Exhibit 10.1




 





 


CREDIT AGREEMENT


 


Dated as of October 6, 2005,


 


as amended and restated as of November 17, 2010,


 


Among


 


THE FINANCIAL INSTITUTIONS PARTY HERETO


 


as the Lenders


 


and


 


CREDIT SUISSE AG


 


as Administrative Agent and Collateral Agent,


 


and


 


NEIMAN MARCUS, INC.,


 


and


 


THE NEIMAN MARCUS GROUP, INC.


 


and


 


The subsidiaries of The Neiman Marcus Group, Inc. from time to
time party hereto


 






 


CREDIT SUISSE SECURITIES (USA) LLC

DEUTSCHE BANK SECURITIES INC.

as Joint Lead Arrangers


 


BANC OF AMERICA SECURITIES LLC

GOLDMAN SACHS CREDIT PARTNERS L.P.

as Co-Arrangers


 


CREDIT SUISSE SECURITIES (USA) LLC

DEUTSCHE BANK SECURITIES INC.

BANC OF AMERICA SECURITIES LLC

GOLDMAN SACHS CREDIT PARTNERS L.P.

as Joint Bookrunners


 


and


 


DEUTSCHE BANK SECURITIES INC.

BANC OF AMERICA SECURITIES LLC

GOLDMAN SACHS CREDIT PARTNERS L.P.

as Co-Syndication Agents




 





 

















 


TABLE
OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  
	
   

  
	
  Definitions

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.  Defined Terms

  	
   

  	
  1

  
	
  SECTION 1.02.  Classification of Loans and Borrowings

  	
   

  	
  38

  
	
  SECTION 1.03.  Terms Generally

  	
   

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  
	
  The Credits

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.  Commitments

  	
   

  	
  38

  
	
  SECTION 2.02.  Loans and Borrowings

  	
   

  	
  38

  
	
  SECTION 2.03.  [Reserved]

  	
   

  	
  39

  
	
  SECTION 2.04.  [Reserved]

  	
   

  	
  39

  
	
  SECTION 2.05.  Type; Interest Elections

  	
   

  	
  39

  
	
  SECTION 2.06.  Termination of Commitments

  	
   

  	
  40

  
	
  SECTION 2.07.  Repayment of Loans; Evidence of Debt

  	
   

  	
  40

  
	
  SECTION 2.08.  Optional Prepayment of Loans

  	
   

  	
  41

  
	
  SECTION 2.09.  Mandatory Prepayment of Loans

  	
   

  	
  41

  
	
  SECTION 2.10.  Fees

  	
   

  	
  42

  
	
  SECTION 2.11.  Interest

  	
   

  	
  42

  
	
  SECTION 2.12.  Alternate Rate of Interest

  	
   

  	
  43

  
	
  SECTION 2.13.  Increased Costs

  	
   

  	
  43

  
	
  SECTION 2.14.  Break Funding Payments

  	
   

  	
  44

  
	
  SECTION 2.15.  Taxes

  	
   

  	
  44

  
	
  SECTION 2.16.  Payments Generally; Allocation of Proceeds;
  Sharing of Set-offs

  	
   

  	
  46

  
	
  SECTION 2.17.  Mitigation Obligations; Replacement of
  Lenders

  	
   

  	
  47

  
	
  SECTION 2.18.  Illegality

  	
   

  	
  48

  
	
  SECTION 2.19.  Change of Control

  	
   

  	
  48

  
	
  SECTION 2.20.  Asset Sale Offer

  	
   

  	
  49

  
	
  SECTION 2.21.  Repricing

  	
   

  	
  52

  
	
  SECTION 2.22.  Loan Modifications

  	
   

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  
	
  Representations and Warranties

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.  Organization; Powers

  	
   

  	
  53

  
	
  SECTION 3.02.  Authorization; Enforceability

  	
   

  	
  53

  
	
  SECTION 3.03.  Governmental Approvals; No Conflicts

  	
   

  	
  53

  



 


ii

















 


	
  SECTION 3.04.  Financial Condition; No Material Adverse
  Change

  	
   

  	
  53

  
	
  SECTION 3.05.  Properties

  	
   

  	
  54

  
	
  SECTION 3.06.  Litigation and Environmental Matters

  	
   

  	
  55

  
	
  SECTION 3.07.  Compliance with Laws and Agreements;
  Licenses and Permits

  	
   

  	
  55

  
	
  SECTION 3.08.  Investment and Holding Company Status

  	
   

  	
  56

  
	
  SECTION 3.09.  Taxes

  	
   

  	
  56

  
	
  SECTION 3.10.  ERISA

  	
   

  	
  56

  
	
  SECTION 3.11.  Disclosure

  	
   

  	
  56

  
	
  SECTION 3.12.  Material Agreements

  	
   

  	
  56

  
	
  SECTION 3.13.  Solvency

  	
   

  	
  57

  
	
  SECTION 3.14.  Insurance

  	
   

  	
  57

  
	
  SECTION 3.15.  Capitalization and Subsidiaries

  	
   

  	
  57

  
	
  SECTION 3.16.  Security Interest in Collateral

  	
   

  	
  57

  
	
  SECTION 3.17.  Labor Disputes

  	
   

  	
  57

  
	
  SECTION 3.18.  Federal Reserve Regulations

  	
   

  	
  58

  
	
  SECTION 3.19.  Transaction Documents

  	
   

  	
  58

  
	
  SECTION 3.20.  Senior Indebtedness

  	
   

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  
	
  [Reserved]

  
	
   

  
	
  ARTICLE V

  
	
   

  
	
  Affirmative Covenants

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.  Financial Statements and Other Information

  	
   

  	
  59

  
	
  SECTION 5.02.  Notices of Material Events

  	
   

  	
  61

  
	
  SECTION 5.03.  Existence; Conduct of Business

  	
   

  	
  61

  
	
  SECTION 5.04.  Payment of Obligations

  	
   

  	
  61

  
	
  SECTION 5.05.  Maintenance of Properties

  	
   

  	
  62

  
	
  SECTION 5.06.  Books and Records; Inspection Rights

  	
   

  	
  62

  
	
  SECTION 5.07.  Maintenance of Ratings

  	
   

  	
  62

  
	
  SECTION 5.08.  Compliance with Laws

  	
   

  	
  62

  
	
  SECTION 5.09.  Use of Proceeds

  	
   

  	
  62

  
	
  SECTION 5.10.  Insurance

  	
   

  	
  62

  
	
  SECTION 5.11.  Additional Collateral; Further Assurances

  	
   

  	
  62

  
	
  SECTION 5.12.  Maintenance of Corporate Separateness

  	
   

  	
  64

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  
	
  Negative Covenants

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.  Limitation on Incurrence of Indebtedness and
  Issuance of Disqualified Stock and Preferred Stock

  	
   

  	
  64

  
	
  SECTION 6.02.  Limitation on Liens

  	
   

  	
  70

  
	
  SECTION 6.03.  Merger, Consolidation or Sale of All or
  Substantially All Assets

  	
   

  	
  71

  
	
  SECTION 6.04.  Limitation on Restricted Payments

  	
   

  	
  73

  
	
  SECTION 6.05.  Limitations on Transactions with Affiliates

  	
   

  	
  78

  



 


iii

















 


	
  SECTION 6.06.  Limitations on Asset Sales

  	
   

  	
  80

  
	
  SECTION 6.07.  Dividends and Other Payment Restrictions
  Affecting Restricted Subsidiaries

  	
   

  	
  81

  
	
  SECTION 6.08.  Limitations on Guarantees of Indebtedness by
  Restricted Subsidiaries

  	
   

  	
  83

  
	
  SECTION 6.09.  Limitations on Sale and Lease-Back
  Transactions

  	
   

  	
  84

  
	
  SECTION 6.10.  Amendments to Subordination Provisions

  	
   

  	
  84

  
	
  SECTION 6.11.  Obligations of the Borrower and the
  Restricted Subsidiaries Relating to Kate Spade

  	
   

  	
  84

  
	
  SECTION 6.12.  Impairment of Security Interest

  	
   

  	
  85

  
	
  SECTION 6.13.  Business of Borrower and Restricted
  Subsidiaries

  	
   

  	
  85

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
   

  
	
  Events of Default

  
	
   

  
	
  ARTICLE VIII

  
	
   

  
	
  The Agent

  
	
   

  
	
  ARTICLE IX

  
	
   

  
	
  Miscellaneous

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01.  Notices

  	
   

  	
  89

  
	
  SECTION 9.02.  Waivers; Amendments

  	
   

  	
  90

  
	
  SECTION 9.03.  Expenses; Indemnity; Damage Waiver

  	
   

  	
  92

  
	
  SECTION 9.04.  Successors and Assigns

  	
   

  	
  93

  
	
  SECTION 9.05.  Survival

  	
   

  	
  97

  
	
  SECTION 9.06.  Effectiveness

  	
   

  	
  97

  
	
  SECTION 9.07.  Severability

  	
   

  	
  97

  
	
  SECTION 9.08.  Right of Setoff

  	
   

  	
  98

  
	
  SECTION 9.09.  Governing Law; Jurisdiction; Consent to
  Service of Process

  	
   

  	
  98

  
	
  SECTION 9.10.  WAIVER OF JURY TRIAL

  	
   

  	
  99

  
	
  SECTION 9.11.  Headings

  	
   

  	
  99

  
	
  SECTION 9.12.  Confidentiality

  	
   

  	
  99

  
	
  SECTION 9.13.  Several Obligations; Nonreliance; Violation
  of Law

  	
   

  	
  100

  
	
  SECTION 9.14.  USA PATRIOT Act

  	
   

  	
  100

  
	
  SECTION 9.15.  Disclosure

  	
   

  	
  100

  
	
  SECTION 9.16.  Appointment for Perfection

  	
   

  	
  100

  
	
  SECTION 9.17.  Interest Rate Limitation

  	
   

  	
  100

  
	
  SECTION 9.18.  [Reserved]

  	
   

  	
  100

  
	
  SECTION 9.19.  INTERCREDITOR AGREEMENT

  	
   

  	
  100

  



 


iv

















 


	
  ARTICLE X

  
	
   

  
	
  Loan Guaranty

  
	
   

  	
   

  	
   

  
	
  SECTION 10.01.  Guaranty

  	
   

  	
  101

  
	
  SECTION 10.02.  Guaranty of Payment

  	
   

  	
  101

  
	
  SECTION 10.03.  No Discharge or Diminishment of Loan
  Guaranty

  	
   

  	
  101

  
	
  SECTION 10.04.  Defenses Waived

  	
   

  	
  102

  
	
  SECTION 10.05.  Rights of Subrogation

  	
   

  	
  102

  
	
  SECTION 10.06.  Reinstatement; Stay of Acceleration

  	
   

  	
  102

  
	
  SECTION 10.07.  Information

  	
   

  	
  102

  
	
  SECTION 10.08.  Taxes

  	
   

  	
  102

  
	
  SECTION 10.09.  Maximum Liability

  	
   

  	
  103

  
	
  SECTION 10.10.  Contribution

  	
   

  	
  103

  
	
  SECTION 10.11.  Liability Cumulative

  	
   

  	
  104

  
	
  SECTION 10.12.  Release of Loan Guarantors

  	
   

  	
  104

  



 


SCHEDULES:(1)


 


	
  Commitment Schedule

  
	
  Schedule
  1.01(a)

  	
  —

  	
  Immaterial
  Subsidiaries

  
	
  Schedule
  1.01(b)

  	
  —

  	
  Mortgaged
  Properties

  
	
  Schedule
  3.05(a)

  	
  —

  	
  Properties

  
	
  Schedule
  3.05(g)

  	
  —

  	
  Intellectual
  Property

  
	
  Schedule
  3.06

  	
  —

  	
  Disclosed
  Matters

  
	
  Schedule
  3.14

  	
  —

  	
  Insurance

  
	
  Schedule
  3.15

  	
  —

  	
  Capitalization
  and Subsidiaries

  
	
  Schedule
  3.17

  	
  —

  	
  Labor
  Disputes

  
	
  Schedule
  4.01(b)

  	
  —

  	
  Local
  Counsel

  
	
  Schedule
  6.01

  	
  —

  	
  Existing
  Indebtedness

  
	
  Schedule
  9.01

  	
  —

  	
  Borrower’s
  Website for Electronic Delivery

  



 


EXHIBITS:(2)


 


	
  Exhibit A

  	
  —

  	
  Form of
  Administrative Questionnaire

  
	
  Exhibit B

  	
  —

  	
  Form of Assignment
  and Assumption

  
	
  Exhibit C

  	
  —

  	
  Form of Compliance
  Certificate

  
	
  Exhibit D

  	
  —

  	
  Joinder Agreement

  
	
  Exhibit E

  	
  —

  	
  Form of Borrowing
  Request

  
	
  Exhibit F

  	
  —

  	
  Form of Promissory Note

  



 






(1) 
Schedules other than the Commitment Schedule are not being restated.


(2) 
Exhibits are not being restated.


 


v






 












 


CREDIT
AGREEMENT dated as of October 6, 2005, as amended and restated as of November 17,
2010 (this “Agreement”), among THE NEIMAN MARCUS GROUP, INC., a
Delaware corporation (the “Borrower”), NEIMAN MARCUS, INC. (formerly
known as Newton Acquisition, Inc.), a Delaware corporation (“Holdings”),
each subsidiary of the Borrower from time to time party hereto, the Lenders (as
defined in Article I) and CREDIT SUISSE AG (formerly known as Credit
Suisse), as administrative agent and collateral agent for the Lenders hereunder
(in such capacities, the “Agent”).


 


Pursuant
to the Original Credit Agreement (as defined in Article I below) the
Lenders extended credit in the form of Loans on the Closing Date, in an initial
aggregate principal amount of $1,975,000,000, of which $1,505,735,000 is
outstanding as of the date hereof.


 


Pursuant
to the Amendment Agreement (as defined in Article I below), the Borrower
has requested, and the parties thereto have agreed, upon the terms and
conditions set forth therein, that the Original Credit Agreement be amended and
restated in its entirety as provided herein, effective upon the satisfaction of
the conditions set forth in the Amendment Agreement.  Accordingly, the parties hereto agree as follows:


 


ARTICLE I


 


Definitions


 


SECTION 1.01.  Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:


 


“ABL
Security Documents” means any and all security agreements, pledge
agreements, mortgages and other agreements and documents pursuant to which any
Liens are granted to secure any Indebtedness or other obligations in respect of
the Senior Secured Asset-Based Revolving Credit Facility.


 


“ABR”,
when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.


 


“Acquired
Indebtedness” means, with respect to any specified Person, (a) Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Restricted Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into, or becoming a Restricted Subsidiary of such
specified Person, and (b) Indebtedness secured by a Lien encumbering any
asset acquired by such specified Person.


 


“Additional
Assets” means (a) any property, plant or equipment used or useful in a
Similar Business, including any such asset acquired through any capital
expenditure, (b) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the Borrower
or another Restricted Subsidiary or is merged with or into the Borrower or
another Restricted Subsidiary and that is primarily engaged in a Similar
Business, (c) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary that is primarily engaged in a
Similar Business, (d) all or substantially all of the assets of a Similar
Business or (e) other assets that are not classified as current assets
under GAAP and that are used or useful in a Similar Business.


 


“Adjusted
LIBOR Rate” means, for any Interest Period, the rate obtained by dividing (a) the
LIBOR Rate for such Interest Period by (b) a percentage equal to 1 minus
the stated maximum rate 


 


1

















 


(stated
as a decimal) of all reserves, if any, required to be maintained against “Eurocurrency
liabilities” as specified in Regulation D (including any marginal, emergency,
special or supplemental reserves).


 


“Administrative
Questionnaire” means an Administrative Questionnaire in the form of Exhibit A.


 


“Affiliate”
of any specified Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specified Person.  For purposes of
this Agreement, “control” (including, with correlative meanings, the
terms “controlling”, “controlled by” and “under common control
with”), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.


 


“Affiliate
Transaction” has the meaning assigned to such term in Section 6.05.


 


“Agent”
has the meaning assigned to such term in the preamble to this Agreement.


 


“Alternate
Base Rate” means, for any day, a rate per annum equal to the greater of
(a) the Prime Rate in effect on such day, (b) the Federal Funds
Effective Rate in effect on such day plus 1⁄2 of 1% and (c) the
Adjusted LIBOR Rate for a one-month Interest Period on such day (or if such day
is not a Business Day, the immediately preceding Business Day) plus 1.00%; provided that for the avoidance of doubt, the Adjusted LIBOR
Rate for any day shall be based on the rate determined on such day at
approximately 11:00 a.m. (London time) by reference to the British Bankers’
Association Interest Settlement Rates for deposits in dollars (as set forth by
any service selected by the Agent that has been nominated by the British
Bankers’ Association as an authorized vendor for the purpose of displaying such
rates) on such day.  Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.


 


“Amendment
Agreement” means the Amendment and Restatement Agreement, dated as of the
Restatement Effective Date among the Borrower, Holdings, the other Loan
Guarantors party thereto, the Administrative Agent and the Lenders party
thereto.


 


“Applicable
Percentage” means, with respect to any Lender, a percentage equal to a
fraction the numerator of which is the aggregate outstanding principal amount
of the Loans (or, if no Loans are then outstanding, the Commitment) of such
Lender and the denominator of which is the aggregate outstanding principal
amount of the Loans (or, if no Loans are then outstanding, the Commitments) of
all Lenders.


 


“Applicable
Rate” means, for any day, with respect to (a) any ABR Tranche B-1 Loan
or LIBOR Rate Tranche B-1 Loan, the applicable rate per annum set forth below
under the caption “ABR Spread (Tranche B-1 Loan)” or “LIBOR Rate Spread
(Tranche B-1 Loan)”, as the case may be, based upon the Consolidated Leverage
Ratio as of the relevant date of determination:


 


2

















 


	
  Consolidated

  Leverage Ratio

  	
   

  	
  ABR Spread

  (Tranche B-1 Loan)

  	
   

  	
  LIBOR Rate

  Spread

  (Tranche B-1

  Loan)

  	
   

  
	
  Category
  1

  Greater than or equal to 4.50 to 1.00

  	
   

  	
  1.00

  	
  %

  	
  2.00

  	
  %

  
	
  Category
  2

  Less than 4.50 to 1.00

  	
   

  	
  0.75

  	
  %

  	
  1.75

  	
  %

  



 


and
(b) any ABR Tranche B-2 Loan or LIBOR Rate Tranche B-2 Loan, the
applicable rate per annum set forth below under the caption “ABR Spread
(Tranche B-2 Loan)” or “LIBOR Rate Spread (Tranche B-2 Loan)”, as the case may
be, based upon the Consolidated Leverage Ratio as of the relevant date of
determination:


 


	
  Consolidated

  Leverage Ratio

  	
   

  	
  ABR Spread

  (Tranche B-2 Loan)

  	
   

  	
  LIBOR Rate

  Spread

  (Tranche B-2

  Loan)

  	
   

  
	
  Category
  1

  Greater than or equal to 5.00 to 1.00

  	
   

  	
  3.00

  	
  %

  	
  4.00

  	
  %

  
	
  Category
  2

  Less than 5.00 to 1.00

  	
   

  	
  2.75

  	
  %

  	
  3.75

  	
  %

  



 


Each
change in the Applicable Rate resulting from a change in the Consolidated
Leverage Ratio shall be effective with respect to all Loans outstanding on and
after the date of delivery to the Agent of the financial statements and
certificate required by Section 5.01(a) or (b) and
Section 5.01(c), respectively, indicating such change until the date
immediately preceding the next date of delivery of such financial statements
and certificate indicating another such change. 
In addition, (a) at any time during which the Borrower has failed
to deliver the financial statements and certificate required by
Section 5.01(a) or (b) and Section 5.01(c), respectively,
or (b) at any time after the occurrence and during the continuance of an
Event of Default under clause (f) or (g) of Article VII, the
Consolidated Leverage Ratio shall be deemed to be in Category 1 for
purposes of determining the Applicable Rate.


 


“Approved
Fund” means any Person (other than an natural person) that is engaged in
making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course and that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of
an entity that administers, advises or manages a Lender.


