-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RD2rVYDJLZquUcP4qzdSJpwPFY0EBecqeB2IZ1I4ZzLp0YFu7t04jCHpb90dIVzR 8XU3qkSpXyTH0WpCzccKkA== 0000893220-03-001803.txt : 20031105 0000893220-03-001803.hdr.sgml : 20031105 20031105165647 ACCESSION NUMBER: 0000893220-03-001803 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20031105 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BON TON STORES INC CENTRAL INDEX KEY: 0000878079 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 232835229 STATE OF INCORPORATION: PA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-41835 FILM NUMBER: 03980026 BUSINESS ADDRESS: STREET 1: 2801 E MARKET ST CITY: YORK STATE: PA ZIP: 17402-2406 BUSINESS PHONE: 7177577660 MAIL ADDRESS: STREET 1: P O BOX 2821 CITY: YORK STATE: PA ZIP: 17405-2821 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GRUMBACHER M THOMAS CENTRAL INDEX KEY: 0000938690 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 2801 E MARKET STREET CITY: YORK STATE: PA ZIP: 17402 BUSINESS PHONE: 7177577660 MAIL ADDRESS: STREET 1: 2801 E MARKET STREET CITY: YORK STATE: PA ZIP: 17402 SC 13D/A 1 w91230sc13dza.txt AMENDMENT #3 SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------ SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 3) THE BON-TON STORES, INC. --------------------------------------------------------------------- (Name of Issuer) COMMON STOCK ----------------------------------------------------------- (Title of Class of Securities) 09776J 10 1 ------------------------------------------------------------------------- (CUSIP Number) Henry F. Miller, Esquire Wolf, Block, Schorr and Solis-Cohen LLP 1650 Arch Street, 22nd Floor Philadelphia, PA 19103 (215) 977-2000 ---------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 23, 2003 ------------------------------------------------------ (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. (Continued on following pages) (Page 1 of 9 Pages) CUSIP No. 09776J 10 1 13D Page 2 of 9 Pages 1. NAME OF REPORTING PERSON: M. THOMAS GRUMBACHER 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) (b) 3. SEC USE ONLY 4. SOURCE OF FUNDS -- BK 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ] 6. CITIZENSHIP OR PLACE OF ORGANIZATION -- U.S.A. NUMBER OF 7. SOLE VOTING POWER - 5,397,498 SHARES BENEFICIALLY 8. SHARED VOTING POWER - 1,082,464 OWNED BY EACH 9. SOLE DISPOSITIVE POWER - 5,397,498 REPORTING PERSON WITH 10. SHARED DISPOSITIVE POWER - 1,082,464 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON - 6,479,962 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) - 41.4% 14. TYPE OF REPORTING PERSON -- IN -2- AMENDMENT NO. 3 TO STATEMENT ON SCHEDULE 13D This Amendment No. 3 amends the Schedule 13D with respect to the common stock of The Bon-Ton Stores, Inc. beneficially owned by M. Thomas Grumbacher, filed on October 18, 1999, as amended by Amendment No. 1 filed October 29, 1999 and Amendment No. 2 filed on July 16, 2001. ITEM 1. SECURITY AND ISSUER This statement relates to the common stock, $.01 par value (the "Common Stock"), of The Bon-Ton Stores, Inc. (the "Company"), a Pennsylvania corporation with principal executive offices at 2801 E. Market Street, York, Pennsylvania 17402. The Company has one other series of common stock: Class A common stock, $.01 par value (the "Class A Stock"). Each share of Class A Stock is convertible, at the option of its holder, into one share of Common Stock. ITEM 2. IDENTITY AND BACKGROUND (a) Name of person filing: M. Thomas Grumbacher (b) Business address: 2801 E. Market Street, York, Pennsylvania 17402 (c) M. Thomas Grumbacher's present principal occupation is Chief Executive Officer and Chairman of the Board of the Company. (d) M. Thomas Grumbacher has not been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) during the past five years. (e) M. Thomas Grumbacher has not been a party during the past five years to a civil proceeding of a judicial or administrative body of competent jurisdiction or subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Citizenship: U.S.A. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION On October 23, 2003, Mr. Grumbacher obtained a loan in the principal amount of $6,600,000 (the "Loan") from Manufacturers and Traders Trust Company ("M&T Bank"). Mr. Grumbacher used $6,500,000 of the proceeds of the Loan to purchase 476,890 shares of Common Stock on the same date. The purchase price per share for such shares was $13.63 per share, and the purchase was made directly from the Company. ITEM 4. PURPOSE OF TRANSACTION Mr. Grumbacher's acquisition of shares of Common Stock on October 23, 2003 was for investment purposes and to fund, in part, the acquisition by the Company of all of the outstanding shares of common stock of The Elder-Beerman Stores Corp. -3- Mr. Grumbacher intends from time to time to review his ownership position in the Company and may, based on such factors as he deems relevant, seek to acquire additional shares of Common Stock, dispose of shares of Common Stock (whether pursuant to a registered offering or otherwise), or take any of the actions set forth in items (a) through (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) Mr. Grumbacher is the beneficial owner of an aggregate of 6,479,962 shares of Common Stock, which comprises 41.4% of the outstanding shares of Common Stock, as calculated in accordance with Rule 13d-3(d)(1). Specifically, Mr. Grumbacher beneficially owns, and is the record holder of 2,609,387 shares of Common Stock and 2,406,253 shares of Class A Stock. Mr. Grumbacher also beneficially owns 337,308 shares of Common Stock held for his benefit under the Company's Profit Sharing/Retirement Savings Plan (the "401(k) Plan"); the 401(k) Plan is the record holder of such shares. Mr. Grumbacher also beneficially owns 44,550 shares of Common Stock as a result of his ownership of options to purchase 44,550 shares of Common Stock, which options are presently exercisable. Mr. Grumbacher also beneficially owns 185,773 shares of Common Stock in his capacity as one of three directors of a charitable foundation (the "Foundation") which owns 185,773 shares of Common Stock. Mr. Grumbacher may also be deemed a beneficial owner of certain shares held in trust. Mr. Grumbacher's spouse, Nancy T. Grumbacher ("Nancy Grumbacher"), is a trustee of seven trusts: (i) three trusts, each created under an Indenture of Trust of M. Thomas Grumbacher dated March 9, 1989 (the "1989 Trusts"); (ii) three trusts, each created under an Indenture of Trust of M. Thomas Grumbacher dated June 21, 1993 (the "1993 Trusts"); and (iii) one trust created under an Indenture of Trust of M. Thomas Grumbacher dated December 30, 1999 (the "1999 Trust," and collectively with the 1989 Trusts and the 1993 Trusts the "Trusts"). Each of the 1989 Trusts and the 1993 Trusts is created for the benefit of one of Mr. Grumbacher's three adult children. The 1999 Trust is created for the benefit of Mr. Grumbacher's grandchild. The 1989 Trusts own 321,504 shares of Common Stock and 545,237 shares of Class A Stock. The 1993 Trusts own 24,950 shares of Common Stock. The 1999 Trust owns 5,000 shares of Common Stock. As a result of the capacity of Nancy Grumbacher as a trustee of each of the Trusts, Mr. Grumbacher may be deemed to be a beneficial owner of the shares of Common Stock and Class A Stock owned by such Trusts. Mr. Grumbacher hereby disclaims beneficial ownership of the shares of Common Stock and Class A Stock owned by the Trusts. (b) Mr. Grumbacher has sole voting and dispositive power with respect to 2,991,245 shares of Common Stock and 2,406,253 shares of Class A Stock. Mr. Grumbacher shares voting and dispositive power with respect to 185,773 shares of Common Stock held by the Foundation with the other directors of the Foundation. The other directors of the Foundation are Nancy Grumbacher and Henry F. Miller ("Miller"). If deemed a beneficial owner of the shares held by the Trusts, Mr. Grumbacher shares voting power and dispositive power with the respective trustees of each Trust, for each of the shares held by such Trust. The trustees and shares of each of the Trusts are as follows: -4- (i) The trustees of the 1989 Trusts are Nancy Grumbacher, David R. Glyn ("Glyn"), Thomas W. Wolf ("Wolf") and Miller, and these trustees share voting and dispositive power with respect to 321,504 shares of Common Stock and 545,237 shares of Class A Stock; (ii) The trustees of the 1993 Trusts are Nancy Grumbacher, Glyn, Wolf and Miller, and these trustees share voting and dispositive power with respect to 24,950 shares of Common Stock; and (iii) The trustees of the 1999 Trust are Nancy Grumbacher, Glyn, Wolf and Beth G. Elser ("Elser"), and these trustees share voting and dispositive power with respect to 5,000 shares of Common Stock. The identity and background for each of the above-named persons with whom Mr. Grumbacher shares voting and dispositive power as to any shares is as follows: Nancy T. Grumbacher: -Residence Address: 460 Country Club Road, York, Pennsylvania 17403. -Nancy Grumbacher is presently not employed. -Nancy Grumbacher has not been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) during the past five years. -Nancy Grumbacher has not been a party during the past five years to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which she was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. -Citizenship: U.S.A David R. Glyn -Business Address: Wolf, Block, Schorr and Solis-Cohen LLP, 1650 Arch Street, 22nd Floor, Philadelphia, Pennsylvania 19103. -Glyn's present principal occupation is partner in Wolf, Block, Schorr and Solis-Cohen LLP. -Glyn has not been convicted in any criminal proceeding (excluding traffic violations or similar misdeamors) during the past five years. -Glyn has not been a party during the past five years to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he was or is subject to a judgement, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. -Citizenship: U.S.A. -5- Thomas W. Wolf -Business Address: Wolf Organization, Inc., P.O. Box 1267, York, PA 17405 -Wolf's present principal occupation is President of the Wolf Organization, Inc., a building materials manufacturer and distributor. He is also a director of the Company. -Wolf has not been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) during the past five years. -Wolf has not been a party during the past five years to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. -Citizenship: U.S.A. Henry F. Miller -Business Address: Wolf, Block, Schorr and Solis-Cohen LLP, 1650 Arch Street, 22nd Floor, Philadelphia, Pennsylvania 19103. -Miller's present principal occupation is partner in Wolf, Block, Schorr and Solis-Cohen LLP. -Miller has not been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) during the past five years. -Miller has not been a party during the past five years to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. -Citizenship: U.S.A. Beth G. Elser -Residence Address: 5303 Lakeside Avenue, Virginia Beach, VA 23451. -Elser is presently not employed. -Elser has not been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) during the past five years. -Elser has not been a party during the past five years to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which she was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. -Citizenship: U.S.A. -6- (c) The following transactions have been effected in the last 60 days: On October 23, 2003, Mr. Grumbacher purchased 476,890 shares of Common Stock in a private placement at a price of $13.63 per share. (d) The Foundation has the right to receive dividends from, and the proceeds from the sale of, 185,773 shares of Common Stock. Mr. Grumbacher, Nancy Grumbacher and Miller, as the directors of the Foundation, have the power to direct the receipt of dividends from, and the proceeds from the sale of, such shares. The 1989 Trusts have the right to receive dividends from, and the proceeds from the sale of, 321,504 shares of Common Stock and 545,237 shares of Class A Stock. Nancy Grumbacher, Glyn and Miller, as the trustees of the 1989 Trusts, have the power to direct the receipt of dividends from, and the proceeds from the sale of, such shares. The 1993 Trusts have the right to receive dividends from, and the proceeds from the sale of, 24,950 shares of Common Stock. Nancy Grumbacher and Miller, as the trustees of the 1993 Trusts, have the power to direct the receipt of dividends from, and the proceeds from the sale of, such shares. The 1999 Trust has the right to receive dividends from, and the proceeds from the sale of, 5,000 shares of Common Stock. Nancy Grumbacher, Glyn and Elser, as the trustees of the 1999 Trust, have the power to direct the receipt of dividends from, and the proceeds from the sale of such shares (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The Shareholders' Agreement (the "Class A Shareholders Agreement") by and among the Company and the holders of shares of Class A Stock (the "Class A Shareholders") imposes restrictions on the transfer of shares of Class A Stock by the Class A Shareholders, grants Mr. Grumbacher a right of first refusal, in the event that a Class A Shareholder desires to transfer shares of Class A Stock, and a right of first purchase, in the event that a Class A Shareholder desires to transfer, during any three month period, shares of Class A Stock if such shares do not, in the aggregate, exceed one percent (1%) of the issued and outstanding shares of capital stock of the Company, allows the free transfer of shares of Class A Stock to one or more beneficiaries of the Trusts or any other trust established for the benefit of one or more of the beneficiaries of the Trusts and limits the rights of the Class A Shareholders to convert shares of Class A Stock into shares of Common Stock. -7- On October 23, 2003, Mr. Grumbacher entered into a loan agreement (the "Loan Agreement") with M&T Bank with respect to the Loan. The Loan Agreement provides for a maturity date of October 23, 2006 at variable rates of interest based on either (a) 225 basis points above the London Interbank Offered Rate, as described therein, with a one-day interest period, or (b) one percentage point above the prime rate of interest announced by M&T Bank. The Pledge Agreement, dated October 23, 2003, between Mr. Grumbacher and M&T Bank grants a security interest in, and assigns, pledges, and hypothecates to M&T Bank all of Mr. Grumbacher's rights, title and interest in a certain 1,788,997 shares of Common Stock. Also, in connection with Mr. Grumbacher's purchase of the shares described in Item 3, he entered into a Stock Purchase Agreement with the Company, dated October 23, 2003 and a Registration Rights Agreement with the Company, dated October 31, 2003. ITEM 7. MATERIALS TO BE FILED AS EXHIBITS Exhibit 1. Shareholders' Agreement by and among the holders of Class A Stock (incorporated by reference to Exhibit 10.3 to Amendment No. 2 to the Company's Registration Statement on Form S-1, File No. 33-42142). Exhibit 2. Loan Agreement, dated October 23, 2003, by and between M. Thomas Grumbacher, as borrower, and Manufacturer's and Trader's Trust Company, as lender. Exhibit 3. Pledge Agreement, dated October 23, 2003, by and between M. Thomas Grumbacher and Manufacturer's and Trader's Trust Company. Exhibit 4. Stock Purchase Agreement, dated October 23, 2003, by and between The Bon-Ton Stores, Inc. and Tim Grumbacher. Exhibit 5. Registration Rights Agreement, dated October 31, 2003, by and between The Bon-Ton Stores, Inc., and Tim Grumbacher. -8- SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: November 5, 2003 /s/ David R. Glyn -------------------------------------- Name: David R. Glyn Attorney-in-fact -9- EX-2 3 w91230exv2.txt LOAN AGREEMENT DATED OCTOBER 23, 2003 Exhibit 2 [M&T BANK LOGO] LIBOR TERM NOTE PENNSYLVANIA October 23, 2003 $6,600,000.00 BORROWER: M. THOMAS GRUMBACHER, an [X] individual [ ] partnership [ ] corporation [ ] trust ____________________ organized under the laws of _________________ Address of residence: c/o Bon Ton Stores, Inc., 2801 East Market Street, York, Pennsylvania 17405. BANK: MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation with banking offices at One M&T Plaza, Buffalo, New York 14240. Attention: Office of General Counsel 1. DEFINITIONS. As used in this Note, each capitalized term shall have the meaning specified in the Note or as it appears in initial capitalization. Additionally, the following terms shall have the indicated meanings: a. "APPLICABLE RATE" shall mean either the LIBOR Rate or the Base Rate, as the case may be. b. "ADJUSTMENT DATE", when applicable, shall mean: (i) If the Interest Period duration selected below is "one day": the first day of the applicable Interest Period (or, if such date is not a Business Day, the immediately preceding Business Day). (ii) If the Interest Period duration selected below is other than "one day": two (2) Business Days before the first day of the applicable Interest Period (each of which shall have a duration as selected below; see LIBOR Rate definition). c. "BASE RATE" shall mean one (1) percentage point above the rate of interest announced by the Bank as its prime rate of interest. d. "BUSINESS DAY" shall mean any