Document:

Exhibit 10.1

 

 

 

 

CREDIT AGREEMENT

 

Dated
as of October 9, 2009

 

among

 

TOPS
MARKETS, LLC,

as the Lead Borrower

 

For

 

The
Borrowers Party Hereto

 

The
BORROWERS Party Hereto

 

The
GUARANTORS Party Hereto

 

BANK
OF AMERICA, N.A.

as Administrative Agent, Collateral Agent, Swing Line Lender

and

L/C Issuer,

 

and

 

The
LENDERS Party Hereto

 

BANC
OF AMERICA SECURITIES LLC

MORGAN STANLEY SENIOR FUNDING, INC.

as Joint Lead Arrangers and Joint Bookrunners

 

HSBC
BUSINESS CREDIT (USA) INC.

as Documentation Agent

 

 

 

TABLE OF CONTENTS

 

	
  Section

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I
  DEFINITIONS AND ACCOUNTING TERMS

  	
  1

  
	
   

  	
   

  
	
  1.01

  	
   

  	
  Defined Terms

  	
  1

  
	
  1.02

  	
   

  	
  Other Interpretive Provisions

  	
  59

  
	
  1.03

  	
   

  	
  Accounting Terms

  	
  60

  
	
  1.04

  	
   

  	
  Rounding

  	
  61

  
	
  1.05

  	
   

  	
  Times of Day

  	
  61

  
	
  1.06

  	
   

  	
  Letter of Credit Amounts

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  II THE COMMITMENTS AND CREDIT EXTENSIONS

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  2.01

  	
   

  	
  Committed Loans; Reserves

  	
  61

  
	
  2.02

  	
   

  	
  Borrowings, Conversions and Continuations of Committed
  Loans

  	
  62

  
	
  2.03

  	
   

  	
  Letters of Credit

  	
  65

  
	
  2.04

  	
   

  	
  Swing Line Loans

  	
  75

  
	
  2.05

  	
   

  	
  Prepayments

  	
  78

  
	
  2.06

  	
   

  	
  Termination or Reduction of Commitments

  	
  80

  
	
  2.07

  	
   

  	
  Repayment of Loans

  	
  81

  
	
  2.08

  	
   

  	
  Interest

  	
  81

  
	
  2.09

  	
   

  	
  Fees

  	
  82

  
	
  2.10

  	
   

  	
  Computation of Interest and Fees

  	
  83

  
	
  2.11

  	
   

  	
  Evidence of Debt

  	
  83

  
	
  2.12

  	
   

  	
  Payments Generally; Administrative Agent’s Clawback

  	
  84

  
	
  2.13

  	
   

  	
  Sharing of Payments by Lenders

  	
  86

  
	
  2.14

  	
   

  	
  Settlement Amongst Lenders

  	
  86

  
	
  2.15

  	
   

  	
  Increase in Commitments

  	
  87

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  III TAXES, YIELD PROTECTION AND ILLEGALITY; APPOINTMENT OF LEAD BORROWER

  	
  89

  
	
   

  	
   

  
	
  3.01

  	
   

  	
  Taxes

  	
  89

  
	
  3.02

  	
   

  	
  Illegality

  	
  91

  
	
  3.03

  	
   

  	
  Inability to Determine Rates

  	
  92

  
	
  3.04

  	
   

  	
  Increased Costs; Reserves on LIBO Rate Loans

  	
  92

  
	
  3.05

  	
   

  	
  Compensation for Losses

  	
  94

  
	
  3.06

  	
   

  	
  Mitigation Obligations; Replacement of Lenders

  	
  94

  
	
  3.07

  	
   

  	
  Survival

  	
  95

  
	
  3.08

  	
   

  	
  Designation of Lead Borrower as Borrowers’ Agent

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  4.01

  	
   

  	
  Conditions of Initial Credit Extension

  	
  95

  
	
  4.02

  	
   

  	
  Conditions to all Credit Extensions

  	
  99

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V
  REPRESENTATIONS AND WARRANTIES

  	
  100

  
	
   

  	
   

  	
   

  	
   

  
	
  5.01

  	
   

  	
  Existence, Qualification and Power

  	
  100

  
	
  5.02

  	
   

  	
  Authorization; No Contravention

  	
  100

  

 

i

 

	
  5.03

  	
   

  	
  Governmental Authorization; Other Consents

  	
  101

  
	
  5.04

  	
   

  	
  Binding Effect

  	
  101

  
	
  5.05

  	
   

  	
  Financial Statements; No Material Adverse Effect

  	
  101

  
	
  5.06

  	
   

  	
  Litigation

  	
  102

  
	
  5.07

  	
   

  	
  No Default

  	
  102

  
	
  5.08

  	
   

  	
  Ownership of Property; Liens

  	
  102

  
	
  5.09

  	
   

  	
  Environmental Compliance

  	
  103

  
	
  5.10

  	
   

  	
  Insurance

  	
  103

  
	
  5.11

  	
   

  	
  Taxes

  	
  104

  
	
  5.12

  	
   

  	
  ERISA Compliance

  	
  104

  
	
  5.13

  	
   

  	
  Subsidiaries; Equity Interests

  	
  105

  
	
  5.14

  	
   

  	
  Margin Regulations; Investment Company Act

  	
  105

  
	
  5.15

  	
   

  	
  Disclosure

  	
  105

  
	
  5.16

  	
   

  	
  Compliance with Laws

  	
  106

  
	
  5.17

  	
   

  	
  Intellectual Property; Licenses, Etc.

  	
  106

  
	
  5.18

  	
   

  	
  Labor Matters

  	
  106

  
	
  5.19

  	
   

  	
  Security Documents

  	
  107

  
	
  5.20

  	
   

  	
  Solvency

  	
  108

  
	
  5.21

  	
   

  	
  Deposit Accounts; Credit Card Arrangements

  	
  108

  
	
  5.22

  	
   

  	
  Brokers

  	
  108

  
	
  5.23

  	
   

  	
  Material Contracts

  	
  108

  
	
  5.24

  	
   

  	
  Casualty

  	
  109

  
	
  5.25

  	
   

  	
  Pharmaceutical Laws

  	
  109

  
	
  5.26

  	
   

  	
  HIPAA Compliance

  	
  109

  
	
  5.27

  	
   

  	
  Compliance With Health Care Laws

  	
  110

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VI AFFIRMATIVE COVENANTS

  	
  111

  
	
   

  	
   

  	
   

  	
   

  
	
  6.01

  	
   

  	
  Financial Statements

  	
  111

  
	
  6.02

  	
   

  	
  Certificates; Other Information

  	
  112

  
	
  6.03

  	
   

  	
  Notices

  	
  115

  
	
  6.04

  	
   

  	
  Payment of Obligations

  	
  116

  
	
  6.05

  	
   

  	
  Preservation of Existence, Etc.

  	
  116

  
	
  6.06

  	
   

  	
  Maintenance of Properties

  	
  116

  
	
  6.07

  	
   

  	
  Maintenance of Insurance

  	
  117

  
	
  6.08

  	
   

  	
  Compliance with Laws

  	
  118

  
	
  6.09

  	
   

  	
  Books and Records; Accountants

  	
  118

  
	
  6.10

  	
   

  	
  Inspection Rights

  	
  118

  
	
  6.11

  	
   

  	
  Use of Proceeds

  	
  119

  
	
  6.12

  	
   

  	
  Additional Loan Parties

  	
  119

  
	
  6.13

  	
   

  	
  Cash Management

  	
  120

  
	
  6.14

  	
   

  	
  Information Regarding the Collateral

  	
  122

  
	
  6.15

  	
   

  	
  Physical Inventories

  	
  123

  
	
  6.16

  	
   

  	
  Environmental Laws

  	
  123

  
	
  6.17

  	
   

  	
  Further Assurances

  	
  123

  
	
  6.18

  	
   

  	
  Compliance with Terms of Leaseholds

  	
  124

  
	
  6.19

  	
   

  	
  Material Contracts

  	
  124

  
	
  6.20

  	
   

  	
  Post-Closing Matters

  	
  124

  

 

ii

 

	
  ARTICLE
  VII NEGATIVE COVENANTS

  	
  125

  
	
   

  	
   

  	
   

  	
   

  
	
  7.01

  	
   

  	
  Liens

  	
  126

  
	
  7.02

  	
   

  	
  Investments

  	
  126

  
	
  7.03

  	
   

  	
  Indebtedness

  	
  126

  
	
  7.04

  	
   

  	
  Fundamental Changes

  	
  126

  
	
  7.05

  	
   

  	
  Dispositions

  	
  126

  
	
  7.06

  	
   

  	
  Restricted Payments

  	
  126

  
	
  7.07

  	
   

  	
  Repayments and Prepayments of Indebtedness

  	
  127

  
	
  7.08

  	
   

  	
  Change in Nature of Business

  	
  128

  
	
  7.09

  	
   

  	
  Transactions with Affiliates

  	
  128

  
	
  7.10

  	
   

  	
  Burdensome Agreements

  	
  129

  
	
  7.11

  	
   

  	
  Use of Proceeds

  	
  131

  
	
  7.12

  	
   

  	
  Amendment of Material Documents

  	
  131

  
	
  7.13

  	
   

  	
  Fiscal Year; Changes Regarding the Collateral

  	
  131

  
	
  7.14

  	
   

  	
  Blocked Accounts; Credit Card Processors

  	
  132

  
	
  7.15

  	
   

  	
  Consolidated Fixed Charge Coverage Ratio

  	
  132

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII EVENTS OF DEFAULT AND REMEDIES

  	
  132

  
	
   

  	
   

  	
   

  	
   

  
	
  8.01

  	
   

  	
  Events of Default

  	
  132

  
	
  8.02

  	
   

  	
  Remedies Upon Event of Default

  	
  135

  
	
  8.03

  	
   

  	
  Application of Funds

  	
  136

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IX ADMINISTRATIVE AGENT

  	
  138

  
	
   

  	
   

  	
   

  	
   

  
	
  9.01

  	
   

  	
  Appointment and Authority

  	
  138

  
	
  9.02

  	
   

  	
  Rights as a Lender

  	
  138

  
	
  9.03

  	
   

  	
  Exculpatory Provisions

  	
  139

  
	
  9.04

  	
   

  	
  Reliance by Agents

  	
  140

  
	
  9.05

  	
   

  	
  Delegation of Duties

  	
  140

  
	
  9.06

  	
   

  	
  Resignation of Agents

  	
  140

  
	
  9.07

  	
   

  	
  Non-Reliance on Administrative Agent and Other Lenders

  	
  141

  
	
  9.08

  	
   

  	
  Administrative Agent May File Proofs of Claim

  	
  141

  
	
  9.09

  	
   

  	
  Collateral and Guaranty Matters

  	
  142

  
	
  9.10

  	
   

  	
  Notice of Transfer

  	
  143

  
	
  9.11

  	
   

  	
  Reports and Financial Statements

  	
  143

  
	
  9.12

  	
   

  	
  Agency for Perfection

  	
  144

  
	
  9.13

  	
   

  	
  Indemnification of Agents

  	
  144

  
	
  9.14

  	
   

  	
  Relation among Lenders

  	
  144

  
	
  9.15

  	
   

  	
  Defaulting Lender

  	
  144

  
	
  9.16

  	
   

  	
  Syndication Agents and Co-Lead Arrangers

  	
  146

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X
  MISCELLANEOUS

  	
  146

  
	
   

  	
   

  	
   

  	
   

  
	
  10.01

  	
   

  	
  Amendments, Etc.

  	
  146

  
	
  10.02

  	
   

  	
  Notices; Effectiveness; Electronic Communications

  	
  148

  
	
  10.03

  	
   

  	
  No Waiver; Cumulative Remedies

  	
  150

  
	
  10.04

  	
   

  	
  Expenses; Indemnity; Damage Waiver

  	
  150

  
	
  10.05

  	
   

  	
  Payments Set Aside

  	
  151

  

 

iii

 

	
  10.06

  	
   

  	
  Successors and Assigns

  	
  152

  
	
  10.07

  	
   

  	
  Treatment of Certain Information; Confidentiality

  	
  156

  
	
  10.08

  	
   

  	
  Right of Setoff

  	
  157

  
	
  10.09

  	
   

  	
  Interest Rate Limitation

  	
  157

  
	
  10.10

  	
   

  	
  Counterparts; Integration; Effectiveness

  	
  157

  
	
  10.11

  	
   

  	
  Survival

  	
  158

  
	
  10.12

  	
   

  	
  Severability

  	
  158

  
	
  10.13

  	
   

  	
  Replacement of Lenders

  	
  158

  
	
  10.14

  	
   

  	
  Governing Law; Jurisdiction; Etc.

  	
  159

  
	
  10.15

  	
   

  	
  Waiver of Jury Trial

  	
  160

  
	
  10.16

  	
   

  	
  No Advisory or Fiduciary Responsibility

  	
  160

  
	
  10.17

  	
   

  	
  USA PATRIOT Act Notice

  	
  161

  
	
  10.18

  	
   

  	
  Foreign Asset Control Regulations

  	
  161

  
	
  10.19

  	
   

  	
  Time of the Essence

  	
  162

  
	
  10.20

  	
   

  	
  Press Releases

  	
  162

  
	
  10.21

  	
   

  	
  Additional Waivers

  	
  162

  
	
  10.22

  	
   

  	
  No Strict Construction

  	
  164

  
	
  10.23

  	
   

  	
  Attachments

  	
  164

  
	
  10.24

  	
   

  	
  Intercreditor Agreement

  	
  164

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNATURES

  	
  S-1

  

 

iv

 

SCHEDULES

 

	
  1.01

  	
  Borrowers

  
	
  1.02

  	
  Guarantors

  
	
  2.01

  	
  Commitments and Applicable Percentages

  
	
  5.01

  	
  Loan Parties; Organizational Information

  
	
  5.06

  	
  Litigation

  
	
  5.08(b)(1)

  	
  Owned Real Estate

  
	
  5.08(b)(2)

  	
  Leased Real Estate

  
	
  5.09

  	
  Environmental Matters

  
	
  5.10

  	
  Insurance

  
	
  5.13

  	
  Subsidiaries; Other Equity Investments

  
	
  5.17

  	
  Intellectual Property Matters

  
	
  5.18

  	
  Collective Bargaining Agreements

  
	
  5.21(a)

  	
  DDAs

  
	
  5.21(b)

  	
  Credit Card Arrangements

  
	
  5.23

  	
  Material Contracts

  
	
  5.26(b)

  	
  Business Associate Agreements

  
	
  5.27(d)

  	
  Participation Agreements

  
	
  6.02

  	
  Financial and Collateral Reporting

  
	
  7.01

  	
  Existing Liens

  
	
  7.02

  	
  Existing Investments

  
	
  7.03

  	
  Existing Indebtedness

  
	
  7.09

  	
  Transactions with Affiliates

  
	
  10.02

  	
  Administrative Agent’s Office; Certain Addresses for Notices

  
	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  
	
   

  	
  Form of

  
	
   

  	
   

  
	
  A-1

  	
  Committed Loan Notice

  
	
  A-2

  	
  Conversion/Continuation Notice

  
	
  B

  	
  Swing Line Loan Notice

  
	
  C

  	
  Note

  
	
  D

  	
  Compliance Certificate

  
	
  E

  	
  Assignment and Assumption

  
	
  F

  	
  Borrowing Base Certificate

  
	
  G

  	
  Credit Card Notification

  
	
  H

  	
  Joinder
  Agreement

  
			

 

v

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”) is entered into as of October 9,
2009, among

 

TOPS MARKETS, LLC, a New York limited liability company, for itself and
as agent (in such capacity, the “Lead Borrower”) for the other Borrowers
now or hereafter party hereto;

 

the BORROWERS now or hereafter party hereto;

 

the GUARANTORS now or hereafter party hereto;

 

each lender from time to time party hereto (collectively, the “Lenders”
and individually, a “Lender”); and

 

BANK OF AMERICA, N.A., as Administrative Agent, Collateral Agent, Swing
Line Lender and L/C Issuer.

 

The Borrowers have requested that the Lenders provide a revolving
credit facility, and the Lenders have indicated their willingness to lend and
the L/C Issuer has indicated its willingness to issue Letters of Credit, in
each case on the terms and conditions set forth herein.

 

In consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:

 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

 

1.01 Defined Terms.  As used in this Agreement, the following
terms shall have the meanings set forth below:

 

“ABL Priority Collateral” has the meaning given that term in the
Intercreditor Agreement.

 

“Accelerated Borrowing Base Delivery Event” means either (i) the
occurrence and continuance of any Event of Default, or (ii) the failure of
the Borrowers to maintain Availability at least equal to Fourteen Million
Dollars ($14,000,000) at the End of any Business Day.   For purposes of this Agreement, the occurrence
of an Accelerated Borrowing Base Delivery Event shall be deemed continuing at
the Administrative Agent’s option (i) so long as such Event of Default has
not been waived, and/or (ii) if the Accelerated Borrowing Base Delivery
Event arises as a result of the Borrowers’ failure to maintain Availability as
required hereunder, until Availability has exceeded Fourteen Million Dollars
($14,000,000) at the End of each calendar day for sixty (60) consecutive
calendar days, in which case an Accelerated Borrowing Base Delivery Event shall
no longer be deemed to be continuing for purposes of this Agreement.

 

“ACH” means automated clearing house transfers.

 

“Accommodation Payment” as defined in Section 10.21(d).

 

1

 

“Account” means “accounts” as defined in the UCC, and also means
a right to payment of a monetary obligation, whether or not earned by
performance, (a) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (b) for services rendered or
to be rendered, (c) for a policy of insurance issued or to be issued, (d) for
a secondary obligation incurred or to be incurred, (e) for energy provided
or to be provided, (f) for the use or hire of a vessel under a charter or
other contract, (g) arising out of the use of a credit or charge card or
information contained on or for use with the card, or (h) as winnings in a
lottery or other game of chance operated or sponsored by a state, governmental
unit of a state, or person licensed or authorized to operate the game by a
state or governmental unit of a state. 
The term “Account” includes health-care-insurance receivables.

 

“Acquisition” means, with respect to any Person (a) a
purchase of a Controlling interest in the Equity Interests of any other Person,
(b) a purchase or other acquisition of all or substantially all of the
assets or properties of, another Person or of any business unit of another
Person, (c) any merger or consolidation of such Person with any other
Person or other transaction or series of transactions resulting in the
acquisition of all or substantially all of the assets, or a Controlling
interest in the Equity Interests, of any Person, or (d) any acquisition of
any Store locations of any Person, in each case in any transaction or group of
transactions which are part of a common plan.

 

“Additional Commitment Lender” has the meaning provided in Section 2.15(c).

 

“Adjusted LIBO Rate” means, with respect to any LIBO Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of one percent (1%)) equal to (a) the LIBO
Rate for such Interest Period multiplied by (b) the Statutory
Reserve Rate.  The Adjusted LIBO Rate
will be adjusted automatically as to all LIBO Borrowings then outstanding as of
the effective date of any change in the Statutory Reserve Rate.

 

“Adjustment Date” means the first day of each calendar quarter, provided that
the first Adjustment Date after the Closing Date shall be June 1, 2010.

 

“Administrative Agent” means Bank of America, in its capacity as
administrative agent under any of the Loan Documents, or any successor
administrative agent.

 

“Administrative Agent’s Account” has the meaning provided in Section 6.13(c).

 

“Administrative Agent’s Office” means the Administrative Agent’s
address and, as appropriate, account as set forth on Schedule 10.02, or
such other address or account as the Administrative Agent may from time to time
notify the Lead Borrower and the Lenders.

 

“Administrative Questionnaire” means an Administrative
Questionnaire in a form supplied by the Administrative Agent.

 

“Affiliate” means, with respect to any Person, (i) another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified, (ii) any other Person directly or indirectly holding 15% or
more of any class of the Equity Interests of that Person, and (iii) any
other Person 15% or more of any class of whose Equity Interests is held directly
or indirectly by that Person.

 

2

 

“Agent Parties” has the meaning specified in Section 10.02(c).

 

“Agent(s)” means, individually, the Administrative Agent or the
Collateral Agent and, collectively, means both of them.

 

“Aggregate Commitments” means the Commitments of all of the
Lenders. As of the Closing Date, the Aggregate Commitments shall be
$70,000,000, as such amount may be increased, decreased or otherwise modified
pursuant to the terms of this Agreement.

 

“Agreement” means this Credit Agreement.

 

“Allocable Amount” has the meaning specified in Section 10.21(d).

 

“Applicable Margin” means:

 

(a)     From and after the Closing Date until the first Adjustment Date,
the percentages set forth in Level II of the pricing grid below, unless Average
Daily Availability does not support the requirements of Level II or lower, in
which event the Applicable Margin will be set at Level III.  In no event shall the Applicable Margin be
set at Level I prior to the first Adjustment Date (even if the Average Daily
Availability requirements for Level I have been met); and

 

(b)     From and after the first Adjustment Date, the Applicable Margin
shall be determined from the following pricing grid based upon Average Daily
Availability for the most recent calendar quarter ended immediately preceding
such Adjustment Date; provided, however, that notwithstanding
anything to the contrary set forth herein, upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent may, and at the
direction of the Required Lenders shall, immediately increase the Applicable
Margin to that set forth in Level III (even if the Average Daily Availability
requirements for a different Level have been met) and interest shall accrue at
the Default Rate; provided further that, if any of the
financial statements delivered pursuant to Section 6.01 of this
Agreement or any Borrowing Base Certificate is at any time restated or
otherwise revised (including as a result of an audit), or if the information
set forth in any such financial statements or any such Borrowing Base
Certificate otherwise proves to be false or incorrect such that the Applicable
Margin would have been higher than was otherwise in effect during any period,
without constituting a waiver of any Default or Event of Default arising as a
result thereof, interest due under this Agreement shall be immediately
recalculated at such higher rate for any applicable periods and shall be due
and payable on demand.

 

3

 

	
  Level

  	
   

  	
  Average Daily

  Availability

  	
   

  	
  Applicable Margin

  for LIBO Rate

  Loans

  	
   

  	
  Applicable Margin

  for Prime Rate

  Loans

  	
   

  
	
  I

  	
   

  	
  Greater than $47,000,000

  	
   

  	
  3.50%

  	
   

  	
  2.50%

  	
   

  
	
  II

  	
   

  	
  Less than or equal to
  $47,000,000 but greater than $23,000,000

  	
   

  	
  3.75%

  	
   

  	
  2.75%

  	
   

  
	
  III

  	
   

  	
  Less than or equal to
  $23,000,000

  	
   

  	
  4.00%

  	
   

  	
  3.00%

  	
   

  

 

“Applicable Percentage” means, with respect to any Lender at any
time, the percentage (carried out to the ninth decimal place) of the Aggregate
Commitments represented by such Lender’s Commitment at such time.  If the commitment of each Lender to make
Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have
been terminated pursuant to Section 2.06 or Section 8.02
or if the Aggregate Commitments have expired, then the Applicable Percentage of
each Lender shall be determined based on the Applicable Percentage of such
Lender most recently in effect, giving effect to any subsequent
assignments.  The initial Applicable
Percentage of each Lender is set forth opposite the name of such Lender on Schedule
2.01 or in the Assignment and Assumption pursuant to which such Lender
becomes a party hereto, as applicable.

 

“Appraised Value” means (a) with respect to Borrowers’
Eligible Inventory, the appraised orderly liquidation value, net of costs and
expenses to be incurred in connection with any such liquidation, which value is
expressed as a percentage of Cost of the Borrowers’ Eligible Inventory as set
forth in the Borrowers’ inventory stock ledger, which value shall be determined
from time to time by the most recent appraisal undertaken by an independent
appraiser engaged by the Administrative Agent using a methodology substantially
consistent with the methodology utilized in connection with the Initial
Appraisal, or (b) with respect to Borrower’s Prescription Lists, the
appraised orderly liquidation value, net of costs and expenses to be incurred
in connection with any such liquidation, of the Borrowers’ Prescription Lists,
which value shall be determined from time to time by the most recent appraisal
undertaken by an independent appraiser engaged by the Administrative Agent
using a methodology substantially consistent with the methodology utilized in
connection with the Initial Appraisal.

 

“Approved Fund” means 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.

 

“Arrangers” means Banc of America Securities LLC and Morgan
Stanley Senior Funding, Inc., in their capacities as joint lead arrangers.

 

4

 

“Assignee Group” means 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” means an assignment and assumption
entered into by a Lender and an Eligible Assignee (with the consent of any
party whose consent is required by Section 10.06(b)), and accepted
by the Administrative Agent, in substantially the form of Exhibit E
or any other form approved by the Administrative Agent.

 

“Attributable Indebtedness” means, on any date, (a) in
respect of any Capital Lease Obligation of any Person, the capitalized amount
thereof that would appear on a balance sheet of such Person prepared as of such
date in accordance with GAAP, and (b) in respect of any Synthetic Lease
Obligation, the capitalized amount of the remaining lease or similar payments
under the relevant lease or other applicable agreement or instrument that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP if such lease, agreement or instrument were accounted for as a
capital lease.

 

“Audited Financial Statements” means the audited Consolidated
balance sheet of the Parent and its Subsidiaries for the Fiscal Year ended December 27,
2008, and the related Consolidated statements of income or operations,
Shareholders’ Equity and cash flows for such fiscal year of the Parent and its
Subsidiaries, including the notes thereto.

 

“Auto-Extension Letter of Credit” has the meaning provided in Section 2.03(b)(iii).

 

“Availability” means, as of any date of determination thereof by
the Administrative Agent, the result, if a positive number, of:

 

(a)           The Loan Cap as of
such date;

 

Minus

 

(b)           The Total
Outstandings on such date.

 

In calculating Availability at any time and for any purpose under this
Agreement, the Lead Borrower shall certify to the Administrative Agent that all
accounts payable and Taxes are being paid on a timely basis (absent which the
Administrative Agent may establish a Reserve therefor).

 

“Availability
Condition” means, at the time of determination with respect to any
specified transaction or payment, Availability at the time of such
determination and immediately following, and after giving effect to, such
transaction or payment was, and is projected by the Borrowers on a pro forma
basis for each of the thirteen (13) Fiscal Periods immediately following such
transaction or payment to be, equal to or greater than thirty percent (30%) of
the Loan Cap.  In the case of any
transaction pursuant to which the assets (or the assets of the Person) acquired
in such transaction are to be included in the Borrowing Base, Availability
shall be determined after giving effect to the inclusion of such assets, provided that
the Administrative Agent has (a) completed or received an appraisal of the
assets (or the assets of the Person) to be acquired in such transaction from
appraisers satisfactory to the Collateral Agent, (b) established in its Permitted
Discretion an advance rate and Reserves (if applicable) therefor, and (c) 

 

5

 

otherwise agreed in its Permitted Discretion that such assets are
eligible for inclusion in the Borrowing Base.

 

“Availability Period” means the period from and including the
Closing Date to the earliest of (a) the Maturity Date, (b) the date
of termination of the Aggregate Commitments pursuant to Section 2.06,
and (c) the date of termination of the commitment of each Lender to make
Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions
pursuant to Section 8.02.

 

“Availability Reserves” means, without duplication of any other
Reserves or items that are otherwise addressed or excluded through eligibility
criteria, such reserves as the Administrative Agent from time to time
determines in its Permitted Discretion as being appropriate (a) to reflect
the impediments to the Agents’ ability to realize upon the Collateral, (b) to
reflect claims and liabilities that the Administrative Agent determines in its
Permitted Discretion will need to be satisfied in connection with the
realization upon the Collateral, (c) to reflect criteria, events,
conditions, contingencies or risks which adversely affect any component of the
Borrowing Base or the Collateral or which could reasonably be expected to
result in a Material Adverse Effect, or (d) to reflect that an Event of
Default then exists.  Without limiting
the generality of the foregoing, Availability Reserves may include (but are not
limited to), in the Administrative Agent’s Permitted Discretion, reserves based
on: (i) rent; (ii) customs duties and other costs to release
Inventory which is being imported into the United States; (iii) outstanding
Taxes and other governmental charges, including, without limitation, ad
valorem, real estate, personal property, sales, claims of the PBGC and other
Taxes which may have priority over the interests of the Collateral Agent in the
Collateral; (iv) salaries, wages and benefits due to employees of any
Borrower; (v) Customer Credit Liabilities; (vi) reserves for
reasonably anticipated changes in the Appraised Value of Eligible Inventory or
Prescription Lists between appraisals; (vii) warehousemen’s or bailee’s
charges and other Permitted Encumbrances which may have priority over the
interests of the Collateral Agent in the Collateral; (viii) amounts due to
vendors on account of consigned goods; (ix) Cash Management Reserves; (x) Bank
Product Reserves; and (xi) payables to vendors entitled to the benefits of PACA
or PASA, or any similar statute or regulation.

 

“Average Daily Availability” means, as of any date of
determination, the average daily Availability for the Fiscal Quarter most
recently ended.

 

“Banker’s Acceptance” means a time draft or bill of exchange or
other deferred payment obligation relating to a Commercial Letter of Credit
which has been accepted by the L/C Issuer.

 

“Bank of America” means Bank of America, N.A. and its
successors.

 

“Bank Products” means any services or
facilities provided to any Loan Party by the Administrative Agent, any Lender
or any of their respective Affiliates, including, without limitation, on
account of (a) Swap Contracts and/or (b) leasing, but excluding Cash
Management Services.

 

6

 

“Bank Product Reserves” means such
reserves as the Administrative Agent from time to time determines in its
Permitted Discretion as being appropriate to reflect the liabilities and
obligations of the Loan Parties with respect to Bank Products then provided or
outstanding.

 

“BAS” means Banc of America Securities LLC.

 

“Blocked Account” has the meaning provided in Section 6.13(a)(ii).

 

“Blocked Account Agreement” means, with respect to an account
established by a Loan Party, an agreement, in form and substance reasonably
satisfactory to the Collateral Agent, establishing Control (as defined in the
UCC) of such account by the Collateral Agent and whereby the bank maintaining
such account agrees, upon the occurrence and during the continuance of a Cash
Dominion Event, to comply only with the instructions originated by the
Collateral Agent without the further consent of any Loan Party.

 

“Blocked Account Bank” means Bank of America, N.A. and each
other bank with whom deposit accounts are maintained in which any funds of any
of the Loan Parties from one or more DDAs are concentrated and with whom a
Blocked Account Agreement has been, or is required to be, executed in
accordance with the terms hereof.

 

“Borrower Materials” has the meaning specified in Section 6.02.

 

“Borrowers” means, collectively, the Lead Borrower, the Persons
named on Schedule 1.01 annexed hereto, and each other Person who shall
from time to time enter into a Joinder Agreement as a Borrower.

 

“Borrowing” means a Committed Borrowing or a Swing Line
Borrowing, as the context may require.

 

“Borrowing Base” means, at any time of calculation, an amount
equal to:

 

(a)           the face amount of
Eligible Credit Card Receivables multiplied by eighty-five percent
(85%);

 

plus

 

(b)           the Cost of Eligible
Inventory, net of Inventory Reserves, multiplied by eighty-five percent
(85%) of the Appraised Value of Eligible Inventory; provided that
in no event shall the amounts available to be borrowed pursuant to this clause (b) in
respect of Eligible Inventory consisting of gasoline, diesel or other petroleum
products exceed One Million Dollars ($1,000,000);

 

plus

 

(c)     the face amount of Eligible Health Care Receivables (net of
Receivables Reserves) multiplied by eighty-five percent (85%);

 

7

 

plus

 

(d)     the face amount of Eligible Trade Receivables (net of
Receivables Reserves) multiplied by eight-five percent (85%)

 

(e)     seventy-five percent (75%) of the Appraised Value of
Prescription Lists; provided that in no event shall amounts
available to be borrowed pursuant to this clause (e) exceed twenty-five
percent (25%) of the Loan Cap;

 

minus

 

(f)      the then amount of all Availability Reserves.

 

“Borrowing Base Certificate” means a certificate substantially
in the form of Exhibit F hereto (with such changes therein as may
be reasonably required by the Administrative Agent to reflect the components
of, and reserves against, the Borrowing Base as provided for hereunder from
time to time), executed and certified as accurate and complete by a Responsible
Officer of the Lead Borrower, which shall include appropriate exhibits,
schedules, supporting documentation and additional reports as reasonably
requested by the Administrative Agent.

 

“Business Day” means any day other than a Saturday, Sunday or
other day on which commercial banks are authorized to close under the Laws of,
or are in fact closed in, the state where the Administrative Agent’s Office is
located and, if such day relates to any LIBO Rate Loan, means any such day on
which dealings in Dollar deposits are conducted by and between banks in the
London interbank market.

 

“C&S Supply Agreement” means that certain Amended and
Restated Supply Agreement, dated as of June 15, 2007, by and among the
Lead Borrower, C&S Wholesale Grocers, Inc., C&S Wholesale Services
(f/k/a C&S Reclamation, Inc.), C&S Sourcing, Inc., Erie
Logistics LLC and Koninklijke Ahold N.V., as amended and in effect from time to
time.

 

“Capital Expenditures” means, with respect to any Person for any
period, (a) all expenditures made (whether made in the form of cash or
other property) or costs incurred for the acquisition or improvement of fixed
or capital assets of such Person (excluding normal replacements and maintenance
which are properly charged to current operations), in each case that are (or
should be) set forth as capital expenditures in a Consolidated statement of
cash flows of such Person for such period, in each case prepared in accordance
with GAAP, and (b) Capital Lease Obligations incurred by a Person during
such period; provided that “Capital Expenditures” shall not
include (i) any additions to property, plant and equipment and other
capital expenditures made with (A) the proceeds from any casualty
insurance or condemnation or eminent domain, to the extent that the proceeds
therefrom are utilized (or are contractually committed to be utilized) for
capital expenditures within 180 days of the receipt of such proceeds, or (B) the
proceeds of any Equity Interests issued or capital contributions received by
any Loan Party or any Subsidiary in connection with such capital expenditures,
or (ii) any portion of the purchase price of a Permitted Acquisition which
is allocated to property, plant or equipment acquired as part of such Permitted
Acquisition, or (iii) any expenditures which are contractually required to
be, and are, reimbursed to the Loan Parties in cash by a third party (including
landlords) during such period of calculation, or (iv) the trade-in value
of existing equipment to the extent that the gross amount of the purchase price
of equipment that is 

 

8

 

purchased simultaneously with the trade-in of
such existing equipment is reduced by the credit granted by the seller of such
equipment.

 

“Capital Lease Obligations” means, with respect to any Person
for any period, the obligations of such Person to pay rent or other amounts
under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to
be classified and accounted for as liabilities on a balance sheet of such
Person under GAAP and the amount of which obligations shall be the capitalized
amount thereof determined in accordance with GAAP.

 

“Cash Collateral Account” means a non-interest bearing account
established by one or more of the Loan Parties with Bank of America, in the
name of the Collateral Agent or as the Collateral Agent shall otherwise direct
and under the sole and exclusive dominion and control of the Collateral Agent,
in which deposits are required to be made in accordance with Section 2.03(g) or
Section 8.02(c).

 

“Cash Collateralize” has the meaning specified in Section 2.03(g).

 

“Cash Dominion Event” means (a) the occurrence and continuance
of any Event of Default, (b) the failure of the Borrowers to maintain
Availability equal to or greater than Eleven Million Dollars ($11,000,000) at
the End of each Business Day, or (c) the failure of the Borrowers to
maintain Availability equal to or greater than Fourteen Million Dollars
($14,000,000) at the End of any three (3) consecutive Business Days.  For purposes of this Agreement, the
occurrence of a Cash Dominion Event shall be deemed continuing at the
Administrative Agent’s option (i) so long as such Event of Default has not
been waived, and/or (ii) if such Cash Dominion Event arises as a result of
the Borrowers’ failure to maintain Availability as required pursuant to clauses
(b) or (c) hereunder, until Availability has exceeded Fourteen Million
Dollars ($14,000,000) at the End of each calendar day for sixty (60)
consecutive calendar days, in which case a Cash Dominion Event shall no longer
be deemed to be continuing for purposes of this Agreement; provided that a Cash Dominion Event shall be deemed
continuing (even if an Event of Default is no longer continuing and/or
Availability at the end of each calendar day exceeds the required amount for
sixty (60) consecutive calendar days) at all times after a Cash Dominion Event
has occurred and been discontinued on four (4) occasion(s) after the
Closing Date.  The termination of a Cash
Dominion Event as provided herein shall in no way limit, waive or delay the
occurrence of a subsequent Cash Dominion Event in the event that the conditions
set forth in this definition again arise.

 

“Cash Equivalents” means:

 

(a)           securities issued or
directly and fully and unconditionally guaranteed or insured by the U.S.
government or any agency or instrumentality thereof the securities of which are
unconditionally guaranteed as a full faith and credit obligation of such
government with maturities of 24 months or less from the date of acquisition;

 

(b)           certificates of
deposit, time deposits and Eurodollar time deposits with maturities of one year
or less from the date of acquisition, bankers’ acceptances with 

 

9

 

maturities not exceeding one year and
overnight bank deposits, in each case with any commercial bank having capital
and surplus of not less than $500,000,000;

 

(c)           repurchase
obligations for underlying securities of the types described in clauses (a) and
(b) entered into with any financial institution meeting the qualifications
specified in clause (b) above;

 

(d)           securities with
maturities of 24 months or less from the date of acquisition backed by standby
letters of credit issued by any commercial bank satisfying the requirements of
clause (b) above;

 

(e)           commercial paper
rated at least P-2 by Moody’s  or at
least A-2 by S&P (or, if at any time neither Moody’s nor S&P shall be
rating such obligations, an equivalent rating from another rating agency) and
in each case maturing within one year after the date of creation thereof;

 

(f)            marketable
short-term money market and similar securities having a rating of least P-2 or
A-2 from either Moody’s or S&P, respectively (or, if at any time neither
Moody’s nor S&P shall be rating such obligations, an equivalent rating from
another rating agency) and in each case maturing within 24 months after the
date of creation thereof;

 

(g)           repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the United States or issued
by any agency thereof and backed by the full faith and credit of the United
States maturing within 365 days from the date of acquisition;

 

(h)           Investments with
average maturities of 12 months or less from the date of acquisition in money
market funds rated AAA- (or the equivalent thereof) or better by S&P or
Aaa3 (or the equivalent thereof) or better by Moody’s (or, if at any time
neither Moody’s nor S&P shall be rating such obligations, an equivalent
rating from another rating agency); and

 

(i)            investment funds
investing ninety-five percent (95%) of their assets in cash and securities of the
types described in clauses (a) through (h) above.

 

“Cash Management Reserves” means such reserves as the
Administrative Agent from time to time determines in its Permitted Discretion
as being appropriate to reflect the reasonably anticipated liabilities and
obligations of the Loan Parties with respect to Cash Management Services then
provided or outstanding.

 

“Cash Management Services” means any one or more of the
following types or services or facilities provided to any Loan Party by the
Administrative Agent, any Lender or any of their respective Affiliates: (a) ACH
transactions, (b) cash management services, including, without limitation,
controlled disbursement services, treasury, depository, overdraft, and
electronic funds transfer services, (c) foreign exchange facilities, (d) credit
card processing services, (e) purchase cards, and (f) credit or debit
cards.

 

10

 

“CERCLA”
means the Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C. § 9601 et seq.

 

“CERCLIS”
means the Comprehensive Environmental Response, Compensation, and Liability
Information System maintained by the United States Environmental Protection
Agency.

 

“CFC”
means a Person that is a controlled foreign corporation under Section 957
of the Code.

 

“Change
in Law” means the occurrence, after the date of this Agreement, of any of
the following: (a) the adoption of any law, rule, regulation or treaty, (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority or (c) the
making or issuance of any request, guideline or directive (whether or not
having the force of law) by any Governmental Authority.

 

“Change
of Control” means an event or series of events by which:

 

(a)                                  at any time
prior to the creation of a Public Market, the Permitted Holders shall cease to
own and control legally and beneficially (free and clear of all Liens), either
directly or indirectly, equity securities in the Parent representing more than
fifty percent (50%) of the combined voting power of all of Equity Interests
entitled to vote for members of the board of directors or equivalent governing
body of the Parent on a fully-diluted basis (and taking into account all such
securities that the Permitted Holders have the right to acquire pursuant to any
option right (as defined in clause (b) below));

 

(b)                                 at any time
after the creation of a Public Market, any “person” or “group” (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, but excluding any employee benefit plan of such person or its
subsidiaries, and any person or entity acting in its capacity as trustee, agent
or other fiduciary or administrator of any such plan) other than a Permitted
Holder becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934, except that a person or group shall
be deemed to have “beneficial ownership” of all securities that such person or
group has the right to acquire, whether such right is exercisable immediately
or only after the passage of time (such right, an “option right”)),
directly or indirectly, of (i) twenty five percent (25%) or more of the
Equity Interests of the Parent entitled to vote for members of the board of
directors or equivalent governing body of the Parent on a fully-diluted basis
(and taking into account all such Equity Interests that such “person” or “group”
has the right to acquire pursuant to any option right) and (ii) a
percentage that is greater than the percentage of the Equity Interests of the
Parent entitled to vote for members of the board of directors or equivalent
governing body of the Parent that is then beneficially owned by the Permitted
Holders; or

 

(b)                                 during any
period of 12 consecutive months, a majority of the members of the board of
directors or other equivalent governing body of the Parent cease to be composed
of individuals (i) who were members of that board or equivalent governing
body on the first day of such period, (ii) whose election or nomination to
that board or equivalent governing body was approved by individuals referred to
in clause (i) above 

 

11

 

constituting
at the time of such election or nomination at least a majority of that board or
equivalent governing body or (iii) whose election or nomination to that
board or other equivalent governing body was approved by individuals referred
to in clauses (i) and (ii) above constituting at the time of such
election or nomination at least a majority of that board or equivalent
governing body (excluding, in the case of both clause (ii) and clause
(iii), any individual whose initial nomination for, or assumption of office as,
a member of that board or equivalent governing body occurs as a result of an
actual or threatened solicitation of proxies or consents for the election or
removal of one or more directors by any person or group other than a
solicitation for the election of one or more directors by or on behalf of the
board of directors); or

 

(c)                                  the Parent
fails at any time to own, directly or indirectly, 100% of the Equity Interests
of the Lead Borrower and each other Loan Party free and clear of all Liens
(other than Permitted Encumbrances), except where such failure is as a result
of a transaction permitted by the Loan Documents.

 

“Closing
Date” means the first date all the conditions precedent in Section 4.01
are satisfied or waived in accordance with Section 10.01.

 

“Code”
means the Internal Revenue Code of 1986, and the regulations promulgated
thereunder, as amended and in effect.

 

“Collateral”
means any and all “Collateral” as defined in any applicable Security Document
and all other property that is or is intended under the terms of the Security
Documents to be subject to Liens in favor of the Collateral Agent.

 

“Collateral
Access Agreement” means an agreement reasonably satisfactory in form and
substance to the Collateral Agent executed by (a) a bailee or other Person
in possession of Collateral, or (b) a landlord of Real Estate leased by
any Loan Party, in each case, pursuant to which such Person (i) acknowledges
the Collateral Agent’s Lien on the Collateral, (ii) releases or
subordinates such Person’s Liens in the Collateral held by such Person or
located on such Real Estate, (iii) provides the Collateral Agent with
access to the Collateral held by such bailee or other Person or located in or
on such Real Estate, (iv) as to any landlord, provides the Collateral
Agent with a reasonable time to sell and dispose of the Collateral from such
Real Estate, and (v) makes such other agreements with the Collateral Agent
as the Collateral Agent may reasonably require.

 

“Collateral
Agent” means Bank of America, acting in its capacity as collateral agent
for its own benefit and the benefit of the other Credit Parties, or any
successor collateral agent.

 

“Commercial
Letter of Credit” means any Letter of Credit issued for the purpose of
providing the primary payment mechanism in connection with the purchase of any
materials, goods or services by a Borrower in the ordinary course of business
of such Borrower.

 

“Commitment”
means, as to each Lender, its obligation to (a) make Committed Loans to
the Borrowers pursuant to Section 2.01, (b) purchase
participations in L/C Obligations, and (c) purchase participations in
Swing Line Loans, in an aggregate principal amount at any one time outstanding
not to exceed the amount set forth opposite such Lender’s name on Schedule
2.01 or 

 

12

 

in
the Assignment and Assumption pursuant to which such Lender becomes a party
hereto, as applicable, as such amount may be adjusted from time to time in accordance
with this Agreement.

 

“Commitment
Fee” has the meaning provided in Section 2.09(a).

 

“Commitment
Fee Adjustment Date” means the first day of each calendar quarter.

 

“Committed
Borrowing” means a borrowing consisting of a Committed Loan or simultaneous
Committed Loans of the same Type and, in the case of LIBO Rate Loans, having
the same Interest Period made by each of the Lenders pursuant to Section 2.01.

 

“Committed
Loan” has the meaning provided in Section 2.01.

 

“Committed
Loan Notice” means a notice of a Committed Borrowing pursuant to Section 2.02,
which, if in writing, shall be substantially in the form of Exhibit A-1.

 

‘‘Commodity Price
Protection Agreement’’ means any forward contract, commodity swap,
commodity option or other similar agreement or arrangement relating to, or the
value of which is dependent upon, fluctuations in commodity prices.

 

“Compliance
Certificate” means a certificate substantially in the form of Exhibit D.

 

“Consent”
means (a) actual consent given by a Lender from whom such consent is
sought or (b) the passage of seven (7) Business Days from receipt of
written notice to a Lender from the Administrative Agent of a proposed course
of action to be followed by the Administrative Agent without such Lender’s
giving the Administrative Agent written notice of that Lender’s objection to
such course of action.

 

“Consolidated”
means, when used to modify a financial term, test, statement, or report of a
Person, the application or preparation of such term, test, statement or report
(as applicable) based upon the consolidation, in accordance with GAAP, of the
financial condition or operating results of such Person and its Subsidiaries.

 

“Consolidated EBITDA” means, at any
date of determination, the sum, without duplication, of (A) Consolidated
Net Income (Loss) for the most recently completed Measurement Period, (B) in
each case to the extent deducted in computing Consolidated Net Income (Loss)
for such Measurement Period, (i) Consolidated Interest Charges, (ii) Consolidated
Income Tax Expense, (iii) Consolidated Non-cash Charges, (iv) any
unusual or non-recurring items and any restructuring charges or reserves,
including, without limitation, in connection with a Permitted Acquisition made
after the Closing Date (which, for the avoidance of doubt, shall include
retention, severance, systems establishment costs, excess pension charges,
contract and lease termination costs and costs to consolidate facilities and
relocate employees), (v) the amount of Management Fees and expense
reimbursements accrued by such Person to the Permitted Holders pursuant to the
Management Agreement, (vi) the amount of any expenses in connection with
any actual or proposed Investment, incurrence or repayment of Indebtedness,
issuance of Equity Interests or Acquisition or Disposition outside the ordinary
course of business, (vii) expenses incurred to the extent covered by
indemnification provisions in any agreement in 

 

13

 

connection
with an Acquisition (including the Acquisition of the Parent) to the extent
reimbursed in cash and such indemnification payments are not otherwise included
in Consolidated EBITDA, and (viii) commissions, discounts, yield and other
fees and expenses (including interest expense) related to any Qualified
Securitization Transaction, in each case, for such Measurement Period, of such
Person and its Subsidiaries all determined in accordance with GAAP, and (C) proceeds
from any business interruption insurance to the extent not otherwise included
in Consolidated Net Income (Loss) for such Measurement Period, and less (D) all
non-cash items increasing Consolidated Net Income (Loss) for such Measurement
Period (other than the accrual of revenue and other than non-cash items to the
extent they represent the reversal of an accrual of, or cash reserve for,
anticipated charges made in any prior Measurement Period or which will result
in the receipt of cash in a future Measurement Period).

 

“Consolidated Fixed Charge Coverage Ratio” means, at any date of
determination, the ratio of (a) (i) Consolidated EBITDA for the most
recently completed Measurement Period minus (ii) Capital
Expenditures made during such Measurement Period minus (iii) the
aggregate amount of federal, state, local and foreign income taxes paid in cash
during such Measurement Period to (b) the sum of (i) Debt Service
Charges for such Measurement Period plus (ii) the aggregate amount
of all Restricted Payments made in cash during such Measurement Period, in each
case, of or by the Parent and its Subsidiaries, all as determined on a
Consolidated basis in accordance with GAAP.

 

“Consolidated Income Tax Expense” of any Person
means, for any Measurement Period, the provision for federal, state, local and
foreign income taxes of such Person and its Consolidated Subsidiaries for such
Measurement Period as determined in accordance with GAAP.

 

“Consolidated
Interest Charges” means, for any Measurement Period, the sum of (a) all
interest, premium payments, debt discount, fees, charges and related expenses
in connection with borrowed money (including capitalized interest) or in
connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers’ acceptance financing and net costs
under Swap Contracts, but excluding any non-cash or deferred interest financing
costs, (b) all interest paid or payable with respect to discontinued
operations and (c) the portion of rent expense with respect to such period
under Capital Lease Obligations that is treated as interest in accordance with
GAAP, in each case of or by the Parent and its Subsidiaries for the most
recently completed Measurement Period, all as determined on a Consolidated
basis in accordance with GAAP.

 

“Consolidated Net Income (Loss)”
of any Person means, for any Measurement Period, the consolidated net income
(or loss) of such Person and its Subsidiaries for such Measurement Period on a
Consolidated basis as determined in accordance with GAAP, adjusted, to the
extent included in calculating such net income (or loss), by excluding, without
duplication: (1) all extraordinary gains or losses net of taxes (less all
fees and expenses relating thereto); (2) the portion of net income (or
loss) of such Person and its Subsidiaries on a Consolidated basis allocable to
minority interests in unconsolidated Persons to the extent that cash dividends
or distributions have not actually been received by such Person or one of its
Consolidated Subsidiaries; (3) any gain or loss, net of taxes, realized
upon the termination of any employee 

 

14

 

pension
benefit plan and any non-cash charges incurred relating to the underfunded
portion of any pension plan; (4) gains or losses, net of taxes (less all
fees and expenses relating thereto), in respect of Dispositions of assets other
than in the ordinary course of business (5) any net gain or loss arising
from the acquisition of any securities or extinguishment or conversion of any
Indebtedness or obligations with respect to any Swap Contracts of such Person; (6) any
non-cash goodwill or asset impairment charges, any non-cash write-downs
attributable to joint ventures held by such Person or any of its Subsidiaries
and the amortization of intangibles, in each case pursuant to GAAP; (7) any
non-cash charges resulting from the application of SFAS No. 123 and any
other non-cash compensation charges or other non-cash expenses or charges
arising from the grant of or issuance or repricing of stock, stock options or
other equity-based awards or any amendment, modification, substitution or
change of any such stock, stock options or other equity-based awards; (8) all
deferred financing costs written off, and premiums paid, in connection with any
early extinguishment of Indebtedness; (10) the cumulative effect of a
change in accounting principles during such period and any amounts attributable
to LIFO adjustments; (11) unrealized gains and losses from obligations with
respect to any Swap Contracts or ‘‘embedded derivatives’’ that require the same
accounting treatment as obligations with respect to any Swap Contracts; (12)
any purchase accounting adjustments (including, without limitation, the impact
of writing up inventory, deferred marketing and deferred financing costs or
deferred revenue at fair value), amortizations, impairments, write-offs, or
non-cash charges with respect to purchase accounting with respect to any
Acquisitions, Disposition, merger, consolidation, amalgamation or similar
transactions.

 

“Consolidated Non-cash Charges” of
any Person means, for any Measurement Period, the aggregate depreciation,
amortization and other non-cash charges of such Person and its Subsidiaries on
a Consolidated basis for such Measurement Period, as determined in accordance
with GAAP (excluding any non-cash charge which requires an accrual or reserve
for cash charges for any future period).

 

“Contractual
Obligation” means, as to any Person, any provision of any agreement,
instrument or other undertaking to which such Person is a party or by which it
or any of its property is bound.

 

“Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled”
have meanings correlative thereto.

 

“Conversion/Continuation
Notice” means a notice of (a) a conversion of Loans from one Type to
the other, or (b) a continuation of LIBO Rate Loans, pursuant to Section 2.02(b),
which, if in writing, shall be substantially in the form of Exhibit A-2.

 

“Cost”
means the lower of cost or market value of Inventory, based upon the Borrowers’
accounting practices, known to the Administrative Agent, which practices are in
effect on the Closing Date as such calculated cost is determined from invoices
received by the Borrowers, the Borrowers’ purchase journals or the Borrowers’
stock ledger.  “Cost” does not include
inventory capitalization costs or other non-purchase price charges (such as
freight) used in the Borrowers’ calculation of cost of goods sold.

 

15

 

“Covenant
Compliance Event” means either (a) that an Event of Default has
occurred and is continuing or (b) Availability is less than or equal to
Ten Million Dollars ($10,000,000) (i) on any Business Day at the time a
Committed Loan Request is made, or (ii) if no Committed Loan Request is
made on such day, the End of that Business Day. 
For purposes hereof, the occurrence of a Covenant Compliance Event shall
be deemed continuing at the Administrative Agent’s option (a) so long as
such Event of Default has not been waived, and/or (b) if the Covenant
Compliance Event arises as a result of the Borrowers’ failure to maintain
Availability as required hereunder, until Availability has exceeded Ten Million
Dollars ($10,000,000) for sixty (60) consecutive calendar days, in which case a
Covenant Compliance Event shall no longer be deemed to be continuing for
purposes of this Agreement.  The
termination of a Covenant Compliance as provided herein shall in no way limit,
waive or delay the occurrence of a subsequent Covenant Compliance Event in the
event that the conditions set forth in this definition again arise.

 

“Credit
Card Notifications” has the meaning provided in Section 6.13(a)(i).

 

“Credit
Card Receivables” means each “Account” (as defined in the UCC) together
with all income, payments and proceeds thereof, owed by a major credit or debit
card issuer (including, but not limited to, Visa, Mastercard and American
Express and such other issuers approved by the Administrative Agent in its
Permitted Discretion) to a Loan Party resulting from charges by a customer of a
Loan Party on credit or debit cards issued by such issuer in connection with
the sale of goods by a Loan Party, or services performed by a Loan Party, in
each case in the ordinary course of its business.

 

“Credit
Extensions” mean each of the following: (a) a Borrowing and (b) an
L/C Credit Extension.

 

“Credit
Party” or “Credit Parties” means (a) individually, (i) each
Lender and its Affiliates, (ii) each Agent, (iii) each L/C Issuer, (iv) each
Arranger, (v) each beneficiary of each indemnification obligation
undertaken by any Loan Party under any Loan Document, (vi) any other
Person to whom Obligations under this Agreement and other Loan Documents are
owing, and (vii) the successors and assigns of each of the foregoing, and (b) collectively,
all of the foregoing.

 

“Credit
Party Expenses” means, without limitation:

 

(a)                                  all reasonable
out-of-pocket expenses incurred by the Agents, the Arrangers and their
respective Affiliates, in connection with (i) the syndication of the credit
facilities provided for herein, (ii) the preparation, negotiation,
administration, management, execution and delivery of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (iii) the enforcement or protection of
their rights in connection with this Agreement or the Loan Documents or efforts
to preserve, protect, collect, or enforce the Collateral or in connection with
any proceeding under any Debtor Relief Laws, or (iv) any workout,
restructuring or negotiations in respect of any Obligations, including, without
limitation, the reasonable 

 

16

 

fees,
charges and disbursements of (A) counsel for the Agents, (B) outside
consultants for the Agents, (C) appraisers, and (D) commercial
finance examiners;

 

(b)                                 all reasonable
out-of-pocket expenses incurred by the L/C Issuer and its Affiliates in
connection with the issuance, amendment, renewal or extension of any Letter of
Credit or any demand for payment thereunder; and

 

(c)                                  all reasonable
out-of-pocket expenses incurred by the Credit Parties who are not the Agents,
the Arrangers, the L/C Issuer, the Sponsor Group or any Affiliate of any of
them in connection with the enforcement of the Credit Parties’ rights and
remedies under any of the Loan Documents or applicable Law, including in the
course of any work-out or restructuring of the Loans or other Obligations
during the pendency of any Event of Default, provided that
such Credit Parties shall be entitled to reimbursement for no more than one
counsel representing all such Credit Parties (absent a conflict of interest in
which case the Credit Parties may engage and be reimbursed for additional
counsel).

 

“Customer
Credit Liabilities” means, at any time, the aggregate remaining value at
such time of (a) outstanding gift certificates and gift cards of the
Borrowers entitling the holder thereof to use all or a portion of the certificate
or gift card to pay all or a portion of the purchase price for any Inventory,
and (b) outstanding merchandise credits and customer deposits of the
Borrowers.

 

“DDA”
means each checking, savings or other demand deposit account maintained by any of
the Loan Parties.  All funds in each DDA
shall be conclusively presumed to be Collateral and proceeds of Collateral and
the Agents and the Lenders shall have no duty to inquire as to the source of
the amounts on deposit in any DDA.

 

“Debtor
Relief Laws” means the Bankruptcy Code of the United States, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

 

“Debt
Service Charges” means, for any Measurement Period, the sum of (a) Consolidated
Interest Charges paid in cash or required to be paid in cash for such
Measurement Period, plus (b) principal payments made or required to
be made on account of Indebtedness (excluding the Obligations, voluntary
prepayments of Indebtedness permitted pursuant to Section 7.07 of
this Agreement and any Synthetic Lease Obligations, but including, without
limitation, any Capital Lease Obligations) during such Measurement Period, in
each case determined on a Consolidated basis in accordance with GAAP.

 

“Default”
means any event or condition that constitutes an Event of Default or that, with
the giving of any notice, the passage of time, or both, would be an Event of
Default.

 

“Default
Rate” means: (a) when used with respect to Obligations other than
Letter of Credit Fees, an interest rate equal to (i) the Prime Rate plus
(ii) the Applicable Margin, if any, applicable to Prime Rate Loans, plus
(iii) two percent (2%) per annum; provided, however, that
with respect to a LIBO Rate Loan, the Default Rate shall be an interest rate
equal to the interest 

 

17

 

rate
(including any Applicable Margin) otherwise applicable to such LIBO Rate Loan plus
two percent (2%) per annum; and (b) when used with respect to Letter of
Credit Fees, a rate equal to the Applicable Margin for Standby Letters of
Credit or Commercial Letters of Credit, as applicable, plus two percent
(2%) per annum.