 


“Asset
Sale” means (a) the sale, conveyance, transfer or other disposition,
whether in a single transaction or a series of related transactions, of
property or assets (including by way of a Sale and Lease-Back Transaction) of
the Borrower or any Restricted Subsidiary (each referred to in this definition
as a “disposition”), and (b) the issuance or sale of Equity
Interests of any Restricted Subsidiary, whether in a single transaction or a
series of related transactions, in each case, other than:


 


(i) a disposition of cash, Cash Equivalents or
Investment Grade Securities or obsolete or worn out equipment, vehicles or
other similar assets in the ordinary course of business or any disposition of
inventory or goods held for sale in the ordinary course of business;


 


3

















 


(ii) the disposition of all or substantially
all of the assets of the Borrower in a manner permitted pursuant to Section 6.03
or any disposition that constitutes a Change of Control;


 


(iii) the making of any Permitted Investment or
the making of any Restricted Payment that is not prohibited by
Section 6.04;


 


(iv) any disposition of assets or issuance or
sale of Equity Interests of any Restricted Subsidiary, in each case that do not
or would not upon issuance constitute Term Loan First Lien Collateral, in any
transaction or series of transactions with an aggregate fair market value of
less than $25,000,000;


 


(v) any disposition of Term Loan First Lien
Collateral in any transaction or series of transactions with an applicable fair
market value of less than $10,000,000;


 


(vi) any disposition of property or assets or
issuance of securities by a Restricted Subsidiary to the Borrower or by the
Borrower or a Restricted Subsidiary to a Restricted Subsidiary;


 


(vii) to the extent allowable under
Section 1031 of the Code, any exchange of like property (excluding any
boot thereon) for use in a Similar Business;


 


(viii) the lease, assignment or sub-lease of
any real or personal property in the ordinary course of business;


 


(ix) any issuance or sale of Equity Interests
in, or Indebtedness or other securities of, an Unrestricted Subsidiary (other
than any sale of Equity Interests in, or Indebtedness or other securities of,
Kate Spade held by the Borrower or any Restricted Subsidiary);


 


(x) foreclosures on assets;


 


(xi) sales of accounts receivable, or
participations therein, in connection with any Receivables Facility; and


 


(xii) the unwinding of any Hedging Obligations.


 


“Asset
Sale Offer” has the meaning assigned to such term in Section 2.20(d).


 


“Assignment
and Assumption” means an assignment and assumption entered into by a Lender
and an assignee (with the consent of any party whose consent is required by
Section 9.04), and accepted by the Agent, in the form of Exhibit B
or any other form approved by the Agent.


 


“Attributable
Debt” in respect of a Sale and Lease-Back Transaction means, as at the time
of determination, the present value (discounted at the interest rate then borne
by the Loans, compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such Sale
and Lease-Back Transaction (including any period for which such lease has been
extended); provided, however, that if such Sale and Lease-Back
Transaction results in a 


 


4

















 


Capitalized
Lease Obligation, the amount of Indebtedness represented thereby will be
determined in accordance with the definition of “Capitalized Lease Obligation”.


 


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


 


“Board of Directors” means
(a) with respect to a corporation, the board of directors of the
corporation, (b) with respect to a partnership, the board of directors of
the general partner of the partnership and (c) with respect to any other
Person, the board or committee of such Person serving a similar function.


 


“Board
Resolution” means, with respect to the Borrower, a duly adopted resolution
of the Board of Directors of the Borrower or any committee thereof.


 


“Borrower”
has the meaning assigned to such term in the preamble to this Agreement; provided
that when used in the context of determining the fair market value of an asset
or liability under this Agreement, “Borrower” shall, unless otherwise expressly
stated, be deemed to mean the Board of Directors of the Borrower when the fair
market value of such asset or liability is equal to or in excess of
$100,000,000.


 


“Borrowing”
means any Loans of the same Class and the same Type made, converted or
continued on the same date and, in the case of LIBOR Rate Loans, as to which a
single Interest Period is in effect.


 


“Borrowing
Request” means a request by the Borrower for a Borrowing in accordance with
Section 2.03 and substantially in the form attached hereto as Exhibit E,
or such other form as shall be approved by the Agent.


 


“Business
Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain
closed; provided that, when used in connection with a LIBOR Rate Loan,
the term “Business Day” shall also exclude any day on which banks are
not open for dealings in dollar deposits in the London interbank market.


 


“Capital Expenditures” means, for
any period, the aggregate of (a) all expenditures (whether paid in cash or
accrued as liabilities) by the Borrower and the Restricted Subsidiaries during
such period that, in conformity with GAAP, are or are required to be included
as additions during such period to property, plant or equipment reflected in
the consolidated balance sheet of the Borrower and the Restricted Subsidiaries
and (b) the value of all assets under Capitalized Lease Obligations
incurred by the Borrower and its Restricted Subsidiaries during such period; provided that the term “Capital Expenditures” shall not
include:


 


(i) expenditures made in connection with the
replacement, substitution, restoration or repair of assets to the extent
financed with (x) insurance proceeds paid on account of the loss of or
damage to the assets being replaced, restored or repaired or (y) awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced,


 


(ii) the purchase price of equipment that is
purchased simultaneously with the trade-in of existing equipment to the extent
that the gross amount of such 


 


5

















 


purchase
price is reduced by the credit granted by the seller of such equipment for the
equipment being traded in at such time,


 


(iii) the purchase of plant, property or
equipment to the extent financed with the proceeds of Asset Sales that are not
applied to prepay Loans pursuant to Section 2.20,


 


(iv) expenditures that constitute Consolidated
Lease Expense,


 


(v) expenditures that are accounted for as capital
expenditures by the Borrower or any Restricted Subsidiary and that actually are
paid for by a Person other than the Borrower or any Restricted Subsidiary and
for which neither the Borrower nor any Restricted Subsidiary has provided or is
required to provide or incur, directly or indirectly, any consideration or
obligation to such Person or any other Person (whether before, during or after
such period),


 


(vi) the book value of any asset owned by the
Borrower or any Restricted Subsidiary prior to or during such period to the
extent that such book value is included as a capital expenditure during such
period as a result of such Person reusing or beginning to reuse such asset
during such period without a corresponding expenditure actually having been
made in such period, provided that (x) any expenditure necessary in order
to permit such asset to be reused shall be included as a Capital Expenditure
during the period in which such expenditure actually is made and (y) such book
value shall have been included in Capital Expenditures when such asset was
originally acquired, or


 


(vii) expenditures that constitute acquisitions
of Persons or business units permitted hereunder.


 


“Capital
Stock” means (a) in the case of a corporation, corporate stock,
(b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(d) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.


 


“Capitalized Lease Obligation”  means, at the time any
determination thereof is to be made, the amount of the liability in respect of
a capital lease that would at such time be required to be capitalized and
reflected as a liability on a balance sheet (excluding the footnotes thereto)
in accordance with GAAP.


 


“Cash
Equivalents” means:


 


(a) Dollars;


 


(b) Canadian dollars, Japanese yen, pounds sterling, euro or, in
the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local
currencies held by it from time to time in the ordinary course of business;


 


6

















 


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


 


(d) certificates of deposit, time deposits and eurodollar time
deposits with maturities of one year or less from the date of acquisition,
bankers’ acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any commercial bank having capital and surplus in
excess of $250,000,000;


 


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


 


(f) commercial paper rated at least “P-1” by Moody’s or at least “A-1”
by S&P and in each case maturing within 12 months after the date of
issuance thereof;


 


(g) investment funds investing at least 95% of their assets in
securities of the types described in clauses (a) through (f) above;


 


(h) readily marketable direct obligations issued by any state of
the United States of America or any political subdivision thereof having one of
the two highest rating categories obtainable from either Moody’s or S&P
with maturities of 24 months or less from the date of acquisition; and


 


(i) Indebtedness or Preferred Stock issued by Persons with a
rating of “A” or higher from S&P or “A2” or higher from Moody’s with
maturities of 12 months or less from the date of acquisition.


 


Notwithstanding
the foregoing, Cash Equivalents shall include amounts denominated in currencies
other than those set forth in clauses (a) and (b) above; provided
that such amounts are converted into one or more of the currencies set forth in
clauses (a) and (b) above as promptly as practicable and in any event
within ten (10) Business Days following the receipt of such amounts.


 


“Change
of Control” means the occurrence of (a) the sale, lease or transfer,
in one or a series of related transactions, of all or substantially all of the
assets of the Borrower and its subsidiaries, taken as a whole, to any Person
other than a Permitted Holder or (b) the Borrower becomes aware of (by way
of a report or any other filing pursuant to Section 13(d) of the
Exchange Act, proxy, vote, written notice or otherwise) the acquisition by any
Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2)
of the Exchange Act, or any successor provision), including any group acting
for the purpose of acquiring, holding or disposing of securities (within the
meaning of Rule 13d-5(b)(1) under the Exchange Act, or any successor
provision), other than the Permitted Holders, in a single transaction or in a
series of related transactions, by way of merger, consolidation or other
business combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or
more of the total voting power of the Voting Stock of the Borrower or any of
its direct or indirect parent companies.


 


“Change
of Control Offer” has the meaning assigned to such term in Section 2.19(b).


 


“Change
in Law” means (a) the adoption of any law, rule or regulation
after the Closing Date, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any 


 


7

















 


Governmental
Authority after the Closing Date or (c) compliance by any Lender (or, for
purposes of Section 2.13(b), by any lending office of such Lender or by
such Lender’s holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the Closing Date (other than any such request, guideline or
directive to comply with any law, rule or regulation that was in effect on
the Closing Date).


 


“Class”
when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are Tranche B-1 Loans or Tranche B-2
Loans.


 


“Closing
Date” means October 6, 2005.


 


“Code”
means the Internal Revenue Code of 1986, as amended from time to time.


 


“Co-Investors”
means the investment funds associated with each of Credit Suisse AG and Leonard
Green & Partners, L.P., and their respective Affiliates.


 


“Collateral”
means any and all property owned, leased or operated by a Person subject to a
security interest or Lien under the Collateral Documents and any and all other
property of any Loan Party, now existing or hereafter acquired, that may at any
time be or become subject to a security interest or Lien in favor of Agent, on behalf
of itself and the Lenders, to secure the Secured Obligations; provided, however,
that Collateral shall not at any time include any Margin Stock.


 


“Collateral
Documents” means, collectively, the Security Agreement, the Mortgages and
any other documents granting a Lien upon the Collateral as security for payment
of the Secured Obligations.


 


“Commitment”
means with respect to each Lender, its obligation to make a Loan to the
Borrower in an aggregate amount not to exceed the amount set forth opposite such
Lender’s name on the Commitment Schedule under the caption “Commitment”
or in the Assignment and Assumption pursuant to which such Term Lender becomes
a party hereto, as such amount may be adjusted from time to time in accordance
with this Agreement.  The initial
aggregate amount of the Commitments on the Closing Date was $1,975,000,000.


 


“Commitment
Schedule” means Exhibit B to the Amendment and Restatement Agreement.


 


“Consolidated
Depreciation and Amortization Expense” means with respect to any Person for
any period, the total amount of depreciation and amortization expense,
including the amortization of deferred financing fees and other related noncash
charges of such Person and its Restricted Subsidiaries for such period on a
consolidated basis and otherwise determined in accordance with GAAP.


 


“Consolidated
Interest Expense” means, with respect to any Person for any period, the sum,
without duplication, of (a) consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, to the extent such expense was
deducted in computing Consolidated Net Income (including (i) amortization
of original issue discount resulting from the issuance of Indebtedness at less
than par, (ii) all commissions, discounts and other fees and charges owed
with respect to letters of credit or bankers’ acceptances, (iii) noncash
interest payments (but excluding any noncash interest expense attributable to
the movement in the mark-to-market valuation of Hedging Obligations or other
derivative instruments pursuant to GAAP), (iv) the interest component of
Capitalized Lease Obligations and (v) net payments, if any, pursuant to
interest rate Hedging Obligations with respect to Indebtedness, 


 


8

















 


and
excluding (A) any expenses resulting from the discounting of the 2028
Debentures as a result of the application of purchase accounting in connection
with the Transactions, (B) amortization of deferred financing fees, debt
issuance costs, commissions, fees and expenses, (C) any expensing of
bridge, commitment and other financing fees and (D) commissions,
discounts, yield and other fees and charges (including any interest expense)
related to any Receivables Facility, plus (b) consolidated capitalized
interest of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued, less
(c) interest income for such period. For purposes of this definition,
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by such Person to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP.


 


“Consolidated
Lease Expense” means for any period, all rental expenses of the Borrower
and its Restricted Subsidiaries during such period under operating leases for
real or personal property (including in connection with Sale and Lease-Back
Transactions permitted hereunder), excluding real estate taxes, insurance costs
and common area maintenance charges and net of sublease income, other than (a) obligations
under vehicle leases entered into in the ordinary course of business, (b) all
such rental expenses associated with assets acquired pursuant to an acquisition
of a Person or business unit to the extent such rental expenses relate to operating
leases in effect at the time of (and immediately prior to) such acquisition and
related to periods prior to such acquisition and (c) all Capitalized Lease
Obligations, all as determined on a consolidated basis in accordance with GAAP.


 


“Consolidated Leverage Ratio”,
with respect to any Person as of any date of determination, means the ratio of
(a) Consolidated Total Indebtedness of such Person as of the end of the most
recent fiscal quarter for which internal financial statements are available
immediately preceding the date on which such event for which such calculation
is being made shall occur to (b) the aggregate amount of EBITDA of such
Person for the period of the most recently ended four full consecutive fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such event for which such calculation is being made
shall occur, in each case with such pro
forma adjustments to Consolidated Total Indebtedness and EBITDA as are
appropriate and consistent with the pro
forma adjustment provisions set forth in the definition of “Fixed Charge
Coverage Ratio”.


 


“Consolidated
Net Income” means, with respect to any Person for any period, the aggregate
of the Net Income of such Person and its Restricted Subsidiaries for such
period, on a consolidated basis, and otherwise determined in accordance with
GAAP; provided that, without duplication:


 


(a) any net after-tax extraordinary,
non-recurring or unusual gains or losses (less all fees and expenses relating
thereto) or expenses (including relating to severance, relocation, one-time
compensation charges and the Transactions) shall be excluded,


 


(b) the Net Income for such period shall not
include the cumulative effect of a change in accounting principles during such period,
whether effected through a cumulative effect adjustment or a retroactive
application in each case in accordance with GAAP,


 


(c) any net after-tax income (loss) from
disposed or discontinued operations and any net after-tax gains or losses on
disposal of disposed or discontinued operations shall be excluded,


 


(d) any net after-tax gains or losses (less
all fees and expenses relating thereto) attributable to asset dispositions or
the sale or other disposition of any Capital Stock of any Person other than in
the ordinary course of business, as determined in good faith by the Borrower,
shall be excluded,


 


9

















 


(e) the Net Income for such period of any
Person that is not a subsidiary, or is an Unrestricted Subsidiary, or that is
accounted for by the equity method of accounting, shall be excluded; provided
that Consolidated Net Income of the Borrower shall be increased by the amount
of dividends or distributions or other payments that are actually paid in cash
(or to the extent converted into cash) to the referent Person or a Restricted
Subsidiary thereof in respect of such period (subject in the case of dividends,
distributions or other payments made to a Restricted Subsidiary to the
limitations contained in clause (f) below),


 


(f) solely for the purpose of determining the
amount available for Restricted Payments under Section 6.04(a)(iii)(A),
the Net Income for such period of any Restricted Subsidiary (other than any
Subsidiary Guarantor) shall be excluded if the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of its Net
Income is not at the date of determination wholly permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule, or governmental regulation applicable
to that Restricted Subsidiary or its stockholders, unless such restriction with
respect to the payment of dividends or similar distributions has been legally
waived; provided that Consolidated Net Income of the Borrower will be
increased by the amount of dividends or other distributions or other payments
actually paid in cash (or to the extent converted into cash) to the Borrower or
a Restricted Subsidiary thereof in respect of such period, to the extent not
already included therein,


 


(g) any increase in amortization or
depreciation or other noncash charges resulting from the application of
purchase accounting in relation to the Transactions or any acquisition that is
consummated after the Closing Date, net of taxes, shall be excluded,


 


(h) any net after-tax income (loss) from the
early extinguishment of Indebtedness or Hedging Obligations or other derivative
instruments shall be excluded,


 


(i) any impairment charge or asset write-off,
in each case pursuant to GAAP, and the amortization of intangibles arising
pursuant to GAAP shall be excluded, and


 


(j) any noncash compensation expense recorded
from grants of stock appreciation or similar rights, stock options, restricted
stock or other rights to officers, directors or employees shall be excluded.


 


Notwithstanding
the foregoing, for the purpose of Section 6.04 only (other than clause
(a)(iii)(D) thereof), there shall be excluded from Consolidated Net Income
any income arising from any sale or other disposition of Restricted Investments
made by the Borrower and the Restricted Subsidiaries, any repurchases and
redemptions of Restricted Investments from the Borrower and the Restricted
Subsidiaries, any repayments of loans and advances that constitute Restricted
Investments by the Borrower or any Restricted Subsidiary, any sale of the stock
of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted
Subsidiary, in each case only to the extent such amounts increase the amount of
Restricted Payments permitted under Section 6.04(a)(iii)(D); provided,
however, that any income arising from any sale or other disposition of
the Equity Interests in Kate Spade or any Extraordinary Distribution shall be
excluded from Consolidated Net Income for the purpose of Section 6.04
only.


 


“Consolidated
Secured Debt Ratio” as of any date of determination means the ratio of
(a) Consolidated Total Indebtedness of the Borrower and the Restricted
Subsidiaries that is secured by Liens as of the end of the most recent fiscal
quarter for which internal financial statements are available immediately
preceding the date on which such event for which such calculation is being made
shall occur


 


10






 












 


to
(b) the aggregate amount of EBITDA of the Borrower and the Restricted
Subsidiaries for the period of the most recently ended consecutive four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such event for which such calculation
is being made shall occur, in each case with such pro forma adjustments to
Consolidated Total Indebtedness and EBITDA as are appropriate and consistent
with the pro forma adjustment provisions set forth in the definition of “Fixed
Charge Coverage Ratio”.


 


“Consolidated
Total Indebtedness” means, as at any date of determination, an amount equal
to the sum of (a) the aggregate amount of all outstanding Indebtedness of
the Borrower and the Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money,
obligations in respect of Capitalized Lease Obligations, Attributable Debt in
respect of Sale and Lease-Back Transactions and debt obligations evidenced by
bonds, notes, debentures or similar instruments or letters of credit or bankers’
acceptances (and excluding (x) any undrawn letters of credit issued in the
ordinary course of business and (y) all obligations relating to
Receivables Facilities) and (b) the aggregate amount of all
outstanding Disqualified Stock of the Borrower and all Disqualified Stock and
Preferred Stock of the Restricted Subsidiaries (excluding items eliminated in
consolidation), with the amount of such Disqualified Stock and Preferred Stock
equal to the greater of their respective voluntary or involuntary liquidation
preferences and Maximum Fixed Repurchase Prices, in each case determined on a
consolidated basis in accordance with GAAP. 
For purposes of this definition, the “Maximum Fixed Repurchase Price”
of any Disqualified Stock or Preferred Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock or Preferred Stock as if such Disqualified Stock or
Preferred Stock were purchased on any date on which Consolidated Total
Indebtedness shall be required to be determined pursuant to this Agreement, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Stock or Preferred Stock, such fair market value shall be
determined reasonably and in good faith by the Borrower.


 


“Consolidated
Working Capital” means, at any date, the excess of (a) the sum of all
amounts (other than cash and Cash Equivalents) that would, in conformity with
GAAP, be set forth opposite the caption “total current assets” (or any like
caption) on a consolidated balance sheet of the Borrower and its Restricted
Subsidiaries at such date over (b) the sum of all amounts that would, in
conformity with GAAP, be set forth opposite the caption “total current
liabilities” (or any like caption) on a consolidated balance sheet of the
Borrower and its Restricted Subsidiaries on such date, including deferred
revenue but excluding, without duplication, (i) the current portion of any
Funded Debt, (ii) the current portion of interest and (iii) the
current portion of current and deferred income taxes.


 


“Contingent
Obligations” means, with respect to any Person, any obligation of such
Person guaranteeing any leases, dividends or other obligations that do not
constitute Indebtedness (the “primary obligations”) of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly,
including any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, or (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation against loss in respect thereof.


 


“Credit
Card Sale” has the meaning specified in the Original Credit Agreement (it
being understood that such sale was consummated on July 7, 2005).