day of the year on which banking institutions in New York, New York are not authorized or required by law or other governmental action to close and, to the extent the LIBOR Rate is applicable, on which dealings are carried on in the London interbank market. e. "CONTINUATION DATE" shall mean the last day of each Interest Period. f. "INTEREST PERIOD" shall mean, as to the LIBOR Rate, the period commencing on the date of this Note or Continuation Date (as the case may be) and ending on the date that shall be: (i) If the Interest Period duration selected below is "one day": the following day; provided, however, that if an Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day. (ii) If the Interest Period duration selected below is other than "one day": the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) of the calendar month that is one (1), two (2), three (3) or six (6) months thereafter (as selected below); provided, however, that if an Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the immediately preceding Business Day. g. "LIBOR" shall mean the rate obtained by dividing (i) the one-day, one-month, two-month, three-month or six-month interest period London Interbank Offered Rate (as selected below), fixed by the British Bankers Association for United States dollar deposits in the London Interbank Eurodollar Market at approximately 11:00 a.m. London, England time (or as soon thereafter as practicable) as determined by the Bank from any broker, quoting service or commonly available source utilized by the Bank by (ii) a percentage equal to 100% minus the stated maximum rate of all reserves required to be maintained against "Eurocurrency Liabilities" as specified in Regulation D (or against any other category of liabilities which includes deposits by reference to which the interest rate on LIBOR Rate loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States' office of a bank to United States residents) on such date to any member bank of the Federal Reserve System. h. "LIBOR RATE" shall mean 225 basis points above LIBOR with an Interest Period duration of: [X] one day [ ] one month [ ] two months [ ] three months [ ] six months. (Select applicable duration for each Interest Period. If no selection is made, the one-day Interest Period duration shall apply). i. "MATURITY DATE" is the Payment Due Date in October 23, 2006. j. "PAYMENT DUE DATE", when applicable, shall mean the same day of the calendar month as the date of this Note (or if there is no numerically corresponding day in a month, on the last day of such month); provided, however, if that day is not a Business Day, the Payment Due Date shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Payment Due Date shall be the immediately preceding Business Day. k. "PRINCIPAL AMOUNT" shall mean Six Million Six Hundred Thousand Dollars ($6,600,000.00). (C) Manufacturers and Traders Trust Company, 2003 1 2. PAYMENT OF PRINCIPAL, INTEREST AND EXPENSES. a. PROMISE TO PAY. For value received and intending to be legally bound, Borrower promises to pay to the order of the Bank on the dates set forth below, the Principal Amount, plus interest as agreed below and all fees and costs (including without limitation attorneys' fees and disbursements whether for internal or outside counsel) the Bank incurs in order to collect any amount due under this Note, to negotiate or document a workout or restructuring, or to preserve its rights or realize upon any guaranty or other security for the payment of this Note ("Expenses"). b. INITIAL APPLICABLE RATE. The initial Applicable Rate shall be the LIBOR Rate (based on the Interest Period duration selected above) in effect on the date that is: (i) If the Interest Period duration selected above is "one day": the date of this Note (or, if such date is not a Business Day, the immediately preceding Business Day ). (ii) If the Interest Period duration selected above is other than "one day": two (2) Business Days before the date of this Note. In either case, the initial Interest Period shall start on the date of this Note. c. INTEREST. Interest shall accrue on the outstanding Principal Amount calculated on the basis of a 360-day year for the actual number of days of each year (365 or 366) at the Applicable Rate that on each day shall be: i. IF THE LIBOR RATE IS THE APPLICABLE RATE. Interest shall accrue on the Principal Amount from and including the first day of the Interest Period (with the duration selected above) until, but not including, the last day of such Interest Period or the day the Principal Amount is paid in full (if sooner), at a rate per annum equal to the LIBOR Rate determined and in effect on the applicable Adjustment Date. ii. IF THE BASE RATE IS THE APPLICABLE RATE. Interest shall accrue on the Principal Amount from and including the first date the Base Rate is the Applicable Rate to but not including, the day such Principal Amount is paid in full or the Applicable Rate is converted to the LIBOR Rate, at the rate per annum equal to the Base Rate. Any change in the Base Rate resulting from a change in the Bank's prime rate shall be effective on the date of such change. d. PAYMENT SCHEDULE. (Check applicable box): [ ] Borrower shall pay the entire outstanding Principal Amount on the Maturity Date. In addition, until the outstanding Principal Amount is paid in full, Borrower shall pay all accrued and unpaid interest, in amounts which may vary, as follows: (i) if the LIBOR Rate is the Applicable Rate, on the last day of each Interest Period, (except, however, if the Interest Period duration selected above is "one day", in which case such interest payments shall be made on the Payment Due Date for each month, or as otherwise invoiced by the Bank), (ii) if the Base Rate is the Applicable Rate, on the Payment Due Date for each month, and (iii) at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. [X] Borrower shall pay interest only until October 23, 2004, then principal and interest shall be payable in 8 quarterly payments as follows: (i) if the Interest Period duration is "one day", starting on the first Payment Due Date after the anniversary date of this Note and on each Payment Due Date thereafter, or (ii) if the Interest Period duration is other than "one day", starting on the last day of the Interest Period that commences on the date of this Note and on last day of each Interest Period thereafter; in either case, consisting of 7 equal quarterly installments of principal each in the amount of $300,000.00, plus interest and ONE (1) FINAL INSTALLMENT on the Maturity Date in an amount equal to the outstanding Principal Amount at that time together with all other amounts outstanding hereunder including, without limitation, accrued interest, costs and Expense (the "Final Installment"); provided, however, if the Applicable Rate is converted to the Base Rate, Borrower shall pay the outstanding Principal Amount in consecutive monthly installments commencing on the first Payment Due Date after the date of such conversion and on the same Payment Due Date thereafter until conversion back to the LIBOR Rate (at which time Borrower shall resume the monthly, bi-monthly, quarterly or semi-annual installments in the amount set forth above or as otherwise agreed to by the Bank and Borrower in writing) or the Maturity Date (at which time Borrower shall pay the Final Installment) with each such installment being equal in an amount to fully amortize the outstanding Principal Amount of the Note in full by the Maturity Date or such other date agreed to by the Bank and Borrower in writing. The determination by the Bank of the foregoing amount shall, in the absence of manifest error, be conclusive and binding upon Borrower. In addition, until the outstanding Principal Amount is paid in full, Borrower shall pay all accrued and unpaid interest, in amounts which may vary, as follows: (i) if the LIBOR Rate is the Applicable Rate, on the last day of each Interest Period (except, however, if the Interest Period duration selected above is "one day", in which case such interest payments shall be made on the Payment Due Date for each month, or as otherwise invoiced by the Bank), (ii) if the Base Rate is the Applicable Rate, on the Payment Due Date for each month, and (iii) at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. e. MAXIMUM LEGAL RATE. It is the intent of the Bank and Borrower that in no event shall interest be payable at a rate in excess of the maximum rate permitted by applicable law (the "Maximum Legal Rate"). Solely to the extent necessary to prevent interest under this Note from exceeding the Maximum Legal Rate, any amount that would be treated as excessive under a final judicial interpretation of applicable law shall be deemed to have been a mistake and automatically canceled, and, if received by the Bank, shall be refunded to Borrower. f. DEFAULT RATE. If an Event of Default (defined below) occurs, the interest rate on the unpaid Principal Amount shall immediately be automatically increased to 3 percentage points per year above the higher of the LIBOR Rate or the Base Rate, and any judgment entered hereon or otherwise in connection with any suit to collect amounts due hereunder shall bear interest at such default rate. (C) Manufacturers and Traders Trust Company, 2003 2 g. REPAYMENT OF PRINCIPAL AND INTEREST; LATE CHARGE. Payments shall be made in immediately available United States funds at any banking office of the Bank. Interest will continue to accrue until payment is actually received. If payment is not received within five days of its due date, Borrower shall pay a late charge equal to the greatest of (a) $50.00, (b) 5% of the delinquent amount or (c) the Bank's then current late charge as announced from time to time. If this Note is secured by a one- to six-family owner-occupied residence, the late charge shall equal 2% of the delinquent amount and shall be payable if payment is not received within fifteen days of its due date. Payments may be applied in any order in the sole discretion of the Bank but, prior to default, shall be applied first to past due interest, Expenses, late charges and principal, then to current interest, Expenses, late charges and principal, and last to remaining principal. h. PREPAYMENT. i. Subject to the following, during the term of this Note, Borrower shall have the option of paying the Principal Amount to the Bank in advance of the Maturity Date, in whole or in part, at any time and from time to time upon written notice received by the Bank at least three (3) business days prior to making such payment. If (i) Borrower prepays, in whole or in part, any Principal Amount when the Applicable Rate is the LIBOR Rate before the end of the Interest Period, or (ii) there occurs an Event of Default or the Applicable Rate is converted from the LIBOR Rate to the Base Rate before the end of an Interest Period pursuant to Section 3, then Borrower shall be liable for and shall pay the Bank, on demand, the higher of $250.00 or the actual amount of the liabilities, expenses, costs or funding losses that are a direct or indirect result of such prepayment (based on the entire Principal Amount pre-paid), failure to draw, early termination of the Interest Period, revocation, bankruptcy or otherwise. The determination by the Bank of the foregoing amount shall, in the absence of manifest error, be conclusive and binding upon Borrower. The provisions of this paragraph shall not be applicable if the Interest Period duration selected above is "one day". ii. Upon making any prepayment of the Principal Amount in whole, Borrower shall pay to the Bank all interest and Expenses owing pursuant to the Note and remaining unpaid. Each partial prepayment of the Principal Amount shall be applied in inverse order of maturity to the principal included in the installments provided herein. iii. In the event the Maturity Date is accelerated following an Event of Default by Borrower, any tender of payment of the amount necessary to satisfy the entire indebtedness made after such Event of Default shall be expressly deemed a voluntary prepayment. In such a case, to the extent permitted by law, the Bank shall be entitled to the amount necessary to satisfy the entire indebtedness, plus the appropriate prepayment premium calculated in accordance with this Section 2(h). iv. The prepayment premium shall not apply if the Principal Amount of this Note is $50,000 or less and is secured by a mortgage on Pennsylvania real property containing two or less residential units or on which two or fewer residential units are to be built (including obligations on a residential condominium unit). 3. CONTINUATIONS AND CONVERSIONS. a. EXPIRATION OF INTEREST PERIOD. Subject to Section 3(b), upon the expiration of the first Interest Period and each Interest Period thereafter, on the Continuation Date the LIBOR Rate will be automatically continued with an Interest Period of the same duration as the Interest Period duration initially selected above. b. CONVERSION UPON DEFAULT. Unless the Bank shall otherwise consent in writing, if (i) Borrower has failed to pay when due, in whole or in part, the indebtedness under the Note (whether upon maturity, acceleration or otherwise), or (ii) there exists a condition or event which with the passage of time, the giving of notice or both shall constitute an Event of Default, the Bank, in its sole discretion, may (i) permit the LIBOR Rate to continue until the last day of the applicable Interest Period at which time such the Applicable Rate shall automatically be converted to the Base Rate or (ii) convert the LIBOR Rate to the Base Rate before the end of the applicable Interest Period. Notwithstanding the foregoing, upon the occurrence of an Event of Default in Section 5(ix), the Applicable Rate shall be automatically converted to the Base Rate without further action by the Bank and Borrower shall have no right to have the Applicable Rate converted from the Base Rate to the LIBOR Rate. Nothing herein shall be construed to be a waiver by the Bank to have the Principal Amount accrue interest at the Default Rate or the right of the Bank to the amounts set forth in Section 2(h) of this Note, if any. 4. REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower represents and warrants to and agrees and covenants with the Bank that now and until this Note is paid in full: a. BUSINESS PURPOSE. The Loan proceeds shall be used only for a business purpose and not for any personal, family or household purpose. b. FINANCIAL AND OTHER INFORMATION. For each year until this Note is paid in full, Borrower shall provide to the Bank in form and number, within 120 days after the end of each fiscal year of the Borrower, personal financial statements and tax returns of the Borrower as of the fiscal year end, each in reasonable detail and in such form as reasonably required by the Bank. c. TITLE TO ASSETS; INSURANCE. Borrower has good and marketable title to each of its assets free of security interests and mortgages and other liens except as disclosed in his financial statements or on a schedule attached to this Note or pursuant to the Bank's prior written consent. Borrower will maintain his property in good repair and will maintain and on request provide the Bank with evidence of insurance coverage satisfactory to the Bank including without limitation fire and hazard, liability, worker's compensation and business interruption insurance and flood hazard insurance as required. d. JUDGMENTS AND LITIGATION. There is no pending or threatened claim, audit, investigation, action or other legal proceeding or judgment, order or award of any court, agency or other governmental authority or arbitrator (each an "Action") which involves (C) Manufacturers and Traders Trust Company, 2003 3 Borrower or his assets and might have a material adverse effect upon Borrower or threaten the validity of this Note or any related document or transaction. Borrower will immediately notify the Bank in writing upon acquiring knowledge of any such Action. e. NOTICE OF CHANGE OF ADDRESS AND OF DEFAULT. Borrower will immediately notify the Bank in writing (i) of any change in its address or of the location of any collateral securing this Note, (ii) of the occurrence of any Event of Default defined below, and (iii) of any material adverse change in Borrower's ability to repay this Note. 5. EVENTS OF DEFAULT; ACCELERATION. The following constitute an event of default ("Event of Default"): (i) failure by Borrower to make any payment when due (whether at the stated maturity, by acceleration or otherwise) of the amounts due under this Note, or any part thereof, or there occurs any event or condition which after notice, lapse of time or both will permit such acceleration; (ii) Borrower defaults in the performance of any covenant or other provision with respect to this Note or any other agreement between Borrower and the Bank or any of its affiliates or subsidiaries (collectively, "Affiliates"); (iii) Borrower fails to pay when due (whether at the stated maturity, by acceleration or otherwise) any indebtedness for borrowed money owing to the Bank (other than under this Note), any third party or any Affiliate, the occurrence of any event which could result in acceleration of