 

“Defaulting
Lender” means any Lender that (a) has failed to fund any portion of
the Committed Loans, participations in L/C Obligations or participations in
Swing Line Loans required to be funded by it hereunder within one Business Day
of the date required to be funded by it hereunder, (b) has otherwise
failed to pay over to the Administrative Agent or any other Lender any other
amount required to be paid by it hereunder within one Business Day of the date
when due, or (c) has been deemed insolvent or become the subject of any
proceeding under any Debtor Relief Law.

 

“Deteriorating
Lender” means any Defaulting Lender or any Lender as to which (a) the
L/C Issuer or the Swing Line Lender believes in good faith that such Lender has
defaulted in fulfilling its obligations under one or more other syndicated
credit facilities, or (b) a Person that Controls such Lender has been
deemed insolvent or become the subject of any proceeding under any Debtor
Relief Law.

 

“Disposition”
or “Dispose” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction and any sale,
transfer, license or other disposition (whether in one transaction or in a
series of transactions) of all or substantially all of its assets to or in
favor of any Person) of any property (including, without limitation, any Equity
Interests) by any Person (or the granting of any option or other right to do
any of the foregoing), including any sale, assignment, transfer or other
disposal, with or without recourse, of any notes or accounts receivable or any
rights and claims associated therewith.

 

“Disqualified
Stock” means any Equity Interest 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 91 days after the date on which the Loans
mature; provided, however, that (i) only the portion of such
Equity Interests which so matures or is mandatorily redeemable, is so
convertible or exchangeable or is so redeemable at the option of the holder
thereof prior to such date shall be deemed to be Disqualified Stock and (ii) with
respect to any Equity Interests issued to any employee or to any plan for the
benefit of employees of the Lead Borrower or its Subsidiaries or by any such
plan to such employees, such Equity Interest shall not constitute Disqualified
Stock solely because it may be required to be repurchased by the Lead Borrower
or one of its Subsidiaries in order to satisfy applicable statutory or
regulatory obligations or as a result of such employee’s termination,
resignation, death or disability and if any class of Equity Interest of such
Person that by its terms authorizes such Person to satisfy its obligations
thereunder by delivery of an Equity Interest that is not Disqualified Stock,
such Equity Interests shall not be deemed to be Disqualified Stock.
Notwithstanding the preceding sentence, any Equity Interest that would constitute
Disqualified Stock solely because the holders thereof have the right to require
a Loan Party to repurchase such Equity Interest upon the occurrence of a change
of control or an asset sale shall not constitute Disqualified Stock.  The amount of Disqualified Stock deemed to be
outstanding at any time for 

 

18

 

purposes
of this Agreement will be the maximum amount that the Lead Borrower and its
Subsidiaries may become obligated to pay upon maturity of, or pursuant to any
mandatory redemption provisions of, such Disqualified Stock or portion thereof,
plus accrued dividends.

 

“Dollars”
and “$” mean lawful money of the United States.

 

“Domestic
Subsidiary” means any Subsidiary that is organized under the laws of the
United States, any state thereof or the District of Columbia (excluding, for
the avoidance of doubt, any Subsidiary organized under the laws of Puerto Rico
or any other territory).

 

“Early Termination Fee” has the meaning provided in Section 2.09(b).

 

“EDS
Agreement” means the Master Services Agreement between the Lead Borrower
and Electronic Data Systems Corporation dated May 1, 2008, as amended and
in effect from time to time.

 

“Eligible
Assignee” means: (a) a Credit Party or any of its Affiliates; (b) a
bank, insurance company, or company engaged in the business of making
commercial loans, which Person, together with its Affiliates, has a combined
capital and surplus in excess of $250,000,000; (c) an Approved Fund; (d) any
Person to whom a Credit Party assigns its rights and obligations under this
Agreement as part of an assignment and transfer of such Credit Party’s rights
in and to a material portion of such Credit Party’s portfolio of asset based
credit facilities; and (e) any other Person (other than a natural person)
approved by (i) the Administrative Agent, the L/C Issuer and the Swing
Line Lender, and (ii) unless an Event of Default has occurred and is
continuing, the Lead Borrower (each such approval not to be unreasonably
withheld or delayed); provided that notwithstanding the
foregoing, “Eligible Assignee” shall not include a Loan Party or any of the
Loan Parties’ Affiliates or Subsidiaries, other than Morgan Stanley Senior
Funding, Inc., Morgan Stanley Bank and HSBC USA.

 

“Eligible
Credit Card Receivables” means, at the time of any determination thereof,
each Credit Card Receivable that satisfies the following criteria at the time
of creation and continues to meet the same at the time of such determination:
such Credit Card Receivable (i) has been earned by performance and
represents the bona fide amounts due to a Borrower from a credit card payment
processor and/or credit card issuer, and in each case originated in the
ordinary course of business of such Borrower, and (ii) in each case is
acceptable to the Administrative Agent in its Permitted Discretion, and is not
ineligible for inclusion in the calculation of the Borrowing Base pursuant to
any of clauses (a) through (k) below. 
Without limiting the foregoing, to qualify as an Eligible Credit Card
Receivable, an Account shall indicate no Person other than a Borrower as payee
or remittance party.  In determining the
amount to be so included, the face amount of an Account shall be reduced by,
without duplication, to the extent not reflected in such face amount, (i) the
amount of all accrued and actual discounts, claims, credits or credits pending,
promotional program allowances, price adjustments, finance charges or other
allowances (including any amount that a Borrower may be obligated to rebate to
a customer, a credit card payment processor, or credit card issuer pursuant to
the terms of any agreement or understanding (written or oral)) and (ii) the
aggregate amount of all cash received in respect of such Account but not yet
applied by the Loan Parties to reduce the amount of such Credit Card
Receivable.  Any Credit Card Receivables
meeting the foregoing criteria shall be 

 

19

 

deemed
Eligible Credit Card Receivables but only as long as such Credit Card
Receivable is not included within any of the following categories, in which
case such Credit Card Receivable shall not constitute an Eligible Credit Card
Receivable:

 

(a)                                  Credit Card
Receivables which do not constitute an “Account” (as defined in the UCC);

 

(b)                                 Credit Card
Receivables that have been outstanding for more than five (5) Business
Days from the date of sale;

 

(c)                                  Credit Card
Receivables with respect to which a Loan Party does not have good, valid and
marketable title, free and clear of any Lien (other than Liens described in
clauses (g)(i), (i) and (p) of the definition of Permitted
Encumbrances);

 

(d)                                 Credit Card
Receivables that are not subject to a first priority security interest in favor
of the Collateral Agent (subject only to the Lien described in clause (g)(i) of
the definition of Permitted Encumbrances) (it being the intent that chargebacks
in the ordinary course by such processors shall not be deemed violative of this
clause);

 

(e)                                  Credit Card
Receivables which are disputed, are with recourse, or with respect to which a
claim, counterclaim, offset or chargeback has been asserted (to the extent of
such claim, counterclaim, offset or chargeback);

 

(f)                                    Credit Card
Receivables as to which the processor has the right under certain circumstances
to require a Loan Party to repurchase the Accounts from such credit card
processor;

 

(g)                                 Credit Card
Receivables due from an issuer or payment processor of the applicable credit
card which is the subject of any proceeding under any Debtor Relief Law;

 

(h)                                  Credit Card
Receivables which are not a valid, legally enforceable obligation of the
applicable issuer with respect thereto;

 

(i)                                     Credit Card
Receivables which do not conform in all material respects to all
representations, warranties or other provisions in the Loan Documents relating
to Credit Card Receivables;

 

(j)                                     Credit Card
Receivables which are evidenced by “chattel paper” or an “instrument” of any
kind unless such “chattel paper” or “instrument” is in the possession of the
Collateral Agent, and to the extent necessary or appropriate, endorsed to the
Collateral Agent; or

 

(k)                                  Credit Card
Receivables which the Administrative Agent determines in its Permitted
Discretion to be unlikely to be collected.

 

“Eligible
Health Care Receivables” means Accounts due to a Borrower on a non-recourse
basis from insurance companies and other Persons acceptable to the
Administrative Agent in its 

 

20

 

Permitted
Discretion as arise in the ordinary course of business, which have been earned
by performance, have been adjudicated and are deemed by the Administrative
Agent in its Permitted Discretion to be eligible for inclusion in the
calculation of the Borrowing Base. Without limiting the foregoing, except as
otherwise agreed by the Administrative Agent, none of the following shall be
deemed to be Eligible Health Care Receivables:

 

(a)                                  Accounts that
are not evidenced by an invoice;

 

(b)                                 Accounts that
have been outstanding for more than ninety (90) days past the invoice date or
that are more than sixty (60) days past due;

 

(c)                                  Accounts due
from any insurance company to the extent that fifty (50%) or more of all
Accounts from such insurance company are not Eligible Health Care Receivables
under clause (b), above;

 

(d)                                 Accounts with
respect to which a Borrower does not have good, valid and marketable title
thereto, free and clear of any Lien (other than Liens described in clauses
(g)(i), (i) and (p) of the definition of Permitted Encumbrances);

 

(e)                                  Accounts that
are not subject to a first priority security interest in favor of the
Collateral Agent (subject only to the Lien described in clause (g)(i) of
the definition of Permitted Encumbrances);

 

(f)                                    Accounts which
are disputed, are with recourse, or with respect to which a claim,
counterclaim, offset or chargeback has been asserted (to the extent of such
claim, counterclaim, offset or chargeback);

 

(g)                                 Accounts for
which all consents, approvals or authorizations of, or registrations or
declarations required to be obtained, effected or given in connection with the
performance of such Account by the account debtor or in connection with the
enforcement of such Account by the Agents have not been duly obtained, effected
or given and are not in full force and effect;

 

(h)                                 Accounts due
from an account debtor which is the subject of any bankruptcy or insolvency
proceeding, has had a trustee or receiver appointed for all or a substantial
part of its property, has made an assignment for the benefit of creditors or
has suspended its business;

 

(i)                                     Accounts due
from any Governmental Authority, including, pursuant to Medicare, Medicaid or
other similar programs; or

 

(j)                                     Accounts which
the Administrative Agent determines in its Permitted Discretion to be uncertain
of collection.

 

“Eligible
Inventory” means, as of the date of determination thereof, without
duplication, items of Inventory of a Borrower that are finished goods,
merchantable and readily saleable to the public in the ordinary course deemed
by the Administrative Agent in its Permitted Discretion to be eligible for
inclusion in the calculation of the Borrowing Base, in each case that, except
as 

 

21

 

otherwise
agreed by the Administrative Agent, complies in all material respects with each
of the representations and warranties respecting Inventory made by the
Borrowers in the Loan Documents, and that is not excluded as ineligible by
virtue of one or more of the criteria set forth below.  Except as otherwise agreed by the
Administrative Agent, the following items of Inventory shall not be included in
Eligible Inventory:

 

(a)                                  Inventory that
is not solely owned by a Borrower or a Borrower does not have good and valid
title thereto;

 

(b)                                 Inventory that
is leased by, or is on consignment to, a Borrower,  or that is consigned by a
Borrower to a Person which is not a Loan Party;

 

(c)                                  Inventory that
is not located in the United States (excluding territories or possessions of
the United States);

 

(d)                                 Inventory that
is located at a location that is not owned or leased by a Borrower (except
Inventory that is in
transit between owned or leased locations of a Borrower), except to the
extent that the Borrowers have furnished the Administrative Agent with (i) any
UCC financing statements or other documents that the Administrative Agent may
determine to be necessary to perfect its security interest in such Inventory at
such location, and (ii) a Collateral Access Agreement executed by the
Person owning any such location on terms reasonably acceptable to the Administrative
Agent;

 

(e)                                  Inventory that
is located at a distribution center or warehouse leased by a Borrower unless
the applicable lessor has delivered to the Collateral Agent a Collateral Access
Agreement;

 

(f)                                    Inventory that
is comprised of goods which (i) are damaged, defective, “seconds,” or
otherwise unmerchantable, (ii) are to be returned to the vendor, (iii) are
obsolete or slow moving, or custom items, work-in-process, raw materials, or
that constitute spare parts, promotional, marketing, packaging and shipping
materials or supplies used or consumed in a Borrower’s business, (iv) are
seasonal in nature and which have been packed away for sale in a subsequent
season), (v) are not in compliance with all standards imposed by any
Governmental Authority having regulatory authority over such Inventory, its use
or sale, or (vi) are bill and hold goods;

 

(g)                                 Inventory that
is not subject to a perfected first priority security interest in favor of the
Collateral Agent (subject only to the Lien described in clause (g)(i) of
the definition of Permitted Encumbrances);

 

(h)                                 Inventory that
consists of samples, labels, bags, packaging, and other similar non-merchandise
categories;

 

(i)                                     Inventory that
is not insured in compliance with the provisions of Section 5.10
hereof;

 

(j)                                     Inventory that
has been sold but not yet delivered or as to which a Borrower has accepted a
deposit;

 

22

 

(k)                                  Inventory
consisting of lottery tickets;

 

(l)                                     Inventory that
is subject to any licensing, patent, royalty, trademark, trade name or
copyright agreement with any third party from which any Borrower or any of its
Subsidiaries has received notice of a dispute in respect of any such agreement;

 

(m)                               Inventory
acquired in a Permitted Acquisition, unless and until the Collateral Agent has (i) completed
or received an appraisal of such Inventory from appraisers satisfactory to the
Collateral Agent and such other due diligence as the Agents may require, all of
the results of the foregoing to be reasonably satisfactory to the Agents, (ii) established
an Inventory advance rate and Inventory Reserves (if applicable) therefor, and (iii) otherwise
agreed that such Inventory shall be deemed Eligible Inventory; or

 

(n)                                 Inventory that
the Administrative Agent determines in its Permitted Discretion is not suitable
for inclusion in the Borrowing Base.

 

“Eligible
Trade Receivables” means Accounts (including, without limitation, Accounts
owed by bottle handling companies) arising from the sale of a Borrower’s goods
or services (other than those consisting of Credit Card Receivables) that
satisfy the following criteria at the time of creation and continue to meet the
same at the time of such determination: such Account (i) has been earned
by performance and represents the bona fide amounts due to a Borrower from an
account debtor, other than a direct store delivery vendor, and in each case
originated in the ordinary course of business of such Borrower, and (ii) in
each case is acceptable to the Administrative Agent in its Permitted Discretion
and is not ineligible for inclusion on the calculation of the Borrowing Base
pursuant to any of clauses (a) through (s) below.  Without limiting the foregoing, to qualify as
an Eligible Trade Receivable, an Account shall indicate no Person other than a
Borrower as payee or remittance party. 
In determining the amount to be so included, the face amount of an
Account shall be reduced by, without duplication, to the extent not reflected
in such face amount, (i) the amount of all accrued and actual discounts,
claims, credits or credits pending, promotional program allowances, price
adjustments, finance charges or other allowances (including any amount that a
Borrower may be obligated to rebate to a customer pursuant to the terms of any
agreement or understanding (written or oral)) and (ii) the aggregate
amount of all cash received in respect of such Account but not yet applied by
the Borrowers to reduce the amount of such Eligible Trade Receivable.  Except as otherwise agreed by the
Administrative Agent, any Account included within any of the following
categories shall not constitute an Eligible Trade Receivable:

 

(a)                                  Accounts that
are not evidenced by an invoice;

 

(b)                                 Accounts that
have been outstanding for more than sixty (60) days from the date of invoice;

 

(c)                                  Accounts due
from any account debtor to the extent that fifty (50%) or more of all Accounts
from such account debtor are not Eligible Trade Receivables under clause (b),
above.

 

(d)                                 Accounts (i) that
are not subject to a perfected first priority security interest in favor of the
Collateral Agent (subject only to the Lien described in clause (g)(i) of
the definition of Permitted Encumbrances), or (ii) with respect to which a
Loan Party does not have good, valid 

 

23

 

and
marketable title thereto, free and clear of any Lien (other than Liens
described in clauses (g)(i), (i) and (p) of the definition of
Permitted Encumbrances);

 

(e)                                  Accounts which
are disputed or with respect to which a claim, counterclaim, offset or
chargeback has been asserted, but only to the extent of such dispute,
counterclaim, offset or chargeback;

 

(f)                                    Accounts which
arise out of any sale made not in the ordinary course of business, made on a
basis other than upon credit terms usual to the business of the Borrowers or
are not payable in Dollars;

 

(g)                                 Accounts which
are owed by any account debtor whose principal place of business is not within
the continental United States;

 

(h)                                 Accounts which
are owed by any Affiliate or any employee of a Loan Party;

 

(i)                                     Accounts for
which all consents, approvals or authorizations of, or registrations or
declarations with any Governmental Authority required to be obtained, effected
or given in connection with the performance of such Account by the account
debtor or in connection with the enforcement of such Account by the Agents have
been duly obtained, effected or given and are in full force and effect;

 

(j)                                     Accounts due
from an account debtor which is the subject of any bankruptcy or insolvency
proceeding, has had a trustee or receiver appointed for all or a substantial
part of its property, has made an assignment for the benefit of creditors or
has suspended its business;

 

(k)                                  Accounts due
from any Governmental Authority except to the extent that the subject account
debtor is the federal government of the United States of America and has
complied with the Federal Assignment of Claims Act of 1940 and any similar
state legislation;

 

(l)                                     Accounts (i) owing
from any Person that is also a direct supplier to or creditor of a Borrower or
any of its Subsidiaries unless such Person has waived any right of setoff in a
manner acceptable to the Administrative Agent or (ii) representing any
manufacturer’s or supplier’s credits, discounts, incentive plans or similar
arrangements entitling a Borrower or any of its Subsidiaries to discounts on
future purchase therefrom;

 

(m)                               Accounts
subject to any right of return, setoff or charge back;

 

(n)                                 Accounts
payable other than in Dollars or that are otherwise on terms other than those
normal and customary in the Borrowers’ business;

 

(o)                                 Accounts
evidenced by a promissory note or other instrument;

 

(p)                                 Accounts which
are in excess of the credit limit for such account debtor established by the
Borrowers in the ordinary course of business and consistent with past
practices;

 

24

 

(q)                                 Accounts which
include extended payment terms (datings) beyond those generally furnished to
other account debtors in the ordinary course of business;

 

(r)                                    Accounts which
constitute Credit Card Receivables; or

 

(s)                                  Accounts which
the Administrative Agent determines in its Permitted Discretion to be
unacceptable for borrowing.

 

“End”
means, with respect to any Business Day or calendar day, 4:30 p.m. Eastern
time on such Business Day or calendar day, as the case may be.

 

“Environmental
Laws” means any and all applicable federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, licenses, agreements or governmental restrictions relating to
pollution and the protection of the environment or the release of any materials
into the environment, including those related to hazardous substances or
wastes, air emissions and discharges to waste or public systems.

 

“Environmental
Liability” means any liability, obligation, damage, loss, claim, action,
suit, judgment, order, fine, penalty, fee, expense, or cost, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrower, any other Loan
Party or any of their respective Subsidiaries directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal or
presence of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is allocated with respect to
any of the foregoing.

 

“Environmental
Permit” means any permit, approval, identification number, license or other
authorization required under any Environmental Law.

 

“Equipment”
has the meaning set forth in the Security Agreement.

 

“Equity
Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the
warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests
in) such Person, all of the securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit interests in) such
Person or warrants, rights or options for the purchase or acquisition from such
Person of such shares (or such other interests), and all of the other ownership
or profit interests in such Person (including partnership, member or trust
interests therein), whether voting or nonvoting, and whether or not such
shares, warrants, options, rights or other interests are outstanding on any
date of determination.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974.

 

“ERISA
Affiliate” means any trade or business (whether or not incorporated) under
common control with a Loan Party within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).

 

25

 

“ERISA
Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by a Loan Party or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by a Loan Party or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan
is in reorganization; (d) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Sections 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (f) the imposition of any liability under Title IV of ERISA, other than
for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
a Loan Party or any ERISA Affiliate.

 

“Event
of Default” has the meaning provided in Section 8.01.  An Event of Default shall be deemed to be
continuing unless and until that Event of Default has been duly waived as
provided in Section 10.01 hereof.

 

“Excluded
Taxes” means, with respect to the Administrative Agent, any Lender, the L/C
Issuer or any other recipient of any payment to be made by or on account of any
obligation of any Loan Party hereunder, (a) Taxes imposed on or measured
by its overall net or gross income (however denominated), and franchise and
other similar Taxes imposed on it, by the jurisdiction (or any political
subdivision thereof) under the laws of which such recipient is organized, or is
resident for tax purposes, or in which its principal office is located or, in
the case of any Lender, in which its applicable Lending Office is located, (b) any
branch profits Taxes imposed by the United States or any similar Tax imposed by
any other jurisdiction described in clause (a), above, and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the Lead
Borrower under Section 10.13), any withholding Tax that is imposed
on amounts payable to such Foreign Lender at the time such Foreign Lender
becomes a party hereto (or designates a new Lending Office) or is attributable
to such Foreign Lender’s failure or inability (other than as a result of a
Change in Law) to comply with Section 3.01(d), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive additional
amounts from the Borrowers with respect to such withholding tax pursuant to Section 3.01(a).

 

“Executive
Order” has the meaning provided in Section 10.18.

 

“Existing
Credit Agreements” means: (a) that certain Second Amended and Restated
First Lien Credit Agreement, dated as of December 1, 2007 and amended and
restated as of January 18, 2008 and November 17, 2008, by and
between, among others, the Parent, the Lead Borrower, the lenders from time to
time party thereto, and HSBC Bank USA, National Association, as administrative
agent and collateral agent; and (b) that certain Mortgage Loan Agreement,
dated as of November 17, 2008, by and among the Parent, the Lead Borrower,
Bank of America, N.A., as agent, and the lenders from time to time party
thereto.

 

“Federal
Funds Rate”  means, 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 

 

26

 

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 determined by the Administrative Agent.

 

“Fee
Letter” means the letter agreement, dated September 23, 2009, among
the Lead Borrower, the Administrative Agent and BAS.

 

“Fiscal
Period” means any fiscal period of any Fiscal Year of the Parent.

 

“Fiscal
Quarter” means any fiscal quarter of any Fiscal Year of the Parent.

 

“Fiscal
Year” means any period of thirteen consecutive Fiscal Periods ending on the
calendar Saturday closest to December 31 of
any calendar year.

 

“Foreign
Asset Control Regulations” has the meaning provided in Section 10.18.

 

“Foreign
Lender” means any Lender that is organized under the laws of a jurisdiction
other than that in which any Borrower is resident for tax purposes.  For purposes of this definition, the United
States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.

 

“FRB”
means the Board of Governors of the Federal Reserve System of the United
States.

 

“Fronting
Fee” has the meaning provided in Section 2.03(j).

 

“Fund”
means 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 business.

 

“GAAP”
means generally accepted accounting principles in the United States set forth
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

 

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

 

27

 

“Guarantee”
means, as to any Person, any (a) any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation payable or performable by another Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or
services for the purpose of assuring the obligee in respect of such
Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity or level
of income or cash flow of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, or (iv) entered into
for the purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such Person securing any Indebtedness or other obligation
of any other Person, whether or not such Indebtedness or other obligation is
assumed by such Person (or any right, contingent or otherwise, of any holder of
such Indebtedness to obtain any such Lien) or is limited in recourse.  The amount of any Guarantee shall be deemed
to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is
made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the guaranteeing Person in good
faith.  The term “Guarantee” as a verb
has a corresponding meaning.

 

“Guarantor”
means the Parent, each direct or indirect Subsidiary of the Parent (other than
any CFC) listed on Schedule 1.02 annexed hereto and each other direct or
indirect Subsidiary of the Parent that shall be required to execute and deliver
a Joinder Agreement as a Guarantor pursuant to Section 6.12.

 

“Hazardous Materials” means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.

 

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

 

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

 

“HIPAA
Compliance Date” has the meaning provided in Section 5.26(a).

 

“HIPAA
Compliance Plan” has the meaning provided in Section 5.26(a).

 

28

 

“HIPAA
Compliant” has the meaning provided in Section 5.26(a).

 

“Honor
Date” has the meaning provided in Section 2.03(c)(i).

 

“HSBC
USA” means HSBC Business Credit (USA) Inc.

 

“Immaterial
Subsidiary” means, on any date, any Subsidiary of the Parent that (a) had
less than five percent (5%) of consolidated assets and less than five percent
(5%) of annual consolidated revenues of the Loan Parties as reflected on the
most recent financial statements delivered pursuant to Section 6.01
prior to such date and (b) has been designated as such by the Parent in a
written notice delivered to the Administrative Agent, other than any such
Subsidiary as to which the Parent has revoked such designation by written
notice to the Administrative Agent; provided that at no time
shall all Immaterial Subsidiaries so designated by the Parent have in the
aggregate consolidated assets or annual consolidated revenues as reflected on
the most recent financial statements delivered pursuant to Section 6.01
prior to such time in excess of ten percent (10%) of consolidated assets or
annual consolidated revenues respectively of the Loan Parties; provided further
that a Subsidiary shall not be an Immaterial Subsidiary if it (i) holds
title to any ABL Priority Collateral or (ii) is a Borrower.

 

“Increase
Effective Date” has the meaning provided in Section 2.15(d).

 

“Indebtedness”
means, as to any Person at a particular time, without duplication, all of the
following, 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)                                 the maximum
amount of 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 Swap Contract;

 

(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 not past
due for more than sixty (60) days);

 

(e)                                  all
Attributable Indebtedness of such Person;

 

(f)                                    all
Disqualified Stock, valued, in the case of a redeemable preferred interest, at
the greater of its voluntary or involuntary liquidation preference plus
accrued and unpaid dividends; and

 

(g)                                 all Guarantees
of such Person in respect of any of the foregoing.

 

For
all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited 

 

29

 

liability
company) in which such Person is a general partner or a joint venturer, unless
such Indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.

 

“Indemnified
Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees”
has the meaning specified in Section 10.04(b).

 

“Indenture”
means that certain Indenture, dated as of October 9, 2009, among the
Parent and the Lead Borrower, as co-issuers, and the Indenture Trustee,
governing the issuance of the Senior Notes, as amended, restated, supplemented
or otherwise modified from time to time in accordance with Section 7.12.

 

“Indenture
Trustee” means Bank of America, N.A., in its capacity as trustee for the
Note Holders pursuant to the terms of the Indenture, together with any
successor trustee appointed in accordance with the Indenture.

 

“Information”
has the meaning specified in Section 10.07.

 

“Initial
Appraisal” means the inventory and prescription list appraisal dated September 2009
undertaken by the Great American Group.

 

“Intellectual
Property” means the Patents, Trademarks, Copyrights and Licenses (as each
such term is defined in the Security Agreement).

 

“Intercreditor
Agreement” means that certain Intercreditor Agreement, dated as of the
Closing Date, by and between the Agents and the Indenture Trustee and
acknowledged and agreed to by the Loan Parties, as amended and in effect from
time to time.

 

“Interest
Payment Date” means, (a) as to any Loan other than a Prime Rate Loan,
the last day of each Interest Period applicable to such Loan and the Maturity
Date; provided, however, that if any Interest Period for a LIBO
Rate Loan exceeds three months, the respective dates that fall every three
months after the beginning of such Interest Period shall also be Interest
Payment Dates; and (b) as to any Prime Rate Loan (including a Swing Line
Loan), the first Business Day of each month and the Maturity Date.

 

“Interest
Period” means, as to each LIBO Rate Loan, the period commencing on the date
such LIBO Rate Loan is disbursed or converted to or continued as a LIBO Rate
Loan and ending on the date one, two, three or six months thereafter, as
selected by the Lead Borrower in its Committed Loan Notice; provided that:

 

(a)                                  any Interest
Period that would otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Business Day;

 

30

 

(b)                                 any Interest
Period that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period;

 

(c)                                  no Interest
Period shall extend beyond the Maturity Date; and

 

(d)                                 notwithstanding
the provisions of clause (c), no Interest Period shall have a duration of less
than one (1) month, and if any Interest Period applicable to a LIBO
Borrowing would be for a shorter period, such Interest Period shall not be
available hereunder.

 

For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.

 

“Inventory”
has the meaning given that term in the UCC, and shall also  include,
without limitation, all: (a) goods which (i) are leased by a Person
as lessor, (ii) are held by a Person for sale or lease or to be furnished
under a contract of service, (iii) are furnished by a Person under a
contract of service, or (iv) consist of raw materials, work in process, or
materials used or consumed in a business; (b) goods of said description in
transit; (c) goods of said description which are returned, repossessed or
rejected; and (d) packaging, advertising, and shipping materials related
to any of the foregoing.

 

“Inventory
Reserves” means such reserves as may be established from time to time by
the Administrative Agent in the Administrative Agent’s Permitted Discretion
with respect to the determination of the saleability, at retail, of the
Eligible Inventory or which reflect such other factors as may affect the market
value of the Eligible Inventory.  Without limiting the
generality of the foregoing, Inventory Reserves may, in the Administrative
Agent’s Permitted Discretion, include (but are not limited to) reserves based
on: (a) obsolescence; (b) seasonality; (c) Shrink; (d) imbalance;
(e) change in Inventory character; (f) change in Inventory
composition; (g)    change in
Inventory mix; (h) mark-downs (both permanent and point of sale); (i) retail
mark-ons and mark-ups inconsistent with prior period practice and performance,
industry standards, current business plans or advertising calendar and planned
advertising events; and (j) out-of-date and/or expired Inventory.

 

“Investment”
means, as to any Person, any direct or indirect acquisition or investment by
such Person, by means of (a) the purchase or other acquisition of Equity
Interests of another Person, (b) a loan, advance or capital contribution
to, Guarantee or assumption of debt of, or purchase or other acquisition of any
other debt or interest in, another Person, or (c) any Acquisition, or (d) any
other investment of money or capital in another Person in order to obtain a
profitable return.  For purposes of
covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value
of such Investment.

 

“IRS”
means the United States Internal Revenue Service.

 

31

 

“ISP”
means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance).

 

“Issuer
Documents” means, with respect to any Letter of Credit, the Letter Credit
Application, and any other document, agreement and instrument entered into by
the L/C Issuer and any Borrower (or any Subsidiary) or in favor the L/C Issuer
and relating to any such Letter of Credit.

 

“Joinder
Agreement” means an agreement, substantially in the form attached hereto as
Exhibit H, pursuant to which, among other things, a Person becomes
a party to, and bound by the terms of, this Agreement and/or the other Loan
Documents in the same capacity and to the same extent as either a Borrower or a
Guarantor, as the Administrative Agent may determine.

 

“Lancaster
Mortgage” means the mortgage, security agreement and assignment of leases
and rents granted by the Lead Borrower and the Town of Lancaster Industrial
Development Agency in favor of the Collateral Agent on the land described
therein, together with the distribution center and other improvements thereon,
located at 5873 Genesee Street, Lancaster, New York.

 

“Landlord Lien State” means Pennsylvania, Virginia and
Washington and such other state(s) in which a landlord’s claim for rent
may have priority over the lien of the Collateral Agent in any of the
Collateral.

 

“Laws”
means each international, foreign, federal, state and local statute, treaty,
rule, guideline, regulation, ordinance, code and administrative or judicial
precedent or authority, including the interpretation or administration thereof
by any Governmental Authority charged with the enforcement, interpretation or
administration thereof, and each applicable administrative order, directed
duty, request, license, authorization and permit of, and agreement with, any
Governmental Authority, in each case whether or not having the force of law.

 

“L/C
Advance” means, with respect to each Lender, such Lender’s funding of its
participation in any L/C Borrowing in accordance with its Applicable
Percentage.

 

“L/C
Borrowing” means an extension of credit resulting from a drawing under any
Letter of Credit which has not been reimbursed on the date when made or
refinanced as a Committed Borrowing.

 

“L/C
Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the increase of the amount
thereof.

 

“L/C
Issuer” means Bank of America, in its capacity as issuer of Letters of
Credit hereunder, or any successor issuer of Letters of Credit hereunder (which
successor may only be a Lender selected by the Administrative Agent in its
Permitted discretion).  The L/C Issuer
may, in its discretion, arrange for one or more Letters of Credit to be issued
by Affiliates of the L/C Issuer, in which case the term “L/C Issuer” shall
include any such Affiliate with respect to Letters of Credit issued by such
Affiliate.

 

32

 

“L/C
Obligations” means, as at any date of determination, the aggregate undrawn
amount available to be drawn under all outstanding Letters of Credit plus
the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.  For purposes of computing the amounts
available to be drawn under any Letter of Credit, the amount of such Letter of
Credit shall be determined in accordance with Section 1.06.  For all purposes of this Agreement, if on any
date of determination a Letter of Credit has expired by its terms but any
amount may still be drawn thereunder by reason of the operation of Rule 3.14
of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the
amount so remaining available to be drawn.

 

“Lease”
means any agreement, whether written or oral, no matter how styled or
structured, pursuant to which a Loan Party is entitled to the use or occupancy
of any real property for any period of time.

 

“Lender”
has the meaning specified in the introductory paragraph hereto and, as the
context requires, includes the Swing Line Lender.

 

“Lending
Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other
office or offices as a Lender may from time to time notify the Lead Borrower
and the Administrative Agent.

 

“Letter
of Credit” means each Banker’s Acceptance, each Standby Letter of Credit
and each Commercial Letter of Credit issued hereunder.

 

“Letter
of Credit Application” means an application and agreement for the issuance
or amendment of a Letter of Credit in the form from time to time in use by the
L/C Issuer.

 

“Letter
of Credit Expiration Date” means the day that is thirty (30) days prior to
the Maturity Date then in effect (or, if such day is not a Business Day, the
next preceding Business Day).

 

“Letter
of Credit Fee” has the meaning specified in Section 2.03(i).

 

“Letter
of Credit Sublimit” means an amount equal to $50,000,000.  The Letter of Credit Sublimit is part of, and
not in addition to, the Aggregate Commitments. 
A permanent reduction of the Aggregate Commitments shall not require a
corresponding pro rata reduction in the Letter of Credit Sublimit; provided,
however, that if the Aggregate Commitments are reduced to an amount less
than the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be
reduced to an amount equal to (or, at the Lead Borrower’s option, less than)
the Aggregate Commitments.

 

“LIBO
Borrowing” means a Borrowing comprised of LIBO Loans.

 

“LIBO
Rate” means for any Interest Period with respect to a LIBO Rate Loan, 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 the Administrative 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.  If such rate is
not available at such time for any reason, then the “LIBO Rate” for such 

 

33

 

Interest
Period shall be the rate per annum determined by the Administrative 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 LIBO Rate
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.

 

“LIBO
Rate Loan” means a Committed Loan that bears interest at a rate based on
the Adjusted LIBO Rate.

 

“Lien”
means (a) any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement in
the nature of a security interest of any kind or nature whatsoever (including
any conditional sale, Capital Lease Obligation, Synthetic Lease Obligation or
other title retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing, but excluding,
for the avoidance of doubt, any licenses of intellectual property) and (b) in
the case of securities, any purchase option, call or similar right of a third
party with respect to such securities.

 

“Liquidation”
means (after the occurrence and during the continuation of an Event of Default)
the exercise by the Administrative Agent or Collateral Agent of those rights
and remedies accorded to such Agents under the Loan Documents and applicable
Laws as a creditor of the Loan Parties with respect to the realization on the
Collateral, including the conduct by the Loan Parties acting with the consent
of the Administrative Agent, of any public, private, “going-out-of-business”,
store closing or other similar sale or any other disposition of the Collateral
for the purpose of liquidating the Collateral. 
Derivations of the word “Liquidation” (such as “Liquidate”) are used
with like meaning in this Agreement.

 

“Liquidity
Conditions” means, at the time of determination with respect to any
specified transaction or payment, that (a) no Default or Event of Default
then exists or would arise as a result of entering into such transaction or
making such payment, (b) the Availability Condition has been satisfied,
and (c) the Consolidated Fixed Charge Coverage Ratio, calculated based
upon the most recent Measurement Period, was equal to or greater than 1.10:1.00.  Prior to undertaking any transaction or
payment which is subject to the Liquidity Conditions, the Loan Parties shall
deliver to the Administrative Agent (i) a certificate signed by a
Responsible Officer of the Lead Borrower certifying that the conditions
contained in clauses (a), (b) and (c) of the preceding sentence have
been satisfied, and (ii) forecasts prepared in good faith by management of
the Lead Borrower of Consolidated balance sheets, statements of income or
operations and cash flows, and Availability projections on a Fiscal Period
basis for the immediately following thirteen Fiscal Periods, which projected
financial information shall give due consideration to results for prior Fiscal
Periods, shall give effect to the proposed transaction or payment and shall be
in a form and based upon assumptions reasonably satisfactory to the
Administrative Agent.

 

“Loan”
means an extension of credit by a Lender to any Borrower under Article II
in the form of a Committed Loan or a Swing Line Loan.

 

34

 

“Loan
Account” has the meaning provided in Section 2.11(a).

 

“Loan
Cap” means, at any time of determination, the lesser of (a) the
Aggregate Commitments or (b) the Borrowing Base.

 

“Loan
Documents” means this Agreement, each Note, each Issuer Document, the Fee
Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the
Credit Card Notifications, the Security Documents, the Intercreditor Agreement,
and any other instrument or agreement now or hereafter executed and delivered
in connection herewith, or in connection with any transaction arising out of
any Cash Management Services and Bank Products, each as amended and in effect
from time to time; provided that, for purposes of the definition of “Material
Adverse Effect” and Article VII, “Loan Documents” shall not include
agreements relating to Cash Management Services and Bank Products.

 

“Loan
Parties” means, collectively, the Borrowers and each Guarantor.  “Loan Party” means any one of such Persons.

 

“Management
Agreement” means the Transaction and Monitoring Fee Agreement, dated as of November 30,
2007, by and among certain of the management companies affiliated with the
Sponsor and the Parent, as in effect on the Closing Date and as modified from
time to time in a manner not materially adverse to the Lenders or otherwise
with the consent of the Administrative Agent.

 

“Management
Fee” means any management or advisory fee to be paid pursuant to the terms
and conditions of the Management Agreement.

 

“Material
Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual
or contingent) or financial condition of the Parent and its Subsidiaries taken
as a whole; (b) a material impairment of the ability of the Loan Parties
(taken as a whole) to perform their obligations under any Loan Document to
which they are parties; or (c) a material impairment of the rights and
remedies (taken as a whole) of the Agents or the Lenders under any Loan
Document or a material adverse effect upon the legality, validity, binding
effect or enforceability against the Loan Parties (taken as a whole) of any
Loan Document to which they are parties. 
In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event in and of itself does not have
such effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.

 

“Material
Contract” means (a) the McKesson Agreements, (b) the C&S
Supply Agreement, (c) the EDS Agreement and (d) with respect to any
Person, each other contract to which such Person is a party, the termination or
breach of which (unless replaced in accordance with the terms of Section 7.12(a))
would reasonably likely result in a Material Adverse Effect.

 

“Material
Indebtedness” means (a) Indebtedness of the Loan Parties under the
Senior Notes Documents and (b) other Indebtedness (other than the
Obligations) of the Loan Parties in an aggregate principal amount exceeding
$5,000,000.   For purposes of determining
the amount of Material Indebtedness at any time, (a) the amount of the
obligations in respect of any Swap 

 

35

 

Contract
at such time shall be calculated at the Swap Termination Value thereof, (b) undrawn
committed or available amounts shall be included, and (c) all amounts
owing to all creditors under any combined or syndicated credit arrangement
shall be included.

 

“Maturity
Date” means October 9, 2013.

 

“Maximum
Rate” has the meaning provided in Section 10.09.

 

“McKesson
Agreements” means, collectively, (a) that certain Master License and
Services Agreement (ASP), dated as of November 27, 2007, by and between
NDCHealth Corporation d/b/a Per-Se Technologies and the Lead Borrower, and (b) that
certain Supply Agreement, dated as of January 31, 2008, between McKesson
Corporation and the Lead Borrower, each as amended and in effect from time to
time.

 

“Measurement
Period” means, at any date of determination, the most recently completed
thirteen Fiscal Periods of the Parent or, if fewer than thirteen consecutive
Fiscal Periods of the Parent have been completed since the Closing Date, the
Fiscal Periods of the Parent that have been completed since the Closing Date.

 

“Moody’s”
means Moody’s Investors Service, Inc. and any successor thereto.

 

“Multiemployer
Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of
ERISA, to which a Loan Party or any ERISA Affiliate makes or is obligated to
make contributions, or during the preceding five plan years, has made or been
obligated to make contributions.

 

“Net
Proceeds” means:

 

(a)                                  with respect to
any Prepayment Event described in clauses (a) or (b) of the
definition thereof, the excess, if any, of (i) the sum of cash and cash
equivalents received in connection with such Prepayment Event (including any
cash or cash equivalents received by way of deferred payment pursuant to, or by
monetization of, a note receivable or otherwise, but only as and when so
received) over (ii) the sum of (A) the principal amount of any
Indebtedness that is secured by the applicable asset by a Lien permitted
hereunder which is senior to the Collateral Agent’s Lien on such asset and that
is required to be repaid (or to establish an escrow for the future repayment
thereof) in connection with such Prepayment Event (other than Indebtedness
under the Loan Documents, but including the payment of the proceeds from any
Notes Priority Collateral in reduction of the Indebtedness under the Senior
Notes Documents), (B) the reasonable and customary out-of-pocket expenses
incurred by such Loan Party or
such Subsidiary in connection with such Prepayment Event (including, without
limitation, appraisals, and brokerage, legal, title and recording or transfer
tax expenses and commissions) paid by any Loan Party to third parties (other
than Affiliates)); and

 

(b)                                 with respect to
any Prepayment Event described in clause (c) of the definition thereof,
the excess of (i) the sum of the cash and cash equivalents received in
connection with such Prepayment Event over (ii) the sum of (A) the
underwriting discounts and commissions, and other reasonable and customary
out-of-pocket expenses, 

 

36

 

incurred
by such Loan Party or such Subsidiary in connection therewith and (B) the
principal amount of any Indebtedness (plus any premium or other required
payment on account thereof) under the Senior Note Documents (if any) that is
required to be repaid in connection with such Prepayment Event.

 

“Non-Consenting
Lender” has the meaning provided in Section 10.01.

 

“Non-Loan
Party Subsidiary” means any Subsidiary of the Borrower which is not, and is
not required to become, a Guarantor or Borrower.

 

“Non-Extension
Notice Date” has the meaning provided in Section 2.03(b)(iii).

 

“Note” means a promissory note made by the Borrowers in favor of
a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit C,
as the same may be amended, supplemented or modified from time to time.

 

“Note
Holders” means the holders of the Senior Notes pursuant to the terms of the
Indenture.

 

“Note
Obligations” has the meaning given that term in the Intercreditor
Agreement.

 

“Notes
Priority Collateral” has the meaning given that term in the Intercreditor
Agreement.

 

“NPL” means the
National Priorities List under CERCLA.

 

“Obligations”
means (a) all advances to, and debts (including principal, interest, fees,
costs, and expenses), liabilities, obligations, covenants, indemnities, and
duties of, any Loan Party arising under any Loan Document or otherwise with
respect to any Loan or Letter of Credit (including payments in respect of reimbursement
of disbursements, interest thereon and obligations to provide cash collateral
therefor), whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising
and including interest, fees, costs, expenses and indemnities that accrue after
the commencement by or against any Loan Party or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest, fees, costs, expenses and
indemnities are allowed claims in such proceeding, and (b) any Other
Liabilities.

 

“Organization
Documents” means, (a) with respect to any corporation, the certificate
or articles of incorporation and the bylaws (or equivalent or comparable
constitutive documents with respect to any non-U.S. jurisdiction); (b) with
respect to any limited liability company, the certificate or articles of
formation or organization and operating agreement; (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity, and (d) in each case, all shareholder or
other equity holder agreements, voting trusts and similar arrangements to 

 

37

 

which
such Person is a party or which is applicable to its Equity Interests and all
other arrangements relating to the Control or management of such Person.

 

“Other
Liabilities” means any obligation on account of (a) any Cash
Management Services furnished to any of the Loan Parties and/or any of their
Subsidiaries and/or (b) any Bank Product furnished to any of the Loan
Parties and/or any of their Subsidiaries, as each may be amended from time to
time.

 

“Other
Taxes” means all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment
made hereunder or under any other Loan Document or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.

 

“Outstanding
Amount” means: (i) with respect to Committed Loans and Swing Line
Loans on any date, the aggregate outstanding principal amount thereof after
giving effect to any borrowings and prepayments or repayments of Committed
Loans and Swing Line Loans, as the case may be, occurring on such date; and (ii) with
respect to any L/C Obligations on any date, the amount of such L/C Obligations
on such date after giving effect to any L/C Credit Extension occurring on such
date and any other changes in the aggregate amount of the L/C Obligations as of
such date, including as a result of any reimbursements by the Borrowers of
Unreimbursed Amounts.

 

“Overadvance”
means a Credit Extension to the extent that, immediately after its having been
made, Availability is less than zero.

 

“PACA”
means the Perishable Agriculture Commodities Act, 1930 and all regulations promulgated
thereunder, as amended from time to time.

 

“Parent”
means Tops Holding Corporation, a Delaware corporation.

 

“Participant”
has the meaning provided in Section 10.06(c).

 

“PASA”
means the Packers and Stockyard Act, 1921 and all regulations promulgated
thereunder, as amended from time to time.

 

“Patriot
Act” has the meaning provided in Section 4.01(k).

 

“Payment
Conditions” means, at the time of determination with respect to any
specified transaction or payment, that (a) no Default or Event of Default
then exists or would arise as a result of entering into such transaction or
making such payment, (b) the Availability Condition has been satisfied,
and (c) the Consolidated Fixed Charge Coverage Ratio, calculated based
upon the most recent Measurement Period, was equal to or greater than
1.25:1.00.  Prior to undertaking any
transaction or payment which is subject to the Payment Conditions, the Loan
Parties shall deliver to the Administrative Agent (i) a certificate signed
by a Responsible Officer of the Lead Borrower certifying that the conditions
contained in clauses (a), (b) and (c) of the preceding sentence have
been satisfied, and (ii) forecasts prepared in good faith by management of
the Lead Borrower of Consolidated balance sheets, statements of income or
operations and cash flows, and Availability projections on a Fiscal Period
basis for the immediately following 

 

38

 

thirteen
Fiscal Periods, which projected financial information shall give due consideration
to results for prior Fiscal Periods, shall give effect to the proposed
transaction or payment and shall be in a form and based upon assumptions
reasonably satisfactory to the Administrative Agent.

 

“PBGC”
means the Pension Benefit Guaranty Corporation.

 

“PCAOB”
means the Public Company Accounting Oversight Board.

 

“Pension
Plan” means any “employee pension benefit plan” (as such term is defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by a Loan Party or
any ERISA Affiliate or to which a Loan Party or any ERISA Affiliate contributes
or has an obligation to contribute, or in the case of a multiple employer or
other plan described in Section 4064(a) of ERISA, has made contributions
at any time during the immediately preceding five plan years.

 

“Perfection
Certificate” has the meaning given that term in the Security Agreement.

 

“Perishable
Inventory” means Inventory consisting of meat, dairy, cheese, seafood,
produce, delicatessen, non-artificial floral products, bakery goods and
prepared foods and other similar categories of Inventory which have a short
shelf life.

 

“Permitted
Acquisition” means (i) an Acquisition or series of related
Acquisitions of Store locations (including, if applicable, the related
Inventory at such Store locations) in which the total consideration paid
(whether in cash, tangible property, notes or other property) does not exceed
in the aggregate the sum of $2,000,000 in any Fiscal Year, provided that
no Default or Event of Default exists at the time of, or immediately after
giving effect to, the consummation of any such Acquisition or series of related
Acquisitions, or (ii) an Acquisition in which all of the following
conditions are satisfied:

 

(a)                                  No Default or
Event of Default then exists or would arise from the consummation of such
Acquisition;

 

(b)                                 Such
Acquisition shall have been approved by the Board of Directors of the Person
(or similar governing body if such Person is not a corporation) which is the
subject of such Acquisition and such Person shall not have announced that it
will oppose such Acquisition or shall not have commenced any action which
alleges that such Acquisition shall violate applicable Law;

 

(c)                                  The Lead
Borrower shall have furnished the Administrative Agent with fifteen (15) days’
written notice prior to the consummation of such intended Acquisition and shall
have furnished the Administrative Agent with (i) a current draft of the
documents, agreements and instruments contemplated to be executed in connection
therewith (and final copies thereof as and when executed), and (ii) historical
financial statements (whether audited or unaudited) or tax returns (to be
provided only if historical financial statements are not available) in each
case to the extent received by the Lead Borrower by or on behalf of the Person
which is the subject of such Acquisition;

 

39

 

(d)                                 If the proceeds
of any Credit Extension are being used to directly or indirectly finance all or
any portion of such Acquisition, either (i) the legal structure of such
Acquisition shall be acceptable to the Administrative Agent in its Permitted
Discretion, or (ii) the Loan Parties shall have provided the
Administrative Agent with a solvency opinion from an unaffiliated third party
valuation firm reasonably satisfactory to the Administrative Agent;

 

(f)                                    After giving
effect to such Acquisition, if such Acquisition is an Acquisition of Equity
Interests, a Loan Party shall acquire and own, directly or indirectly, a
majority of the Equity Interests in the Person being acquired and shall Control
a majority of any voting interests or shall otherwise Control the governance of
the Person being acquired;

 

(g)                                 Prior to the
inclusion of the assets (or the assets of the Person) acquired in such
Acquisition in the Borrowing Base, the Administrative Agent shall have received
(i) the results of appraisals of the assets (or the assets of the Person)
to be acquired in such Acquisition and of a commercial finance examination of
the Person which is (or whose assets are) being acquired, and (ii) such
other due diligence as the Administrative Agent may reasonably require, all of
the results of such due diligence to be reasonably satisfactory to the Administrative
Agent;

 

(h)                                 Any assets
acquired shall be utilized in, and if such Acquisition involves a merger,
consolidation or stock acquisition, the Person which is the subject of such
Acquisition shall be engaged in, a business otherwise permitted to be engaged
in by a Borrower under this Agreement;

 

(i)                                     If the Person
which is the subject of such Acquisition will be maintained as a Wholly Owned
Subsidiary of a Loan Party, or if the assets acquired in such Acquisition will
be transferred to a Wholly Owned Subsidiary which is not then a Loan Party,
such Subsidiary shall have been joined as a “Borrower” hereunder or as a
Guarantor in accordance with the terms of Section 6.12, and the
Collateral Agent shall have received a security and/or mortgage interest in such
Subsidiary’s Equity Interests, Inventory, Accounts, Real Estate and other
property of the same nature as constitutes Collateral under the Security
Documents; and

 

(j)                                     The Liquidity
Conditions shall have been satisfied.

 

“Permitted Additional Pari Passu Obligations”
has the meaning set forth in the Indenture.

 

“Permitted Business” means the
business conducted by the Loan Parties on the Closing Date, and any business
substantially similar, reasonably related, complementary, incidental or
ancillary thereto.

 

“Permitted
Discretion” means a determination made by the Administrative Agent in the
exercise of its commercially reasonable business judgment, exercised in good
faith in accordance with customary business practices for comparable
asset-based lending transactions in the retail industry.

 

40

 

“Permitted
Disposition” means any of the following:

 

(a)                                  Dispositions of
Inventory in the ordinary course of business;

 

(b)                                 bulk sales or
other Dispositions of the Inventory of a Loan Party not in the ordinary course
of business in connection with Store closings and/or Store sales for cash
consideration, at arm’s length, provided that such Store
closures and/or Store sales and related Inventory Dispositions shall not exceed
(i) in any Fiscal Year of the Parent and its Subsidiaries, ten percent
(10%) of the number of the Loan Parties’ Stores as of the beginning of such
Fiscal Year (net of new Store openings) and (ii) in the aggregate from and
after the Closing Date, twenty five percent (25%) of the number of the Loan
Parties’ Stores in existence as of the Closing Date (net of new Store
openings); provided further
that all sales of Inventory in connection with Store closings (in a single
transaction or series of related transactions) that exceed the foregoing limits
shall (i) require the consent of the Administrative Agent and the Required
Lenders (which consent shall not be unreasonably withheld, delayed or
conditioned), and (ii) be in accordance with liquidation agreements and
with professional liquidators reasonably acceptable to the Agents; provided further
that all Net Proceeds received in connection with such Store closures and/or
Store sales and related Inventory Dispositions are applied to the Obligations
if then required in accordance with Section 2.05 hereof;

 

(c)                                  licenses of
intellectual property of a Loan Party or any of its Subsidiaries in the
ordinary course of business;

 

(d)                                 licenses for
the conduct of licensed departments within the Loan Parties’ Stores in the ordinary
course of business; provided that the Loan Parties shall
provide the Agents with thirty (30) days prior written notice and, if requested
by the Agents, the Loan Parties shall use commercially reasonable efforts to
cause the Person operating such licensed department to enter into an
intercreditor agreement on terms and conditions reasonably satisfactory to the
Agents (provided that the Administrative Agent may impose
Reserves in its Permitted Discretion with respect to the operation of any such
licensed department);

 

(e)                                  Dispositions of
Equipment in the ordinary course of business that is substantially worn,
damaged, obsolete or, in the judgment of a Loan Party, no longer useful or
necessary in its business or that of any Subsidiary and is not replaced with
similar property having at least equivalent value;

 

(f)                                    sales,
transfers and Dispositions among the Loan Parties or by any Subsidiary to a
Loan Party;

 

(g)                                 sales,
transfers and Dispositions of or by any Subsidiary which is not a Loan Party to
another Subsidiary that is not a Loan Party; and

 

(h)                                 to the extent
constituting a Disposition, Liens to the extent permitted by Section 7.01
of this Agreement;

 

41

 

(i)                                     Restricted
Payments to the extent permitted by Section 7.02 of this Agreement;

 

(j)                                     Investments to
the extent permitted by Section 7.02 of this Agreement;

 

(k)                                  any Disposition
in connection with a foreclosure on assets, or a Disposition of Investments or
receivables, in connection with the compromise, settlement or collection
thereof or in a bankruptcy or similar proceedings;

 

(l)                                     the Disposition
or voluntary termination of any Swap Contract;

 

(m)                               the surrender
or waiver of any contract rights or the settlement, release or surrender of
contract, tort or other claims of any kind, provided that
Loan Parties comply with the provisions of Section 6.19 of this
Agreement;

 

(n)                                 the Disposition
of any Cash Equivalents, provided that the proceeds of the
same constitute a Permitted Investment or are used in a manner consistent with Section 6.11
of this Agreement;

 

(o)                                 the Disposition
of cash in the ordinary course of business, to the extent used in a manner
consistent with Section 6.11 of this Agreement;

 

(p)                                 to the extent
allowable under Section 1031 of the Code, any exchange of like property
(excluding any boot thereon) for use in a Permitted Business; provided that,
to the extent the property exchanged was ABL Priority Collateral, substantially
all of property received in exchange therefor constitutes ABL Priority
Collateral having an Appraised Value at least equal to the Appraised Value of
the property exchanged and the Collateral Agent shall have a first priority
perfected Lien on such property; provided further that,
prior to making such Disposition, the Administrative Agent shall have received (i) the
results of appraisals and of a commercial finance examination of the
assets  to be acquired and (ii) such
other due diligence as the Administrative Agent may reasonably require, all of
the results of the foregoing to be reasonably satisfactory to the
Administrative Agent;

 

(q)                                 as long as no
Default or Event of Default then exists or would arise therefrom, sales of Real
Estate of any Loan Party (or sales of any Person or Persons created to hold
such Real Estate or the Equity Interests in such Person or Persons), including
sale-leaseback transactions involving any such Real Estate pursuant to leases
on market terms, as long as, (i) such sale is made for fair market value, (ii) all
Net Proceeds received in connection with any such sale are applied to the
Obligations if then required in accordance with Section 2.05
hereof, and (iii) in the case of any sale-leaseback transaction permitted
hereunder, the Agents shall have received from each purchaser or transferee a
Collateral Access Agreement on terms and conditions reasonably satisfactory to
the Agents;

 

(r)                                    Dispositions of
non-ABL Priority Collateral to Non-Loan Party Subsidiaries in an aggregate
amount not to exceed $5,000,000 during the term of this Agreement;

 

42

 

(s)                                  Dispositions
made in connection with a Qualified Securitization Transaction;

 

(t)                                    Dispositions of
non-ABL Priority Collateral in an aggregate amount not to exceed $10,000,000
during the term of this Agreement;

 

(u)                                 the issuance
and sale of Equity Interests (other than Disqualified Stock) by any Loan Party
or any Subsidiary thereof;

 

(v)                                  any other
Dispositions (other than bulk sales of Inventory in connection with Store
closings, in which case the requirements of clause (b) of this definition
must be satisfied; provided that, for the avoidance of
doubt, the sale of a Store to a third party for cash consideration shall not,
for purposes of this clause (u), constitute a “Store closing”), provided that
(i) the Liquidity Conditions shall have been satisfied and (ii) in
the case of bulk sales of Inventory in connection with Store sales, such Store
sales shall be for cash consideration and the Administrative Agent shall have
received, prior to the consummation of any such Store sales and related
Inventory Dispositions, an updated Inventory and prescription list appraisal
undertaken by an independent appraiser engaged by the Administrative Agent at
the Loan Parties’ expense (it being acknowledged and agreed that the
Administrative Agent’s right to obtain an updated appraisal pursuant to this
clause (u) is in addition to, and not in limitation of, the Administrative
Agent’s right to conduct appraisals pursuant to Section 6.10 at the
Loan Parties’ expense).