 


11

















 


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


 


“Derivative
Transaction” means (a) an interest-rate transaction, including an
interest-rate swap, basis swap, forward rate agreement, interest rate option (including
a cap, collar, and floor), and any other instrument linked to interest rates
that gives rise to similar credit risks (including when-issued securities and
forward deposits accepted), (b) an exchange-rate transaction, including a
cross-currency interest-rate swap, a forward foreign-exchange contract, a
currency option, and any other instrument linked to exchange rates that gives
rise to similar credit risks, (c) an equity derivative transaction,
including an equity-linked swap, an equity-linked option, a forward
equity-linked contract, and any other instrument linked to equities that gives
rise to similar credit risk and (d) a commodity (including precious metal)
derivative transaction, including a commodity-linked swap, a commodity-linked
option, a forward commodity-linked contract, and any other instrument linked to
commodities that gives rise to similar credit risks; provided that no
phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Borrower or its subsidiaries shall be a Derivative
Transaction.


 


“Designated Noncash Consideration”  means the fair market value
of noncash consideration received by the Borrower or a Restricted Subsidiary in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers’ Certificate, setting forth the basis of
such valuation, executed by an executive vice president and the principal
financial officer of the Borrower, less the amount of cash or Cash Equivalents
received in connection with a subsequent sale of such Designated Noncash
Consideration.


 


“Designated
Preferred Stock” means Preferred Stock of the Borrower or any parent
company thereof (in each case other than Disqualified Stock) that is issued for
cash (other than to a Restricted Subsidiary) and is so designated as Designated
Preferred Stock pursuant to an Officers’ Certificate executed by an executive
vice president and the principal financial officer of the Borrower or the
applicable parent company thereof, as the case may be, on the issuance date
thereof, the cash proceeds of which are excluded from the calculation set forth
in Section 6.04(a)(iii).


 


“Disclosed
Matters” means the actions, suits and proceedings and the environmental
matters disclosed in Schedule 3.06.


 


“Disqualified
Stock” means, with respect to any Person, any Capital Stock of such Person
which, by its terms, or by the terms of any security into which it is
convertible or for which it is putable or exchangeable, or upon the happening
of any event, matures or is mandatorily redeemable (other than solely for
Capital Stock that is not Disqualified Stock), other than as a result of a
change of control or asset sale, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder thereof, other than as
a result of a change of control or asset sale, in whole or in part, in each
case (x) if issued prior to the Restatement Effective Date, prior to the
date that is ninety-one (91) days after the earlier of the Tranche B-1
Loan Maturity Date and the date the Tranche B-1 Loans are no longer outstanding
or (y) if issued after the Restatement Effective Date, prior to the date
that is ninety-one (91) days after the earlier of the Tranche B-2 Loan Maturity
Date and the date the Tranche B-2 Loans are no longer outstanding; provided  that if such Capital Stock is issued to
any plan for the benefit of employees of the Borrower or its subsidiaries or by
any such plan to such employees, such Capital Stock shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Borrower or its subsidiaries in order to satisfy applicable statutory or
regulatory obligations.


 


“Dollars”
or “$” refers to lawful money of the United States of America.


 


12

















 


“Domestic
Subsidiary” means, with respect to any Person, any Restricted Subsidiary of
such Person other than (a) a Foreign Subsidiary or (b) any Domestic
Subsidiary of a Foreign Subsidiary, but, in each case, including any subsidiary
that guarantees or otherwise provides direct credit support for any
indebtedness of the Borrower.


 


“EBITDA”
means, with respect to any Person for any period, the Consolidated Net Income
of such Person for such period,


 


(a) increased by (without duplication): (i) provision for
taxes based on income or profits, plus franchise or similar taxes, of such
Person for such period deducted in computing Consolidated Net Income, plus (ii) consolidated Fixed Charges of such Person for such
period to the extent the same was deducted in calculating Consolidated Net
Income, plus (iii) Consolidated
Depreciation and Amortization Expense of such Person for such period to the
extent such depreciation and amortization were deducted in computing
Consolidated Net Income, plus  (iv) any expenses or charges related
to any Equity Offering, Permitted Investment, acquisition, disposition,
recapitalization or the incurrence of Indebtedness permitted to be incurred hereunder
including a refinancing thereof (whether or not successful) and any amendment
or modification to the terms of any such transactions, including such fees,
expenses or charges related to the Transactions and the Credit Card Sale
(including any one-time costs associated with entering into any program
agreements or servicing agreements directly related to the Credit Card Sale,
but not any payments required or contemplated by such agreements, other than
payments in respect of transition services provided thereunder prior to the
first anniversary of the Credit Card Sale), in each case, deducted in computing
Consolidated Net Income, plus (v) the amount of any
restructuring charge or reserve deducted in such period in computing
Consolidated Net Income, including any one-time costs incurred in connection
with (A) acquisitions after the Closing Date or (B) the closing of
any stores or distribution centers after the Closing Date, plus
(vi) any write offs, write downs or other noncash charges reducing
Consolidated Net Income for such period, excluding any such charge that
represents an accrual or reserve for a cash expenditure for a future period, plus (vii) the amount of any minority interest expense deducted
in calculating Consolidated Net Income, plus (viii) the
amount of management, monitoring, consulting and advisory fees and related
expenses paid (or any accruals related to such fees or related expenses)  during such period to the Sponsors to the
extent permitted under Section 6.05, plus (ix) the amount of
net cost savings projected by the Borrower in good faith to be realized as a
result of specified actions taken during such period (calculated on a pro forma
basis as though such cost savings had been realized on the
first day of such period), net of the amount of actual benefits realized during
such period from such actions; provided  that (A) such cost savings are
reasonably identifiable and factually supportable, (B) such actions are
taken within 36 months after the Closing Date and (C) the aggregate amount
of cost savings added pursuant to this clause (ix) shall not exceed
$50,000,000 for any four consecutive quarter period (which adjustments may be
incremental to pro forma
adjustments made pursuant to the second paragraph of the definition of “Fixed
Charge Coverage Ratio”), plus (x) any costs or expenses incurred
by the Borrower or a Restricted Subsidiary pursuant to any management equity
plan or stock option plan or any other management or employee benefit plan or
agreement or any stock subscription or stockholders agreement, to the extent
that such costs or expenses are funded with cash proceeds contributed to the
capital of the Borrower or net cash proceeds of issuance of Equity Interests of
the Borrower (other than Disqualified Stock that is Preferred Stock) in each
case, solely to the extent that such cash proceeds are excluded from the
calculation set forth in Section 6.04(a)(iii);


 


(b) decreased by (without duplication) noncash gains increasing
Consolidated Net Income of such Person for such period, excluding any gains
that represent the reversal of any 


 


13

















 


accrual
of, or cash reserve for, anticipated cash charges in any prior period (other
than such cash charges that have been added back to Consolidated Net Income in
calculating EBITDA in accordance with this definition); and


 


(c) increased or decreased, as applicable, by (without
duplication) (i) any net gain or loss resulting in such period from
Hedging Obligations and the application of Statement of Financial Accounting
Standards #133, (ii) any net gain or loss resulting in such period from
currency translation gains or losses related to currency remeasurements of
Indebtedness and (iii) the amount of gain or loss resulting in such period from
a sale of receivables and related assets to a Receivables Subsidiary in
connection with a Receivables Facility.


 


“Eligible
Assignee” means (i) a Lender, (ii) a commercial bank, insurance
company, or company engaged in the business of making commercial loans or a commercial
finance company, which Person, together with its Affiliates, has a combined
capital and surplus in excess of $100,000,000, (iii) any Affiliate of a
Lender under common control with such Lender or (iv) an Approved Fund of a
Lender, provided that in any event, “Eligible Assignee” shall not
include (w) any natural person, (x) Holdings or the Borrower or any
Affiliate (which for this purpose shall not include the Agent or any of its
branches or Affiliates engaged in the business of making commercial loans)
thereof, (y) any Sponsor or any of their respective Affiliates or
(z) any “creditor”, as defined in Regulation T, or “foreign branch of a
broker-dealer”, within the meaning of Regulation X; provided, however,
that upon the occurrence of an Event of Default, no Person (other than a
Lender) shall be an “Eligible Assignee” if the assignment of any Commitment or
Loan to such Person would cause such Person to have Commitments or Loans in
excess of twenty-five percent (25%) of the then outstanding total aggregate
Commitments or Loans, as the case may be.


 


“EMU” means the economic and monetary union
contemplated by the Treaty of the European Union.


 


“Environmental
Laws” means all laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to
health and safety matters.


 


“Environmental
Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or
indemnities), of the Borrower or any Subsidiary directly or indirectly
resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.


 


“Equity
Interests” means Capital Stock and all warrants, options or other rights to
acquire Capital Stock, but excluding any debt security that is convertible
into, or exchangeable for, Capital Stock.


 


“Equity
Offering” means any public or private sale of common stock or Preferred
Stock of the Borrower or any of its direct or indirect parent companies
(excluding Disqualified Stock), other than (a) public offerings with
respect to the Borrower’s or any direct or indirect parent company’s common
stock registered on Form S-4 or Form S-8, (b) any such public or
private sale that constitutes an Excluded Contribution and (c) an issuance
to any subsidiary of the Borrower.


 


14

















 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time.


 


“ERISA
Affiliate” means any trade or business (whether or not incorporated) that,
together with the Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer
under Section 414 of the Code.


 


“ERISA
Event” means (a) any “reportable event”, as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to
a Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of
ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of
the Code or Section 303(d) of ERISA of an application for a waiver of
the minimum funding standard with respect to any Plan; (d) the incurrence
by the Borrower or any of its ERISA Affiliates of any liability under
Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a
plan administrator of any notice of an intent to terminate any Plan or Plans or
to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower
or any of its ERISA Affiliates of any liability with respect to the withdrawal
or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is insolvent or in reorganization, within the meaning of
Title IV of ERISA.


 


“euro” means the single currency of
participating member states of the EMU.


 


“Event
of Default” has the meaning assigned to such term in Article VII.


 


“Excess Cash Flow” means, for any
fiscal year of the Borrower, an amount equal to the excess of:


 


(a) the sum, without duplication, of:


 


(i) Consolidated Net Income for such period,


 


(ii) an amount equal to the amount of all non-cash charges to the
extent deducted in arriving at such Consolidated Net Income,


 


(iii) decreases in Consolidated Working Capital and long-term
account receivables for such period (other than any such decreases arising from
acquisitions by the Borrower and its Restricted Subsidiaries completed during
such period), and


 


(iv) an amount equal to the aggregate net non-cash loss on the
sale, lease, transfer or other disposition of assets by the Borrower and its
Restricted Subsidiaries during such period (other than sales in the ordinary
course of business) to the extent deducted in arriving at such Consolidated Net
Income; over


 


(b) the sum, without duplication, of:


 


(i) an amount equal to the amount of all non-cash credits included
in arriving at such Consolidated Net Income and cash charges included in
clauses (a) through (j) of the definition of Consolidated Net Income,


 


15

















 


(ii) without duplication of amounts deducted pursuant to clause (xi) below
in prior periods, the amount of Capital Expenditures made in cash during such
period, except to the extent that such Capital Expenditures were financed with
the proceeds of Indebtedness of the Borrower or its Restricted Subsidiaries,


 


(iii) the aggregate amount of all principal payments of
Indebtedness of the Borrower and its Restricted Subsidiaries (including (x) the
principal component of payments in respect of Capitalized Lease Obligations and
(y) the amount of any prepayment of Loans pursuant to Section 2.08 or
2.20 made with the proceeds of an Asset Sale to the extent such Asset Sale
resulted in an increase to Consolidated Net Income and not in excess of the
amount of such increase, but excluding all other prepayments of the Loans) made
during such period (other than in respect of any revolving credit facility to
the extent there is not an equivalent permanent reduction in commitments
thereunder), except to the extent financed with the proceeds of other
Indebtedness of the Borrower or its Restricted Subsidiaries,


 


(iv) an amount equal to the aggregate net non-cash gain on the
sale, lease, transfer or other disposition of assets by the Borrower and its
Restricted Subsidiaries during such period (other than sales in the ordinary
course of business) to the extent included in arriving at such Consolidated Net
Income,


 


(v) increases in Consolidated Working Capital and long-term
account receivables for such period (other than any such increases arising from
acquisitions of a Person or business unit by the Borrower and its Restricted
Subsidiaries during such period),


 


(vi) cash payments by the Borrower and its Restricted Subsidiaries
during such period in respect of long-term liabilities of the Borrower and its
Restricted Subsidiaries other than Indebtedness,


 


(vii) without duplication of amounts deducted pursuant to clause (xi) below
in prior periods, the amount of Investments and acquisitions made during such
period to the extent permitted under Section 6.04, to the extent that such
Investments and acquisitions were financed with internally generated cash flow
of the Borrower and its Restricted Subsidiaries,


 


(viii) the amount of Restricted Payments made during such period
to the extent permitted under Section 6.04(b)(xvi), to the extent that such
Restricted Payments were financed with internally generated cash flow of the
Borrower and its Restricted Subsidiaries,


 


(ix) the aggregate amount of expenditures actually made by the
Borrower and the Restricted Subsidiaries in cash during such period (including
expenditures for the payment of financing fees) to the extent that such
expenditures are not expensed during such period,


 


(x) the aggregate amount of any premium, make-whole or penalty
payments actually paid in cash by the Borrower and the Restricted Subsidiaries
during such period that are required to be made in connection with any
prepayment of Indebtedness,


 


(xi) without duplication of amounts deducted from Excess Cash Flow
in prior periods, the aggregate consideration required to be paid in cash by
the Borrower or any of its Restricted Subsidiaries pursuant to binding
contracts (the “Contract
Consideration”) entered into prior to or during such period relating
to acquisitions or Capital Expenditures to be consummated or made during the
period of four consecutive fiscal quarters of the Borrower following the end of
such period, provided that to the extent the aggregate amount of
internally generated cash actually 


 


16

















 


utilized
to finance such acquisitions or Capital Expenditures during such period of four
consecutive fiscal quarters is less than the Contract Consideration, the amount
of such shortfall shall be added to the calculation of Excess Cash Flow at the
end of such period of four consecutive fiscal quarters, and


 


(xii) the amount of cash taxes paid in such period to the extent
they exceed the amount of tax expense deducted in determining Consolidated Net
Income for such period.


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC promulgated thereunder.


 


“Excluded
Contribution” means net cash proceeds, marketable securities or Qualified
Proceeds received by the Borrower from (a) contributions to its common
equity capital, and (b) the sale (other than to a subsidiary of the
Borrower or to any management equity plan or stock option plan or any other
management or employee benefit plan or agreement of the Borrower) of Capital Stock
(other than Disqualified Stock and Designated Preferred Stock) of the Borrower,
in each case designated as Excluded Contributions pursuant to an Officers’
Certificate executed by an executive vice president and the principal financial
officer of the Borrower on the date such capital contributions are made or the
date such Equity Interests are sold, as the case may be, which are excluded
from the calculation set forth in Section 6.04(a)(iii).


 


“Excluded
Taxes” means, with respect to the Agent, any Lender or any other recipient
of any payment to be made by or on account of any obligation of the Borrower or
any other Loan Party hereunder, (a) income or franchise taxes imposed on
(or measured by) its net income by the United States of America, or by the jurisdiction
under the laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its applicable
lending office is located, (b) any branch profits taxes imposed by the United
States of America or any similar tax imposed by any other jurisdiction in which
the Borrower or any other Loan Party is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 2.17(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender’s failure to comply with Section 2.15(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower or any other Loan Party with respect to
such withholding tax pursuant to Section 2.15(a).


 


“Extraordinary
Distribution” means any dividends, distributions or other payments made by
Kate Spade to the Borrower or a Restricted Subsidiary (a) to the extent
generated by (i) borrowings other than working capital borrowings, (ii) the
sale of debt or equity securities or (iii) sales or other dispositions or
assets, other than inventory, accounts receivable and other assets sold in the
ordinary course of business or as part of the normal retirement or replacement
of assets or (b) representing a liquidating distribution or payment in
connection with the liquidation or winding up of Kate Spade.


 


“Federal
Funds Effective Rate” means, for any day, the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day that is a Business Day, the average of the quotations
for such day for such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by it.


 


17

















 


“Fee
Letter” means that certain Amended and Restated Fee Letter dated as of May 26,
2005, by and among the Borrower, the Agent, Deutsche Bank Trust Company
Americas, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities
Inc., Bank of America, N.A., Banc of America Bridge LLC, Banc of America
Securities LLC and Goldman Sachs Credit Partners L.P.


 


“Financial
Officer” means the chief financial officer, treasurer or controller of the
Borrower.


 


“Fixed
Charge Coverage Ratio” means, with respect to any Person for any period,
the ratio of EBITDA of such Person for such period to the Fixed Charges of such
Person for such period.  In the event
that the Borrower or any Restricted Subsidiary incurs, assumes, guarantees,
redeems, retires or extinguishes any Indebtedness (other than Indebtedness
incurred under any revolving credit facility that has been permanently repaid
and has not been replaced) or issues or redeems Disqualified Stock or Preferred
Stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to or simultaneously with the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
“Calculation Date”),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma
effect to such incurrence, assumption, guarantee, redemption, retirement or
extinguishing of Indebtedness, or such issuance or redemption of Disqualified
Stock or Preferred Stock, as if the same had occurred at the beginning of the
applicable four-quarter period (the “reference period”).


 


For
purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, consolidations and disposed operations (as
determined in accordance with GAAP) that have been made by the Borrower or any
Restricted Subsidiary during the four-quarter reference period or subsequent to
such reference period and on or prior to or simultaneously with the Calculation
Date shall be calculated on a pro forma basis assuming that all such
Investments, acquisitions, dispositions, mergers, consolidations and disposed operations
(and the change in any associated fixed charges and the change in EBITDA
resulting therefrom) had occurred on the first day of the reference
period.  If since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Borrower or any Restricted Subsidiary since the
beginning of such period) shall have made any Investment, acquisition,
disposition, merger, consolidation or disposed operation that would have
required adjustment pursuant to this definition, then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect thereto for such period as if
such Investment, acquisition, disposition, merger, consolidation or disposed
operation had occurred at the beginning of the reference period.


 


For
purposes of this definition, whenever pro forma effect is to be given to a
transaction, the pro forma calculations shall be made in good faith by a
responsible financial or accounting officer of the Borrower.  If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the Calculation Date had been
the applicable rate for the entire period (taking into account any Hedging Obligations
applicable to such Indebtedness). 
Interest on a Capitalized Lease Obligation shall be deemed to accrue at
an interest rate reasonably determined by a responsible financial or accounting
officer of the Borrower to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP. 
For purposes of making the computation referred to above, interest on
any Indebtedness under a revolving credit facility computed on a pro forma
basis shall be computed based upon the average daily balance of such
Indebtedness during the applicable period. 
Interest on Indebtedness that may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rate, shall be deemed to have been based upon
the rate actually chosen, or, if none, then based upon such optional rate
chosen as the Borrower may designate.


 


18

















 


“Fixed
Charges” means, with respect to any Person for any period, the sum of (a) Consolidated
Interest Expense of such Person for such period, (b) all cash dividend
payments (excluding items eliminated in consolidation) on any series of
Preferred Stock during such period, and (c) all cash dividend payments
(excluding items eliminated in consolidation) on any series of Disqualified
Stock made during such period.


 


“Foreign
Lender” means a person that is not a “United States person” within the
meaning of Section 7701(a)(30) of the Code.


 


“Foreign
Subsidiary” means, with respect to any Person, any Restricted Subsidiary of
such Person that is not organized or existing under the laws of the United
States of America, any state thereof, the District of Columbia, or any
territory thereof.


 


“Foreign Subsidiary Total Assets”  means the total amount of
all assets of Foreign Subsidiaries of the Borrower and the Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP as
shown on the most recent balance sheet of the Borrower.


 


“Funded
Debt” means all Indebtedness of the Borrower and its Restricted
Subsidiaries for borrowed money that matures more than one year from the date
of its creation or matures within one year from such date that is renewable or
extendable, at the option of such Person, to a date more than one year from
such date or arises under a revolving credit or similar agreement that
obligates the lender or lenders to extend credit during a period of more than
one year from such date, including Indebtedness in respect of the Loans.


 


“GAAP”
means generally accepted accounting principles in the United States of America
that are in effect on the Closing Date.


 


“Governmental
Authority” means the government of the United States of America, any other
nation or any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.


 


“guarantee”
means a guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in any
manner (including letters of credit and reimbursement agreements in respect
thereof), of all or any part of any Indebtedness or other obligations, and,
when used as a verb, shall have a corresponding meaning.


 


“Guaranteed
Obligations” has the meaning assigned to such term in Section 10.01.