payment of any such indebtedness or the failure to perform any agreement with any third party; (iv) the death or judicial declaration of incompetency of Borrower, if an individual; (v) failure to pay, withhold or collect any tax as required by law; the service or filing against Borrower or any of its assets of any lien (other than a lien permitted in writing by the Bank), judgment, garnishment, order or award, other than a judgment, order or award for which Borrower is fully insured, if ten (10) days thereafter such judgment, order or awarded is not satisfied, vacated, bonded or stayed pending appeal; (vi) if Borrower becomes insolvent (however such insolvency is evidenced) or is generally not paying its debts as such debts become due; (viii) the making of any general assignment by Borrower for the benefit of creditors; the appointment of a receiver or similar trustee for Borrower or its assets; or the making of any, or sending notice of any intended, bulk sale; (viii) Borrower commences, or has commenced against it, any proceeding or request for relief under any bankruptcy, insolvency or similar laws now or hereafter in effect in the United States of America or any state or territory thereof or any foreign jurisdiction or any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against or winding up of affairs of Borrower; (ix) any representation or warranty made in this Note, any related document, any agreement between Borrower and the Bank or any Affiliate or in any financial statement of Borrower proves to have been misleading in any material respect when made; Borrower omits to state a material fact necessary to make the statements made in this Note, any related document, any agreement between Borrower and the Bank or any Affiliate or any financial statement of Borrower not misleading in light of the circumstances in which they were made; or, if upon the date of execution of this Note, there shall have been any materially adverse change in any of the facts disclosed in any financial statement, representation or warranty that was not disclosed in writing to the Bank at or prior to the time of execution hereof; (x) the occurrence of any event described in sub-paragraph (i) through and including (ix) hereof with respect to any endorser, guarantor or any other party liable for, or whose assets or any interest therein secures, payment of any of the amounts due under this Note ("Guarantor");; (xi) Borrower fails to supply new or additional collateral within ten days of request by the Bank; or (xii) the Bank in good faith deems itself insecure with respect to payment or performance of under this Note. All amounts hereunder shall become immediately due and payable upon the occurrence of Section 5(ix) above, or at the Bank's option, upon the occurrence of any other Event of Default. 6. RIGHT OF SETOFF. The Bank shall have the right to set off against the amounts owing under this Note any property held in a deposit or other account with the Bank or any Affiliate or otherwise owing by the Bank or any Affiliate in any capacity to Borrower or any guarantor or endorser of this Note. Such set-off shall be deemed to have been exercised immediately at the time the Bank or such Affiliate elect to do so. 7. INABILITY TO DETERMINE LIBOR RATES, INCREASED COSTS, ILLEGALITY. a. INCREASED COSTS. If the Bank shall determine that, due to either (a) the introduction of any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the LIBOR) in or in the interpretation of any requirement of law or (b) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to the Bank of agreeing to make or making, funding or maintaining any loans based on LIBOR, then Borrower shall be liable for, and shall from time to time, upon demand therefor by the Bank and pay to the Bank such additional amounts as are sufficient to compensate the Bank for such increased costs. b. INABILITY TO DETERMINE RATES. If the Bank shall determine that for any reason adequate and reasonable means do not exist for ascertaining LIBOR for the Interest Period specified above, the Bank will give notice of such determination to Borrower. Thereafter, the Bank may not maintain the loan hereunder at the LIBOR Rate until the Bank revokes such notice in writing and, until such revocation, the Bank may convert the Applicable Rate from the LIBOR Rate to the Base Rate. c. ILLEGALITY. If the Bank shall determine that the introduction of any law (statutory or common), treaty, rule, regulation, guideline or determination of an arbitrator or of a governmental authority or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other governmental authority has asserted that it is unlawful for the Bank to make loans at based on LIBOR then, on notice thereof by the Bank to Borrower, the Bank may suspend the maintaining of the loan hereunder at the LIBOR Rate until the Bank shall have notified Borrower that the circumstances giving rise to such determination shall no longer exist. If the Bank shall determine that it is unlawful to maintain the loan hereunder based on LIBOR, the Bank may convert the Applicable Rate from the LIBOR Rate to the Base Rate. 8. MISCELLANEOUS. This Note, together with any related loan and security agreements and guaranties, contains the entire agreement between the Bank and Borrower with respect to the Note, and supersedes every course of dealing, other conduct, oral agreement and representation previously made by the Bank. All rights and remedies of the Bank under applicable law and this Note or amendment of any provision of this Note are cumulative and not exclusive. No single, partial or delayed exercise by the Bank of any right or remedy shall preclude the subsequent exercise by the Bank at any time of any right or remedy of the Bank without notice. No waiver or amendment of any provision of this Note shall be effective unless made specifically in writing by the Bank. No course of (C) Manufacturers and Traders Trust Company, 2003 4 dealing or other conduct, no oral agreement or representation made by the Bank, and no usage of trade, shall operate as a waiver of any right or remedy of the Bank. No waiver of any right or remedy of the Bank shall be effective unless made specifically in writing by the Bank. Borrower agrees that in any legal proceeding, a copy of this Note kept in the Bank's course of business may be admitted into evidence as an original. This Note is a binding obligation enforceable against Borrower and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. If a court deems any provision of this Note invalid, the remainder of the Note shall remain in effect. Section headings are for convenience only. Borrower hereby waives protest, presentment and notice of any kind in connection with this Note. Singular number includes plural and neuter gender includes masculine and feminine as appropriate. 9. NOTICES. Any demand or notice hereunder or under any applicable law pertaining hereto shall be in writing and duly given if delivered to Borrower (at its address on the Bank's records) or to the Bank (at the address on page one and separately to the Bank officer responsible for Borrower's relationship with the Bank). Such notice or demand shall be deemed sufficiently given for all purposes when delivered (i) by personal delivery and shall be deemed effective when delivered, or (ii) by mail or courier and shall be deemed effective three (3) business days after deposit in an official depository maintained by the United States Post Office for the collection of mail or one (1) business day after delivery to a nationally recognized overnight courier service (e.g., Federal Express). Notice by e-mail is not valid notice under this or any other agreement between Borrower and the Bank. 10. JOINT AND SEVERAL. If there is more than one Borrower, each of them shall be jointly and severally liable for all amounts which become due under this Note and the term "Borrower" shall include each as well as all of them. 11. GOVERNING LAW; JURISDICTION. This Note has been delivered to and accepted by the Bank and will be deemed to be made in the Commonwealth of Pennsylvania. Except as otherwise provided under federal law, this Note will be interpreted in accordance with the laws of the Commonwealth of Pennsylvania excluding its conflict of laws rules. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE COMMONWEALTH OF PENNSYLVANIA IN A COUNTY OR JUDICIAL DISTRICT WHERE THE BANK MAINTAINS A BRANCH AND CONSENTS THAT THE BANK MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT BORROWER'S ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS NOTE WILL PREVENT THE BANK FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST BORROWER INDIVIDUALLY, AGAINST ANY SECURITY OR AGAINST ANY PROPERTY OF BORROWER WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Borrower acknowledges and agrees that the venue provided above is the most convenient forum for both the Bank and Borrower. Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Note. 12. WAIVER OF JURY TRIAL. BORROWER AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY BORROWER AND THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS NOTE OR THE TRANSACTIONS RELATED HERETO. BORROWER REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS JURY TRIAL WAIVER. BORROWER ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS NOTE BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION. 13. POWER TO CONFESS JUDGMENT. BORROWER HEREBY EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD, AFTER THE OCCURRENCE OF ANY EVENT OF DEFAULT HEREUNDER, TO APPEAR FOR BORROWER AND, WITH OR WITHOUT COMPLAINT FILED, CONFESS JUDGMENT, OR A SERIES OF JUDGMENTS, AGAINST BORROWER IN FAVOR OF THE BANK OR ANY HOLDER HEREOF FOR THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE, ALL ACCRUED INTEREST AND ALL OTHER AMOUNTS DUE HEREUNDER, TOGETHER WITH COSTS OF SUIT AND AN ATTORNEY'S COMMISSION OF THE GREATER OF FIVE PERCENT (5%) OF SUCH PRINCIPAL AND INTEREST OR $1,000 ADDED AS A REASONABLE ATTORNEY'S FEE, AND FOR DOING SO THIS NOTE OR A COPY VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. BORROWER HEREBY FOREVER WAIVES AND RELEASES ALL ERRORS IN SAID PROCEEDINGS AND ALL RIGHTS OF APPEAL AND ALL RELIEF FROM ANY AND ALL APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER ENACTED. INTEREST ON ANY SUCH JUDGMENT SHALL ACCRUE AT THE DEFAULT RATE. NO SINGLE EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT, OR A SERIES OF JUDGMENTS, SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE BANK SHALL ELECT UNTIL SUCH TIME AS THE BANK SHALL HAVE RECEIVED PAYMENT IN FULL OF THE DEBT, INTEREST AND COSTS. PREAUTHORIZED TRANSFERS FROM DEPOSIT ACCOUNT. If a deposit account number is provided in the following blank Borrower hereby authorizes the Bank to debit Borrower's deposit account #____________________________with the Bank automatically for any amount which becomes due under this Note. (C) Manufacturers and Traders Trust Company, 2003 5 ACKNOWLEDGMENT. Borrower acknowledges that he has read and understands all the provisions of this Note, including the CONFESSION OF JUDGMENT, GOVERNING LAW, JURISDICTION and WAIVER OF JURY TRIAL, and has been advised by counsel as necessary or appropriate. TAX ID/SS # M. Thomas Grumbacher ------------------------------ M. Thomas Grumbacher Keith E. Plowman - --------------------------------------------- ------------------------------ Signature of Witness Keith E. Plowman - --------------------------------------------- ------------------------------ Typed Name of Witness ACKNOWLEDGMENT COMMONWEALTH OF PENNSYLVANIA ) : SS. COUNTY OF YORK ) On the 23rd day of October, in the year 2003, before me, the undersigned, a Notary Public in and for said Commonwealth, personally appeared M. Thomas Grumbacher, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ------------------------------- Notary Public FOR BANK USE ONLY Authorization Confirmed: ------------------------------------------------------- Product Code: 22660 Disbursement of Funds: Credit A/C # ---------- Off Ck # ----------. Payoff Obligation # ----------- $ ---------- $ ---------- $ ----------- (C) Manufacturers and Traders Trust Company, 2003 6 EX-3 4 w91230exv3.txt PLEDGE AGREEMENT DATED OCTOBER 23, 2003 Exhibit 3 [M&T BANK LOGO] PLEDGE OF SECURITIES PENNSYLVANIA PLEDGOR: M. THOMAS GRUMBACHER An [X] individual [ ] corporation [ ] partnership [ ] _______________________ organized and registered under the laws of the State of ______________________ Organizational Identification Number (if any): _________________ (Note: this number is not the same as the Taxpayer Identification Number.) Principal residence: c/o Bon Ton Stores, Inc., 2801 East Market Street, York, Pennsylvania 17405. BORROWER (IF NOT SAME AS PLEDGOR):______________________________________________ A(n) [ ] individual(s) [ ] corporation [ ] partnership [ ] _____________________ organized under the laws of the State of _______________________ Chief executive office/principal residence: ____________________________________________________ BANK: MANUFACTURERS AND TRADERS TRUST COMPANY (the "Bank"), a New York banking corporation with offices at One M&T Plaza, Buffalo, New York 14240. THIS SECURITY AGREEMENT is granted to the Bank by Pledgor in consideration of and as further security for payment of the Obligations, and for other valuable consideration, the receipt and sufficiency of which is acknowledged. Pledgor, intending to be legally bound, agrees with the Bank as follows: 1. DEFINITIONS. All terms unless otherwise defined in this Agreement shall have the meanings assigned in the Uniform Commercial Code as the same may be in effect in the Commonwealth of Pennsylvania, as amended from time to time ("UCC"). a. "BROKERAGE ACCOUNT" means any securities account or commodity account included in the Collateral at any time together with all credit balances and money credited to the account, all investment property carried in the account, and, except as otherwise agreed by the Bank in writing, all other securities accounts and commodity accounts maintained by Pledgor with the same Institution. b. "COLLATERAL" means collectively, whether now owned or hereafter acquired or existing and wherever located all Pledgor's investment property described on Schedule A, which Pledgor has delivered to the Bank or agrees to deliver (or cause to be delivered or appropriate book-entries made) or otherwise identified on any Institution's books and records as being subject to the Bank's security interest, whether or not described in any schedule delivered to the Bank, together with all Brokerage Accounts and all Income and Proceeds. In addition, the word "Collateral" includes all property of Pledgor (however owned) in the possession of, or subject to the control of, the Bank (or in the possession of, or subject to the control of, a third party subject to the control of the Bank including any Institution), whether now owned or hereafter existing and whether tangible or intangible in character. c. "CONTROL AGREEMENT" means an agreement, in form and substance acceptable to the Bank in its sole discretion, among Pledgor, the Bank and an Institution for the purpose of perfecting the security interest granted to the Bank by Pledgor herein. d. Any of the following events or conditions shall constitute an "EVENT OF DEFAULT": (i) failure by Pledgor to make any payment when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, or any part thereof, or there occurs any event or condition which after notice, lapse of time or both will permit such acceleration; (ii) Pledgor defaults in the performance of any covenant or other provision with respect to this Agreement, the Control Agreement, the Obligations or any other agreement between Pledgor and the Bank or any of its affiliates or subsidiaries (collectively, "Affiliates"); (iii) Pledgor fails to pay when due (whether at the stated maturity, by acceleration or otherwise) any indebtedness for borrowed money owing to any third party, the occurrence of any event which could result in acceleration of payment of any such indebtedness or the failure to perform any agreement with any third party; (iv) the death or judicial declaration of incompetency of Pledgor, if an individual; (v) failure to pay, withhold or collect any tax as required by law; the service or filing against Pledgor or any of its assets of any lien (other than a lien permitted in writing by the Bank), judgment, garnishment, order or award; (vi) if Pledgor becomes insolvent or is generally not paying its debts as such debts become due; (vii) the making of any general assignment by Pledgor for the benefit of creditors; the appointment of a receiver or similar trustee for Pledgor or its assets; or the making of any, or sending notice of any intended, bulk sale; (ix) Pledgor commences, or has commenced against it, any proceeding or request for relief under any bankruptcy, insolvency or similar laws now or hereafter in effect in the United States of America or any state or territory thereof or any foreign jurisdiction or any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against or winding up of affairs of Pledgor; (ix) any representation or warranty made in this Agreement, any related document, any agreement between Pledgor