 

“Permitted Encumbrances” means:

 

(a)                                  Liens imposed
by law for Taxes that are not yet due or are being contested in compliance with
Section 6.04;

 

(b)                                 Carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
imposed by applicable Law, arising in the ordinary course of business and securing
obligations that are not overdue by more than thirty (30) days or are being
contested in compliance with Section 6.04;

 

(c)                                  Pledges and
deposits made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations, other than any Lien imposed by ERISA;

 

(d)                                 Deposits to
secure the performance of bids, trade contracts and leases (other than
Indebtedness), statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business;

 

(e)                                  Liens in
respect of judgments that would not constitute an Event of Default hereunder;

 

(f)                                    Easements,
covenants, conditions, restrictions, building code laws, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property or materially interfere 

 

43

 

with
the ordinary conduct of business of a Loan Party and such other minor title
defects or survey matters that are disclosed by current surveys that, in each
case, do not materially interfere with the current use of the real property;

 

(g)                                 (i) the
Lien of The Buffalo Economic Renaissance Corporation on the assets of the Lead
Borrower located at, or related to, 1275 Jefferson Avenue, Buffalo, New York
securing Indebtedness in an aggregate principal amount not to exceed $200,000
and (ii) other Liens existing on the Closing Date and listed on Schedule
7.01 (or, to the extent not listed on Schedule 7.01, Liens on
non-ABL Priority Collateral having an aggregate fair market value of less than
$1,000,000);

 

(h)                                 Liens on fixed
or capital assets acquired by any Loan Party which are permitted under clause (c) of
the definition of Permitted Indebtedness so long as (i) such Liens and the
Indebtedness secured thereby are incurred prior to or within ninety (90) days
after such acquisition, (ii) the Indebtedness secured thereby does not
exceed the cost of acquisition of such fixed or capital assets and (iii) such
Liens shall not extend to any other property or assets of the Loan Parties;

 

(i)                                     Liens in favor
of the Collateral Agent;

 

(j)                                     Landlords’ and
lessors’ Liens in respect of rent not in default;

 

(k)                                  Possessory
Liens in favor of brokers and dealers arising in connection with the
acquisition or disposition of Investments owned as of the date hereof and
Permitted Investments, provided that such liens (i) attach
only to such Investments and (ii) secure only obligations incurred in the
ordinary course and arising in connection with the acquisition or disposition
of such Investments and not any obligation in connection with margin financing;

 

(l)                                     Liens arising
solely by virtue of any statutory or common law provisions relating to banker’s
liens, liens in favor of securities intermediaries, rights of setoff or similar
rights and remedies as to deposit accounts or securities accounts or other
funds maintained with depository institutions or securities intermediaries;

 

(m)                               Liens arising
from precautionary UCC filings regarding “true” operating leases or, to the
extent permitted under the Loan Documents, the consignment of goods to a Loan
Party;

 

(n)                                 voluntary Liens
on property (other than ABL Priority Collateral) in existence at the time such
property is acquired or on such property of a Subsidiary of a Loan Party in
existence at the time such Subsidiary is acquired; provided that
such Liens are not incurred in connection with, or in anticipation of, such
acquisition and do not attach to any other assets of any Loan Party or any
Subsidiary;

 

(o)                                 Liens in favor
of customs and revenues authorities imposed by applicable Law arising in the
ordinary course of business in connection with the importation of goods and
securing obligations (i) that are not overdue by more than thirty (30)
days, or (ii)(A) that are being contested in good faith by appropriate
proceedings, (B) the 

 

44

 

applicable
Loan Party or Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (C) such contest effectively
suspends collection of the contested obligation and enforcement of any Lien
securing such obligation during the pendency of such contest;

 

(p)                                 Liens on the
Collateral securing the Indebtedness arising under the Senior Notes Documents,
including any Permitted Additional Pari Passu Obligations (and any Permitted
Refinancing thereof) having the priority set forth in the Intercreditor
Agreement;

 

(q)                                 encumbrances
referred to in Schedule B of the mortgage policy in favor of the Indenture
Trustee insuring the Lancaster Mortgage;

 

(r)                                    any interest or
title of a lessor or sublessor under any lease or sublease of real property
entered into by any Loan Party in the ordinary course of its business and not
interfering in any material respect with the business of the Loan Parties;

 

(s)                                  Liens on
property of Non-Loan Party Subsidiaries securing Indebtedness or other
obligations not prohibited by this Agreement to be incurred by such Non-Loan
Party Subsidiaries;

 

(t)                                    Liens arising
by operation of law under Article 4 of the UCC in connection with the
collection of items provided for therein;

 

(u)                                 Liens on assets
transferred to a Securitization Entity or on assets of a Securitization Entity,
in either case incurred in connection with a Qualified Securitization
Transaction;

 

(v)                                 other Liens on
non-ABL Priority Collateral securing obligations in an aggregate amount not to
exceed $10,000,000 at any one time outstanding; and

 

(w)                               any extension,
renewal, refinancing or replacement, in whole or in part, of any Lien described
in the foregoing clauses (a) through (v), provided that
(i) the property or assets covered thereby is not changed, (ii) the
amount secured or benefited thereby is not increased, (iii) the direct or
any contingent obligor with respect thereto is not changed, and (iv) any
renewal or extension of the obligations secured or benefited thereby is
permitted by clause (a) of the definition of Permitted Indebtedness.

 

‘‘Permitted Holders’’
means (i) each of the Sponsors, (ii) each member of management of the
Parent or the Lead Borrower who are holders of Equity Interests of the Parent
and (iii) any ‘‘group’’ (within the meaning of Section 13(d) or Section 14(d) of
the Securities Exchange Act of 1934 or any successor provision) of which any of
the foregoing Persons is a member, provided that in the case of such
‘‘group’’ and without giving effect to the existence of such ‘‘group’’ or any
other ‘‘group,’’ such Sponsors and members of management, collectively, have
beneficial ownership, directly or indirectly, of more than 50% of the total
voting power of the voting Equity Interests of the Parent or any of its direct
or indirect parent entities held by such ‘‘group.’’

 

45

 

“Permitted
Indebtedness” means each of the following, as long as no Default or Event
of Default has occurred and is continuing or would arise from the incurrence
thereof:

 

(a)                                  Indebtedness
outstanding on the date hereof and listed on Schedule 7.03 and any
Permitted Refinancing thereof;

 

(b)                                 Indebtedness
of: (i) any Loan Party to any other Loan Party; (ii) any Non-Loan
Party Subsidiary to any other Non-Loan Party Subsidiary; (iii) any
Non-Loan Party Subsidiary to any Loan Party; and (iv) any Loan Party to
any Non-Loan Party Subsidiary, provided that the aggregate
amount of all such Indebtedness in all Non-Loan Party Subsidiaries, together
with Investments permitted pursuant to clause (i) of the definition of
Permitted Investments, shall not exceed $1,500,000 at any time outstanding.

 

(c)                                  without
duplication of Indebtedness described in clauses (a) or (f) of this
definition, purchase money Indebtedness of any Loan Party to finance the
acquisition of any fixed or capital assets, including Capital Lease Obligations
and Synthetic Lease Obligations, and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and Permitted Refinancings thereof; provided,
however, that the aggregate principal amount of Indebtedness permitted
by this clause (c) shall not exceed $50,000,000 at any time outstanding; provided further
that, if such fixed or capital asset is material to the operation of a Loan
Party’s business and is determined by the Collateral Agent in its Permitted
Discretion to be reasonably necessary for the Liquidation of ABL Priority
Collateral then, if requested by the Collateral Agent, the Loan Parties shall
use commercially reasonable efforts to cause the holders of such Indebtedness
to enter into a Collateral Access Agreement on terms reasonably satisfactory to
the Collateral Agent (provided that the Administrative Agent
may impose reserves in its Permitted Discretion with respect to the obligations
arising under such transaction);

 

(d)                                 obligations
(contingent or otherwise) of any Loan Party or any Subsidiary thereof existing
or arising under any Swap Contract or any Commodity Price Protection Agreement,
provided that such obligations are (or were) entered into by
such Person in the ordinary course of business for the purpose of directly
mitigating risks associated with fluctuations in interest rates, foreign
exchange rates or commodity prices, and not for purposes of speculation or
taking a “market view”;

 

(e)                                  contingent
liabilities under surety bonds or similar instruments incurred in the ordinary
course of business in connection with the construction or improvement of Real
Estate;

 

(f)                                    Indebtedness
incurred for the construction or acquisition or improvement of, or to finance
or to refinance, any Real Estate owned or leased by any Loan Party (including
therein any Indebtedness incurred in connection with sale-leaseback
transactions permitted hereunder), provided that (i) all
Net Proceeds received in connection with any such Indebtedness are applied to
the Obligations if then required in accordance with Section 2.05
hereof, and (ii) the Loan Parties shall cause the holders of 

 

46

 

such
Indebtedness to enter into a Collateral Access Agreement on terms reasonably
satisfactory to the Collateral Agent;

 

(g)                                 Indebtedness
with respect to the deferred purchase price for any Permitted Acquisition, provided that
such Indebtedness does not require the payment in cash of principal (other than
in respect of working capital adjustments) prior to the Maturity Date, has a
maturity which extends beyond the Maturity Date, and is subordinated to the
Obligations on terms reasonably acceptable to the Administrative Agent;

 

(h)                                 Indebtedness of
any Person that becomes a Subsidiary of a Loan Party in a Permitted
Acquisition, which Indebtedness is existing at the time such Person becomes a
Subsidiary of a Loan Party (other than Indebtedness incurred solely in
contemplation of such Person’s becoming a Subsidiary of a Loan Party);

 

(i)                                     the
Obligations;

 

(j)                                     Indebtedness
arising under the Indenture and the other Senior Notes Documents (including
Indebtedness consisting of Guarantees of the Indenture) and any refinancing
thereof in accordance with the terms of the Intercreditor Agreement;

 

(k)                                  unsecured
Indebtedness arising under a Guarantee by a Loan Party of obligations of any
Non-Loan Party Subsidiary in an aggregate amount not to exceed $5,000,000 at
any one time outstanding;

 

(l)                                     Indebtedness of
any Loan Party arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn by such
Loan Party in the ordinary course of business against insufficient finds so
long as such Indebtedness is promptly repaid;

 

(m)                               Indebtedness
incurred by a Securitization Entity in connection with a Qualified Securitization
Transaction that is non-recourse Indebtedness with respect to the Loan Parties
(except for Standard Securitization Undertakings);

 

(n)                                 Indebtedness of
a Loan Party to officers, directors, employees and consultants of such Loan
Party, their respective estates, spouses or former spouses, in each case to
finance the purchase or redemption of Equity Interests of the Parent to the
extent permitted by clause (d) of Section 7.06 upon
termination, disability or death;

 

(o)                                 Indebtedness
incurred by a Loan Party or any Non-Loan Party Subsidiary in connection with
the financing of insurance premiums;

 

(p)                                 Indebtedness
incurred pursuant to a Guarantee of Indebtedness permitted under this
definition;

 

(q)                                 Indebtedness
incurred in the ordinary course of business consisting of take-or-pay
obligations contained in supply arrangements; and

 

47

 

(r)                                    unsecured
Indebtedness in an aggregate principal amount not to exceed $30,000,000 at any
time outstanding.

 

“Permitted
Investments” means each of the following, as long as no Event of Default
has occurred and is continuing or would arise from the making of such
Investment:

 

(a)                                  Cash
Equivalents;

 

(b)                                 Investments
existing on the Closing Date and set forth on Schedule 7.02,  and
Investments that replace such Investments, provided that
such Investments are Permitted Investments;

 

(c)                                  (i) Investments
by any Loan Party and its Subsidiaries in their respective Subsidiaries
outstanding on the date hereof, (ii) additional Investments by any Loan
Party and its Subsidiaries in Loan Parties (other than the Parent), and (iii) additional
Investments by Subsidiaries of the Loan Parties that are not Loan Parties in
other Subsidiaries that are not Loan Parties;

 

(d)                                 Investments
consisting of extensions of credit in the nature of accounts receivable or
notes receivable arising from the grant of trade credit in the ordinary course
of business, and Investments received in satisfaction or partial satisfaction
thereof from financially troubled account debtors to the extent reasonably
necessary in order to prevent or limit loss;

 

(e)                                  Guarantees
constituting Permitted Indebtedness;

 

(f)                                    Investments by
any Loan Party in Swap Contracts permitted hereunder;

 

(g)                                 Investments
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;

 

(h)                                 advances to
officers, directors and employees of the Loan Parties and Subsidiaries in the
ordinary course of business in an aggregate amount not to exceed $2,000,000 at
any time outstanding;

 

(i)                                     Investments in
Non-Loan Party Subsidiaries, together with Indebtedness incurred pursuant to
clause (b)(iv) of the definition of Permitted Indebtedness, in an
aggregate amount not to exceed $1,500,000 at any time outstanding;

 

(j)                                     Investments
constituting Permitted Acquisitions;

 

(k)                                  capital
contributions made by any Loan Party to another Loan Party;

 

(l)                                     Investments
made in connection with a Qualified Securitization Transaction;

 

48

 

(m)                               Investments in
the form of promissory notes or other non-cash consideration received by any
Loan Party from purchasers of any assets in connection with Permitted Dispositions;

 

(n)                                 other
Investments in an aggregate amount not to exceed $2,500,000 in any Fiscal Year;
and

 

(o)                                 other
Investments if the Liquidity Conditions are satisfied;

 

provided,
however, that notwithstanding the foregoing, after the occurrence and
during the continuance of a Cash Dominion Event, no such Investments specified
in clause (a) shall be permitted unless either (i) no Loans are
outstanding or (ii) (A) the Investment is a temporary Investment
pending expiration of an Interest Period for a LIBO Rate Loan, the proceeds of
which Investment will be applied to the Obligations after the expiration of
such Interest Period, and (B) such Investments are pledged to the
Collateral Agent as additional collateral for the Obligations pursuant to such
agreements as may be reasonably required by the Collateral Agent.

 

“Permitted
Overadvance” means an Overadvance made by the Administrative Agent, in its
Permitted Discretion, which:

 

(a)                                  Is made to
maintain, protect or preserve the Collateral and/or the Credit Parties’ rights
under the Loan Documents or which is otherwise for the benefit of the Credit
Parties; or

 

(b)                                 Is made to
enhance the likelihood of, or to maximize the amount of, repayment of any
Obligation; or

 

(c)                                  Is made to pay
any other amount chargeable to any Loan Party hereunder; and

 

(d)                                 Together with
all other Permitted Overadvances then outstanding, shall not (i) exceed
ten percent (10%) of the Borrowing Base at any time or (ii) unless a
Liquidation is occurring, remain outstanding for more than forty-five (45)
consecutive Business Days, unless in each case, the Required Lenders otherwise
agree;

 

provided,
however, that the foregoing shall not (i) modify or abrogate any of
the provisions of Section 2.03 regarding the Lender’s obligations
with respect to Letters of Credit, or (ii) result in any claim or
liability against the Administrative Agent (regardless of the amount of any
Overadvance) for Unintentional Overadvances, and such Unintentional
Overadvances shall not reduce the amount of Permitted Overadvances allowed
hereunder; provided further that in no event shall the
Administrative Agent make an Overadvance if, after giving effect thereto, the
principal amount of the Credit Extensions would exceed the Aggregate
Commitments (as in effect prior to any termination of the Commitments pursuant
to Section 2.06 hereof).

 

“Permitted Refinancing” means,
with respect to any Person, any Indebtedness issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund (collectively, to “Refinance”), the Indebtedness being
Refinanced; provided that (a) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing does not

 

49

 

exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid
accrued interest and premiums thereon and underwriting discounts, defeasance
costs, fees, commissions and expenses), (b) the weighted average life to
maturity of such Permitted Refinancing is greater than or equal to weighted
average life to maturity of the Indebtedness being Refinanced, (c) such
Permitted Refinancing shall not require any scheduled principal payments due
prior to the Maturity Date in excess of, or prior to, the scheduled principal
payments due prior to such Maturity Date for the Indebtedness being Refinanced,
(d) if the Indebtedness being Refinanced is subordinated in right of
payment to the Obligations under this Agreement, such Permitted Refinancing shall
be subordinated in right of payment to such Obligations on terms at least as
favorable to the Credit Parties as those contained in the documentation
governing the Indebtedness being Refinanced, (e) no Permitted Refinancing
shall have additional direct or indirect obligors, or greater guarantees or
security, than the Indebtedness being Refinanced, (f) such Permitted
Refinancing shall be otherwise on market terms for similar Indebtedness,
including, without limitation, with respect to financial and other covenants
and events of default, (g) the interest rate applicable to any such
Permitted Refinancing does not exceed the then applicable market interest rate,
and (h) at the time thereof, no Default or Event of Default shall have
occurred and be continuing.

 

“Person”
means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, limited partnership, Governmental
Authority or other entity.

 

“Pharmaceutical
Laws” means federal, state and local laws, rules or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered, relating to dispensing, storing or distributing prescription
medicines or products, including laws, rules or regulations relating to
the qualifications of Persons employed to do the same.

 

“Plan” means any “employee benefit plan” (as such term is
defined in Section 3(3) of ERISA) established by a Loan Party or,
with respect to any such plan that is subject to Section 412 of the Code
or Title IV of ERISA, any ERISA Affiliate.

 

“Platform”
has the meaning specified in Section 6.02.

 

“Prepayment
Event” means:

 

(a)                                  Any Disposition
(including pursuant to a sale and leaseback transaction, but excluding any
Disposition permitted pursuant to clauses (a), (c), (d), (e), (f) and (g) of
the definition of Permitted Dispositions) of any ABL Priority Collateral of a
Loan Party; provided that any individual Disposition or
series of related Dispositions for which any Loan Party or any of its
Subsidiaries receives Net Proceeds in an amount not to exceed $2,500,000 prior
to the occurrence of a Cash Dominion Event shall not be deemed a Prepayment
Event;

 

(b)                                 Any casualty or
other insured damage to, or any taking under power of eminent domain or by
condemnation or similar proceeding of, any ABL Priority Collateral of a Loan
Party unless, prior to the occurrence of a Cash Dominion Event, the proceeds
therefrom are utilized for purposes of replacing or repairing the assets in
respect 

 

50

 

of
which such proceeds, awards or payments were received within 180 days of the
occurrence of the damage to or loss of the assets being repaired or replaced; provided that
any individual casualty or other insured damage to, or taking under power of
eminent domain or by condemnation or similar proceeding of, any property or
asset of a Loan Party for which any Loan Party receives Net Proceeds in an
amount not to exceed $2,500,000 prior to the occurrence of a Cash Dominion
Event shall not be deemed a Prepayment Event; or

 

(c)                                  The incurrence
by a Loan Party of any Indebtedness for borrowed money other than Permitted
Indebtedness.

 

“Prescription
Lists” means lists of customers for which specific prescription information
is maintained in the ordinary course of business of a Borrower.

 

“Prime
Rate” means, for any day, a fluctuating rate per annum equal to the highest
of (a) the rate of interest in effect for such day as publicly announced
from time to time by Bank of America as its “prime rate”, (b) the Federal
Funds Rate for such day plus one-half of one percent (0.50%) or (c) the
Adjusted LIBO Rate (calculated utilizing the LIBO Rate for a one-month interest
period, as determined on such day), plus one percent (1.00%).  The “prime rate” is a rate set by Bank of
America based upon various factors including Bank of America’s costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.  If, for any reason,
the Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Rate or the LIBO Rate for any reason, including the inability or failure
of the Administrative Agent to obtain sufficient quotations thereof in
accordance with the terms hereof, the Prime Rate shall be determined without
regard to clauses (b) or (c) of the first sentence of this
definition, as applicable, until the circumstances giving rise to such
inability no longer exist.  Any change in
the Prime Rate due to a change in Bank of America’s “prime rate”, the Federal
Funds Rate or the Adjusted LIBO Rate shall be effective on the effective date
of such change in Bank of America’s “prime rate”, the Federal Funds Rate or the
Adjusted LIBO Rate, respectively.

 

“Prime
Rate Loan” means a Loan that bears interest based on the Prime Rate.

 

“Public
Market” shall exist if a Public Offering has been consummated.

 

“Public
Offering” means a public offering of the Equity Interests of the Lead
Borrower pursuant to an effective registration statement (other than a
registration statement on Form S-8) under the Securities Act of 1933.

 

“Qualified
Securitization Transaction” means any transaction or series of transactions
that may be entered into by a Loan Party or any Subsidiary pursuant to which (a) such
Loan Party or Subsidiary may sell, convey or otherwise transfer to a
Securitization Entity its interests in Receivables and Related Assets and (b) such
Securitization Entity transfers to any other Person, or grants a Lien in, such
Receivables and Related Assets, pursuant to a transaction customary in the
industry which is used to achieve a transfer of financial assets under GAAP.

 

51

 

“Real
Estate” means all Leases and all land, together with the buildings,
structures, parking areas, and other improvements thereon, now or hereafter
owned by any Loan Party, including all easements, rights-of-way, and similar
rights relating thereto and all leases, tenancies, and occupancies thereof.

 

“Receivables
and Related Assets” means any account receivable (whether now existing or
arising thereafter) of a Loan Party or any Subsidiary, and any assets related
thereto including all collateral securing such accounts receivable, all
contracts and contract rights and all guarantees or other obligations in
respect of such accounts receivable, proceeds of such accounts receivable and
other assets which are customarily transferred or in respect of which Lien are
customarily granted in connection with asset securitization transactions
involving accounts receivable.

 

“Receivables
Reserves” means such Reserves as may be established from time to time by
the Administrative Agent in its Permitted Discretion with respect to the
determination of the collectability in the ordinary course of Eligible Trade
Receivables and Eligible Health Care Receivables.

 

“Register”
has the meaning specified in Section 10.06(c).

 

“Registered
Public Accounting Firm” has the meaning specified by the Securities Laws
and shall be independent of the Parent and its Subsidiaries as prescribed by
the Securities Laws.

 

“Related
Parties” means, with respect to any Person, such Person’s Affiliates and
the partners, directors, officers, employees, agents and advisors of such
Person and of such Person’s Affiliates.

 

“Reportable
Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

 

“Reports”
has the meaning provided in Section 9.11(b).

 

“Request
for Credit Extension” means (a) with respect to a Borrowing of
Committed Loans, a Committed Loan Notice, (b) with respect to a conversion
or continuation of Committed Loans, a Conversion/Continuation Notice, (c) with
respect to an L/C Credit Extension, a Letter of Credit Application, and (d) with
respect to a Swing Line Loan, a Swing Line Loan Notice.

 

“Required
Lenders” means, as of any date of determination, (a) at all times
during which Bank of America, HSBC USA and/or members of the Sponsor Group are
the only Lenders, Lenders (other than Lenders who are subject to the Sponsor
Group Limitations) holding more than 50% of the Aggregate Commitments or, if
the commitment of each Lender to make Loans and the obligation of the L/C
Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02,
Lenders (other than Lenders who are subject to the Sponsor Group Limitations)
holding in the aggregate more than 50% of the Total Outstandings (with the
aggregate amount of each Lender’s risk participation and funded participation
in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for
purposes of this definition), and (b) at all times during which there is
at least one other Lender in addition to Bank of America, HSBC USA and/or
members of the Sponsor Group, at least two Lenders (other than Lenders 

 

52

 

who
are subject to the Sponsor Group Limitations) holding more than 50% of the
Aggregate Commitments or, if the commitment of each Lender to make Loans and
the obligation of the L/C Issuer to make L/C Credit Extensions have been
terminated pursuant to Section 8.02, at least two Lenders (other
than Lenders who are subject to the Sponsor Group Limitations) holding in the
aggregate more than 50% of the Total Outstandings (with the aggregate amount of
each Lender’s risk participation and funded participation in L/C Obligations
and Swing Line Loans being deemed “held” by such Lender for purposes of this
definition); provided that, for purposes of the foregoing
clauses (a) and (b), the Commitment of, and the portion of the Total
Outstandings held or deemed held by, any Defaulting Lender or Deteriorating
Lender shall be excluded for purposes of making a determination of Required
Lenders; provided further that, for purposes of the
foregoing clauses (a) and (b), the Commitment of, and the portion of the
Total Outstandings held or deemed held by, members of the Sponsor Group shall be
excluded for purposes of making a determination of Required Lenders at all
times during which the Sponsor Group is subject to the Sponsor Group
Limitations.

 

“Reserves” means all (if any) Inventory Reserves, Availability
Reserves and Receivables Reserves.

 

“Responsible
Officer” means the chief executive officer, president, chief financial
officer, controller, treasurer or assistant treasurer of a Loan Party or any of
the other individuals designated in writing to the Administrative Agent by an
existing Responsible Officer of a Loan Party as an authorized signatory of any
certificate or other document to be delivered hereunder.  Any document delivered hereunder that is
signed by a Responsible Officer of a Loan Party shall be conclusively presumed
to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Loan Party and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Loan Party.

 

“Restricted
Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity
Interest of any Person or any of its Subsidiaries (including, without
limitation, upon the liquidation or dissolution of such Person or any of its
Subsidiaries), or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, defeasance, acquisition, cancellation or termination of
any such capital stock or other Equity Interest, or on account of any return of
capital to such Person’s stockholders, partners or members (or the equivalent
of any thereof).

 

“S&P” means Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Companies, Inc. and any successor thereto.

 

“Sarbanes-Oxley”
means the Sarbanes-Oxley Act of 2002, as amended and in effect from time to
time.

 

“SEC”
means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.

 

53

 

“Securities Laws” means 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 PCAOB.

 

“Securitization Entity” means a Subsidiary of the Parent to
which a Loan Party or its Subsidiary transfers Receivables and Related Assets
that engages in no activities other than in connection with the financing of
Receivables and Related Assets and that is designated by the Parent’s board of
directors (as provided below) as a Securitization Entity and: (a) no
portion of the Indebtedness or any other obligations (contingent or otherwise)
of which: (i) is guaranteed by a Loan Party (excluding guarantees (other
than the principal of, and interest on, Indebtedness) pursuant to Standard
Securitization Undertakings); (ii) is recourse to or obligates any Loan
Party (other than such Securitization Entity) in any way other than pursuant to
Standard Securitization Undertakings; or (iii) subjects any property or
asset of any Loan Party (other than such Securitization Entity), directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings; (b) with which no Loan
Party (other than such Securitization Entity) has any material contract,
agreement, arrangement or understanding other than on terms not materially less
favorable to the Loan Party than those that might be obtained at the time from
Persons that are not Affiliates of the Loan Parties, other than fees payable in
the ordinary course of business in connection with servicing accounts
receivable; and (c) to which no Loan Party (other than such Securitization
Entity) has any obligation to maintain or preserve such entity’s financial
condition or cause such entity to achieve certain levels of operating results.
Any designation of a Subsidiary as a Securitization Entity shall be evidenced
to the Administrative Agent by delivering to the Administrative Agent a
certified copy of the resolution of the board of directors of the Parent giving
effect to the designation and a certificate signed by a Responsible Officer of
the Parent certifying that the designation complied with the preceding
conditions and was permitted by the Agreement.

 

“Securitization Repurchase Obligation” means any
obligation of a seller of Receivables and Related Assets in a Qualified
Securitization Transaction to repurchase Receivables and Related Assets arising
as a result of a breach of a representation, warranty or covenant or otherwise
that are customary for receivables of Securitization Financings, including,
without limitation, as a result of a receivable or portion thereof becoming
subject to any asserted defense, dispute, off set or counterclaim of any kind
as a result of any action taken by, any failure to take action by or any other
event relating to the seller.

 

“Security Agreement” means the Guarantee and Security Agreement
dated as of the Closing Date among the Loan Parties and the Collateral Agent,
as amended, modified, supplemented or replaced and in effect from time to time.

 

“Security Documents” means the Security Agreement, the Trademark
Security Agreement, the Blocked Account Agreements, the Lancaster Mortgage, the
Credit Card Notifications, and each other security agreement or other
instrument or document executed and delivered to the Collateral Agent pursuant
to this Agreement or any other Loan Document granting a Lien to secure any of
the Obligations.

 

“Senior Notes” means the 10 1/8% Senior Secured Notes due 2015
in the aggregate original principal amount of up to $275,000,000 issued by the
Parent and the Lead Borrower 

 

54

 

under and pursuant to the
terms of the Indenture, as amended, restated, supplemented or otherwise
modified from time to time in accordance with Section 7.12.

 

“Senior Notes Documents” means the Indenture, the Senior Notes
and any other document, instrument or other agreement now or hereafter executed
in connection with any of the foregoing, in each case as amended, restated,
supplemented or otherwise modified from time to time in accordance with Section 7.12.

 

“Settlement Date” has the meaning provided in Section 2.14(a).

 

“Shareholders’ Equity” means, as of any date of determination,
consolidated shareholders’ equity of the Parent and its Subsidiaries as of that
date determined in accordance with GAAP.

 

“Shrink” means Inventory which has been lost, misplaced, stolen,
or is otherwise unaccounted for.

 

“Solvent” and “Solvency” means, with respect to any
Person on a particular date, that on such date (a) at fair valuation, all
of the properties and assets of such Person are greater than the sum of the
debts, including contingent liabilities, of such Person, (b) the present
fair saleable value of the properties and assets of such Person is not less
than the amount that would be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person’s ability to pay as such debts mature, and (d) such Person is not
engaged in a business or a transaction, and is not about to engage in a
business or transaction, for which such Person’s properties and assets would
constitute unreasonably small capital after giving due consideration to the
prevailing practices in the industry in which such Person is engaged.  The amount of all contingent liabilities at
any time shall be computed as the amount that, in light of all the facts and
circumstances existing at the time, can reasonably be expected to become an
actual or matured liability.

 

“Sponsor” means, collectively, Morgan Stanley Capital Partners V
U.S. Holdco, LLC, HSBC Private Equity Partners USA, LP, HSBC Private Equity
Partners II USA, LP and each of their respective Affiliates (but not including,
however, any of their respective portfolio companies).

 

“Sponsor Group” means the Sponsor, Morgan Stanley Senior Funding, Inc.,
Morgan Stanley Bank and their respective Affiliates.

 

“Sponsor Group Limitations” means, with respect to any member of
the Sponsor Group that at any time holds any portion of the Obligations or
Commitments, such Person(s) shall have no right whatsoever with respect to
that portion of the Commitments which it holds (i) to consent to any
amendment, modification, waiver, consent or other such action with respect to
any of the terms of any Loan Document, except with respect to those matters
designated in clauses (a) through (f) and (h) through (k) of
Section 10.01, (ii) otherwise to vote on any matter related to
any Loan Document which requires the consent of the Required Lenders, (iii) to
require the Agents or any Lender to undertake any action (or refrain from taking
any action) with respect to any Loan Document, (iv) to attend any meeting
with the Agents or any Lender or receive any 

 

55

 

information from the Agents
or any Lender other than Borrowing Base Certificates, financial statements and
projections, (v) to the benefit of any advice provided by counsel to the
Agents or the other Lenders or to challenge the attorney-client privilege of
the communications between the Agents, such other Lenders and such counsel, or (vi) to
make or bring any claim, in its capacity as Lender, against the Agents with
respect to the fiduciary duties of the Agents or such Lender and the other
duties and obligations of the Agents hereunder; provided that
no amendment, modification or waiver to any Loan Document shall, without the
consent of the Sponsor Group, deprive any such Person of its pro rata share of
any payments to which the Lenders as a group are otherwise entitled; provided further
that, in the event that at any time Bank of America assigns its entire interest
in the Obligations, the Sponsor Group shall no longer be subject to the Sponsor
Group Limitations.

 

“Standard Securitization Undertakings” means
representations, warranties, covenants and indemnities entered into by a Loan
Party that are reasonably customary in an accounts receivable securitization
transaction, including without limitation, those relating to the servicing of
the assets of a Securitization Entity; it being understood that any
Securitization Repurchase Obligation that is customary in a Qualified
Securitization Transaction shall be deemed to be a Standard Securitization
Undertaking.

 

“Standby Letter of Credit” means any Letter of Credit that is
not a Commercial Letter of Credit and that (a) is used in lieu or in support
of performance guaranties or performance, surety or similar bonds (excluding
appeal bonds) arising in the ordinary course of business, (b) is used in
lieu or in support of stay or appeal bonds, (c) supports the payment of
insurance premiums for reasonably necessary casualty insurance carried by any
of the Loan Parties, or (d) supports payment or performance for identified
purchases or exchanges of products or services in the ordinary course of
business.

 

“Stated Amount” means at any time the maximum amount for which a
Letter of Credit may be honored.

 

“Statutory Reserve Rate” means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the FRB to which the Administrative Agent is
subject with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of
the Board). Such reserve percentages shall include those imposed pursuant to
such Regulation D.  LIBO Loans shall
be deemed to constitute eurocurrency funding and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under such
Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change
in any reserve percentage.

 

“Store” means any retail store (which may include any real
property, fixtures, equipment, inventory and other property related thereto)
operated, or to be operated, by any Loan Party.

 

56

 

“Subordinated Indebtedness” means Indebtedness which is
expressly subordinated in right of payment to the prior payment in full of the
Obligations and which is in form and on terms reasonably acceptable to the
Administrative Agent.

 

“Subsidiary” of a Person means a corporation, partnership, joint
venture, limited liability company or other business entity of which a majority
of the shares Equity Interests having ordinary voting power for the election of
directors or other governing body are at the time beneficially owned, or the
management of which is otherwise controlled, directly, or indirectly through
one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references
herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or
Subsidiaries of a Loan Party.

 

“Swap Contract” means (a) any and all rate swap
transactions, basis swaps, credit derivative transactions, forward rate
transactions, commodity swaps, commodity options, forward commodity contracts,
equity or equity index swaps or options, bond or bond price or bond index swaps
or options or forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap
transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transactions, currency options, spot
contracts, or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether
or not any such transaction is governed by or subject to any master agreement, (b) any
and all transactions of any kind, and the related confirmations, which are
subject to the terms and conditions of, or governed by, any form of master
agreement published by the International Swaps and Derivatives Association, Inc.,
any International Foreign Exchange Master Agreement, or any other master
agreement (any such master agreement, together with any related schedules, a “Master
Agreement”), including any such obligations or liabilities under any Master
Agreement, and (c) any Commodity Price Protection Agreement.

 

“Swap Termination Value” means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or
after the date such Swap Contracts have been closed out and termination value(s) determined
in accordance therewith, such termination value(s), and (b) for any date
prior to the date referenced in clause (a), the amount(s) determined as
the mark-to-market value(s) for such Swap Contracts, as determined based
upon one or more mid-market or other readily available quotations provided by
any recognized dealer in such Swap Contracts (which may include a Lender or any
Affiliate of a Lender).

 

“Swing Line” means the revolving credit facility made available
by the Swing Line Lender pursuant to Section 2.04.

 

“Swing Line Borrowing” means a borrowing of a Swing Line Loan
pursuant to Section 2.04.

 

“Swing Line Lender” means Bank of America, in its capacity as
provider of Swing Line Loans, or any successor swing line lender hereunder.

 

“Swing Line Loan” has the meaning specified in Section 2.04(a).

 

57

 

“Swing Line Loan Notice” means a notice of a Swing Line
Borrowing pursuant to Section 2.04(b), which, if in writing, shall
be substantially in the form of Exhibit B.

 

“Swing Line Sublimit” means an amount equal to the lesser of (a) $10,000,000
or (b) the Aggregate Commitments. 
The Swing Line Sublimit is part of, and not in addition to, the
Aggregate Commitments.

 

“Synthetic Lease Obligation” means the monetary obligation of a
Person under (a) a so-called synthetic, off-balance sheet or tax retention
lease, or (b) an agreement for the use or possession of property
(including sale and leaseback transactions), in each case, creating obligations
that do not appear on the balance sheet of such Person but which, upon the
application of any Debtor Relief Laws to such Person, would be characterized as
the indebtedness of such Person (without regard to accounting treatment).

 

“Tax Distributions” means Restricted Payments made to a direct
or indirect member of a Loan Party in respect of any taxable period in an
aggregate amount equal to the product of (a) the taxable income of the
Loan Parties for such period and (b) the highest combined marginal federal
and state tax rate applicable to individuals living in New York, provided that
Tax Distributions may be made not more frequently than quarterly with respect
to each period for which an installment of estimated tax would be required to
be paid by the direct or indirect members of the Loan Parties, except that an
additional final Tax Distribution may be made after the final taxable income of
the Loan Parties has been determined.

 

“Taxes” means all present or future taxes, levies, imposts,
duties, deductions, withholdings, assessments or other charges imposed by any
Governmental Authority in the nature of a tax, including any interest,
additions to tax, fees or penalties applicable thereto.

 

“Termination Date” means the earliest to occur of (i) the
Maturity Date, (ii) the date on which the maturity of the Obligations is
accelerated (or deemed accelerated) and the Commitments are irrevocably
terminated (or deemed terminated) in accordance with Article VIII,
or (iii) the date on which the Commitments are irrevocably terminated in
accordance with the provisions of Section 2.06.

 

“Total Outstandings” means the aggregate Outstanding Amount of
all Loans and all L/C Obligations.

 

“Trademark Security Agreement” means the Trademark Security
Agreement dated as of the Closing Date between the Lead Borrower and the
Collateral Agent, as amended, modified, supplemented or replaced and in effect
from time to time.

 

“Trading with the Enemy Act” has the meaning provided in Section 10.18.

 

“Trust Account” means the Notes Collateral Account, as defined
in the Intercreditor Agreement.

 

“Type” means, with respect to a Committed Loan, its character as
a Prime Rate Loan or a LIBO Rate Loan.

 

58

 

“UCC” or “Uniform Commercial Code” means the Uniform
Commercial Code as in effect from time to time in the State of New York; provided,
however, that if a term is defined in Article 9 of the Uniform
Commercial Code differently than in another Article thereof, the term
shall have the meaning set forth in Article 9; provided further
that, if by reason of mandatory provisions of law, perfection, or the effect of
perfection or non-perfection, of a security interest in any Collateral or the
availability of any remedy hereunder is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, “Uniform
Commercial Code” means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or effect of perfection or non-perfection or availability of such remedy, as
the case may be.

 

“UFCA” has the meaning provided in Section 10.21(d).

 

“UFTA” has the meaning provided in Section 10.21(d).

 

“Unfunded Pension Liability” means the excess of a Pension Plan’s
benefit liabilities under Section 4001(a)(16) of ERISA, over the current
value of that Pension Plan’s assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412 of
the Code for the applicable plan year.

 

“Unintentional Overadvance” means an Overadvance which, to the
Administrative Agent’s knowledge, did not constitute an Overadvance when made
but which has become an Overadvance resulting from changed circumstances beyond
the control of the Credit Parties, including, without limitation, a reduction
in the Appraised Value of property or assets included in the Borrowing Base or
misrepresentation by the Loan Parties.

 

“United States” and “U.S.” mean the United States of
America.

 

“Unreimbursed Amount” has the meaning provided in Section 2.03(c)(i).

 

“Wholly Owned Subsidiary” means, with respect to any Person, any
corporation, partnership or other entity of which all of the Equity Interests
(other than, in the case of a corporation, directors’ qualifying shares) are
directly or indirectly owned or controlled by such Person or one or more Wholly
Owned Subsidiaries of such Person or by such Person and one or more Wholly
Owned Subsidiaries of such Person.

 

1.02    Other
Interpretive Provisions.  With
reference to this Agreement and each other Loan Document, unless otherwise
specified herein or in such other Loan Document:

 

(a)                The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  The words “include,”
“includes” and “including” shall be deemed to be followed by the
phrase “without limitation.”  The word “will”
shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any
definition of or reference to any agreement, instrument or other document
(including any Organization Document) shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or 

 

59

 

otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein
or in any other Loan Document), (ii) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (iii) the
words “herein,” “hereof” and “hereunder,” and words of
similar import when used in any Loan Document, shall be construed to refer to
such Loan Document in its entirety and not to any particular provision thereof,
(iv) all references in a Loan Document to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, the Loan Document in which such references appear, (v) any
reference to any law shall include all statutory and regulatory provisions
consolidating, amending replacing or interpreting such law and any reference to
any law or regulation shall, unless otherwise specified, refer to such law or
regulation as amended, modified or supplemented from time to time, and (vi) the
words “asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.

 

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

 

(c)                Article and Section headings
used herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any
other Loan Document.

 

1.03    Accounting
Terms.

 

(a)                Generally.  All accounting terms not specifically or
completely defined herein shall be construed in conformity with, and all
financial data (including financial ratios and other financial calculations)
required to be submitted pursuant to this Agreement shall be prepared in conformity
with, GAAP applied on a consistent basis, as in effect from time to time,
applied in a manner consistent with that used in preparing the Audited
Financial Statements, except as otherwise specifically prescribed
herein.

 

(b)               Changes in GAAP.  If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in any
Loan Document, and either the Lead Borrower or the Required Lenders shall so
request, the Administrative Agent, the Lenders and the Lead Borrower shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the
approval of the Required Lenders); provided that, until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Lead
Borrower shall provide to the Administrative Agent and the Lenders financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting forth a reconciliation between calculations of such
ratio or requirement made before and after giving effect to such change in
GAAP.

 

60

 

1.04               Rounding.  Any financial ratios
required to be maintained by the Borrowers pursuant to this Agreement shall be
calculated by dividing the appropriate component by the other component,
carrying the result to one place more than the number of places by which such
ratio is expressed herein and rounding the result up or down to the nearest
number (with a rounding-up if there is no nearest number).

 

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

 

1.06               Letter of Credit Amounts.
 Unless
otherwise specified, all references herein to the amount of a Letter of Credit
at any time shall be deemed to be the Stated Amount of such Letter of Credit in
effect at such time; provided, however, that with respect to any Letter of
Credit that, by its terms of any Issuer Documents related thereto, provides for
one or more automatic increases in the Stated Amount thereof, the amount of
such Letter of Credit shall be deemed to be the maximum Stated Amount of such Letter
of Credit after giving effect to all such increases, whether or not such
maximum Stated Amount is in effect at such time.

 

ARTICLE II

THE COMMITMENTS AND CREDIT
EXTENSIONS

 

2.01               Committed Loans; Reserves.

 

(a)                Subject to the terms and
conditions set forth herein, each Lender severally agrees to make loans (each
such loan, a “Committed Loan”) to the Borrowers from time to time, on
any Business Day during the Availability Period,  in an aggregate amount not
to exceed at any time outstanding the lesser of (x) the amount of such
Lender’s Commitment at such time, or (y) such Lender’s Applicable
Percentage of the Borrowing Base at such time, subject in each case to the
following limitations:

 

(i)                                     after giving
effect to any Committed Borrowing, the Total Outstandings shall not exceed the
Loan Cap;

 

(ii)                                  after giving
effect to any Committed Borrowing, the aggregate Outstanding Amount of the
Committed Loans of any Lender, plus such Lender’s Applicable Percentage
of the Outstanding Amount of all L/C Obligations, plus such Lender’s
Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall
not exceed such Lender’s Commitment; and

 

(iii)                               The Outstanding
Amount of all L/C Obligations shall not at any time exceed the Letter of Credit
Sublimit.

 

Within the limits of each Lender’s
Commitment, and subject to the other terms and conditions hereof, the Borrowers
may borrow under this Section 2.01, prepay under Section 2.05,
and reborrow under this Section 2.01.  Committed Loans may be Prime Rate Loans or LIBO
Rate Loans, as further provided herein.

 

(b)               The following are the
Inventory Reserves and Availability Reserves as of the Closing Date:

 

61

 

(i)                                     Rent Reserve
(an Availability Reserve): An amount equal to one (1) month’s rent for all
of the Borrowers’ leased locations in the States of Pennsylvania, Virginia and
Washington, other than leased locations with respect to which the Collateral
Agent has received a Collateral Access Agreement in form reasonably satisfactory
to the Collateral Agent;

 

(ii)                                  Customer Credit
Liabilities Reserve (an Availability Reserve): An amount equal to fifty percent
(50%) of the Customer Credit Liabilities as reflected in the Borrowers’ books
and records;

 

(iii)                               Perishable
Inventory Reserve (an Inventory Reserve): An amount equal to fifty percent
(50%) of the Perishable Inventory reflected from time to time on the Borrowers’
books and records;

 

(iv)                              PACA Reserve
(an Availability Reserve):  An amount
equal to any liabilities owed at any time to any Person entitled to the
benefits of PACA or any similar statute or regulation as reflected from time to
time on the Borrowers’ books and records, which Reserve shall be $0 as of the
Closing Date;

 

(v)                                 Buffalo
Economic Renaissance Reserve (an Availability Reserve): An Amount equal to Two
Hundred Thousand Dollars ($200,000);

 

(vi)                              Retail Method
Adjustment Reserve (an Inventory Reserve): An amount equal to Nine Million One
Hundred Eighty-One Thousand Dollars ($9,181,000); and

 

(vii)                           Dilution Reserve
(an Availability Reserve): An amount equal to fifteen percent (15%) of Eligible
Trade Receivables.

 

(c)                The Administrative Agent
shall have the right, at any time and from time to time after the Closing Date
in its Permitted Discretion, to establish new, or modify or eliminate any
existing, eligibility criteria or Reserves upon one (1) Business Day prior
notice to the Lead Borrower (during which period the Administrative Agent shall
be available to discuss any such proposed changes with the Borrowers at reasonable
times and upon reasonable advance notice); provided that no
such prior notice shall be required (i) after the occurrence and during
the continuance of an Event of Default or (ii) for (A) changes to any
Reserves resulting solely by virtue of mathematical calculations of the amount
of the Reserve in accordance with the methodology of calculation previously
utilized, or (B) changes to Reserves or establishment of additional
Reserves if a Material Adverse Effect has occurred or could reasonably be expected
to occur were such Reserves not changed or established prior to the expiration
of such one (1) Business Day period.

 

2.02    Borrowings, Conversions and
Continuations of Committed Loans.

 

(a)                Committed Loans (other than
Swing Line Loans) shall be either Prime Rate Loans or LIBO Rate Loans, as the
Lead Borrower may request subject to and in accordance with this Section 2.02.  All Swing Line Loans shall be only Prime Rate

 

62

 

Loans. 
Subject to the other provisions of this Section 2.02,
Committed Borrowings of more than one Type may be incurred at the same time.

 

(b)               Each Committed Borrowing,
each conversion of Committed Loans from one Type to the other, and each
continuation of LIBO Rate Loans shall be made upon the Lead Borrower’s
irrevocable notice to the Administrative Agent, which may be given by
telephone.  Each such notice must be
received by the Administrative Agent not later than 11:00 a.m. (i) two
(2) Business Days prior to the requested date of any Borrowing of,
conversion to, or continuation of, LIBO Rate Loans or of any conversion of LIBO
Rate Loans to Prime Rate Loans, and (ii) on the date of any Borrowing of
Prime Rate Loans.  Each telephonic notice
by the Lead Borrower pursuant to this Section 2.02(b) must be
confirmed promptly by delivery to the Administrative Agent of a written
Committed Loan Notice or Conversion/Continuation Notice, as the case may be,
appropriately completed and signed by a Responsible Officer of the Lead
Borrower.  Each Borrowing of, conversion
to, or continuation of, LIBO Rate Loans shall be in a principal amount of
$1,000,000 or a whole multiple of $100,000 in excess thereof.  Except as provided in Sections 2.03(c) and
2.04(b), each Borrowing of or conversion to Prime Rate Loans shall be in
a principal amount of $250,000 or a whole multiple of $100,000 in excess
thereof.  Each Committed Loan Notice
(whether telephonic or written) shall specify (i) the requested date of
the Borrowing (which shall be a Business Day), (ii) the principal amount
of Committed Loans to be borrowed, (iii) the Type of Committed Loans to be
borrowed, and (iv) if applicable, the duration of the Interest Period with
respect thereto.  Each
Conversion/Continuation Notice (whether telephonic or written) shall specify (i) whether
the Borrowers are requesting a conversion of Committed Loans from one Type to
the other or a continuation of LIBO Rate Loans, (ii) the requested date of
the conversion or continuation, as the case may be (which shall be a Business
Day), (iii) the principal amount of Committed Loans to be converted or
continued, (iv) the Type of Committed Loans to which existing Committed
Loans are to be converted, and (v) if applicable, the duration of the
Interest Period with respect thereto.  If
the Lead Borrower fails to specify a Type of Committed Loan in a Committed Loan
Notice or if the Lead Borrower fails to give a timely notice of a conversion or
continuation in a Conversion/Continuation Notice, then the applicable Committed
Loans shall be made as, or converted to, Prime Rate Loans.  Any such automatic conversion to Prime Rate
Loans shall be effective as of the last day of the Interest Period then in
effect with respect to the applicable LIBO Rate Loans.  If the Lead Borrower requests a Borrowing of
LIBO Rate Loans in any such Committed Loan Notice or a conversion to, or
continuation of, LIBO Rate Loans in a Conversion/Continuation Notice, but fails
to specify an Interest Period, it will be deemed to have specified an Interest
Period of one month.  Notwithstanding
anything to the contrary herein, a Swing Line Loan may not be converted to a
LIBO Rate Loan.

 

(c)                Following receipt of a
Committed Loan Notice, the Administrative Agent shall promptly notify each
Lender of the amount of its Applicable Percentage of the applicable Committed
Loans, and if no timely notice of a conversion or continuation in a
Conversion/Continuation Notice is provided by the Lead Borrower, the
Administrative Agent shall notify each Lender of the details of any automatic 

 

63

 

conversion to Prime Rate Loans described in Section 2.02(b).  In the case of a Committed Borrowing, each
Lender shall make the amount of its Committed Loan available to the
Administrative Agent in immediately available funds at the Administrative Agent’s
Office not later than 1:00 p.m. on the Business Day specified in the
applicable Committed Loan Notice.  Upon
satisfaction of the applicable conditions set forth in Section 4.02
(and, if such Borrowing is the initial Credit Extension, Section 4.01),
the Administrative Agent shall use reasonable efforts to make all funds so
received available to the Borrowers in like funds by no later than 4:00 p.m.
on the day of receipt by the Administrative Agent either by (i) crediting
the account of the Lead Borrower on the books of Bank of America with the
amount of such funds or (ii) wire transfer of such funds, in each case in
accordance with instructions provided to (and reasonably acceptable to) the
Administrative Agent by the Lead Borrower; provided, however,
that if, on the date the Committed Loan Notice with respect to such Borrowing
is given by the Lead Borrower, there are L/C Borrowings outstanding, then the
proceeds of such Borrowing, first, shall be applied to the payment in
full of any such L/C Borrowings, and, second, shall be made available to
the Borrowers as provided above.

 

(d)               The Administrative Agent,
without the request of the Lead Borrower, may advance any interest, fee,
service charge, Credit Party Expense, or other payment to which any Credit
Party is entitled from the Loan Parties pursuant hereto or any other Loan
Document and may charge the same to the Loan Account notwithstanding that an
Overadvance may result thereby.  The
Administrative Agent shall advise the Lead Borrower of any such advance or
charge promptly after the making thereof. 
Such action on the part of the Administrative Agent shall not constitute
a waiver of the Administrative Agent’s rights and the Borrowers’ obligations
under Section 2.05.  Any
amount which is added to the principal balance of the Loan Account as provided
in this Section 2.02(d) shall bear interest at the interest
rate then and thereafter applicable to Prime Rate Loans.

 

(e)                Except as otherwise provided
herein, a LIBO Rate Loan may be continued or converted only on the last day of
an Interest Period for such LIBO Rate Loan. 
During the existence of an Event of Default, no Loans may be requested
as, converted to, or continued as, LIBO Rate Loans without the Consent of the
Required Lenders.

 

(f)                  The Administrative Agent
shall promptly notify the Lead Borrower and the Lenders of the interest rate
applicable to any Interest Period for LIBO Rate Loans upon determination of
such interest rate.  At any time that Prime
Rate Loans are outstanding, the Administrative Agent shall notify the Lead
Borrower and the Lenders of any change in Bank of America’s prime rate used in
determining the Prime Rate promptly following the public announcement of such
change.

 

(g)               After giving effect to all
Committed Borrowings, all conversions of Committed Loans from one Type to the
other, and all continuations of Committed Loans as the same Type, there shall
not be more than four (4) Interest Periods in effect with respect to LIBO
Rate Loans.

 

64

 

(h)               The Administrative Agent,
the Lenders, the Swing Line Lender and the L/C Issuer shall have no obligation
to make any Loan or to provide any Letter of Credit if an Overadvance would
result.  The Administrative Agent may, in
its discretion, make Permitted Overadvances without the consent of the Lenders,
the Swing Line Lender and the L/C Issuer and each Lender shall be bound
thereby.  Any Permitted Overadvance may
constitute a Swing Line Loan. A Permitted Overadvance is for the account of the
Borrowers and shall constitute a Prime Rate Loan and an Obligation and shall be
repaid by the Borrowers in accordance with the provisions of Section 2.05(c).  The making of any such Permitted Overadvance
on any one occasion shall not obligate the Administrative Agent or any Lender
to make or permit any Permitted Overadvance on any other occasion or to permit
such Permitted Overadvances to remain outstanding. The making by the
Administrative Agent of a Permitted Overadvance shall not modify or abrogate
any of the provisions of Section 2.03 regarding the Lenders’
obligations to purchase participations with respect to Letters of Credit or of Section 2.04
regarding the Lenders’ obligations to purchase participations with respect to
Swing Line Loans.  The Administrative
Agent shall have no liability for, and no Loan Party or Credit Party shall have
the right to, or shall, bring any claim of any kind whatsoever against the
Administrative Agent with respect to Unintentional Overadvances regardless of
the amount of any such Overadvance(s).

 

2.03    Letters
of Credit.

 

(a)                The Letter of Credit
Commitment.

 

(i)                                     Subject to the
terms and conditions set forth herein, (A) the L/C Issuer agrees, in
reliance upon the agreements of the Lenders set forth in this Section 2.03,
(1) from time to time on any Business Day during the period from the
Closing Date until the Letter of Credit Expiration Date, to issue Letters of
Credit for the account of the Borrowers, and to amend or extend Letters of
Credit previously issued by it, in accordance with Section 2.03(b) below,
and (2) to honor drawings under the Letters of Credit, and (B) the
Lenders severally agree to participate in Letters of Credit issued for the
account of the Borrowers and any drawings thereunder; provided that,
after giving effect to any L/C Credit Extension with respect to any Letter of
Credit, (x) the Total Outstandings shall not exceed the lesser of the
Aggregate Commitments or the Borrowing Base, (y) the aggregate Outstanding
Amount of the Committed Loans of any Lender, plus such Lender’s
Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus
such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line
Loans shall not exceed such Lender’s Commitment, and (z) the Outstanding
Amount of the L/C Obligations shall not exceed the Letter of Credit
Sublimit.  Each request by the Lead
Borrower for the issuance or amendment of a Letter of Credit shall be deemed to
be a representation by the Borrowers that the L/C Credit Extension so requested
complies with the conditions set forth in the proviso to the preceding
sentence.  Within the foregoing limits,
and subject to the terms and conditions hereof, the Borrowers’ ability to
obtain Letters of Credit shall be fully revolving, and accordingly the Borrowers

 

65

 

may, during the foregoing period, obtain
Letters of Credit to replace Letters of Credit that have expired or that have
been drawn upon and reimbursed.

 

(ii)                                  The L/C Issuer
shall not issue any Letter of Credit, if:

 

(A)                              subject to Section 2.03(b)(iii),
the expiry date of such requested Standby Letter of Credit would occur more
than twelve months after the date of issuance or last extension, unless the
Required Lenders have approved such expiry date; or

 

(B)                                subject to Section 2.03(b)(iii),
the expiry date of such requested Commercial Letter of Credit would occur more
than 120 days after the date of issuance or last extension, unless the Required
Lenders have approved such expiry date; or

 

(C)                                the expiry date
of such requested Letter of Credit would occur after the Letter of Credit
Expiration Date, unless either such Letter of Credit is Cash Collateralized on
or prior to the date of issuance of such Letter of Credit (or such later date
as to which the Admnistrative Agent may agree) or all the Lenders have approved
such expiry date.

 

(iii)          The L/C Issuer
shall not issue any Letter of Credit without the prior consent of the
Administrative Agent if:

 

(A)                              any order,
judgment or decree of any Governmental Authority or arbitrator shall by its
terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of
Credit, or any Law applicable to the L/C Issuer or any request or directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the L/C Issuer with respect to such
Letter of Credit any restriction, reserve or capital requirement (for which the
L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing
Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or
expense which was not applicable on the Closing Date and which the L/C Issuer
in good faith deems material to it;

 

(B)                                the issuance of
such Letter of Credit would violate one or more policies of the L/C Issuer
applicable to letters of credit generally;

 

(C)                                 except as
otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of
Credit is in an initial Stated Amount less than $25,000, in the case of a
Commercial Letter of Credit, or $100,000, in the case of a Standby Letter of
Credit;

 

(D)                               such Letter of
Credit is to be denominated in a currency other than Dollars; provided that if the L/C
Issuer, in its discretion, issues 

 

66

 

a Letter of Credit
denominated in a currency other than Dollars, all reimbursements by the Borrowers
of the honoring of any drawing under such Letter of Credit shall be paid in the
currency in which such Letter of Credit was denominated;

 

(E)                                 such Letter of
Credit contains any provisions for automatic reinstatement of the Stated Amount
after any drawing thereunder; or

 

(F)                                 a default of
any Lender’s obligations to fund under Section 2.03(c) exists
or any Lender is at such time a Defaulting Lender or Deteriorating Lender
hereunder, unless the L/C Issuer has received Cash Collateral or entered into
other arrangements satisfactory to the L/C Issuer with the Borrowers or such
Lender to eliminate the L/C Issuer’s risk with respect to such Lender.

 

(iv)                              The L/C Issuer
shall not amend any Letter of Credit if the L/C Issuer would not be permitted
at such time to issue such Letter of Credit in its amended form under the terms
hereof or if the beneficiary of such Letter of Credit does not accept the
proposed amendment to such Letter of Credit.

 

(v)                                 The L/C Issuer
shall act on behalf of the Lenders with respect to any Letters of Credit issued
by it and the documents associated therewith, and the L/C Issuer shall have all
of the benefits and immunities (A) provided to the Administrative Agent in
Article IX with respect to any acts taken or omissions suffered by
the L/C Issuer in connection with Letters of Credit issued by it or proposed to
be issued by it and Issuer Documents pertaining to such Letters of Credit as
fully as if the term “Administrative Agent” as used in Article IX
included the L/C Issuer with respect to such acts or omissions, and (B) as
additionally provided herein with respect to the L/C Issuer.

 

(b)               Procedures for Issuance and
Amendment of Letters of Credit; Auto-Extension Letters of Credit.

