 	 	 	 
	 

	 	Address:
	 	2801 East Market Street
	 

	 	 	 	York, PA 17402
	 

	 	Attn:
	 	Keith E. Plowman
	 

	 	Telecopy:
	 	(717) 751-3196







 


 









 





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



	 	 	 	 	 
	 	OBLIGORS:




THE BON-TON STORES, INC.

 	 
	 	/s/  Keith E. Plowman
 	 
	 	By:	 	     Keith E. Plowman 	 
	 	Title:  	 	Executive Vice President, Chief Financial Officer and Principal
Accounting Officer 	 



	 	 	 	 	 
	 

	 	Address:
	 	2801 East Market Street
	 

	 	 	 	York, PA 17402
	 

	 	Attn:
	 	Keith E. Plowman
	 

	 	Telecopy:
	 	(717) 751-3196






	 	 	 	 	 
	 	THE BON-TON TRADE, LLC

 	 
	 	/s/  Keith E. Plowman
 	 
	 	By:	 	     Keith E. Plowman 	 
	 	Title:  	 	Treasurer and  Chief Financial Officer 	 



	 	 	 	 	 
	 

	 	Address:
	 	300 Delaware Avenue
	 

	 	 	 	Suite 12122
	 

	 	 	 	Wilmington, DE 19801
	 

	 	Attn:
	 	Keith E. Plowman
	 

	 	Telecopy:
	 	(302) 652-8667






Signature Page to Second Lien Loan and Security Agreement



 


 









 





	 	 	 	 	 
	 	THE BON-TON STORES OF LANCASTER, INC.

 
	 	/s/  Robert E. Stern
 	 
	 	By:	 	     Robert E. Stern 	 
	 	Title:  	 	Secretary and Treasurer 	 



	 	 	 	 	 
	 

	 	Address:
	 	2801 East Market Street
	 

	 	 	 	York, PA 17402
	 

	 	Attn:
	 	Keith E. Plowman
	 

	 	Telecopy:
	 	(717) 751-3196






	 	 	 	 	 
	 	THE BON-TON GIFTCO, INC.

 	 
	 	/s/  Keith E. Plowman
 	 
	 	By:	 	     Keith E. Plowman 	 
	 	Title:  	 	President and Chief Financial Officer 	 



	 	 	 	 	 
	 

	 	Address:
	 	2801 East Market Street
	 

	 	 	 	York, PA 17402
	 

	 	Attn:
	 	Keith E. Plowman
	 

	 	Telecopy:
	 	(717) 751-3196






	 	 	 	 	 
	 	CARSON PIRIE SCOTT II, INC.

 	 
	 	/s/  H. Todd Dissinger
 	 
	 	By: 	 	    H. Todd Dissinger 	 
	 	Title:  	 	Vice President — Treasurer 	 



	 	 	 	 	 
	 

	 	Address:
	 	2801 East Market Street
	 

	 	 	 	York, PA 17402
	 

	 	Attn:
	 	Keith E. Plowman
	 

	 	Telecopy:
	 	(717) 751-3196





Signature Page to Second Lien Loan and Security Agreement




 


 









 





	 	 	 	 	 
	 	BON-TON DISTRIBUTION, INC.

 	 
	 	/s/  H. Todd Dissinger
 	 
	 	By:	 	     H. Todd Dissinger 	 
	 	Title:  	 	Vice President — Treasurer 	 



	 	 	 	 	 
	 

	 	Address:
	 	2801 East Market Street
	 

	 	 	 	York, PA 17402
	 

	 	Attn:
	 	Keith E. Plowman
	 

	 	Telecopy:
	 	(717) 751-3196






	 	 	 	 	 
	 	MCRIL, LLC

 	 
	 	/s/  H. Todd Dissinger
 	 
	 	By:	 	     H. Todd Dissinger 	 
	 	Title:  	 	Vice President — Treasurer 	 



	 	 	 	 	 
	 