and the Bank or any Affiliate or in any financial statement of Pledgor proves to have been misleading in any material respect when made; Pledgor omits to state a material fact necessary to make the statements made in this Agreement, any related document, any agreement between Pledgor and the Bank or any Affiliate or any financial statement of Pledgor not misleading in light of the circumstances in which they were made; or, if upon the date of execution of this Agreement, there shall have been any materially adverse change in any of the facts disclosed in any financial statement, representation or warranty that was not disclosed in writing to the Bank at or prior to the time of execution hereof; (x) the occurrence of any event described in paragraph 1(d)(i) through and including 1(d)(ix) hereof with respect to Borrower (if Pledgor and Borrower are not the same) or to any endorser, guarantor or any other party liable for, or whose assets or any interest therein secures, payment of any of the Obligations; (xii) the occurrence of any event described in paragraph 1(d)(ii), (iv), (vi), (vii), (viii), (ix) or (xi) with respect to any Institution if the Collateral is, or is in, a Brokerage Account or otherwise held by an Institution; (xii) the Bank in good faith deems itself insecure with respect to payment or performance of the Obligations; or (xv) any Control Agreement is terminated without the consent of the Bank. e. "INCOME AND PROCEEDS" mean all present and future income, proceeds, earnings, increases, and substitutions from or for the Collateral of every kind and nature, whether direct or indirect, including without limitation all payments, interest, profits, distributions, benefits, rights, options, warrants, dividends, stock dividends, stock splits, stock rights, regulatory dividends, distributions, subscriptions, monies, claims for money due and to become due, proceeds of any insurance on the Collateral, shares of stock of different par value or no par value issued in substitution or exchange for shares included in the Collateral (whether voluntary or involuntary, by agreement or by operation of law), proceeds of any sale, transfer, surrender, redemption, exchange or other disposition of the Collateral (whether merger, dissolution or liquidation of the issuer of the Collateral) and all other property Pledgor is entitled to receive on account of such Collateral, including accounts, documents, instruments, chattel paper, investment property, and general intangibles. (C) Manufacturers and Traders Trust Company, 2001 f. "INSTITUTION" means any (i) securities intermediary (ii) broker; (iii) issuer; or (iv) any other entity holding or who has issued any of the Collateral to or on behalf of Pledgor, including, without limitation, any fiduciary. g. "OBLIGATIONS" means collectively, any and all indebtedness and other liabilities or obligations of Pledgor (or if Pledgor is a partnership, any general partner of Pledgor) to the Bank of every kind and character and all extensions, refinancings, renewals, modifications and replacements thereof, including, without limitation, all unpaid accrued interest thereon and all of the costs and expenses payable as hereinafter provided: (i) whether now existing or hereafter incurred; (ii) whether direct, indirect, primary, absolute, secondary, contractual, tortious, liquidated, unliquidated, contingent, secured, unsecured, matured or unmatured, by guarantee or otherwise; (iii) whether such indebtedness or obligations are from time to time reduced and thereafter increased, or entirely extinguished and thereafter reincurred; (iv) whether such indebtedness was originally contracted with the Bank or with another or others; (v) whether or not such indebtedness or obligations are evidenced by a negotiable or non-negotiable instrument or any other writing; (vi) whether such indebtedness is contracted by Pledgor alone or jointly or severally with another or others; and (vii) all indebtedness incurred prior to, during or after any filing by or against Pledgor of any petition or request for liquidation, reorganization, arrangement, adjudication as a bankrupt, relief as a debtor, or other relief under bankruptcy, insolvency, or similar laws now or hereafter in effect in the United States of America or any state or territory thereof or any foreign jurisdiction, notwithstanding Pledgor's legal status as a debtor or a debtor-in-possession or Pledgor's discharge in any such proceeding. Obligations also include, without limitation, all payments recovered from the Bank such as sums claimed as impermissible set-offs, diversion of trust funds or as a preference or fraudulent transfer. Such recovered sums shall be reinstated as Obligations of Pledgor as of the date they arose, but for purposes of any statute limiting action by the Bank under this Agreement or relating to the Obligations, as of the date of recovery from the Bank. As used in this section, if Pledgor and Borrower are not the same person or entity, then any reference to "Pledgor" shall be deemed to include a reference to "Borrower". h. "PLEDGOR" means each of the persons or entities identified above as Pledgor in any capacity, and each legal representative, successor or assign of any thereof. 2. SECURITY INTEREST. a. GRANT OF SECURITY INTEREST. As security for payment and performance of the Obligations, Pledgor grants a security interest in, and assigns, pledges and hypothecates to the Bank all of its rights, title and interest in and to the Collateral, whether now or hereafter acquired or existing and wheresoever located. b. CONTINUING AND UNCONDITIONAL PLEDGE. This Agreement is absolute and unconditional and shall continue, notwithstanding any interim payment in full of the Obligations, until released in writing by the Bank. c. CONTROL AGREEMENT. If any of the Collateral is, or is maintained in, a Brokerage Account or with an Institution, Pledgor agrees that it shall before, or at the same time as, it has executed and delivered this Agreement to the Bank, execute and deliver to the Bank, and cause any Institution at which the Brokerage Account is maintained or any of the Collateral is held to execute and deliver to the Bank, a Control Agreement. If the Institution refuses to execute a Control Agreement that is acceptable to the Bank in its sole discretion, Pledgor shall transfer the Collateral to a Brokerage Account maintained by M&T Securities, Inc. with National Financial Services Corporation or if the Collateral is in certificated form, cause the Collateral to be delivered to the Bank, duly endorsed in blank without restrictions and with all signatures guaranteed with medallion signature guaranty acceptable to the Bank and with all necessary transfer tax stamps affixed, if applicable. If any of the Collateral is held in a Brokerage Account with National Financial Services Corporation through M&T Securities, Inc., Pledgor authorizes and consents to such portion of the Collateral being subject to a Master Control Agreement between the Bank, National Financial Services Corporation, M&T Securities, Inc. and other Affiliates dated as of January 1, 1997, as such agreement may be amended, modified or replaced from time to time. Pledgor acknowledges that such Master Control Agreement provides, among other things, that the Bank has the ability and right to have such portion of the Collateral sold, transferred or otherwise disposed of without further action or consent by Pledgor. d. DELIVERY OF CERTIFICATED AND UNCERTIFICATED SECURITIES NOT IN BROKERAGE ACCOUNT. If the Collateral is not maintained in a Brokerage Account, then contemporaneously with the execution and delivery of this Agreement to the Bank, Pledgor shall: i. Certificated Securities. If certificated securities, deliver such certificated securities to the Bank, duly endorsed in blank without restrictions and with all signatures guaranteed with medallion signature guaranty acceptable to the Bank and with all necessary transfer tax stamps affixed. ii. Uncertificated Securities. If uncertificated securities, either (x) procure the issuance of security certificates to represent such uncertificated securities and endorse and deliver such certificates as required above; (y) cause the issuer thereof to register the Bank as the registered owner of such uncertificated securities; or (z) cause the issuer of the uncertificated securities to enter into a Control Agreement with the Bank and Pledgor. 3. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and warrants to the Bank that now and until this Agreement is terminated: a. ENFORCEABILITY. Pledgor, if an entity, (i) is duly organized, validly existing and in good standing under the law of the jurisdiction in which it was formed; (ii) is duly authorized to do business in each jurisdiction in which failure to be so qualified might have a material adverse effect on its business or assets; and (iii) has the power, authority and approvals necessary to own the Collateral and grant a security interest in the Collateral under this Agreement and execute and deliver this Agreement and each Control Agreement (if applicable). This Agreement and each Control Agreement (if applicable) have been duly executed and delivered by Pledgor, constitute valid and legally binding obligations of Pledgor and are enforceable in accordance with their respective terms against Pledgor. b. NO CONFLICTS. The execution, delivery and performance by Pledgor of this Agreement and each Control Agreement (if applicable), the grant of the security interest in the Collateral hereunder and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate any statute, regulation or other law applicable to Pledgor; (ii) violate any judgment, order or award of any court, agency or other governmental authority or of any arbitrator applicable to Pledgor; (iii) if an entity, violate Pledgor's certificate of incorporation, by-laws, partnership agreement, operating agreement or other applicable governing documents; (iv) constitute a default under any agreement binding on Pledgor or result in a lien or encumbrance on any assets of Pledgor; or (v) violate any restriction on the transfer of any of the Collateral. c. NO CONSENTS. No consent, approval, license, permit or other authorization of any third-party (other than an Institution) or any governmental body or office is required for the valid and lawful execution and delivery of this Agreement and each Control Agreement, the creation and perfection of the Bank's security interest in the Collateral or the valid and lawful exercise by the Bank of the remedies available to it under this Agreement, any Control (C) Manufacturers and Traders Trust Company, 2001 Agreement or applicable law or of the voting and other rights granted to the Bank in this Agreement or any Control Agreement except as may be required for the offer of sale of those items of the Collateral that are securities under applicable law. d. SOLE OWNER; NO OTHER LIEN. Pledgor is sole record and beneficial owner of the Collateral free and clear of all liens, security interests, pledges, encumbrances and adverse claims (other than those created under this Agreement), has the unrestricted right to grant the security interest granted under this Agreement and has granted to the Bank a valid security interest in the Collateral free of all liens, encumbrances and adverse claims. There are no restrictions applicable to the transfer of any of the Collateral, unless fully and accurately described in an exhibit to this Agreement. The Collateral is held or registered in Pledgor's legal name. e. BROKERAGE ACCOUNT. If any of the Collateral is, or is maintained in, a Brokerage Account, such Brokerage Account is a valid and legally binding obligation of the Institution with which such Brokerage Account is maintained, the securities entitlements credited thereto are valid and genuine and are enforceable in accordance with their terms and Pledgor has provided the Bank with a complete and accurate statement of the financial assets and money credited to such Brokerage Account as of the date hereof. f. CERTIFICATES GENUINE. If any of the Collateral is certificated securities, each certificate or other document evidencing such portion of the Collateral is genuine, has been duly authorized and validly issued by each of the respective Issuers, is in all respects what it purports to be and is enforceable in accordance with its terms. g. JUDGMENTS AND LITIGATION. There is no pending or threatened claim, audit, investigation, action or other legal proceeding or judgment, order or award of any court, agency or other governmental authority or arbitrator that involves Pledgor or any of the Collateral and might have a material adverse effect upon, or threaten the validity of, this Agreement or any of the Collateral. Pledgor shall immediately notify the Bank upon acquiring knowledge of such an action. h. NAME, ADDRESS AND ORGANIZATIONAL INFORMATION. Pledgor's full legal name and its principal residence or its chief executive office (if a business) address, and its state of registration and organizational identification number (if any) are correctly set forth at the beginning of this Agreement. i. MUTUAL FUNDS HELD FOR 30 DAYS. If any of the Collateral consists of mutual fund shares or any other interest in a mutual fund, such shares or interest shall have been owned by Pledgor for more than thirty (30) days prior to the date of this Agreement. 4. COVENANTS. Pledgor hereby covenants and agrees with the Bank that now and until this Agreement is terminated Pledgor shall: a. DEFEND TITLE. Defend its title to the Collateral and the security interest of the Bank therein against the claims of any person claiming rights in the Collateral against or through Pledgor and maintain and preserve such security and its priority. b. COLLATERAL COVERAGE. Maintain the initial ratio of the principal amount of the Obligations to market value of the Collateral as of the date of this Agreement or, if Schedule A so provides, the minimum market value of the Collateral or the maximum Obligations-to-value ratio as stated on Schedule A; provided, however, the Bank reserves the right to increase any such ratio according to the Bank's determination of the quality of the Collateral. If the outstanding principal amount of the Obligations increases or the market value of the Collateral declines so that the initial ratio or the ratio or value set forth on Schedule A is not being met, Pledgor shall supply to the Bank additional collateral to be covered by this Agreement or prepay the Obligations as appropriate to effect the Obligations-to-value ratio required by the Bank or any applicable statute. Absent manifest error, the Bank's determination of the value or quality of the Collateral shall be deemed conclusive. c. NO TRANSFER. Neither sell, offer to sell nor otherwise transfer or encumber any of the Collateral and if any of the Collateral is, or is in, a Brokerage Account or subject to a Control Agreement, withdraw any money or property from such Brokerage Account or enter into a control agreement with any third-party relating to the foregoing. If any of the Collateral is, or is maintained in, a Brokerage Account, this provision shall not prohibit Pledgor from making trades in such Brokerage Account before the occurrence of an Event of Default provided that (i) the Bank has agreed in a writing (acceptable to the Bank in its sole discretion), signed by a duly authorized officer of the Bank and the Institution, that Pledgor is authorized to engage in such trading; (ii) the proceeds of such trades remain in the Brokerage Account; and (iii) the trades do not have a material adverse effect on the value of all or any part of the Collateral and are not otherwise inconsistent with the provisions of this Agreement or any Control Agreement. d. CONTROL AND CUSTOMER AGREEMENTS. If the Collateral is held in a Brokerage Account, neither attempt to modify or attempt to terminate any Control Agreement or the customer agreement with the Institution under which such Brokerage Account was established. e. LATER DELIVERIES. Pledgor shall promptly deliver or transfer to the Bank (with respect to any of the Collateral in the physical possession of the Bank) or to an Institution (with respect to any of the Collateral held by such Institution) for credit to the Brokerage Account and/or coverage by the Control Agreement with such Institution, such portion of the Collateral (including, without limitation, any certificate or instrument constituting or representing such portion of the Collateral and any replacement or related certificates or instruments, transaction statements, option contracts, warrants or related documents evidencing transactions or proceeds thereof) that Pledgor may obtain possession of after the date hereof, free and clear of all liens, encumbrances, transfer restrictions and adverse claims so that the Bank has a first priority interest in such portion of the Collateral. All such certificates, instruments and the like shall be duly endorsed in blank without restriction and with all signatures guaranteed with a medallion signature guaranty acceptable to the Bank. Until such delivery or transfer, Pledgor shall hold each such item in trust for the Bank. f. TAXES