 


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


 


“Hedge
Agreement” means any agreement with
respect to any Derivative Transaction between the Borrower or any Subsidiary
and any other Person.


 


“Hedging Obligations”  means, with respect to any
Person, the obligations of such Person under currency exchange, interest rate
or commodity swap agreements, currency exchange, interest rate or commodity cap
agreements and currency exchange, interest rate or commodity collar agreements
and 


 


19

















 


other
agreements or arrangements, in each case designed to protect such Person
against fluctuations in currency exchange, interest rates or commodity prices.


 


“Holdings”
has the meaning assigned to such term in the preamble to this Agreement.


 


“Immaterial
Subsidiary” means, at any date of determination, any Restricted Subsidiary
designated as such in writing by the Borrower that (i) contributed 2.5% or
less of EBITDA of the Borrower and the Restricted Subsidiaries for the period
of four fiscal quarters most recently ended more than forty-five (45) days
prior to the date of determination and (ii) had consolidated assets
representing 2.5% or less of Total Assets on the last day of the most recent
fiscal quarter ended more than forty-five (45) days prior to the date of
determination.  The Immaterial
Subsidiaries as of the Closing Date are listed on Schedule 1.01(a).


 


“incur”
has the meaning set forth in Section 6.01.


 


“incurrence”
has the meaning set forth in Section 6.01.


 


“Indebtedness”
means, with respect to any Person, (a) any indebtedness (including
principal and premium) of such Person, whether or not contingent (i) in
respect of borrowed money, (ii) evidenced by bonds, notes, debentures or
similar instruments or letters of credit or bankers’ acceptances (or, without
double counting, reimbursement agreements in respect thereof), (iii) representing
the balance deferred and unpaid of the purchase price of any property
(including Capitalized Lease Obligations), except any such balance that
constitutes a trade payable or similar obligation to a trade creditor, in each
case accrued in the ordinary course of business, or (iv) representing any
Hedging Obligations, if and to the extent that any of the foregoing Indebtedness
(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet (excluding the footnotes thereto) of such Person
prepared in accordance with GAAP; (b) to the extent not otherwise
included, any obligation by such Person to be liable for, or to pay, as
obligor, guarantor or otherwise, on the obligations of the type referred to in
clause (a) of another Person (whether or not such items would appear
upon the balance sheet of such obligor or guarantor), other than by endorsement
of negotiable instruments for collection in the ordinary course of business;
(c) to the extent not otherwise included, the obligations of the type
referred to in clause (a) of another Person secured by a Lien on any
asset owned by such Person, whether or not such obligations are assumed by such
Person and whether or not such obligations would appear upon the balance sheet
of such Person;  provided that the amount of such
Indebtedness will be the lesser of the fair market value of such asset at the
date of determination and the amount of Indebtedness so secured; and (d) Attributable
Debt in respect of Sale and Lease-Back Transactions; provided, however, that notwithstanding the foregoing, Indebtedness will be
deemed not to include (A) Contingent Obligations incurred in the ordinary
course of business and (B) Obligations under, or in respect of, Receivables
Facilities.


 


“Indemnified
Taxes” means Taxes other than Excluded Taxes.


 


“Independent
Financial Advisor” means an accounting, appraisal, investment banking firm
or consultant to Persons engaged in Similar Businesses of nationally recognized
standing that is, in the good faith judgment of the Borrower, qualified to
perform the task for which it has been engaged and that is independent of the
Borrower and its Affiliates.


 


“Information”
has the meaning set forth in Section 3.11(a).


 


20






 












 


“Information
Memorandum” means the Confidential Information Memorandum dated September 2005,
relating to the Borrower and the Transactions.


 


“Intercreditor
Agreement” means the Lien Subordination and Intercreditor Agreement dated
the Closing Date, among Holdings, the Borrower, the subsidiaries of the
Borrower party from time to time thereto, the Agent and the Revolving Facility
Agent (as defined therein).


 


“Interest
Election Request” means a request by the Borrower to convert or continue a
Borrowing in accordance with Section 2.05.


 


“Interest
Payment Date” means (a) with respect to any ABR Loan, the first
Business Day of each January, April, July and October and the Maturity
Date applicable to such ABR Loan and (b) with respect to any LIBOR Rate
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a LIBOR Rate Borrowing with an Interest
Period of more than three months’ duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months’ duration after
the first day of such Interest Period (or if such day is not a Business Day,
the next succeeding Business Day).


 


“Interest
Period” means with respect to any LIBOR Rate Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or
six months (or, to the extent available to each Lender, nine or twelve
months) thereafter, as the Borrower may elect; provided, that (i) if
any Interest Period would end on a day other than 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 next preceding Business Day and (ii) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period.  For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing.


 


“Investment
Grade Securities” means (a) securities issued or directly and fully
guaranteed or insured by the government of the United States of America or any
agency or instrumentality thereof (other than Cash Equivalents), (b) debt
securities or debt instruments with a rating of BBB- or higher by S&P or
Baa3 or higher by Moody’s or the equivalent of such rating by such rating
organization, or, if no rating of S&P or Moody’s then exists, the
equivalent of such rating by any other nationally recognized securities rating
agency, but excluding any debt securities or instruments constituting loans or
advances among the Borrower and its subsidiaries, (c) investments in any
fund that invests exclusively in investments of the type described in
clauses (a) and (b), which fund may also hold immaterial amounts of
cash pending investment or distribution and (d) corresponding instruments
in countries other than the United States of America customarily utilized for
high quality investments.


 


“Investments” means, with respect to any
Person, all investments by such Person in other Persons (including Affiliates)
in the form of loans (including guarantees), advances or capital contributions
(including by means of any transfer of cash or other property to others or any
payment for property or services for the account or use of others, but
excluding accounts receivable, trade credit, advances to customers, commission,
travel and similar advances to officers and employees, in each case made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities issued by any other
Person and investments that are required by GAAP to be classified on the
balance sheet (excluding the footnotes) of such Person in the 


 


21

















 


same
manner as the other investments included in this definition to the extent such
transactions involve the transfer of cash or other property.  For purposes of the definition of “Unrestricted
Subsidiary” and Section 6.04, (a) “Investments” shall include the
portion (proportionate to the Borrower’s equity interest in such subsidiary) of
the fair market value of the net assets of a subsidiary of the Borrower at the
time that such subsidiary is designated an Unrestricted Subsidiary; provided  that upon a redesignation of such
subsidiary as a Restricted Subsidiary, the Borrower shall be deemed to continue
to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if
positive) equal to (i) the Borrower’s “Investment” in such subsidiary at
the time of such redesignation, less (ii) the portion (proportionate to
the Borrower’s equity interest in such subsidiary) of the fair market value of
the net assets of such subsidiary at the time of such redesignation, and (b) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Borrower.


 


“Joinder
Agreement” has the meaning assigned to such term in Section 5.11.


 


“Joint
Lead Arrangers” means Credit Suisse AG and Deutsche Bank Securities Inc.,
and as of the Restatement Effective Date, J.P. Morgan Securities LLC.


 


“Kate
Spade” means Kate Spade LLC, a Delaware limited liability company.


 


“Lenders”
means the Persons listed on the Commitment Schedule and any other Person
that shall have become a party hereto pursuant to an Assignment and Assumption,
other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Assumption.


 


“LIBOR
Rate” means, with respect to any Interest Period, (a) the rate per
annum determined by the Agent at approximately 11:00 a.m. (London time) on
the date that is two Business Days prior to the commencement of such Interest
Period by reference to the British Bankers’ Association Interest Settlement
Rates for deposits in dollars (as set forth by any service selected by the
Agent that has been nominated by the British Bankers’ Association as an
authorized information vendor for the purpose of displaying such rates) for a
period equal to such Interest Period; provided that, to the extent that
an interest rate is not ascertainable pursuant to the foregoing provisions of
this definition, the “LIBOR Rate” shall be the interest rate per annum
determined by the Agent to be the average of the rates per annum at which
deposits in dollars are offered for such relevant Interest Period to major
banks in the London interbank market in London, England by the Agent at
approximately 11:00 a.m. (London time) on the date that is two Business
Days prior to the beginning of such Interest Period.


 


“Lien”
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, whether or not
filed, recorded or otherwise perfected under applicable law, including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the UCC
(or equivalent statutes) of any jurisdiction; provided  that
in no event shall an operating lease be deemed to constitute a Lien.


 


“Loan
Documents” means this Agreement, any promissory notes issued pursuant to
the Agreement, the Collateral Documents, the Intercreditor Agreement and the
Amendment Agreement. Any reference in this Agreement or any other Loan Document
to a Loan Document shall include all appendices, exhibits or schedules thereto,
and all amendments, restatements, supplements or other modifications thereto.


 


“Loan
Guarantor” means each Loan Party (other than the Borrower).


 


22

















 


“Loan
Guaranty” means Article X of this Agreement.


 


“Loan
Parties” means Holdings, the Borrower, each Domestic Subsidiary (other than
(i) subject to compliance with Section 5.11, any Domestic Subsidiary that
is an Immaterial Subsidiary and (ii) any Unrestricted Subsidiary), and any
other Person who becomes a party to this Agreement as a Loan Party pursuant to
a Joinder Agreement, and their respective successors and assigns.


 


“Loans”
means Tranche B-1 Loans and the Tranche B-2 Loans made by the Lenders pursuant
to this Agreement.


 


“Management
Services Agreement” means the agreement among Holdings, the Borrower and
the Sponsors dated as of October 6, 2005, as amended from time to time,
pursuant to which the Sponsors agree to provide certain services to Holdings
and the Borrower in exchange for certain fees.


 


“Management
Stockholders” means the members of management of the Borrower (or its
direct parent) who are holders of Equity Interests of the Borrower (or any of
its direct or indirect parent companies) on the Closing Date.


 


“Margin
Stock” shall have the meaning assigned to such term in Regulation U.


 


“Material
Adverse Effect” means a material adverse effect on (a) the business,
assets, operations or financial condition of the Borrower and the Subsidiaries
taken as a whole, (b) the ability of the Borrower and the other Loan
Parties (taken as a whole) to perform their obligations under the Loan
Documents or (c) the rights of, or remedies available to the Agent or the
Lenders under, the Loan Documents.


 


“Material
Indebtedness” means Indebtedness (other than the Loans), or obligations in
respect of one or more Hedge Agreements, of any one or more of the Borrower and
its Subsidiaries in an aggregate principal amount exceeding $50,000,000.  For purposes of determining Material
Indebtedness, the “obligations” of the Borrower or any Subsidiary in respect of
any Hedge Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that the Borrower or such Subsidiary would be
required to pay if such Hedge Agreement were terminated at such time.


 


“Maturity
Date” means the Tranche B-1 Loan Maturity Date or the Tranche B-2 Loan
Maturity Date, as applicable.


 


“Maximum
Liability” has the meaning assigned to such term in Section 10.09.


 


“Merger”
has the meaning assigned to such term in the Original Credit Agreement.


 


“Merger
Agreement” means the Agreement and Plan of Merger dated as of May 1,
2005 among Holdings, Newton Acquisition Merger Sub, Inc. and the Borrower,
as amended from time to time.


 


“Moody’s”
means Moody’s Investors Service, Inc. and any successor to its rating
agency business.


 


“Mortgaged
Properties” means, as of the Closing Date, the owned real properties and
leasehold and subleasehold interests of the Loan Parties specified on Schedule 1.01(b),
and shall include each other parcel of real property and improvements thereto
with respect to which a Mortgage is granted pursuant to Section 5.11.


 


23

















 


“Mortgages”
means any mortgage, deed of trust or other agreement which conveys or evidences
a Lien in favor of the Agent, for the benefit of the Agent and the Lenders, on
real property of a Loan Party, including any amendment, modification or
supplement thereto.


 


“Multiemployer
Plan” means a multiemployer plan as defined in Section 3(37) or
4001(a)(3) of ERISA.


 


“Net
Income” means, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of Preferred Stock dividends.


 


“Net
Proceeds” means the aggregate cash proceeds received by the Borrower or any
Restricted Subsidiary in respect of any Asset Sale, including any cash received
upon the sale or other disposition of any Designated Noncash Consideration
received in any Asset Sale, net of the direct costs relating to such Asset Sale
and the sale or disposition of such Designated Noncash Consideration, including
legal, accounting and investment banking fees, and brokerage and sales
commissions, any relocation expenses incurred as a result thereof, taxes paid
or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), amounts required to be
applied to the repayment of principal, premium, if any, and interest on
Indebtedness required (other than as required by Section 2.20(a)(i) or
Section 2.20(b)(i)(A)) to be paid as a result of such transaction and any
deduction of appropriate amounts to be provided by the Borrower as a reserve in
accordance with GAAP against any liabilities associated with the asset disposed
of in such transaction and retained by the Borrower after such sale or other
disposition thereof, including pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any indemnification
obligations associated with such transaction.


 


“New
Note Documents” means, collectively, the Senior Note Documents and the
Senior Subordinated Note Documents.


 


“New
Notes” means, collectively, the Senior Notes and the Senior Subordinated
Notes.


 


“Non-Consenting Lender” has the meaning
assigned to such term in Section 9.02(e).


 


“Non-Paying Guarantor” has the meaning
assigned to such term in Section 10.10.


 


“Obligated Party” has the meaning assigned to
such term in Section 10.02.


 


“Obligations”
means all unpaid principal of and accrued and unpaid interest on the Loans, all
accrued and unpaid fees and all expenses, reimbursements, indemnities and other
obligations of the Loan Parties to the Lenders or to any Lender, the Agent or
any indemnified party arising under the Loan Documents.


 


“Officer”
means the Chairman of the Board, the Chief Executive Officer, the Chief
Financial Officer, the President, any Executive Vice President, Senior Vice
President or Vice President, the Treasurer or the Secretary of the Borrower.


 


“Officers’ Certificate”  means a certificate signed
on behalf of the Borrower by two Officers of the Borrower, one of whom must be
the principal executive officer, the principal financial officer, the treasurer
or the principal accounting officer of the Borrower.


 


“Original
Credit Agreement” means the Credit Agreement dated as of October 6,
2005, by and among the Borrower, Holdings, the subsidiaries of the Borrower
from time to time party thereto, 


 


24

















 


the
Lenders from time to time party thereto, the Administrative Agent and the
Collateral Agent, as amended prior to the Restatement Effective Date.


 


“Other
Information” has the meaning assigned to such term in Section 3.11(b).


 


“Other
Pari Passu Lien Obligations” means (i) any Indebtedness constituting
debt securities incurred pursuant to an indenture with an institutional trustee
or loans incurred in the bank credit market (including institutional investor
participation therein) and (ii) all obligations with respect to such
Indebtedness.


 


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


 


“Pari
Passu Liens” means any Lien on the Collateral granted for the benefit of
the holders of the 2028 Debentures that is required by the terms of the
indenture applicable thereto as a result of the grant of security interests
pursuant to any Loan Document, the ABL Security Documents or otherwise.


 


“Participant”
has the meaning assigned to such term in Section 9.04.


 


“Paying Guarantor” has the meaning
assigned to such term in Section 10.10.


 


“PBGC”
means the Pension Benefit Guaranty Corporation referred to and defined in ERISA
and any successor entity performing similar functions.


 


“Perfection
Certificate” shall mean a certificate in the form of Exhibit I
to the Security Agreement or any other form approved by the Agent.


 


“Permitted
Asset Swap” means the concurrent purchase and sale or exchange of Related
Business Assets or a combination of Related Business Assets and cash or Cash
Equivalents between the Borrower or any of its Restricted Subsidiaries and
another Person that is not the Borrower or any of its Restricted Subsidiaries; provided
that any cash or Cash Equivalents received must be applied in accordance with
Section 2.20.


 


“Permitted
Collateral Liens” means:


 


(a) Liens securing any Other Pari Passu Lien Obligations; provided,
however, that, at the time of incurrence and after giving pro forma
effect thereto, the Consolidated Secured Debt Ratio would be no greater than
3.75 to 1.00;


 


(b) Liens existing on the Closing Date;


 


(c) Pari Passu Liens;


 


(d) Liens described in clauses (c), (d), (f), (h), (i), (l),
(m), (o), (q) (but only with respect to clauses (h), (i) and (r)
(but only with respect to Section 6.01(b)(vi) referred to therein)
referred to therein), (r) (but only with respect to Sections 6.01(b)(vi) and
(b)(xxii)(A) referred to therein), (t), (u) and (aa) (but only with
respect to obligations secured by Liens described in clauses (a) or (c) set
forth above) of the definition of “Permitted Liens”; and


 


25

















 


(e) Liens on the Term Loan First Lien Collateral in favor of the
Agent relating to the Agent’s administrative expenses with respect to the Term
Loan First Lien Collateral.


 


“Permitted
Debt” has the meaning assigned to such term in Section 6.01.


 


“Permitted
Holders” means each of the Sponsors, the Co-Investors and Management
Stockholders and any group (within the meaning of Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act, or any successor provision) of
which any of the foregoing are members; provided that, in the case of such group and without giving
effect to the existence of such group or any other group, the Sponsors, the
Co-Investors and Management Stockholders, collectively, have beneficial
ownership of more than 50% of the total voting power of the Voting Stock of the
Borrower or any of its direct or indirect parent companies.  Any Person or group whose acquisition of
beneficial ownership constitutes a Change of Control in respect of which a
Change of Control Offer is made in accordance with Section 2.19 will
thereafter, together with its Affiliates, constitute an additional Permitted
Holder.