	 	Address:
	 	2801 East Market Street
	 

	 	 	 	York, PA 17402
	 

	 	Attn:
	 	Keith E. Plowman
	 

	 	Telecopy:
	 	(717) 751-3196






Signature Page to Second Lien Loan and Security Agreement



 


 









 





	 	 	 	 	 
	 	AGENT:



SANKATY ADVISORS, LLC,

as Agent

 	 
	 	By:  	/s/  Michael Ewald
 	 
	 	 	Name:  	Michael Ewald 	 
	 	 	Title:  	Managing Director 	 



	 	 	 	 	 
	 

	 	Address:
	 	Sankaty Advisors, LLC
	 

	 	 	 	111 Huntington Avenue
	 

	 	 	 	Boston, Massachusetts 02199
	 

	 	Attn:
	 	James Athanasoulas
	 

	 	Fax:
	 	(617) 516-2710
	 

	 	Email:
	 	jathanasoulas@sankaty.com
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 

	 	Address:
	 	Proskauer Rose LLP
	 

	 	 	 	One International Place, 23rd Floor
	 

	 	 	 	Boston, MA 02110
	 

	 	Attn:
	 	Peter J. Antoszyk
	 

	 	Fax:	 	 (617) 526-9899
	 

	 	Email:	 	 pantoszyk@proskauer.com






Signature Page to Second Lien Loan and Security Agreement




 


 









 







	 	 	 	 	 
	 	COLLATERAL AGENT:



GB MERCHANT PARTNERS, LLC,

as Collateral Agent

 	 
	 	By:  	/s/  D. Michael Murray
 	 
	 	 	Name:  	D. Michael Murray 	 
	 	 	Title:  	Managing Director 	 



	 	 	 	 	 
	 

	 	Address:
	 	GB Merchant Partners, LLC
	 

	 	 	 	101 Huntington Avenue 10th Floor
	 

	 	 	 	Boston, MA 02199
	 

	 	Attn:
	 	D. Michael Murray
	 

	 	Fax:
	 	(617) 210-7141
	 

	 	Email:
	 	mmurray@gordonbrothers.com
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 

	 	Address:
	 	Proskauer Rose LLP
	 

	 	 	 	One International Place, 23rd Floor
	 

	 	 	 	Boston, MA 02110
	 

	 	Attn:
	 	Peter J. Antoszyk
	 

	 	Fax:	 	 (617) 526-9899
	 

	 	Email:	 	 pantoszyk@proskauer.com






Signature Page to Second Lien Loan and Security Agreement



 


 









 





	 	 	 	 	 
	 	DOCUMENTATION AGENT:



GA CAPITAL, LLC,

as Documentation Agent

 	 
	 	By:  	/s/  Daniel Platt
 	 
	 	 	Name:  	Daniel Platt 	 
	 	 	Title:  	President 	 



	 	 	 	 	 
	 

	 	Address:
	 	GA Capital, LLC
	 

	 	 	 	130 West 42nd Street
	 

	 	 	 	Suite 1001
	 

	 	 	 	New York, NY 10036
	 
	 	 	 	 
	 

	 	Attn:
	 	Daniel Platt
	 

	 	Fax:
	 	646-381-9247 Fax
	 

	 	Email:
	 	dplatt@greatamerican.com
	 
	 	 	 	 
	 	 	With a copy to:
	 	 	
	 

	 	Address:	 	Proskauer Rose LLP
	 

	 	 	 	One International Place, 23rd Floor
	 

	 	 	 	Boston, MA 02110
	 

	 	Attn:
	 	Peter J. Antoszyk
	 

	 	Fax:
	 	(617) 526-9899
	 

	 	Email:
	 	pantoszyk@proskauer.com






Signature Page to Second Lien Loan and Security Agreement



 


 









 





	 	 	 	 	 
	 	LENDERS:



SANKATY CREDIT OPPORTUNITIES II, L.P.,

as Lender

 	 
	 	By:  	/s/  Michael Ewald
 	 
	 	 	Name:  	Michael Ewald 	 
	 	 	Title:  	Managing Director 	 



	 	 	 	 	 
	 

	 	Address:
	 	c/o Sankaty Advisors, LLC
	 

	 	 	 	111 Huntington Avenue
	 

	 	 	 	Boston, Massachusetts 02199
	 

	 	Attn:
	 	James Athanasoulas
	 

	 	Fax:
	 	(617) 516-2710
	 

	 	Email:
	 	jathanasoulas@sankaty.com
	 
	 	 	With a copy to:
	 
	 

	 	Address:
	 	Proskauer Rose LLP
	 

	 	 	 	One International Place, 23rd Floor
	 

	 	 	 	Boston, MA 02110
	 

	 	Attn:
	 	Peter J. Antoszyk
	 

	 	Fax:
	 	(617) 526-9899
	 

	 	Email:
	 	pantoszyk@proskauer.com






Signature Page to Second Lien Loan and Security Agreement



 


 









 





	 	 	 	 	 
	 	SANKATY CREDIT OPPORTUNITIES III, L.P.,

as Lender

 	 
	 	By:  	/s/  Michael Ewald
 	 
	 	 	Name:  	Michael Ewald 	 
	 	 	Title:  	Managing Director 	 



	 	 	 	 	 
	 

	 	Address:
	 	c/o Sankaty Advisors, LLC
	 

	 	 	 	111 Huntington Avenue
	 

	 	 	 	Boston, Massachusetts 02199
	 

	 	Attn:
	 	James Athanasoulas
	 

	 	Fax:
	 	(617) 516-2710
	 

	 	Email:
	 	jathanasoulas@sankaty.com
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 

	 	Address:
	 	Proskauer Rose LLP
	 

	 	 	 	One International Place, 23rd Floor
	 

	 	 	 	Boston, MA 02110
	 

	 	Attn:
	 	Peter J. Antoszyk
	 

	 	Fax:
	 	(617) 526-9899
	 

	 	Email:
	 	pantoszyk@proskauer.com






Signature Page to Second Lien Loan and Security Agreement



 


 









 





	 	 	 	 	 
	 	SANKATY CREDIT OPPORTUNITIES IV, L.P.,

as Lender

 	 
	 	By:  	              /s/  Michael Ewald
 	 
	 	 	Name:  	Michael Ewald 	 
	 	 	Title:  	Managing Director 	 



	 	 	 	 	 
	 

	 	Address:
	 	c/o Sankaty Advisors, LLC
	 

	 	 	 	111 Huntington Avenue
	 

	 	 	 	Boston, Massachusetts 02199
	 

	 	Attn:
	 	James Athanasoulas
	 

	 	Fax:
	 	(617) 516-2710
	 

	 	Email:
	 	jathanasoulas@sankaty.com
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 

	 	Address:
	 	Proskauer Rose LLP
	 

	 	 	 	One International Place, 23rd Floor
	 

	 	 	 	Boston, MA 02110
	 

	 	Attn:
	 	Peter J. Antoszyk
	 

	 	Fax:
	 	(617) 526-9899
	 

	 	Email:
	 	pantoszyk@proskauer.com






Signature Page to Second Lien Loan and Security Agreement



 


 









 





	 	 	 	 	 
	 	SANKATY CREDIT OPPORTUNITIES 
(OFFSHORE MASTER) IV,
L.P., as Lender

 	 
	 	By:  	/s/  Michael Ewald
 	 
	 	 	Name:  	Michael Ewald 	 
	 	 	Title:  	Managing Director 	 



	 	 	 	 	 
	 