TO BE PAID. Pay when due every tax, assessment, fee and charge and file each report required by any taxing authority for Pledgor or its assets, including without limitation the Collateral. g. NOTICE OF CHANGES. Immediately notify the Bank of (i) any Event of Default; (ii) any event or condition that might have a material adverse effect upon Pledgor (or Borrower, if not same) the Institution, the value of the Collateral or the security interest of the Bank; or (iii) any encumbrance upon or claim asserted against any of the Collateral. Pledgor shall notify the Bank at least ninety (90) days in advance of any change in (i) the name, identity or structure of Pledgor (or Borrower, if not same) or (ii) the location of (A) any of the Collateral, (B) any record concerning any of the Collateral, or (C) Pledgor's (or Borrower's, if not same) state of registration, chief executive office or principal residence. h. MARK-TO-MARKET PROVISIONS. Cause the Bank to receive all information needed to enable the Bank to monitor the market value of the Collateral including, without limitation, if the Collateral is held by an Institution, to cause such Institution to send to the Bank a complete and accurate copy of each statement, confirmation, notice or other communication concerning any Brokerage Account that the Institution sends to Pledgor. All information furnished by Pledgor concerning the Collateral or otherwise in connection with this Agreement is or shall be at the time the same is furnished, accurate, correct and complete in all material respects. (C) Manufacturers and Traders Trust Company, 2001 i. FURTHER ASSURANCES. i. At Pledgor's expense, Pledgor shall do such further acts and execute and deliver to the Bank all such additional conveyances, financing statements, certificates, stock or bond powers, instruments, legal opinions and other assurances as the Bank may from time to time request or require to protect, assure or enforce its interests, rights and remedies under this Agreement. All endorsements must be in blank without restriction and with all signatures guaranteed with a medallion signature guaranty acceptable to the Bank. ii. Pledgor will promptly deliver to the Bank (with respect to any of the Collateral in the physical possession of the Bank) or to an Institution (with respect to any of the Collateral held by such Institution), all endorsements and instruments that could be necessary or convenient to transfer any financial asset in the physical possession of the Bank or an Institution, that are registered in the name of, payable to the order of or specially endorsed to Pledgor, to such Institution or one of their respective nominees. 5. POWER OF ATTORNEY, IRREVOCABLE PROXY. a. Pledgor irrevocably and unconditionally appoints the Bank as its attorney-in-fact with full power to perform in the name of Pledgor each of Pledgor's obligations under this Agreement or any Control Agreement and take any action or execute any instrument that the Bank deems necessary or convenient for such purpose including, without limitation, the power to endorse or execute and deliver all stock or bond powers, pledges, instruments of assignment, certificates, orders for transfer, financing statements, releases and other writings relating to any of the Collateral in the Bank's or Pledgor's name. Such power of attorney is coupled with an interest in favor of the Bank, and shall not be terminated or otherwise affected by the death, bankruptcy, disability or incompetence of Pledgor or by lapse of time. The Bank may receive and open any mail addressed to Pledgor, retain any enclosure constituting or relating to any of the Collateral, and take any other action deemed necessary in the Bank's sole discretion to perfect or protect the Bank's interests pursuant to this Agreement or any Control Agreement. Pledgor acknowledges (both prospectively and retroactively) the Bank also has the right to file in any public office financing statements, and any continuations and amendments thereof, regarding any of the Collateral without the signature of Pledgor. A photocopy or other reproduction of this Agreement or any financing statement relating to any of the Collateral shall be sufficient as a financing statement. Pledgor hereby consents and agrees that the issuers of or obligors of the Collateral or any registrar or transfer agent or trustee for any of the Collateral shall be entitled to accept the provisions hereof as conclusive evidence of the rights of the Bank to effect any transfer pursuant to this Agreement and the authority granted to the Bank herein, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by Pledgor or any other person to any of such issuers, obligors, registrars, transfer agents and trustees. b. Pledgor irrevocably consents and appoints the Bank, whether or not any of the Collateral has been transferred into the name of the Bank or its nominee, as Pledgor's proxy with full power, in the same manner, to the same extent and with the same effect as if Pledgor were to do the same: (i) to attend all meetings of stockholders of the issuer of any financial asset which comprises the Collateral (the "Company") held from the date hereof and to vote such portion of the Collateral at such meeting in such manner as the Bank shall, in its sole discretion, deem appropriate, including, without limitation, in favor of the liquidation of the Company; (ii) to consent, in the sole discretion of the Bank, to any and all action by or with respect to the Company for which the consent of the stockholders of the Company is or may be necessary or appropriate; and (iii) without limitation, to do all things which Pledgor can or could do as a stockholder of the Company, giving to the Bank full power of substitution and revocation. Such proxy shall not be exercisable by the Bank and Pledgor alone shall have the foregoing powers (whether or not any of the Collateral has been transferred into the name of the Bank or its nominee) until the occurrence of an Event of Default; provided, however, Pledgor shall not exercise or, as the case may be, shall not refrain from exercising such rights if, in the Bank's judgment, such action would impair or otherwise have a material adverse effect on the value of the Collateral or would otherwise be inconsistent with this Agreement. The Bank, in its sole discretion, may elect to postpone having such proxy become exercisable notwithstanding the occurrence of any Event of Default which would otherwise cause such proxy to become exercisable. Such proxy shall terminate when this Agreement is no longer in full force and effect as hereinafter provided. Any expenses incurred with the exercise of any of the rights hereunder shall constitute part of the Obligations. c. Pledgor hereby revokes for the duration of this Agreement each power of attorney, authorization and proxy granted by Pledgor to any other person (other than any Institution acting as safekeeping agent, if any) with respect to the Collateral. 6. PLEDGOR'S WAIVERS. Neither Pledgor's obligations under this Agreement nor Bank's interest in the Collateral shall be released, impaired or affected in any way by (i) Pledgor's (or Borrower's, if not same) bankruptcy, reorganization or insolvency under any law or that of any other party, or any action of a trustee in any such proceeding; (ii) failure of any other party to perform its obligations to the Bank; or (iii) any other circumstance that might constitute a legal or equitable defense to Pledgor's (or Borrower's, if not same) obligations under this Agreement, including without limitation: (A) any new agreements or obligations of Pledgor (or Borrower, if not same) with or to the Bank, amendments, changes in rate of interest, extensions of time for payments, modifications, renewals or the existence of or waivers of default as to any existing or future agreements of Pledgor (or Borrower, if not same) or any other party with the Bank; (B) any adjustment, compromise or release of any of the Obligations by the Bank or any other party; the existence or nonexistence or order of any filings, exchanges, releases, impairment or sale of any security for the Obligations or any part thereof or the order in which payments and proceeds of collateral are applied; or acceptance by the Bank of any writing intended by any other party to create an accord and satisfaction with respect to any of the Obligations; (C) any delay in or failure to call for, take, hold, continue, collect, preserve or protect, replace, assign, sell, lease, exchange, convert or otherwise transfer or dispose of, perfect a security interest in, realize upon or enforce any security interest in any security for the Obligations or any part thereof, regardless of its value; (D) any exercise, delay in the exercise or waiver of, any failure to exercise, or any forbearance or other indulgence relating to, any right or remedy of the Bank against Pledgor (or Borrower, if not same) or other person or relating to the Obligations, any part thereof or any security for the Obligations; (E) any fictitiousness, incorrectness, invalidity or unenforceability, for any reason, of any instrument or other agreement, or act of commission or omission by the Bank or Pledgor (or Borrower, if not same); (F) any composition, extension, moratoria or other statutory relief granted to Pledgor (or Borrower, if not same); or (G) any interruption in the business relations between the Bank and Pledgor (or Borrower, if not same), or any dissolution or change in form of organization, name or ownership of Pledgor (or Borrower, if not same) or death or declaration of Pledgor or Borrower (if not same) if an individual as incompetent. Further, Pledgor (or Borrower, if not same) waives without notice each demand, presentment, protest and other act or thing upon which any of Pledgor's (or Borrower's, if not same) obligations or the Bank's rights or remedies pursuant to this Agreement or otherwise would or might be conditioned. (C) Manufacturers and Traders Trust Company, 2001 7. INCOME AND PROCEEDS OF THE COLLATERAL. a. CASH INCOME. Until the occurrence of an Event of Default, Pledgor shall receive all cash income and cash dividends that comprise the Income and Proceeds (except cash income or cash dividends paid or payable in respect of the total or partial liquidation or dissolution of an issuer) paid on the Collateral; provided, however, until actually paid, all rights to such cash income or cash dividends shall remain subject to the Bank's security interest granted hereunder. Any other Income and Proceeds shall be delivered to the Bank immediately upon receipt (but not later than the next business day), in the exact form received and without commingling with other property which may be received by, paid or delivered to Pledgor or for Pledgor's account, whether as an addition to, in discharge of, in substitution of, or in exchange of any of the Collateral. b. BOND COUPONS. If the Collateral consists of bonds with coupons, Pledgor authorizes the Bank to remove all coupons from such bonds when interest is due and send them for collection on Pledgor's behalf. The proceeds of such bonds will be applied as directed by Pledgor in writing. The Bank shall have no responsibility or liability for failure to process such coupons in a timely fashion. If any coupon is returned unpaid, the Bank may either debit any of Pledgor's deposit accounts with the Bank or reverse the loan credit, as appropriate, in the amount of each such coupon previously credited, plus the Bank expenses incurred in the attempted collection. If Pledgor's deposit accounts have insufficient funds to pay any or all such amounts, each such unpaid amount shall be added to the Obligations, and shall be secured by the Collateral. c. CASH INCOME AFTER EVENT OF DEFAULT. Upon the occurrence of an Event of Default, Pledgor shall not demand or receive any cash income or cash dividends with regard to the Collateral, and if Pledgor receives any such cash income or cash dividends, the same shall be held by Pledgor in trust for the Bank in the same medium in which received, shall not be commingled with any assets of Pledgor and shall be delivered to the Bank in the form received, properly endorsed to permit collection, not later than the next business day following the day of its receipt. The Bank may apply the net cash receipts from such income or cash dividends to payment of the Obligations or any part thereof, provided that the Bank shall account for and pay over to Pledgor any such income or interest remaining after payment in full of the Obligations. d. INCREASES AND PROFITS. Subject to 7(a) above, whether or not an Event of Default has occurred, Pledgor authorizes the Bank to receive Income and Proceeds on the Collateral and to hold the same as part of the Collateral and agrees to deliver the Income and Proceeds to the Bank immediately upon receipt (but not later than the next business day), in the exact form received and without commingling with other property which may be received by, paid or delivered to Pledgor or for Pledgor's account, whether as an addition to, in discharge of, in substitution of, or in exchange of any of the Collateral. 8. ADDITIONAL DUTIES OF PLEDGOR AND RIGHTS OF THE BANK. a. COMPLIANCE WITH SECURITIES LAWS. i. Pledgor has not acquired or transferred any of the Collateral in any manner that would result in a violation of any applicable law, including without limitation federal and state securities laws. Upon the occurrence of an Event of Default, (x) Pledgor shall execute and deliver or file each form and other writing (including without limitation any application for exemption or notice of proposed sale pursuant to any securities laws) and take each other action that the Bank deems necessary or desirable to permit the sale or other disposition of any portion of the Collateral with or without registration, (y). Pledgor shall upon the request of the Bank cause the Collateral to be registered and take each other action including, without limitation, compliance with all applicable "blue sky" and other securities laws and regulations to permit transfer or registration of those items of the Collateral in each jurisdiction which the Bank shall select; and (z) Pledgor shall execute and deliver in form and substance satisfactory to the Bank its indemnity of each underwriter of such Security against all of its liabilities, costs and expenses in connection with the transfer, including attorneys' fees and disbursements. ii. Pledgor acknowledges that compliance with the Securities Act of 1933, as amended, the rules and regulations thereunder (collectively, the "Act") may impose limitations on the right of the Bank to sell or otherwise dispose of securities included in the Collateral. For this reason, Pledgor hereby authorizes the Bank to sell any securities included in the Collateral in such manner and to such person as would, in the sole discretion of the Bank, help to ensure the prompt transfer or sale of such securities and shall not require any of such securities to be registered or qualified under any applicable securities law. Without limiting the generality of the foregoing, in any such event the Bank in its sole discretion may (i) proceed to make a private sale notwithstanding that a registration statement for the purpose of registering any of such securities could be or shall have been filed under the Act; (ii) approach and negotiate with a single possible purchaser to effect such sale; (iii) restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment and not with a view to the distribution or sale of any of such securities; or (iv) require that any sale hereunder (including a sale at auction) be conducted subject to restrictions (A) as to the financial sophistication and ability of any person permitted to bid or purchase at sale, (B) as to the content of legends to be placed upon any certificates representing the securities sold in such sale, including restrictions on future transfer thereof, (C) as to the representations required to be made by each person bidding or purchasing at such sale relating to that person's access to financial information about Pledgor or any issuer of any of such securities, such person's intentions as to the holding of any of such securities so sold for investment, for its own account, and not with a view to the distribution thereof, and (D) as to such other matters as the Bank may, in its sole discretion, deem necessary or appropriate in order that such sale (notwithstanding any failure so to register) may be effected in compliance with the UCC and other laws affecting the enforcement of creditors' rights under the Act and all applicable state securities laws. Pledgor understands that a sale under the above circumstances may yield a substantially lower price for such securities than would otherwise be obtainable if the same were registered and sold in the open market, and Pledgor shall not attempt to hold the Bank responsible for sale of any of such securities at an inadequate price even if the Bank accepts the first offer received or if only one potential purchaser appears or bids at any such sale. If the Bank shall sell any securities included in the Collateral at a sale, the Bank shall have the right to