 

(i)                                     Each Letter of
Credit shall be issued or amended, as the case may be, upon the request of the
Lead Borrower delivered to the L/C Issuer (with a copy to the Administrative
Agent) in the form of a Letter of Credit Application, appropriately completed
and signed by a Responsible Officer of the Lead Borrower.  Such Letter of Credit Application must be
received by the L/C Issuer and the Administrative Agent not later than 11:00 a.m.
at least two Business Days (or such other date and time as the Administrative
Agent and the L/C Issuer may agree in a particular instance in their sole
discretion) prior to the proposed issuance date or date of amendment, as the
case may be.  In the case of a request
for an initial issuance of a Letter of Credit, such Letter of Credit
Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the
proposed issuance date of the requested Letter of Credit (which shall be a
Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the
name and address of the beneficiary thereof; (E) the documents to be presented
by such beneficiary in 

 

67

 

case of any drawing thereunder; (F) the
full text of any certificate to be presented by such beneficiary in case of any
drawing thereunder; (G) the identity of the Borrower for the account of
which such Letter of Credit is requested to be issued; and (H) such other
matters as the L/C Issuer may reasonably require.  In the case of a request for an amendment of
any outstanding Letter of Credit, such Letter of Credit Application shall
specify in form and detail satisfactory to the L/C Issuer: (A) the Letter
of Credit to be amended; (B) the proposed date of amendment thereof (which
shall be a Business Day); (C) the nature of the proposed amendment; and (D) such
other matters as the L/C Issuer may require. 
Additionally, the Lead Borrower shall furnish to the L/C Issuer and the
Administrative Agent such other documents and information pertaining to
such requested Letter of Credit issuance or amendment, including any Issuer
Documents, as the L/C Issuer or the Administrative Agent may reasonably
require.

 

(ii)                                  Promptly after
receipt of any Letter of Credit Application, the L/C Issuer will confirm with
the Administrative Agent (by telephone or in writing) that the Administrative
Agent has received a copy of such Letter of Credit Application from the Lead
Borrower and, if not, the L/C Issuer will provide the Administrative Agent with
a copy thereof.  Unless the L/C Issuer
has received written notice from any Lender, the Administrative Agent or any
Loan Party, at least one Business Day prior to the requested date of issuance
or amendment of the applicable Letter of Credit, that one or more applicable
conditions contained in Article IV shall not then be satisfied,
then, subject to the terms and conditions hereof, the L/C Issuer shall, on the
requested date, issue a Letter of Credit for the account of the applicable
Borrower or enter into the applicable amendment, as the case may be, in each
case in accordance with the L/C Issuer’s usual and customary business
practices.  Immediately upon the issuance
or amendment of each Letter of Credit, each Lender shall be deemed to (without
any further action), and hereby irrevocably and unconditionally agrees to, purchase
from the L/C Issuer, without recourse or warranty, a risk participation in such
Letter of Credit in an amount equal to the product of such Lender’s Applicable
Percentage times the Stated Amount of such Letter of Credit.  Upon any change in the Commitments under this
Agreement, it is hereby agreed that with respect to all L/C Obligations, there
shall be an automatic adjustment to the participations hereby created to
reflect the new Applicable Percentages of the assigning and assignee Lenders.

 

(iii)                               If the Lead
Borrower so requests in any applicable Letter of Credit Application, the L/C
Issuer may, in its sole and absolute discretion, agree to issue a Standby
Letter of Credit that has automatic extension provisions (each, an “Auto-Extension
Letter of Credit”); provided that any such Auto-Extension
Letter of Credit must permit the L/C Issuer to prevent any such extension at
least once in each twelve-month period (commencing with the date of issuance of
such Standby Letter of Credit) by giving prior notice to the beneficiary
thereof not later than a day (the “Non-Extension Notice Date”) in each
such twelve-month period to be agreed upon at the time such Standby Letter of
Credit is issued.  Unless otherwise
directed by the L/C Issuer, the Lead Borrower shall not be required to 

 

68

 

make a specific request to the L/C Issuer for
any such extension.  Once an
Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to
have authorized (but may not require) the L/C Issuer to permit the extension of
such Standby Letter of Credit at any time to an expiry date not later than the
Letter of Credit Expiration Date; provided, however, that the L/C
Issuer shall not permit any such extension if (A) the L/C Issuer has
determined that it would not be permitted, or would have no obligation, at such
time to issue such Standby Letter of Credit in its revised form (as extended)
under the terms hereof (by reason of the provisions of clauses (ii) or (iii) of
Section 2.03(a) or otherwise), or (B) it has received
notice (which may be by telephone or in writing) on or before the day that is
five Business Days before the Non-Extension Notice Date (1) from the
Administrative Agent that the Required Lenders have elected not to permit such
extension or (2) from the Administrative Agent, any Lender or the Lead
Borrower that one or more of the applicable conditions specified in Section 4.02
is not then satisfied, and in each such case directing the L/C Issuer not to
permit such extension.

 

(iv)                              Promptly after
its delivery of any Letter of Credit or any amendment to a Letter of Credit to
an advising bank with respect thereto or to the beneficiary thereof, the L/C
Issuer will also deliver to the Lead Borrower and the Administrative Agent a
true and complete copy of such Letter of Credit or amendment.

 

(c)                Drawings and Reimbursements;
Funding of Participations.

 

(i)                                     Upon receipt
from the beneficiary of any Letter of Credit of any notice of a drawing under
such Letter of Credit, the L/C Issuer shall notify the Lead Borrower and the
Administrative Agent thereof; provided, however, that any failure
to give or delay in giving such notice shall not relieve the Borrowers of their
obligation to reimburse the L/C Issuer and the Lenders with respect to any such
payment.  Not later than 11:00 a.m.
on the date of any payment by the L/C Issuer under a Letter of Credit (each
such date, an “Honor Date”), the Borrowers shall reimburse the L/C
Issuer through the Administrative Agent in an amount equal to the amount of
such drawing.  If the Borrowers fail to
so reimburse the L/C Issuer by such time, the Administrative Agent shall
promptly notify each Lender of the Honor Date, the amount of the unreimbursed
drawing (the “Unreimbursed Amount”), and the amount of such Lender’s
Applicable Percentage thereof.  In such
event, the Borrowers shall be deemed to have requested a Committed Borrowing of
Prime Rate Loans to be disbursed on the Honor Date in an amount equal to the
Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02
for the principal amount of Prime Rate Loans, but subject to the amount of the
unutilized portion of the Aggregate Commitments and the conditions set forth in
Section 4.02 (other than the delivery of a Committed Loan
Notice).  Any notice given by the L/C
Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may
be given by telephone if immediately confirmed in writing; provided that
the lack of such an

 

69

 

immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.

 

(ii)                                  Each Lender
shall, upon any notice pursuant to Section 2.03(c)(i), make funds
available to the Administrative Agent for the account of the L/C Issuer at the
Administrative Agent’s Office in an amount equal to its Applicable Percentage
of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day
specified in such notice by the Administrative Agent, whereupon, subject to the
provisions of Section 2.03(c)(iii), each Lender that so makes funds
available shall be deemed to have made a Prime Rate Loan to the Borrowers in
such amount.  The Administrative Agent
shall remit the funds so received to the L/C Issuer.

 

(iii)                               With respect to
any Unreimbursed Amount that is not fully refinanced by a Committed Borrowing
of Prime Rate Loans because the conditions set forth in Section 4.02
cannot be satisfied or for any other reason, the Borrowers shall be deemed to
have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed
Amount that is not so refinanced, which L/C Borrowing shall be due and payable
on demand (together with interest) and shall bear interest at the Default
Rate.  In such event, each Lender’s
payment to the Administrative Agent for the account of the L/C Issuer pursuant
to Section 2.03(c)(i) shall be deemed payment in respect of
its participation in such L/C Borrowing and shall constitute an L/C Advance
from such Lender in satisfaction of its participation obligation under this Section 2.03.

 

(iv)                              Until each
Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.03(c) to
reimburse the L/C Issuer for any amount drawn under any Letter of Credit,
interest in respect of such Lender’s Applicable Percentage of such amount shall
be solely for the account of the L/C Issuer.

 

(v)                                 Each Lender’s
obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuer
for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c),
shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense
or other right which such Lender may have against the L/C Issuer, any Borrower
or any other Person for any reason whatsoever, (B) the occurrence or continuance
of a Default or an Event of Default, or (C) any other occurrence, event or
condition, whether or not similar to any of the foregoing; provided, however,
that each Lender’s obligation to make Committed Loans pursuant to this Section 2.03(c) is
subject to the conditions set forth in Section 4.02 (other than
delivery by the Lead Borrower of a Committed Loan Notice).  No such making of an L/C Advance shall
relieve or otherwise impair the obligation of the Borrowers to reimburse the
L/C Issuer for the amount of any payment made by the L/C Issuer under any
Letter of Credit, together with interest as provided herein.

 

70

 

(vi)                              If any Lender
fails to make available to the Administrative Agent for the account of the L/C
Issuer any amount required to be paid by such Lender pursuant to the foregoing
provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii),
the L/C Issuer shall be entitled to recover from such Lender (acting through
the Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment
is immediately available to the L/C Issuer at a rate per annum equal to the
greater of the Federal Funds Rate and a rate determined by the L/C Issuer in
accordance with banking industry rules on interbank compensation plus any
administrative, processing or similar fees customarily charged by the L/C
Issuer in connection with the foregoing. 
If such Lender pays such amount (with interest and fees as aforesaid),
the amount so paid shall constitute such Lender’s Committed Loan included in
the relevant Committed Borrowing or L/C Advance in respect of the relevant L/C
Borrowing, as the case may be.  A
certificate of the L/C Issuer submitted to any Lender (through the
Administrative Agent) with respect to any amounts owing under this clause (vi) shall
be conclusive absent manifest error.

 

(d)               Repayment of Participations.

 

(i)                                     At any time
after the L/C Issuer has made a payment under any Letter of Credit and has
received from any Lender such Lender’s L/C Advance in respect of such payment
in accordance with Section 2.03(c), if the Administrative Agent
receives for the account of the L/C Issuer any payment in respect of the
related Unreimbursed Amount or interest thereon (whether directly from the
Borrowers or otherwise, including proceeds of Cash Collateral applied thereto
by the Administrative Agent), the Administrative Agent will distribute to such
Lender its Applicable Percentage thereof (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Lender’s
L/C Advance was outstanding) in the same funds as those received by the
Administrative Agent.

 

(ii)                                  If any payment
received by the Administrative Agent for the account of the L/C Issuer pursuant
to Section 2.03(c)(i) is required to be returned under any of
the circumstances described in Section 10.05 (including pursuant to
any settlement entered into by the L/C Issuer in its discretion), each Lender
shall pay to the Administrative Agent for the account of the L/C Issuer its
Applicable Percentage thereof on demand of the Administrative Agent, plus
interest thereon from the date of such demand to the date such amount is returned
by such Lender, at a rate per annum equal to the Federal Funds Rate from time
to time in effect.  The obligations of
the Lenders under this clause shall survive the payment in full of the
Obligations and the termination of this Agreement.

 

(e)                Obligations Absolute.  The obligation of the Borrowers to reimburse
the L/C Issuer for each drawing under each Letter of Credit and to repay each
L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be
paid strictly 

 

71

 

in accordance with the terms of this
Agreement under all circumstances, including the following:

 

(i)                                     any lack of
validity or enforceability of such Letter of Credit, this Agreement, or any
other Loan Document;

 

(ii)                                  the existence
of any claim, counterclaim, setoff, defense or other right that the Borrowers
or any Subsidiary may have at any time against any beneficiary or any
transferee of such Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the L/C Issuer or any other
Person, whether in connection with this Agreement, the transactions
contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction;

 

(iii)                               any draft,
demand, certificate or other document presented under such Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; or any loss or
delay in the transmission or otherwise of any document required in order to
make a drawing under such Letter of Credit;

 

(iv)                              any payment by
the L/C Issuer under such Letter of Credit against presentation of a draft or
certificate that does not strictly comply with the terms of such Letter of
Credit; or any payment made by the L/C Issuer under such Letter of Credit to
any Person purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of such
Letter of Credit, including any arising in connection with any proceeding under
any Debtor Relief Law;

 

(v)                                 any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing, including any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Borrowers or any of their
Subsidiaries; or

 

(vi)                              the fact that
any Event of Default shall have occurred and be continuing.

 

The Lead Borrower shall
promptly examine a copy of each Letter of Credit and each amendment thereto
that is delivered to it and, in the event of any claim of noncompliance with
the Lead Borrower’s instructions or other irregularity, the Lead Borrower will
promptly notify the L/C Issuer.  The
Borrowers shall be conclusively deemed to have waived any such claim against
the L/C Issuer and its correspondents unless such notice is given as aforesaid.

 

(f)                  Role of L/C Issuer.  Each Lender and the Borrowers agree that, in
paying any drawing under a Letter of Credit, the L/C Issuer shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and documents expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or 

 

72

 

delivering any such document.  None of the L/C Issuer, the Administrative
Agent, any of their respective Related Parties nor any correspondent,
participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any
action taken or omitted in connection herewith at the request or with the
approval of the Lenders or the Required Lenders, as applicable; (ii) any
action taken or omitted in the absence of gross negligence or willful
misconduct; (iii) any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit or any error in interpretation of technical
terms; or (iv) the due execution, effectiveness, validity or
enforceability of any document or instrument related to any Letter of Credit or
Issuer Document.  The Borrowers hereby
assume all risks of the acts or omissions of any beneficiary or transferee with
respect to its use of any Letter of Credit; provided, however,
that this assumption is not intended to, and shall not, preclude the Borrowers’
pursuing such rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. 
None of the L/C Issuer, the Administrative Agent, any of their
respective Related Parties nor any correspondent, participant or assignee of
the L/C Issuer shall be liable or responsible for any of the matters described
in clauses (i) through (v) of Section 2.03(e); provided,
however, that anything in such clauses to the contrary notwithstanding,
the Borrowers may have a claim against the L/C Issuer, and the L/C Issuer may
be liable to the Borrowers, to the extent, but only to the extent, of any
direct, as opposed to consequential or exemplary, damages suffered by the
Borrowers which the Borrowers prove were caused by the L/C Issuer’s willful
misconduct or gross negligence or the L/C Issuer’s willful failure to pay under
any Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions
of a Letter of Credit.  In furtherance,
and not in limitation, of the foregoing, the L/C Issuer may accept documents
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary (or the
L/C Issuer may refuse to accept and make payment upon such documents if such
documents are not in strict compliance with the terms of such Letter of
Credit), and the L/C Issuer shall not be responsible for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason.

 

(g)               Cash Collateral.  Upon the request of the Administrative Agent,
(i) if the L/C Issuer has honored any full or partial drawing request
under any Letter of Credit and such drawing has resulted in an L/C Borrowing,
or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation
for any reason remains outstanding, the Borrowers shall, in each case, immediately
Cash Collateralize the then Outstanding Amount of all L/C Obligations.  Sections 2.05 and 8.02(c) set
forth certain additional requirements to deliver Cash Collateral
hereunder.  For purposes of this Section 2.03,
Section 2.05 and Section 8.02(c), “Cash
Collateralize” means to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as
collateral for the L/C Obligations, cash or deposit account balances in an
amount equal to one hundred five percent (105%) of the Outstanding Amount of
all L/C Obligations, pursuant to documentation in form and substance
satisfactory to the 

 

73

 

Administrative Agent and the L/C Issuer
(which documents are hereby Consented to by the Lenders).  Derivatives of such term have corresponding
meanings.  The Borrowers hereby grant to
the Collateral Agent a security interest in all such cash, deposit accounts and
all balances therein and all proceeds of the foregoing.  Cash Collateral shall be maintained in
blocked, non-interest bearing deposit accounts at Bank of America.  If, at any time, the Administrative Agent
determines that any funds held as Cash Collateral are subject to any right or
claim of any Person other than the Administrative Agent or that the total
amount of such funds is less than the aggregate Outstanding Amount of all L/C
Obligations, the Borrowers will, forthwith upon demand by the Administrative
Agent, pay to the Administrative Agent, as additional funds to be deposited as
Cash Collateral, an amount equal to the excess of (x) such aggregate Outstanding
Amount over (y) the total amount of funds, if any, then held as Cash
Collateral that the Administrative Agent determines to be free and clear of any
such right and claim.  Upon the drawing
of any Letter of Credit for which funds are on deposit as Cash Collateral, such
funds shall be applied, to the extent permitted under applicable Laws, to
reimburse the L/C Issuer and, to the extent not so applied, shall thereafter be
applied to satisfy other Obligations.

 

(h)               Applicability of ISP and UCP.  Unless otherwise expressly agreed by the L/C
Issuer and the Lead Borrower when a Letter of Credit is issued, (i) the rules of
the ISP shall apply to each Standby Letter of Credit, and (ii) the rules of
the Uniform Customs and Practice for Documentary Credits, as most recently
published by the International Chamber of Commerce at the time of issuance
shall apply to each Commercial Letter of Credit.

 

(i)                   Letter of
Credit Fees.  The
Borrowers shall pay to the Administrative Agent for the account of each Lender
in accordance with its Applicable Percentage a Letter of Credit fee (the “Letter
of Credit Fee”) for each Letter of Credit equal to the Applicable Margin
for LIBO Rate Loans multiplied by the daily Stated Amount under each
such Letter of Credit (whether or not such maximum amount is then in effect
under such Letter of Credit).  For
purposes of computing the daily amount available to be drawn under any Letter
of Credit, the amount of the Letter of Credit shall be determined in accordance
with Section 1.06.  Letter of
Credit Fees shall be (i) due and payable on the first Business Day after
the end of each calendar quarter, commencing with the first such date to occur
after the issuance of such Letter of Credit, on the Letter of Credit Expiration
Date and thereafter on demand, and (ii) computed on a quarterly basis in
arrears.  If there is any change in the
Applicable Margin during any quarter, the daily amount available to be drawn
under of each Letter of Credit shall be computed and multiplied by the
Applicable Margin separately for each period during such quarter that such
Applicable Margin was in effect. 
Notwithstanding anything to the contrary contained herein, upon the occurrence
and during the continuance of any Event of Default, all Letter of Credit Fees
shall accrue at the Default Rate.

 

(j)                   Fronting Fee
and Documentary and Processing Charges Payable to L/C Issuer.  The Borrowers shall pay directly to the L/C
Issuer for its own account a fronting fee (the “Fronting Fee”) with
respect to each Letter of Credit at a rate equal to 0.125% per annum, computed
on the daily amount available to be drawn under such 

 

74

 

Letter of Credit and payable on a quarterly
basis in arrears.  Such Fronting Fees
shall be due and payable on the first Business Day after the end of each
calendar quarter, commencing with the first such date to occur after the issuance
of such Letter of Credit, on the Letter of Credit Expiration Date and
thereafter on demand.  For purposes of
computing the daily amount available to be drawn under any Letter of Credit,
the amount of the Letter of Credit shall be determined in accordance with Section 1.06.  In addition, the Borrowers shall pay directly
to the L/C Issuer, for its own account, the customary issuance, presentation,
amendment and other processing fees, and other standard costs and charges, of
the L/C Issuer relating to letters of credit as from time to time in
effect.  Such customary fees and standard
costs and charges are due and payable on demand and are nonrefundable.

 

(k)                Conflict with Issuer
Documents.  In the
event of any conflict between the terms hereof and the terms of any Issuer
Document, the terms hereof shall control.

 

2.04    Swing Line Loans.

 

(a)                The Swing Line.  Subject to the terms and conditions set forth
herein, the Swing Line Lender may, in its discretion and in reliance upon the
agreements of the other Lenders set forth in this Section 2.04,
make loans (each such loan, a “Swing Line Loan”) to the Borrowers from
time to time on any Business Day during the Availability Period in an aggregate
amount not to exceed at any time outstanding the amount of the Swing Line
Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated
with the Applicable Percentage of the Outstanding Amount of Committed Loans and
L/C Obligations of the Lender acting as Swing Line Lender, may exceed the
amount of such Lender’s Commitment; provided, however, that after
giving effect to any Swing Line Loan, (i) the Total Outstandings shall not
exceed the lesser of (A) the Aggregate Commitments, or (B) the
Borrowing Base, and (ii) the aggregate Outstanding Amount of the Committed
Loans of any Lender at such time, plus such Lender’s Applicable
Percentage of the Outstanding Amount of all L/C Obligations at such time, plus
such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line
Loans at such time shall not exceed such Lender’s Commitment; provided further
that the Borrowers shall not use the proceeds of any Swing Line Loan to
refinance any outstanding Swing Line Loan; provided further that
the Swing Line Lender shall not be obligated to make any Swing Line Loan at any
time when any Lender is at such time a Defaulting Lender or Deteriorating
Lender hereunder, unless the Swing Line Lender has entered into satisfactory
arrangements with the Borrower or such Lender to eliminate the Swing Line
Lender’s risk with respect to such Lender. 
Within the foregoing limits, and subject to the other terms and
conditions hereof, the Borrowers may borrow under this Section 2.04,
prepay under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall bear interest only
at a rate based on the Prime Rate. 
Immediately upon the making of a Swing Line Loan, each Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from
the Swing Line Lender a risk participation in such Swing Line Loan in an amount
equal to the product of such Lender’s Applicable Percentage times the
amount of such Swing Line Loan.  The
Swing Line Lender shall have all of the benefits and immunities (A) provided
to the Administrative Agent in 

 

75

 

Article IX with respect
to any acts taken or omissions suffered by the Swing Line Lender in connection
with Swing Line Loans made by it or proposed to be made by it as if the term “Administrative
Agent” as used in Article IX included the Swing Line Lender with
respect to such acts or omissions, and (B) as additionally provided herein
with respect to the Swing Line Lender.

 

(b)               Borrowing Procedures.  Each Swing Line Borrowing shall be made upon
the Lead Borrower’s irrevocable notice to the Swing Line Lender and the
Administrative Agent, which may be given by telephone. Each such notice must be
received by the Swing Line Lender and the Administrative Agent not later than
1:00 p.m. on the requested borrowing date, and shall specify (i) the
amount to be borrowed, which shall be a minimum of $100,000, and (ii) the
requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed
promptly by delivery to the Swing Line Lender and the Administrative Agent of a
written Swing Line Loan Notice, appropriately completed and signed by a
Responsible Officer of the Lead Borrower. 
Promptly after receipt by the Swing Line Lender of any telephonic Swing
Line Loan Notice, the Swing Line Lender will confirm with the Administrative
Agent (by telephone or in writing) that the Administrative Agent has also
received such Swing Line Loan Notice and, if not, the Swing Line Lender will
notify the Administrative Agent (by telephone or in writing) of the contents
thereof.  Unless the Swing Line Lender
has received notice (by telephone or in writing) from the Administrative Agent
at the request of the Required Lenders prior to 2:00 p.m. on the date of
the proposed Swing Line Borrowing (A) directing the Swing Line Lender not
to make such Swing Line Loan as a result of the limitations set forth in the
proviso to the first sentence of Section 2.04(a), or (B) that
one or more of the applicable conditions specified in Article IV is
not then satisfied, then, subject to the terms and conditions hereof, the Swing
Line Lender may, in its discretion, not later than 3:00 p.m. on the
borrowing date specified in such Swing Line Loan Notice, make the amount of its
Swing Line Loan available to the Borrowers at its office by crediting the
account of the Lead Borrower on the books of the Swing Line Lender in
immediately available funds.

 

(c)                Refinancing of Swing Line
Loans.

 

(i)                                     The Swing Line
Lender, at any time in its sole and absolute discretion, may request, on behalf
of the Borrowers (which hereby irrevocably authorize the Swing Line Lender to
so request on their behalf), that each Lender make a Prime Rate Loan in an
amount equal to such Lender’s Applicable Percentage of the amount of Swing Line
Loans then outstanding.  Such request
shall be made in writing (which written request shall be deemed to be a
Committed Loan Notice for purposes hereof) and in accordance with the
requirements of Section 2.02, without regard to the minimum and
multiples specified therein for the principal amount of Prime Rate Loans, but
subject to the unutilized portion of the Aggregate Commitments and the
conditions set forth in Section 4.02.  The Swing Line Lender shall furnish the Lead
Borrower with a copy of the applicable Committed Loan Notice promptly after
delivering such notice to the Administrative Agent.  Each Lender shall make an amount equal to 

 

76

 

its Applicable Percentage of the amount
specified in such Committed Loan Notice available to the Administrative Agent
in immediately available funds for the account of the Swing Line Lender at the
Administrative Agent’s Office not later than 1:00 p.m. on the day
specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii),
each Lender that so makes funds available shall be deemed to have made a Prime
Rate Loan to the Borrowers in such amount. 
The Administrative Agent shall remit the funds so received to the Swing
Line Lender.

 

(ii)                                  If for any
reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing in
accordance with Section 2.04(c)(i), the request for Prime Rate
Loans submitted by the Swing Line Lender as set forth herein shall be deemed to
be a request by the Swing Line Lender that each of the Lenders fund its risk
participation in the relevant Swing Line Loan and each Lender’s payment to the
Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall
be deemed payment in respect of such participation.

 

(iii)                               If any Lender
fails to make available to the Administrative Agent for the account of the
Swing Line Lender any amount required to be paid by such Lender pursuant to the
foregoing provisions of this Section 2.04(c) by the time
specified in Section 2.04(c)(i), the Swing Line Lender shall be
entitled to recover from such Lender (acting through the Administrative Agent),
on demand, such amount with interest thereon for the period from the date such
payment is required to the date on which such payment is immediately available
to the Swing Line Lender at a rate per annum equal to the greater of the
Federal Funds Rate and a rate determined by the Swing Line Lender in accordance
with banking industry rules on interbank compensation plus any
administrative, processing or similar fees customarily charged by the Swing Line
Lender in connection with the foregoing. 
If such Lender pays such amount (with interest and fees as aforesaid),
the amount so paid shall constitute such Lender’s Committed Loan included in
the relevant Committed Borrowing or funded participation in the relevant Swing
Line Loan, as the case may be.  A
certificate of the Swing Line Lender submitted to any Lender (through the
Administrative Agent) with respect to any amounts owing under this clause (iii) shall
be conclusive absent manifest error.

 

(iv)                              Each Lender’s
obligation to make Committed Loans or to purchase and fund risk participations
in Swing Line Loans pursuant to this Section 2.04(c) shall be
absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, the Borrowers or any
other Person for any reason whatsoever, (B) the occurrence or continuance
of a Default or Event of Default, or (C) any other occurrence, event or
condition, whether or not similar to any of the foregoing; provided, however,
that each Lender’s obligation to make Committed Loans pursuant to this Section 2.04(c) is
subject to the conditions set forth in Section 4.02.  No such funding of risk participations shall
relieve or otherwise impair the obligation of the Borrowers to repay Swing Line
Loans, together with interest as provided herein.

 

77

 

(d)               Repayment of Participations.

 

(i)                                     At any time
after any Lender has purchased and funded a risk participation in a Swing Line
Loan, if the Swing Line Lender receives any payment on account of such Swing
Line Loan, the Swing Line Lender will distribute to such Lender its Applicable
Percentage of such payment (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender’s risk
participation was funded) in the same funds as those received by the Swing Line
Lender.

 

(ii)                                  If any payment
received by the Swing Line Lender in respect of principal or interest on any
Swing Line Loan is required to be returned by the Swing Line Lender under any
of the circumstances described in Section 10.05 (including pursuant
to any settlement entered into by the Swing Line Lender in its discretion),
each Lender shall pay to the Swing Line Lender its Applicable Percentage
thereof on demand of the Administrative Agent, plus interest thereon from the
date of such demand to the date such amount is returned, at a rate per annum
equal to the Federal Funds Rate.  The
Administrative Agent will make such demand upon the request of the Swing Line
Lender.  The obligations of the Lenders
under this clause shall survive the payment in full of the Obligations and the
termination of this Agreement.

 

(e)                Interest for Account of
Swing Line Lender.  The Swing
Line Lender shall be responsible for invoicing the Borrowers for interest on
the Swing Line Loans.  Until each Lender
funds its Prime Rate Loan or risk participation pursuant to this Section 2.04
to refinance such Lender’s Applicable Percentage of any Swing Line Loan,
interest in respect of such Applicable Percentage shall be solely for the
account of the Swing Line Lender.

 

(f)                  Payments Directly to Swing
Line Lender.  The
Borrowers shall make all payments of principal and interest in respect of the
Swing Line Loans directly to the Swing Line Lender.

 

2.05    Prepayments.

 

(a)                The Borrowers may, upon
irrevocable notice from the Lead Borrower to the Administrative Agent, at any
time or from time to time voluntarily prepay Committed Loans in whole or in
part, without premium or penalty; provided that (i) such
notice must be received by the Administrative Agent not later than 11:00 a.m.
(A) two (2) Business Days prior to any date of prepayment of LIBO
Rate Loans and (B) on the date of prepayment of Prime Rate Loans; (ii) any
prepayment of LIBO Rate Loans shall be in a principal amount of $1,000,000 or a
whole multiple of $100,000 in excess thereof; and (iii) any prepayment of
Prime Rate Loans shall be in a principal amount of $250,000 or a whole multiple
of $100,000 in excess thereof or, in each case, if less, the entire principal
amount thereof then outstanding.  Each such
notice shall specify the date and amount of such prepayment and the Type(s) of
Loans to be prepaid and, if LIBO Rate Loans, the Interest Period(s) of
such Loans.  The 

 

78

 

Administrative Agent will promptly notify
each Lender of its receipt of each such notice, and of the amount of such
Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Lead Borrower,
the Borrowers shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified therein.  Any prepayment of a LIBO Rate Loan shall be
accompanied by all accrued interest on the amount prepaid, together with any
additional amounts required pursuant to Section 3.05.  Each such prepayment shall be applied to the
Committed Loans of the Lenders in accordance with their respective Applicable
Percentages.

 

(b)               The Borrowers may, upon
irrevocable notice from the Lead Borrower to the Swing Line Lender (with a copy
to the Administrative Agent), at any time or from time to time, voluntarily
prepay Swing Line Loans in whole or in part without premium or penalty; provided that
(i) such notice must be received by the Swing Line Lender and the
Administrative Agent not later than 1:00 p.m. on the date of the prepayment,
and (ii) any such prepayment shall be in a minimum principal amount of
$100,000.  Each such notice shall specify
the date and amount of such prepayment. 
If such notice is given by the Lead Borrower, the Borrowers shall make
such prepayment and the payment amount specified in such notice shall be due
and payable on the date specified therein.

 

(c)                If for any reason the Total
Outstandings (determined as of the end of any Business Day) exceed the Loan
Cap, as then in effect, the Borrowers shall immediately prepay Loans, Swing
Line Loans and L/C Borrowings and/or Cash Collateralize the L/C Obligations
(other than L/C Borrowings) in an aggregate amount equal to such excess; provided,
however, that the Borrowers shall not be required to Cash Collateralize
the L/C Obligations pursuant to this Section 2.05(c) unless,
after the prepayment in full of the Loans, the Total Outstandings exceed the
Loan Cap, as then in effect.

 

(d)               (i) After the
occurrence and during the continuance of a Cash Dominion Event, the Borrowers
shall prepay the Loans in accordance with the provisions of Section 6.13(c) hereof,
and (ii) after the occurrence and during the continuance of an Event of
Default, the Borrowers shall Cash Collateralize the L/C Obligations in
accordance with the provisions of Section 8.02 hereof.

 

(e)                The Borrowers shall prepay
the Loans and, after the occurrence and during the continuance of an Event of
Default, Cash Collateralize the L/C Obligations in an amount equal to the Net
Proceeds (other than, with respect only to the Notes Priority Collateral, that
portion of the Net Proceeds (if any) that is then required to be paid to the
Note Holders under the Senior Note Documents) received by a Loan Party on
account of a Prepayment Event, irrespective of whether or not a Cash Dominion
Event then exists and is continuing, which Net Proceeds shall be paid over to
the Administrative Agent within two (2) Business Days of receipt (provided that,
after the occurrence and during the continuance of a Cash Dominion Event, the
Borrowers shall pay such Net Proceeds over to the Administrative Agent
immediately upon receipt thereof) and shall be utilized to prepay the Loans in
the order of priority set forth in 

 

79

 

Section 2.05(f).  The application of such Net Proceeds to the
Loans shall not reduce the Commitments. 
If all Obligations then due are paid, any excess Net Proceeds shall be
remitted to the operating account of the Borrowers maintained with the
Administrative Agent.

 

(f)                  Prepayments made pursuant to
this Section 2.05, first, shall be applied ratably to the
L/C Borrowings and the Swing Line Loans, second, shall be applied
ratably to the outstanding Committed Loans, third, shall be used to Cash
Collateralize the remaining L/C Obligations, and, fourth, the amount
remaining, if any, after the prepayment in full of all L/C Borrowings, Swing
Line Loans and Committed Loans outstanding at such time and the Cash
Collateralization of the remaining L/C Obligations in full may be retained by
the Borrowers for use in the ordinary course of its business.  Upon the drawing of any Letter of Credit that
has been Cash Collateralized, the funds held as Cash Collateral shall be
applied (without any further action by or notice to or from the Borrowers or
any other Loan Party) to reimburse the L/C Issuer or the Lenders, as
applicable.

 

2.06    Termination or Reduction of Commitments.

 

(a)                The Borrowers may, upon
irrevocable notice from the Lead Borrower to the Administrative Agent,
terminate the Aggregate Commitments, the Letter of Credit Sublimit or the Swing
Line Sublimit or from time to time permanently reduce the Aggregate
Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit; provided that
(i) any such notice shall be received by the Administrative Agent not
later than 11:00 a.m. two (2) Business Days prior to the date of
termination or reduction, (ii) any such partial reduction shall be in an
aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess
thereof, and (iii) the Borrowers shall not terminate or reduce (A) the
Aggregate Commitments if, after giving effect thereto and to any concurrent
prepayments hereunder, the Total Outstandings would exceed the Aggregate
Commitments, (B) the Letter of Credit Sublimit if, after giving effect
thereto, the Outstanding Amount of L/C Obligations not fully Cash
Collateralized hereunder would exceed the Letter of Credit Sublimit, and (C) the
Swing Line Sublimit if, after giving effect thereto, and to any concurrent
payments hereunder, the Outstanding Amount of Swing Line Loans hereunder would
exceed the Swing Line Sublimit.

 

(b)               If, after giving effect to
any reduction of the Aggregate Commitments, the Letter of Credit Sublimit or
the Swing Line Sublimit exceeds the amount of the Aggregate Commitments, such
Letter of Credit Sublimit or Swing Line Sublimit shall be automatically reduced
by the amount of such excess.

 

(c)                The Administrative Agent
will promptly notify the Lenders of any termination or reduction of the Letter
of Credit Sublimit, Swing Line Sublimit or the Aggregate Commitments under this
Section 2.06.  Upon any
reduction of the Aggregate Commitments, the Commitment of each Lender shall be
reduced by such Lender’s Applicable Percentage of such reduction amount.  All fees (including, without limitation,
Commitment Fees, Early Termination Fees and Letter of Credit 

 

80

 

Fees) and interest in respect of the
Aggregate Commitments accrued until the effective date of any termination of
the Aggregate Commitments shall be paid on the effective date of such termination.

 

2.07    Repayment of Loans.

 

(a)                The Borrowers shall repay to
the Lenders on the Termination Date the aggregate principal amount of Committed
Loans outstanding on such date.

 

(b)               To the extent not previously
paid, the Borrowers shall repay the outstanding balance of the Swing Line Loans
on the Termination Date.

 

2.08    Interest.

 

(a)                Subject to the provisions of
Section 2.08(a) below, (i) each LIBO Rate Loan shall bear
interest on the outstanding principal amount thereof for each Interest Period
at a rate per annum equal to the LIBO Rate for such Interest Period plus
the Applicable Margin; (ii) each Prime Rate Loan shall bear interest on
the outstanding principal amount thereof from the applicable borrowing date at
a rate per annum equal to the Prime Rate plus the Applicable Margin; and
(iii) each Swing Line Loan shall bear interest on the outstanding
principal amount thereof from the applicable borrowing date at a rate per annum
equal to the Prime Rate plus the Applicable Margin.

 

(b)               (i)  Upon the
occurrence and during the continuance of any Event of Default under Sections
8.01(a) or 8.01(f), all outstanding Obligations shall bear
interest at a fluctuating interest rate per annum at all times equal to the
Default Rate to the fullest extent permitted by applicable Laws.

 

(ii)                                  Upon the
occurrence and during the continuance of any other Event of Default, then the
Administrative Agent may, and upon the request of the Required Lenders shall,
notify the Lead Borrower that all outstanding Obligations shall thereafter bear
interest at a fluctuating interest rate per annum at all times equal to the
Default Rate and thereafter such Obligations shall bear interest at the Default
Rate to the fullest extent permitted by applicable Laws.

 

(iii)                               Accrued and
unpaid interest on past due amounts (including interest on past due interest)
shall be due and payable upon demand.

 

(c)                Interest on each Loan shall
be due and payable in arrears on each Interest Payment Date applicable thereto
and at such other times as may be specified herein.  Interest hereunder shall be due and payable
in accordance with the terms hereof before and after judgment, and before and
after the commencement of any proceeding under any Debtor Relief Law.

 

2.09    Fees.  In addition to
certain fees described in Sections 2.03(i) and 2.03(j):

 

81

 

(a)                Commitment Fee.  The Borrowers shall pay to the Administrative
Agent, for the account of each Lender in accordance with its Applicable
Percentage, a commitment fee (the “Commitment Fee”) based upon the
average daily outstanding Credit Extensions (excluding Swing Line Loans) equal
to the percentages set forth in the grid below times the actual daily
amount by which the Aggregate Commitments exceed the sum of (i) the
Outstanding Amount of Loans and (ii) the Outstanding Amount of L/C
Obligations.

 

	
   

  	
  Level

  	
   

  	
  Average Daily

  Outstanding

  Credit Extensions

  	
   

  	
  Commitment

  Fee

  	
   

  	
   

  	
   

  
	
   

  	
  I

  	
   

  	
  Less than or equal to 50% of Loan Cap

  	
   

  	
  0.75

  	
  %

  	
   

  	
   

  
	
   

  	
  II

  	
   

  	
  Greater than 50% of Loan Cap

  	
   

  	
  0.50

  	
  %

  	
   

  	
   

  

 

The Commitment Fee shall
accrue at all times during the Availability Period, including at any time
during which one or more of the conditions in Article IV is not
met, and shall be due and payable quarterly in arrears on the last Business Day
of each calendar quarter, commencing with the first such date to occur after
the Closing Date, and on the last day of the Availability Period.  The Commitment Fee, expressed as a percentage,
shall be calculated on the Closing Date and thereafter, the Commitment Fee
shall be calculated on each Commitment Fee Adjustment Date for the most recent
calendar quarter immediately preceding such Commitment Fee Adjustment Date.

 

(b)               Early Termination Fee.  In the event that the Termination Date
occurs, for any reason, prior to the Maturity Date, or in the event that the
Borrowers elect to permanently reduce the Aggregate Commitments pursuant to Section 2.06
hereof, the Borrowers shall pay to the Administrative Agent, for the ratable
benefit of the Lenders, a fee (the “Early Termination Fee”) in respect
of amounts which are or become payable by reason thereof equal to the
following: (i) one-half of one percent (0.50%) of the Aggregate
Commitments then in effect if the Termination Date or such reduction of the
Aggregate Commitments shall occur at any time on or before the second
anniversary of the Closing Date; and (ii) one-quarter of one percent
(0.25%) of the Aggregate Commitments then in effect if the Termination Date or
such reduction of the Aggregate Commitments shall occur at any time on or after
second anniversary of the Closing Date but prior to the third anniversary of
the Closing Date.  There will be no Early
Termination Fee due after the third anniversary of the Closing Date.  All parties to this Agreement agree and
acknowledge that the Lenders will have suffered damages on account of the early
termination of this Agreement or the permanent reduction of the Aggregate
Commitments and that, in view of the difficulty in ascertaining the amount of
such damages, the Early Termination Fee constitutes 

 

82

 

reasonable compensation and liquidated
damages to compensate the Lenders on account thereof.

 

(c)                Other Fees.  The Borrowers shall pay to the Administrative
Agent and BAS, for their own respective accounts, fees in the amounts and at
the times specified in the Fee Letter. 
Such fees shall be fully earned when paid and shall not be refundable
for any reason whatsoever.

 

2.10    Computation
of Interest and Fees.  All
computations of interest for Prime Rate Loans when the Prime Rate is determined
by Bank of America’s “prime rate” 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 computations of fees and interest
shall be made on the basis of a 360-day year and actual days elapsed (which
results in more fees or interest, as applicable, being paid than if computed on
the basis of a 365-day year).  Interest
shall accrue on each Loan for the day on which the Loan is made, and shall not
accrue on a Loan, or any portion thereof, for the day on which the Loan or such
portion is paid, provided that any Loan that is repaid on
the same day on which it is made shall, subject to Section 2.12(a),
bear interest for one day.  Each
determination by the Administrative Agent of an interest rate or fee hereunder
shall be conclusive and binding for all purposes, absent manifest error.

 

2.11    Evidence of Debt.

 

(a)                The Credit Extensions made
by each Lender shall be evidenced by one or more accounts or records maintained
by the Administrative Agent (the “Loan Account”) in the ordinary course
of business.  In addition, each Lender
may record in such Lender’s internal records, an appropriate notation
evidencing the date and amount of each Loan from such Lender, each payment and
prepayment of principal of any such Loan, and each payment of interest, fees
and other amounts due in connection with the Obligations due to such Lender.  The accounts or records maintained by the
Administrative Agent and each Lender shall be conclusive absent manifest error
of the amount of the Credit Extensions made by the Lenders to the Borrowers and
the interest and payments thereon.  Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrowers hereunder to pay any amount
owing with respect to the Obligations. 
In the event of any conflict between the accounts and records maintained
by any Lender and the accounts and records of the Administrative Agent in
respect of such matters, the accounts and records of the Administrative Agent
shall control in the absence of manifest error. 
Upon the request of any Lender made through the Administrative Agent,
the Borrowers shall execute and deliver to such Lender (through the
Administrative Agent) a Note, which shall evidence such Lender’s Loans in
addition to such accounts or records. 
Each Lender may attach schedules to its Note and endorse thereon the
date, Type (if applicable), amount and maturity of its Loans and payments with
respect thereto.  Any failure to so
attach or endorse, or any error in doing so, shall not, however, limit or
otherwise affect the obligation of the Borrowers hereunder to pay any amount
owing with respect to the Obligations. 
Upon receipt of an affidavit of a Lender as to the loss, theft,
destruction or mutilation of such Lender’s Note and upon cancellation of such
Note, the Borrowers will issue, in lieu thereof, a 

 

83

 

replacement Note in favor of such Lender, in
the same principal amount thereof and otherwise of like tenor.

 

(b)               In addition to the accounts
and records referred to in Section 2.11(a), each Lender and the
Administrative Agent shall maintain in accordance with its usual practice
accounts or records evidencing the purchases and sales by such Lender of
participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the
accounts and records maintained by the Administrative Agent and the accounts
and records of any Lender in respect of such matters, the accounts and records
of the Administrative Agent shall control in the absence of manifest error.

 

2.12    Payments Generally; Administrative Agent’s
Clawback.

 

(a)                General.  All payments to be made by the Borrowers
shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff.  Except as
otherwise expressly provided herein, all payments by the Borrowers hereunder
shall be made to the Administrative Agent, for the account of the respective
Lenders to which such payment is owed, at the Administrative Agent’s Office in
Dollars and in immediately available funds not later than 2:00 p.m. on the
date specified herein.  The
Administrative Agent will promptly distribute to each Lender its Applicable
Percentage (or other applicable share as provided herein) of such payment in
like funds as received by wire transfer to such Lender’s Lending Office in
accordance with the provisions of Section 2.14.  All payments received by the Administrative
Agent after 2:00 p.m. shall, at the option of the Administrative Agent, be
deemed received on the next succeeding Business Day and any applicable interest
or fee shall continue to accrue.  If any
payment (other than with respect to payment of a LIBO Rate Loan) to be made by
the Borrowers shall come due on a day other than a Business Day, payment shall
be made on the next following Business Day, and such extension of time shall be
reflected in computing interest or fees, as the case may be.

 

(b)               (i)                                     Funding by
Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have
received notice from a Lender prior to the proposed date of any Borrowing of LIBO
Rate Loans (or, in the case of any Borrowing of Prime Rate Loans, prior to
12:00 noon on the date of such Borrowing) that such Lender will not make
available to the Administrative Agent such Lender’s share of such Borrowing,
the Administrative Agent may assume that such Lender has made such share
available on such date in accordance with Section 2.02 (or, in the
case of a Borrowing of Prime Rate Loans, that such Lender has made such share
available in accordance with, and at the time required by, Section 2.02)
and may, in reliance upon such assumption, make available to the Borrowers a
corresponding amount.  In such event, if
a Lender has not in fact made its share of the applicable Committed Borrowing
available to the Administrative Agent, then the applicable Lender and the
Borrowers severally agree to pay to the Administrative Agent forthwith on
demand such corresponding amount in immediately available funds with interest
thereon, for each day from and including the date such amount is made available
to the Borrowers to but excluding the date of payment to the Administrative
Agent, at (A) in the case of a payment to be made by such Lender, the
greater of the 

 

84

 

Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on
interbank compensation, plus any administrative processing or similar fees
customarily charged by the Administrative Agent in connection with the
foregoing, and (B) in the case of a payment to be made by the Borrowers,
the interest rate applicable to Prime Rate Loans.  If the Borrowers and such Lender shall pay
such interest to the Administrative Agent for the same or an overlapping
period, the Administrative Agent shall promptly remit to the Borrowers the
amount of such interest paid by the Borrowers for such period.  If such Lender pays its share of the
applicable Committed Borrowing to the Administrative Agent, then the amount so
paid shall constitute such Lender’s Committed Loan included in such Committed
Borrowing.  Any payment by the Borrowers
shall be without prejudice to any claim the Borrowers may have against a Lender
that shall have failed to make such payment to the Administrative Agent.

 

(ii)                                  Payments by
Borrowers; Presumptions by Administrative Agent.  Unless the Administrative Agent shall have
received notice from the Lead Borrower prior to the time at which any payment
is due to the Administrative Agent for the account of the Lenders or the L/C
Issuer hereunder that the Borrowers will not make such payment, the
Administrative 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 or the L/C Issuer, as the case may be, the amount
due.  In such event, if the Borrowers
have not in fact made such payment, then each of the Lenders or the L/C Issuer,
as the case may be, severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender or the L/C Issuer,
in immediately available funds with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date
of payment to the Administrative Agent, at the greater of the Federal Funds Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.

 

A notice of the
Administrative Agent to any Lender or the Lead Borrower with respect to any
amount owing under this Section 2.12(b) shall be conclusive,
absent manifest error.

 

(c)                Failure to Satisfy
Conditions Precedent.  If any
Lender makes available to the Administrative Agent funds for any Loan to be
made by such Lender as provided in the foregoing provisions of this Article II,
and such funds are not made available to the Borrowers by the Administrative
Agent because the conditions to the applicable Credit Extension set forth in Article IV
are not satisfied or waived in accordance with the terms hereof (subject to the
provisions of the last paragraph of Section 4.02 hereof), the
Administrative Agent shall return such funds (in like funds as received from
such Lender) to such Lender, without interest.

 

(d)               Obligations of Lenders
Several.  The obligations of the Lenders
hereunder to make Committed Loans, to fund participations in Letters of Credit
and Swing Line Loans and to make payments hereunder are several and not
joint.  The failure of any Lender to make
any Committed Loan, to fund any such participation or to make any payment hereunder
on any date required hereunder shall not relieve any other Lender 

 

85

 

of its corresponding obligation to do so on
such date, and no Lender shall be responsible for the failure of any other
Lender to so make its Committed Loan, to purchase its participation or to make
its payment hereunder.

 

(e)                Funding Source.  Nothing herein shall be deemed to obligate
any Lender to obtain the funds for any Loan in any particular place or manner
or to constitute a representation by any Lender that it has obtained or will
obtain the funds for any Loan in any particular place or manner.

 

2.13    Sharing
of Payments by Lenders.  If any
Credit Party shall, by exercising any right of setoff or counterclaim or
otherwise, obtain payment in respect of any principal of, interest on, or other
amounts with respect to, any of the Obligations resulting in such Lender’s
receiving payment of a proportion of the aggregate amount of such Obligations
greater than its pro rata share thereof as provided herein
(including as in contravention of the priorities of payment set forth in Section 8.03),
then the Credit Party receiving such greater proportion shall (a) notify
the Administrative Agent of such fact, and (b) purchase (for cash at face
value) participations in the Obligations of the other Credit Parties, or make
such other adjustments as shall be equitable, so that the benefit of all such
payments shall be shared by the Credit Parties ratably and in the priorities
set forth in Section 8.03, provided that:

 

(a)                if any such participations
or subparticipations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations or subparticipations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest; and

 

(b)               the provisions of this Section 2.13
shall not be construed to apply to (x) any payment made by the Loan
Parties pursuant to and in accordance with the express terms of this Agreement
or (y) any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Committed Loans or
subparticipations in L/C Obligations or Swing Line Loans to any assignee or
participant, other than to the Borrowers or any Subsidiary thereof (as to
which, the provisions of this Section 2.13 shall apply).

 

Each Loan Party consents to
the foregoing and agrees, to the extent it may effectively do so under
applicable Law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against such Loan Party rights of setoff
and counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of such Loan Party in the amount of such participation.

 

2.14    Settlement Amongst Lenders.

 

(a)                The amount of each Lender’s
Applicable Percentage of outstanding Loans (including outstanding Swing Line
Loans) shall be computed weekly (or more frequently in the Administrative Agent’s
discretion) and shall be adjusted upward or downward based on all Loans
(including Swing Line Loans) and repayments of Loans (including Swingline
Loans) received by the Administrative Agent as of 3:00 p.m. on 

 

86

 

the first Business Day (such date, the “Settlement
Date”) following the end of the period specified by the Administrative
Agent.

 

(b)               The Administrative Agent
shall deliver to each of the Lenders promptly after a Settlement Date a summary
statement of the amount of outstanding Committed Loans and Swing Line Loans for
the period and the amount of repayments received for the period.  As reflected on the summary statement, (i) the
Administrative Agent shall transfer to each Lender its Applicable Percentage of
repayments, and (ii) each Lender shall transfer to the Administrative
Agent (as provided below) or the Administrative Agent shall transfer to each
Lender, such amounts as are necessary to insure that, after giving effect to
all such transfers, the amount of Committed Loans made by each Lender shall be
equal to such Lender’s Applicable Percentage of all Committed Loans outstanding
as of such Settlement Date.  If the summary
statement requires transfers to be made to the Administrative Agent by the
Lenders and is received prior to 1:00 p.m. on a Business Day, such
transfers shall be made in immediately available funds no later than 3:00 p.m.
that day; and, if received after 1:00 p.m., then no later than 3:00 p.m.
on the next Business Day. The obligation of each Lender to transfer such funds
is irrevocable, unconditional and without recourse to or warranty by the
Administrative Agent.  If and to the extent
any Lender shall not have so made its transfer to the Administrative Agent,
such Lender agrees to pay to the Administrative Agent, forthwith on demand such
amount, together with interest thereon, for each day from such date until the
date such amount is paid to the Administrative Agent, equal to the greater of
the Federal Funds Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation plus any
administrative, processing, or similar fees customarily charged by the
Administrative Agent in connection with the foregoing.

 

2.15     Increase in
Commitments.

 

(a)                Request for Increase.  Provided no Default then exists or would
arise therefrom, upon notice to the Administrative Agent (which shall promptly
notify the Lenders), the Lead Borrower may from time to time request an
increase in the Aggregate Commitments by an amount (for all such requests) not
exceeding $20,000,000; provided that (i) any such
request for an increase shall be in a minimum amount of $5,000,000 and (ii) the
Lead Borrower may make a maximum of three such requests.  At the time of sending such notice, the Lead
Borrower (in consultation with the Administrative Agent) shall specify the time
period within which each Lender is requested to respond (which shall in no
event be less than ten Business Days from the date of delivery of such notice
to the Lenders).

 

(b)               Lender Elections to Increase.  Each Lender shall notify the Administrative
Agent within such time period whether or not it agrees to increase its
Commitment and, if so, whether by an amount equal to, greater than, or less
than its Applicable Percentage of such requested increase.  Any Lender not responding within such time
period shall be deemed to have declined to increase its Commitment.

 

87

 

(c)    Notification
by Administrative Agent; Additional Lenders.  The Administrative Agent shall notify the
Lead Borrower and each Lender of the Lenders’ responses to each request made
hereunder.  To achieve the full amount of
a requested increase and subject to the approval of the Administrative Agent,
the L/C Issuer and the Swing Line Lender (which approvals shall not be
unreasonably withheld), to the extent that the existing Lenders decline to
increase their Commitments, or decline to increase their Commitments to the
amount requested by the Lead Borrower, the Administrative Agent, in
consultation with the Lead Borrower, will use its reasonable efforts to arrange
for other Eligible Assignees to become a Lender hereunder and to issue
commitments in an amount equal to the amount of the increase in the Aggregate
Commitments requested by the Lead Borrower and not accepted by the existing
Lenders (and the Lead Borrower may also invite additional Eligible Assignees to
become Lenders) (each, an “Additional Commitment Lender”); provided, however, that without the consent of the Administrative
Agent, at no time shall the Commitment of any Additional Commitment Lender be
less than $2,500,000.

 

(d)     Effective
Date and Allocations.  If the
Aggregate Commitments are increased in accordance with this Section, the
Administrative Agent, in consultation with the Lead Borrower, shall determine
the effective date (the “Increase Effective Date”) and the final
allocation of such increase.  The
Administrative Agent shall promptly notify the Lead Borrower and the Lenders of
the final allocation of such increase and the Increase Effective Date and on
the Increase Effective Date (i) the Aggregate Commitments under, and for
all purposes of, this Agreement shall be increased by the aggregate amount of
such Commitment Increases, and (ii) Schedule 2.01 shall be deemed
modified, without further action, to reflect the revised Commitments and
Applicable Percentages of the Lenders.

 

(e)     Conditions
to Effectiveness of Increase.  As
conditions precedent to each such increase: (i) the Lead Borrower shall
deliver to the Administrative Agent a certificate of each Loan Party dated as
of the Increase Effective Date (in sufficient copies for each Lender) signed by
a Responsible Officer of such Loan Party (A) certifying and attaching the
resolutions adopted by such Loan Party approving or consenting to such
increase, and (B) in the case of the Borrowers, certifying that, before
and after giving effect to such increase, the representations and warranties contained
in Article V and the other Loan Documents are true and correct on
and as of the Increase Effective Date, except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they are true and correct as of such earlier date, and except that for
purposes of this Section 2.15, the representations and warranties
contained in the representations and warranties contained in Sections 5.05(a) and
5.05(b) shall be deemed to refer to the most recent statements furnished
pursuant to clauses (a) and (b), respectively, of Section 6.01;
(ii) the Borrowers, the Administrative Agent and the Lenders shall have
executed and delivered an amendment to this Agreement increasing the minimum
Availability thresholds set forth in the definitions of Accelerated Borrowing
Base Delivery Event, Covenant Compliance Event and Cash Dominion Event such
that the Availability thresholds after the Increase Effective Date are equal to
the same percentage of the Aggregate Commitments after the Increase Effective
Date as the percentage of the

 

88

 

Aggregate Commitments as of the Closing Date; (iii) the Borrowers,
the Administrative Agent, and any Additional Commitment Lender shall have
executed and delivered a joinder to the Loan Documents in such form as the
Administrative Agent shall reasonably require; (iv) the Borrowers shall
have paid such fees and other compensation to the Additional Commitment Lenders
as the Lead Borrower and such Additional Commitment Lenders shall agree; (v) the
Borrowers shall have paid such arrangement fees to the Administrative Agent as
the Lead Borrower and the Administrative Agent may agree; (vi) the
Borrowers shall deliver to the Administrative Agent and the Lenders an opinion
or opinions, in form and substance reasonably satisfactory to the
Administrative Agent, from counsel to the Borrowers reasonably satisfactory to
the Administrative Agent and dated such date; (vii) the Borrowers and the
Additional Commitment Lender shall have delivered such other instruments,
documents and agreements as the Administrative Agent may reasonably have
requested to effectuate the documentation of the foregoing; and (viii) no
Default exists.  The Borrowers shall
prepay any Committed Loans outstanding on the Increase Effective Date (and pay
any additional amounts required pursuant to Section 3.05) to the
extent necessary to keep the outstanding Committed Loans ratable with any
revised Applicable Percentages arising from any nonratable increase in the
Commitments under this Section.

 

(f)      Conflicting
Provisions.  This Section shall
supersede any provisions in Sections 2.13 or 10.01 to the
contrary.

 

ARTICLE
III

TAXES, YIELD PROTECTION AND ILLEGALITY;

APPOINTMENT OF LEAD BORROWER

 

3.01     Taxes.

 

(a)     Payments
Free of Taxes.  Any and all payments
by or on account of any obligation of the Borrowers hereunder or under any
other Loan Document shall be made free and clear of, and without reduction or
withholding for, any Indemnified Taxes or Other Taxes, provided that,
if the Borrowers shall be required by applicable Law to deduct any Indemnified
Taxes (including any Other Taxes) from such payments, then (i) the sum
payable shall be increased as necessary so that, after making all required
deductions (including deductions applicable to additional sums payable under
this Section 3.01), the Administrative Agent, Lender or L/C Issuer,
as the case may be, receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrowers shall make such
deductions and (iii) the Borrowers shall timely pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
Law.

 

(b)     Payment
of Other Taxes by the Borrowers. 
Without limiting the provisions of Section 3.01(a) above,
the Borrowers shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable Law.

 

89

 

(c)     Indemnification
by the Loan Parties.  The Loan Parties
shall indemnify the Administrative Agent, each Lender and the L/C Issuer for
the full amount of any Indemnified Taxes or Other Taxes (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section 3.01) paid by the Administrative Agent, such
Lender or the L/C Issuer, as the case may be, and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority.  The Loan Parties shall pay such payment or
liability within ten (10) days after receipt of a certificate setting
forth in reasonable detail the basis for, and amount of, such payment or
liability delivered to the Lead Borrower by a Lender or the L/C Issuer (with a
copy to the Administrative Agent), or by the Administrative Agent on its own
behalf or on behalf of a Lender or the L/C Issuer, which certificate shall be
conclusive absent manifest error.