	 	Address:
	 	c/o Sankaty Advisors, LLC
	 

	 	 	 	111 Huntington Avenue
	 

	 	 	 	Boston, Massachusetts 02199
	 

	 	Attn:
	 	James Athanasoulas
	 

	 	Fax:
	 	(617) 516-2710
	 

	 	Email:
	 	jathanasoulas@sankaty.com
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 

	 	Address:
	 	Proskauer Rose LLP
	 

	 	 	 	One International Place, 23rd Floor
	 

	 	 	 	Boston, MA 02110
	 

	 	Attn:
	 	Peter J. Antoszyk
	 

	 	Fax:
	 	(617) 526-9899
	 

	 	Email:
	 	pantoszyk@proskauer.com






Signature Page to Second Lien Loan and Security Agreement



 


 









 





	 	 	 	 	 
	 	1903 ONSHORE FUNDING, LLC,

as Lender

 	 
	 	By:  	GB Merchant Partners, LLC,
 	 
	 	 	its Investment Manager 	 
	 	 	 	 
	 	By:  	/s/  D. Michael Murray
 	 
	 	 	Name:  	D. Michael Murray 	 
	 	 	Title:  	Managing Director 	 



	 	 	 	 	 
	 

	 	Address:
	 	c/o GB Merchant Partners, LLC
	 

	 	 	 	101 Huntington Avenue 10th Floor
	 

	 	 	 	Boston, MA 02188
	 

	 	Attn:
	 	D. Michael Murray
	 

	 	Fax:
	 	(617) 210-7141
	 

	 	Email:
	 	mmurray@gordonbrothers.com
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 

	 	Address:
	 	Proskauer Rose LLP
	 

	 	 	 	One International Place, 23rd Floor
	 

	 	 	 	Boston, MA 02110
	 

	 	Attn:
	 	Peter J. Antoszyk
	 

	 	Fax:	 	 (617) 526-9899
	 

	 	Email:	 	 pantoszyk@proskauer.com






Signature Page to Second Lien Loan and Security Agreement



 


 









 





	 	 	 	 	 
	 	BANK OF AMERICA, N.A.,

as Lender

 	 
	 	By:  	/s/  Kendra Neigoot
 	 
	 	 	Name:  	Kendra Neigoot 	 
	 	 	Title:  	Vice President 	 



Signature Page to Second Lien Loan and Security Agreement





 


 









 







Schedule 1.1(a)

Commitments of Lenders




	 	 	 	 	 	 	 	 	 
	 	 	Amount of Term Loan	 	 	Amount of Term Loan	 
	 	 	Outstanding as of the	 	 	Proceeds Provided less the	 
	Lender	 	Closing Date	 	 	OID	 
	Sankaty Credit Opportunities II, L.P.
	 	$	7,500,000.00	 	 	$	7,275,000.00	 
	Sankaty Credit Opportunities III, L.P.
	 	$	11,250,000.00	 	 	$	10,912,500.00	 
	Sankaty Credit Opportunities IV, L.P.
	 	$	8,190,000.00	 	 	$	7,944,300.00	 
	Sankaty Credit Opportunities
(Offshore Master) IV, L.P.
	 	$	10,560,000.00	 	 	$	10,243,200.00	 
	1903 Onshore Funding, LLC
	 	$	17,500,000.00	 	 	$	16,975,000.00	 
	Bank of America, N.A.
	 	$	20,000,000.00	 	 	$	19,400,000.00	 
	 	 	 	 	 	 	 
	TOTAL
	 	$	75,000,000.00	 	 	$	72,750,000.00	 
	 	 	 	 	 	 	 







 


 









 







Schedule 7.1(c)




Commercial Tort Claims




Bostco LLC, et al. v. MMSD, et al., Case No. 03-CV-005040 (filed August 2003 in Cir. Ct., Milwaukee
Co., WI). Bon-Ton, successor by merger to Parisian, Inc., is one of the plaintiffs in this claim
for damages to a building in Milwaukee. Borrowers maintain a retail store and corporate offices in
the building.