 


“Permitted
Investments” means:


 


(a) any Investment in the Borrower or any Restricted Subsidiary;


 


(b) any Investment in cash and Cash Equivalents or Investment
Grade Securities;


 


(c) (i) any Investment by the Borrower or any Restricted
Subsidiary of the Borrower in a Person that is engaged in a Similar Business if
as a result of such Investment (A) such Person becomes a Restricted Subsidiary
of the Borrower or (B) such Person, in one transaction or a series of related
transactions, is merged, consolidated or amalgamated with or into, or transfers
or conveys substantially all of its assets to, or is liquidated into, the
Borrower or a Restricted Subsidiary of the Borrower, and (ii) any
Investment held by such Person;


 


(d) any Investment in securities or other assets not constituting
cash, Cash Equivalents or Investment Grade Securities and received in
connection with an Asset Sale made pursuant to Section 6.06 or any other
disposition of assets not constituting an Asset Sale;


 


(e) any Investment existing on the Closing Date or made pursuant
to legally binding written commitments in existence on the Closing Date;


 


(f) loans and advances to, and guarantees of Indebtedness of,
employees not in excess of $10,000,000 outstanding at any one time, in the
aggregate;


 


(g) any Investment acquired by the Borrower or any Restricted
Subsidiary (i) in exchange for any other Investment or accounts receivable
held by the Borrower or any such Restricted Subsidiary in connection with or as
a result of a bankruptcy, workout, reorganization or recapitalization of the
Person in which such other Investment is made or which is the obligor with
respect to such accounts receivable or (ii) as a result of a foreclosure
by the Borrower or any Restricted Subsidiary with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default;


 


(h) Hedging Obligations permitted under Section 6.01(b)(xii);


 


(i) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar expenses,
in each case incurred in the ordinary course of business or consistent with
past practice or to fund such Person’s purchase of Equity 


 


26

















 


Interests
of the Borrower or any direct or indirect parent company thereof under
compensation plans approved by the Board of Directors of the Borrower in good
faith;


 


(j) Investments the payment for which consists of Equity Interests
of the Borrower, or any of its direct or indirect parent companies (exclusive
of Disqualified Stock); provided  that such Equity Interests will not
increase the amount available for Restricted Payments under Section 6.04(a)(iii);


 


(k) guarantees of Indebtedness permitted under Section 6.01
and performance guarantees in the ordinary course of business;


 


(l) any transaction to the extent it constitutes an investment
that is permitted and made in accordance with the provisions of Section 6.05(b) (other
than any transaction set forth in clauses (ii), (vi) and (xi) of Section 6.05(b));


 


(m) Investments consisting of purchases and acquisitions of
inventory, supplies, material or equipment or the licensing or contribution of
intellectual property pursuant to joint marketing arrangements with other
Persons;


 


(n) Investments in a Similar Business having an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (n) that are at that time outstanding (without giving effect
to the sale of an Unrestricted Subsidiary to the extent the proceeds of such
sale do not consist of cash or marketable securities), not to exceed the
greater of (x) $100,000,000 and (y) 1.50% of Total Assets at the time
of such Investment (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value);


 


(o) Investments relating to a Receivables Facility; provided that in the case of
Receivables Facilities established after the Closing Date, such Investments are
necessary or advisable (in the good faith determination of the Borrower) to
effect such Receivables Facility; and


 


(p) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (p) that
are at that time outstanding (without giving effect to the sale of an
Unrestricted Subsidiary to the extent the proceeds of such sale do not consist
of cash or marketable securities), not to exceed $150,000,000 (with the fair
market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value)


 


“Permitted
Liens” means, with respect to any Person:


 


(a) Liens to secure Indebtedness incurred under
Sections 6.01(b)(i) or (b)(ii) and the 2028 Debentures (and, in
each case, any related obligations);


 


(b) pledges or deposits by such Person under workmen’s
compensation laws, unemployment insurance laws or similar legislation, or good
faith deposits to secure bids, tenders, contracts (other than for the payment
of Indebtedness) or leases to which such Person is a party, or deposits to
secure public or statutory obligations of such Person or deposits of cash or U.S.
government bonds to secure surety or appeal bonds to which such Person is a
party, or deposits as security for contested taxes or import duties or for the
payment of rent, in each case incurred in the ordinary course of business;


 


27

















 


(c) Liens imposed by law, such as carriers’, warehousemen’s and
mechanics’ Liens and other similar Liens, in each case, for sums not yet
overdue for a period of more than thirty (30) days or being contested in
good faith by appropriate proceedings or other Liens arising out of judgments
or awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review, if adequate reserves
with respect thereto are maintained on the books of such Person in accordance
with GAAP;


 


(d) Liens for taxes, assessments or other governmental charges or
claims not yet overdue for a period of more than thirty (30) days or
payable or subject to penalties for nonpayment or which are being contested in
good faith by appropriate proceedings diligently conducted, if adequate
reserves with respect thereto are maintained on the books of such Person in
accordance with GAAP;


 


(e) Liens in favor of issuers of performance and surety bonds or
bid bonds or with respect to other regulatory requirements or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business;


 


(f) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to the ownership of
its properties, in each case, which were not incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person;


 


(g) Liens existing on the Closing Date;


 


(h) Liens on property or shares of stock of a Person at the time
such Person becomes a subsidiary; provided  that such Liens are not created or
incurred in connection with, or in contemplation of, such other Person becoming
such a subsidiary; provided,  further,  that such Liens may not extend to any
other property owned by the Borrower or any Restricted Subsidiary;


 


(i) Liens on property at the time the Borrower or a Restricted
Subsidiary acquired the property, including any acquisition by means of a
merger or consolidation with or into the Borrower or any Restricted Subsidiary;
provided that such Liens
are not created or incurred in connection with, or in contemplation of, such
acquisition; provided,  further,  that the Liens may not extend to any
other property owned by the Borrower or any Restricted Subsidiary;


 


(j) Liens securing Indebtedness or other obligations of a
Restricted Subsidiary owing to the Borrower or another Restricted Subsidiary
permitted to be incurred in accordance with Section 6.01;


 


(k) Liens on specific items of inventory or other goods and
proceeds of any Person securing such Person’s obligations in respect of bankers’
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;


 


(l) leases and subleases granted to others in the ordinary course
of business which do not materially interfere with the ordinary conduct of the
business of the Borrower or any of the Restricted Subsidiaries and do not
secure any Indebtedness;


 


28

















 


(m) Liens arising from financing statement filings under the UCC
or similar state laws regarding operating leases entered into by the Borrower
and its Restricted Subsidiaries in the ordinary course of business;


 


(n) Liens in favor of the Borrower or any Subsidiary Guarantor;


 


(o) Liens on inventory or equipment of the Borrower or any
Restricted Subsidiary granted in the ordinary course of business to the
Borrower’s client at which such inventory or equipment is located;


 


(p) Liens on accounts receivable and related assets incurred in
connection with a Receivables Facility;


 


(q) Liens to secure any refinancing, refunding, extension, renewal
or replacement (or successive refinancing, refunding, extensions, renewals or
replacements) as a whole, or in part, of any Indebtedness secured by any Lien
referred to in clauses (a), (g), (h), (i), (r) and (aa) of this
definition; provided  that (x) such new Lien shall be
limited to all or part of the same property that secured the original Lien
(plus improvements on such property), and (y) the Indebtedness secured by
such Lien at such time is not increased to any amount greater than the sum of
(A) the outstanding principal amount or, if greater, committed amount of
the Indebtedness described under clauses (a), (g), (h), (i), (r) and
(aa) of this definition at the time the original Lien became a Permitted Lien
pursuant this Agreement, and (B) an amount necessary to pay any fees and
expenses, including premiums, related to such refinancing, refunding,
extension, renewal or replacement;


 


(r) Liens securing Indebtedness permitted to be incurred pursuant
to Section 6.01(b)(vi), (b)(xix), (b)(xx), (b)(xxii)(A) and (b)(xxiii); provided that (A) Liens
securing Indebtedness permitted to be incurred pursuant to Section 6.01(b)(vi) do
not at any time encumber any property other than the property financed by such
Indebtedness and the proceeds and the products thereof, (B) Liens securing
Indebtedness permitted to be incurred pursuant to Section 6.01(b)(xix) are
solely on acquired property or the assets of the acquired entity, as the case
may be and (C) Liens securing Indebtedness permitted to be incurred
pursuant to Section 6.01(b)(xx) extend only to the assets of Foreign
Subsidiaries;


 


(s) deposits in the ordinary course of business to secure
liability to insurance carriers;


 


(t) Liens securing judgments for the payment of money not
constituting an Event of Default under paragraph (h) of Article VII,
so long as such Liens are adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such judgment
have not been finally terminated or the period within which such proceedings
may be initiated has not expired;


 


(u) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods in the ordinary course of business;


 


(v) Liens (i) of a collection bank arising under Section 4-210
of the UCC on items in the course of collection, (ii) attaching to commodity
trading accounts or other commodity brokerage accounts incurred in the ordinary
course of business and (iii) in favor of banking institutions arising as a
matter of law encumbering deposits (including the right of set-off) and which
are within the general parameters customary in the banking industry;


 


29

















 


(w) Liens that are contractual rights of set-off (i) relating
to the establishment of depository relations with banks not given in connection
with the issuance of Indebtedness, (ii) relating to pooled deposit or
sweep accounts of the Borrower or any of its Restricted Subsidiaries to permit
satisfaction of overdraft or similar obligations incurred in the ordinary
course of business of the Borrower and its Restricted Subsidiaries or (iii) relating
to purchase orders and other agreements entered into with customers of the
Borrower or any of its Restricted Subsidiaries in the ordinary course of
business;


 


(x) Liens encumbering reasonable customary initial deposits and
margin deposits and similar Liens attaching to commodity trading accounts or
other brokerage accounts incurred in the ordinary course of business and not
for speculative purposes;


 


(y) Liens deemed to exist in connection with Investments in
repurchase agreements permitted under Section 6.01; provided  that such Liens do not extend to any
assets other than those assets that are the subject of such repurchase
agreement;


 


(z) other Liens securing obligations incurred in the ordinary
course of business which obligations do not exceed $50,000,000 at any one time
outstanding;


 


(aa) Liens securing Hedging Obligations, so long as the related
Indebtedness is, and is permitted to be pursuant to Section 6.02, secured by a
Lien on the same property securing such Hedging Obligations;


 


(bb) Liens incurred to secure obligations in respect of any
Indebtedness permitted to be incurred pursuant to Section 6.01; provided
that, at the time of incurrence and after giving pro forma effect thereto, the
Consolidated Secured Debt Ratio would be no greater than 4.00 to 1.00; and


 


(cc) Liens securing Permitted Loan Refinancing Indebtedness.


 


“Permitted
Loan Refinancing Indebtedness” means Indebtedness of the Borrower that may
be (i) Other Pari Passu Lien Obligations, (ii) secured by the
Collateral on a junior basis to the Loans and other Obligations or (iii) unsecured;
provided that (a) such Indebtedness shall have a stated maturity no
earlier than, and shall not provide for any scheduled amortization, principal
or sinking fund payments prior to, the date that is 91 days after the latest
Maturity Date of any Loan outstanding at the time of the incurrence of such
Indebtedness, (b) the terms and conditions of such Indebtedness shall not
provide for any mandatory prepayment or redemption, prepayment or redemption at
the option of the holder thereof, or similar mandatory prepayment provisions,
other than, subject to reinvestment rights no less favorable to the Borrower
than those under this Agreement and to rights in respect of the prior repayment
of or prior offer to repay the Obligations, upon the occurrence of a change of
control or similar event, asset sale or casualty or condemnation event and
customary acceleration rights following an event of default, (c) the
covenants and events of default and other terms and conditions of such
Indebtedness (other than interest rate, fees, funding discounts and redemption
or prepayment premiums), taken as a whole, are not more restrictive to
Holdings, the Borrower or the Loan Guarantors than the terms of this Agreement,
(d) such Indebtedness shall not be guaranteed by any person other than a
Loan Guarantor and the terms of any such guarantee shall be no more favorable
to the secured parties in respect of such Indebtedness than the terms of the
Loan Guaranty are to the Secured Parties, (e) the Net Proceeds of such
Indebtedness are applied within three Business Days following the incurrence
thereof to prepay Tranche B-1 Loans in accordance Section 2.08, (f) in
the case of secured Indebtedness, such Indebtedness shall not be secured by any
assets or property other than the Collateral and (g) in the case of
secured Indebtedness, all security therefor shall be granted pursuant to
documentation substantially similar to the Collateral Documents, and 


 


30

















 


the
secured parties thereunder, or a trustee or collateral agent on their behalf,
shall have become a party, in the case of Other Pari Passu Lien Obligations, to
the Intercreditor Agreement, and in the case of such Indebtedness that is
secured by the Collateral on a junior basis, another intercreditor agreement in
form and substance reasonably satisfactory to the Administrative Agent and the
agent under the Senior Secured Asset-Based Revolving Credit Facility (it being
understood that such intercreditor agreement shall provide for “silent second”
lien provisions with respect of such Indebtedness and that the Administrative
Agent and the agent under the Senior Secured Asset Based Revolving Credit
Facility will control all remedies with respect to the Collateral as set forth
in the Intercreditor Agreement).


 


“Person”
means any individual, corporation, limited liability company, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.


 


“Plan”
means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the
Code or Section 302 of ERISA, and in respect of which the Borrower or any
ERISA Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.


 


“Preferred
Stock” means any Equity Interest with preferential rights of payment of
dividends or upon liquidation, dissolution, or winding up.


 


“Prime
Rate” means the rate of interest per annum determined from time to time by
Credit Suisse AG as its prime rate in effect at its principal office in
New York City and notified to the Borrower.


 


“Projections”
means the projections of the Borrower and the Subsidiaries included in the
Information Memorandum and any other projections and any forward-looking
statements of such entities furnished to the Lenders or the Agent by or on
behalf of Holdings, the Borrower or any of the Subsidiaries prior to the
Closing Date.


 


“Qualified Proceeds” means assets
that are used or useful in, or Capital Stock of any Person engaged in, a
Similar Business; provided  that the fair market value of any such
assets or Capital Stock shall be determined by the Borrower in good faith.


 


“Receivables
Facility” means one or more receivables financing facilities, as amended,
supplemented, modified, extended, renewed, restated, refunded, replaced or
refinanced from time to time, the Indebtedness of which is non-recourse (except
for standard representations, warranties, covenants and indemnities made in
connection with such facilities) to the Borrower and its Restricted
Subsidiaries pursuant to which the Borrower or any of its Restricted
Subsidiaries sells its accounts receivable to either (a) a Person that is not
a Restricted Subsidiary or (b) a Receivables Subsidiary that in turn sells
its accounts receivable to a Person that is not a Restricted Subsidiary.


 


“Receivables
Fees” means distributions or payments made directly or by means of
discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.


 


“Receivables
Subsidiary” means any subsidiary formed solely for the purpose of engaging,
and that engages only, in one or more Receivables Facilities.


 


“Refinancing
Indebtedness” has the meaning assigned to such term in
Section 6.01(b)(xv).


 


31






 












 


“Refunding
Capital Stock” has the meaning assigned to such term in Section 6.04(b)(ii).


 


“Register”
has the meaning assigned to such term in Section 9.04.


 


“Registration
Rights Agreement” means the Registration Rights Agreement relating to the
Senior Notes and the Senior Subordinated Notes, dated as of the Closing Date,
among the Borrower, each Subsidiary Guarantor, Credit Suisse First Boston LLC,
Deutsche Bank Securities Inc., Banc of America Securities LLC and Goldman Sachs &
Co.


 


“Regulation
T” means Regulation T of the Board as from time to time in effect and
all official rulings and interpretations thereunder or thereof, and any
successor provision thereto.


 


“Regulation
U” means Regulation U of the Board as from time to time in effect and
all official rulings and interpretations thereunder or thereof, and any
successor provision thereto.


 


“Regulation X”
means Regulation X of the Board as from time to time in effect and all
official rulings and interpretations thereunder or thereof, and any successor
provision thereto.


 


“Related
Business Assets” means assets (other than cash or Cash Equivalents) used or
useful in a Similar Business; provided  that any assets received by the Borrower
or a Restricted Subsidiary in exchange for assets transferred by the Borrower
or a Restricted Subsidiary shall not be deemed to be Related Business Assets if
they consist of securities of a Person, unless upon receipt of the securities
of such Person, such Person would become a Restricted Subsidiary.


 


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


 


“Required
Lenders” means at any time the Lenders holding more than 50% of the
aggregate principal amount of Loans outstanding at such time.


 


“Requirement
of Law” means, as to any Person, the Certificate of Incorporation and
By-Laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.


 


“Responsible
Officer” of any Person means the chief executive officer, the president,
any vice president, the chief operating officer or any Financial Officer of
such Person and any other officer or similar official thereof responsible for
the administration of the obligations of such Person in respect of this
Agreement.  Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate, partnership
and/or other action on the part of such Loan Party and such Responsible Officer
shall be conclusively presumed to have acted on behalf of such Loan Party.


 


“Restatement
Effective Date” has the meaning assigned to such term in the Amendment
Agreement.


 


“Restricted
Investment” means an Investment other than a Permitted Investment.


 


“Restricted
Payments” has the meaning assigned to such term in Section 6.04(a).


 


32

















 


“Restricted Subsidiary”  means, at any time, any
direct or indirect subsidiary of the Borrower (including any Foreign
Subsidiary) that is not then an Unrestricted Subsidiary; provided  that upon the occurrence of an
Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such
subsidiary shall be included in the definition of “Restricted Subsidiary”.


 


“Retired
Capital Stock” has the meaning assigned to such term in Section 6.04(b)(ii).


 


“Revolving
Facility First Lien Collateral” has the meaning set forth in the
Intercreditor Agreement.


 


“Sale
and Lease-Back Transaction” means any arrangement with any Person providing
for the leasing by the Borrower or any Restricted Subsidiary of any real or
tangible personal property, which property has been or is to be sold or
transferred by the Borrower or such Restricted Subsidiary to such Person in
contemplation of such leasing.


 


“S&P”
means Standard & Poor’s Ratings Service, a division of the McGraw-Hill
Companies, Inc., and any successor to its rating agency business.


 


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


 


“Secured
Hedging Obligations” means all Hedging Obligations owing to the Agent, a
Joint Lead Arranger or a co-arranger, a Lender or any Affiliate of any of the
foregoing and with respect to which, at or prior to the time that the Hedge
Agreement relating to such Hedging Obligation is entered into, the Borrower (or
another Loan Party) and the Lender or other Person referred to above in this
definition (or Affiliate) party thereto (except in the case of the Agent) shall
have delivered written notice to the Agent that such a transaction has been
entered into and that it constitutes a Secured Hedging Obligation entitled to
the benefits of the Collateral Documents and the Intercreditor Agreement.


 


“Secured Indebtedness” means any
Indebtedness secured by a Lien.


 


“Secured
Obligations” means all Obligations, together with all Secured Hedging
Obligations.


 


“Secured
Parties” has the meaning assigned to such term in the Security Agreement.


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.


 


“Security
Agreement” means that certain Pledge and Security and Intercreditor
Agreement, dated as of the Closing Date, between the Loan Parties and the
Agent, for the benefit of the Agent and the other Secured Parties.


 


“Senior Indebtedness” means with respect to any Person (a) all Indebtedness of such
Person, whether outstanding on the Closing Date or thereafter incurred and
(b) all other obligations of such Person (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization
relating to such Person whether or not post-filing interest is allowed in such
proceeding) in respect of Indebtedness described in clause (a) above
unless, in the case of clauses (a) and (b), the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness or other obligations are subordinate in right
of payment to the Obligations or the Loan Guarantee of such Person, as the case
may be; provided that Senior Indebtedness 


 


33

















 


shall
not include (i) any obligation of such Person to the Borrower or any
subsidiary or to any joint venture in which the Borrower or any Restricted
Subsidiary has an interest, 
(ii) any liability for Federal, state, local or other Taxes owed or
owing by such Person, (iii) any accounts payable or other liability to
trade creditors in the ordinary course of business (including guarantees
thereof as instruments evidencing such liabilities), (iv) any Indebtedness
or other obligation of such Person that is subordinate or junior in any respect
to any other Indebtedness or other obligation of such Person or (v) that
portion of any Indebtedness that at the time of incurrence is incurred in
violation of this Agreement.


 


“Senior
Note Documents” means the Senior Notes Indenture and all other instruments,
agreements and other documents evidencing the Senior Notes or providing for any
guarantee or other right in respect thereof.


 


“Senior
Notes” means the Borrower’s 9%/93⁄4% Senior Notes due 2015, in an initial
aggregate principal amount of $700,000,000.


 


“Senior
Notes Indenture” means the Indenture dated as of the Closing Date, among
the Borrower, as issuer, certain of its subsidiaries, as guarantors, and Wells
Fargo Bank, National Association, as trustee, pursuant to which the Senior
Notes are issued.


 


“Senior
Secured Asset-Based Revolving Credit Agreement” means the Amended and
Restated Credit Agreement dated as of July 15, 2009, among Holdings, the
Borrower, the subsidiaries of the Borrower from time to time party thereto,
Bank of America, N.A., as administrative agent and collateral agent, and the
lenders from time to time party thereto.


 


“Senior
Secured Asset-Based Revolving Credit Facility” means the credit facility
provided under the Senior Secured Asset-Based Revolving Credit Agreement,
including any guarantees, collateral documents, instruments and agreements executed
in connection therewith, and any amendments, supplements, modifications,
extensions, replacements, renewals, restatements, refundings or refinancings
thereof and any indentures or credit facilities or commercial paper facilities
with banks or other institutional lenders or investors that extend, replace,
refund, refinance, renew or defease any part of the loans, notes, other credit
facilities or commitments thereunder, including any such replacement, refunding
or refinancing facility or indenture that increases the amount borrowable
thereunder or alters the maturity thereof (provided that such increase in
borrowings is permitted under Section 6.01).


 


“Senior
Secured Term Loan Facility” means the credit facility provided under this
Agreement, including any guarantees, collateral documents, instruments and
agreements executed in connection therewith, and any amendments, supplements,
modifications, extensions, replacements, renewals, restatements, refundings or
refinancings thereof and any indentures or credit facilities or commercial
paper facilities with banks or other institutional lenders or investors that
extend, replace, refund, refinance, renew or defease any part of the loans,
notes, other credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility or indenture that increases the
amount borrowable thereunder or alters the maturity thereof (provided that such
increase in borrowings is permitted under Section 6.01).


 


“Senior
Subordinated Notes Indenture” means the Indenture dated as of the Closing
Date, among the Borrower, as issuer, certain of its subsidiaries, as
guarantors, and Wells Fargo Bank, National Association, as trustee, pursuant to
which the Senior Subordinated Notes are issued.


 


“Senior
Subordinated Notes” means the Borrower’s 103/8% Senior Subordinated Notes due 2015, in an initial aggregate principal
amount of $500,000,000.


 


34

















 


“Senior
Subordinated Note Documents” means the Senior Subordinated Notes Indenture
and all other instruments, agreements and other documents evidencing the Senior
Subordinated Notes or providing for any guarantee or other right in respect
thereof.


 


“Significant Subsidiary”  means any Restricted
Subsidiary of the Borrower that would be a “significant subsidiary” as defined
in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to
the Securities Act, as such regulation is in effect on the Closing Date.


 


“Similar Business” means  any business conducted by
the Borrower and its Restricted Subsidiaries on the Closing Date or any
business that is similar, reasonably related, incidental or ancillary thereto.