 

(d)     Evidence
of Payments.  As soon as practicable
after any payment of Indemnified Taxes or Other Taxes by the Borrowers to a
Governmental Authority, the Lead Borrower shall deliver to the Administrative
Agent the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.

 

(e)     Status
of Lenders.  Any Foreign Lender that
is entitled to an exemption from, or reduction of, withholding tax under the
law of the jurisdiction in which any Borrower is resident for tax purposes, or
any treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Lead Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by
applicable Law or reasonably requested by the Lead Borrower or the
Administrative Agent, such properly completed and executed documentation
prescribed by applicable Law as will permit such payments to be made without
withholding or at a reduced rate of withholding.  In addition, any Lender, if requested by the
Lead Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable Law or reasonably requested by the Lead
Borrower or the Administrative Agent as will enable the Lead Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements.

 

Without limiting the
generality of the foregoing, in the event that any Borrower is resident for tax
purposes in the United States, any Foreign Lender shall deliver to the Lead
Borrower and the Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the request of the Lead Borrower or the Administrative Agent, but only if
such Foreign Lender is legally entitled to do so), whichever of the following
is applicable:

 

90

 

(i)            duly
completed copies of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States is
a party;

 

(ii)           duly
completed copies of Internal Revenue Service Form W-8ECI;

 

(iii)          in
the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a “bank”
within the meaning of section 881(c)(3)(A) of the Code, (B) a “10
percent shareholder” of the Borrowers within the meaning of section 881(c)(3)(B) of
the Code, or (C) a “controlled foreign corporation” described in section
881(c)(3)(C) of the Code and (y) duly completed copies of  Internal Revenue Service Form W-8BEN; or

 

(iv)          any
other form prescribed by applicable Law as a basis for claiming exemption from
or a reduction in United States Federal withholding tax duly completed together
with such supplementary documentation as may be prescribed by applicable Law to
permit the Lead Borrower to determine the withholding or deduction required to
be made.

 

(f)      Treatment
of Certain Refunds.  If the
Administrative Agent, any Lender or the L/C Issuer determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrowers or with respect to which the
Borrowers have paid additional amounts pursuant to this Section 3.01,
it shall pay to the Borrowers an amount equal to such refund (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrowers
under this Section 3.01 with respect to the Taxes or Other Taxes
giving rise to such refund), net of all out-of-pocket expenses of the
Administrative Agent, such Lender or the L/C Issuer, as the case may be, and
without interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund), provided that the Borrowers,
upon the request of the Administrative Agent, such Lender or the L/C Issuer,
agree to repay the amount paid over to the Borrowers (plus any penalties,
interest or other charges imposed by the relevant Governmental Authority) to
the Administrative Agent, such Lender or the L/C Issuer in the event the
Administrative Agent, such Lender or the L/C Issuer is required to repay such
refund to such Governmental Authority. 
This subsection shall not be construed to require the Administrative
Agent, any Lender or the L/C Issuer to make available its tax returns (or any
other information relating to its taxes that it deems confidential) to the
Borrowers or any other Person.

 

3.02     Illegality.  If any Lender determines that any
Law has made it unlawful, or that any Governmental Authority has asserted that
it is unlawful, for any Lender or its applicable Lending Office to make,
maintain or fund LIBO Rate Loans, or to determine or charge interest rates based
upon the LIBO Rate, or any Governmental Authority has imposed material
restrictions on the authority of such Lender to purchase or sell, or to take
deposits of, Dollars in the London interbank market, then, on notice thereof by
such Lender to the Lead Borrower through the Administrative Agent, any
obligation of such Lender to make or continue LIBO Rate

 

91

 

Loans
or to convert Prime Rate Loans to LIBO Rate Loans shall be suspended until such
Lender notifies the Administrative Agent and the Lead Borrower that the
circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, the Borrowers
shall, upon demand from such Lender (with a copy to the Administrative Agent),
prepay or, if applicable, convert all LIBO Rate Loans of such Lender to Prime
Rate Loans, either on the last day of the Interest Period therefor, if such
Lender may lawfully continue to maintain such LIBO Rate Loans to such day, or
immediately, if such Lender may not lawfully continue to maintain such LIBO
Rate Loans.  Upon any such prepayment or
conversion, the Borrowers shall also pay accrued interest on the amount so
prepaid or converted.

 

3.03     Inability to Determine Rates.  If the Required Lenders determine
that, for any reason in connection with any request for a LIBO Rate Loan or a
conversion to or continuation thereof, (a) Dollar deposits are not being
offered to banks in the London interbank market for the applicable amount and
Interest Period of such LIBO Rate Loan, (b) adequate and reasonable means
do not exist for determining the LIBO Rate for any requested Interest Period
with respect to a proposed LIBO Rate Loan, or (c) the LIBO Rate for any
requested Interest Period with respect to a proposed LIBO Rate Loan does not
adequately and fairly reflect the cost to such Lenders of funding such Loan,
the Administrative Agent will promptly so notify the Lead Borrower and each
Lender.  Thereafter, the obligation of
the Lenders to make or maintain LIBO Rate Loans shall be suspended until the
Administrative Agent (upon the instruction of the Required Lenders) revokes
such notice.  Upon receipt of such
notice, the Lead Borrower may revoke any pending request for a Borrowing of,
conversion to or continuation of LIBO Rate Loans or, failing that, will be
deemed to have converted such request into a request for a Committed Borrowing
of Prime Rate Loans in the amount specified therein.

 

3.04     Increased Costs; Reserves on LIBO Rate Loans.

 

(a)     Increased
Costs Generally.  If any Change in
Law shall:

 

(i)            impose,
modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by, any Lender (except
any reserve requirement reflected in the LIBO Rate) or the L/C Issuer; or

 

(ii)           impose
on any Lender or the L/C Issuer or the London interbank market any other
condition, cost or expense affecting this Agreement or LIBO Rate Loans made by
such Lender or any Letter of Credit or participation therein;

 

and
the result of any of the foregoing shall be to increase the cost to such Lender
of making or maintaining any LIBO Rate Loan (or of maintaining its obligation
to make any such Loan), or to increase the cost to such Lender or the L/C
Issuer of participating in, issuing or maintaining any Letter of Credit (or of
maintaining its obligation to participate in or to issue any Letter of Credit),
or to reduce the amount of any sum received or receivable by such Lender or the
L/C Issuer hereunder (whether of principal, interest or any other amount) then,
upon request of such Lender or the L/C Issuer), the Borrowers will pay to such
Lender or the L/C Issuer, as the case may be, such additional amount or amounts
as will compensate such Lender or the L/C Issuer, as the case

 

92

 

may
be, for such additional costs incurred or reduction suffered.  For the avoidance of doubt, the Borrowers
shall not be obligated to pay any additional amounts under this Section 3.04(a) with
respect to Taxes or any costs attributable to Taxes; the obligation of the
Borrowers to pay any amounts with respect to Taxes shall be governed by Section 3.01.

 

(b)     Capital
Requirements.  If any Lender or the
L/C Issuer determines that any Change in Law affecting such Lender or the L/C
Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s
holding company, if any, regarding capital requirements has had, or would have,
the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s
capital or on the capital of such Lender’s or the L/C Issuer’s holding company,
if any, as a consequence of this Agreement, the Commitments of such Lender or
the Loans made by, or participations in Letters of Credit held by, such Lender,
or the Letters of Credit issued by the L/C Issuer, to a level below that which
such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding
company could have achieved but for such Change in Law (taking into
consideration such Lender’s or the L/C Issuer’s policies and the policies of
such Lender’s or the L/C Issuer’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or the
L/C Issuer or such Lender’s or the L/C Issuer’s holding company, as the case
may be, such additional amount or amounts as will compensate such Lender or the
L/C Issuer or such Lender’s or the L/C Issuer’s holding company, as the case
may be, for any such reduction suffered.

 

(c)     Certificates
for Reimbursement.  A certificate of
a Lender or the L/C Issuer setting forth the amount or amounts necessary to
compensate such Lender or the L/C Issuer or its holding company, as the case
may be, as specified in subsection (a) or (b) of this Section 3.04
and delivered to the Lead Borrower shall be conclusive absent manifest
error.  The Borrowers shall pay such
Lender or the L/C Issuer, as the case may be, the amount shown as due on any
such certificate within 10 days after receipt thereof.

 

(d)     Delay
in Requests.  Failure or delay on the
part of any Lender or the L/C Issuer to demand compensation pursuant to the
foregoing provisions of this Section 3.04 shall not constitute a
waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that
the Borrowers shall not be required to compensate a Lender or the L/C Issuer
pursuant to the foregoing provisions of this Section 3.04 for any
increased costs incurred or reductions suffered more than six (6) months
prior to the date that such Lender or the L/C Issuer, as the case may be,
notifies the Lead Borrower of the Change in Law giving rise to such increased
costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect
thereof).

 

(e)     Reserves
on LIBO Rate Loans.  The Borrowers
shall pay to each Lender, as long as such Lender shall be required to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits (currently known

 

93

 

as “Eurocurrency liabilities”), additional interest on the unpaid
principal amount of each LIBO Rate Loan equal to the actual costs of such
reserves allocated to such Loan by such Lender (as determined by such Lender in
good faith, which determination shall be conclusive), which shall be due and
payable on each date on which interest is payable on such Loan, provided that
the Lead Borrower shall have received at least 10 days’ prior notice (with a
copy to the Administrative Agent) of such additional interest from such
Lender.  If a Lender fails to give notice
10 days prior to the relevant Interest Payment Date, such additional interest
shall be due and payable 10 days from receipt of such notice.

 

3.05     Compensation for Losses.  Upon demand of any Lender (with a
copy to the Administrative Agent) from time to time, the Borrowers shall
promptly compensate such Lender for and hold such Lender harmless from any
loss, cost or expense actually incurred by it as a result of:

 

(a)     any
continuation, conversion, payment or prepayment of any LIBO Rate Loan on a day
other than the last day of the Interest Period for such LIBO Rate Loan (whether
voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

(b)     any
failure by the Borrowers (for a reason other than the failure of such Lender to
make a Loan) to prepay, borrow, continue or convert any LIBO Rate Loan on the
date or in the amount notified by the Lead Borrower; or

 

(c)     any
assignment of a LIBO Rate Loan on a day other than the last day of the Interest
Period therefor as a result of a request by the Lead Borrower pursuant to Section 10.13;

 

including
any loss or expense arising from the liquidation or reemployment of funds
obtained by it to maintain such Loan or from fees payable to terminate the deposits
from which such funds were obtained.  The
Borrowers shall also pay any customary administrative fees charged by such
Lender in connection with the foregoing.

 

For purposes of calculating
amounts payable by the Borrowers to the Lenders under this Section 3.05,
each Lender shall be deemed to have funded each LIBO Rate Loan made by it at
the LIBO Rate for such Loan by a matching deposit or other borrowing in the
London interbank market for a comparable amount and for a comparable period,
whether or not such LIBO Rate Loan was in fact so funded.

 

3.06     Mitigation Obligations; Replacement of Lenders.

 

(a)     Designation
of a Different Lending Office.  If
any Lender requests compensation under Section 3.04, or the
Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01,
or if any Lender gives a notice pursuant to Section 3.02, then such
Lender shall use reasonable efforts to designate a different Lending Office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable

 

94

 

pursuant to Section 3.01 or Section 3.04, as
the case may be, in the future, or eliminate the need for the notice pursuant
to Section 3.02, as applicable, and (ii) in each case, would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. 
The Borrowers hereby agree to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.

 

(b)     Replacement
of Lenders.  If any Lender requests
compensation under Section 3.04, or if the Borrowers are required
to pay any additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Section 3.01, the Borrowers
may replace such Lender in accordance with Section 10.13.

 

3.07     Survival.  All of
the Borrowers’ obligations under this Article III shall survive
termination of the Aggregate Commitments and repayment of all other Obligations
hereunder.

 

3.08     Designation of Lead Borrower as Borrowers’ Agent.

 

(a)     Each
Borrower hereby irrevocably designates and appoints the Lead  Borrower as such Borrower’s agent to obtain
Credit Extensions, the proceeds of which shall be available to each Borrower
for such uses as are permitted under this Agreement.  As the disclosed principal for its agent,
each Borrower shall be obligated to each Credit Party on account of Credit
Extensions so made as if made directly by the applicable Credit Party to such
Borrower, notwithstanding the manner by which such Credit Extensions are
recorded on the books and records of the Lead Borrower and of any other
Borrower.  In addition, each Loan Party
other than the Borrowers hereby irrevocably designates and appoints the Lead  Borrower as such Loan Party’s agent to
represent such Loan Party in all respects under this Agreement and the other
Loan Documents.

 

(b)     Each
Borrower recognizes that credit available to it hereunder is in excess of and
on better terms than it otherwise could obtain on and for its own account and
that one of the reasons therefor is its joining in the credit facility
contemplated herein with all other Borrowers. 
Consequently, each Borrower hereby assumes and agrees to discharge all
Obligations of each of the other Borrowers.

 

(c)     The
Lead Borrower shall act as a conduit for each Borrower (including itself, as a “Borrower”)
on whose behalf the Lead Borrower has requested a Credit Extension.  Neither the Administrative Agent nor any
other Credit Party shall have any obligation to see to the application of such
proceeds therefrom.

 

ARTICLE
IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01     Conditions of Initial Credit Extension.  The obligation of
the L/C Issuer and each Lender to make its initial Credit Extension hereunder
is subject to satisfaction of the following conditions precedent:

 

95

 

(a)     The
Administrative Agent’s receipt of the following, each of which shall be
originals, PDFs or telecopies (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer of the signing Loan
Party, each dated the Closing Date (or, in the case of certificates of
governmental officials, a recent date before the Closing Date) and each in form
and substance satisfactory to the Administrative Agent:

 

(i)            executed
counterparts of this Agreement sufficient in number for distribution to the
Administrative Agent, each Lender and the Lead Borrower;

 

(ii)           a
Note executed by the Borrowers in favor of each Lender requesting a Note;

 

(iii)          such
certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Loan Party as the
Administrative Agent may reasonably require evidencing (A) the authority
of each Loan Party to enter into this Agreement and the other Loan Documents to
which such Loan Party is a party or is to be a party and (B) the identity,
authority and capacity of each Responsible Officer thereof authorized to act as
a Responsible Officer in connection with this Agreement and the other Loan
Documents to which such Loan Party is a party or is to be a party;

 

(iv)          copies
of each Loan Party’s Organization Documents and such other documents and
certifications as the Administrative Agent may reasonably require to evidence
that each Loan Party is duly organized or formed, and that each Loan Party is
validly existing, in good standing and qualified to engage in business in each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, except to the extent that
failure to so qualify in any such jurisdiction could not reasonably be expected
to have a Material Adverse Effect;

 

(v)           a
favorable opinion of counsel to the Loan Parties, addressed to the Administrative
Agent and each Lender, in each case as to such matters concerning the Loan
Parties and the Loan Documents as the Administrative Agent may reasonably
request;

 

(vi)          a
certificate signed by a Responsible Officer of the Lead Borrower, certifying
that (A) the conditions specified in Sections 4.02(a) and 4.02(b) have
been satisfied, (B) no consents, licenses or approvals are required in
connection with the execution, delivery and performance by such Loan Party, and
the validity against such Loan Party, of the Loan Documents to which it is a
party, except for (1) such consents, licenses and approvals obtained by
the Loan Parties prior to the Closing Date, each of which are in full force and
effect as of the Closing Date, or (2) those the failure of which to
obtain, individually or in the aggregate, could not have, and could not
reasonably be expected to have, a Material Adverse Effect, and (D) as of
the Closing Date after giving effect to the transactions contemplated hereby,
the Loan Parties on a Consolidated basis are Solvent;

 

96

 

(vii)         a
Borrowing Base Certificate dated the Closing Date, relating to the month ended
on September 5, 2009, and executed by a Responsible Officer of the Lead
Borrower;

 

(viii)        evidence
that all insurance required to be maintained pursuant to the Loan Documents and
all endorsements in favor of the Agents required under the Loan Documents have
been obtained and are in effect;

 

(ix)           a
payoff letter from the lenders or the agent for the lenders under each of the
Existing Credit Agreements evidencing that, upon the making of the initial
Credit Extensions on the Closing Date and the application of such funds in
accordance with such payoff letter, all obligations under each of the Existing
Credit Agreements will have been paid in full and all commitments thereunder
will have terminated, and confirming that all Liens securing obligations under
each of the Existing Credit Agreements will be released upon payment in full of
the obligations under each of the Existing Credit Agreements, which payment in
full shall occur contemporaneously with the initial funding hereunder;

 

(x)            the
Security Documents (other than the Lancaster Mortgage) and copies of
certificates evidencing any stock being pledged thereunder, together with
copies of undated stock powers executed in blank, each duly executed by the
applicable Loan Parties;

 

(xi)           the
Intercreditor Agreement, duly executed by each of the parties thereto;

 

(xii)          all
other Loan Documents, each duly executed by the applicable Loan Parties;

 

(xiii)         certified
copies of the Senior Notes Documents, duly executed by the parties thereto,
together with such other agreements, instruments and documents delivered in
connection therewith as the Administrative Agent shall reasonably request;

 

(xiv)        (A) appraisals
(based on net liquidation value) by a third party appraiser acceptable to the
Collateral Agent of all Inventory and Prescription Lists of the Borrowers, (B) a
written report regarding the results of a commercial finance examination of the
Loan Parties, and (C) other due diligence materials (including, without
limitation, with respect to the Loan Parties’ and their Affiliates’
organizational structure) reasonably requested by the Administrative Agent;

 

(xv)         results
of searches or other evidence reasonably satisfactory to the Collateral Agent
(in each case dated as of a date reasonably satisfactory to the Collateral
Agent) indicating the absence of Liens on the assets of the Loan Parties,
except for Permitted Encumbrances and Liens for which termination statements
and releases, satisfactions and discharges of any mortgages, and releases or
subordination agreements satisfactory to the Collateral Agent are being 

 

97

 

tendered concurrently with such extension of credit or other
arrangements satisfactory to the Collateral Agent for the delivery of such
termination statements and releases, satisfactions and discharges have been
made; and

 

(xvi)        (A) all
documents and instruments, including Uniform Commercial Code financing
statements, required by Law or reasonably requested by the Collateral Agent to
be filed, registered or recorded to create or perfect the Liens intended to be
created under the Loan Documents and all such documents and instruments shall
have been so filed, registered or recorded to the satisfaction of the
Collateral Agent (other than the Lancaster Mortgage, which shall be filed,
registered or recorded not later than sixty (60) days after the Closing Date) and
(B) the Credit Card Notifications and Blocked Account Agreements required
pursuant to Section 6.13 hereof.

 

(b)     After
giving effect to (i) the first funding under the Loans, (ii) any
charges to the Loan Account made in connection with the establishment of the
credit facility contemplated hereby and (iii) all Letters of Credit to be
issued at, or immediately subsequent to, such establishment, Availability shall
be not less than $25,000,000.

 

(c)     There
shall not have occurred since June 30, 2009 any event or condition that
has had or could be reasonably expected to have, either individually or in the
aggregate, a Material Adverse Effect.

 

(d)     The
Administrative Agent shall have received the Audited Financial Statements.

 

(e)     There
shall not have occurred any default of any Material Contract of any Loan Party
which could reasonably be expected to have a Material Adverse Effect.

 

(f)      The
consummation of the transactions contemplated hereby shall not violate any
applicable Law or any Organization Document.

 

(g)     The
Borrowers shall have received gross proceeds from the issuance and sale by the
Borrowers of the Senior Notes in an amount not less than $240,000,000.

 

(h)     There
shall be no Indebtedness of the Loan Parties outstanding immediately after the
Closing Date other than the Obligations and the Indebtedness arising under the
Senior Notes Documents, except as permitted pursuant to Section 7.02.

 

(i)      All
fees required to be paid to any of the Agents or the Arrangers on or before the
Closing Date shall have been paid in full, and all fees required to be paid to
the Lenders on or before the Closing Date shall have been paid in full.

 

(j)      The
Borrowers shall have paid all fees, charges and disbursements of counsel to the
Administrative Agent and BAS to the extent invoiced at least three (3) Business
Days prior to the Closing Date, plus such additional amounts of such fees,

 

98

 

charges and disbursements as shall constitute its reasonable estimate
of such fees, charges and disbursements incurred or to be incurred by it
through the closing proceedings (provided that such estimate
shall not thereafter preclude a final settling of accounts between the
Borrowers and the Administrative Agent).

 

(k)     The
Administrative Agent shall have received all documentation and other
information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including,
without limitation, the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)) (the “Patriot Act”).

 

(l)      No
material changes in governmental regulations or policies materially adversely
affecting any Lender’s ability to make loans or enter into credit facilities of
the type contemplated herein shall have occurred prior to the Closing Date.

 

Without
limiting the generality of the provisions of Section 9.04, for
purposes of determining compliance with the conditions specified in this Section 4.01,
each Lender that has signed this 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 Administrative Agent shall have received notice
from such Lender prior to the proposed Closing Date specifying its objection
thereto.

 

4.02     Conditions to all Credit Extensions.  The obligation of each Lender to
honor any Request for Credit Extension (other than a Conversion/Continuation
Notice requesting only a conversion of Committed Loans to the other Type, or a
continuation of LIBO Rate Loans) and of each L/C Issuer to issue each Letter of
Credit is subject to the following conditions precedent:

 

(a)     The
representations and warranties of the Borrowers and each other Loan Party
contained in Article V or any other Loan Document, or which are
contained in any document furnished at any time under or in connection herewith
or therewith, shall be true and correct in all material respects (or, in the
case of any representation and warranty qualified by materiality, in all
respects) on and as of the date of such Credit Extension, except to the extent
that such representations and warranties specifically refer to an earlier date,
in which case they shall be true and correct in all material respects (or, in
the case of any representation and warranty qualified by materiality, in all
respects) as of such earlier date, and except that for purposes of this Section 4.02,
the representations and warranties contained in Sections 5.05(a) and
5.05(b) shall be deemed to refer to the most recent statements
furnished pursuant to clauses (a) and (b), respectively, of Section 6.01.

 

(b)     No
Default or Event of Default shall have occurred and be continuing, or would
result from such proposed Credit Extension or from the application of the
proceeds thereof.

 

(c)     The
Administrative Agent and, if applicable, the L/C Issuer or the Swing Line
Lender shall have received a Request for Credit Extension in accordance with
the requirements hereof.

 

99

 

Each
Request for Credit Extension (other than a Conversion/Continuation Notice
requesting only a conversion of Committed Loans to the other Type or a
continuation of LIBO Rate Loans) submitted by the Lead Borrower shall be deemed
to be a representation and warranty by the Borrowers that the conditions
specified in Sections 4.02(a) and 4.02(b) have been
satisfied on and as of the date of the applicable Credit Extension.  The conditions set forth in this Section 4.02
are for the sole benefit of the Credit Parties, but until the Required Lenders
otherwise direct the Administrative Agent to cease making Committed Loans, the
Lenders will fund their Applicable Percentage of all Loans and L/C Advances and
participate in all Swing Line Loans and Letters of Credit whenever made or
issued, which are requested by the Lead Borrower and which, notwithstanding the
failure of the Loan Parties to comply with the provisions of this Article IV,
agreed to by the Administrative Agent; provided, however, the
making of any such Loans or the issuance of any Letters of Credit shall not be
deemed a modification or waiver by any Credit Party of the provisions of this Article IV
on any future occasion or a waiver of any rights of the Credit Parties as a
result of any such failure to comply.

 

ARTICLE
V

REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties
to enter into this Agreement and to make Loans and to issue Letters of Credit
hereunder, each Loan Party represents and warrants to the Administrative Agent
and the other Credit Parties that:

 

5.01     Existence, Qualification and Power.  Each Loan Party and each Subsidiary
thereof (a) is a corporation, limited liability company, partnership or
limited partnership, duly organized or formed, validly existing and, where
applicable, in good standing under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority
and all requisite governmental licenses, permits, authorizations, consents and
approvals to (i) own or lease its assets and carry on its business and (ii) execute,
deliver and perform its obligations under the Loan Documents to which it is a
party, and (c) is duly qualified and is licensed and, where applicable, in
good standing under the Laws of each jurisdiction where its ownership, lease or
operation of properties or the conduct of its business requires such
qualification or license; except in each case referred to in clause (b)(i) or
(c), to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect.  Schedule
5.01 annexed hereto sets forth, as of the Closing Date, each Loan Party’s
name as it appears in official filings in its state of incorporation or
organization, its state of incorporation or organization, organization type,
organization number, if any, issued by its state of incorporation or
organization, and its federal employer identification number.

 

5.02     Authorization; No Contravention.  The execution, delivery and
performance by each Loan Party of each Loan Document to which such Person is or
is to be a party, has been duly authorized by all necessary corporate or other
organizational action, and does not and will not: (a) contravene the terms
of any of such Person’s Organization Documents; (b) conflict with or
result in any breach, termination, or contravention of, or constitute a default
under, or require any payment to be made under (i) any Material Contract
or any Material Indebtedness to which such Person is a party or affecting such
Person or the properties of such Person or any of its Subsidiaries or (ii) any
order, injunction, writ or decree of any Governmental Authority or any arbitral
award to which such Person or its property is subject; (c) result in or
require the creation 

 

100

 

of any
Lien upon any asset of any Loan Party (other than Liens in favor of the
Collateral Agent under the Security Documents); or (d) violate any Law.

 

5.03     Governmental Authorization; Other Consents.  No approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or any other Person is necessary or required
in connection with the execution, delivery or performance by, or enforcement
against, any Loan Party of this Agreement or any other Loan Document, except
for (a) the perfection or maintenance of the Liens created under the
Security Documents (including the priority thereof as provided in the
Intercreditor Agreement) or (b) such
as have been obtained or made and are in full force and effect.

 

5.04     Binding Effect.  This Agreement has been, and each
other Loan Document, when delivered, will have been, duly executed and
delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other
Loan Document when so delivered will constitute, a legal, valid and binding
obligation of such Loan Party, enforceable against each Loan Party that is
party thereto in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.

 

5.05     Financial Statements; No Material Adverse Effect.

 

(a)     The
Audited Financial Statements (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; and (ii) fairly present in all material respects
the financial condition of the Parent and its Subsidiaries as of the date
thereof and their results of operations for the period covered thereby in
accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein.

 

(b)     The
unaudited Consolidated balance sheet of the Parent and its Subsidiaries dated July 11,
2009, and the related Consolidated and consolidating statements of income or
operations, Shareholders’ Equity and cash flows for the twenty eight weeks
ended on that date (i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein, and (ii) fairly present in all material respects the
financial condition of the Parent and its Subsidiaries as of the date thereof
and their results of operations for the period covered thereby, subject, in the
case of clauses (i) and (ii), to the absence of footnotes and to normal
year-end audit adjustments.

 

(c)     Since
the date of the Audited Financial Statements, there has been no event or circumstance,
either individually or in the aggregate, that has had or could reasonably be
expected to have a Material Adverse Effect.

 

(d)     The
Consolidated forecasted balance sheet and statements of income and cash flows
of the Parent and its Subsidiaries delivered pursuant to Sections 4.01
or 6.01 were prepared in good faith on the basis of the assumptions
stated therein, which assumptions were believed to be reasonable at the time of
delivery.

 

101

 

5.06     Litigation.  There are no actions, suits,
proceedings, claims or disputes pending or, to the knowledge of the Loan
Parties after due and diligent investigation, threatened or contemplated, at
law, in equity, in arbitration or before any Governmental Authority, by or
against any Loan Party or any of its Subsidiaries or against any of its
properties or revenues that (a) purport to affect or pertain to this
Agreement or any other Loan Document, or any of the transactions contemplated
hereby, or (b) except as specifically disclosed in Schedule 5.06,
either individually or in the aggregate, if determined adversely, could
reasonably be expected to have a Material Adverse Effect.

 

5.07     No Default.  No
Loan Party or any Subsidiary is in default under or with respect to, or party
to, any Material Indebtedness, the effect of which default is to cause, or to
permit the holder or holders of such Material Indebtedness (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required, such Material Indebtedness to be
demanded or to become due or to be repurchased, prepaid, defeased or redeemed
(automatically or otherwise), or an offer to repurchase, prepay, defease or
redeem such Material Indebtedness to be made, prior to its stated
maturity.  No Default or Event of Default
has occurred and is continuing or would result from the consummation of the
transactions contemplated by this Agreement or any other Loan Document.

 

5.08     Ownership of Property; Liens.

 

(a)     Each
of the Loan Parties and each Subsidiary thereof has good and marketable fee
simple title to, or valid leasehold interests in, all real property necessary
or used in the ordinary conduct of its business, except for such defects in
title as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.  The real
property subject to the Lancaster Mortgage is free and clear of all Liens,
other than Permitted Encumbrances.  Each
of the Loan Parties and each Subsidiary has good and marketable title to, valid
leasehold interests in, or valid licenses to use all personal property and
assets material to the ordinary conduct of its business, free and clear of all
Liens, other than Permitted Encumbrances.

 

(b)     Schedule
5.08(b)(1) sets forth the address (including street address, county
and state) of all Real Estate that is owned in fee by the Loan Parties as of
the Closing Date.  Schedule 5.08(b)(2) sets
forth the name of the lessor and the address (including street address, county
and state) of all Leases pursuant to which a Loan Party is the lessee as of the
Closing Date.  To the knowledge of the
Loan Parties, each of such Leases is in full force and effect and the Loan
Parties are not in default of the terms thereof, except to the extent that any
such failure to be in full force and effect or any such default could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

(c)     The
property of each Loan Party and each of its Subsidiaries is subject to no
Liens, other than Permitted Encumbrances.

 

(d)     As
of the Closing Date, no Loan Party or any Subsidiary of a Loan Party holds any
Investments other than Permitted Investments.

 

102

 

5.09     Environmental Compliance. 
Except as specifically disclosed in Schedule 5.09, or except, in each
case, as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect:

 

(a)     No
Loan Party or any Subsidiary thereof (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received written notice
of any claim with respect to any Environmental Liability or (iv) knows of
any basis for any Environmental Liability.

 

(b)     (i) None
of the properties currently or, to the knowledge of the Loan Parties, formerly
owned or operated by any Loan Party or any Subsidiary thereof is listed on the
NPL or on the CERCLIS or any analogous foreign, state or local list, (ii) there
are no and, to the knowledge of the Loan Parties, never have been any
underground or above-ground storage tanks or any surface impoundments, septic tanks,
pits, sumps or lagoons in which Hazardous Materials are being or have been
treated, stored or disposed on any property currently owned or operated by any
Loan Party or any Subsidiary thereof or, to the knowledge of the Loan Parties,
on any property formerly owned or operated by any Loan Party or Subsidiary
thereof, and (iii) Hazardous Materials have not been released, discharged
or disposed of on any property currently or, to the knowledge of the Loan
Parties, formerly owned or operated by any Loan Party or any Subsidiary
thereof.

 

(c)     (i) No
Loan Party or any Subsidiary thereof is undertaking, and no Loan Party or any
Subsidiary thereof has completed, either individually or together with other
potentially responsible parties, any investigation or assessment or remedial or
response action relating to any actual or threatened release, discharge or disposal
of Hazardous Materials at any site, location or operation, either voluntarily
or pursuant to the order of any Governmental Authority or the requirements of
any Environmental Law, and (ii) all Hazardous Materials generated, used,
treated, handled or stored at, or transported to or from, any property currently
or formerly owned or operated by any Loan Party or any Subsidiary thereof, have
been disposed of, at all times during which such property was owned or operated
by any Loan Party or any Subsidiary thereof, in a manner not reasonably expected
to result in material liability to any Loan Party or any Subsidiary thereof.

 

5.10     Insurance.  The properties of the Loan Parties
and their Subsidiaries are insured with financially sound and reputable
insurance companies which are not Affiliates of the Loan Parties, in such
amounts, with such deductibles and covering such risks (including, without
limitation, workmen’s compensation, public liability, business interruption and
property damage insurance) as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where the Loan
Parties or the applicable Subsidiary operates. 
Schedule 5.10 sets forth a description of all insurance
maintained by or on behalf of the Loan Parties as of the Closing Date.  Each insurance policy listed on Schedule
5.10 is in full force and effect as of the Closing Date and all premiums in
respect thereof that are due and payable have been paid.

 

103

 

5.11     Taxes.  The Loan Parties and their
Subsidiaries have filed all Federal, state and other material Tax returns and
reports required to be filed, and have paid all Federal, state and other
material Taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except (a) those which (i) are being contested in good faith
by appropriate proceedings being diligently conducted, (ii) for which
adequate reserves have been provided in accordance with GAAP, (iii) as to
which Taxes no Lien has been filed and (iv) such contest effectively
suspends the collection of the contested obligation and the enforcement of any
Lien securing such obligation or (b) those which could not reasonably be
expected to result in a Material Adverse Effect.  There is no proposed Tax assessment against
any Loan Party or any Subsidiary that would, if made, have a Material Adverse
Effect.  No Loan Party or any Subsidiary
thereof is a party to any tax sharing agreement, with the exception of any tax
sharing agreement solely among the Loan Parties.

 

5.12     ERISA Compliance.

 

(a)     Each
Plan is in compliance in all material respects with the applicable provisions
of ERISA, the Code and other Federal or state Laws.  Each Plan maintained by a Loan Party that is
intended to qualify under Section 401(a) of the Code either (i) has
been determined by the IRS to be qualified under Section 401(a) of
the Code or (ii) has an applicable remedial amendment period that will not
have ended before the Closing Date, and, to the knowledge of the Lead Borrower,
nothing has occurred which, if known by the IRS, could reasonably be expected
to prevent, or cause the loss of, such qualification.  The Loan Parties and each ERISA Affiliate
have made all required contributions to each Plan subject to Section 412
of the Code, unless the failure to make such contributions could not reasonably
be expected to result in a Material Adverse Effect.  No Lien on the assets of a Loan Party or an
ERISA Affiliate imposed under the Code or ERISA exists or could reasonably be
expected to arise on the assets of Loan Party or an ERISA Affiliate with respect
to any Plan.

 

(b)     There
are no pending or, to the best knowledge of the Lead Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that could reasonably be expected to have a Material Adverse
Effect.  There has been no prohibited
transaction or violation of the fiduciary responsibility rules with
respect to any Plan that has resulted or could reasonably be expected to result
in a Material Adverse Effect.

 

(c)     To
the best knowledge of the Lead Borrower, none of the following have occurred,
unless the occurrence of the same could not reasonably be expected to have a
Material Adverse Effect: (i) no ERISA Event has occurred or could
reasonably be expected to occur; (ii) no Pension Plan has any Unfunded
Pension Liability; (iii) neither any Loan Party nor any ERISA Affiliate
has incurred, or reasonably expects to incur, any liability under Title IV of
ERISA with respect to any Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA); (iv) neither any Loan Party
nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability (and no event has occurred which, with the giving of notice under Section 4219
of ERISA, could reasonably be expected to result in such liability) under
Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither

 

104

 

any Loan Party nor any ERISA Affiliate has engaged in a transaction
that could reasonably be expected to be subject to Sections 4069 or 4212(c) of
ERISA.

 

5.13     Subsidiaries; Equity Interests.  As of the Closing Date, the Loan
Parties have no Subsidiaries other than those specifically disclosed in Part (a) of
Schedule 5.13, which Schedule sets forth the legal name, jurisdiction of
incorporation or formation and authorized Equity Interests of each such
Subsidiary as of the Closing Date.  All
of the outstanding Equity Interests in such Subsidiaries have been validly
issued, are fully paid and non-assessable and are owned by a Loan Party (or a
Subsidiary of a Loan Party) as of the Closing Date in the amounts specified on Part (a) of
Schedule 5.13 free and clear of all Liens except Permitted
Encumbrances.  Except as set forth in Schedule
5.13, as of the Closing Date, there are no outstanding rights to purchase
any Equity Interests in any Subsidiary. 
As of the Closing Date, the Loan Parties have no equity investments in
any other corporation or entity other than those specifically disclosed in Part (b) of
Schedule 5.13.  All of the
outstanding Equity Interests in the Loan Parties have been validly issued, and
are fully paid and non-assessable and are owned as of the Closing Date in the
amounts specified on Part (c) of Schedule 5.13 free and clear
of all Liens except for Permitted Encumbrances. 
The copies of the Organization Documents of each Loan Party and each
amendment thereto provided as of the Closing Date pursuant to Section 4.01
are true and correct copies of each such document, each of which is valid and
in full force and effect as of the Closing Date.

 

5.14     Margin Regulations; Investment Company Act.

 

(a)     No
Loan Party is engaged or will be engaged, principally or as one of its
important activities, in the business of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the FRB), or extending credit for
the purpose of purchasing or carrying margin stock.  None of the proceeds of the Credit Extensions
shall be used directly or indirectly for the purpose of purchasing or carrying
any margin stock, for the purpose of reducing or retiring any Indebtedness that
was originally incurred to purchase or carry any margin stock or for any other
purpose that might cause any of the Credit Extensions to be considered a “purpose
credit” within the meaning of Regulations T, U, or X issued by the FRB.

 

(b)     None
of the Loan Parties, any Person Controlling any Loan Party, or any Subsidiary
is or is required to be registered as an “investment company” under the
Investment Company Act of 1940.

 

5.15     Disclosure.  As of
the Closing Date, each Loan Party has disclosed to the Administrative Agent and
the Lenders all agreements, instruments and corporate or other restrictions to
which it or any of its Subsidiaries is subject, and all other matters known to
it, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.  No
report, financial statement, certificate or other information furnished
(whether in writing or orally) by or on behalf of any Loan Party to the
Administrative Agent or any Lender in connection with the transactions
contemplated hereby and the negotiation of this Agreement or delivered
hereunder or under any other Loan Document (in each case, as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the 

 

105

 

circumstances
under which they were made, not misleading; provided that,
with respect to projected financial information, the Loan Parties represent
only that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time.

 

5.16     Compliance with Laws.  Each of the Loan Parties and each
Subsidiary is in compliance in all material respects with the requirements of
all Laws and all orders, writs, injunctions and decrees applicable to it or to
its properties, except in such instances in which (a) such requirement of
Law or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply
therewith, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

 

5.17     Intellectual Property; Licenses, Etc.  The Loan Parties and their
Subsidiaries own, or possess the right to use, all of the Intellectual Property
and all of the licenses, permits and other authorizations that are reasonably
necessary for the operation of their respective businesses.  To the best knowledge of the Lead Borrower,
no slogan or other advertising device, product, process, method, substance,
part or other material now employed, or now contemplated to be employed, by any
Loan Party or any Subsidiary infringes upon any Intellectual Property rights
held by any other Person, except for such infringement which, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.  Except as
specifically disclosed in Schedule 5.17, no claim or litigation
regarding any of the foregoing is pending or, to the best knowledge of the Lead
Borrower, threatened, which, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

 

5.18     Labor Matters.  As
of the Closing Date, except as, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect: (a) there are no
strikes, lockouts, slowdowns or other labor disputes against any Loan Party or
its Subsidiaries pending or, to the knowledge of any the Lead Borrower,
threatened; (b) the hours worked by, and payments made to, employees of
the Loan Parties and their Subsidiaries are not in violation of the Fair Labor
Standards Act or any other applicable federal, state, local or foreign Law
dealing with such matters; (c) no Loan Party or any of its Subsidiaries
has incurred any liability or obligation under the Worker Adjustment and
Retraining Act or similar state Law; and (d) all payments due from any
Loan Party or its Subsidiaries, or for which any claim may be made against any
Loan Party or any of its Subsidiaries, on account of wages and employee health
and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of such Loan Party or such Subsidiary to the extent
required by GAAP.  Except as set forth on
Schedule 5.18 no Loan Party or any Subsidiary is a party to or bound by
any collective bargaining agreement. 
Except as, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect,: (A) there are no
representation proceedings pending or, to any Loan Party’s knowledge,
threatened to be filed with the National Labor Relations Board, and no labor
organization or group of employees of any Loan Party or any Subsidiary has made
a pending demand for recognition; (B) there are no complaints, unfair
labor practice charges, grievances, arbitrations, unfair employment practices
charges or any other claims or complaints against any Loan Party or any
Subsidiary pending or, to the knowledge of any Loan Party, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment of any employee of any Loan Party or any of its Subsidiaries; and (C) the
consummation of the 

 

106

 

transactions
contemplated by the Loan Documents will not give rise to a right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which any Loan Party or any of its Subsidiaries is
bound.

 

5.19     Security Documents.

 

(a)     The
Security Agreement creates in favor of the Collateral Agent, for the benefit of
the Credit Parties, a legal, valid, continuing and enforceable security
interest in the Collateral (as defined in the Security Agreement), the
enforceability of which is subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered
in a proceeding in equity or at law.  The
financing statements, releases and other filings are in appropriate form and
have been or will be filed in the offices specified in the Perfection
Certificate.  Upon the filing of such
financing statements, releases and other filings and/or the obtaining of “control,”
the Collateral Agent will have a perfected Lien on, and security interest in,
to and under all right, title and interest of the Loan Parties thereunder in
all Collateral that may be perfected by filing, recording or registering a
financing statement or analogous document (including, without limitation, the
proceeds of such Collateral subject to the limitations relating to such
proceeds in the UCC) or by obtaining control under the UCC (in effect on the
date this representation is made) in each case prior and superior in right to
any other Person, except for (a) with respect to the Notes Priority
Collateral only, Liens securing the obligations of the Loan Parties arising
under the Senior Notes Documents, and (b) other Permitted Encumbrances
having priority under applicable Law.

 

(b)     When
the Trademark Security Agreement is filed in the United States Patent and
Trademark Office within the three-month period (commencing as of the Closing
Date) pursuant to 15 U.S.C. §1060, and when financing statements in appropriate
form are filed in the offices specified in the Perfection Certificate, the
Collateral Agent shall have a fully perfected Lien on, and security interest
in, all right, title and interest of the applicable Loan Parties in the
Intellectual Property Collateral (as defined in the Security Agreement) in
which a security interest may be perfected by filing, recording or registering
a security agreement, financing statement or analogous document in the United
States Patent and Trademark Office, in each case prior and superior in right to
any other Person (it being understood that subsequent recordings in the United
States Patent and Trademark Office and the United States Copyright Office may
be necessary to perfect a Lien on patents, patent applications, registered
trademarks, trademark applications and copyrights acquired by the Loan Parties
after the date hereof), except for (a) with respect to the Notes Priority
Collateral only, Liens securing the obligations of the Loan Parties arising
under the Senior Notes Documents, and (b) other Permitted Encumbrances
having priority under applicable Law.

 

(c)     The
Lancaster Mortgage, together with any required financing statements (if
applicable), when filed with the appropriate Governmental Authorities, shall
create in favor of the Collateral Agent, for the benefit of the Credit Parties,
a legal, valid, 

 

107

 

continuing and enforceable Lien in the Mortgaged Property (as defined
in the Lancaster Mortgage), the enforceability of which is subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at
law.  Upon the filing of the Lancaster
Mortgage and any required financing statements (if applicable) with the
appropriate Governmental Authorities, the Collateral Agent will have a
perfected Lien on, and security interest in, to and under all right, title and
interest of the grantors thereunder in all Mortgaged Property (as defined in
the Lancaster Mortgage) that may be perfected by such filing (including,
without limitation, the proceeds of such Mortgaged Property), in each case
prior and superior in right to any other Person, except for (a) with
respect to the Notes Priority Collateral only, Liens securing the obligations
of the Loan Parties arising under the Senior Notes Documents, and (b) other
Permitted Encumbrances having priority under applicable Law.

 

5.20     Solvency.  After
giving effect to the transactions contemplated by this Agreement, and before
and after giving effect to each Credit Extension, the Loan Parties, on a
Consolidated basis, are, and will be, Solvent. No transfer of property has been
or will be made by any Loan Party and no obligation has been or will be
incurred by any Loan Party in connection with the transactions contemplated by
this Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of any Loan Party.

 

5.21     Deposit Accounts; Credit Card Arrangements.

 

(a)     Annexed
hereto as Schedule 5.21(a) is a list of all DDAs maintained by the
Loan Parties as of the Closing Date, which Schedule includes, with respect to
each DDA: (i) the name and address of the depository; (ii) the
account number(s) maintained with such depository; (iii) a contact
person at such depository, and (iv) the identification of each Blocked
Account Bank.

 

(b)     Annexed
hereto as Schedule 5.21(b) is a list describing all arrangements as
of the Closing Date to which any Loan Party is a party with respect to the
processing and/or payment to such Loan Party of the proceeds of any credit card
charges for sales made by such Loan Party.

 

5.22     Brokers.  No broker
or finder brought about the obtaining, making or closing of the Loans or
transactions contemplated by the Loan Documents, and no Loan  Party or Affiliate thereof has any obligation
to any Person in respect of any finder’s or brokerage fees in connection
therewith.

 

5.23     Material Contracts. 
The Loan Parties have delivered or otherwise made available to the
Administrative Agent true, correct and complete copies of all Material
Contracts to which any Loan Party is a party or is bound as of the Closing
Date.  The Loan Parties are not in breach
or in default of or under any Material Contract, the effect of which breach or
default is to cause, or to permit, any other party thereto to terminate such
Material Contract, and the Loan Parties have not received any notice of the
intention of any other party thereto to terminate any Material Contract,
except, in each case referred to in this sentence, for any such Material
Contract that has 

 

108

 

been
replaced prior to, or concurrently with, the termination thereof in accordance
with the terms of Section 7.12(a).

 

5.24     Casualty.  Neither
the businesses nor the properties of any Loan Party or any of its Subsidiaries
are affected by any fire, explosion, accident, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance) that, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

5.25     Pharmaceutical Laws.

 

(a)     The
Loan Parties have obtained all permits, licenses and other authorizations which
are required with respect to the ownership and operations of their businesses
under any Pharmaceutical Law, except where the failure to obtain such permits,
licenses or other authorizations could not reasonably be expected to have a Material
Adverse Effect.

 

(b)     The
Loan Parties are in compliance with all terms and conditions of all such
permits, licenses, orders and authorizations, and are also in compliance with
all Pharmaceutical Laws, including all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Pharmaceutical Laws, except where the failure to
comply with such terms, conditions or laws could not reasonably be expected to
have a Material Adverse Effect.

 

(c)     None
of the Loan Parties has any liabilities, claims against it or presently
outstanding notices imposed or based upon any provision of any Pharmaceutical
Law, except for such liabilities, claims, citations or notices which
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.

 

5.26     HIPAA Compliance.

 

(a)     To
the extent that, and for so long as, a Loan Party is a “covered entity” within
the meaning of HIPAA, such Loan Party: (i) has undertaken or will promptly
undertake all applicable surveys, audits, inventories, reviews, analyses and/or
assessments (including any required risk assessments) of all areas of its
business and operations required by HIPAA and/or that could be adversely
affected by failure of Loan Party to be HIPAA Compliant (as defined below); (ii) has
developed or will promptly develop a detailed plan and time line for becoming
HIPAA Compliant (a “HIPAA Compliance Plan”); and (iii) has
implemented, or will implement, those provisions of such HIPAA Compliance Plan
in all material respects necessary to ensure that such Loan Party is or becomes
HIPAA Compliant.  For purposes hereof, “HIPAA
Compliant” shall mean that a Loan Party, to the extent legally required, (i) is
or will use commercially reasonable efforts to be in compliance in all material
respects with each of the applicable requirements of the so-called “Administrative
Simplification” provisions of HIPAA on and as of each date that any part
thereof, or any final rule or regulation thereunder, becomes effective in
accordance with its or 

 

109

 

their terms, as the case may be (each such date, a “HIPAA Compliance
Date”), and (ii) is not, and could not reasonably be expected to
become, as of any date following any such HIPAA Compliance Date, the subject of
any civil or criminal penalty, process, claim, action or proceeding, or any
administrative or other regulatory review, survey, process or proceeding (other
than routine surveys or reviews conducted by any government health plan or
other accreditation entity) that has had or could reasonably be expected to
have a Material Adverse Effect.

 

(b)     Schedule
5.26(b), annexed hereto, sets forth a complete list of all “business
associate agreements” (as such term is defined in HIPAA) that any Loan Party
has entered into with any person as of the Closing Date and true, correct and
complete copies of all of such agreements have been provided to Agent.

 

5.27     Compliance With Health Care Laws.

 

(a)     Each
Loan Party is in compliance with all Health Care Laws, including all Medicare
and Medicaid program rules and regulations applicable to it, unless the
failure to comply with any such law, rule or regulation has not had and
could not reasonably be expected to have a Material Adverse Effect.  Without limiting the generality of the
foregoing, no Loan Party has received notice of any violation of any provisions
of the Medicare and Medicaid Anti-Fraud and Abuse or Anti-Kickback Amendments
of the Social Security Act (presently codified in Section 1128(B)(b) of
the Social Security Act) or the Medicare and Medicaid Patient and Program
Protection Act of 1987.

 

(b)     Each
Loan Party has maintained in all material respects all records required to be
maintained by the Joint Commission on Accreditation of Healthcare
Organizations, the Food and Drug Administration, Drug Enforcement Agency and
State Boards of Pharmacy and the Federal and State Medicare and Medicaid
programs as required by the Health Care Laws or other applicable Law or
regulation and each Loan Party and the owners of the facilities and other
businesses managed by any Loan Party have all permits, licenses, franchises,
certificates and other approvals or authorizations of Governmental Authority as
are required under Health Care Laws and under such HMO or similar licensure
laws and such insurance laws and regulations, as are applicable thereto, and
with respect to those facilities and other businesses that participate in
Medicare and/or Medicaid, to receive reimbursement under Medicare and Medicaid,
except where the failure to obtain any such permit, license, franchise,
certificate or other approval or authorization could not reasonably be expected
to have a Material Adverse Effect.

 

(c)     Each
Loan Party which is a Certified Medicare Provider or Certified Medicaid
Provider has in a timely manner filed all requisite cost reports, claims and
other reports required to be filed in connection with all Medicare and Medicaid
programs due on or before the date hereof, all of which are complete and
correct in all material respects. To the best of the Loan Parties’ knowledge,
there are no claims, actions or appeals pending (and no Loan Party has filed
any claims or reports which should result in any such claims, actions or appeals)
before any Third Party Payor or 

 

110

 

Governmental Authority, including, without limitation, any Fiscal
Intermediary, the Provider Reimbursement Review Board or the Administrator of
HCFA, with respect to any Medicare or Medicaid cost reports or claims filed by
any Loan Party on or before the date hereof. No validation review or program
integrity review related to a Loan Party which could reasonably be expected to
have a Material Adverse Effect has been conducted by any Third Party Payor or
Governmental Authority in connection with Medicare or Medicare programs, and to
the best of the Loan Parties’ knowledge, no such reviews are scheduled, pending
or threatened against or affecting any Loan Party, or any of its assets, or,
the consummation of the transactions contemplated hereby.  To the best of the Loan Parties’ knowledge,
there currently exist no restrictions, deficiencies, required plans of
correction actions or other such remedial measures with respect to Federal and
State Medicare and Medicaid certifications or licensure against such parties.

 

(d)     Schedule
5.27(d) hereto sets forth an accurate, complete and current list of
all participation agreements of the Loan Parties with health maintenance
organizations, insurance programs, preferred provider organizations and other
Third Party Payors as of the Closing Date. 
Each such agreement is in full force and effect and no default exists
thereunder, except to the extent that (i) any such failure to be in full
force and effect or any such default could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect or (ii) such
agreement has been replaced prior to, or concurrently with, the termination
thereof in accordance with the terms of Section 7.12(a).

 

ARTICLE
VI

AFFIRMATIVE COVENANTS

 

So long as any Lender shall
have any Commitment hereunder, any Loan or other Obligation (other than any
Obligation in respect of the Other Liabilities) hereunder shall remain unpaid
or unsatisfied, or any Letter of Credit shall remain outstanding, the Loan
Parties shall, and shall (except in the case of the covenants set forth in Sections
6.01, 6.02, and 6.03) cause each Subsidiary to:

 

6.01     Financial Statements. 
Deliver to the Administrative Agent:

 

(a)     as
soon as available, but in any event within ninety (90) days after the end of
each Fiscal Year of the Parent (commencing with the first Fiscal Year ending
after the Closing Date), a Consolidated balance sheet of the Parent and its
Subsidiaries as at the end of such Fiscal Year, and the related Consolidated
statements of income or operations, Shareholders’ Equity and cash flows for
such Fiscal Year, setting forth in each case in comparative form the figures
for the previous Fiscal Year, all in reasonable detail and prepared in
accordance with GAAP, such Consolidated statements to be audited and
accompanied by a report and unqualified opinion of a Registered Public
Accounting Firm of nationally recognized standing reasonably acceptable to the Administrative
Agent, which report and opinion shall be prepared in accordance with generally
accepted auditing standards and shall not be subject to any 

 

111

 

“going concern” or like qualification or exception or any qualification
or exception as to the scope of such audit;

 

(b)     as
soon as available, but in any event within forty-five (45) days after the end
of each of the first three Fiscal Quarters of each Fiscal Year of the Parent
(commencing with the first Fiscal Quarter ending after the Closing Date), a
Consolidated balance sheet of the Parent and its Subsidiaries as at the end of
such Fiscal Quarter, and the related Consolidated statements of income or
operations, Shareholders’ Equity and cash flows for such Fiscal Quarter and for
the portion of the Parent’s Fiscal Year then ended, setting forth in each case
in comparative form the figures for (i) such period set forth in the
projections delivered pursuant to Section 6.01(d) hereof, (ii) the
corresponding Fiscal Quarter of the previous Fiscal Year and (iii) the
corresponding portion of the previous Fiscal Year, all in reasonable detail,
such Consolidated statements to be certified by a Responsible Officer of the
Lead Borrower as fairly presenting the financial condition, results of
operations, Shareholders’ Equity and cash flows of the Parent and its
Subsidiaries as of the end of such Fiscal Quarter in accordance with GAAP,
subject only to normal year-end audit adjustments and the absence of footnotes;

 

(c)     as
soon as available, but in any event within thirty (30) days after the end of
each Fiscal Period of each Fiscal Year of the Parent (commencing with the
Fiscal Period ended October 3, 2009), a Consolidated balance sheet of the
Parent and its Subsidiaries as at the end of such Fiscal Period, and the
related Consolidated statements of income or operations for such Fiscal Period,
and for the portion of the Parent’s Fiscal Year then ended, setting forth in
each case in comparative form the figures for (i) such period set forth in
the projections delivered pursuant to Section 6.01(d) hereof, (ii) the
corresponding Fiscal Period of the previous Fiscal Year and (iii) the
corresponding portion of the previous Fiscal Year, all in reasonable detail,
such Consolidated statements to be certified by a Responsible Officer of the
Lead Borrower as fairly presenting the financial condition, results of
operations of the Parent and its Subsidiaries as of the end of such Fiscal
Period in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes;

 

(d)     as
soon as available, but in any event within thirty (30) days after the end of
each Fiscal Year of the Parent, forecasts prepared by management of the Lead
Borrower, in form and detail reasonably satisfactory to the Administrative
Agent, of Consolidated balance sheets and statements of income or operations
and cash flows and an availability model of the Parent and its Subsidiaries on
a monthly basis for the immediately following Fiscal Year (including the Fiscal
Year in which the Maturity Date occurs) and, as soon as available, any
significant revisions (if any) to such forecast with respect to such Fiscal
Year.

 

6.02     Certificates; Other Information.  Deliver to the Administrative
Agent, in form and detail reasonably satisfactory to the Administrative Agent:

 

112

 

(a)    (i) concurrently with
the delivery of the financial statements referred to in Sections 6.01(a),
6.01(b) and 6.01(c) (commencing with the delivery of the financial
statements for the Fiscal Period ended October 3, 2009),
(i) a duly completed Compliance Certificate signed by a Responsible
Officer of the Lead Borrower (to be furnished even if a Covenant Compliance
Event is not then in effect) and (ii) concurrently
with the delivery of the financial statements referred to in Sections 6.01(a) and
6.01(b), a copy of management’s discussion and analysis with respect to
such financial statements.  In the event
of any change in GAAP used in the preparation of such financial statements, the
Lead Borrower shall also provide a statement of reconciliation conforming such
financial statements to GAAP;

 

(b)     on
the 15th day of each Fiscal Period (or, if such day is
not a Business Day, on the next succeeding Business Day), a Borrowing Base
Certificate showing the Borrowing Base as of the close of business as of the
last day of the immediately preceding Fiscal Period, each Borrowing Base
Certificate to be certified as complete and correct by a Responsible Officer of
the Lead Borrower; provided that, upon the occurrence and
during the continuance of an Accelerated Borrowing Base Delivery Event, such
Borrowing Base Certificate shall be delivered on Thursday of each week (or, if
Thursday is not a Business Day or if such week has a holiday on a Monday,
Tuesday, Wednesday or Thursday, on the next succeeding Business Day), as of the
close of business on the immediately preceding Saturday;

 

(c)     promptly
upon receipt, copies of any detailed audit reports, management letters or
recommendations submitted to the board of directors (or the audit committee of
the board of directors) of any Loan Party by its Registered Public Accounting
Firm in connection with the accounts or books of the Loan Parties or any
Subsidiary, or any audit of any of them;

 

(d)     promptly
after the same are available, copies of each annual report, proxy or financial
statement or other report or communication sent to the shareholders of the Loan
Parties and copies of all annual, regular, periodic and special reports and
registration statements which any Loan Party may file or be required to file
with the SEC under Sections 13 or 15(d) of the Securities Exchange Act of
1934 or with any national securities exchange;

 

(e)     the
financial and collateral reports described on Schedule 6.02 hereto, at
the times set forth in such Schedule;

 

(f)      as
soon as available, but in any event within thirty (30) days prior to the expiry
of the then existing insurance policies certificates evidencing renewal of all
insurance policies required to be maintained pursuant hereto;

 

(g)     promptly,
and in any event within five (5) Business Days after receipt thereof by
any Loan Party or any Subsidiary thereof, copies of each notice or other
correspondence received from any Governmental Authority (including, without
limitation, the SEC (or comparable agency in any applicable non-U.S.
jurisdiction)) concerning any proceeding with, or investigation or possible
investigation or other 

 

113

 

inquiry by such Governmental Authority regarding financial or other
operational results of any Loan Party or any Subsidiary thereof or any other
matter which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect; and

 

(h)     promptly,
such additional information regarding the business affairs, financial condition
or operations of any Loan Party or any Subsidiary, or compliance with the terms
of the Loan Documents, as the Administrative Agent or any Lender (upon request
to the Administrative Agent) may from time to time reasonably request.