rely upon the advice and opinion of any qualified appraiser, investment banker or broker as to the commercially reasonable price obtainable on the sale thereof but shall not be obligated to obtain such advice or opinion. Pledgor acknowledges that, notwithstanding the legal availability of a private sale or a sale subject to restrictions of the character described above, the Bank may, in its sole discretion, elect to seek registration of any securities included in the Collateral under the Act (or any applicable state securities laws). Pledgor hereby assigns to the Bank any registration rights or similar rights Pledgor may have from time to time with respect to any securities included in the Collateral. b. SUBSTITUTION OF COLLATERAL. Prior to an Event of Default, Pledgor may request the Bank (and Bank will not unreasonably deny the request) in writing (i) to liquidate an item of the Collateral held by the Bank and use the Proceeds thereof to purchase substitute items of the Collateral, or (ii) to accept substitute Collateral in the same form, and with the same value, as the Collateral for which it replaces. If the Bank grants such request, the items purchased with the Proceeds shall constitute part of the Collateral without the need for any additional notice or action by the Bank or Pledgor. c. SUBSEQUENT CHANGES AFFECTING COLLATERAL. Pledgor acknowledges that it has made its own arrangements for keeping informed of changes or potential changes affecting the Collateral including, but not limited to, conversions, subscriptions, exchanges, reorganizations, dividends, tender offers, mergers, consolidations, maturity of bonds or other financial assets and shareholder meetings. Pledgor agrees that the Bank has no (C) Manufacturers and Traders Trust Company, 2001 responsibility to inform Pledgor of such matters or to take any action with respect thereto even if any of the Collateral has been registered in the name of the Bank or its agent or nominee. d. TAX REPORTING. All items of income, gain, expense and loss recognized in any Brokerage Account or any Collateral in the possession of the Bank shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of Pledgor. e. RIGHT TO CURE. The Bank has the right, but not the obligation, to perform at Pledgor's expense any of Pledgor's obligations with respect to the Collateral under this Agreement. Further, at its option, the Bank may pay and discharge taxes, liens, securities interest or other encumbrances on or adverse claim against the Collateral and Pledgor agrees to reimburse the Bank for any payment made or any expenses incurred (including attorneys' fees) by the Bank pursuant to the foregoing. 9. DEFAULT. a. REMEDIES UPON DEFAULT. At any time, and from time to time, after the occurrence or existence of any Event of Default the Bank may take one or more of the following remedies: i. ACCELERATION. All of the Obligations then owing by Pledgor (or Borrower, if not same) to the Bank shall become immediately due and payable, at the sole discretion of the Bank and without any notice, demand, presentment or protest of any kind. Nothing in this subsection shall render any portion of the Obligations which is payable on demand to be payable otherwise than on demand or shall in any other way affect any right or remedy of the Bank with respect to the Obligations or the Collateral. ii. SALE OF COLLATERAL. (1) The Bank may, in its sole discretion, transfer and realize upon its interest in any portion of the Collateral by public or private sale or otherwise, without notice to Pledgor including, without limitation, (i) deliver a notice under any Control Agreement to an Institution for the sale or other disposition of the financial assets in a Brokerage Account, (ii) remove any financial asset in a Brokerage Account and register such asset in the Bank's name or the name of the Bank's Institution or nominee or any other nominee; (iii) exchange certificates representing any of the Collateral for certificates of larger or smaller denominations; (iv) collect, including by legal action, any notes, checks or other instruments for the payment of money included in the Collateral and compromise or settle with any obligor of any such instrument. (2) If notice of the time and place of any public sale of any of the Collateral or the time after which any private sale or other intended disposition thereof is required by the UCC, Pledgor acknowledges that five (5) days advance notice shall constitute reasonable notice. The Bank shall not be obligated to make any sale of any of the Collateral regardless of notice of sale having been given. The Bank may adjourn any public or private sale from time to time by announcing at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (3) If, under the UCC, the Bank may purchase any portion of the Collateral, it may in payment of any part of the purchase price thereof, cancel any part of the Obligations. (4) If any portion of the Collateral is sold on credit or for future delivery, it need not be retained by the Bank until the purchase price is paid and the Bank shall incur no liability if the purchaser fails to take up or pay for such portion of the Collateral. In case of any such failure, such portion of the Collateral may be sold again. (5) Pledgor shall execute and deliver to the purchasers of any portion of the Collateral all instruments and other documents necessary or proper to sell, convey and transfer title to such portion of the Collateral and, if approval of any sale of such portion of the Collateral by any governmental body or officer is required, Pledgor shall prepare or cooperate fully in the preparation of and cause to be filed with such governmental body or officer all necessary or proper applications, reports, registration statements and forms and do all other things necessary or proper to expeditiously obtain such approval. iii. SET-OFF. The Bank shall have the right but not the obligation to set off against the Obligations any amount owing by the Bank or any of its Affiliates in any capacity to any Pledgor in any capacity. Such set-off shall be deemed to have been exercised immediately at the time the Bank or such Affiliate elect to do so. iv. TERMINATION OF COMMITMENTS. Any commitment of the Bank to grant any financial accommodation to Pledgor (or Borrower, if not same) shall terminate. b. APPLICATION OF PROCEEDS. Any cash held by the Bank as part of the Collateral and all cash Proceeds of any sale of, collection from or other realization upon any portion of the Collateral may, in the sole discretion of the Bank, be held by the Bank as collateral for, or then or at any time be applied, after payment of the Bank's Costs (defined below), in whole or in part against, the Obligations or any part thereof in such order as the Bank may elect, in its sole discretion. Any surplus of such cash or cash Proceeds held by the Bank and remaining after the Bank's Costs and the Obligations have been indefeasibly paid in full shall be paid over to Pledgor or to whomever may be lawfully entitled to receive such surplus. c. CONSENT TO CHANGE COLLATERAL TO BOOK-ENTRY OR UNCERTIFICATED FORM. Pledgor authorizes the Bank and each Institution to take, at Pledgor's expense, all steps necessary to change to appropriate form each certificated item of the Collateral which is eligible for safekeeping in uncertificated form, to be maintained in a Brokerage Account subject to a Control Agreement (if held with an Institution) or to be held by the Bank (subject to the delivery requirements in Section 2(d) hereof). Pledgor understands that there may be some delay and expense in release of uncertificated items of the Collateral if Pledgor requires its reissue in certificated form and that change to book-entry form for U.S. Treasury securities may not be reversible. d. REGISTERED HOLDER OF COLLATERAL. Pledgor authorizes the Bank to transfer any of the Collateral into its own name or that of its nominee so that the Bank or its nominee may appear on record as the sole owner thereof; provided, however, notwithstanding such a transfer, the Bank shall refrain from exercising its rights under Section 9 until the occurrence of an Event of Default. 10. STANDARD OF CARE. Other than the exercise of reasonable care in the custody of the Collateral in the Bank's physical possession, the Bank shall have no responsibility or duty with respect to any of the Collateral or any matter or proceeding arising out of or relating thereto and shall have no (C) Manufacturers and Traders Trust Company, 2001 liability to Pledgor (or Borrower, if not same) arising from any failure or delay by the Bank. The Bank shall be deemed to have exercised reasonable care in the custody and preservation of any portion of the Collateral which is in its possession if the Bank affords such portion of the Collateral treatment substantially equal to the treatment that the Bank accords its own assets of a similar nature; provided, however, that the Bank shall have no duty to sell or convert any of the Collateral whose market value is declining. In no event shall the Bank be obligated to (a) preserve any right or remedy of Pledgor against any party with respect to any of the Collateral; (b) ascertain any maturity, call, exchange, conversion, redemption, offer, tender or similar matter relating to any of the Collateral or provide notice of any such matter to Pledgor; or (c) provide to Pledgor any communication received by the Bank or its nominee. Pledgor acknowledges that Pledgor is not looking to the Bank to provide it with investment advice. 11. COSTS AND EXPENSES; INDEMNITY. a. BANK COSTS. Pledgor agrees to pay on demand all costs and expenses incurred by the Bank in enforcing this Agreement, in realizing upon or protecting any of the Collateral (including preserving the value of any of the Collateral) and in enforcing and collecting any of the Obligations or any guaranty thereof, including, without limitation, if the Bank retains counsel for advice, suit, appeal, insolvency or other proceedings under the Federal Bankruptcy Code or otherwise, or for any of the above purposes, the actual attorneys' fees incurred by the Bank (collectively "Bank Costs"). Payment of all Bank Costs is secured by the Collateral. Bank Costs shall accrue interest at the highest legal rate from the date of demand until payment is received by the Bank. b. INDEMNITY. Pledgor shall indemnify the Bank and its directors, officers and employees, agents and attorneys against, and hold them harmless from, all liabilities, costs or expenses, including attorneys' fees, incurred by any of them under the corporate or securities laws applicable to holding, registering or selling any of the Collateral, except for liability, costs or expenses arising out of the recklessness or willful misconduct of the Bank. 12. MISCELLANEOUS. a. REMEDIES CUMULATIVE; NON-WAIVER. The Bank shall have all of the rights and remedies of a secured party under the UCC and other applicable law as well as those specified by agreement with Pledgor or Borrower. All rights and remedies of the Bank are cumulative, and no right or remedy shall be exclusive of any other right or remedy. No single, partial or delayed exercise by the Bank of any right or remedy shall preclude full and timely exercise at any time of any right or remedy of the Bank without notice. No course of dealing or other conduct, no oral agreement or representation made by the Bank, and no usage of trade, shall operate as a waiver of any right or remedy of the Bank. No waiver of any right or remedy of the Bank shall be effective unless made specifically in writing by the Bank. b. CONSTRUCTION. This Agreement and any agreement executed in connection herewith contains the entire agreement between the Bank and Pledgor with respect to the Collateral, and supersedes every course of dealing, other conduct, oral agreement and representation previously made by the Bank. Pledgor expressly disclaims any reliance on any oral representation of the Bank with respect to the subject matter of this Agreement or otherwise. No change in this Agreement shall be effective unless made in a writing duly executed by the Bank. This Agreement is a binding obligation enforceable against Pledgor and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. Each provision of this Agreement shall be interpreted as consistent with existing law and shall be deemed amended to the extent necessary to comply with any conflicting law. If a court deems any provision invalid, the remainder of this Agreement shall remain in effect. Pledgor agrees that in any legal proceeding, a copy of this Agreement kept in the Bank's course of business may be admitted into evidence as an original. Unless the context otherwise clearly requires, references to plural includes the singular and references to the singular include the plural and "or" has the inclusive meaning represented by the phrase "and/or". Section headings are for convenience only. Neuter pronouns shall be construed as masculine or feminine, and singular forms as plural, as appropriate. c. GUARANTY OF OBLIGATIONS. Solely to the extent required by applicable law to make the Collateral available for payment of the Obligations, Pledgor guarantees the payment of the Obligations, without set-off, counterclaim or other deduction and without limitation as to amount. d. WAIVER OF SUBROGATION. Pledgor hereby waives any claim, right or remedy which Pledgor may now have or hereafter acquire against Borrower that arises hereunder or from the performance by Pledgor hereunder including, without limitation, any claim, remedy or right of subrogation, reimbursement, exoneration, indemnification, contribution or participation in any claim, right or remedy of the Bank against Borrower or any security which the Bank now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise. e. NOTICES. Unless specified otherwise hereunder, any demand or notice hereunder or under any applicable law pertaining hereto shall be in writing and duly given if delivered to Pledgor (at its address on the Bank's records) or to the Bank (at the address on page one and separately to the Bank officer responsible for Borrower's relationship with the Bank). Such notice or demand shall be deemed sufficiently given for all purposes when delivered (i) by personal delivery and shall be deemed effective when delivered, or (ii) by mail or courier and shall be deemed effective three (3) business days after deposit in an official depository maintained by the United States Post Office for the collection of mail or one (1) business day after delivery to a nationally recognized overnight courier service (e.g., Federal Express). Notice by e-mail is not valid notice under this or any other agreement between Pledgor and the Bank. f. JOINT AND SEVERAL LIABILITY. If there is more than one Pledgor, each of them shall be jointly and severally liable pursuant to this Agreement and the term "Pledgor" shall include each as well as all of them. g. GOVERNING LAW; JURISDICTION. This Agreement has been delivered to and accepted by the Bank and will be deemed to be made in the Commonwealth of Pennsylvania. Except as otherwise provided under federal law, this Agreement will be interpreted in accordance with the laws of the Commonwealth of Pennsylvania excluding its conflict of laws rules. PLEDGOR HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE COMMONWEALTH OF PENNSYLVANIA IN A COUNTY OR JUDICIAL DISTRICT WHERE THE BANK MAINTAINS A BRANCH AND CONSENTS THAT THE BANK MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT PLEDGOR'S ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS AGREEMENT WILL PREVENT THE BANK FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST PLEDGOR INDIVIDUALLY, AGAINST ANY SECURITY OR AGAINST ANY PROPERTY OF PLEDGOR WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Pledgor acknowledges and agrees that the venue provided above is the most convenient forum for both the Bank and Pledgor. Pledgor waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement. h. WAIVER OF JURY TRIAL. PLEDGOR AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY PLEDGOR AND THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH (C) Manufacturers and Traders Trust Company, 2001 THIS AGREEMENT OR THE TRANSACTIONS RELATED HERETO. PLEDGOR REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS JURY TRIAL WAIVER. PLEDGOR ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION. 13. TIN CERTIFICATION. Under penalties of perjury, Pledgor certifies that: (1) the taxpayer number set forth below is Pledgor's correct social security or employer identification number (or I am waiting for a number to be issued to me); and (2) Pledgor is not subject to backup withholding because (a) Pledgor is exempt from backup withholding; (b) Pledgor has not been notified by the Internal Revenue Service ("IRS") that it is subject to backup withholding as a result of a failure to report all interest or dividends; or (c) the IRS has notified Pledgor that it is no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS: PLEDGOR MUST CROSS OUT ITEM (2) IF IT HAS BEEN NOTIFIED BY THE IRS THAT PLEDGOR IS CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDER-REPORTING INTEREST OR DIVIDENDS ON PLEDGOR'S TAX