 


“Sponsors”
means Texas Pacific Group and Warburg Pincus LLC and their respective
Affiliates.


 


“Subordinated
Indebtedness” means (a) with respect to the Borrower, any Indebtedness
of the Borrower that is by its terms subordinated in right of payment to the
Obligations, and (b) with respect to any Loan Guarantor, any Indebtedness
of such Loan Guarantor that is by its terms subordinated in right of payment to
the Loan Guaranty of such Loan Guarantor.


 


“subsidiary”
means, with respect to any Person, (a) any corporation, association, or
other business entity (other than a partnership, joint venture, limited
liability company or similar entity) of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time of determination owned or controlled, directly or
indirectly, by such Person or one or more of the other subsidiaries of that
Person or a combination thereof and (b) any partnership, joint venture,
limited liability company or similar entity of which (i) more than 50% of
the capital accounts, distribution rights, total equity and voting interests or
general or limited partnership interests, as applicable, are owned or
controlled, directly or indirectly, by such Person or one or more of the other
subsidiaries of that Person or a combination thereof whether in the form of
membership, general, special or limited partnership or otherwise, and (ii) such
Person or any Restricted Subsidiary of such Person is a controlling general
partner or otherwise controls such entity.


 


“Subsidiary”
means, unless the context otherwise requires, a Restricted Subsidiary of the
Borrower.  For purposes of Sections 3.06,
3.09, 3.10, 3.15, 5.04 and 5.08 only, references to Subsidiaries shall be
deemed also to be references to Unrestricted Subsidiaries.


 


“Subsidiary
Guarantor” means each Restricted Subsidiary of the Borrower that is a Loan
Party and that executes this Agreement as a Loan Guarantor on the Closing Date
and each other Restricted Subsidiary of the Borrower that thereafter guarantees
the Secured Obligations pursuant to the terms of this Agreement.


 


“Successor
Borrower” has the meaning assigned to such term in Section 6.03(a)(i).


 


“Successor
Person” has the meaning assigned to such term in Section 6.03(c)(i).


 


“Taxes”
means any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any Governmental Authority.


 


“Term
Loan First Lien Collateral” has the meaning set forth in the Intercreditor
Agreement.


 


35

















 


“Title
Insurance Company” means the title insurance company providing the Title
Insurance Policies.


 


“Title
Insurance Policies” means the lender’s title insurance policies issued to
Agent with respect to the Mortgaged Properties.


 


“Total Assets”  means the total amount of all assets of the Borrower
and the Restricted Subsidiaries, determined on a consolidated basis in
accordance with GAAP as shown on the most recent balance sheet of the Borrower.


 


“Tranche
B-1 Lender” means a Lender with an outstanding Tranche B-1 Loan.


 


“Tranche
B-1 Loan Maturity Date” means April 6, 2013.


 


“Tranche
B-1 Loans” means the term loans made to the Borrower pursuant to the
Original Credit Agreement and designated as “Tranche B-1 Loans” pursuant to the
Amendment Agreement.


 


“Tranche
B-2 Lender” means a Lender with an outstanding Tranche B-2 Loan.


 


“Tranche
B-2 Loan Maturity Date” means April 6, 2016; provided that if,
as of July 15, 2015, Senior Notes and Senior Subordinated Notes in an
aggregate principal amount in excess of $300,000,000 remain outstanding, the
Tranche B-2 Loan Maturity Date will be July 15, 2015.


 


“Tranche
B-2 Loans” means the term loans made to the Borrower pursuant to the
Original Credit Agreement and designated as “Tranche B-2 Loans” pursuant to the
Amendment Agreement.


 


“Transactions”
has the meaning specified in the Original Credit Agreement.


 


“2028
Debentures” means the 7.125% Senior Debentures due 2028 of the Borrower
outstanding on the Closing Date.


 


“Type”,
when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined
by reference to the Adjusted LIBOR Rate or the Alternate Base Rate.


 


“UCC”
means the Uniform Commercial Code as in effect from time to time in the state
of New York or any other state the laws of which are required to be applied in
connection with the issue of perfection of security interests.


 


“Unliquidated
Obligations” means, at any time, any Secured Obligations (or portion
thereof) that are contingent in nature or unliquidated at such time, including
any Secured Obligation that is: (i) an obligation to reimburse a bank for
drawings not yet made under a letter of credit issued by it; (ii) any
other obligation (including any guarantee) that is contingent in nature at such
time; or (iii) an obligation to provide collateral to secure any of the
foregoing types of obligations, but excluding unripened or contingent
obligations related to indemnification under Section 9.03 for which no
written demand has been made.


 


36

















 


“Unrestricted
Subsidiary” means (a) any subsidiary of the Borrower that at the time
of determination is an Unrestricted Subsidiary (as designated by the Borrower,
as provided below) and (b) any subsidiary of an Unrestricted Subsidiary.


 


The
Borrower may designate any subsidiary of the Borrower (including any existing
subsidiary and any newly acquired or newly formed subsidiary) to be an
Unrestricted Subsidiary unless such subsidiary or any of its subsidiaries owns
any Equity Interests or Indebtedness of, or owns or holds any Lien on, any
property of, the Borrower or any subsidiary of the Borrower (other than any
subsidiary of the subsidiary to be so designated); provided  that
(i) any Unrestricted Subsidiary must be an entity of which shares of the
capital stock or other equity interests (including partnership interests)
entitled to cast at least a majority of the votes that may be cast by all
shares or equity interests having ordinary voting power for the election of
directors or other governing body are owned, directly or indirectly, by the
Borrower, (ii) such designation complies with Section 6.04 and
(iii) each of (A) the subsidiary to be so designated and (B) its
subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Borrower or any Restricted Subsidiary.


 


The
Borrower may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided  that, immediately after giving effect to
such designation no Default shall have occurred and be continuing and either
(x) the Borrower could incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test described in the first
paragraph of Section 6.01 or (y) the Fixed Charge Coverage Ratio for
the Borrower and its Restricted Subsidiaries would be greater than such ratio
for the Borrower and its Restricted Subsidiaries immediately prior to such
designation, in each case on a pro forma basis taking into account such
designation.


 


Any
such designation by the Borrower shall be notified by the Borrower to the Agent
by promptly delivering to the Agent a copy of any applicable Board Resolution
giving effect to such designation and an Officers’ Certificate certifying that
such designation complied with the foregoing provisions.  Notwithstanding the foregoing, as of the
Closing Date, all of the subsidiaries of the Borrower will be Restricted
Subsidiaries, other than Neiman Marcus Funding Corporation, Kate Spade,
Gurwitch Products LLC and their respective subsidiaries, which shall be
Unrestricted Subsidiaries.


 


“USA
PATRIOT Act” means The Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. No. 107-56 (signed into law October 26,
2001)), as amended from time to time.


 


“Voting Stock”  of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.


 


“Weighted
Average Life to Maturity” means, when applied to any Indebtedness, Disqualified
Stock or Preferred Stock, as the case may be, at any date, the quotient
obtained by dividing  (1) the sum of the products of the
number of years from the date of determination to the date of each successive
scheduled principal payment of such Indebtedness or redemption or similar
payment with respect to such Disqualified Stock or Preferred Stock multiplied
by the amount of such payment, by (2) the sum of all such payments.


 


“Wholly-Owned
Subsidiary” of any Person means a subsidiary of such Person, 100% of the
outstanding Capital Stock or other ownership interests of which (other than
directors’ qualifying 


 


37

















 


shares)
shall at the time be owned by such Person or by one or more Wholly-Owned
Subsidiaries of such Person.


 


“Withdrawal
Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.


 


SECTION 1.02.  Classification of Loans and Borrowings.  For purposes of this Agreement, Loans may be
classified and referred to by Type (e.g., a “LIBOR Rate Loan” or a “LIBOR
Rate Borrowing”) or Class (e.g., a “Tranche B-2 Borrowing”).


 


SECTION 1.03.  Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  Unless otherwise specifically indicated, the
term “consolidated” with respect to any Person refers to such Person
consolidated with its Restricted Subsidiaries, and excludes from such consolidation
any Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an
Affiliate of such Person.  The word “will”
shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.


 


ARTICLE II


 


The
Credits


 


SECTION 2.01.  Commitments.  The Commitments have been fully utilized as
of the Restatement Effective Date and as of such date, each borrowing of Loans
(as defined in the Original Credit Agreement) is deemed to be a Tranche B-1
Loan Borrowing or a Tranche B-2 Loan Borrowing, as applicable; accordingly, as
of the Restatement Effective Date, $1,505,735,000 aggregate prinicipal amount
of Loans (consisting of $437,925,354.32 of Tranche B-1 Loans and
$1,067,809,645.68 of Tranche B-2 Loans) is outstanding hereunder.  Amounts repaid or prepaid in respect of the
Loans may not be reborrowed.


 


SECTION 2.02.  Loans and Borrowings.  (a)  Each Loan shall be made as part of
a Borrowing consisting of Loans of the same Type made by the Lenders ratably in
accordance with their respective Commitments. 
The failure of any Lender to make any Loan required to be made by it
shall not relieve any other Lender of its obligations hereunder; provided
that the Commitments of the Lenders are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.


 


38

















 


(b) 
Subject to Section 2.12, each Borrowing shall be comprised entirely of ABR
Loans or LIBOR Rate Loans as the Borrower may request in accordance
herewith.  Each Lender at its option may
make any LIBOR Rate Loan by causing any domestic or foreign branch or Affiliate
of such Lender to make such Loan; provided that (i) any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement, (ii) in exercising such
option, such Lender shall use reasonable efforts to minimize any increase in
the Adjusted LIBOR Rate or increased costs to the Borrower resulting therefrom
(which obligation of such Lender shall not require it to take, or refrain from
taking, actions that it determines would result in increased costs for which it
will not be compensated hereunder or that it otherwise determines would be
disadvantageous to it and in the event of such request for costs for which
compensation is provided under this Agreement, the provisions of Section 2.13
shall apply) and (iii) such branch or Affiliate of such Lender would not
be included in clause (z) of the first proviso to the definition of the
term “Eligible Assignee” set forth in Section 1.01.


 


(c) 
At the commencement of each Interest Period for any LIBOR Rate Borrowing, such
Borrowing shall comprise an aggregate principal amount that is an integral
multiple of $1,000,000 and not less than $5,000,000.  Each ABR Borrowing when made shall be in a
minimum principal amount of $1,000,000; provided that an ABR Borrowing may be
maintained in a lesser amount equal to the difference between the aggregate
principal amount of all other Borrowings and the total amount of Loans at such
time outstanding.  Borrowings of more
than one Type may be outstanding at the same time; provided that there
shall not at any time be more than a total of ten different Interest Periods in
effect for LIBOR Rate Borrowings at any time outstanding.


 


(d) 
Notwithstanding any other provision of this Agreement, the Borrower shall not
be entitled to request, or to elect to convert or continue, any Borrowing if
the Interest Period requested with respect thereto would end after the Maturity
Date.


 


SECTION 2.03.  [Reserved].


 


SECTION 2.04.  [Reserved].


 


SECTION 2.05.  Type; Interest Elections.  (a)  The Borrower may elect to convert
all or any portion of any Borrowing (subject to the minimum amounts for
Borrowings of the applicable Type specified in Section 2.02(c)) to a
different Type or to continue such Borrowing and, in the case of a LIBOR Rate
Borrowing, may elect Interest Periods therefor, all as provided in this
Section.  The Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing.


 


(b) 
To make an election pursuant to this Section, the Borrower shall notify the
Agent of such election by telephone (i) in the case of an election to
convert to or continue as a LIBOR Rate Borrowing, not later than
11:00 a.m., New York City time, three (3) Business Days before
the date of the proposed conversion or continuation or (ii) in the case of
an election to convert to or continue as an ABR Borrowing, not later than 10:00 a.m.,
New York City time, on the date of the proposed conversion or
continuation.  Each such telephonic
Interest Election Request shall be irrevocable and shall be confirmed promptly
by hand delivery or facsimile to the Agent of a written Interest Election
Request in a form approved by the Agent and signed by the Borrower.


 


(c) 
Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:


 


39

















 


(i) the
Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the
portions thereof to be allocated to each resulting Borrowing (in which case the
information to be specified pursuant to clauses (iii) and (iv) below
shall be specified for each resulting Borrowing);


 


(ii) the
effective date of the election made pursuant to such Interest Election Request,
which shall be a Business Day;


 


(iii) whether
the resulting Borrowing is to be an ABR Borrowing or a LIBOR Rate Borrowing; and


 


(iv) if
the resulting Borrowing is a LIBOR Rate Borrowing, the Interest Period to be
applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.


 


If
any such Interest Election Request requests a LIBOR Rate Borrowing but does not
specify an Interest Period, then the Borrower shall be deemed to have selected
an Interest Period of one month’s duration.


 


(d) 
Promptly following receipt of an Interest Election Request, the Agent shall
advise each Lender of the details thereof and of such Lender’s portion of each
resulting Borrowing.


 


(e) 
If the Borrower fails to deliver a timely Interest Election Request with
respect to a LIBOR Rate Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein,
at the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing.  Notwithstanding any contrary
provision hereof, if an Event of Default has occurred and is continuing and the
Agent, at the request of the Required Lenders, so notifies the Borrower, then,
so long as an Event of Default is continuing (i) no outstanding Borrowing
may be converted to or continued as a LIBOR Rate Borrowing and (ii) unless
repaid, each LIBOR Rate Borrowing shall be converted to an ABR Borrowing at the
end of the then current Interest Period applicable thereto.


 


SECTION 2.06.  Termination of Commitments.  Each party to this Agreement acknowledges
that the Commitments terminated upon the making of the Loans on the Closing
Date.


 


SECTION 2.07.  Repayment of Loans; Evidence of Debt.  (a)  The Borrower hereby unconditionally
promises to pay to the Agent for the account of each Lender (x) the then
unpaid principal amount of each Tranche B-1 Loan on the Tranche B-1 Loan
Maturity Date and (y) the then upaid principal amount of each Tranche B-2
Loan on the Tranche B-2 Loan Maturity Date.


 


(b) 
Each Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to such Lender resulting
from each Loan made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.


 


(c) 
The Agent shall maintain accounts in which it shall record (i) the amount
of each Loan made hereunder, the Type thereof and the Interest Period (if any)
applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Agent hereunder for the
account of the Lenders and each Lender’s share thereof.


 


40

















 


(d) 
The entries made in the accounts maintained pursuant to paragraph (b) or (c) of
this Section shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of any Lender or
the Agent to maintain such accounts or any error therein shall not in any
manner affect the obligation of the Borrower to repay the Loans in accordance
with the terms of this Agreement.


 


(e) 
Any Lender may request that Loans made by it be evidenced by a promissory
note.  In such event, the Borrower shall
prepare, execute and deliver to such Lender a promissory note payable to such
Lender and its registered assigns and in substantially the form of Exhibit F
hereto.  Thereafter, the Loans evidenced
by such promissory note and interest thereon shall at all times (including
after assignment pursuant to Section 9.04) be represented by one or more
promissory notes in such form payable to the payee named therein and its
registered assigns.


 


SECTION 2.08.  Optional Prepayment of Loans.  (a)  Upon prior notice in accordance
with paragraph (b) of this Section, the Borrower shall have the right at
any time and from time to time to prepay any Borrowing in whole or in part
without premium or penalty (but subject to Section 2.14). In the event of
any optional prepayment of Loans made at a time when Loans of more than one Class remain
outstanding, the Borrower shall allocate such prepayment ratably between the
Tranche B-1 Loans and the Tranche B-2 Loans based on the aggregate principal
amount of outstanding Borrowings of each Class; provided that any such
optional prepayment of Tranche B-1 Loans may be made without a pro rata
prepayment of Tranche B-2 Loans.


 


(b) 
The Borrower shall notify the Agent by telephone (confirmed by facsimile) of
any prepayment hereunder (i) in the case of prepayment of a LIBOR Rate
Borrowing, not later than 11:00 a.m., New York City time, three (3) Business
Days before the date of prepayment or (ii) in the case of prepayment of an
ABR Borrowing, not later than 10:00 a.m., New York City time, on the day
of prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof
to be prepaid. Promptly following receipt of any such notice relating to a
Borrowing, the Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of a Borrowing of the same Type as provided in
Section 2.02. Each prepayment of a Borrowing shall be applied ratably to
the Loans included in the prepaid Borrowing. Prepayments shall be accompanied
by accrued interest as required by Section 2.11.


 


SECTION 2.09.  Mandatory Prepayment of Loans.  (a)  No later than five (5) Business
Days after the earlier of (i) ninety (90) days after the end of each
fiscal year of the Borrower, and (ii) the date on which the financial
statements with respect to such period are delivered pursuant to
Section 5.01(a), the Borrower shall prepay outstanding Loans in an
aggregate principal amount equal to (A) 50% of Excess Cash Flow for the
fiscal year then ended minus (B) the amount of any prepayments of
Loans made pursuant to Section 2.08 during such fiscal year, except to the
extent that such prepayments were (1) deducted in determining the amount
of Excess Cash Flow for such fiscal year or (2) financed with the proceeds
of other Indebtedness of the Borrower or its Restricted Subsidiaries; provided
that (i) such percentage of Excess Cash Flow shall be reduced to 25% of
such Excess Cash Flow if the Consolidated Leverage Ratio at the end of such
fiscal year shall be equal to or less than 5.00 to 1.00, but greater than 4.50
to 1.00, and (ii) such prepayment shall not be required if the
Consolidated Leverage Ratio at the end of such fiscal year shall be equal to or
less than 4.50 to 1.00.


 


(b) 
The Borrower shall deliver to the Agent, at the time of each prepayment
required under this Section 2.09, (i) a certificate signed by a
Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) at least five (5) Business
Days prior written notice of such prepayment. Each notice of prepayment shall
specify the prepayment date, the


 


41
















 


Type of each Loan being
prepaid and the principal amount of each Loan (or portion thereof) to be
prepaid. Each prepayment of a Borrowing shall be applied ratably to the Loans
included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest
as required by Section 2.11. All prepayments of Borrowings under this
Section 2.09 shall be subject to Section 2.14, but shall otherwise be
without premium or penalty.


 


(c)  Any Lender may elect, by notice to the Agent
at or prior to the time and in the manner specified by the Agent, prior to any
prepayment of Loans required to be made by the Borrower pursuant to this
Section, to decline all (but not a portion) of its pro rata
share of such prepayment (such declined amounts, the “Declined Proceeds”).  Any Declined Proceeds shall be offered by the
Agent to the Lenders not so declining such prepayment (with such Lenders having
the right to decline any prepayment with Declined Proceeds at the time and in
the manner specified by the Agent).  To
the extent such Lenders elect to decline their pro rata
shares of such Declined Proceeds, such remaining Declined Proceeds shall not be
subject to prepayment pursuant to this Section and may be retained by the
Borrower.  The Agent shall notify the
Borrower of the amount of such remaining Declined Proceeds as promptly as
practicable and, in any event, no later than one (1) Business Day prior to the
date on which such prepayment is required to be made by the Borrower pursuant
to this Section.  Notwithstanding
anything to the contrary contained in this Section, (i) prepayments of
outstanding Loans pursuant to this Section shall be allocated ratably among the
Lenders that accept the same and (ii) if at the time of any prepayment
pursuant to this Section there shall be outstanding Borrowings of different
Types or LIBOR Rate Loans with different Interest Periods, and if some but not
all of the Lenders have accepted such prepayment, then the aggregate amount of
such prepayment shall be allocated ratably to each outstanding Borrowing of the
accepting Lenders.


 


SECTION
2.10.  Fees.  The Borrower agrees to pay to the Agent, for
its own account, the agency fees set forth in the Fee Letter, as amended,
restated, supplemented or otherwise modified from time to time, or such agency fees
as may otherwise be separately agreed upon by the Borrower and the Agent
payable in the amounts and at the times specified therein or as so otherwise
agreed upon.


 


SECTION
2.11.  Interest.  (a) 
The Loans comprising each ABR Borrowing shall bear interest at the
Alternate Base Rate plus the Applicable Rate.


 


(b)  The Loans comprising each LIBOR Rate
Borrowing shall bear interest at the Adjusted LIBOR Rate for the Interest
Period in effect for such Borrowing plus the Applicable Rate.