 

Documents
required to be delivered pursuant to Sections 6.01(a),  (b), or (c) may
be delivered electronically and, if so delivered, shall be deemed to have been
delivered on the date (i) on which the Lead Borrower posts such documents,
or provides a link thereto on the Lead Borrower’s website on the Internet at
the website address listed on Schedule 10.02; or (ii) on which such
documents are provided to the Administrative Agent for posting on the Lead
Borrower’s behalf on an Internet or intranet website, if any, to which each
Lender and the Administrative Agent have access (whether a commercial,
third-party website or whether sponsored by the Administrative Agent); provided that:
(i) the Lead Borrower shall deliver paper copies of such documents to the
Administrative Agent or any Lender that requests the Lead Borrower to deliver
such paper copies until a written request to cease delivering paper copies is
given by the Administrative Agent or such Lender and (ii) the Lead
Borrower shall notify the Administrative Agent and each Lender (by telecopier
or electronic mail) of the posting of any such documents and provide to the
Administrative Agent by electronic mail electronic versions (i.e., soft
copies) of such documents.  The
Administrative 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 Loan Parties with any such
request for delivery, and each Lender shall be solely responsible for
requesting delivery to it or maintaining its copies of such documents.

 

The Loan Parties hereby acknowledge
that (a) the Administrative Agent and/or the Arrangers may make available
to the Lenders and the L/C Issuer materials and/or information provided by or
on behalf of the Loan Parties hereunder (collectively, “Borrower Materials”)
by posting the Borrower Materials on IntraLinks or another similar electronic
system (the “Platform”) and (b) certain of the Lenders may be “public-side”
Lenders (i.e., Lenders that do not wish to receive material non-public
information with respect to the Loan Parties or their securities) (each, a “Public
Lender”).  The Loan Parties hereby
agree that so long as any Loan Party is
the issuer of any outstanding debt or equity securities that are registered or
issued pursuant to a private offering or is actively contemplating issuing any
such securities they will use commercially reasonable efforts to
identify that portion of the Borrower Materials that may be distributed to the
Public Lenders and that (w) all such Borrower Materials 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 Loan Parties shall be deemed to have authorized
the Administrative Agent, the Arrangers, the L/C Issuer and the Lenders to
treat such Borrower Materials as not containing any material non-public
information (although it may be sensitive and proprietary) with respect to the
Loan Parties 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 

 

114

 

be
treated as set forth in Section 10.07); (y) all Borrower
Materials marked “PUBLIC” are permitted to be made available through a portion
of the Platform designated “Public Investor”; and (z) the Administrative
Agent shall be entitled to treat any Borrower Materials that are not marked “PUBLIC”
as being suitable only for posting on a portion of the Platform not designated “Public
Investor.”

 

6.03     Notices.  Promptly, and in any event within
five (5) Business Days (other than with respect to clauses (f) and (h) below,
in which case such notice is required within fifteen (15) Business Days) after
a Responsible Officer of the Lead Borrower has obtained knowledge thereof,
notify the Administrative Agent:

 

(a)     of
the occurrence of any Default;

 

(b)     of
any breach or non-performance of, or any default under, the C&S Supply
Agreement or either of the McKesson Agreements, the effect of which breach or
default is to cause, or to permit, any party to such agreement to terminate
such agreement;

 

(c)     of
any matter that has resulted or could reasonably be expected to result in a
Material Adverse Effect, including (i) breach or non-performance of, or
any default under, a Material Contract or with respect to Material Indebtedness
of any Loan Party or any Subsidiary thereof, (ii) any dispute, litigation,
investigation, proceeding or suspension between any Loan Party or any
Subsidiary thereof and any Governmental Authority, or (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting any Loan Party or any Subsidiary thereof, including pursuant to any
applicable Environmental Laws;

 

(d)     of
the occurrence of any ERISA Event;

 

(e)     of
any change in any Loan Party’s chief executive officer or chief financial
officer;

 

(f)      of
the discharge by any Loan Party of its present Registered Public Accounting
Firm or any withdrawal or resignation by such Registered Public Accounting
Firm;

 

(g)     of
any collective bargaining agreement or other labor contract to which a Loan
Party becomes a party, or the application for the certification of a collective
bargaining agent;

 

(h)     of
the filing of any Lien for unpaid Taxes against any Loan Party in excess of
$500,000;

 

(i)      of
any casualty or other insured damage to any material portion of the Collateral
or the commencement of any action or proceeding for the taking of any interest
in a material portion of the Collateral under power of eminent domain or by
condemnation or similar proceeding or if any material portion of the Collateral
is damaged or destroyed;

 

115

 

(j)      the
receipt of any notice from a supplier, seller or agent pursuant to either PACA
or PASA with respect to claims individually or in the aggregate in excess of
$1,000,000; and

 

(k)     of
any failure by any Loan Party to pay rent at any of such Loan Party’s locations
if such failure continues for more than ten (10) days following the day on
which such rent first came due and such failure could reasonably be expected to
result in a Material Adverse Effect.

 

Each
notice pursuant to this Section 6.03 shall be accompanied by a
statement of a Responsible Officer of the Lead Borrower setting forth details
of the occurrence referred to therein and stating what action the Lead Borrower
has taken and proposes to take with respect thereto.  Each notice pursuant to Section 6.03(a) shall
describe with particularity any and all provisions of this Agreement and any
other Loan Document that have been breached.

 

6.04     Payment of Obligations. 
Pay and discharge, as the same shall become due and payable, all its
material obligations and liabilities, including: (a) all Tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets; (b) all lawful claims (including, without limitation, claims of
landlords, warehousemen, customs brokers, and carriers) which, if unpaid, would
by law become a Lien upon its property; and (c) all Indebtedness, as and
when due and payable, but subject to any subordination provisions contained in
any instrument or agreement evidencing such Indebtedness, except, in each case,
where (i) (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) such Loan Party has set aside
on its books adequate reserves with respect thereto in accordance with GAAP, (c) such
contest effectively suspends collection of the contested obligation and
enforcement of any Lien securing such obligation, and (d) no Lien has been
filed with respect thereto or (ii) the failure to make payment pending
such contest could not reasonably be expected to result in a Material Adverse
Effect. Nothing contained herein shall be deemed to limit the rights of the
Administrative Agent with respect to establishing Reserves pursuant to this
Agreement.

 

6.05     Preservation of Existence, Etc.  (a) Preserve, renew and maintain in full
force and effect its legal existence and good standing under the Laws of the
jurisdiction of its organization or formation except in a transaction permitted
by Sections 7.04 or 7.05; (b) take all reasonable action to
maintain all rights, privileges, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) preserve or renew all of its Intellectual Property, except
to the extent such Intellectual Property is no longer used or useful in the
conduct of the business of the Loan Parties or the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.

 

6.06     Maintenance of Properties.  Except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect, (a) maintain,
preserve and protect all of its properties and equipment necessary in the
operation of its business in good working order and condition, ordinary wear
and tear excepted, and (b) make all necessary repairs thereto and renewals
and replacements thereof.

 

116

 

6.07     Maintenance of Insurance.  Maintain with financially sound
and reputable insurance companies reasonably acceptable to the Administrative
Agent not Affiliates of the Loan Parties, insurance with respect to its
properties and business against loss or damage of the kinds customarily insured
against by Persons engaged in the same or similar business and operating in the
same or similar locations or as is required by applicable Law, of such types
and in such amounts as are customarily carried under similar circumstances by
such other Persons and as are reasonably acceptable to the Administrative
Agent.

 

(a)     Cause
fire and extended coverage policies maintained with respect to any Collateral
to be endorsed or otherwise amended to include (i) a non-contributing
mortgagee clause (regarding improvements to real property) and lenders’ loss
payable clause (regarding personal property), in form and substance reasonably
satisfactory to the Collateral Agent, which endorsements or amendments shall
provide that the insurer shall pay all proceeds otherwise payable to the Loan
Parties under the policies directly to the Collateral Agent (provided  that
the Collateral Agent shall promptly remit such proceeds, in their entirety, to
the Lead Borrower, unless such proceeds constitute Net Proceeds on account of a
Prepayment Event or a Cash Dominion Event has occurred and is continuing, in
which case the Administrative Agent shall promptly apply such proceeds to
reduce the outstanding balance of Credit Extensions in accordance with Sections
2.05(f) or 8.03, as applicable), (ii) a provision to the
effect that none of the Loan Parties, Credit Parties or any other Person shall
be a co-insurer and (iii) such other provisions as the Collateral Agent
may reasonably require from time to time to protect the interests of the Credit
Parties.

 

(b)     Cause
commercial general liability policies and excess (umbrella) liability policies
to be endorsed to name the Collateral Agent as an additional insured.

 

(c)     Cause
business interruption policies (if any) to name the Collateral Agent as a loss
payee and to be endorsed or amended to include (i) a provision that, from
and after the Closing Date, the insurer shall pay all proceeds otherwise
payable to the Loan Parties under the policies directly to the Collateral Agent
(provided that the Collateral Agent shall promptly remit
such proceeds, in their entirety, to the Lead Borrower, unless such proceeds
constitute Net Proceeds on account of a Prepayment Event or a Cash Dominion
Event has occurred and is continuing, in which case the Administrative Agent
shall promptly apply such proceeds to reduce the outstanding balance of Credit
Extensions in accordance with Sections 2.05(f) or 8.03, as
applicable), (ii) a provision to the effect that none of the Loan Parties,
the Administrative Agent, the Collateral Agent or any other party shall be a
co-insurer and (iii) such other provisions as the Collateral Agent may
reasonably require from time to time to protect the interests of the Credit
Parties.

 

(d)     Cause
each such policy referred to in this Section 6.07 to also provide
that it shall not be canceled, modified or not renewed (i) by reason of
nonpayment of premium except upon not less than ten (10) days prior
written notice thereof by the insurer to the Collateral Agent (giving the
Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for
any other reason except upon not less than thirty (30) days prior written
notice thereof by the insurer to the Collateral Agent.

 

117

 

(e)     Deliver
to the Collateral Agent, prior to the cancellation, modification or non-renewal
of any such policy of insurance, a copy of a renewal or replacement policy (or
other evidence of renewal of a policy previously delivered to the Collateral
Agent, including an insurance binder) together with evidence satisfactory to
the Collateral Agent of payment of the premium therefor.

 

None
of the Credit Parties or their agents or employees shall be liable for any loss
or damage insured by the insurance policies required to be maintained under this
Section 6.07.  If the
insurance policies do not provide waiver of subrogation rights against the
Credit Parties and their agents or employees, then the Loan Parties hereby
agree, to the extent permitted by law, to waive their right of recovery, if
any, against such parties.  The
designation of any form, type or amount of insurance coverage by any Credit
Party under this Section 6.07 shall in no event be deemed a
representation, warranty or advice by such Credit Party that such insurance is
adequate for the purposes of the business of the Loan Parties or the protection
of their properties.

 

6.08     Compliance with Laws.  Comply in all material respects
with the requirements of all Laws and all orders, writs, injunctions and
decrees applicable to it or to its business or property, except in such
instances in which (a) (i) such requirement of Law or order, writ,
injunction or decree is being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
have been set aside and maintained by the Loan Parties in accordance with GAAP,
and (ii) such contest effectively suspends enforcement of the contested
Laws, or (b) the failure to comply therewith could not reasonably be
expected to have a Material Adverse Effect.

 

6.09     Books and Records; Accountants.

 

(a)     (i) 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 financial
transactions and matters involving the assets and business of the Loan Parties
or such Subsidiary, as the case may be; and (ii) maintain such books of
record and account in material conformity with all applicable requirements of
any Governmental Authority having regulatory jurisdiction over the Loan Parties
or such Subsidiary, as the case may be.

 

(b)     At
all times, retain a Registered Public Accounting Firm which is reasonably
satisfactory to the Administrative Agent and instruct such Registered Public
Accounting Firm to cooperate with, and be available to, the Administrative
Agent or its representatives to discuss the Loan Parties’ financial
performance, financial condition, operating results, controls, and such other
matters, within the scope of the retention of such Registered Public Accounting
Firm, as may be raised by the Administrative Agent.

 

6.10     Inspection Rights.

 

(a)     Permit
representatives and independent contractors of the Administrative Agent (acting
in consultation with the Administrative Agent) to visit and inspect any of its
properties, to examine its corporate, financial and operating records
(including, 

 

118

 

without limitation, the insurance policies maintained by or on behalf
of the Loan Parties), and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its directors, officers, and
Registered Public Accounting Firm (provided that the Lead
Borrower shall have the opportunity to participate in any such discussions),
all at the expense of the Loan Parties and at such reasonable times during
normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Lead Borrower; provided, however,
that when an Event of Default has occurred and is continuing, the Administrative
Agent (or any of its representatives or independent contractors) may do any of
the foregoing at the expense of the Loan Parties at any time during normal
business hours and without advance notice.

 

(b)     Upon
the request of the Administrative Agent after reasonable prior notice, permit
the Administrative Agent or professionals (including investment bankers,
consultants, accountants, lawyers and appraisers) retained by the
Administrative Agent to conduct appraisals, commercial finance examinations and
other evaluations, including, without limitation, of (i) the Lead Borrower’s
practices in the computation of the Borrowing Base and (ii) the assets
included in the Borrowing Base and related financial information such as, but
not limited to, sales, gross margins, payables, accruals and reserves.  Subject to the following sentences, the Loan
Parties shall pay the fees and expenses of the Administrative Agent and such
professionals with respect to such evaluations and appraisals.  The Loan Parties acknowledge that the
Administrative Agent may, in its reasonable discretion, undertake up to two (2) appraisals
of the Borrowers’ Inventory and Prescription Lists and two (2) commercial
finance examinations in any twelve month period at the Loan Parties’ expense; provided that,
if Availability is less than thirty percent (30%) of the Loan Cap at the End of
any Business Day, the Loan Parties acknowledge that the Administrative Agent
may, in its reasonable discretion, undertake up to three (3) appraisals of
the Borrowers’ Inventory and Prescription Lists and up to three (3) commercial
finance examinations in the following twelve month period at the Loan Parties’
expense.  Notwithstanding anything to the
contrary contained herein, the Administrative Agent may cause additional
appraisals and commercial finance examinations to be undertaken (i) as it
in its reasonable discretion deems necessary or appropriate, at its own
expense, or (ii) if required by applicable Law or if an Event of Default
shall have occurred and be continuing, at the expense of the Loan Parties.

 

6.11     Use of Proceeds. 
Use the proceeds of the Credit Extensions (a) to refinance the
Indebtedness of the Lead Borrower and its Subsidiaries under the Existing
Credit Agreements, (b) to finance transaction fees and expenses related
hereto, (c) to finance the acquisition of working capital assets of the
Borrowers, including the purchase of Inventory and Equipment, in each case in
the ordinary course of business, (d) to finance Capital Expenditures of
the Borrowers, and (e) for general corporate purposes of the Loan Parties,
in each case to the extent permitted under applicable Law and the Loan
Documents.

 

6.12     Additional Loan Parties.  Notify the Administrative Agent
promptly after any Person becomes a Wholly Owned Subsidiary, and promptly
thereafter (and in any event within thirty (30) days (or such longer period of
time as may be agreed to by the Administrative Agent 

 

119

 

in its
reasonable discretion)) (a) cause any such Person that is a Domestic
Subsidiary to (i) (A) become a Borrower, if such Person is a Domestic
Subsidiary that owns assets of the type included in the Borrowing Base or (B) become
a Guarantor, if such Person is a Domestic Subsidiary that does not own assets
of the type included in the Domestic Borrowing Base, by executing and
delivering to the Administrative Agent a Joinder Agreement or such other
document as the Administrative Agent shall deem appropriate for such purpose, (ii) grant
a Lien to the Collateral Agent on such Person’s assets to secure the
Obligations, and (iii) deliver to the Administrative Agent documents of
the types referred to in Sections 4.01(a)(iii), 4.01(a)(iv), 4.01(a)(xv)
and 4.01(a)(xvi) and customary opinions of counsel to such Person as to
such matters concerning such Person and the Loan Documents as the
Administrative Agent may reasonably request, and (b) if any Equity
Interests or Indebtedness of such Person are owned by or on behalf of any Loan
Party, cause such Loan Party to pledge such Equity Interests and promissory
notes evidencing such Indebtedness (if any) (except that, if such Subsidiary is
a CFC, the Equity Interests of such Subsidiary to be pledged may be limited to
65% of the outstanding voting Equity Interests of such Subsidiary and 100% of
the non-voting Equity Interests of such Subsidiary and such time period may be
extended based on local law or practice), in each case in form, content and
scope reasonably satisfactory to the Administrative Agent.  For the avoidance of doubt, no assets of a
CFC, and no Equity Interests of a Subsidiary of any CFC, shall be required to
be pledged under this Section 6.12. 
In no event shall compliance with this Section 6.12 waive or
be deemed a waiver or Consent to any transaction giving rise to the need to
comply with this Section 6.12 if such transaction was not otherwise
expressly permitted by this Agreement or constitute or be deemed to constitute,
with respect to any Subsidiary, an approval of such Person as a Borrower or
permit the inclusion of any acquired assets in the computation of the Borrowing
Base.

 

6.13     Cash Management.

 

(a)     On
or prior to the Closing Date (or, in the case of clause (a)(ii) below,
within the time period specified in Section 6.20):

 

(i)            deliver
to the Administrative Agent copies of notifications (each, a “Credit Card
Notification”) substantially in the form attached hereto as Exhibit G
which have been executed on behalf of such Loan Party and delivered to such
Loan Party’s credit card clearinghouses and processors listed on Schedule
5.21(b); and

 

(ii)           enter
into a Blocked Account Agreement with each Blocked Account Bank (collectively,
the “Blocked Accounts”).

 

(b)     The
Loan Parties shall ACH or wire transfer no less frequently than once each
Business Day (and whether or not there are then any outstanding Obligations)
all amounts on deposit in each DDA (other than the Trust Account) and all
payments received by any Loan Party from credit card processors (i) prior
to the establishment of the Blocked Accounts in accordance with the terms of Section 6.20(d),
to one or more accounts maintained by the Loan Parties at a Blocked Account
Bank, and (ii) upon the establishment of the Blocked Accounts in
accordance with the terms of Section 6.20(d), to a Blocked Account.

 

120

 

(c)     After
the occurrence and during the continuance of a Cash Dominion Event, the Loan
Parties and each Blocked Account Bank shall ACH or wire transfer no less
frequently than once each Business Day (and whether or not there are then any
outstanding Obligations) to the concentration account maintained by the
Administrative Agent at Bank of America (the “Administrative Agent’s Account”)
all cash receipts and collections by the Loan Parties, including, without
limitation, the following:

 

(i)            all
available cash receipts from the sale of Inventory (including, without
limitation, proceeds of credit card charges) and other assets (whether or not
constituting Collateral);

 

(ii)           all
proceeds of collections of Accounts;

 

(iii)          all
Net Proceeds, and all other cash payments received by a Loan Party from any
Person or from any source or on account of any sale or other transaction or
event, including, without limitation, any Prepayment Event;

 

(iv)          the
then contents of each DDA (other than the Trust Account), net of any minimum
balance, not to exceed $2,500.00, as may be required to be kept in the subject
DDA by the depository institution at which such DDA is maintained; and

 

(v)           the
then entire ledger balance of each Blocked Account (other than the Trust
Account), net of any minimum balance, not to exceed $2,500.00, as may be
required to be kept in the subject Blocked Account by the applicable Blocked
Account Bank.

 

In the event that,
notwithstanding the provisions of this Section 6.13(c), any Loan
Party receives or otherwise has dominion and control of any such proceeds or
collections after the occurrence and during the continuance of a Cash Dominion
Event, such proceeds and collections shall be held in trust by such Loan Party
for the Collateral Agent, shall not be commingled with any of such Loan Party’s
other funds or deposited in any account of such Loan Party and shall, not later
than the Business Day after receipt thereof, be deposited into the
Administrative Agent’s Account or dealt with in such other fashion as such Loan
Party may be instructed by the Collateral Agent.

 

(d)     Upon
the occurrence and during the continuance of a Cash Dominion Event, the Loan
Parties shall provide the Administrative Agent with an accounting of the
contents of the Blocked Accounts and the Administrative Agent’s Account, which
shall identify, to the satisfaction of the Administrative Agent, the proceeds
from the Notes Priority Collateral which were deposited into a Blocked Account
and swept to the Administrative Agent’s Account.  Upon the receipt of (i) the contents of
the Blocked Accounts, and (ii) such accounting, the Administrative Agent
agrees to promptly remit to the Indenture Trustee the proceeds of the Notes
Priority Collateral received by the Administrative Agent.

 

121

 

(e)     The
Administrative Agent’s Account shall at all times be under the sole dominion
and control of the Administrative Agent. 
The Loan Parties hereby acknowledge and agree that (i) the Loan
Parties have no right of withdrawal from the Administrative Agent’s Account, (ii) the
funds on deposit in the Administrative Agent’s Account shall at all times be
collateral security for all of the Obligations and (iii) after the occurrence
and during the continuance of a Cash Dominion Event, the funds on deposit in
the Administrative Agent’s Account shall be applied as provided in Sections
2.05(f) or 8.03, as applicable, of this Agreement.

 

(f)      Upon
the request of the Administrative Agent, the Loan Parties shall cause bank
statements and/or other reports to be delivered to the Administrative Agent not
less often than monthly, accurately setting forth all amounts deposited in each
Blocked Account to ensure the proper transfer of funds as set forth above.  So long as no Cash Dominion Event has
occurred and is continuing, the Loan Parties may direct, and shall have sole
control over, the manner of disposition of funds in the Blocked Accounts (other
than the Administrative Agent’s Account). 
Any amounts held or received in the Administrative Agent’s Account at
any time when no Cash Dominion Event exists shall be promptly remitted to an
account of the Lead Borrower, or as the Lead Borrower may otherwise direct.

 

6.14     Information Regarding the Collateral.

 

(a)     Furnish
to the Administrative Agent prompt written notice (but in any event not more
than thirty (30) days after any change referred to herein) of any change in: (i) any
Loan Party’s name or in any trade name used to identify it in the conduct of
its business or in the ownership of its properties; (ii) the location of
any Loan Party’s chief executive office, its principal place of business, any
office in which it maintains books or records relating to Collateral owned by
it or any office or facility at which Collateral owned by it is located
(including the establishment of any such new office or facility); (iii) any
Loan Party’s organizational structure or jurisdiction of incorporation or
formation; or (iv) any Loan Party’s Federal Taxpayer Identification Number
or organizational identification number assigned to it by its state of
organization.

 

(b)     Should
any of the information on any of the Schedules hereto become inaccurate or
misleading in any material respect as a result of changes after the Closing
Date, the Lead Borrower shall advise the Administrative Agent in writing of
such revisions or updates as may be necessary or appropriate to update or
correct the same.  From time to time as
may be reasonably requested by the Administrative Agent, the Lead Borrower
shall supplement each Schedule hereto, or any representation herein or in any
other Loan Document, with respect to any matter arising after the Closing Date
that, if existing or occurring on the Closing Date, would have been required to
be set forth or described in such Schedule or as an exception to such
representation or that is necessary to correct any information in such Schedule
or representation which has been rendered inaccurate thereby (and, in the case
of any supplements to any Schedule, such Schedule shall be appropriately marked
to show the changes made therein). 
Notwithstanding the foregoing, no supplement or revision 

 

122

 

to any Schedule or representation shall be deemed the Credit Parties’
consent to the matters reflected in such updated Schedules or revised
representations nor permit the Loan Parties to undertake any actions otherwise
prohibited hereunder or fail to undertake any action required hereunder from
the restrictions and requirements in existence prior to the delivery of such
updated Schedules or such revision of a representation; nor shall any such
supplement or revision to any Schedule or representation be deemed the Credit
Parties’ waiver of any Default or Event of Default resulting from the matters
disclosed therein.

 

6.15     Physical Inventories.

 

(a)     Cause
not less than two (2) physical inventories to be undertaken, at the
expense of the Loan Parties, in each Fiscal Year and periodic cycle counts (provided that,
upon prior written notice to the Administrative Agent, the Loan Parties may
reduce the number of physical inventories to one (1) physical inventory in
each Fiscal Year), in each case conducted by such inventory takers as are
satisfactory to the Collateral Agent and following such methodology as is
consistent with the methodology used in the immediately preceding inventory or
as otherwise may be satisfactory to the Collateral Agent.  The Collateral Agent, at the expense of the
Loan Parties, may participate in and/or observe each scheduled physical count
of Inventory which is undertaken on behalf of any Loan Party.   The Lead Borrower, within thirty (30) days
following the completion of such inventory, shall provide the Collateral Agent
with a reconciliation of the results of such inventory (as well as of any other
physical inventory undertaken by a Loan Party) and shall post such results to
the Loan Parties’ stock ledgers and general ledgers, as applicable.

 

(b)     Upon
the occurrence and during the continuance of an Event of Default, the
Collateral Agent, in its reasonable discretion, may cause additional such
inventories to be taken as the Collateral Agent determines (each, at the
expense of the Loan Parties).

 

6.16     Environmental Laws. 
(a) Conduct its operations and keep and maintain its Real Estate in
material compliance with all Environmental Laws and Environmental Permits; (b) obtain
and renew all Environmental Permits necessary for its operations and
properties; and (c) implement any and all investigation, remediation,
removal and response actions with respect to its Real Estate that are required
in order to comply with Environmental Laws.

 

6.17     Further Assurances.

 

(a)     Execute
any and all further documents, financing statements, agreements and instruments,
and take all such further actions (including the filing and recording of
financing statements and other documents), that may be required under any
applicable Law, or which any Agent may reasonably request, to effectuate the
transactions contemplated by the Loan Documents or to grant, preserve, protect
or perfect the Liens created or intended to be created by the Security
Documents or the validity or priority of any such Lien, all at the expense of
the Loan Parties. The Loan Parties also agree to provide to the Agents, from
time to time upon request, evidence satisfactory to the 

 

123

 

Agents as to the perfection and priority of the Liens created or
intended to be created by the Security Documents.

 

(b)     Except
as otherwise permitted under the Security Agreement, if any assets having a
fair market value in excess of $250,000, individually or in the aggregate, are
acquired by any Loan Party after the Closing Date (other than assets
constituting Excluded Property (as defined in the Security Agreement) or
Collateral that automatically becomes subject to the Lien of the Security
Documents upon acquisition thereof), notify the Agents thereof, and the Loan
Parties will cause such assets to be subjected to a Lien securing the
Obligations (subject to Permitted Encumbrances) and will take such actions as
shall be necessary or shall be requested by any Agent to grant and perfect such
Liens, including actions described in paragraph (a) of this Section 6.17,
all at the expense of the Loan Parties. 
In no event shall compliance with this Section 6.17(b) waive
or be deemed a waiver or Consent to any transaction giving rise to the need to
comply with this Section 6.17(b) if such transaction was not
otherwise expressly permitted by this Agreement or constitute or be deemed to
constitute Consent to the inclusion of any acquired assets in the computation
of the Borrowing Base.

 

6.18     Compliance with Terms of Leaseholds.  Except as otherwise expressly permitted
hereunder, (i) make all payments and otherwise perform all obligations in
respect of all Leases of real property to which any Loan Party or any of its
Subsidiaries is a party, (ii) keep such Leases in full force and effect
and not allow such Leases to lapse or be terminated or any rights to renew such
leases to be forfeited or cancelled, (iii) notify the Administrative Agent
of any default by any party with respect to such Leases and cooperate with the
Administrative Agent in all respects to cure any such default, and (iv) cause
each of its Subsidiaries to do so, except, in any case described in the
foregoing clauses (i) through (iv), where the failure to do so, either
individually or in the aggregate, could not be reasonably likely to have a
Material Adverse Effect.

 

6.19     Material Contracts. 
Perform and observe all the terms and provisions of each Material
Contract to be performed or observed by it, maintain each such Material
Contract in full force and effect, enforce each such Material Contract in accordance
with its terms, take all such action to such end as may be from time to time
requested by the Administrative Agent and, upon request of the Administrative
Agent, make to each other party to each such Material Contract such demands and
requests for information and reports or for action as any Loan Party or any of
its Subsidiaries is entitled to make under such Material Contract, and cause
each of its Subsidiaries to do so, except,
in any case, where the failure to do so, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

6.20     Post-Closing Matters.

 

(a)     Within
thirty (30) days after the Closing Date (or such longer period of time as may
be agreed to by the Administrative Agent in its reasonable discretion), the
Loan Parties shall use commercially reasonable efforts to deliver to the
Administrative Agent, a Collateral Access Agreement for their corporate
headquarters and each of their locations located in Pennsylvania.  Notwithstanding the foregoing, the

 

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Administrative Agent reserves the right in its Permitted Discretion to
impose Reserves with respect to such locations.

 

(b)     Within
sixty (60) days after the Closing Date (or such longer period of time as may be
agreed to by the Administrative Agent in its reasonable discretion), deliver to
the Collateral Agent the Lancaster Mortgage, along with evidence that all other
actions that the Collateral Agent may deem necessary or desirable in order to
create a valid and subsisting Lien on the property described in the Lancaster
Mortgage, subject only to Permitted Encumbrances having priority by operation
of applicable Law, has been taken.

 

(c)     Within
fifteen (15) days after the Closing Date (or such longer period of time as may
be agreed to by the Administrative Agent in its reasonable discretion), use
commercially reasonable efforts to deliver to the Administrative Agent an
agreement with each franchisee of the Loan Parties, in form and substance
reasonably satisfactory to the Administrative Agent.  Notwithstanding anything to the contrary
contained herein, so long as no Default or Event of Default has occurred and is
continuing, the Administrative Agent hereby acknowledges and agrees that it
shall not impose any Reserves in respect of the Loan Parties’ relationship with
the franchisees solely as a result of the failure to deliver such agreement
prior to the expiration of the time period set forth herein; provided, however,
in the event that (i) a Default or an Event of Default has occurred and is
continuing or (ii) the Loan Parties are unable to deliver an agreement
with one or more of the franchisees within the time period set forth herein,
the Administrative Agent reserves the right in its Permitted Discretion to
impose Reserves with respect to all amounts owing by the Loan Parties to such
franchisees.

 

(d)     Within
sixty (60) days after the Closing Date (or such longer period of time as may be
agreed to by the Administrative Agent in its reasonable discretion), deliver,
or cause to be delivered, to the Collateral Agent a Blocked Account Agreement
with each of the following financial institutions, in each case relating to
accounts in respect of which the Loan Parties are required to deliver Blocked
Account Agreements pursuant to the terms of this Agreement: (a) Bank of
America, N.A.; and (b) M&T Bank.

 

(e)     Within
thirty (30) days after the Closing Date (or such longer period of time as may
be agreed to by the Administrative Agent in its reasonable discretion), the
Loan Parties shall deliver to the Administrative Agent a certificate of foreign
qualification from the State of New York for Bath LLC.

 

ARTICLE
VII

NEGATIVE COVENANTS

 

So long as any Lender shall
have any Commitment hereunder, any Loan or other Obligation (other than any Obligation
in respect of the Other Liabilities) hereunder shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, no Loan Party
shall, nor shall it permit any Subsidiary to, directly or indirectly:

 

125

 

7.01 Liens.  Create, incur,
assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, or sign or file or suffer to
exist under the UCC or any similar Law or statute of any jurisdiction a financing
statement that names any Loan Party or any Subsidiary thereof as debtor; sign
or suffer to exist any security agreement authorizing any Person thereunder to
file such financing statement; sell any of its property or assets subject to an
understanding or agreement (contingent or otherwise) to repurchase such
property or assets with recourse to it or any of its Subsidiaries; or assign or
otherwise transfer any accounts or other rights to receive income, other than,
as to all of the above, Permitted Encumbrances.

 

7.02 Investments.  Make any
Investments, except Permitted Investments.

 

7.03 Indebtedness.  Create, incur, assume, guarantee, suffer to
exist or otherwise become or remain liable with respect to, any Indebtedness,
except Permitted Indebtedness.

 

7.04 Fundamental
Changes.  Merge,
dissolve, liquidate, consolidate with or into another Person (or agree to do
any of the foregoing), except that, so long as no Default or Event of Default
shall have occurred and be continuing prior to, or immediately after giving
effect to, any action described below or would result therefrom:

 

(a)     any Subsidiary which is not a
Loan Party may merge with (i) a Loan Party, provided that
the Loan Party shall be the continuing or surviving Person, or (ii) any
one or more other Subsidiaries which are not Loan Parties, provided that
when any wholly-owned Subsidiary is merging with another Subsidiary, the
wholly-owned Subsidiary shall be the continuing or surviving Person;

 

(b)     any Loan Party or any
Subsidiary which is a Loan Party may merge with or into any other Subsidiary
which is a Loan Party, provided that in any merger involving
a Borrower, such Borrower shall be the continuing or surviving Person;

 

(c)     in connection with a
Permitted Acquisition, any Subsidiary of a Loan Party may merge with or into or
consolidate with any other Person or permit any other Person to merge with or
into or consolidate with it; provided that (i) the
Person surviving such merger shall be a wholly-owned Subsidiary of a Loan Party
and (ii) in the case of any such merger to which any Loan Party is a
party, such Loan Party is the surviving Person; and

 

(d)     any CFC that is not a Loan
Party may merge into any CFC that is not a Loan Party.

 

7.05 Dispositions.  Make any Disposition or enter into any agreement
to make any Disposition, except Permitted Dispositions.

 

7.06 Restricted
Payments.  Declare or make, directly
or indirectly, any Restricted Payment, or incur any obligation (contingent or
otherwise) to do so, except that, so long as no Default or Event of Default
shall have occurred and be continuing prior to, or immediately after giving
effect to, any action described below or would result therefrom:

 

126

 

(a)     each Subsidiary of a Loan
Party may make Restricted Payments to any Loan Party;

 

(b)     the Loan Parties and each
Subsidiary may declare and make dividend payments or other distributions
payable solely in Equity Interests of such Person (other than Disqualified
Stock);

 

(c)     the Lead Borrower may utilize
a portion of the proceeds of the Senior Notes to pay cash dividends to its
shareholders in any transaction or group of transactions which are part of a
common plan completed on or within thirty (30) calendar days of the Closing
Date, in an aggregate amount not to exceed $105,000,000, provided that
such dividends shall be made solely from identifiable cash proceeds of the
Senior Notes which have been segregated by the Lead Borrower or the Parent in a
separate account;

 

(d)     the Loan Parties and each Subsidiary
may purchase, redeem or otherwise acquire Equity Interests held by any of its
present or former employees, directors or consultant pursuant to any management
equity plan or stock option plan, provided that Restricted
Payments made pursuant to this clause (d) shall not exceed $2,500,000 in
the aggregate in any Fiscal Year (with unused amounts in any Fiscal Year being
carried over to the next succeeding Fiscal Year);

 

(e)     if the Payment Conditions are
satisfied, the Loan Parties and each Subsidiary may purchase, redeem or
otherwise acquire Equity Interests issued by it;

 

(f)      if the Payment Conditions
are satisfied, the Parent may declare or pay dividends or distributions with
respect to any capital stock or other Equity Interest of the Parent;

 

(g)     the Loan Parties may make
Restricted Payments for the purpose of paying Tax Distributions; and

 

(h)     the Loan Parties and each
Subsidiary may pay any dividend or redeem any Equity Interests within ten (10) days
after the date of declaration or call for redemption thereof if, at such date
of declaration or call for redemption, such payment was otherwise permitted
pursuant to this Section 7.06.

 

7.07 Repayments
and Prepayments of Indebtedness. 
Repay, prepay, redeem, purchase, defease or otherwise satisfy prior to
the scheduled maturity thereof in any manner any Indebtedness, or make any
payment in violation of any subordination terms of any Subordinated
Indebtedness, except (a) as long as no Default or Event of Default then
exists or would arise therefrom, regularly scheduled repayments, repurchases,
redemptions or defeasances of interest on account of Permitted Indebtedness, (b) mandatory
prepayments of principal and interest on account of the Note Obligations made
solely with proceeds of the Notes Priority Collateral, (c) voluntary
prepayments, repurchases, redemptions or defeasances of principal and interest
on account of Permitted Indebtedness as long as the Payment Conditions are
satisfied, and (d) Permitted Refinancings of any such Indebtedness.

 

127

 

7.08 Change
in Nature of Business.

 

(a)     In the case of the Parent,
engage in any business or activity other than (i) direct or indirect
ownership of all outstanding Equity Interests in the other Loan Parties, (ii) maintenance
of its corporate existence, (iii) participation in tax, accounting and
other administrative activities as the parent of the consolidated group of
companies, including the Loan Parties, (iv) execution and delivery of the
Loan Documents to which it is a party and the performance of its obligations
thereunder, (v) execution and delivery of the Senior Notes Documents to
which it is a party and the performance of its obligations thereunder, and (vi) activities
incidental to the businesses or activities described in clauses (i) through
(v) of this Section 7.08(a).

 

(b)     In the case of each of the
other Loan Parties, engage in any line of business other than a Permitted
Business.

 

7.09 Transactions
with Affiliates.  Enter into, renew, extend or be a
party to any transaction of any kind with any Affiliate of any Loan Party,
whether or not in the ordinary course of business, other than on fair and
reasonable terms substantially as favorable to the Loan Parties or such
Subsidiary as would be obtainable by the Loan Parties or such Subsidiary at the
time in a comparable arm’s length transaction with a Person other than an
Affiliate, provided that the foregoing restriction shall
not apply to:

 

(a)     a transaction between or
among the Loan Parties not prohibited hereunder;

 

(b)     any issuance or sale of
Equity Interests of the Parent (other than Disqualified Stock) to Affiliates;

 

(c)     payments pursuant to the
Management Agreement on account of Management Fees payable to the Sponsor on a
quarterly basis in advance after the Closing Date not to exceed $2,500,000 in
any calendar year, provided that such Management Fees may
not be paid if an Event of Default then exists or would arise therefrom, provided further
that any such Management Fees not be permitted to be paid hereunder shall
accrue and be payable when the applicable Event of Default has been waived and
no additional Event of Default has occurred and is continuing or would arise as
a result of such payment;

 

(d)     transactions permitted
pursuant to Sections 7.02, 7.03 and 7.06 of this
Agreement;

 

(e)     payments of reasonable and
documented out-of-pocket expenses provided by the Sponsor to the Loan Parties
pursuant to the Management Agreement, provided that no Event
of Default then exists or would arise therefrom;

 

(f)      payments in connection with
Qualified Securitization Transaction;

 

(g)     transactions related to the
repayment of the Indebtedness of the Loan Parties’ existing as of the Closing
Date to be repaid in accordance with the terms and conditions of the Indenture
or this Agreement;

 

128

 

(h)     Investments by the Sponsor in
debt securities of the Parent (or any of its Subsidiaries) so long as (i) the
Investments are being offered to other investors on the same or more favorable
terms and (ii) the Investments constitute less than five percent (5%) of
the proposed outstanding issue amount of the class of securities;

 

(i)      payment of reasonable
compensation to officers and employees for services actually rendered to any
Loan Party or any of its Subsidiaries; and

 

(j)      transactions undertaken
pursuant to the agreements described on Schedule 7.09 and any renewals,
replacements or modifications of such agreements, provided that
the terms thereof are not materially less favorable when taken as a whole to
the Lenders than those in effect on the Closing Date.

 

7.10 Burdensome
Agreements.

 

(a)     Enter into or permit to exist
any Contractual Obligation (other than the Senior Notes Documents, this
Agreement or any other Loan Document) that (i) limits the ability (A) of
any Subsidiary to make Restricted Payments or other distributions to any Loan
Party or to otherwise transfer property to or invest in a Loan Party, (B) of
any Subsidiary to Guarantee the Obligations, (C) of any Subsidiary to make
or repay loans to a Loan Party, or (D) of the Loan Parties or any
Subsidiary to create, incur, assume or suffer to exist Liens on property of
such Person in favor of the Collateral Agent; or (ii) requires the grant
of a Lien to secure an obligation of such Person if a Lien is granted to secure
another obligation of such Person.

 

(b)     The restrictions contained in
Section 7.10(a) shall not prohibit:

 

(i)            any encumbrance or
restriction pursuant to an agreement or instrument (including, without
limitation, the Loan Documents and the Senior Note Documents) in effect on the
Closing Date, or any agreement governing Indebtedness that contains
encumbrances and restrictions that are not materially more restrictive than
those contained in the Loan Documents and the Senior Notes Documents;

 

(ii)           any encumbrance or
restriction with respect to a Subsidiary that is not a Subsidiary on the
Closing Date, in existence at the time such Person becomes a Subsidiary and not
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary, provided that such encumbrances and restrictions
are not applicable to any Subsidiary or the properties or assets of any
Subsidiary other than such Subsidiary which is becoming a Subsidiary or such
Subsidiary’s Subsidiaries;

 

(iii)          any encumbrance or
restriction pursuant to any agreement governing any Indebtedness permitted
under clauses (c) or (f) of the definition of Permitted Indebtedness;

 

(iv)          any encumbrance or
restriction contained in any Indebtedness acquired or other agreement of any
Person or related to assets acquired (whether

 

129

 

by merger, consolidation or
otherwise) by the Parent or any of its Subsidiaries, so long as such
encumbrance or restriction (A) was not entered into in contemplation of
the acquisition, merger or consolidation transaction, and (B) is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or such Person’s Subsidiaries, or the property or assets of the
Person or such Person’s Subsidiaries, so acquired;

 

(v)           any encumbrance or
restriction existing under applicable Law, rule, regulation or order or any
requirement of any regulatory body;

 

(vi)          in the case of clause
(i)(A) of subsection (a) above, Permitted Encumbrances that limit the
right of the debtor to dispose of the assets subject to such Permitted
Encumbrances;

 

(vii)         customary non-assignment
provisions in leases, licenses or contracts;

 

(viii)        customary restrictions
contained in (A) asset sale agreements that limit the transfer of such
assets pending the closing of such sale and (B) any other agreement for
the sale or other disposition of a Subsidiary that restricts distributions by
that Subsidiary pending its sale or other Disposition;

 

(ix)           customary restrictions
imposed by the terms of shareholders’, partnership or joint venture agreements;
provided, however, that such restrictions
do not apply to any Subsidiaries other than the applicable company, partnership
or joint venture;

 

(x)            restrictions contained
in Permitted Indebtedness, so long as such restrictions are customary for
Indebtedness of the type incurred and the board of directors of the Parent
determines in good faith that such restrictions will not adversely affect the
Parent’s or the Lead Borrower’s ability to make payments of principal or
interest on the Obligations;

 

(xi)           any encumbrance or
restriction with respect to a Securitization Entity in connection with a
Qualified Securitization Transaction; provided,
however, that such
encumbrances and restrictions are necessary or advisable to effect the
transactions contemplated under such Qualified Securitization Transaction in
the good faith determination of the Parent;

 

(xii)          restrictions on cash or
other deposits or net worth imposed by customers or suppliers under contracts
entered into in the ordinary course of business; and

 

(xiii)         any encumbrance or
restriction under any agreement that amends, extends, renews, refinances or
replaces the agreements containing the encumbrances or restrictions in the
foregoing clauses (i) through (xii), or in this clause (xiii); provided that
the terms and conditions of any such encumbrances or restrictions are no more
restrictive in any material respect than those under or

 

130

 

pursuant to the agreement
evidencing the Indebtedness so extended, renewed, refinanced or replaced.

 

7.11 Use
of Proceeds.  Use
the proceeds of any Credit Extension, whether directly or indirectly, and
whether immediately, incidentally or ultimately, to purchase or carry margin
stock (within the meaning of Regulation U of the FRB) or to extend credit to
others for the purpose of purchasing or carrying margin stock or to refund
Indebtedness originally incurred for such purpose.

 

7.12 Amendment
of Material Documents.

 

(a)     (i) Enter  into any amendment or modification of, or agree to or
accept any waiver under, (A) its Organization Documents or (B) any
Material Indebtedness (other than the Indenture or any of the other Senior
Notes Documents), in each of the cases described in this clause (i), to the
extent that such amendment, modification or waiver would materially adversely
affect the rights of any Loan Party or any Subsidiary, as applicable, or any
Credit Party; or (ii) permit any Material Contract to be cancelled or
terminated prior to its stated expiration unless such Material Contract is
either (A) replaced by a new agreement with a third party reasonably
acceptable to the Administrative Agent in its Permitted Discretion or (B) replaced
by the Loan Parties’ in-sourcing of the services previously provided by a third
party under such Material Contract, in each of the cases described in this
clause (ii), on terms substantially similar or more favorable to the Loan
Parties than those in effect under the Material Contract being cancelled or
terminated and otherwise reasonably acceptable to the Administrative Agent in
its Permitted Discretion.

 

(b)     Enter into any amendment or
modification of, or agree to or accept any waiver under, the Indenture or any
of the other Senior Notes Documents to the extent that the effect of such
amendment, modification or waiver would be to: (i) increase the interest
rate or the cash rate of interest on, such Indebtedness by more than two (2%)
percent; (ii) cause there to be an earlier maturity date or decreased
weighted average life thereof; (iii) add, or change in a manner adverse to
any Loan Party, any event of default or add, or make more restrictive, any
covenant with respect to the Indebtedness thereunder; (iv) change in a
manner adverse to any Loan Party the prepayment provisions of such
Indebtedness; (v) change in a manner adverse to any Loan Party the terms
of, or otherwise alter, any redemption or put rights thereunder; or (vi) change
or amend any other term if such change or amendment would (A) increase the
obligations of the Loan Parties or (B) confer additional rights on the
holder of such Indebtedness in a manner adverse to any Loan Party or any Credit
Party.

 

7.13 Fiscal Year; Changes Regarding the Collateral.

 

(a)     Change the Fiscal Year of any
Loan Party, or the accounting policies or reporting practices of the Loan
Parties, except as permitted or required by GAAP upon thirty (30) days prior
written notice to the Administrative Agent.

 

131

 

(b)     Effect or permit any change
referred to in Section 6.14(a) unless all filings have been
made under the UCC or otherwise that are required in order for the Collateral
Agent to continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral (having the priority set
forth in the Intercreditor Agreement) for its own benefit and the benefit of
the other Credit Parties.

 

7.14 Blocked Accounts; Credit Card Processors.  (a) Open new DDAs (other than the Trust
Account) after the closing Date unless either (i) such new DDAs sweep on a
daily basis to a Blocked Account or (ii) the Loan Parties shall have
delivered to the Administrative Agent appropriate Blocked Account Agreements or
(b) enter into agreements with new credit card processors unless the Loan
Parties shall have delivered to the Administrative Agent appropriate Credit
Card Notifications, in each of the cases described in clauses (i) and
(ii), consistent with the provisions of Section 6.13.  No Loan Party shall maintain any bank
accounts or enter into any agreements with credit card processors other than
the ones expressly contemplated herein or in Section 6.13 hereof.

 

7.15 Consolidated
Fixed Charge Coverage Ratio.  During
the continuance of a Covenant Compliance Event, permit the Consolidated Fixed
Charge Coverage Ratio, calculated as of the occurrence of such Covenant
Compliance Event and as of the last day of each Fiscal Period thereafter based
upon the most recent Measurement Period, to be less than 1.10 to 1.00.

 

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

 

8.01 Events
of Default.  Any of the following
shall constitute an Event of Default:

 

(a)     Non-Payment.  The Borrowers or any other Loan Party fails
to pay when and as required to be paid herein, (i) any amount of principal
of any Loan or any L/C Obligation, or deposit any funds as Cash Collateral in
respect of L/C Obligations, or (ii) any interest on any Loan or on any L/C
Obligation, or any fee due hereunder, and, in the case of this clause (ii),
such failure continues for one (1) Business Day, or (iii) any other
amount payable hereunder or under any other Loan Document and, in the case of
this clause (iii), such failure continues for three (3) days; or

 

(b)     Specific Covenants.  Any Loan Party fails to perform or observe
any term, covenant or agreement contained in any of Sections 6.01, 6.02,
6.03, 6.05, 6.07, 6.10, 6.11, 6.12, 6.13,
6.14(a) or 6.20 or Article VII; or

 

(c)     Other Defaults.  Any Loan Party fails to perform or observe
any other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for thirty (30) days; or

 

(d)     Representations and
Warranties.  Any representation,
warranty, certification or statement of fact made or deemed made by or on
behalf of any Borrower or any other Loan Party herein, in any other Loan
Document, or in any document delivered in connection herewith or therewith
(including, without limitation,

 

132

 

any Borrowing Base Certificate)
shall be incorrect or misleading in any material respect when made or deemed
made; or

 

(e)     Cross-Default.  (i) Any Loan Party or any Subsidiary
thereof (A) fails to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) in respect
of any Material Indebtedness (other than Indebtedness under any Swap Contract),
or (B) fails to observe or perform any other agreement or condition
relating to any such Material Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event occurs,
the effect of which default or other event is to cause, or to permit the holder
or holders of such Material Indebtedness (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Material Indebtedness to be demanded or to
become due or to be repurchased, prepaid, defeased or redeemed (automatically
or otherwise), or an offer to repurchase, prepay, defease or redeem such
Material Indebtedness to be made, prior to its stated maturity, or such
Guarantee to become payable or cash collateral in respect thereof to be
demanded; or (ii) there occurs under any Swap Contract an Early
Termination Date (as defined in such Swap Contract) resulting from (A) any
event of default under such Swap Contract as to which a Loan Party or any
Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract)
or (B) any Termination Event (as so defined) under such Swap Contract as
to which a Loan Party or any Subsidiary thereof is an Affected Party (as so
defined) and, in either event, the Swap Termination Value owed by the Loan
Party or such Subsidiary as a result thereof is greater than $4,000,000; or

 

(f)      Insolvency Proceedings,
Etc.  Any Loan Party or any of its
Subsidiaries, other than an Immaterial Subsidiary, institutes or consents to
the institution of any proceeding under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its
property; or a proceeding shall be commenced or a petition filed, without the
application or consent of such Person, seeking or requesting the appointment of
any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed and the appointment continues undischarged,
undismissed or unstayed for forty-five (45) calendar days or an order or decree
approving or ordering any of the foregoing shall be entered; or any proceeding
under any Debtor Relief Law relating to any such Person or to all or any
material part of its property is instituted without the consent of such Person
and continues undismissed or unstayed for forty-five (45) calendar days, or an
order for relief is entered in any such proceeding; or

 

(g)     Inability to Pay Debts;
Attachment.  (i) Any Loan Party
or any Subsidiary, other than an Immaterial Subsidiary, thereof becomes unable
or admits in writing its inability or fails generally to pay its debts as they
become due in the ordinary course of business, 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 such Person and

 

133

 

is not released, vacated or
fully bonded within ten (10) days after its issuance or levy; or

 

(h)     Judgments.  There is entered against any Loan Party or
any Subsidiary thereof (i) one or more judgments or orders for the payment
of money in an aggregate amount (as to all such judgments and orders) exceeding
$2,000,000 (unless bonded or covered by independent third-party insurance as to
which the insurer is rated at least “A” by A.M. Best Company, and such
insurer has been notified of the potential claim and does not dispute
coverage), or (ii) any one or more non-monetary judgments that have, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect and, in either case, (A) enforcement proceedings
are commenced by any creditor upon such judgment or order, or (B) there is
a period of thirty (30) consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, is not in
effect; or

 

(i)      ERISA.  (i) An ERISA Event occurs with respect
to a Pension Plan or Multiemployer Plan (other than the United Food and
Commercial Workers’ Local One Pension Fund) which has resulted or could
reasonably be expected to result in liability of any Loan Party under Title IV
of ERISA to the Pension Plan, Multiemployer Plam or the PBGC in an aggregate
amount in excess of $2,000,000 or which could reasonably be expected to result
in a Material Adverse Effect; or (ii) an ERISA Event occurs with respect
to the United Food and Commercial Workers’ Local One Pension Fund (A) which
has resulted or could reasonably be expected to result in any Loan Party or any
ERISA Affiliate being obligated to make aggregate payments to the United Food
and Commercial Workers’ Local One Pension Fund in any Fiscal Year that exceed
the sum of (1) the Lead Borrower’s aggregate employer contribution
obligation for the year 2011 with respect to the United Food and Commercial
Workers’ Local One Pension Fund, as set forth in the Lead Borrower’s current
collective bargaining agreements with the United Food and Commercial Workers’
District Union Local One, plus (2) $10,000,000 or (B) which
has resulted or could reasonably be expected to result in a Material Adverse
Effect; or (iii) a Loan Party or any ERISA Affiliate (A) incurs a “default”,
as such term is defined in Section 4219(c)(5)(A) of ERISA, with
respect to a withdrawal liability payment, which default results in, or could
reasonably be expected to result in, a Material Adverse Effect or (B) receives
notice from the sponsor of a Multiemployer Plan requiring immediate payment of
the full outstanding amount of such Loan Party’s or ERISA Affiliate’s
withdrawal liability pursuant to Section 4219(c)(5) of ERISA; or

 

(j)      Invalidity of Loan
Documents.  (i)  Any provision
of any Loan Document, at any time after its execution and delivery and for any
reason other than as expressly permitted hereunder or thereunder or
satisfaction in full of all the Obligations, ceases to be in full force and
effect; or any Loan Party or any other Person contests in any manner the
validity or enforceability of any provision of any Loan Document; or any Loan
Party denies that it has any or further liability or obligation under any
provision of any Loan Document, or purports to revoke, terminate or rescind any
provision of any Loan Document or seeks to avoid, limit or otherwise adversely
affect any Lien purported to be created under any Security Document; or (ii) any
Lien purported to be 

 

134

 

created under any Security
Document shall cease to be, or shall be asserted by any Loan Party or any other
Person not to be, a valid and perfected Lien on any Collateral, with the
priority required by the applicable Security Document and the Intercreditor
Agreement; or

 

(k)     Change of Control.  There occurs any Change of Control; or

 

(l)      Cessation of Business.  Except as otherwise expressly permitted
hereunder, any Loan Party, other than an Immaterial Subsidiary, shall take any
action to suspend the operation of its business in the ordinary course,
liquidate all or a material portion of its assets or Store locations, or employ
an agent or other third party to conduct a program of closings, liquidations or
“Going-Out-Of-Business” sales of any material portion of its business; or

 

(m)    Loss of Collateral.  There occurs any uninsured loss to any
material portion of the Collateral; or

 

(n)     Breach of Contractual
Obligation.  (i) Any Loan Party
or any Subsidiary thereof fails to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) in
respect of any Material Contract or fails to observe or perform any other
agreement or condition relating to any such Material Contract or contained in
any instrument or agreement evidencing, securing or relating thereto, or (ii) any
other event occurs with respect to any Material Contract, the effect of which
default or other event described in the foregoing clauses (i) or (ii) is
to cause, or to permit, the counterparty to such Material Contract to terminate
such Material Contract, unless such Material Contract has been replaced prior
to, or concurrently with, the termination thereof in accordance with the terms
of Section 7.12(a); or

 

(o)     Indictment.  The indictment or institution of any legal
process or proceeding against, any Loan Party or any Subsidiary thereof, under
any federal, state, municipal, and other criminal statute, rule, regulation,
order, or other requirement having the force of law for a felony and such
indictment remains unquashed or undismissed for a period of ninety (90) days or
more, unless the Agents, in their reasonable discretion, determined that the
indictment is not material; or

 

(p)     Guaranty.  The termination or attempted termination of
any guarantee of the Obligations except as expressly permitted hereunder or
under any other Loan Document.

 

8.02 Remedies
Upon Event of Default.  If any Event of Default occurs and
is continuing, the Administrative Agent may, or, at the request of the Required
Lenders, shall, take any or all of the following actions:

 

(a)     declare the Commitments of
each Lender to make Loans and any obligation of the L/C Issuer to make L/C
Credit Extensions to be terminated, whereupon such Commitments and obligation
shall be terminated;

 

135

 

(b)     declare the unpaid principal
amount of all outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other Loan Document
to be immediately due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the Loan
Parties;

 

(c)     require that the Loan Parties
Cash Collateralize the L/C Obligations; and

 

(d)     whether or not the maturity
of the Obligations shall have been accelerated pursuant hereto, proceed to
protect, enforce and exercise all rights and remedies of the Credit Parties
under this Agreement, any of the other Loan Documents or applicable Law,
including, but not limited to, by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations are evidenced, and, if such amount shall have
become due, by declaration or otherwise, proceed to enforce the payment thereof
or any other legal or equitable right of the Credit Parties;

 

provided, however, that upon the
occurrence of any Event of Default under Section 8.01(f) as to
any Borrower, the obligation of each Lender to make Loans and any obligation of
the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the
unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable, and the
obligation of the Loan Parties to Cash Collateralize the L/C Obligations as
aforesaid shall automatically become effective, in each case without further
act of the Administrative Agent or any Lender.

 

No remedy herein is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or any other provision of Law.