RETURN. (Please check here[ ] only if you are subject to backup withholding.) THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING. Dated: October 23, 2003 SS#/TIN ------------------------- PLEDGOR: Keith E. Plowman M. Thomas Grumbacher - -------------------------------------------- ------------------------------ Witness Signature M. Thomas Grumbacher Keith E. Plowman - -------------------------------------------- Witness Name Printed ACKNOWLEDGMENT COMMONWEALTH OF PENNSYLVANIA ) : SS. COUNTY OF YORK ) On the 23rd day of October in the year 2003, before me, the undersigned, a Notary Public in and for said Commonwealth, personally appeared M. Thomas Grumbacher, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual or the person upon behalf of which the individual acted, executed the instrument. ----------------------------------- Notary Public (C) Manufacturers and Traders Trust Company, 2001 SCHEDULE A TO PLEDGE OF SECURITIES OF M. THOMAS GRUMBACHER ("PLEDGOR") DESCRIPTION OF PLEDGED SECURITIES 1. MAXIMUM OBLIGATION TO VALUE: 40% OR MINIMUM MARKET VALUE: $ _______________ 2. INITIAL MARKET VALUE: $ 25,493,207.25 3. LIST OF COLLATERAL FOR INITIAL PLEDGE: [ ] See attached copy of account statement from Institution [X] See list below or on separate sheet (include: number of shares or face value, issue name, CUSIP number, maturity date) Bon Ton Stores, Inc., 1,788,997 shares with a face value of 17,889.97 in the name of M. Thomas Grumbacher. IF COLLATERAL IS HELD BY AN INSTITUTION, ALSO COMPLETE THE FOLLOWING: 4. INSTITUTION HOLDING COLLATERAL ______________________________________________________ ______________________________________________________ Attention: ____________________________________________ Phone: ________________________________________________ 5. M&T COLLATERAL ACCOUNT NO. (AT INSTITUTION): 6. BROKERAGE ACCOUNT TITLE: M&T Collateral Account for ________________ (Pledgor) 7. STATEMENTS TO: M&T Bank Attention: __________________________ (Loan Officer) _____________________________________ _____________________________________ (C) Manufacturers and Traders Trust Company, 2001 EX-4 5 w91230exv4.txt STOCK PURCHASE AGREEMENT DATED OCTOVER 23, 2003 Exhibit 4 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into as of October 23, 2003 by and between The Bon-Ton Stores, Inc., a Pennsylvania corporation (the "COMPANY"), and Tim Grumbacher ("PURCHASER"). W I T N E S S E T H: WHEREAS, in connection with the acquisition by the Company, through a wholly-owned subsidiary of the Company, of all the issued and outstanding capital stock of the Elder-Beerman Stores Corp. (the "TRANSACTION"), it is necessary and desirable for the Company to raise equity capital through the issuance for cash of shares of the Company's common stock, $0.01 par value per share (the "COMMON STOCK"); and WHEREAS, Purchaser desires to purchase such number of shares of Common Stock from the Company sufficient to satisfy the Company's equity capital requirements in connection with the Transaction. NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement, intending to be legally bound, the parties to this Agreement hereby agree as follows: 1. Purchase and Sale of Stock. Subject to the terms and conditions of this Agreement, Purchaser agrees to purchase from the Company, and the Company agrees to sell and issue to Purchaser, 476,890 shares of Common Stock (the "SHARES") at a purchase price of $13.63 per Share, or $6,500,000 in the aggregate. 2. Closing, Delivery and Payment. The closing of the purchase and sale of the Shares (the "CLOSING") shall take place on the date hereof at the offices of the Company, 2801 East Market Street, York, Pennsylvania 17402, or such other time and place as the Company and Purchaser shall mutually agree. At the Closing, subject to the terms and conditions hereof, the Company shall deliver to Purchaser a certificate or certificates representing the Shares being purchased by such Purchaser, or such other evidence of such issuance and delivery reasonably satisfactory to Purchaser, against delivery to the Company by Purchaser of a wire transfer of immediately available funds to an account maintained and designated by or for the account of the Company in the amount of the aggregate purchase price therefor. 3. Representations and Warranties of the Company. The Company hereby represents and warrants to Purchaser that: (a) Organization, Good Standing, Licensing and Qualification. The Company is a corporation duly organized and subsisting under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to own its properties and to carry on its business as now conducted and as proposed to be conducted. The Company is duly licensed or qualified to transact business and is in good standing in each jurisdiction wherein the character of the property owned or leased, or the nature of the activities conducted, make such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a material adverse effect on its business or properties. (b) Authorization. All corporate actions on the part of the Company, its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement, and the performance of all obligations of the Company hereunder have been taken, and this Agreement constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors rights generally and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. (c) Compliance with Charter Documents. The Company is not in violation of any provision of its Articles of Incorporation or Bylaws (collectively, the "CHARTER DOCUMENTS"). The execution, delivery, and performance of and compliance with this Agreement and the issuance and sale of the Shares pursuant hereto will not be in conflict with or constitute, with or without the passage of time or the giving of notice, a default under any Charter Document. (d) Validity of Stock. The Shares to be purchased and sold pursuant to this Agreement, when issued, sold and delivered in accordance with the terms hereof for the consideration expressed herein, will be duly authorized, validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer contained in applicable state and federal securities laws. (e) Securities Law Compliance. Subject in part to the truth and accuracy of Purchaser's representations set forth in this Agreement, the offer, sale, and issuance of the Shares as contemplated by this Agreement are exempt from the registration requirements of the Securities Act of 1933, as amended (the "ACT"), and from the requirements of any applicable state securities or "blue sky" laws, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemptions. 4. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants that: (a) Authorization. This Agreement constitutes the valid and legally binding obligation of Purchaser, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors rights generally, as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. (b) Investment Representation. Purchaser is aware that the Shares to be purchased hereunder have not been registered under the Act or qualified under any other state securities or "blue sky" laws. Such Shares are being acquired by him for investment purposes only and not for sale or with a view to distribution of all or any part of such Shares. (c) Restricted Securities. Purchaser understands that the Shares being purchased hereunder are characterized as restricted securities under the federal securities laws - 2 - inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and that under such laws and applicable regulations such Shares may be resold without registration under the Act only in certain limited circumstances and that otherwise such Shares must be held indefinitely. In this connection, Purchaser represents that he is familiar with Rule 144 under the Act, as presently in effect, and the conditions that must be met in order for that Rule to be available for resale of restricted securities, and understands the resale limitations imposed by the Act. (d) Accredited Investor. Purchaser is an accredited investor as such term is defined in Rule 501(a) of Regulation D under the Securities Act. 5. Limited Right of Rescission. The parties hereby acknowledge and agree that Purchaser is purchasing the Shares hereunder in support of the Company's ability to complete the Transaction. In the event that as of 5:30 PM New York City time on October 31, 2003, the Company's applicable subsidiaries and the other parties thereto shall not have executed and delivered the Second Amended and Restated Credit Agreement (the "Credit Agreement") among The Bon-Ton Department Stores, Inc. ("BTDS") and The Bon-Ton Stores of Lancaster, Inc. ("BTSL"), as Borrowers, the other Credit Parties signatory thereto, the Lenders signatory thereto and General Electric Capital Corporation ("GECC"), as Administrative Agent and Lender, and GECC Capital Markets Group, Inc., as Syndication Agent, which Credit Agreement contains terms and conditions substantially as provided in that certain commitment letter dated as of August 29, 2003 among the Company, BTDS, BTSL and GECC, then either of the Company or Purchaser, in its respective sole discretion, shall have the right to rescind this transaction effective immediately at such time upon delivery of written notice of an election to rescind at the executive offices of the Company, and, upon delivery of such notice, Purchaser shall deliver the certificate(s) evidencing the Shares (or such other evidence of delivery, together with such documents evidencing transfer, as are reasonably acceptable to the Company) to the Company, and the Company shall immediately deliver to Purchaser by wire transfer of immediately available funds, at an account designated by Purchaser, an amount equal to the aggregate purchase price for the Shares. The parties hereby agree that in the event of such rescission, to the extent legally possible, the issuance and sale of the Shares shall be deemed void ab initio and not to have occurred. 6. Restrictions on the Transfer of Securities. (a) Corporate Securities Law. The Shares may be transferred only in compliance with the provisions of the Act and state securities laws with respect to the transfer of any such securities. Any certificate representing the Shares shall bear the legend substantially in the form set forth below until such time as the conditions of such legend have been met. The Company shall, promptly upon the request of any holder of a certificate bearing the legend set forth below and the surrender of such certificate, issue a new stock certificate in the name of a transferee provided that there has been compliance with the provisions of applicable federal and state securities law. All certificates representing Shares shall be marked with the following legends for so long as such legends are applicable: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS - 3 - AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. THE COMPANY SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS. (b) Additional Legends. The Company may also impose any additional legend required by its Bylaws or any applicable state securities laws and shall be entitled to issue stop transfer notices on its stock books with respect to any Shares, until the conditions set forth in the applicable legends have been met. 7. Miscellaneous. (a) Survival of Warranties. The warranties, representations and covenants of the Company and of Purchaser contained in or made pursuant to this Agreement shall survive the Closing. (b) Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided herein. (c) Governing Law. This Agreement shall be governed by and construed under the laws of the Commonwealth of Pennsylvania, without regard to the conflicts of law provisions thereof. (d) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each party hereto will receive by delivery or facsimile transmission a duplicate original of this Agreement executed by each party, and each party agrees that the delivery of this Agreement by facsimile transmission will be deemed to be an original of the Agreement so transmitted. (e) Amendments and Waivers. Any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Purchaser. (f) Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and thereof, and supercedes all prior agreements and understandings of the parties, oral and written, with respect to such subject matter. - 4 - IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement as of the date first above written. THE BON-TON STORES, INC. By: /s/ James H. Baireuther ------------------------ Name: James H. Baireuther Title: Vice Chairman PURCHASER: /s/ Tim Grumbacher ------------------- Name: Tim Grumbacher - 5 - EX-5 6 w91230exv5.txt REGISTRATION RIGHTS AGREEMENT Exhibit 5 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of October 31, 2003, by and between THE BON-TON STORES, INC., a Pennsylvania corporation (the "COMPANY"), and TIM GRUMBACHER ("GRUMBACHER"). WHEREAS: A. In connection with the Stock Purchase Agreement dated as of October 23, 2003 by and between the Company and Grumbacher (the "Stock Purchase Agreement"), Grumbacher has agreed, upon the terms and subject to the conditions contained therein, to purchase from the Company 476,890 Shares (the "Shares") of the Company's common stock, $.01 par value per share (the "Common Stock"); and B. To induce Grumbacher to execute and deliver the Stock Purchase Agreement and to purchase the Shares, the Company has agreed to provide Grumbacher with certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "Securities Act"), and applicable state securities laws. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound, the Company and Grumbacher hereby agree as follows: 1. REGISTRATION RIGHTS. 1.1 Definitions. For purposes of this Section 1: (a) Registration. The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis, and the declaration or ordering of effectiveness of such registration statement. (b) Registrable Securities. The term "Registrable Securities" means: (i) the Shares, and (ii) any shares of Common Stock issued as a dividend or other distribution with respect to, in exchange for or in replacement of, all such shares of Common Stock described in clause (i) or (ii) of this subsection (b). (c) Registrable Securities Then Outstanding. "Registrable Securities then outstanding" shall mean the number of shares of Common Stock that are Registrable Securities and are then issued and outstanding. (d) Holder. For purposes of this Section 1 and Section 2 hereof, the term "Holder" or "Holders" means (i) Grumbacher or (ii) any assignee of record of such Registrable Securities to whom rights under this Section 1 have been duly assigned in accordance with this Agreement. (e) Form S-3. The term "Form S-3" means such form under the Securities Act as is in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC (as defined below) that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC after the effective date of such registration statement. (f) SEC. The term "SEC" means the United States Securities and Exchange Commission. 1.2 Piggyback Registrations. The Company shall notify all Holders of Registrable Securities in writing at least thirty (30) days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to any registration under Section 1.3 of this Agreement or to any employee benefit plan or a corporate reorganization or business combination transaction) and will afford each such Holder an opportunity to include in such registration statement all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by such Holder shall, within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Securities such Holder wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. (a) Underwriting. If a registration statement under which the Company gives notice under this Section 1.2 is for an underwritten offering, then the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder's Registrable Securities to be included in a registration pursuant to this Section 1.2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Agreement, if the Company or its managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares (including Registrable Securities) from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated, first, to the Company, and second, to each of the Holders requesting inclusion of their Registrable 2 Securities in such registration statement on a pro rata basis based on the total number of Registrable Securities requested by each such Holder to be included in the registration. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. (b) Expenses. All expenses incurred in connection with a registration pursuant to this Section 1.2 (excluding underwriters' and brokers' discounts and commissions), including, without limitation all federal and "blue sky" registration and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company and reasonable fees and disbursements of one (1) counsel for the selling Holder or Holders, selected by the selling Holder or Holders holding a majority of the shares included in the registration by all selling Holders, shall be borne by the Company. 