 


(c)  Notwithstanding the foregoing, if any
principal of or interest on any Loan or any fee or other amount payable by the
Borrower hereunder is not paid when due, whether at stated maturity, upon
acceleration or otherwise, such overdue amount shall bear interest, after as well
as before judgment, at a rate per annum equal to (i) in the case of
overdue principal of any Loan, 2% plus the rate otherwise applicable to such
Loan as provided in the preceding paragraphs of this Section or (ii) in
the case of any other amount, 2% plus the rate applicable to ABR Loans as
provided in paragraph (a) of this Section.


 


(d)  Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan; provided
that (i) interest accrued pursuant to paragraph (c) of this Section shall be
payable on demand, (ii) in the event of any repayment or prepayment of any
Loan, accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (iii) in the event of
any conversion of any LIBOR Rate Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.


 


(e)  All interest hereunder shall be computed on
the basis of a year of 360 days, except that interest computed by reference to
the Alternate Base Rate at times when the Alternate Base Rate is 


 


42

















 


based on the Prime Rate
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).  The applicable Alternate Base Rate, Adjusted
LIBOR Rate or LIBOR Rate shall be determined by the Agent, and such
determination shall be conclusive absent manifest error.


 


SECTION
2.12.  Alternate Rate of Interest.  If prior to the commencement of any Interest
Period for a LIBOR Rate Borrowing:


 


(a) the Agent determines (which determination shall
be conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBOR Rate or the LIBOR Rate, as
applicable, for such Interest Period; or


 


(b) the Agent is advised by the Required Lenders
that the Adjusted LIBOR Rate or the LIBOR Rate, as applicable, for such
Interest Period will not adequately and fairly reflect the cost to such Lenders
of making or maintaining their Loans included in such Borrowing for such
Interest Period;


 


then
the Agent shall promptly give notice thereof to the Borrower and the Lenders by
telephone or facsimile as promptly as practicable thereafter and, until the
Agent notifies the Borrower and the Lenders that the circumstances giving rise
to such notice no longer exist, any Interest Election Request that requests the
conversion of any Borrowing to, or continuation of any Borrowing as, a LIBOR
Rate Borrowing shall be ineffective and such Borrowing shall be converted to an
ABR Borrowing on the last day of the Interest Period applicable thereof.


 


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


 


(i)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBOR Rate); or


 


(ii)
impose on any Lender or the London interbank market any other condition
affecting this Agreement or LIBOR Rate Loans made by such Lender;


 


and
the result of any of the foregoing shall be to increase the cost to such Lender
of making or maintaining any LIBOR Rate Loan or to reduce the amount of any sum
received or receivable by such Lender hereunder (whether of principal, interest
or otherwise), then, following delivery of the certificate contemplated by
paragraph (c) of this Section, the Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered (except for any Taxes, which shall be
dealt with exclusively pursuant to Section 2.15).


 


(b)  If any Lender determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender’s capital or on the capital of such Lender’s
holding company, if any, as a consequence of this Agreement or the Loans made
by such Lender to a level below that which such Lender or such Lender’s holding
company could have achieved but for such Change in Law  other than due to Taxes, which shall be dealt
with exclusively pursuant to Section 2.15 (taking into consideration such
Lender’s policies and the policies of such Lender’s holding company with
respect to capital adequacy), then from time to time following delivery of the
certificate contemplated by paragraph (c) of this Section the Borrower
will pay to such Lender such additional amount or amounts as will compensate
such Lender or such Lender’s holding company for any such reduction suffered.


 


43

















 


(c)  A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company as
specified in paragraph (a) or (b) of this Section and setting forth in
reasonable detail the manner in which such amount or amounts was determined
shall be delivered to the Borrower and shall be conclusive absent manifest
error.  The Borrower shall pay such
Lender the amount shown as due on any such certificate within ten
(10) days after receipt thereof.


 


(d)  Failure or delay on the part of any Lender to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender’s right to demand such compensation; provided that the
Borrower shall not be required to compensate a Lender pursuant to this Section
for any increased costs or reductions incurred more than 180 days prior to the
date that such Lender notifies the Borrower of the Change in Law giving rise to
such increased costs or reductions and of such Lender’s intention to claim
compensation therefor; provided  further that, if the Change in
Law giving rise to such increased costs or reductions is retroactive, then the
180-day period referred to above shall be extended to include the period of
retroactive effect thereof.


 


SECTION
2.14.  Break Funding Payments.  In the event of (a) the payment of any
principal of any LIBOR Rate Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default),
(b) the conversion of any LIBOR Rate Loan other than on the last day of
the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any LIBOR Rate Loan on the date specified in any
notice delivered pursuant hereto, or (d) the assignment of any LIBOR Rate
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by the Borrower pursuant to Section 2.17, then, in any
such event, the Borrower shall compensate each Lender for the loss, cost and
expense attributable to such event.  In
the case of a LIBOR Rate Loan, such loss, cost or expense to any Lender shall
be deemed to be the amount determined by such Lender to be the excess, if any,
of (i) the amount of interest which would have accrued on the principal
amount of such Loan had such event not occurred, at the Adjusted LIBOR Rate
that would have been applicable to such Loan, for the period from the date of
such event to the last day of the then current Interest Period therefor (or, in
the case of a failure to borrow, convert or continue, for the period that would
have been the Interest Period for such Loan), over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement
of such period, for dollar deposits of a comparable amount and period from
other banks in the eurodollar market.  A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section and the basis therefor and
setting forth in reasonable detail the manner in which such amount or amounts
was determined shall be delivered to the Borrower and shall be conclusive
absent manifest error.  The Borrower
shall pay such Lender the amount shown as due on any such certificate within
ten (10) days after receipt thereof.


 


SECTION
2.15.  Taxes.  (a) 
Any and all payments by or on account of any obligation of any Loan
Party hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if a Loan Party shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section) the Agent or Lender (as applicable) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Loan Party shall make such deductions and (iii) such
Loan Party shall timely pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.  If at any time a Loan Party is required by
applicable law to make any deduction or withholding from any sum payable
hereunder, such Loan Party shall promptly notify the relevant Lender or Agent
upon becoming aware of the same. In addition, each Lender or Agent shall
promptly notify a Loan Party upon becoming aware of any circumstances as a
result of which a Loan Party is or would be required to make any deduction or
withholding from any sum payable hereunder.


 


44

















 


(b)  In addition, the Loan Parties shall pay any
Other Taxes to the relevant Governmental Authority in accordance with
applicable law.


 


(c)  Each Loan Party shall indemnify the Agent and
each Lender, within ten (10) days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Agent or such
Lender, as applicable, on or with respect to any payment by or on account of
any obligation of such Loan Party hereunder (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under
this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.  A certificate as
to the amount of such payment or liability delivered to the Borrower by a
Lender, or by the Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.


 


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


 


(e)  Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the
jurisdiction in which the Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall
deliver to the Borrower (with a copy to the Agent), at the time or times
prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.  In particular, on or prior
to the date which is ten (10) Business Days after the Closing Date, each
Foreign Lender shall deliver to the Borrower (with a copy to the Agent) two
duly signed, properly completed copies of either IRS Form W- 8BEN or any
successor thereto (relating to such Foreign Lender and entitling it to an
exemption from, or reduction of, United States withholding tax on all payments
to be made to such Foreign Lender by the Borrower or any other Loan Party pursuant
to this Agreement or any other Loan Document) or IRS Form W-8ECI or any
successor thereto (relating to all payments to be made to such Foreign Lender
by the Borrower or any other Loan Party pursuant to this Agreement or any other
Loan Document) or such other evidence reasonably satisfactory to the Borrower
and the Agent that such Foreign Lender is entitled to an exemption from, or
reduction of, United States withholding tax, including any exemption pursuant
to Section 871(h) or 881(c) of the Code, and in the case of a Foreign Lender
claiming such an exemption under Section 881(c) of the Code, a certificate that
establishes in writing to the Borrower and the Agent that such Foreign Lender
is not (i) a “bank” as defined in Section 881(c)(3)(A) of the Code,
(ii) a 10-percent stockholder within the meaning of Section 881(c)(3)(B)
of the Code, or (iii) a controlled foreign corporation related to the
Borrower with the meaning of Section 881(c)(3)(C) of the Code.  Thereafter and from time to time, each such
Foreign Lender shall (A) promptly submit to the Borrower (with a copy to
the Agent) such additional duly completed and signed copies of one or more of
such forms or certificates (or such successor forms or certificates as shall be
adopted from time to time by the relevant United States taxing authorities) as
may then be available under then current United States Laws and regulations to
avoid, or such evidence as is reasonably satisfactory to the Borrower and the
Agent of any available exemption from, or reduction of, United States
withholding taxes in respect of all payments to be made to such Foreign Lender
by the Borrower or other Loan Party pursuant to this Agreement, or any other
Loan Document, in each case, (1) on or before the date that any such form,
certificate or other evidence expires or becomes obsolete, (2) after the
occurrence of any event requiring a change in the most recent form, certificate
or evidence previously delivered by it to the Borrower and (3) from time
to time thereafter if reasonably requested by the Borrower or the Agent, and
(B) promptly notify the Borrower 


 


45

















 


and the Administrative
Agent of any change in circumstances which would modify or render invalid any
claimed exemption or reduction.


 


(f)  Each Lender or Agent that is a United States
person, agrees to complete and deliver to the Borrower a statement signed by an
authorized signatory of the Lender to the effect that it is a United States
person together with a duly completed and executed copy of Internal Revenue
Service Form W-9 or successor form.


 


(g)  If the Agent or a Lender determines, in good
faith in its sole discretion, that it has received a refund of any Indemnified Taxes or Other Taxes as to which
it has been indemnified by a Loan Party or with respect to which such Loan
Party has paid additional amounts pursuant to this Section 2.15, it shall pay
over such refund to such Loan Party (but only to the extent of indemnity
payments made, or additional amounts paid, by such Loan Party under this
Section 2.15 with respect to the Taxes or Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of the Agent or such Lender (including
any Taxes imposed with respect to such refund) as is determined by the Agent or
such Lender in good faith in its sole discretion, and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided, that such
Loan Party, upon the request of the Agent or such Lender, agrees to repay as
soon as reasonably practicable the amount paid over to such Loan Party (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Agent or such Lender in the event the Agent or such Lender is
required to repay such refund to such Governmental Authority. This Section
shall not be construed to require the Agent or any Lender to make available its
tax returns (or any other information relating to its taxes which it deems
confidential) to such Loan Party or any other Person.


 


(h)  If the Borrower determines in good faith that
a reasonable basis exists for contesting any Indemnified Taxes or Other Taxes
for which additional amounts have been paid under this Section 2.15, the
relevant Lender or Agent shall cooperate with the Borrower in challenging such
Indemnified Taxes or Other Taxes, at the Borrower’s expense, if so requested by
the Borrower in writing.


 


(i)  For U.S. federal income tax purposes, any
amendment fees paid pursuant to the Amendment Agreement shall be treated as “points”
under applicable U.S. Treasury Regulations.


 


SECTION
2.16.  Payments Generally; Allocation
of Proceeds; Sharing of Set-offs. 
(a)  Unless otherwise specified,
the Borrower shall make each payment required to be made by it hereunder
(whether of principal, interest or fees, or of amounts payable under Section
2.13, 2.14 or 2.15, or otherwise) prior to 12:00 (noon), New York City time, on
the date when due, in immediately available funds, without set-off or
counterclaim.  Any amounts received after
such time on any date may, in the discretion of the Agent, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon.  All such payments
shall be made to the Agent to the applicable account designated to the Borrower
by the Agent, except that payments pursuant to Sections 2.13, 2.14, 2.15 and
9.03 shall be made directly to the Persons entitled thereto.  The Agent shall distribute any such payments received
by it, except as otherwise provided, for the account of any other Person to the
appropriate recipient promptly following receipt thereof.  If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such
extension.  All payments hereunder shall
be made in Dollars.  Any payment required
to be made by the Agent hereunder shall be deemed to have been made by the time
required if the Agent shall, at or before such time, have taken the necessary
steps to make such payment in accordance with the regulations or operating
procedures of the clearing or settlement system used by the Agent to make such
payment.


 


46

















 


(b)  Subject in all respects to the provisions of
the Intercreditor Agreement, all proceeds of Collateral received by the Agent
after an Event of Default has occurred and is continuing and all or any portion
of the Loans shall have been accelerated hereunder pursuant to Article VII,
shall upon election by the Agent or at the direction of the Required Lenders be
applied, first, to, ratably, pay any fees, indemnities, or
expense reimbursements then due to the Agent from the Borrower (other than in
connection with Hedging Obligations), second, ratably, to pay any fees
or expense reimbursements then due to the Lenders from the Borrower (other than
in connection with Hedging Obligations), third, to pay interest due and
payable in respect of the Loans, ratably, fourth, to prepay principal on
the Loans and any amounts owing with respect to Hedging Obligations, ratably, fifth,
to the payment of any other Secured Obligation due to the Agent or any Lender
by the Borrower, sixth, as provided for under the Intercreditor
Agreement, and seventh, to the Borrower or as the Borrower shall direct.


 


(c)  If any Lender shall, by exercising any right
of set-off or counterclaim or otherwise, obtain payment in respect of any principal
of or interest on any of its Loans resulting in such Lender receiving payment
of a greater proportion of the aggregate amount of its Loans and accrued
interest thereon than the proportion received by any other Lender, then the
Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans of other Lenders at such time outstanding to
the extent necessary so that the benefit of all such payments shall be shared
by the Lenders ratably in accordance with the aggregate amount of principal of
and accrued interest on their respective Loans; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered,  such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans to any assignee or participant, other than to
the Borrower or any subsidiary or Affiliate thereof (as to which the provisions
of this paragraph shall apply).  The
Borrower consents to the foregoing and agrees, to the extent it may effectively
do so under applicable law, that any Lender acquiring a participation pursuant
to the foregoing arrangements may exercise against the Borrower rights of
set-off and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of the Borrower in the amount of such
participation.


 


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


 


(e)  If any Lender shall fail to make any payment
required to be made by it pursuant to Sections 2.03(a), 2.16(c) or 9.03(c),
then the Agent may, in its discretion (notwithstanding any contrary provision
hereof), apply any amounts thereafter received by the Agent for the account of
such Lender to satisfy such Lender’s obligations under such Sections until all
such unsatisfied obligations are fully paid.


 


SECTION
2.17.  Mitigation Obligations;
Replacement of Lenders.  (a)  If any Lender requests compensation under
Section 2.13, or if the Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 2.15, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its
Loans hereunder or to assign its rights and obligations hereunder to another of
its offices, branches or 


 


47

















 


affiliates, if, in the
reasonable judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as
applicable, in the future and (ii) would not subject such Lender to any
material unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender in any material respect.  The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.


 


(b)  If any Lender requests compensation under
Section 2.13, or if the Borrower is required to pay any additional amount to
any Lender or any Governmental Authority for the account of any Lender pursuant
to Section 2.15, then the Borrower may, at its sole expense and effort, upon notice
to such Lender and the Agent, replace such Lender by requiring such Lender to
assign and delegate (and such Lender shall be obligated to assign and
delegate), without recourse (in accordance with and subject to the restrictions
contained in Section 9.04), all its interests, rights and obligations
under this Agreement to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (i) the Borrower shall have received the prior written consent of the
Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee (to the extent of such outstanding principal
and accrued interest and fees) or the Borrower (in the case of all other
amounts) and (iii) in the case of any such assignment resulting from a claim
for compensation under Section 2.13 or payments required to be made pursuant to
Section 2.15, such assignment will result in a reduction in such compensation
or payments.  A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.


 


SECTION
2.18.  Illegality.  If any Lender reasonably determines that any
Change in Law has made it unlawful, or that any Governmental Authority has
asserted after the Closing Date that it is unlawful, for such Lender or its
applicable lending office to make or maintain any LIBOR Rate Loans, then, on
notice thereof by such Lender to the Borrower through the Agent, any obligations
of such Lender to make or continue LIBOR Rate Loans or to convert ABR
Borrowings to LIBOR Rate Borrowings shall be suspended until such Lender
notifies the Agent and the Borrower that the circumstances giving rise to such
determination no longer exist.  Upon
receipt of such notice, the Borrower shall upon demand from such Lender (with a
copy to the Agent), either convert all LIBOR Rate Borrowings of such Lender to
ABR Borrowings, either on the last day of the Interest Period therefor, if such
Lender may lawfully continue to maintain such LIBOR Rate Borrowings to such
day, or immediately, if such Lender may not lawfully continue to maintain such
Loans.  Upon any such prepayment or
conversion, the Borrower shall also pay accrued interest on the amount so
prepaid or converted.  Each Lender agrees
to designate a different lending office if such designation will avoid the need
for such notice and will not, in the determination of such Lender, otherwise be
disadvantageous to it.


 


SECTION
2.19.  Change of Control.  (a) 
The Borrower shall (i) within thirty (30) days following the occurrence
of a Change of Control, make an offer to all Lenders to prepay all Loans
pursuant to a Change in Control Offer (as defined in paragraph (b) of this
Section 2.19) at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest to the date of prepayment, in
accordance with the terms contemplated in this Section 2.19; and (ii) prepay
all the Loans of all Lenders properly accepting such offer of prepayment in
accordance with such Change of Control Offer.


 


(b)  A “Change of Control Offer” means a
notice delivered to the Agent (which will promptly furnish such notice to the
Lenders) stating:


 


48

















 


(i)
that a Change of Control has occurred and that such Lender has the right to
require the Borrower to prepay all or a portion of such Lender’s Loans at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of prepayment;


 


(ii)
the Change of Control prepayment date (which shall be no earlier than thirty
(30) days nor later than sixty (60) days from the date such notice is
delivered);


 


(iii)
that any Loans as to which such offer is not properly accepted will remain
outstanding and continue to accrue interest;


 


(iv) unless
the Borrower defaults in the payment of the purchase price of any Loans as to
which the Change of Control Offer shall have been accepted, all Loans accepted
for payment pursuant to the Change of Control Offer will cease to accrue
interest on the Change of Control prepayment date;


 


(v) Lenders
electing to have any Loans purchased pursuant to a Change of Control Offer will
be required to notify the Agent prior to the close of business on the third
Business Day preceding the Change of Control prepayment date; and


 


(vi)
that Lenders will be entitled to withdraw their election to require the
Borrower to prepay their Loans; provided  that the Agent receives, not later than
the close of business on the last day of the offer period, a notice setting
forth the name of the Lender, the principal amount of Loans tendered for
prepayment, and a statement that such Lender is withdrawing its election to
have such Loans prepaid.


 


(c)  On the prepayment date, the Borrower shall
prepay the Loans of all Lenders who accept the Change of Control Offer at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of prepayment.  If at the time of any prepayment pursuant to
this Section 2.19 there shall be outstanding Borrowings of different Types
or LIBOR Rate Borrowings with different Interest Periods, and if some but not
all Lenders shall have accepted such Change of Control Offer, then the
aggregate amount of such prepayment shall be allocated ratably to each
outstanding Borrowing that comprises the Loans of the accepting Lenders.  All prepayments of Loans under this
Section 2.19 shall be subject to Section 2.14.


 


(d)  Notwithstanding the foregoing provisions of
this Section, the Borrower shall be deemed to have made a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the requirements
set forth in Section 2.19(b) applicable to a Change of Control Offer made by
the Borrower and prepays all Loans as to which offers for prepayment have been
validly accepted and not withdrawn pursuant to the terms of such Change of
Control Offer.


 


(e)  A Change of Control Offer may be made in
advance of a Change of Control, conditional upon such Change of Control, if a
definitive agreement is in place for such Change of Control at the time of
making of the Change of Control Offer.