 

8.03 Application
of Funds.  After
the exercise of remedies provided for in Section 8.02 (or after the
Loans have automatically become immediately due and payable and the L/C
Obligations have automatically been required to be Cash Collateralized as set
forth in the proviso to Section 8.02), any amounts received on
account of the Obligations shall be applied by the Administrative Agent in the
following order:

 

First, to payment of
that portion of the Obligations (excluding the Other Liabilities) constituting
fees, indemnities, Credit Party Expenses and other amounts (including fees,
charges and disbursements of counsel to the Administrative Agent and the
Collateral Agent and amounts payable under Article III) payable to
the Administrative Agent and the Collateral Agent, each in its capacity as
such;

 

Second, to payment
of that portion of the Obligations (excluding the Other Liabilities)
constituting indemnities, Credit Party Expenses, and other amounts (other than
principal, interest and fees) payable to the Lenders and the L/C Issuer
(including fees, charges and disbursements of counsel to the respective Lenders
and the L/C Issuer

 

136

 

and amounts payable under Article III),
ratably among them in proportion to the amounts described in this clause Second
payable to them;

 

Third, to the extent
not previously reimbursed by the Lenders, to payment to the Agents of that
portion of the Obligations constituting principal and accrued and unpaid
interest on any Permitted Overadvances;

 

Fourth, to the
extent that Swing Line Loans have not been refinanced by a Committed Loan,
payment to the Swing Line Lender of that portion of the Obligations
constituting accrued and unpaid interest on the Swing Line Loans;

 

Fifth, to the extent
that Swing Line Loans have not been refinanced by a Committed Loan, to payment
to the Swing Line Lender of that portion of the Obligations constituting unpaid
principal of the Swing Line Loans;

 

Sixth, to payment of
that portion of the Obligations constituting accrued and unpaid interest on the
Loans, L/C Borrowings and other Obligations, and fees (including Letter of
Credit Fees but excluding Early Termination Fees), ratably among the Lenders
and the L/C Issuer in proportion to the respective amounts described in this clause
Sixth payable to them;

 

Seventh, to payment
of that portion of the Obligations constituting unpaid principal of the Loans
and L/C Borrowings, ratably among the Lenders and the L/C Issuer in proportion
to the respective amounts described in this clause Seventh held by them;

 

Eighth, to the
Administrative Agent for the account of the L/C Issuer, to Cash Collateralize
that portion of L/C Obligations comprised of the aggregate undrawn amount of
Letters of Credit;

 

Ninth, to payment of
all other Obligations (including, without limitation, the cash
collateralization of unliquidated indemnification obligations as provided in Section 10.04
and Early Termination Fees, but excluding any Other Liabilities), ratably among
the Credit Parties in proportion to the respective amounts described in this
clause Ninth held by them;

 

Tenth, to payment of
that portion of the Obligations arising from Cash Management Services, ratably
among the Credit Parties in proportion to the respective amounts described in
this clause Tenth held by them;

 

Eleventh, to payment
of all other Obligations arising from Bank Products, ratably among the Credit
Parties in proportion to the respective amounts described in this clause Eleventh
held by them; and

 

Last, the balance,
if any, after all of the Obligations have been indefeasibly paid in full, to
the Loan Parties or as otherwise required by Law.

 

137

 

Subject to Section 2.03(c),
amounts used to Cash Collateralize the aggregate undrawn amount of Letters of
Credit pursuant to clause Eighth above shall be applied to satisfy
drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash
Collateral after all Letters of Credit have either been fully drawn or expired,
such remaining amount shall be applied to the other Obligations, if any, in the
order set forth above.

 

ARTICLE IX

ADMINISTRATIVE AGENT

 

9.01 Appointment and Authority.

 

(a)     Each of the Lenders and the
L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as
the Administrative Agent hereunder and under the other Loan Documents and
authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms
hereof or thereof, together with such actions and powers as are reasonably
incidental thereto.  The provisions of
this Article IX are solely for the benefit of the Administrative
Agent, the Lenders and the L/C Issuer, and no Loan Party or any Subsidiary
thereof shall have rights as a third party beneficiary of any of such
provisions.

 

(b)     Each of the Lenders (in its
capacities as a Lender), Swing Line Lender and the L/C Issuer hereby
irrevocably appoints Bank of America as Collateral Agent and authorizes the Collateral
Agent to act as the agent of such Lender and the L/C Issuer for purposes of
acquiring, holding and enforcing any and all Liens on Collateral granted by any
of the Loan Parties to secure any of the Obligations, together with such powers
and discretion as are reasonably incidental thereto.  In this connection, the Collateral Agent, as “collateral
agent”, and any co-agents, sub-agents and attorneys-in-fact appointed by the
Collateral Agent pursuant to Section 9.05 for purposes of holding
or enforcing any Lien on the Collateral (or any portion thereof) granted under
the Collateral Documents, or for exercising any rights and remedies thereunder
at the direction of the Collateral Agent), shall be entitled to the benefits of
all provisions of this Article IX and Article X as
though such co-agents, sub-agents and attorneys-in-fact were the “collateral
agent” under the Loan Documents, as if set forth in full herein with respect
thereto.

 

9.02 Rights
as a Lender.  The
Persons serving as the Agents hereunder shall have the same rights and powers
in their capacity as a Lender as any other Lender and may exercise the same as
though they were not the Administrative Agent or the Collateral Agent and the
term “Lender” or “Lenders” shall, unless otherwise expressly indicated or
unless the context otherwise requires, include the Person serving as the
Administrative Agent or the Collateral Agent hereunder in its individual
capacity.  Such Person and its Affiliates
may accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with
the Loan Parties or any Subsidiary or other Affiliate thereof as if such Person
were not the Administrative Agent or the Collateral Agent hereunder and without
any duty to account therefor to the Lenders.

 

138

 

9.03 Exculpatory
Provisions.  The
Agents shall not have any duties or obligations except those expressly set
forth herein and in the other Loan Documents. 
Without limiting the generality of the foregoing, the Agents:

 

(a)     shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default or Event of
Default has occurred and is continuing;

 

(b)     shall not have any duty to
take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby or by the other
Loan Documents that the Administrative Agent or the Collateral Agent, as
applicable, is required to exercise as directed in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be
expressly provided for herein or in the other Loan Documents); provided that
no Agent shall be required to take any action that, in its respective opinion
or the opinion of its counsel, may expose such Agent to liability or that is
contrary to any Loan Document or applicable Law; and

 

(c)     shall not, except as
expressly set forth herein and in the other Loan Documents, have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Loan Parties or any of its Affiliates that is communicated to
or obtained by the Person serving as the Administrative Agent, the Collateral
Agent or any of its Affiliates in any capacity.

 

No Agent shall be
liable for any action taken or not taken by it (i) with the Consent or at
the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as such Agent shall believe in good faith
shall be necessary, under the circumstances as provided in Sections 10.01
and 8.02) or (ii) in the absence of its own gross negligence or
willful misconduct, as determined by a final and non-appealable judgment of a
court of competent jurisdiction.

 

The Agents shall not be deemed to have
knowledge of any Default unless and until notice describing such Default is
given to such Agent by the Loan Parties, a Lender or the L/C Issuer. In the event that the Agents obtain
such actual knowledge or receive such a notice, the Agents shall give prompt
notice thereof to each of the other Credit Parties.  Upon the occurrence of an Event of Default,
the Agents shall take such action with respect to such Default or Event of Default
as shall be reasonably directed by the Required Lenders.  Unless and until the Agents shall have
received such direction, the Agents may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to any such Default
or Event of Default as they shall deem advisable in the best interest of the
Credit Parties.  In no event shall the
Agents be required to comply with any such directions to the extent that any
Agent believes that its compliance with such directions would be unlawful.

 

The Agents shall not be responsible for, or
have any duty to ascertain or inquire into, (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or thereunder or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or 

 

139

 

therein or the occurrence of
any Default, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, any other Loan Document or any other agreement,
instrument or document or the creation, perfection or priority of any Lien
purported to be created by the Security Documents, (v) the value or the
sufficiency of any Collateral, or (vi) the satisfaction of any condition
set forth in Article IV or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Agents.

 

9.04 Reliance
by Agents.  Each Agent shall be
entitled to rely upon, and shall not incur any liability for relying upon, any
notice, request, certificate, consent, statement, instrument, document or other
writing (including, but not limited to, any electronic message, Internet or
intranet website posting or other distribution) believed by it to be genuine
and to have been signed, sent or otherwise authenticated by the proper
Person.  Each Agent also may rely upon any
statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying
thereon.  In determining compliance with
any condition hereunder to the making of a Loan, or the issuance of a Letter of
Credit, that by its terms must be fulfilled to the satisfaction of a Lender or
the L/C Issuer, the Administrative Agent may presume that such condition is
satisfactory to such Lender or the L/C Issuer unless the Administrative Agent
shall have received written notice to the contrary from such Lender or the L/C
Issuer prior to the making of such Loan or the issuance of such Letter of
Credit.  Each Agent may consult with
legal counsel (who may be counsel for any Loan Party), independent accountants
and other experts selected by it, and shall not be liable for any action taken
or not taken by it in accordance with the advice of any such counsel,
accountants or experts.

 

9.05 Delegation
of Duties.  Each
Agent may perform any and all of its duties and exercise its rights and powers
hereunder or under any other Loan Document by or through any one or more
sub-agents appointed by such Agent.  Each
Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article IX
shall apply to any such sub-agent and to the Related Parties of the Agents and
any such sub-agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as
well as activities as such Agent.

 

9.06 Resignation
of Agents.  Either
Agent may at any time give written notice of its resignation to the Lenders,
the L/C Issuer and the Lead Borrower. 
Upon receipt of any such notice of resignation, the Required Lenders
shall have the right, with the consent of the Lead Borrower (such consent not
to be unreasonably withheld or delayed) unless an Event of Default has occurred
and is continuing, to appoint a successor, which shall be an Eligible Assignee.  If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may on behalf of the Lenders and the L/C Issuer appoint a
successor Administrative Agent or Collateral Agent, as applicable, meeting the
qualifications set forth above; provided that, if the Administrative Agent or
the Collateral Agent shall notify the Lead Borrower and the Lenders that no qualifying
Person has accepted such appointment, then such resignation shall nonetheless
become effective in accordance with such notice and (a) the retiring Agent
shall be discharged from its duties and obligations hereunder and under the
other Loan Documents (except that in the case of any Collateral held by the
Collateral Agent on behalf of the Lenders or the L/C Issuer under any of the
Loan Documents, the retiring Collateral Agent

 

140

 

shall continue to hold such collateral
security until such time as a successor Collateral Agent is appointed) and (b) all
payments, communications and determinations provided to be made by, to or
through the Administrative Agent shall instead be made by or to each Lender and
the L/C Issuer directly, until such time as the Required Lenders (in
consultation with the Lead Borrower) appoint a successor Administrative Agent
as provided for above in this Section 9.06.  Upon the acceptance of a successor’s
appointment as Administrative Agent or Collateral Agent, as applicable,
hereunder, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent, and
the retiring Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged
therefrom as provided above in this Section 9.06).  The fees payable by the Borrowers to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Lead Borrower and such
successor.  After the retiring Agent’s
resignation hereunder and under the other Loan Documents, the provisions of
this Article IX and Section 10.04 shall continue in
effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while the retiring Agent was acting as Administrative
Agent or Collateral Agent hereunder.

 

Any resignation by Bank of America as
Administrative Agent pursuant to this Section 9.06 shall also
constitute its resignation as L/C Issuer and Swing Line Lender.  Upon the acceptance of a successor’s
appointment as Administrative Agent hereunder, (a) such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring L/C Issuer and Swing Line Lender, (b) the retiring
L/C Issuer and Swing Line Lender shall be discharged from all of their
respective duties and obligations hereunder or under the other Loan Documents,
and (c) the successor L/C Issuer shall issue letters of credit in
substitution for the Letters of Credit, if any, outstanding at the time of such
succession or make other arrangements satisfactory to the retiring L/C Issuer
to effectively assume the obligations of the retiring L/C Issuer with respect
to such Letters of Credit.

 

9.07 Non-Reliance
on Administrative Agent and Other Lenders.  Each Lender and the L/C Issuer
acknowledges that it has, independently and without reliance upon the Agents or
any other Lender or any of their Related Parties and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. 
Each Lender and the L/C Issuer also acknowledges that it will,
independently and without reliance upon the Agents or any other Lender or any
of their Related Parties and based on such documents and information as it
shall from time to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any other Loan
Document or any related agreement or any document furnished hereunder or
thereunder.  Except as provided in Section 9.11,
the Agents shall not have any duty or responsibility to provide any Credit
Party with any other credit or other information concerning the affairs,
financial condition or business of any Loan Party that may come into the
possession of the Agents.

 

9.08 Administrative
Agent May File Proofs of Claim.  In case of the pendency of any
proceeding under any Debtor Relief Law or any other judicial proceeding
relative to any Loan Party, the Administrative Agent (irrespective of whether
the principal of any Loan or L/C Obligation shall then be due and payable as
herein expressed or by declaration or otherwise and

 

141

 

irrespective of whether the Administrative
Agent shall have made any demand on the Loan Parties) shall be entitled and
empowered, by intervention in such proceeding or otherwise

 

(a)     to file and prove a claim for
the whole amount of the principal and interest owing and unpaid in respect of
the Loans, L/C Obligations and all other Obligations that are owing and unpaid
and to file such other documents as may be necessary or advisable in order to
have the claims of the Lenders, the L/C Issuer, the Administrative Agent and
the other Credit Parties (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders, the L/C Issuer, the
Administrative Agent, such Credit Parties and their respective agents and
counsel and all other amounts due the Lenders, the L/C Issuer the
Administrative Agent and such Credit Parties under Sections 2.03(i) and
2.03(j), as applicable, 2.09 and 10.04) allowed in such
judicial proceeding; and

 

(b)     to collect and receive any
monies or other property payable or deliverable on any such claims and to
distribute the same;

 

and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender and the L/C
Issuer to make such payments to the Administrative Agent and, if the
Administrative Agent shall consent to the making of such payments directly to
the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount
due for the reasonable compensation, expenses, disbursements and advances of
the Administrative Agent and its agents and counsel, and any other amounts due
the Administrative Agent under Sections 2.09 and 10.04.

 

Nothing contained herein shall be deemed to
authorize the Administrative Agent to authorize or consent to or accept or
adopt on behalf of any Lender or the L/C Issuer any plan of reorganization,
arrangement, adjustment or composition affecting the Obligations or the rights
of any Lender or the L/C Issuer or to authorize the Administrative Agent to
vote in respect of the claim of any Lender or the L/C Issuer in any such
proceeding.

 

9.09 Collateral
and Guaranty Matters.  The Credit Parties irrevocably
authorize the Agents, at their option and in their discretion,

 

(a)     to release any Lien on any
property granted to or held by the Collateral Agent under any Loan Document (i) upon
termination of the Aggregate Commitments and payment in full of all Obligations
(other than contingent indemnification obligations for which no claim has been
asserted and any Other Liabilities which are not by their terms then due and
payable, provided that the Agents shall have received such indemnities
and collateral security as they shall have required in accordance with the
terms of Section 10.11 to protect the Credit Parties against any
obligations that may thereafter arise with respect to such Other Liabilities)
and the expiration or termination of all Letters of Credit, (ii) that is
sold or to be sold as part of or in connection with any sale permitted
hereunder or under any other Loan Document, or (iii) if approved,
authorized or ratified in writing by the Required Lenders in accordance with Section 10.01;

 

142

 

(b)     to subordinate any Lien on
any property granted to or held by the Collateral Agent under any Loan Document
to the holder of any Lien on such property that is permitted by clause (h) of
the definition of Permitted Encumbrances; and

 

(c)     to release any Guarantor from
its obligations under any guarantee of the Obligations if such Person ceases to
be a Subsidiary as a result of a transaction permitted hereunder.

 

Upon request by any
Agent at any time, the Required Lenders will confirm in writing such Agent’s
authority to release or subordinate its interest in particular types or items
of property, or to release any Guarantor from its obligations under any
guarantee of the Obligations pursuant to this Section 9.09.  In each case as specified in this Section 9.09,
the Agents will, at the Loan Parties’ expense, execute and deliver to the
applicable Loan Party such documents as such Loan Party may reasonably request
to evidence the release of such item of Collateral from the assignment and
security interest granted under the Security Documents or to subordinate its
interest in such item, or to release such Guarantor from its obligations under
any guarantee of the Obligations, in each case in accordance with the terms of
the Loan Documents and this Section 9.09.

 

9.10 Notice
of Transfer.  The
Agents may deem and treat a Lender party to this Agreement as the owner of such
Lender’s portion of the Obligations for all purposes, unless and until, and
except to the extent, an Assignment and Acceptance shall have become effective
as set forth in Section 10.06.

 

9.11 Reports
and Financial Statements.  By signing this Agreement, each
Lender:

 

(a)     agrees to furnish the
Administrative Agent, after the occurrence and during the continuance of a Cash
Dominion Event (and thereafter at such frequency as the Administrative Agent
may reasonably request), with a summary of all Other Liabilities due or to
become due to such Lender. In connection with any distributions to be made
hereunder, the Administrative Agent shall be entitled to assume that no amounts
are due to any Lender on account of Other Liabilities unless the Administrative
Agent has received written notice thereof from such Lender;

 

(b)     is deemed to have requested
that the Administrative Agent furnish such Lender, promptly after they become
available, copies of all financial statements required to be delivered by the
Lead Borrower hereunder and all commercial finance examinations and appraisals
of the Collateral received by the Agents (collectively, the “Reports”);

 

(c)     expressly agrees and
acknowledges that the Administrative Agent makes no representation or warranty
as to the accuracy of the Reports, and shall not be liable for any information
contained in any Report;

 

(d)     expressly agrees and
acknowledges that the Reports are not comprehensive audits or examinations,
that the Agents or any other party performing any audit or examination will
inspect only specific information regarding the Loan 

 

143

 

Parties and will rely
significantly upon the Loan Parties’ books and records, as well as on
representations of the Loan Parties’ personnel;

 

(e)     agrees to keep all Reports
confidential in accordance with the provisions of Section 10.07
hereof; and

 

(f)      without limiting the
generality of any other indemnification provision contained in this Agreement,
agrees: (i) to hold the Agents and any such other Lender preparing a
Report harmless from any action the indemnifying Lender may take or conclusion
the indemnifying Lender may reach or draw from any Report in connection with
any Credit Extensions that the indemnifying Lender has made or may make to the
Borrowers, or the indemnifying Lender’s participation in, or the indemnifying
Lender’s purchase of, a Loan or Loans; and (ii) to pay and protect, and
indemnify, defend, and hold the Agents and any such other Lender preparing a
Report harmless from and against, the claims, actions, proceedings, damages,
costs, expenses, and other amounts (including attorney costs) incurred by the
Agents and any such other Lender preparing a Report as the direct or indirect
result of any third parties who might obtain all or part of any Report through
the indemnifying Lender.

 

9.12 Agency
for Perfection.  Each Lender hereby
appoints each other Lender as agent for the purpose of perfecting Liens for the
benefit of the Agents and the Lenders, in assets which, in accordance with Article 9
of the UCC or any other applicable Law of the United States can be perfected
only by possession.  Should any Lender
(other than the Agents) obtain possession of any such Collateral, such Lender
shall notify the Agents thereof, and, promptly upon the Collateral Agent’s
request therefor shall deliver such Collateral to the Collateral Agent or
otherwise deal with such Collateral in accordance with the Collateral Agent’s
instructions.

 

9.13 Indemnification
of Agents.  The Lenders shall
indemnify the Agents (to the extent not reimbursed by the Loan Parties and
without limiting the obligations of the Loan Parties hereunder), ratably
according to their Applicable Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by, or asserted against any Agent in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted to be taken by any Agent in connection therewith; provided that
no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Agent’s gross negligence or willful
misconduct as determined by a final and nonappealable judgment of a court of
competent jurisdiction.

 

9.14 Relation
among Lenders.  The Lenders are not
partners or co-venturers, and no Lender shall be liable for the acts or
omissions of, or (except as otherwise set forth herein in case of the Agents)
authorized to act for, any other Lender.

 

9.15 Defaulting
Lender.

 

(a)     If for any reason any Lender
shall fail or refuse to abide by its obligations under this Agreement,
including without limitation its obligation to make available to

 

144

 

the Administrative Agent its
Applicable Percentage of any Loans, expenses or setoff or purchase its
Applicable Percentage of a participation interest in the Swingline Loans or L/C
Borrowings and such failure is not cured within one (1) Business Day after
receipt from the Administrative Agent of written notice thereof, then, in
addition to the rights and remedies that may be available to the other Credit
Parties, the Loan Parties or any other party at law or in equity, and not in
limitation thereof, (i) such Defaulting Lender’s right to participate in
the administration of, or decision-making rights related to, the Obligations,
this Agreement or the other Loan Documents shall be suspended during the
pendency of such failure or refusal, and (ii) a Defaulting Lender shall be
deemed to have assigned any and all payments due to it from the Loan Parties,
whether on account of outstanding Loans, interest, fees or otherwise, to the
remaining non-Defaulting Lenders for application to, and reduction of, their
proportionate shares of all outstanding Obligations until, as a result of
application of such assigned payments the Lenders’ respective Applicable
Percentages of all outstanding Obligations shall have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency, and (iii) at the option of the
Administrative Agent, any amount payable to such Defaulting Lender hereunder
(whether on account of principal, interest, fees or otherwise) shall, in lieu
of being distributed to such Defaulting Lender, be retained by the
Administrative Agent as cash collateral for future funding obligations of the
Defaulting Lender in respect of any Loan or existing or future participating
interest in any Swing Line Loan or Letter of Credit.  The Defaulting Lender’s decision-making and
participation rights and rights to payments as set forth in clauses (i) and
(ii) hereinabove shall be restored only upon the payment by the Defaulting
Lender of its Applicable Percentage of any Obligations, any participation
obligation, or expenses as to which it is delinquent, together with interest
thereon at the rate set forth in Section 2.12 hereof from the date
when originally due until the date upon which any such amounts are actually
paid.

 

(b)     The non-Defaulting Lenders
shall also have the right, but not the obligation, in their respective, sole
and absolute discretion, to cause the termination and assignment, without any further
action by the Defaulting Lender for no cash consideration (pro rata,
based on the respective Commitments of those Lenders electing to exercise such
right), of the Defaulting Lender’s Commitment to fund future Loans.  Upon any such purchase of the Applicable
Percentage of any Defaulting Lender, the Defaulting Lender’s share in future
Credit Extensions and its rights under the Loan Documents with respect thereto
shall terminate on the date of purchase, and the Defaulting Lender shall
promptly execute all documents reasonably requested to surrender and transfer
such interest, including, if so requested, an Assignment and Acceptance.

 

(c)     Each Defaulting Lender shall
indemnify the Administrative Agent and each non-Defaulting Lender from and
against any and all loss, damage or expenses, including but not limited to
reasonable attorneys’ fees and funds advanced by the Administrative Agent or by
any non-Defaulting Lender, on account of a Defaulting Lender’s failure to
timely fund its Applicable Percentage of a Loan or to otherwise perform its
obligations under the Loan Documents.

 

145

 

9.16 Syndication
Agents and Co-Lead Arrangers. 
Notwithstanding the provisions of this Agreement or any of the other
Loan Documents, neither any Person who is or becomes a Syndication Agent nor
the Arrangers, in their capacities as such, shall have any powers, rights,
duties, responsibilities or liabilities with respect to this Agreement and the
other Loan Documents.

 

ARTICLE X

MISCELLANEOUS

 

10.01   Amendments,
Etc.  No
amendment or waiver of any provision of this Agreement or any other Loan
Document, and no Consent to any departure by any Loan Party therefrom, shall be
effective unless in writing signed by the Administrative Agent, with the
Consent of the Required Lenders, and the Lead Borrower or the applicable Loan
Party, as the case may be, and each such waiver or Consent shall be effective
only in the specific instance and for the specific purpose for which given; provided,
however, that no such amendment, waiver or consent shall:

 

(a)     extend or increase the
Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02)
without the written Consent of such Lender;

 

(b)     as to any Lender, postpone
any date fixed by this Agreement or any other Loan Document for (i) any
scheduled payment (including the Maturity Date) or mandatory prepayment of
principal, interest, fees or other amounts due hereunder or under any of the
other Loan Documents without the written Consent of such Lender, or (ii) any
scheduled or mandatory reduction of the Aggregate Commitments hereunder or
under any other Loan Document without the written Consent of such Lender;

 

(c)     as to any Lender, reduce the
principal of, or the rate of interest specified herein on, any Loan or L/C
Borrowing, or (subject to clause (iv) of the second proviso to this Section 10.01)
any fees or other amounts payable hereunder or under any other Loan Document,
without the written Consent of such Lender; provided, however,
that only the Consent of the Required Lenders shall be necessary to amend the
definition of “Default Rate” or to waive any obligation of the Borrowers to pay
interest or Letter of Credit Fees at the Default Rate;

 

(d)     as to any Lender, change Section 2.13
or Section 8.03 in a manner that would alter the pro rata sharing
of payments required thereby without the written Consent of such Lender;

 

(e)     change any provision of this Section 10.01
or the definition of “Required Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any
consent hereunder, without the written Consent of each Lender;

 

146

 

(f)     except in connection with
Permitted Dispositions, release, or limit the liability of, any Loan Party,
other than an Immaterial Subsidiary, without the written Consent of each
Lender;

 

(g)     except in connection with
Permitted Dispositions, release all or substantially all of the Collateral from
the Liens of the Security Documents without the written Consent of each Lender;

 

(h)     except as provided in Section 2.15,
increase the Aggregate Commitments without the written Consent of each Lender;

 

(i)      change the definition of the
term “Borrowing Base” or any component definition thereof if, as a result
thereof, the amounts available to be borrowed by the Borrowers would be
increased without the written Consent of each Lender, provided that
the foregoing shall not limit the discretion of the Administrative Agent to
change, establish or eliminate any Reserves;

 

(j)      modify the definition of
Permitted Overadvance so as to increase the amount thereof or, except as
otherwise provided in such definition, the time period for a Permitted
Overadvance without the written Consent of each Lender; and

 

(k)     except as expressly permitted
herein or in any other Loan Document, subordinate the Obligations hereunder or
the Liens granted hereunder or under the other Loan Documents, to any other
Indebtedness or Lien, as the case may be without the written Consent of each
Lender;

 

and, provided further,
that: (i) no amendment, waiver or Consent shall, unless in writing and
signed by the L/C Issuer in addition to the Lenders required above, affect the
rights or duties of the L/C Issuer under this Agreement or any Issuer Document
relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or Consent shall, unless in writing and signed by the Swing
Line Lender in addition to the Lenders required above, affect the rights or
duties of the Swing Line Lender under this Agreement; (iii) no amendment,
waiver or Consent shall, unless in writing and signed by the Administrative
Agent in addition to the Lenders required above, affect the rights or duties of
the Administrative Agent under this Agreement or any other Loan Document; (iv) no
amendment, waiver or Consent shall, unless in writing and signed by the
Collateral Agent in addition to the Lenders required above, affect the rights
or duties of the Collateral Agent under this Agreement or any other Loan
Document; (v) any member of the Sponsor Group that at any time holds any
portion of the Obligations or Commitments shall be subject to the Sponsor
Lender Limitations; and (vi) the Fee Letter may be amended, or rights or
privileges thereunder waived, in a writing executed only by the parties
thereto.  Notwithstanding anything to the
contrary herein, no Defaulting Lender or Deteriorating Lender shall have any
right to approve or disapprove any amendment, waiver or Consent hereunder,
except that the Commitment of such Lender may not be increased or extended
without the consent of such Lender.

 

If any Lender does not Consent (a “Non-Consenting Lender”) to a
proposed amendment, waiver, consent or release with respect to any Loan
Document that requires the Consent of each 

 

147

 

Lender and that has
been approved by the Required Lenders, the Lead Borrower may replace such
Non-Consenting Lender in accordance with Section 10.13; provided that
such amendment, waiver, consent or release can be effected as a result of the
assignment contemplated by such Section (together with all other such
assignments required by the Lead Borrower to be made pursuant to this
paragraph).

 

10.02   Notices; Effectiveness; Electronic Communications.

 

(a)     Notices Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in subsection (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopier as follows, and all notices and other communications expressly
permitted hereunder to be given by telephone shall be made to the applicable
telephone number, as follows:

 

(i)            if to the Loan
Parties, the Agents, the L/C Issuer or the Swing Line Lender, to the address,
telecopier number, electronic mail address or telephone number specified for
such Person on Schedule 10.02; and

 

(ii)           if to any other Lender,
to the address, telecopier number, electronic mail address or telephone number
specified in its Administrative Questionnaire.

 

Notices sent by hand
or overnight courier service, or mailed by certified or registered mail, shall
be deemed to have been given when received; notices sent by telecopier shall be
deemed to have been given when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the
opening of business on the next Business Day for the recipient).  Notices delivered through electronic
communications to the extent provided in subsection (b) below, shall be
effective as provided in such subsection (b).

 

(b)     Electronic Communications.  Notices and other communications to the
Lenders and the L/C Issuer hereunder may be delivered or furnished by
electronic communication (including e-mail and Internet or intranet websites)
pursuant to procedures approved by the Administrative Agent, provided that
the foregoing shall not apply to notices to any Lender or the L/C Issuer
pursuant to Article II if such Lender or the L/C Issuer, as
applicable, has notified the Administrative Agent that it is incapable of
receiving notices under Article II by electronic
communication.  The Administrative Agent
or the Lead Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to procedures
approved by it, provided that approval of such procedures
may be limited to particular notices or communications.

 

Unless the Administrative Agent otherwise
prescribes, (i) notices and other communications sent to an e-mail address
shall be deemed received upon the sender’s receipt of an acknowledgement from
the intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgement), provided that
if such notice or other communication is not sent during the normal business
hours of the recipient, such

 

148

 

notice or communication shall
be deemed to have been sent at the opening of business on the next Business Day
for the recipient, and (ii) notices or communications posted to an
Internet or intranet website shall be deemed received upon the deemed receipt
by the intended recipient at its e-mail address as described in the foregoing
clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

 

(c)     The Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS
AVAILABLE.”  THE AGENT PARTIES (AS
DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER
MATERIALS OR THE ADEQUACY OF THE PLATFORM, 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 OR THE PLATFORM.  In no event
shall the Agents or any of their Related Parties (collectively, the “Agent
Parties”) have any liability to any Loan Party, any Lender, the L/C Issuer
or any other Person for losses, claims, damages, liabilities or expenses of any
kind (whether in tort, contract or otherwise) arising out of the Loan Parties’
or the Administrative 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 Party; provided, however, that in no
event shall any Agent Party have any liability to any Loan Party, any Lender, the L/C Issuer or any other Person for
indirect, special, incidental, consequential or punitive damages (as opposed to
direct or actual damages).

 

(d)     Change of Address, Etc.  Each of the Loan Parties, the Agents, the L/C
Issuer and the Swing Line Lender may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to
the other parties hereto.  Each other
Lender may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the Lead Borrower, the Agents, the
L/C Issuer and the Swing Line Lender.  In
addition, each Lender agrees to notify the Administrative Agent from time to
time to ensure that the Administrative Agent has on record (i) an effective
address, contact name, telephone number, telecopier number and electronic mail
address to which notices and other communications may be sent and (ii) accurate
wire instructions for such Lender.

 

(e)     Reliance by Agents, L/C
Issuer and Lenders.  The Agents, the
L/C Issuer and the Lenders shall be entitled to rely and act upon any notices
(including telephonic Committed Loan Notices and Swing Line Loan Notices)
purportedly given by or on behalf of the Loan Parties even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof.  The Loan Parties shall
indemnify the Agents, the L/C

 

149

 

Issuer, each Lender and the
Related Parties of each of them from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of the Loan Parties.  All telephonic notices to and other
telephonic communications with the Agents may be recorded by the Agents, and
each of the parties hereto hereby consents to such recording.

 

10.03   No Waiver; Cumulative Remedies.  No failure by any Credit Party to
exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
or under any other Loan Document preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges
provided herein and in the other Loan Documents are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.  Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default or Event of Default, regardless of whether
any Credit Party may have had notice or knowledge of such Default or Event of
Default at the time.

 

10.04   Expenses; Indemnity; Damage Waiver.

 

(a)           Costs and Expenses.  The Borrowers shall pay all Credit Party
Expenses (excluding any Taxes, the payment of which shall be governed by Section 3.01
of this Agreement).

 

(b)           Indemnification by
the Loan Parties.  The Loan Parties
shall indemnify the Agents (and any sub-agent thereof), each other Credit
Party, and each Related Party of any of the foregoing Persons (each such Person
being called an “Indemnitee”) against, and hold each Indemnitee harmless
(on an after tax basis) from, any and all losses, claims, causes of action,
damages, liabilities, settlement payments, costs and related expenses
(including the fees, charges and disbursements of any counsel for any
Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by
any third party or by any Borrower or any other Loan Party arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective
obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby, or, in the case of the Agents (and any sub-agents
thereof) and their Related Parties only, the administration of this Agreement
and the other Loan Documents, (ii) any Loan or Letter of Credit or the use
or proposed use of the proceeds therefrom (including any refusal by the L/C
Issuer to honor a demand for payment under a Letter of Credit if the documents
presented in connection with such demand do not strictly comply with the terms
of such Letter of Credit), (iii) any actual or alleged presence or release
of Hazardous Materials on or from any property owned or operated by any Loan
Party or any of its Subsidiaries, or any Environmental Liability related in any
way to any Loan Party or any of its Subsidiaries, (iv) any claims of, or
amounts paid by any Credit Party to, a Blocked Account Bank or other Person
which has entered into a control agreement with any Credit Party hereunder, or (v) any
actual or prospective claim, litigation, investigation or proceeding relating
to any of the foregoing, whether based on contract, tort or any other theory,
whether brought by a third party or by any Borrower or any other Loan Party or
any of the Loan Parties’ directors,

 

150

 

shareholders or creditors, and regardless of
whether any Indemnitee is a party thereto, in all cases, whether or not caused
by or arising, in whole or in part, out of the comparative, contributory or
sole negligence of the Indemnitee; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses (x) are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or (y) result from a claim brought by a Borrower or any
other Loan Party against an Indemnitee for breach in bad faith of such
Indemnitee’s obligations hereunder or under any other Loan Document, if the
Borrowers or such Loan Party has obtained a final and nonappealable judgment in
its favor on such claim as determined by a court of competent
jurisdiction.  For the avoidance of
doubt, this Section 10.04(b) shall not apply with respect to
Taxes, which shall be governed by Section 3.01.

 

(c)           Waiver of
Consequential Damages, Etc.  To the
fullest extent permitted by applicable Law, the Loan Parties shall not assert,
and hereby waive, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby, the transactions contemplated hereby or thereby, any Loan or Letter of
Credit or the use of the proceeds thereof. 
No Indemnitee shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed to such
unintended recipients by such Indemnitee through telecommunications, electronic
or other information transmission systems in connection with this Agreement or
the other Loan Documents or the transactions contemplated hereby or thereby
other than for direct or actual damages resulting from the gross negligence or
willful misconduct of such Indemnitee as determined by a final and
nonappealable judgment of a court of competent jurisdiction.

 

(d)           Payments.  All amounts due under this Section 10.04
shall be payable on demand.

 

(e)           Survival.  The agreements in this Section 10.04
shall survive the resignation of any Agent and the L/C Issuer, the assignment
of any Commitment or Loan by any Lender, the replacement of any Lender, the
termination of the Aggregate Commitments and the repayment, satisfaction or
discharge of all the other Obligations.

 

10.05   Payments
Set Aside.  To
the extent that any payment by or on behalf of the Loan Parties is made to any
Credit Party, or any Credit Party exercises its right of setoff, and such
payment or the proceeds of such setoff or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by such Credit Party in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to
the extent of such recovery, the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such setoff had not occurred, and (b) each
Lender and the L/C Issuer severally agrees to pay to the Agents upon demand its
Applicable Percentage (without duplication) of any amount so recovered from or
repaid by the Agents, plus interest thereon from the date of such demand to the
date such payment is made at a rate per annum equal to the Federal Funds Rate
from time to

 

151

 

time in effect.  The obligations of the Lenders and the L/C
Issuer under clause (b) of the preceding sentence shall survive the
payment in full of the Obligations and the termination of this Agreement.

 

10.06   Successors and Assigns.

 

(a)     Successors and Assigns
Generally.  The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that no
Loan Party may assign or otherwise transfer any of its rights or obligations
hereunder or under any other Loan Document without the prior written Consent of
the Administrative 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 10.06(b),
(ii) by way of participation in accordance with the provisions of Section 10.06(d),
or (iii) by way of pledge or assignment of a security interest subject to
the restrictions of Section 10.06(f) (and any other attempted
assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
to the extent provided in Section 10.06(d) and, to the extent
expressly contemplated hereby, the Related Parties of each of the Credit
Parties) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

(b)     Assignments by Lenders.  Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment(s) and the
Loans (including for purposes of this Section 10.06(b),
participations in L/C Obligations and in Swing Line Loans) at the time owing to
it); provided that any such assignment shall be subject to
the following conditions:

 

(i)            Minimum Amounts.

 

(A)          in
the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the 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, no minimum amount need be assigned; and

 

(B)           in
any case not described in Section 10.06(b)(i)(A), the aggregate
amount of the Commitment (which for this purpose includes Loans outstanding
thereunder) or, if the Commitment is not then in effect, the principal
outstanding balance of the 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 the Administrative 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 each of the Administrative Agent and,
so long as no Default or

 

152

 

Event of
Default has occurred and is continuing, the Lead Borrower otherwise consents
(each such consent not to be unreasonably withheld or delayed); provided,
however, that concurrent assignments to members of an Assignee Group and
concurrent assignments from members of an Assignee Group to a single Eligible
Assignee (or to an Eligible Assignee and members of its Assignee Group) will be
treated as a single assignment for purposes of determining whether such minimum
amount has been met;

 

(ii)           Proportionate
Amounts.  Each partial assignment
shall be made as an assignment of a proportionate part of all the assigning
Lender’s rights and obligations under this Agreement with respect to the Loans
or the Commitment assigned, except that this clause (ii) shall not apply
to the Swing Line Lender’s rights and obligations in respect of Swing Line
Loans;

 

(iii)          Required Consents.  No consent shall be required for any
assignment except to the extent required by Section 10.06(b)(i)(B) and,
in addition:

 

(A)          the
consent of the Lead Borrower (such consent not to be unreasonably withheld or
delayed) shall be required unless (1) a Default or Event of Default has
occurred and is continuing at the time of such assignment or (2) such
assignment is to a Lender, an Affiliate of a Lender or an Approved Fund with
respect to such Lender; and

 

(B)           the
consent of the Administrative Agent, the L/C Issuer and the Swing Line Lender
(such consent not to be unreasonably withheld or delayed) shall be required for
assignments in respect of any Commitment if such assignment is to a Person that
is not a Lender, an Affiliate of such Lender or an Approved Fund with respect
to such Lender.

 

(iv)          Assignment and
Assumption.  The parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Assumption, together with a processing and recordation fee of $3,500; provided,
however, that the Administrative Agent may, in its sole discretion,
elect to waive such processing and recordation fee in the case of any
assignment. The assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

 

Subject to
acceptance and recording thereof by the Administrative Agent pursuant to Section 10.06(c),
from and after the effective date specified in each Assignment and Assumption,
the Eligible Assignee thereunder shall be a party to this Agreement and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto) but shall continue to be entitled to the
benefits of Sections 3.01, 3.04, 3.05, and 10.04
with respect to facts

 

153

 

and circumstances
occurring prior to the effective date of such assignment.  Upon request, the Borrowers (at their
expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
subsection shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with Section 10.06(d).

 

(c)     Register.  The Administrative Agent, acting solely for
this purpose as an agent of the Borrowers, shall maintain at the Administrative
Agent’s Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans and L/C Obligations owing
to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, absent manifest error, and the Loan Parties, the Administrative
Agent and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Lead Borrower and any Lender at any reasonable time and from
time to time upon reasonable prior notice.

 

(d)     Participations.  Any Lender may at any time, without the consent
of, or notice to, the Loan Parties or the Administrative Agent, sell
participations to any Person (other than a natural person or the Loan Parties
or any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”)
in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans
(including such Lender’s participations in L/C Obligations and/or Swing Line
Loans) owing to it); provided that (i) such Lender’s obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations and (iii) the Loan Parties, the Agents, the Lenders and the
L/C Issuer shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.  Any Participant shall agree in writing to
comply with all confidentiality obligations set forth in Section 10.07
as if such Participant was a Lender hereunder.

 

Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any  provision
of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in
the first proviso to Section 10.01 that affects such
Participant.  Subject to Section 10.06(e),
the Loan Parties agree that each Participant shall be entitled to the benefits
of Sections 3.01, 3.04 and 3.05  to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 10.06(b).  To the extent permitted by Law, each
Participant also shall be entitled to the benefits of Section 10.08  as though it were a Lender, provided that
such Participant agrees to be subject to Section 2.13 as though it
were a Lender.

 

154

 

(e)     Limitations upon
Participant Rights.  A Participant
shall not be entitled to receive any greater payment under Sections 3.01
or 3.04  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 Lead Borrower’s 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 3.01 unless the Lead
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Loan Parties, to comply with Section 3.01(e) as
though it were a Lender.

 

(f)      Certain Pledges.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall
release such Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto.

 

(g)     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.

 

(h)     Resignation as L/C Issuer
or Swing Line Lender after Assignment. 
Notwithstanding anything to the contrary contained herein, if at any
time Bank of America assigns all of its Commitment and Loans pursuant to Section 10.06(b),
Bank of America may, (i) upon 30 days’ notice to the Lead Borrower and the
Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the Lead
Borrower, resign as Swing Line Lender. 
In the event of any such resignation as L/C Issuer or Swing Line Lender,
the Lead Borrower shall be entitled to appoint from among the Lenders a
successor L/C Issuer or Swing Line Lender hereunder; provided, however,
that no failure by the Lead Borrower to appoint any such successor shall affect
the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the
case may be.  If Bank of America resigns
as L/C Issuer, it shall retain all the rights, powers, privileges and duties of
the L/C Issuer hereunder with respect to all Letters of Credit outstanding as
of the effective date of its resignation as L/C Issuer and all L/C Obligations
with respect thereto (including the right to require the Lenders to make Prime
Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  If Bank of America resigns as Swing Line
Lender, it shall retain all the rights of the Swing Line Lender provided for
hereunder with respect to Swing Line Loans made by it and outstanding as of the
effective date of such resignation, including the right to require the Lenders
to make Prime Rate Loans or fund risk participations in outstanding Swing Line
Loans pursuant to Section 2.04(c). 
Upon the appointment of a

 

155

 

successor L/C Issuer and/or
Swing Line Lender, (a) such successor shall succeed to and become vested
with all of the rights, powers, privileges and duties of the retiring L/C
Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C
Issuer shall issue letters of credit in substitution for the Letters of Credit,
if any, outstanding at the time of such succession or make other arrangements
satisfactory to Bank of America to effectively assume the obligations of Bank
of America with respect to such Letters of Credit.

 

10.07   Treatment
of Certain Information; Confidentiality.  Each of the Credit Parties agrees
to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its Affiliates and Approved Funds
and to its and its Affiliates’ and Approved Funds’ respective partners,
directors, officers, employees, agents, funding sources, attorneys, advisors
and representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to
the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the
National Association of Insurance Commissioners), (c) to the extent
required by applicable Laws or regulations or by any subpoena or similar legal
process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions substantially the same as those of this Section 10.07,
to (i) any assignee of or Participant in, or any prospective assignee of
or Participant in, any of its rights or obligations under this Agreement or (ii) any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to any Loan Party and its obligations, (g) with the
consent of the Lead Borrower or (h) to the extent such Information (x) becomes
publicly available other than as a result of a breach of this Section 10.07
or (y) becomes available to any Credit Party or any of their respective
Affiliates on a non-confidential basis from a source other than the Loan
Parties.

 

For purposes of this Section 10.07,
“Information” means all information received from the Loan Parties or
any Subsidiary thereof relating to the Loan Parties or any Subsidiary thereof
or their respective businesses, other than any such information that is
available to any Credit Party on a non-confidential basis prior to disclosure
by the Loan Parties or any Subsidiary thereof, provided that,
in the case of information received from any Loan Party or any Subsidiary after
the date hereof, such information is clearly identified at the time of delivery
as confidential.  Any Person required to
maintain the confidentiality of Information as provided in this Section 10.07
shall be considered to have complied with its obligation to do so if such
Person has exercised the same degree of care to maintain the confidentiality of
such Information as such Person would accord to its own confidential
information.

 

Each of the Credit Parties acknowledges that (a) the
Information may include material non-public information concerning the Loan
Parties or a Subsidiary, as the case may be, (b) it has developed
compliance procedures regarding the use of material non-public information and (c) it
will handle such material non-public information in accordance with applicable
Law, including Federal and state securities Laws.

 

156

 

10.08             Right
of Setoff.  If an Event of
Default shall have occurred and be continuing or if any Lender shall have been
served with a trustee process or similar attachment relating to property of a
Loan Party, each Lender, the L/C Issuer and each of their respective Affiliates
is hereby authorized at any time and from time to time, after obtaining the
prior written consent of the Administrative Agent or the Required Lenders, to
the fullest extent permitted by applicable Law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final, in whatever
currency) or other property at any time held and other obligations (in whatever
currency) at any time owing by such Lender, the L/C Issuer or any such
Affiliate to or for the credit or the account of the Borrowers or any other
Loan Party against any and all of the Obligations now or hereafter existing
under this Agreement or any other Loan Document to such Lender or the L/C
Issuer, regardless of the adequacy of the Collateral, and irrespective of
whether or not such Lender or the L/C Issuer shall have made any demand under
this Agreement or any other Loan Document and although such obligations of the
Borrowers or such Loan Party may be contingent or unmatured or are owed to a branch
or office of such Lender or the L/C Issuer different from the branch or office
holding such deposit or obligated on such indebtedness.  The rights of each Lender, the L/C Issuer and
their respective Affiliates under this Section 10.08 are in
addition to other rights and remedies (including other rights of setoff) that
such Lender, the L/C Issuer or their respective Affiliates may have.  Each Lender and the L/C Issuer agrees to
notify the Lead Borrower and the Administrative Agent promptly after any such
setoff and application, provided  that the failure to give such
notice shall not affect the validity of such setoff and application.

 

10.09             Interest
Rate Limitation.  Notwithstanding
anything to the contrary contained in any Loan Document, the interest paid or
agreed to be paid under the Loan Documents shall not exceed the maximum rate of
non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If the Administrative Agent or any Lender
shall receive interest in an amount that exceeds the Maximum Rate, the excess
interest shall be applied to the principal of the Loans or, if it exceeds such
unpaid principal, refunded to the Borrowers. 
In determining whether the interest contracted for, charged, or received
by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person
may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the contemplated term of the Obligations hereunder.

 

10.10             Counterparts;
Integration; Effectiveness.  This Agreement may
be executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which
when taken together shall constitute a single contract.  This Agreement and the other Loan Documents
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof.  Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.  Delivery of an
executed counterpart of a signature page of this Agreement by telecopy
shall be as effective as delivery of a manually executed counterpart of this
Agreement.

 

157

 

10.11             Survival.  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 Credit Parties, regardless of any investigation made by any Credit Party or
on their behalf and notwithstanding that any Credit Party may have had notice
or knowledge of any Default or Event of Default at the time of any Credit
Extension, and shall continue in full force and effect as long as any Loan or
any other Obligation (other than any Obligation in respect of the Other
Liabilities) hereunder shall remain unpaid or unsatisfied or any Letter of
Credit shall remain outstanding. 
Further, the provisions of Article III, Article IX
and Section 10.04 shall survive and remain in full force and effect
until the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof and repayment
of all of the Obligations (including, without limitation, those arising under Article III,
Article IX and Section 10.04) hereunder.  In connection with the termination of this
Agreement and the release and termination of the security interests in the
Collateral, the Agents may require such indemnities and collateral security as
they shall reasonably deem necessary or appropriate to protect the Credit
Parties against (x) loss on account of credits previously applied to the
Obligations that may subsequently be reversed or revoked, (y) any
obligations that may thereafter arise with respect to the Other Liabilities,
and (z) any Obligations that may thereafter arise under Section 10.04
hereof.

 

10.12             Severability.  If any provision of this Agreement
or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to
replace the illegal, invalid or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the illegal,
invalid or unenforceable provisions.  The
invalidity of a provision in a particular jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

 

10.13             Replacement
of Lenders.   If any Lender
requests compensation under Section 3.04, or if the Borrowers are
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 3.01,
or if any Lender is a Defaulting Lender, a Deteriorating Lender or a
Non-Consenting Lender, then the Borrowers may, at their sole expense and
effort, upon notice to such Lender and the Administrative 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 10.06),
all of its interests, rights and obligations under this 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 Administrative Agent the assignment fee specified in Section 10.06(b);

 

(b)   such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans
and L/C Advances, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents (including any
amounts under Section 3.05) from the assignee (to the 

 

158

 

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 3.04
or payments required to be made pursuant to Section 3.01, 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.

 

10.14             Governing Law; Jurisdiction;
Etc.

 

(a)   GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

 

(b)   SUBMISSION TO JURISDICTION.  EACH LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE LOAN PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE
COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL
COURT.  EACH OF THE LOAN PARTIES HERETO
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER
LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.

 

(c)   WAIVER OF VENUE.  EACH LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER 

 

159

 

HAVE TO THE LAYING OF VENUE OF ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION 10.14.  EACH OF THE LOAN PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

 

(d)   SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW.

 

(e)   ACTIONS COMMENCED BY LOAN
PARTIES. EACH LOAN PARTY AGREES THAT ANY ACTION COMMENCED BY ANY LOAN PARTY
ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT OF THE
STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT SITTING
THEREIN, AS THE ADMINISTRATIVE AGENT MAY ELECT IN ITS SOLE DISCRETION, AND
CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH
ACTION.

 

10.15             Waiver
of Jury Trial.  EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.15.

 

10.16             No
Advisory or Fiduciary Responsibility.  In connection with all aspects of each
transaction contemplated hereby, the Loan Parties each acknowledge and agree
that: (i) the credit facility
provided for hereunder and any related arranging or other services in
connection therewith (including in connection with any amendment, waiver or
other modification hereof or of any other Loan Document) are an arm’s-length
commercial transaction between the Loan Parties, on the one hand, and the
Credit Parties, on the other hand, and each
of the Loan Parties is capable of evaluating and understanding and understands
and accepts the terms, risks and conditions of the transactions contemplated
hereby and by the other Loan 

 

160

 

Documents (including any
amendment, waiver or other modification hereof or thereof); (ii) in
connection with the process leading to such transaction, each Credit Party is
and has been acting solely as a principal and is not the financial advisor,
agent or fiduciary, for the Loan Parties or any of their respective Affiliates, stockholders, creditors or employees
or any other Person; (iii) none of the Credit Parties has assumed or will
assume an advisory, agency or fiduciary responsibility in favor of the Loan
Parties with respect to any of the transactions contemplated hereby or the
process leading thereto, including with respect to any amendment, waiver or
other modification hereof or of any other Loan Document (irrespective of
whether any of the Credit Parties has advised or is currently advising any Loan
Party or any of its Affiliates
on other matters) and none of the Credit Parties has any obligation to any Loan
Party or any of its Affiliates
with respect to the transactions contemplated hereby, except those obligations
expressly set forth herein and in the other Loan Documents; (iv) the
Credit Parties and their respective Affiliates may be engaged in a broad range
of transactions that involve interests that differ from those of the Loan
Parties and their respective
Affiliates, and none of the Credit Parties has any obligation to disclose any
of such interests by virtue of any advisory, agency or fiduciary relationship;
and (v) the Credit Parties have not provided, and will not provide, any
legal, accounting, regulatory or tax advice with respect to any of the
transactions contemplated hereby (including any amendment, waiver or other
modification hereof or of any other Loan Document), and each of the Loan Parties has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate.  Each
of the Loan Parties hereby waives and releases, to the fullest extent
permitted by Law, any claims that it may have against each of the Credit
Parties with respect to any breach or alleged breach of agency or fiduciary
duty.

 

10.17             USA
PATRIOT Act Notice.  Each Lender that is
subject to the Patriot Act and the Administrative Agent (for itself and not on
behalf of any Lender) hereby notifies the Loan Parties that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies each Loan Party, which information includes the
name and address of each Loan Party and other information that will allow such
Lender or the Administrative Agent, as applicable, to identify each Loan Party
in accordance with the Patriot Act.  Each
Loan Party is in compliance, in all material respects, with the Patriot Act.  No part of the proceeds of the Loans will be
used by the Loan Parties, directly or indirectly, for any payments to any
governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of the United States Foreign Corrupt Practices Act of
1977, as amended.

 

10.18             Foreign
Asset Control Regulations.  Neither the advance of the Loans nor the use
of the proceeds of any thereof will violate the Trading With the Enemy Act (50
U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets
Control Regulations”) or any enabling legislation or executive order
relating thereto (which for the avoidance of doubt shall include, but shall not
be limited to (a) Executive Order 13224 of September 21, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive
Order”) and (b) the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56)).  Furthermore, none
of the Borrowers or their Affiliates (a) is or will become a 

 

161

 

“blocked person” as described in
the Executive Order, the Trading With the Enemy Act or the Foreign Assets
Control Regulations or (b) engages or will engage in any dealings or
transactions, or be otherwise associated, with any such “blocked person” or in
any manner violative of any such order.

 

10.19             Time
of the Essence.  Time is of the
essence of the Loan Documents.

 

10.20             Press
Releases.

 

(a)   Each
Credit Party executing this Agreement agrees that neither it nor its Affiliates
will in the future issue any press releases or other public disclosure using
the name of Administrative Agent or its Affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business
Days prior notice to Administrative Agent and without the prior written consent
of Administrative Agent unless (and only to the extent that) such Credit Party
or Affiliate is required to do so under applicable Law and then, in any event,
such Credit Party or Affiliate will consult with the Administrative Agent
before issuing such press release or other public disclosure.

 

(b)   Each Loan
Party consents to the publication by Administrative Agent or any Lender of
advertising material relating to the financing transactions contemplated by
this Agreement using any Loan Party’s name, product photographs, logo or
trademark.  Administrative Agent or such
Lender shall provide a draft reasonably in advance of any advertising material
to the Lead Borrower for review and comment prior to the publication
thereof.  Administrative Agent reserves
the right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements

 

10.21             Additional
Waivers.

 

(a)   The Obligations are the
joint and several obligation of each Loan Party. To the fullest extent
permitted by applicable Law, the obligations of each Loan Party shall not be
affected by (i) the failure of any Credit Party to assert any claim or
demand or to enforce or exercise any right or remedy against any other Loan
Party under the provisions of this Agreement, any other Loan Document or
otherwise, (ii) any rescission, waiver, amendment or modification of, or
any release from any of the terms or provisions of, this Agreement or any other
Loan Document, or (iii) the failure to perfect any security interest in,
or the release of, any of the Collateral or other security held by or on behalf
of the Collateral Agent or any other Credit Party.

 

(b)   The obligations of each Loan
Party  shall not be subject to any
reduction, limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Obligations after the termination
of the Commitments), including any claim of waiver, release, surrender,
alteration or compromise of any of the Obligations, and shall not be subject to
any defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of any of the
Obligations or otherwise. Without limiting the 

 

162

 

generality of the foregoing, the obligations
of each Loan Party hereunder shall not be discharged or impaired or otherwise
affected by the failure of any Agent or any other Credit Party to assert any
claim or demand or to enforce any remedy under this Agreement, any other Loan
Document or any other agreement, by any waiver or modification of any provision
of any thereof, any default, failure or delay, willful or otherwise, in the
performance of any of the Obligations, or by any other act or omission that may
or might in any manner or to any extent vary the risk of any Loan Party or that
would otherwise operate as a discharge of any Loan Party as a matter of law or
equity (other than the indefeasible payment in full in cash of all the
Obligations after the termination of the Commitments).

 

(c)   To the fullest extent
permitted by applicable Law, each Loan Party waives any defense based on or
arising out of any defense of any other Loan Party or the unenforceability of
the Obligations or any part thereof from any cause, or the cessation from any
cause of the liability of any other Loan Party, other than the indefeasible
payment in full in cash of all the Obligations and the termination of the
Commitments. The Collateral Agent and the other Credit Parties may, at their
election upon the occurrence and during the continuance of an Event of Default,
foreclose on any security held by one or more of them by one or more judicial
or non-judicial sales, accept an assignment of any such security in lieu of
foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with any other Loan Party, or exercise any other right or remedy
available to them against any other Loan Party, without affecting or impairing
in any way the liability of any Loan Party hereunder except to the extent that
all the Obligations have been indefeasibly paid in full in cash and the
Commitments have been terminated.  Each
Loan Party waives any defense arising out of any such election even though such
election operates, pursuant to applicable Law, to impair or to extinguish any
right of reimbursement or subrogation or other right or remedy of such Loan
Party against any other Loan Party, as the case may be, or any security.

 

(d)   Each Borrower is obligated
to repay the Obligations as joint and several obligors under this
Agreement.  Upon payment by any Loan
Party of any Obligations, all rights of such Loan Party against any other Loan
Party arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subordinate and
junior in right of payment to the prior indefeasible payment in full in cash of
all the Obligations and the termination of the Commitments. In addition, any
indebtedness of any Loan Party now or hereafter held by any other Loan Party is
hereby subordinated in right of payment to the prior indefeasible payment in
full of the Obligations and no Loan Party will demand, sue for or otherwise
attempt to collect any such indebtedness. 
If any amount shall erroneously be paid to any Loan Party on account of (i) such
subrogation, contribution, reimbursement, indemnity or similar right or (ii) any
such indebtedness of any Loan Party, such amount shall be held in trust for the
benefit of the Credit Parties and shall forthwith be paid to the Administrative
Agent to be credited against the payment of the Obligations, whether matured or
unmatured, in accordance with the terms of this Agreement and the other Loan
Documents.  Subject to the foregoing, to
the extent that any Borrower shall, under this Agreement as a joint and several
obligor, repay any of 

 

163

 

the Obligations constituting Revolving Loans
made to another Borrower hereunder or other Obligations incurred directly and
primarily by any other Borrower (an “Accommodation Payment”), then the
Borrower making such Accommodation Payment shall be entitled to contribution
and indemnification from, and be reimbursed by, each of the other Borrowers in
an amount, for each of such other Borrowers, equal to a fraction of such
Accommodation Payment, the numerator of which fraction is such other Borrower’s
Allocable Amount and the denominator of which is the sum of the Allocable
Amounts of all of the Borrowers.  As of
any date of determination, the “Allocable Amount” of each Borrower shall
be equal to the maximum amount of liability for Accommodation Payments which
could be asserted against such Borrower hereunder without (a) rendering
such Borrower “insolvent” within the meaning of Section 101 (31) of the
Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”)
or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving
such Borrower with unreasonably small capital or assets, within the meaning of Section 548
of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the
UFCA, or (c) leaving such Borrower unable to pay its debts as they become
due within the meaning of Section 548 of the Bankruptcy Code or Section 4
of the UFTA, or Section 5 of the UFCA.

 

10.22             No
Strict Construction.  The parties hereto have participated jointly
in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement.