1.3 Form S-3 Registration. In case the Company shall receive from any Holder or Holders of Registrable Securities a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, then the Company will: (a) promptly give written notice of the proposed registration and the Holder's or Holders' request therefor, and any related qualification or compliance, to all other Holders of Registrable Securities; and (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within twenty (20) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 1.3: (i) if Form S-3 is not available for such offering by the Holders; (ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than One Million Dollars ($1,000,000); (iii) if the Company shall furnish to the Holders a certificate signed by the President or Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time; 3 (iv) if the Company has, within the twelve (12) month period preceding the date of such request, already effected one (1) registration on Form S-3 for Holders pursuant to this Section 1.3; or (v) in any jurisdiction in which the Company would be required to (A) qualify as a foreign corporation or as a dealer in securities in such jurisdiction where it would not otherwise be required to qualify but for this Agreement or (B) take any action that would subject it to general service of process in suits or to taxation in such jurisdiction where it is not then so subject. (c) Expenses. Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Securities and other securities so requested to be registered pursuant to this Section 1.3 as soon as practicable after receipt of the request(s) of the Holder(s) for such registration. The Company shall pay all expenses incurred in connection with each registration requested pursuant to this Section 1.3 (excluding underwriters' or brokers' discounts and commissions), including without limitation all filing, registration and qualification, printers' and accounting fees, fees and disbursements of counsel for the Company and reasonable fees and disbursements of one (1) counsel for the selling Holder or Holders selected by the selling Holder or Holders owning a majority of the shares included in the registration owned by all selling Holders. 1.4 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement, the Company shall, as expeditiously as reasonably possible: (a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities being registered thereunder, use its reasonable effects to keep such registration statement effective for up to one hundred twenty (120) days or until the Holders have completed the distribution referred to in such registration statement, whichever occurs first (but in any event for at least any period required under the Securities Act); provided that before filing such registration statement or any amendments thereto, the Company will furnish to the Holders copies of all such documents proposed to be filed; (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement; (c) furnish to the Holders such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such 4 other documents as Holders may reasonably request in order to facilitate the disposition of Registrable Securities owned by them; (d) use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or "blue sky" laws of such states or jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto (i) to qualify to do business in any state or jurisdiction where it would not otherwise be required to qualify but for the requirements of this clause (d), or (ii) to file a general consent to service of process in any such state or jurisdiction; (e) use its reasonable efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the Company's business or operations to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (f) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering; (g) notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (h) notify each Holder of Registrable Securities covered by such registration statement of the underwriters, if any, and confirm in writing: (i) when the registration statement has become effective; (ii) when any post-effective amendment to the registration statement becomes effective; and (iii) of any request by the SEC for any amendment or supplement to the registration statement or prospectus or for additional information; (i) notify each Holder of Registrable Securities if at any time the SEC should institute or threaten to institute any proceedings for the purpose of issuing, or should issue, a stop order suspending the effectiveness of the registration statement. Upon the occurrence of any of the events mentioned in the preceding sentence, the Company will use its reasonable efforts to prevent the issuance of any stop order or to obtain the withdrawal thereof as soon as possible. The Company will advise each Holder of Registrable Securities promptly of any order or communication of any public board or body addressed to the Company suspending or threatening to suspend the qualification of any Registrable Securities for sale in any jurisdiction; (j) furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Agreement, (i) on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this 5 Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) on the date that the registration statement with respect to such securities becomes effective, a "comfort" letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities, and, if such securities are being sold through underwriters, a reaffirmation of such letter on the date that such Registrable Securities are delivered to the underwriters for sale; (k) as soon as practicable after the effective date of the registration statement, and in any event within sixteen (16) months thereafter, have "made generally available to its security holders" (within the meaning of Rule 158 under the Securities Act) an earning statement (which need not be audited) covering a period of at least twelve (12) months beginning after the effective date of the registration statement and otherwise complying with Section 11(a) of the Securities Act; (l) otherwise use all reasonable efforts to comply with all applicable rules and regulations of the SEC; (m) use all reasonable efforts to cause all the Registrable Securities either (i) to be listed on a national securities exchange (if the Registrable Securities are not already so listed) and on each additional national securities exchange on which similar securities issued by the Company are then listed, if the listing of the Registrable Securities is then permitted under the rules of such exchange, or (ii) to secure designation of all the Registrable Securities as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or, failing that, to secure listing on NASDAQ for the Registrable Securities and, without limiting the generality of the foregoing, to arrange for at least one (1) market maker to register as such with respect to Registrable Securities with the National Association of Securities Dealers; (n) make available for inspection by any seller of Registrable Securities, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter, all pertinent financial and other records and pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; and 6 (o) make such representations and warranties to the selling Holders and the underwriters as are customarily made by issuers to underwriters and selling Holders, as the case may be, in primary underwritten public offerings. 1.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Sections 1.2 or 1.3 hereof that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to timely effect the registration of their Registrable Securities. If any registration statement or comparable statement under the Securities Act refers to a Holder or any of its affiliates, by name or otherwise, as the holder of any securities of the Company then, unless counsel to the Company advises the Company that the Securities Act requires that such reference be included in any such statement, each such Holder shall have the right to require the deletion of such reference to itself and its affiliates. 1.6 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.7 Indemnification. In the event any Registrable Securities are included in a registration statement under Sections 1.2 or 1.3 hereof: (a) By the Company. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the trustees, partners, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in a registration statement under this Agreement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents filed under state securities or "blue sky" laws in connection therewith; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any federal or state securities law in connection with the offering covered by such registration statement; 7 and the Company will reimburse each such Holder, trustee, partner, officer or director, underwriter or controlling person for any legal or other expenses incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, trustee, partner, officer, director, underwriter or controlling person of such Holder. (b) By Selling Holders. To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder's partners, directors or officers or any person who controls such Holder within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, partner or director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld); and provided further, that the total amounts payable in indemnity by a Holder under this Section 1.7(b) in respect of any Violation shall not exceed the net proceeds received by such Holder in the registered offering out of which such Violation arises. (c) Notice. Promptly after receipt by an indemnified party under this Section 1.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with 8 the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall to the extent of such prejudice relieve such indemnifying party of any liability to the indemnified party under this Section 1.7, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.7. (d) Contribution. If for any reason the foregoing indemnity is unavailable, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other (taking into consideration, among other things, the fact that the provision of the registration rights and indemnification hereunder is a material inducement to Grumbacher to purchase the Shares) or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, in such proportion as is appropriate to reflect not only the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other (taking into consideration, among other things, the fact that the provision of the registration rights and indemnification hereunder is a material inducement to Grumbacher to purchase the Shares) but also the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by or on behalf of the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything to the contrary in this Section 1.7, no Holder shall be required, pursuant to this Section 1.7, to contribute any amount in excess of the net proceeds received by such indemnifying party from the sale of Common Stock in the offering to which the losses, claims, damages, liabilities or expenses of the indemnified party relate. (e) Survival. The obligations of the Company and Holders under this Section 1.7 shall survive the completion of any offering of Registrable Securities in a registration statement, and otherwise. 1.8 Termination of the Company's Obligations. The Company shall have no obligations pursuant to Sections 1.2 or 1.3 with respect to any Registrable Securities if, in the opinion of counsel to the Company, all such Registrable Securities proposed to be sold by a 9 Holder may be sold without registration under the Securities Act pursuant to Rule 144(k) under the Securities Act. 2. ASSIGNMENT AND AMENDMENT. 2.1 Assignment. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned in whole or in part by a Holder to one or more of such Holder's spouse, lineal ascendants or descendants, brothers or sisters ("Family Members"), or trusts established for the benefit of any such Family Members or, if the Holder is a trust, to the beneficiary thereof provided that such transferee or assignee delivers to the Company a written instrument by which such transferee or assignee agrees to be bound by the obligations imposed on Holders under this Agreement to the same extent as if such transferee or assignee was a party hereto. 2.2 Amendment; Waiver. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Grumbacher. The observance of any provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the party to be charged, provided that Grumbacher (so long as he holds Registrable Securities) may act on behalf of all such Holders of Registrable Securities. Any amendment or waiver effected in accordance with this Section 2.2 shall be binding upon each Holder of Registrable Securities, each future Holder and holder of all such securities, and the Company. 3. LIMITATIONS. The Company shall not, directly or indirectly, enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation unless the proposed surviving corporation shall, prior to such merger, consolidation or reorganization, agree in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to be references to the securities which the Holders would be entitled to receive in exchange for Registrable Securities under any such merger, consolidation or reorganization; provided, however, that the provisions of this Agreement shall not apply in the event of any merger, consolidation or reorganization in which the Company is not the surviving corporation if the Holders of Registrable Securities are entitled to receive in exchange therefore (i) cash, (ii) securities of the acquiring corporation which have been registered under the Securities Act in connection with the merger, consolidation or reorganization, and/or (iii) securities of the acquiring corporation which the acquiring corporation has agreed to register within ninety (90) days of the completion of the transaction for resale to the public pursuant to the Securities Act. 4. GENERAL PROVISIONS. 4.1 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon receipt by the party to be notified or three (3) days after deposit with the United States Post Office, by registered or certified mail, postage prepaid (or by Federal Express or other similar overnight 10 courier service, so long as written acknowledgement of delivery is obtained), and addressed to the party to be notified (a) if to a party other than the Company, at such party's address set forth at the end of this Agreement, or at such other address as such party shall have furnished the Company in writing, or, until any such party so furnishes an address to the Company, then to and at the address of the last holder of the shares covered by this Agreement who has so furnished an address to the Company, or (b) if to the Company, at its principal executive offices. 4.2 Entire Agreement. This Agreement, together with all the exhibits hereto, constitutes and contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties respecting the subject matter hereof. 4.3 Governing Law. This Agreement shall be governed by and construed exclusively in accordance with the internal laws of the Commonwealth of Pennsylvania as applied to agreements among Pennsylvania residents entered into and to be performed entirely within Pennsylvania, whether or not all parties hereto are residents of Pennsylvania, excluding that body of law relating to conflict of laws and choice of law. 4.4 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, then such provision(s) shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms. 4.5 Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement. 4.6 Successors and Assigns. Subject to the provisions of Section 2.1, the provisions of this Agreement shall inure to the benefit of, and shall be binding upon, the successors and permitted assigns of the parties hereto. 4.7 Captions. The captions to sections of this Agreement have been inserted for identification and reference purposes only and shall not be used to construe or interpret this Agreement. 4.8 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 4.9 Costs and Attorneys' Fees. In the event that any action, suit or other proceeding is instituted concerning or arising out of this Agreement or any transaction contemplated hereunder, the prevailing party shall recover all of such party's costs and attorneys' fees incurred in each such action, suit or other proceeding, including any and all appeals or petitions therefrom. 11 4.10 Adjustments for Stock Splits and Certain Other Changes. Wherever in this Agreement there is a reference to a specific number of shares of Common Stock of the Company of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such class or series of stock, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the affect on the outstanding shares of such class or series of stock by such subdivision, combination or stock dividend. 4.11 Aggregation of Stock. All shares held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 12 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. COMPANY: THE BON-TON STORES, INC. By: /s/ Keith Plowman ----------------------------------- Name: Keith Plowman Title: Senior Vice President HOLDER: /s/ Tim Grumbacher --------------------------------------- Tim Grumbacher Address: 2801 E. Market Street York, PA 17402 -----END PRIVACY-ENHANCED MESSAGE-----