 

10.23             Attachments.  The exhibits,
schedules and annexes attached to this Agreement are incorporated herein and
shall be considered a part of this Agreement for the purposes stated herein,
except that in the event of any conflict between any of the provisions of such
exhibits and the provisions of this Agreement, the provisions of this Agreement
shall prevail.

 

10.24             Intercreditor
Agreement.  Notwithstanding anything herein to the
contrary, the Liens and security interests granted to the Collateral Agent
pursuant to the Security Documents, and the exercise of any right or remedy by
the Collateral Agent hereunder or thereunder, are subject to the provisions of
the Intercreditor Agreement.  In the
event of any conflict between the terms of the Intercreditor Agreement and the
terms of this Agreement, the terms of the Intercreditor Agreement shall govern
and control.

 

[SIGNATURE PAGES FOLLOW]

 

164

 

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

 

	
   

  	
  TOPS
  MARKETS, LLC, as Lead Borrower and as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/

  
	
   

  	
  Name:
  

  	
   

  
	
   

  	
  Title:
  

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TOPS
  HOLDING CORPORATION, as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/

  
	
   

  	
  Name:
  

  	
   

  
	
   

  	
  Title:
  

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TOPS
  GIFT CARD COMPANY, LLC, as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/

  
	
   

  	
  Name:
  

  	
   

  
	
   

  	
  Title:
  

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BATH
  LLC, as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Tops
  Markets, LLC, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/

  
	
   

  	
  Name:
  

  	
   

  
	
   

  	
  Title:
  

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARP
  BRADFORD LLC, as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Tops
  Markets, LLC, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/

  
	
   

  	
  Name:
  

  	
   

  
	
   

  	
  Title: 

  	
   

  

 

 

Signature Page to Credit
Agreement

 

S/1

 

	
   

  	
  BANK
  OF AMERICA, N.A., as Administrative Agent and as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:
  

  	
   

  

 

 

Signature Page to Credit
Agreement

 

S/2

 

	
   

  	
  BANK
  OF AMERICA, N.A., as a Lender, L/C Issuer and Swing Line Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:
  

  	
   

  

 

 

Signature Page to Credit
Agreement

 

S/3

 

	
   

  	
  MORGAN
  STANLEY SENIOR FUNDING, INC., as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:
  

  	
   

  

 

 

Signature Page to Credit
Agreement

 

S/4

 

	
   

  	
  HSBC
  BUSINESS CREDIT (USA) INC., as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title: 

  	
   

  

 

 

Signature Page to Credit
Agreement

 

S/5Exhibit 10.2

 

FIRST AMENDMENT TO CREDIT AGREEMENT

 

FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”)
dated as of January 29, 2010 by and among

 

TOPS MARKETS, LLC, a New York limited
liability company, for itself and as agent (in such capacity, the “Lead
Borrower”) for the Borrowers named herein;

 

The BORROWERS party hereto;

 

The GUARANTORS party hereto;

 

The LENDERS party to the Credit Agreement
referred to below; and

 

BANK OF AMERICA, N.A., as administrative
agent (in such capacity, the “Administrative Agent”) and collateral
agent (in such capacity, the “Collateral Agent”) for the Lenders (as
defined below, the “Lenders”);

 

in
consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

 

W I T N E S S E T H:

 

WHEREAS,
the Borrowers, the Guarantors, the Lenders, the Administrative Agent, and the
Collateral Agent, among others, have entered into a certain Credit Agreement
dated as of October 9, 2009 (as amended and in effect, the “Credit
Agreement”); and

 

WHEREAS,
the Lead Borrower has informed the Administrative Agent that the Borrower
intends to acquire certain assets of The Penn Traffic Company pursuant to an
Asset Purchase Agreement to be entered into by and among the Lead Borrower, as
Buyer, and The Penn Traffic Company, as Seller (the “Penn Traffic
Acquisition”); and

 

WHEREAS,
in connection with the Penn Traffic Acquisition, the Borrowers have requested
that the Agents and the Lenders (i) increase the Aggregate Commitments
under the Credit Agreement to $100,000,000 and (ii) establish a term loan
facility under the Credit Agreement in the amount of $11,000,000; and

 

WHEREAS,
the parties to the Credit Agreement desire to modify certain other provisions
of the Credit Agreement as provided herein.

 

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

 

1.             Incorporation of Terms and Conditions of Credit
Agreement.   All of the terms and conditions of the
Credit Agreement (including, without limitation, all definitions set forth
therein) are specifically incorporated herein by reference.  All capitalized terms not 

 

1

 

otherwise defined herein shall have the same meanings
as in the Credit Agreement, as applicable.

 

2.             Representations and Warranties. 
Each Loan Party hereby represents and warrants that as of the First
Amendment Effective Date, after giving effect to this Amendment, the Penn
Traffic Acquisition and the transactions contemplated hereby (including,
without limitation, the making of the Term Loan on the First Amendment
Effective Date), (i) no Default or Event of Default by the Loan Parties
exists under the Credit Agreement or under any other Loan Document, and (ii) all
representations and warranties contained in the Credit Agreement and the other
Loan Documents are true and correct in all material respects (or, in the case
of any representation and warranty qualified by materiality, in all respects).

 

3.             Amendments to Credit Agreement. 
The Credit Agreement is hereby amended as follows:

 

a.             Amendments to Article I. 
The provisions of Section 1.01 of the Credit Agreement are hereby
amended as follows:

 

i.              The definition of “Accelerated Borrowing Base
Delivery Event” is hereby deleted in its entirety and the following
substituted in its stead:

 

“Accelerated Borrowing Base Delivery Event”
means either (i) the occurrence and continuance of any Event of Default,
or (ii) (x) for the sixty (60) days following the First Amendment
Effective Date, the failure of the Borrowers to maintain Availability at least
equal to fifteen (15%) percent of the Loan Cap at the End of any Business Day,
and (y) thereafter, the failure of the Borrowers to maintain Availability
at least equal to twenty (20%) percent of the Loan Cap at the End of any
Business Day.   For purposes of this
Agreement, the occurrence of an Accelerated Borrowing Base Delivery Event shall
be deemed continuing at the Administrative Agent’s option (i) so long as
such Event of Default has not been waived, and/or (ii) if the Accelerated
Borrowing Base Delivery Event arises as a result of the Borrowers’ failure to
maintain Availability as required hereunder, until Availability has exceeded
the amounts required pursuant to clauses (ii)(x) or (y) above, as
applicable, at the End of each calendar day for sixty (60) consecutive calendar
days, in which case an Accelerated Borrowing Base Delivery Event shall no
longer be deemed to be continuing for purposes of this Agreement.

 

ii.             The definition of “Aggregate Commitments” is
hereby deleted in its entirety and the following substituted in its stead:

 

“Aggregate Commitments” means the Commitments
of all of the Lenders. As of the First Amendment Effective Date, the Aggregate
Commitments 

 

2

 

shall be $100,000,000, as such amount may be
increased, decreased or otherwise modified pursuant to the terms of this
Agreement.

 

iii.            The definition of “Borrowing” is hereby deleted
in its entirety and the following substituted in its stead:

 

“Borrowing” means a Committed Borrowing, a
Swing Line Borrowing, or the borrowing of the Term Loan, as the context may
require.

 

iv.            The definition of “Borrowing Base” is hereby
deleted in its entirety and the following substituted in its stead:

 

“Borrowing Base” means the sum of the Revolving
Facility Borrowing Base plus the Term Loan Borrowing Base; provided
that any assets acquired pursuant to the Penn Traffic Acquisition and otherwise
eligible for inclusion in the Borrowing Base shall be included therein
notwithstanding the fact that they have not been appraised by the Agent and a
commercial finance examination has not been completed with respect thereto; provided,
further, that the Appraised Value of any Inventory acquired in the Penn
Traffic Acquisition shall be determined based on the existing appraised value
of such Inventory until a subsequent appraisal is completed by the Agent.

 

v.             The definition of “Cash Dominion Event” is
hereby deleted in its entirety and the following substituted in its stead:

 

“Cash Dominion Event” means (a) the
occurrence and continuance of any Event of Default, or (b) (x) for
the sixty (60) days following the First Amendment Effective Date, the failure
of the Borrowers to maintain Availability equal to or greater than fifteen
(15%) percent of the Loan Cap at the End of any five (5) consecutive
Business Days, and (y) thereafter, (i) the failure of the Borrowers
to maintain Availability equal to or greater than twenty (20%) percent of the
Loan Cap at the End of any five (5) consecutive Business Days or (ii) the
failure of the Borrowers to maintain Availability equal to or greater than
sixteen (16%) percent of the Loan Cap at the End of each Business Day.  For purposes of this Agreement, the
occurrence of a Cash Dominion Event shall be deemed continuing at the
Administrative Agent’s option (i) so long as such Event of Default has not
been waived, and/or (ii) if such Cash Dominion Event arises as a result of
the Borrowers’ failure to maintain Availability as required pursuant to clause (b) hereunder,
until Availability has exceeded the amounts required pursuant to clause (b)(x) or
(y), as applicable, at the End of each calendar day for sixty (60) consecutive
calendar days, in which case a Cash Dominion Event shall no longer be deemed to
be continuing for purposes of this Agreement; provided that a Cash Dominion Event shall
be deemed 

 

3

 

continuing (even if an Event of Default is no longer
continuing and/or Availability at the end of each calendar day exceeds the
required amount for sixty (60) consecutive calendar days) at all times after a
Cash Dominion Event has occurred and been discontinued on four (4) occasion(s) after
the Closing Date.  The termination of a
Cash Dominion Event as provided herein shall in no way limit, waive or delay
the occurrence of a subsequent Cash Dominion Event in the event that the
conditions set forth in this definition again arise.

 

vi.            The definition of “Covenant Compliance Event”
is hereby deleted in its entirety and the following substituted in its stead:

 

“Covenant Compliance Event” means either (a) that
an Event of Default has occurred and is continuing or (b) Availability is
less than or equal to fifteen (15%) percent of the Loan Cap (i) on any Business
Day at the time a Committed Loan Request is made, or (ii) if no Committed
Loan Request is made on such day, the End of that Business Day.  For purposes hereof, the occurrence of a
Covenant Compliance Event shall be deemed continuing at the Administrative
Agent’s option (a) so long as such Event of Default has not been waived,
and/or (b) if the Covenant Compliance Event arises as a result of the
Borrowers’ failure to maintain Availability as required hereunder, until
Availability has exceeded fifteen (15%) percent of the Loan Cap for sixty (60)
consecutive calendar days, in which case a Covenant Compliance Event shall no
longer be deemed to be continuing for purposes of this Agreement.  The termination of a Covenant Compliance as
provided herein shall in no way limit, waive or delay the occurrence of a
subsequent Covenant Compliance Event in the event that the conditions set forth
in this definition again arise.

 

vii.           The definition of “Eligible Trade Receivables”
is hereby amended to add “Notwithstanding anything to the contrary herein,
Eligible Trade Receivables shall include wholesale receivables to the extent
that such wholesale receivables are not otherwise ineligible by virtue of any
of the foregoing clauses (a) through (s).” as the last sentence.

 

viii.          The definition of “Interest Payment Date” is
hereby amended by adding “or the Term Loan Maturity Date, as applicable” after
the words “Maturity Date” in each of clause (a) and (b) thereof.

 

ix.            Clause (c) of the definition of “Interest
Period” is hereby amended by adding “or the Term Loan Maturity Date, as
applicable” after the words “Maturity Date”.

 

x.             The definition of “Lender” is hereby deleted in
its entirety and the following substituted in its stead:

 

4

 

“Lender” has the meaning specified in the
introductory paragraph hereto and, as the context requires, includes the Swing
Line Lender and the Term Lenders.

 

xi.            The definition of “Loan” is hereby deleted in
its entirety and the following substituted in its stead:

 

“Loan” means (i) an extension of credit by
a Lender to any Borrower under Article II in the form of a
Committed Loan or a Swing Line Loan or (ii) an extension of credit by a
Term Lender to the Borrowers under Article II in the form of the Term
Loan, as applicable.

 

xii.           The definition of “Loan Cap” is hereby deleted
in its entirety and the following substituted in its stead:

 

“Loan Cap” means, at any time of determination,
the lesser of (a) the Aggregate Commitments plus the then outstanding
amount of the Term Loan or (b) the Borrowing Base.

 

xiii.          The definition of “Material Indebtedness” is
hereby amended by adding “and the Bridge Financing” after “the Senior Notes
Documents” in clause (a) thereof.

 

xiv.          The definition of “Note” is hereby deleted in
its entirety and the following substituted in its stead:

 

“Note” means a promissory note made by the
Borrowers in favor of (i) a Lender evidencing Committed Loans made by such
Lender, substantially in the form of Exhibit C, or (ii) a Term
Lender evidencing that portion of the Term Loan made by such Term Lender,
substantially in the form of Exhibit C-1, as applicable, in each
case as the same may be amended, supplemented or modified from time to time.

 

xv.           The definition of “Outstanding Amount” is
hereby deleted in its entirety and the following substituted in its stead:

 

“Outstanding Amount” means: (i) with
respect to Committed Loans and Swing Line Loans on any date, the aggregate
outstanding principal amount thereof after giving effect to any borrowings and
prepayments or repayments of Committed Loans and Swing Line Loans, as the case
may be, occurring on such date; (ii) with respect to any L/C Obligations
on any date, the amount of such L/C Obligations on such date after giving
effect to any L/C Credit Extension occurring on such date and any other changes
in the aggregate amount of the L/C Obligations as of such date, including as a
result of any reimbursements by the Borrowers of Unreimbursed 

 

5

 

Amounts; and (iii) with respect to the Term Loan
on any date, the aggregate outstanding principal amount thereof after giving
effect to any prepayments or repayments of the Term Loan occurring on such
date.

 

xvi.          The lead-in language in the definition of “Permitted
Acquisition” is hereby amended by relettering clause (ii) thereof as
clause (iii) and by adding the following new clause (ii) thereto:

 

“(ii) the Penn Traffic Acquisition,”

 

xvii.         The definition of “Permitted Dispositions” is
hereby amended by relettering clause (v) as clause (w) and by adding
the following new clause (v) thereto:

 

“(v)         the Disposition or liquidation of a
portion of the Stores (including bulk sales of Inventory and other related
assets located in such stores) acquired pursuant to the Penn Traffic
Acquisition as is agreed between the Administrative Agent and the Lead
Borrower; provided that (a) any liquidation consummated in reliance
on this clause (v) shall be conducted in accordance with liquidation
agreements and by professional liquidators, in each case reasonably acceptable
to the Administrative Agent, and (b) to the extent not prohibited by the
terms of the Indenture and the Intercreditor Agreement, all proceeds realized
from any Disposition or liquidation consummated in reliance on this clause (v) shall
be paid to the Administrative Agent for application to the Obligations as set
forth in Section 2.05(k) hereof; and”

 

xviii.        The definition of “Permitted Encumbrances” is
hereby amended by deleting “and” at the end of clause (v) thereof, by
relettering clause (w) as clause (y), by replacing “(a) through (v)”
with “(a) through (x)” in such new clause (y), and by adding the following
new clauses (w) and (x) thereto:

 

“(w)        Liens securing Permitted Indebtedness
under clause (r) of the definition thereof;

 

(x)            Liens on the Collateral securing
Permitted Indebtedness described in clauses (s) and (t) of the
definition thereof and having the priority set forth in the Intercreditor
Agreement; and”

 

xix.           The definition of “Permitted Indebtedness” is
hereby amended by deleting “and” at the end of clause (q) thereof, by
relettering clause (r) as clause (u), and by adding the following new
clauses (r), (s) and (t) thereto:

 

6

 

“(r)          Indebtedness assumed by the Parent or its
Subsidiaries pursuant to the Penn Traffic Acquisition Agreement in an amount
not to exceed the sum of $5,000,000, plus the amount of all Capital Lease
Obligations so assumed;

 

(s)           Indebtedness arising under the Bridge
Financing and any Permitted Additional Pari Passu Obligations all or a portion
of the proceeds of which are used to refinance all or a portion of such Bridge
Financing (provided that, for the purposes of this clause (s), any such
Permitted Additional Pari Passu Obligations permitted pursuant hereto shall not
have a maturity which is earlier than the Initial Maturity Date (as defined in
the Bridge Financing Loan Agreement);

 

(t)            Indebtedness in the form of Permitted
Additional Pari Passu Obligations incurred to prepay the Term Loan; and”

 

xx.            The following new definitions are hereby
added to Section 1.01 of the Credit Agreement in appropriate alphabetical
order:

 

“Bridge Financing” means the bridge loan,
rollover loan or exchange notes in the maximum principal amount of $25,000,000
evidenced by the Bridge Financing Loan Documents.

 

“Bridge Financing Loan Agreement” means the
Interim Loan Agreement dated as of January 29, 2010 among Tops Holding
Corporation and Tops Markets, LLC, as Borrowers, the Guarantors party thereto, the
Lenders party thereto, and Morgan Stanley Senior Funding, Inc., as
Administrative Agent.

 

“Bridge Financing Loan Documents” means the
Bridge Financing Loan Agreement and any other document, instrument or other
agreement now or hereafter executed in connection with any of the foregoing, in
each case as amended, restated, supplemented or otherwise modified from time to
time in accordance with Section 7.12.

 

“First Amendment” means the First Amendment to
this Agreement among the parties hereto.

 

“First Amendment Effective Date” means the date
on which the conditions to effectiveness set out in Section 6 of the First
Amendment have been satisfied.

 

“Penn Traffic Acquisition” means the
acquisition of certain assets of The Penn Traffic Company by the Lead Borrower
pursuant to the Penn Traffic Acquisition Agreement.

 

7

 

“Penn Traffic Acquisition Agreement” means that
certain Asset Purchase Agreement dated on or about January 7, 2010 by and
among the Lead Borrower, as Buyer, and the Target, as Seller, without giving
effect to any amendment, modification or waiver thereof which the
Administrative Agent reasonably determines is materially adverse to the Lenders
(unless the Administrative Agent consents to such amendment, modification or
waiver, which consent shall not be unreasonably withheld or delayed).

 

“Revolver Outstandings” means the aggregate
Outstanding Amount of all Committed Loans and Swing Line Loans and all L/C
Obligations.

 

“Revolving Facility Borrowing Base” means, at
any time of calculation, an amount equal to:

 

(a)           the face amount of Eligible
Credit Card Receivables multiplied by eighty-five percent (85%);

 

plus

 

(b)           the Cost of Eligible
Inventory, net of Inventory Reserves, multiplied by eighty-five percent
(85%) of the Appraised Value of Eligible Inventory; provided that
in no event shall the amounts available to be borrowed pursuant to this clause (b) in
respect of Eligible Inventory consisting of gasoline, diesel or other petroleum
products, together with all amounts available to be borrowed pursuant to clause
(b) of the Term Loan Borrowing Base consisting of gasoline, diesel or
other petroleum products, exceed One Million Dollars ($1,000,000);

 

plus

 

(c)  the face amount of
Eligible Health Care Receivables (net of Receivables Reserves) multiplied by
eighty-five percent (85%);

 

plus

 

(d)  the face amount of
Eligible Trade Receivables (net of Receivables Reserves) multiplied by
eight-five percent (85%);

 

plus

 

(e)   seventy-five percent (75%) of the Appraised
Value of Prescription Lists; provided that in no event shall
amounts available to be borrowed pursuant to this clause (e), together with
amounts available to be borrowed pursuant to clause (e) of the Term Loan
Borrowing Base, exceed twenty-five percent (25%) of the Loan Cap;

 

8

 

minus

 

(f)            the then amount of all
Availability Reserves.”

 

“Target” means The Penn Traffic Company, a
Delaware corporation.

 

“Term Lender” means the Persons identified on Schedule 2.01 hereto as having a
Term Loan Commitment, and each assignee that becomes a party to this Agreement
with respect to the Term Loan as provided in Section 10.06.

 

“Term Loan” means, collectively, the loans made
by the Term Lenders pursuant to Section 2.01(d).

 

“Term Loan Advance Rate” means, subject to any
further reductions required pursuant to Section 2.05(b) or Section 2.05(g) hereof,  the percentages set forth below for the time
periods set forth below:

 

	
  Period

  	
   

  	
  Term Loan Advance Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  First Amendment Effective Date through September 30,
  2010

  	
   

  	
  10

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  October 1, 2010 through January 28, 2011

  	
   

  	
  7.5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  January 29, 2011 and thereafter

  	
   

  	
  0

  	
  %

  

 

“Term Loan Applicable Margin” means the
percentages set forth in the pricing grid below:

 

	
  Term Loan Applicable Margin for 

  LIBO Rate Loans

  	
   

  	
  Term Loan Applicable Margin for 

  Prime Rate Loans

  	
   

  
	
  7.50

  	
  %

  	
  6.50

  	
  %

  

 

“Term Loan Borrowing Base” means, at any time
of calculation, an amount equal to:

 

(a)           the face amount of Eligible
Credit Card Receivables multiplied by the Term Loan Advance Rate;

 

9

 

plus

 

(b)           the Cost of Eligible
Inventory, net of Inventory Reserves, multiplied by the Term Loan
Advance Rate multiplied by the Appraised Value of Eligible Inventory; provided
that in no event shall the amounts available to be borrowed pursuant to
this clause (b) in respect of Eligible Inventory consisting of gasoline,
diesel or other petroleum products, together with all amounts available to be
borrowed pursuant to clause (b) of the Revolving Facility Borrowing Base
consisting of gasoline, diesel or other petroleum products, exceed One Million
Dollars ($1,000,000);

 

plus

 

(c)    the face amount of Eligible Health Care
Receivables (net of Receivables Reserves) multiplied by the Term Loan
Advance Rate;

 

plus

 

(d)   the face amount of Eligible Trade Receivables
(net of Receivables Reserves) multiplied by the Term Loan Advance Rate;

 

plus

 

(e)   the Term Loan Advance Rate multiplied by
the Appraised Value of Prescription Lists; provided  that in no
event shall amounts available to be borrowed pursuant to this clause (e),
together with amounts available to be borrowed pursuant to clause (e) of
the Revolving Facility Borrowing Base, exceed twenty-five percent (25%) of the
Loan Cap.

 

“Term Loan Commitment” means with respect to
each Term Lender, the commitment of such Term Lender hereunder set forth as its
Term Loan Commitment opposite its name on Schedule 2.01 hereto.  As of the First Amendment Effective Date, the
aggregate amount of the Term Loan Commitments is $11,000,000.

 

“Term Loan Maturity Date” means January 29,
2011.

 

b.             Amendments to Article II. 
The provisions of Article II of the Credit Agreement are hereby
amended as follows:

 

i.              Section 2.01(a) of the Credit Agreement is
hereby amended by deleting “Borrowing Base” in clause (y) thereof and by
substituting “Revolving Facility Borrowing Base” in its stead.

 

ii.             Section 2.01(a)(i) of the Credit Agreement
is hereby deleted in its entirety and the following substituted in its stead:

 

10

 

 

“(i)          after giving effect to any Committed
Borrowing, (x) the Revolver Outstandings shall not exceed the lesser of (A) the
Aggregate Commitments and (b) the Revolving Facility Borrowing Base, and (y) the
Total Outstandings shall not exceed the Loan Cap;”

 

iii.            Section 2.01 of the Credit Agreement is hereby
amended by adding the following new clause (d) at the end thereof:

 

“(d)         Term Loan.  Each Term
Lender, severally not jointly, agrees upon the terms and subject to the
conditions set forth herein, on the First Amendment Effective Date, to make its
pro rata portion of the Term Loan to the Borrowers in a single drawing in an
amount equal to such Term Lender’s Term Loan Commitment.  The aggregate outstanding principal amount of
the Term Loan shall not at any time exceed the lesser of (i) $11,000,000
(as such amount may be reduced pursuant to Section 2.05(g) below)
and (ii) the Term Loan Borrowing Base, as then in effect. 
The Term Loan Commitments shall terminate upon the making of the Term
Loan on the First Amendment Effective Date. 
Any portion of the Term Loan that is repaid may not be reborrowed.  The Term Loan by the Term Lenders shall be
made as either a Prime Rate Loan or a LIBO Rate Loan as the Lead Borrower may
request subject to and in accordance with Section 2.02.

 

iv.            Sections 2.02 (a) and 2.02(b) of the Credit
Agreement are hereby deleted in their entirety and the following substituted in
their stead:

 

(a)           Committed Loans (other than Swing Line Loans) and the
outstanding portion of the Term Loan shall be either Prime Rate Loans or LIBO
Rate Loans, as the Lead Borrower may request subject to and in accordance with
this Section 2.02.  All Swing
Line Loans shall be only Prime Rate Loans. 
Subject to the other provisions of this Section 2.02,
Borrowings of more than one Type may be incurred at the same time.

 

(b)           Each Committed Borrowing, the Borrowing of the Term
Loan, each conversion of Committed Loans or of any portion of the Term Loan
from one Type to the other, and each continuation of LIBO Rate Loans shall be
made upon the Lead Borrower’s irrevocable notice to the Administrative Agent,
which may be given by telephone.  Each
such notice must be received by the Administrative Agent not later than 11:00 a.m.
(i) two (2) Business Days prior to the requested date of any
Borrowing of, conversion to, or continuation of, LIBO Rate Loans or of any
conversion of LIBO Rate Loans to Prime Rate Loans, and (ii) on the date of
any Borrowing of Prime Rate Loans.  Each
telephonic notice by the Lead Borrower pursuant to this Section 2.02
must be confirmed promptly by delivery to the Administrative Agent of a written
Committed

 

11

 

Loan Notice or Conversion/Continuation Notice, as the
case may be, appropriately completed and signed by a Responsible Officer of the
Lead Borrower.  Each Borrowing of,
conversion to, or continuation of, LIBO Rate Loans shall be in a principal
amount of $1,000,000 or a whole multiple of $100,000 in excess thereof.  Except as provided in Sections 2.03(c) and
2.04(b), each Borrowing of or conversion to Prime Rate Loans shall be in
a principal amount of $250,000 or a whole multiple of $100,000 in excess
thereof.  Each Committed Loan Notice
(whether telephonic or written) shall specify (i) the requested date of
the Borrowing (which shall be a Business Day), (ii) the principal amount
of Committed Loans to be borrowed, (iii) the Type of Committed Loans to be
borrowed, and (iv) if applicable, the duration of the Interest Period with
respect thereto.  Each
Conversion/Continuation Notice (whether telephonic or written) shall specify (i) whether
the Borrowers are requesting a conversion of Committed Loans or a portion of
the Term Loan from one Type to the other or a continuation of LIBO Rate Loans, (ii) the
requested date of the conversion or continuation, as the case may be (which
shall be a Business Day), (iii) the principal amount of Committed Loans or
the portion of the Term Loan to be converted or continued, (iv) the Type
of Committed Loans or the portion of the Term Loan to which existing Committed
Loans or such portion of the Term Loan are to be converted, and (v) if
applicable, the duration of the Interest Period with respect thereto.  If the Lead Borrower fails to specify a Type
of Committed Loan (or Type of the applicable portion of the Term Loan, as the
case may be) in a Committed Loan Notice or if the Lead Borrower fails to give a
timely notice of a conversion or continuation in a Conversion/Continuation
Notice, then the applicable Committed Loans or applicable portion of the Term
Loan shall be made as, or converted to, Prime Rate Loans.  Any such automatic conversion to Prime Rate
Loans shall be effective as of the last day of the Interest Period then in effect
with respect to the applicable LIBO Rate Loans. 
If the Lead Borrower requests a Borrowing of LIBO Rate Loans in any such
Committed Loan Notice or a conversion to, or continuation of, LIBO Rate Loans
in a Conversion/Continuation Notice, but fails to specify an Interest Period,
it will be deemed to have specified an Interest Period of one month.  Notwithstanding anything to the contrary
herein, a Swing Line Loan may not be converted to a LIBO Rate Loan.”

 

v.             Section 2.02(g) of the Credit Agreement is
hereby deleted in its entirety and the following substituted in its stead:

 

“(g)         After giving effect to all Borrowings,
all conversions of Committed Loans and any portion of the Term Loan from one
Type to the other, and all continuations of Committed Loans or any portion of
the Term Loan as the same Type, there shall not be more 

 

12

 

than four (4) Interest Periods in effect with
respect to LIBO Rate Loans.”

 

vi.            Section 2.02(h) of the Credit Agreement is
hereby amended by deleting “Section 2.05(c)” therein and by
substituting “Section 2.05(d)” in its stead.

 

vii.           Section 2.03(a)(i)(x) of the Credit
Agreement is hereby deleted in its entirety and the following substituted in
its stead:

 

“(x) the Revolver Outstandings shall not exceed
the lesser of (A) the Aggregate Commitments and (B) the Revolving
Facility Borrowing Base, and the Total Outstandings shall not exceed the Loan
Cap,”

 

viii.          Section 2.04(a)(i) of the Credit Agreement
is hereby deleted in its entirety and the following substituted in its stead:

 

“(i) the Revolver Outstandings shall not exceed
the lesser of (A) the Aggregate Commitments and (B) the Revolving
Facility Borrowing Base, and the Total Outstandings shall not exceed the Loan
Cap, and”

 

ix.            Section 2.05 of the Credit Agreement is hereby
deleted in its entirety and the following substituted in its stead:

 

“2.05       Prepayments.

 

(a)           The Borrowers may, upon irrevocable
notice from the Lead Borrower to the Administrative Agent, at any time or from
time to time voluntarily prepay Committed Loans in whole or in part, without
premium or penalty; provided  that (i) such notice must be
received by the Administrative Agent not later than 11:00 a.m. (A) two
(2) Business Days prior to any date of prepayment of LIBO Rate Loans and (B) on
the date of prepayment of Prime Rate Loans; (ii) any prepayment of LIBO
Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of
$100,000 in excess thereof; and (iii) any prepayment of Prime Rate Loans
shall be in a principal amount of $250,000 or a whole multiple of $100,000 in
excess thereof or, in each case, if less, the entire principal amount thereof
then outstanding.  Each such notice shall
specify the date and amount of such prepayment and the Type(s) of Loans to
be prepaid and, if LIBO Rate Loans, the Interest Period(s) of such
Loans.  The Administrative Agent will
promptly notify each Lender of its receipt of each such notice, and of the
amount of such Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Lead Borrower,
the Borrowers shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified therein.  Any prepayment of a LIBO Rate Loan shall be 

 

13

 

accompanied by all accrued interest on the amount
prepaid, together with any additional amounts required pursuant to Section 3.05.  Each such prepayment shall be applied to the
Committed Loans of the Lenders in accordance with their respective Applicable
Percentages.

 

(b)           So long as the Payment Conditions have
been satisfied, the Borrowers may, upon irrevocable notice from the Lead
Borrower to the Administrative Agent, at any time or from time to time
voluntarily prepay the Term Loan in whole or in part, without premium or
penalty; provided  that (i) such notice must be received by
the Administrative Agent not later than 11:00 a.m. (A) two (2) Business
Days prior to any date of prepayment of any portion of the Term Loan consisting
of LIBO Rate Loans and (B) on the date of prepayment of any portion of the
Term Loan consisting of Prime Rate Loans; (ii) any prepayment of any
portion of the Term Loan consisting of LIBO Rate Loans shall be in a principal
amount of $1,000,000 or a whole multiple of $100,000 in excess thereof; and (iii) any
prepayment of any portion of the Term Loan consisting of Prime Rate Loans shall
be in a principal amount of $250,000 or a whole multiple of $100,000 in excess
thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and
amount of such prepayment and the Type(s) of Loans to be prepaid and, if
LIBO Rate Loans, the Interest Period(s) of such Loans.  The Administrative Agent will promptly notify
each Term Lender of its receipt of each such notice, and of the amount of such
Term Lender’s pro rata share of such prepayment.  If such notice is given by the Lead Borrower,
the Borrowers shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified therein.  Any prepayment of any portion of the Term
Loan consisting of a LIBO Rate Loan shall be accompanied by all accrued
interest on the amount prepaid, together with any additional amounts required
pursuant to Section 3.05. 
Each such prepayment shall be applied to the portion of the Term Loan
owing to each Term Lender in accordance with its pro rata share of the Term
Loan.  The Term Loan Advance Rate
shall reduce automatically by 0.91% for each $1,000,000 of the Term Loan so
prepaid.  Any such mandatory reduction of
the Term Loan Advance Rate shall become effective immediately upon such
prepayment, and shall accelerate the time for any scheduled reductions of the
Term Loan Advance Rate as set forth in the definition thereof.  Once repaid, no portion of the Term Loan may be
reborrowed.

 

(c)           The Borrowers may, upon irrevocable
notice from the Lead Borrower to the Swing Line Lender (with a copy to the
Administrative Agent), at any time or from time to time, voluntarily prepay Swing
Line Loans in whole or in part without premium or penalty; provided  that
(i) 

 

14

 

such notice must be received by the Swing Line Lender
and the Administrative Agent not later than 1:00 p.m. on the date of the
prepayment, and (ii) any such prepayment shall be in a minimum principal
amount of $100,000.  Each such notice
shall specify the date and amount of such prepayment.  If such notice is given by the Lead Borrower,
the Borrowers shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified therein.

 

(d)           If for any reason the Revolver
Outstandings (determined as of the end of any Business Day) exceed the lesser
of the Aggregate Commitments and the Revolving Facility Borrowing Base, as then
in effect, the Borrowers shall immediately prepay Committed Loans, Swing Line
Loans and L/C Borrowings and/or Cash Collateralize the L/C Obligations (other
than L/C Borrowings) in an aggregate amount equal to such excess; provided,
however, that the Borrowers shall not be required to Cash Collateralize
the L/C Obligations pursuant to this Section 2.05(d) unless,
after the prepayment in full of the Committed Loans and Swing Line Loans, the
Revolver Outstandings exceed the lesser of the Aggregate Commitments and the
Revolving Facility Borrowing Base, as then in effect.

 

(e)           If for any reason the Total Outstandings
(determined as of the end of any Business Day) exceed the Loan Cap, as then in
effect, the Borrowers shall immediately prepay Committed Loans, Swing Line
Loans and L/C Borrowings and/or Cash Collateralize the L/C Obligations (other
than L/C Borrowings) in an aggregate amount equal to such excess; provided,
however, that the Borrowers shall not be required to Cash Collateralize
the L/C Obligations pursuant to this Section 2.05(e) unless,
after the prepayment in full of the Committed Loans and Swing Line Loans, the
Total Outstandings exceed the Loan Cap, as then in effect.

 

(f)            If for any reason, and for so long as,
the aggregate amount of the outstanding Term Loan exceeds the
lesser of (i) $11,000,000 (as such amount may be reduced pursuant to Section 2.05(g) below)
and (ii) the Term Loan Borrowing Base, as then in effect, an Availability Reserve
shall be established under the Revolving Facility Borrowing Base in the amount
of such excess unless the Borrowers elect to prepay such excess to the extent
permitted pursuant to Section 2.05(b) above.

 

(g)           (i) Upon the issuance
of any Senior Notes constituting Permitted Additional Pari Passu Obligations
pursuant to the Indenture in an amount in excess of $50,000,000, the Borrowers
shall prepay the Term Loan by an amount equal to such excess, and the Term Loan
Advance Rate shall reduce automatically by 0.91% for each $1,000,000 of
Permitted 

 

15

 

Additional Pari Passu
Obligations incurred under the Indenture in excess of $50,000,000.  Any such mandatory reduction of the Term Loan
Advance Rate shall become effective immediately upon issuance of such Senior
Notes, and shall accelerate the time for any scheduled reductions of the Term
Loan Advance Rate as set forth in the definition thereof.

 

(ii) 
In addition to the mandatory prepayment provisions set forth in clause (g)(i) above,
the Borrowers shall repay the Term Loan in such amounts as will cause the Term
Loan to be not more than the following amounts for the periods set forth below:

 

	
  First Amendment Effective Date through
  September 30, 2010

  	
   

  	
  $

  	
  11,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  October 1, 2010 through January 28, 2011

  	
   

  	
  $

  	
  8,250,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Thereafter

  	
   

  	
  $

  	
  0

  	
   

  

 

(h)           (i) After the occurrence and during
the continuance of a Cash Dominion Event, the Borrowers shall prepay the Loans
in accordance with the provisions of Section 6.13(c) hereof,
and (ii) after the occurrence and during the continuance of an Event of
Default, the Borrowers shall Cash Collateralize the L/C Obligations in
accordance with the provisions of Section 8.02 hereof.

 

(i)            The Borrowers shall prepay the Loans and,
after the occurrence and during the continuance of an Event of Default, Cash
Collateralize the L/C Obligations in an amount equal to the Net Proceeds (other
than, with respect only to the Notes Priority Collateral, that portion of the
Net Proceeds (if any) that is then required to be paid to the Note Holders
under the Senior Note Documents) received by a Loan Party on account of a
Prepayment Event, irrespective of whether or not a Cash Dominion Event then
exists and is continuing, which Net Proceeds shall be paid over to the
Administrative Agent within two (2) Business Days of receipt (provided that,
after the occurrence and during the continuance of a Cash Dominion Event, the
Borrowers shall pay such Net Proceeds over to the Administrative Agent
immediately upon receipt thereof) and shall be utilized to prepay the Loans in
the order of priority set forth in Section 2.05(k).  The application of such Net Proceeds to the
Loans shall not reduce the Commitments. 
If all Obligations then due are paid, any excess Net Proceeds shall be
remitted to the operating account of the Borrowers maintained with the
Administrative Agent.

 

16

 

(j)            Prepayments made pursuant to Section 2.05(d) and
(unless the Borrower elects to prepay the Term Loan to the extent permitted
pursuant to Section 2.05(b)) Section 2.05(e), first, shall be applied
ratably to the L/C Borrowings and the Swing Line Loans, second, shall be
applied ratably to the outstanding Committed Loans, third, shall be used
to Cash Collateralize the remaining L/C Obligations, and, fourth, the
amount remaining, if any, after the prepayment in full of all L/C Borrowings,
Swing Line Loans and Committed Loans outstanding at such time and the Cash
Collateralization of the remaining L/C Obligations in full may be retained by
the Borrowers for use in the ordinary course of its business.  Upon the drawing of any Letter of Credit that
has been Cash Collateralized, the funds held as Cash Collateral shall be
applied (without any further action by or notice to or from the Borrowers or
any other Loan Party) to reimburse the L/C Issuer or the Lenders, as
applicable.

 

(k)           Prepayments made pursuant to Section 2.05(h) and
(i), first, shall be applied ratably to the L/C Borrowings and the
Swing Line Loans, second, shall be applied ratably to the outstanding
Committed Loans, third, shall be used to Cash Collateralize the
remaining L/C Obligations, fourth, shall be applied ratably to the
outstanding Term Loan, and fifth, the amount remaining, if any, after
the prepayment in full of all L/C Borrowings, Swing Line Loans, Committed Loans
and the Term Loan outstanding at such time and the Cash Collateralization of
the remaining L/C Obligations in full may be retained by the Borrowers for use
in the ordinary course of its business. 
Upon the drawing of any Letter of Credit that has been Cash
Collateralized, the funds held as Cash Collateral shall be applied (without any
further action by or notice to or from the Borrowers or any other Loan Party)
to reimburse the L/C Issuer or the Lenders, as applicable.

 

x.             Section 2.06(a) of the Credit Agreement is
hereby amended by deleting “Total Outstandings” therein and by substituting “Revolver
Outstandings” in its stead.

 

xi.            Section 2.07 of the Credit Agreement is hereby
amended by adding the following clause (c) at the end thereof:

 

“(c)         To the extent not previously paid, the
Borrowers shall repay the outstanding balance of the Term Loan upon the earlier
to occur of (i) the Term Loan Maturity Date and (ii) the Termination
Date.”

 

xii.           Section 2.08(a) of the Credit Agreement is
hereby deleted in its entirety and the following substituted in its stead:

 

17

 

(a)(i)        Subject
to the provisions of Section 2.08(b) below, (x) each LIBO
Rate Loan which is a Committed Loan shall bear interest on the outstanding
principal amount thereof for each Interest Period at a rate per annum equal to
the LIBO Rate for such Interest Period plus the Applicable Margin; (y) each
Prime Rate Loan which is a Committed Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to the Prime Rate plus the Applicable Margin; and (z) each
Swing Line Loan shall bear interest on the outstanding principal amount thereof
from the applicable borrowing date at a rate per annum equal to the Prime Rate plus
the Applicable Margin.

 

(ii)           Subject to the provisions of Section 2.08(b) below,
(x) each portion of the Term Loan which is a LIBO Rate Loan shall bear interest
on the outstanding principal amount thereof for each Interest Period at a rate
per annum equal to the LIBO Rate for such Interest Period plus the Term
Loan Applicable Margin; and (y) each portion of the Term Loan which is a
Prime Rate Loan shall bear interest on the outstanding principal amount thereof
from the applicable borrowing date at a rate per annum equal to the Prime Rate plus
the Term Loan Applicable Margin.

 

xiii.          Section 2.09(a) of the Credit Agreement is
amended by adding “plus the then outstanding principal balance of the Term Loan”
after the words “the Aggregate Commitments” in the first sentence thereof.

 

xiv.          Section 2.14(a) of the Credit Agreement is
hereby amended by adding “but excluding the Term Loan” at the end of the first
parenthetical therein.

 

xv.           A new Section 2.16 is hereby added to the Credit
Agreement as follows:

 

“2.16     First
Amendment.  For the avoidance of
doubt, the First Amendment shall not be deemed to have been effected in
reliance on Section 2.15 hereof.”

 

c.             Amendment to Article V.  Article V
of the Credit Agreement is hereby amended by deleting the second sentence of Section 5.18
in its entirety and by substituting the following in its stead:

 

“Except as set forth on Schedule 5.18, or to
the extent that the Administrative Agent has been notified in accordance with Section 6.03(g) (or
will be notified within the time period permitted by Section 6.03(g)), no
Loan Party or any Subsidiary is a party to or bound by any collective
bargaining agreement.”

 

d.             Amendment to Article VI.  Article VI
of the Credit Agreement is hereby amended as follows:

 

18

 

i.              Section 6.07(a) of the Credit Agreement is
hereby amended by deleting “Section 2.05(f)” therein and by
substituting “Section 2.05(k)” in its stead.

 

ii.             Section 6.07(c) of the Credit Agreement is
hereby amended by deleting “Section 2.05(f)” therein and by
substituting “Section 2.05(k)” in its stead.

 

iii.            Section 6.10 of the Credit Agreement is hereby
amended by adding the following new sentence at the end of clause (b) thereof:

 

“In addition to the rights of the Administrative Agent
as set forth above, the Administrative Agent shall have the right to conduct an
updated appraisal of the Borrowers’ inventory (including, without limitation,
the inventory to be acquired pursuant to the Penn Traffic Acquisition) and an
updated commercial finance examination of the Borrowers, in each case to be
commenced within thirty (30) days after the First Amendment Effective Date and
in each case at the Loan Parties’ expense.”

 

iv.            Section 6.11 of the Credit Agreement is hereby
deleted in its entirety and the following substituted in its stead:

 

“Section 6.11         Use
of Proceeds.  Use the proceeds of the Credit Extensions (a) to
refinance the Indebtedness of the Lead Borrower and its Subsidiaries under the
Existing Credit Agreements, (b) to finance transaction fees and expenses
related hereto and to the Penn Traffic Acquisition, (c) to finance the
acquisition of working capital assets of the Borrowers, including the purchase
of Inventory and Equipment, in each case in the ordinary course of business and
in connection with the Penn Traffic Acquisition, (d) to finance Capital
Expenditures of the Borrowers, and (e) for general corporate purposes of
the Loan Parties, in each case to the extent permitted under applicable Law and
the Loan Documents.”

 

v.             Section 6.13(e) of the Credit Agreement is
hereby amended by deleting “Section 2.05(f)” therein and by
substituting “Section 2.05(k)” in its stead.

 

e.             Amendments to Article VII.  Article VII
of the Credit Agreement is hereby amended as follows:

 

i.              Section 7.06 of the Credit Agreement is hereby
amended by adding “provided that, no such Restricted Payments shall be
permitted under this clause at any time while the Term Loan is outstanding” at
the end of each of clauses (e), (f), (g) and (h) thereof.

 

ii.             Section 7.07 of the Credit Agreement is hereby
deleted in its entirety and the following substituted in its stead:

 

19

 

 

“7.07       Repayments
and Prepayments of Indebtedness. 
Repay, prepay, redeem, purchase, defease or otherwise satisfy prior to
the scheduled maturity thereof in any manner any Indebtedness (other than the
Obligations), or make any payment in violation of any subordination terms of
any Subordinated Indebtedness, except (a) as long as no Default or Event
of Default then exists or would arise therefrom, regularly scheduled
repayments, repurchases, redemptions or defeasances of interest on account of
Permitted Indebtedness, (b) as long as no Default or Event of Default then
exists or would arise therefrom, regularly scheduled repayments, repurchases,
redemptions or defeasances of principal on account of the Bridge Financing
other than from proceeds of Committed Loans, (c) regularly scheduled
repayments, repurchases, redemptions or defeasances of principal on account of
the Bridge Financing from proceeds of Committed Loans as long as the Payment
Conditions are satisfied, (d) mandatory prepayments of principal and interest
on account of the Note Obligations and the Bridge Financing made solely with
proceeds of the Notes Priority Collateral, (e) voluntary prepayments,
repurchases, redemptions or defeasances of principal and interest on account of
Permitted Indebtedness as long as the Payment Conditions are satisfied, (f) Permitted
Refinancings of any such Indebtedness, and (g) refinancing of the Bridge
Financing with Permitted Additional Pari Passu Obligations as set forth in
clause (s) of the definition of Permitted Indebtedness, provided that
any such Permitted Additional Pari Passu Obligations used to refinance the
Bridge Financing shall not have a maturity which is earlier than the Initial
Maturity Date (as defined in the Bridge Financing Loan Agreement).”

 

iii.                                    Section 7.12 of the Credit Agreement
is hereby amended (A) by adding “or the Bridge Financing Loan Documents”
at the end of the parenthetical in clause (a) thereof, (B) by adding “or
the Bridge Financing Loan Documents” after “Senior Notes Documents” in clause (b) thereof,
and by adding the following new sentence at the end thereof:

 

“Notwithstanding the foregoing, the Loan Parties may
amend the Indenture to increase the obligations thereunder by providing for the
incurrence of Permitted Additional Pari Passu Obligations under the Indenture
pursuant to clauses (s) and (t) of the definition of “Permitted
Indebtedness.””

 

iv.                                   Section 7.15 of the Credit Agreement
is hereby deleted in its entirety and the following substituted in its stead:

 

20

 

“7.15       Financial
Covenants.

 

(a)           Consolidated Fixed Charge Coverage
Ratio.  During the continuance of a
Covenant Compliance Event, permit the Consolidated Fixed Charge Coverage Ratio,
calculated as of the occurrence of such Covenant Compliance Event and as of the
last day of each Fiscal Period thereafter based upon the most recent
Measurement Period, to be less than 1.10 to 1.00.

 

(b)           Availability.  At any time while the Term Loan is
outstanding, permit Availability at any time to be less than five (5%) percent
of the Loan Cap.”

 

f.                                         Amendment to Article VIII.  Article VIII
of the Credit Agreement is hereby amended as follows:

 

i.                                          Section 8.01(i) of the Credit
Agreement is hereby amended by adding the following at the end of clause (A) thereto:

 

“plus (3) to the extent assumed by the Lead
Borrower or any of its Subsidiaries in connection with the Penn Traffic
Acquisition, the Target’s aggregate employer contribution obligation for the
year 2011 (but in no event in excess of $3,000,000), with respect to the United
Food and Commercial Workers’ Local One Pension Fund, as set forth in the
current collective bargaining agreements between the Target and the United Food
and Commercial Workers’ District Union Local One,”

 

ii.                                       Section 8.03 of the Credit Agreement
is hereby deleted in its entirety and the following substituted in its stead:

 

“8.03       Application
of Funds.  After the exercise of
remedies provided for in Section 8.02 (or after the Loans have
automatically become immediately due and payable and the L/C Obligations have
automatically been required to be Cash Collateralized as set forth in the
proviso to Section 8.02), any amounts received on account of the
Obligations shall be applied by the Administrative Agent in the following order:

 

First, to payment of that portion of the
Obligations (excluding the Other Liabilities) constituting fees, indemnities,
Credit Party Expenses and other amounts (including fees, charges and
disbursements of counsel to the Administrative Agent and the Collateral Agent
and amounts payable under Article III) payable to the
Administrative Agent and the Collateral Agent, each in its capacity as such;

 

Second, to payment of that portion of the
Obligations (excluding the Other Liabilities) constituting indemnities, Credit
Party Expenses, and other amounts (other than principal, interest and fees)
payable to the Lenders and the L/C Issuer (including fees, charges and
disbursements of counsel to the respective Lenders

 

21

 

and the L/C Issuer and amounts payable under Article III),
ratably among them in proportion to the amounts described in this clause Second
payable to them;

 

Third, to the extent not previously reimbursed
by the Lenders, to payment to the Agents of that portion of the Obligations
constituting principal and accrued and unpaid interest on any Permitted
Overadvances;

 

Fourth, to the extent that Swing Line Loans
have not been refinanced by a Committed Loan, payment to the Swing Line Lender
of that portion of the Obligations constituting accrued and unpaid interest on
the Swing Line Loans;

 

Fifth, to the extent that Swing Line Loans
have not been refinanced by a Committed Loan, to payment to the Swing Line
Lender of that portion of the Obligations constituting unpaid principal of the
Swing Line Loans;

 

Sixth, to payment of that portion of the
Obligations constituting accrued and unpaid interest on the Loans, L/C
Borrowings and other Obligations (other than the Term Loan), and fees
(including Letter of Credit Fees but excluding Early Termination Fees), ratably
among the Lenders and the L/C Issuer in proportion to the respective amounts
described in this clause Sixth payable to them;

 

Seventh, to payment of that portion of the
Obligations constituting unpaid principal of the Loans (other than the Term
Loan) and L/C Borrowings, ratably among the Lenders and the L/C Issuer in
proportion to the respective amounts described in this clause Seventh
held by them;

 

Eighth, to the Administrative Agent for the
account of the L/C Issuer, to Cash Collateralize that portion of L/C
Obligations comprised of the aggregate undrawn amount of Letters of Credit;

 

Ninth, to payment of that portion of the
Obligations constituting accrued and unpaid interest on the Term Loan, ratably
among the Term Lenders in proportion to the respective amounts described in
this clause Ninth payable to them;

 

Tenth, to payment of that portion of the
Obligations constituting unpaid principal of the Term Loan, ratably among the
Term Lenders in proportion to the respective amounts described in this clause Tenth
held by them;

 

Eleventh, to payment of all other Obligations
(including, without limitation, the cash collateralization of unliquidated
indemnification obligations as provided in Section 10.04 and Early
Termination Fees, but excluding any Other Liabilities), ratably among the
Credit Parties in proportion to the respective amounts described in this clause
Eleventh held by them;

 

22

 

Twelfth, to payment of that portion of the
Obligations arising from Cash Management Services, ratably among the Credit
Parties in proportion to the respective amounts described in this clause Twelfth
held by them;

 

Thirteenth, to payment of all other Obligations
arising from Bank Products, ratably among the Credit Parties in proportion to
the respective amounts described in this clause Thirteenth held by them;
and

 

Last, the balance, if any, after all of the
Obligations have been indefeasibly paid in full, to the Loan Parties or as
otherwise required by Law.

 

Subject to Section 2.03(c), amounts used
to Cash Collateralize the aggregate undrawn amount of Letters of Credit
pursuant to clause Eighth above shall be applied to satisfy drawings
under such Letters of Credit as they occur. 
If any amount remains on deposit as Cash Collateral after all Letters of
Credit have either been fully drawn or expired, such remaining amount shall be
applied to the other Obligations, if any, in the order set forth above.

 

g.                                      Amendments to Article X.  Section 10.01(b) of
the Credit Agreement is hereby amended by adding “or the Term Loan Maturity
Date, as applicable” after the words “Maturity Date” therein.

 

4.                                       Amendments to Exhibits.

 

i.                                          Exhibit F to the Credit Agreement (Borrowing Base
Certificate) is hereby deleted in its entirety and Exhibit F
attached hereto substituted in its stead.

 

ii.                                       Exhibit C-1 (Form of Term Note) attached hereto
is hereby annexed as Exhibit C-1 to the Credit Agreement.

 

5.                                       Amendments to Schedules.  Schedule
2.01 to the Credit Agreement (Commitments and Applicable Percentages) is
hereby deleted in its entirety and Schedule 2.01 attached hereto
substituted in its stead.

 

6.                                       Conditions to Effectiveness. 
This Amendment shall not be effective until each of the following
conditions precedent have been fulfilled to the satisfaction of the Agents; provided
that if such conditions precedent have not been fulfilled on or prior to March 15,
2010, the agreement of the Agent and the Lenders to enter into this Amendment
shall be void and of no further force and effect:

 

a.                                       This Amendment shall have been duly
executed and delivered by the Loan Parties and the Lenders, and the
Administrative Agent shall have received a fully executed copy hereof.

 

23

 

b.                                      The Administrative Agent shall have
received the fully executed Bridge Financing Loan Documents and a Joinder to
the Note Security Agreement (as defined in the Intercreditor Agreement), each
in the form of the January 29, 2010 drafts of such agreements, without
giving effect to any amendment, modification or waiver thereof which the
Administrative Agent reasonably determines is materially adverse to the Lenders
(unless the Administrative Agent consents to such amendment, modification or
waiver, which consent shall not be unreasonably withheld or delayed).

 

c.                                       The Administrative Agent shall have
received a certification by the Loan Parties confirming that the incurrence of
Indebtedness pursuant to the Term Loan and the increase in the Aggregate Commitments
is permitted under the Indenture.

 

d.                                      The Administrative Agent shall have
received (i)  legal opinions of counsel to the Loan Parties substantially
in the form attached as Schedule A hereto and (ii) such customary
corporate resolutions, certificates and other corporate documents as the Agents
shall reasonably request, including, without limitation, a certificate from the
chief financial officer of the Lead Borrower certifying that the Loan Parties,
on a consolidated basis after giving effect to the transactions contemplated
hereby, are Solvent.

 

e.                                       The Agents shall have received and be
satisfied with detailed financial projections and business assumptions for the
Loan Parties and their Subsidiaries on (x) a monthly basis for the twelve
month period following the First Amendment Effective Date and (y) on an
annual basis, for each fiscal year thereafter through 2012, including, in each
case, a consolidated income statement, balance sheet, statement of cash flow
and Availability analysis.  The Agents
acknowledge that the business plan dated January 3, 2010, as supplemented
by the business plan dated January 25, 2010, satisfies the requirements of
this clause (e) (provided that any material revisions to such business
plan shall be reasonably acceptable to the Agents, whose consent shall not be
unreasonably withheld or delayed).

 

f.                                         All necessary consents and approvals to
the Penn Traffic Acquisition as set forth in the January 7, 2010 draft of
the Penn Traffic Acquisition Agreement, as amended pursuant to that certain
Amendment to Asset Purchase Agreement dated as of January 29, 2010 and
that certain Assignment Agreement dated as of January 29, 2010 between
Tops Markets, LLC and Tops PT, LLC, without giving effect to any further
amendment, modification or waiver thereof which the Administrative Agent
reasonably determines is materially adverse to the Lenders (unless the
Administrative Agent consents to such further amendment, modification or
waiver, which consent shall not be unreasonably withheld or delayed) (such
draft and amendment, as further amended, modified or waived in accordance
herewith, collectively, the “Specified Draft”) shall have been 

 

24

 

obtained, including,
without limitation, the receipt of all necessary governmental approvals.

 

g.                                      No Material Adverse Effect shall have
occurred with respect to the Loan Parties.

 

h.                                      The condition precedent set forth in Section 7.2(h) (“Material
Adverse Changes”) of the Specified Draft shall have been fulfilled.

 

i.                                          The consummation of the Penn Traffic
Acquisition shall have occurred on the terms set forth in the Specified Draft.

 

j.                                          The bankruptcy court in the Chapter 11
case of the Target shall have entered an order authorizing the sale of the
assets of the Target to the Borrowers in accordance with the terms of the
Specified Draft, which order shall be on terms and conditions reasonably
satisfactory to the Administrative Agent, and such order shall not have been
stayed pending appeal.

 

k.                                       The Loan Parties shall have paid the fees
set forth in that certain Fee Letter dated as of January 7, 2010 by and
between the Lead Borrower, Banc of America Securities LLC and the
Administrative Agent.

 

l.                                          Availability on the First Amendment
Effective Date, after giving effect to all Credit Extensions made on such date,
shall be greater than or equal to $20,000,000.

 

m.                                    After giving effect to this Amendment and
the transactions contemplated hereby (including, without limitation, the making
of the Term Loan on the First Amendment Effective Date), no Default or Event of
Default shall have occurred and be continuing.

 

7.                                       Binding Effect. 
The terms and provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their heirs, representatives, successors and assigns.

 

8.                                       Expenses.  The Loan
Parties shall reimburse the Agents for all costs, fees and expenses incurred in
connection herewith, including, without limitation, reasonable attorneys’ fees
to the extent invoiced three Business Days prior to the First Amendment
Effective Date.

 

9.                                       Multiple Counterparts.  
This Amendment may be executed in multiple counterparts, each of which
shall constitute an original and together which shall constitute but one and
the same instrument.

 

10.                                 Governing Law. 
This Amendment shall be construed, governed, and enforced pursuant to
the laws of the State of New York.

 

25

 

IN
WITNESS WHEREOF, this Amendment has been duly executed and delivered by each of
the parties hereto as a sealed instrument as of the date first above written.

 

	
   

  	
  TOPS
  MARKETS, LLC, as Lead Borrower and as a Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TOPS
  PT, LLC, as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  TOPS
  MARKETS, LLC, as sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  TOPS
  HOLDING CORPORATION, as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  TOPS
  GIFT CARD COMPANY, LLC, as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

26

 

	
   

  	
  BANK
  OF AMERICA, N.A., as Administrative Agent and as Collateral Agent, and as a
  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Roger Malouf

  
	
   

  	
  Name:

  	
  Roger
  Malouf

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MORGAN
  STANLEY SENIOR FUNDING, INC., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HSBC
  BUSINESS CREDIT (USA) INC., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title: 

  	
   

  

 

27

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