 


SECTION
2.20.  Asset Sale Offer.  (a) 
Within 450 days after the Agent’s receipt of the Net Proceeds of
any Asset Sale of Term Loan First Lien Collateral, the Borrower or the
applicable Restricted Subsidiary may, at its option, apply the Net Proceeds
from such Asset Sale (i) (A) to make an offer to the Lenders to prepay
Loans or (B) to make an offer to purchase, prepay or permanently reduce Other
Pari Passu Lien Obligations secured by a Permitted Collateral Lien; provided,
however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to this clause (i), the 


 


49

















 


Borrower or such
Restricted Subsidiary shall permanently retire such Indebtedness and, in the
case of obligations under revolving credit facilities or other similar
Indebtedness, shall correspondingly permanently reduce commitments with respect
thereto (other than obligations owed to the Borrower or a Restricted
Subsidiary); provided, further, however, that if the
Borrower or any Restricted Subsidiary shall so reduce obligations under any
such Other Pari Passu Lien Obligations, the Borrower or such Restricted
Subsidiary will, equally and ratably, reduce the amount of Indebtedness
outstanding under this Agreement by, at its option, (I) prepaying Loans in
accordance with Section 2.08 or (II) making an offer (in accordance with
the procedures set forth below for an Asset Sale Offer) to all Lenders to
prepay their Loans at 100% of the principal amount thereof, plus the amount of accrued and unpaid
interest on the principal amount of Loans to be prepaid; or (ii) to acquire
Additional Assets; provided, however, that such Additional Assets
are concurrently with their acquisition added to the Collateral securing the
Secured Obligations in accordance with the provisions of Section 5.11 and
the Collateral Documents, and provided, further, that to the
extent such Additional Assets constitute the Capital Stock of any Person, the
assets of such Person that may be used or useful in a Similar Business are, in
accordance with the provisions of Section 5.11 and the Collateral
Documents, concurrently with the acquisition added to the Collateral securing
the Secured Obligations.  Notwithstanding
the foregoing, if during such 450-day period the Borrower or a Restricted
Subsidiary enters into a definitive binding agreement committing it to apply
such Net Proceeds of any Asset Sale of Term Loan First Lien Collateral to
acquire Additional Assets pursuant to clause (ii) of this paragraph (a),
such 450-day period will be extended with respect to the amount of Net Proceeds
so committed until such Net Proceeds are required to be applied in accordance
with such agreement (but such extension will in no event be for a period longer
than 180 days) (or, if earlier, the date of termination of such agreement).


 


(b)  Within 450 days after any of the
Borrower’s or any Restricted Subsidiary’s receipt of the Net Proceeds of any
Asset Sale (other than an Asset Sale of Term Loan First Lien Collateral), the
Borrower or such Restricted Subsidiary may, at its option, apply the Net
Proceeds from such Asset Sale (i) to permanently reduce (A) obligations under
any Senior Indebtedness of the Borrower or any Subsidiary Guarantor and, in the
case of obligations under revolving credit facilities or other similar
Indebtedness, to correspondingly permanently reduce commitments with respect
thereto (other than obligations owed to the Borrower or a Restricted
Subsidiary); provided
that if the Borrower or any Restricted Subsidiary shall so reduce obligations
under any Senior Indebtedness (other than Senior Indebtedness under the Senior
Secured Asset-Based Revolving Credit Facility secured by the Revolving Facility
First Lien Collateral), the Borrower or such Subsidiary Guarantor will, equally
and ratably, reduce the amount of Indebtedness outstanding under this Agreement
by, at its option, (I) prepaying Loans in accordance with Section 2.08 or
(II) making an offer (in accordance with the procedures set forth below
for an Asset Sale Offer) to all Lenders to prepay their Loans at 100% of the
principal amount thereof, plus
the amount of accrued and unpaid interest on the principal amount of Loans to
be prepaid, or (B) Indebtedness of a Restricted Subsidiary that is not a
Subsidiary Guarantor, other than Indebtedness owed to the Borrower or another
Restricted Subsidiary; or (ii) to an investment in (A) any one or more
businesses; provided  that such investment in any business is
in the form of the acquisition of Capital Stock and results in the Borrower or
any Restricted Subsidiary owning an amount of the Capital Stock of such
business such that it constitutes a Restricted Subsidiary, (B) properties,
(C) capital expenditures or (D) acquisitions of other assets, that in
each of (A), (B), (C) and (D), are used or useful in a Similar Business or
replace the businesses, properties and assets that are the subject of such
Asset Sale.  Notwithstanding the
foregoing, if during such 450-day period the Borrower or a Restricted Subsidiary
enters into a definitive binding agreement committing it to apply such Net
Proceeds in accordance with the requirements of clause (ii) of this
paragraph (b), such 450-day period will be extended with respect to the amount
of Net Proceeds so committed until such Net Proceeds are required to be applied
in accordance with such agreement (but such extension will in no event be for a
period longer than 180 days) (or, if earlier, until termination of such
agreement).


 


50

















 


(c)  Any Net Proceeds from an Asset Sale that are
not invested or applied in accordance with paragraph (a) or (b) of this
Section 2.20 within 450 days from the date of the receipt of such Net
Proceeds will be deemed to constitute “Excess Proceeds”.  When the aggregate amount of Excess Proceeds
exceeds $45,000,000, the Borrower shall (i) make an offer within ten (10)
Business Days after the date that Excess Proceeds exceed $45,000,000 to all
Lenders and, if required by the terms of any other Senior Indebtedness, to the
holders of such Senior Indebtedness (other than with respect to Hedging
Obligations) in accordance with the procedures set forth below for prepayment
or an Asset Sale Offer, to prepay the maximum aggregate principal amount of
Loans and prepay or purchase the maximum principal amount of such Senior
Indebtedness that is an integral multiple of $1,000 that may be purchased out
of the Excess Proceeds at a prepayment or purchase price in cash equal to 100%
of the principal amount thereof, plus accrued and unpaid interest to the date
of prepayment or repurchase, in accordance with the terms contemplated in this
Section 2.20; and (ii) prepay all the Loans of Lenders properly
accepting such offer of prepayment in accordance with such Asset Sale Offer
(subject to the proration provisions set forth in paragraph (f) of this
Section 2.20).  The Borrower may
satisfy the foregoing obligations with respect to any Net Proceeds from an
Asset Sale by making an Asset Sale Offer with respect to such Net Proceeds
prior to the expiration of the relevant 450 day period or with respect to
Excess Proceeds of $45,000,000 or less.


 


(d)  An “Asset Sale Offer” means a notice
delivered to the Agent (which will promptly furnish such notice to the Lenders)
stating:


 


(i)
that an Asset Sale Offer is being made pursuant to this Section 2.20 and
that such Lender has the right to require the Borrower to prepay all or a
portion of such Lender’s Loans (subject to the proration provisions set forth
in paragraph (f) of this Section 2.20) at a purchase price in cash
equal to 100% of the principal amount thereof, plus accrued and unpaid interest
to the date of prepayment; and


 


(ii)
the prepayment date (which shall be no earlier than thirty (30) days nor later
than sixty (60) days from the date such notice is mailed).


 


(e)  On the prepayment date, the Borrower (subject
to the proration provisions set forth in paragraph (f) of this
Section 2.20) shall prepay the Loans of all Lenders who accept the Asset
Sale Offer at a purchase price in cash equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the date of prepayment.  If at the time of any prepayment pursuant to
this Section 2.20 there shall be outstanding Borrowings of different Types
or LIBOR Rate Borrowings with different Interest Periods, and if some but not
all Lenders shall have accepted such Asset Sale Offer, then the aggregate
amount of such prepayment shall be allocated ratably to each outstanding
Borrowing that comprises the Loans of the accepting Lenders.  All prepayments of Loans under this
Section 2.20 shall be subject to Section 2.14.


 


(f)  To the extent that the aggregate amount of
Loans and other Senior Indebtedness tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Borrower may use any remaining Excess
Proceeds for general corporate purposes, subject to the terms of this
Agreement.  If the aggregate principal
amount of Loans and other Senior Indebtedness tendered pursuant to an Asset
Sale Offer exceeds the amount of Excess Proceeds, the Borrower shall select or
cause to be selected the Loans and such other Senior Indebtedness to be prepaid
or purchased on a pro rata basis based on the principal amount (or accreted
value) of the Loans and other Senior Indebtedness tendered.  Upon completion of any such Asset Sale Offer,
the amount of Excess Proceeds related to such Asset Sale Offer shall be reset
at zero.


 


51
















 


(g) 
Pending the final application of any Net Proceeds pursuant to this
Section 2.20, the Borrower or the applicable Restricted Subsidiary may
apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a
revolving credit facility or otherwise invest such Net Proceeds in any manner
not prohibited hereunder.


 


SECTION 2.21.  Repricing Protection.  In the event that, prior to the first
anniversary of the Restatement Effective Date, any Tranche B-2 Lender receives
a Repricing Prepayment (as defined below), then, at the time thereof, the
Borrower shall pay to such Tranche B-2 Lender a prepayment premium equal to
1.00% of the amount of such Repricing Prepayment.  As used herein, with respect to any Lender, a
“Repricing Prepayment” is the amount of principal of the Loans of such
Lender that is received by such Lender as a result of the mandatory assignment
of such Loans in the circumstances described in Section 9.02(e) following
the failure of such Lender to consent to an amendment of this Agreement that
would have the effect of reducing the Applicable Rate with respect to such
Loans.


 


SECTION 2.22.  Loan Modifications.  (a)  The Borrower may, by written notice
to the Administrative Agent from time to time, make one or more offers (each, a
“Loan Modification Offer”) to all Lenders of one or more Classes of
Loans (each Class subject to such a Loan Modification Offer, an “Affected
Class”) to make one or more Permitted Amendments (as defined in paragraph (c) below)
pursuant to procedures reasonably specified by the Administrative Agent and
reasonably acceptable to the Borrower. 
Such notice shall set forth (i) the terms and conditions of the
requested Permitted Amendment and (ii) the date on which such Permitted
Amendment is requested to become effective (which shall not be less than 10
Business Days nor more than 30 Business Days after the date of such
notice).  Permitted Amendments shall
become effective only with respect to the Loans of the Lenders of the Affected Class that
accept the applicable Loan Modification Offer (such Lenders, the “Accepting
Lenders”) and, in the case of any Accepting Lender, only with respect to
such Lender’s Loans of the Affected Class as to which such Lender’s
acceptance has been made.


 


(b) 
The Borrower and each Accepting Lender shall execute and deliver to the
Administrative Agent a loan modification agreement (each, a “Loan
Modification Agreement”) and such other documentation as the Administrative
Agent shall reasonably specify to evidence the acceptance of the Permitted Amendments
and the terms and conditions thereof. 
The Administrative Agent shall promptly notify each Lender as to the
effectiveness of each Loan Modification Agreement.  Each of the parties hereto hereby agree that,
upon the effectiveness of any Loan Modification Agreement, this Agreement shall
be deemed amended to the extent (but only to the extent) necessary to reflect
the existence and terms of the Permitted Amendment evidenced by such Loan
Modification Agreement and only with respect to the Loans of the Accepting
Lenders of the Affected Class (including any amendments necessary to treat
the Loans of the Accepting Lenders of the Affected Class as a class of
Loans).  Notwithstanding the foregoing,
no Permitted Amendment shall become effective unless the Administrative Agent,
to the extent reasonably requested by the Administrative Agent, shall have
received legal opinions, board resolutions, officer’s certificates and other
documentation requested by it consistent with those delivered on the closing
date under the Original Credit Agreement.


 


(c) 
“Permitted Amendments” shall be either or both of the following: (i) an
extension of the final maturity date of the applicable Loans of the Accepting
Lenders, (ii) an increase in the Applicable Rate with respect to the
applicable Loans of the Accepting Lenders; provided that if the initial
yield on any new class of Loans established under this Section (which
shall be determined by the Administrative Agent and shall equal the sum of (x) the
margin above the LIBOR Rate on such Loans (which shall be increased by the “LIBOR
floor” applicable to such Loans, if any, to the extent in excess of the “LIBOR
floor”, if any, applicable to the LIBOR Rate Loans then outstanding) and (y) if
such Loans are initially established at a discount or the Lenders establishing
the same receive a fee directly or indirectly from the Borrower or any
Subsidiary for establishing such Loans (the amount of such discount or fee,
expressed as 


 


52

















 


a percentage of such
Loans, being referred to herein as “OID”), the amount of such OID
divided by the lesser of (A) the average life to maturity of such Loans
and (B) four) exceeds by more than 50 basis points (the amount of such
excess above 50 basis points being referred to herein as the “Yield
Differential”) the Applicable Rate then in effect for LIBOR Rate Loans of
any outstanding Class of Loans (other than the Tranche B-1 Loans), then
the Applicable Rate in effect for such outstanding Loans (other than the
Tranche B-1 Loans) shall automatically be increased by the Yield Differential,
effective upon the establishment of the new Class of Loans.


 


ARTICLE III


 


Representations
and Warranties


 


Each
Loan Party represents and warrants to the Lenders that:


 


SECTION 3.01.  Organization; Powers.  Each of the Loan Parties and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to own its property and assets and to carry on its business as now
conducted and, except where the failure to do so, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.


 


SECTION 3.02.  Authorization; Enforceability.  The Transactions are within each applicable
Loan Party’s corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action of such Loan Party.  Each Loan Document to which each Loan Party
is a party have been duly executed and delivered by such Loan Party and is a
legal, valid and binding obligation of such Loan Party, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency or
similar laws affecting creditors’ rights generally and to general principles of
equity.


 


SECTION 3.03.  Governmental Approvals; No Conflicts.  The Transactions (a) do not require any
consent or approval of, registration or filing with, or any other action by,
any Governmental Authority, except such as have been obtained or made and are
in full force and effect, except for filings necessary to perfect Liens created
pursuant to the Loan Documents and the ABL Security Documents and except for
filings in connection with consummating the Merger and filings as may be
required under the Exchange Act and applicable stock exchange rules in
connection therewith, (b) will not violate any Requirement of Law applicable
to any Loan Party or any of its Subsidiaries, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon any Loan Party or any of its Subsidiaries or its assets, or (except for
the Merger Consideration and the 2008 Notes Call for Redemption) give rise to a
right thereunder to require any payment to be made by any Loan Party or any of
its Subsidiaries, and (d) will not result in the creation or imposition of
any Lien on any asset of any Loan Party or any of its Subsidiaries, except
Liens created pursuant to the Loan Documents and the ABL Security Documents;
except, in each case other than with respect to the creation of Liens, to the
extent that any such violation, default or right, or any failure to obtain such
consent or approval or to take any such action, would not reasonably be
expected to result in a Material Adverse Effect.


 


SECTION 3.04.  Financial Condition; No Material Adverse
Change.  (a)  The Borrower has
heretofore furnished to the Lenders its consolidated balance sheet and
statements of earnings, shareholders’ equity and cash flows (i) as of and
for the fiscal years ended July 31, 2004 and July 30, 2005, each
reported on by Deloitte & Touche LLP, independent public accountants,
and (ii) to the extent possible in the exercise of the Borrower’s
commercially reasonable efforts, as of and for each subsequent 


 


53

















 


fiscal month ended at
least thirty (30) days before the Closing Date, certified by its chief
financial officer.  Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower and its consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to the absence of footnotes and normal year-end adjustments in the case
of the statements referred to in clause (ii) above.


 


(b) 
The Borrower has heretofore delivered to the Lenders its unaudited pro forma
consolidated balance sheet and related pro forma statements of earnings,
shareholder’s equity and cash flows as of July 30, 2005, prepared giving
effect to the Transactions as if they had occurred, with respect to such
balance sheet, on such date and, with respect to such other financial
statements, on the first day of the 12-month period ending on such date. Such
pro forma financial statements have been prepared in good faith by the
Borrower, based on the assumptions used to prepare the pro forma financial
information contained in the Information Memorandum (which assumptions are
believed by the Borrower on the Closing Date to be reasonable), are based on
the best information available to the Borrower as of the date of delivery
thereof, accurately reflect all adjustments required to be made to give effect
to the Transactions and present fairly on a pro forma basis the estimated
consolidated financial position of the Borrower and its consolidated
Subsidiaries as of such date and for such period, assuming that the
Transactions had actually occurred at such date or at the beginning of such
period, as the case may be.


 


(c) 
No event, change or condition has occurred that has had, or would reasonably be
expected to have, a Material Adverse Effect, since July 30, 2005.


 


SECTION 3.05.  Properties.  (a)  As of the Closing Date, Schedule
3.05(a) sets forth the address of each parcel of real property (or
each set of parcels that collectively comprise one operating property) that is
owned or leased by each Loan Party, together with a list of the lessors with
respect to all such leased property.  Schedule
3.05(a) also identifies the principal place of business and chief
executive office of each Loan Party.  The
books and records of each Loan Party, and all of their respective chattel paper
and records of Accounts, are maintained exclusively at such locations. There is
no location at which any Loan Party has any Collateral (except for vehicles and
inventory in transit in the ordinary course of business) other than those
locations identified on Schedule 3.05(a).


 


(b) 
Each of the Borrower and each of the Subsidiaries has good and insurable fee
simple title to, or valid leasehold interests in, or easements or other limited
property interests in, all its real properties (including all Mortgaged
Properties) and has good and marketable title to its personal property and
assets, in each case, except for defects in title that do not materially
interfere with its ability to conduct its business as currently conducted or to
utilize such properties and assets for their intended purposes and except where
the failure to have such title would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.  All such properties and assets are free and
clear of Liens, other than Liens (i) permitted by Section 6.02 or
(ii) arising by operation of law (which Liens, in the case of this
clause (ii) do not materially interfere with the ability of Holdings,
the Borrower or the relevant Subsidiary to carry on its business as now
conducted or to utilize the affected properties or assets for their intended
purposes).


 


(c) 
Each of the Borrower and each of the Subsidiaries has complied with all
obligations under all leases to which it is a party, except where the failure
to comply would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and all such leases are in full force and
effect, except leases in respect of which the failure to be in full force and
effect would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. 
Each of the Borrower and each of the Subsidiaries enjoys peaceful and
undisturbed possession under all such leases, other than leases in respect of
which the failure to enjoy peaceful and undisturbed possession would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.


 


54

















 


(d) 
As of the Closing Date and as of the Restatement Effective Date, none of Holdings,
the Borrower or any Subsidiary has received any notice of, nor has any
knowledge of, any pending or contemplated condemnation proceeding affecting any
of the Mortgaged Properties or any sale or disposition thereof in lieu of
condemnation.


 


(e) 
To the Borrower’s knowledge, as of the Closing Date and as of the Restatement
Effective Date, none of the Borrower or any Subsidiary is obligated under any
right of first refusal, option or other contractual right to sell, assign or
otherwise dispose of any Mortgaged Property or any interest therein.


 


(f) 
Copies of certificates of occupancy relating to each Mortgaged Property that
the mortgagor has in its possession have been delivered to the Agent as
mortgagee with respect to each Mortgaged Property.


 


(g) 
Each of the Borrower and the Subsidiaries owns or possesses, or is licensed to
use, all patents, trademarks, service marks, trade names and copyrights and all
licenses and rights with respect to the foregoing, necessary for the present
conduct of its business, without any conflict with the rights of others, and
free from any burdensome restrictions on the present conduct of its business,
except where such failure to own, possess or hold pursuant to a license or such
conflicts and restrictions would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or except as set
forth on Schedule 3.05(g).


 


SECTION 3.06.  Litigation and Environmental Matters.  (a)  Other than the Disclosed Matters,
there are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of any Loan Party,
threatened against or affecting the Loan Parties or any of their Subsidiaries
(i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, would reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or
(ii) that involve any Loan Documents or the Transactions.


 


(b) 
Except for the Disclosed Matters or any other matters that, individually or in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect (i) no Loan Party nor any of its Subsidiaries has received notice
of any claim with respect to any Environmental Liability or knows of any basis
for any Environmental Liability and (ii) no Loan Party nor any of its
Subsidiaries (1) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law or (2) has become subject to any Environmental
Liability.


 


(c) 
Since the Closing Date, there has been no change in the status of the Disclosed
Matters that, individually or in the aggregate, has resulted in, or materially
increased the likelihood of, a Material Adverse Effect.


 


SECTION 3.07.  Compliance with Laws and Agreements;
Licenses and Permits.  (a)  Each
Loan Party is in compliance with all Requirements of Law applicable to it or
its property and all indentures, agreements and other instruments binding upon
it or its property, except where the failure to do so, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect.


 


(b) 
Each Loan Party and its Subsidiaries has obtained and holds in full force and
effect, all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary or advisable for the operation of its businesses
as presently conducted and as proposed to be conducted, except where the
failure to have so obtained or hold 


 


55

















 


or to be in force,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect.  No Loan Party
or any of its Subsidiaries is in violation of the terms of any such franchise,
license, lease, permit, certificate, authorization, qualification, easement,
right of way, right or approval, except where any such violation, individually
or in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect.


 


SECTION 3.08.  Investment and Holding Company Status.  No Loan Party is (a) an “investment
company” as defined in, or is required to be registered under, the Investment
Company Act of 1940 or (b) a “holding company” as defined in, or subject
to regulation under, the Public Utility Holding Company Act of 1935.


 


SECTION 3.09.  Taxes. 
Each Loan Party and its Subsidiaries has timely filed or caused to be
filed all Tax returns and reports required to have been filed and has paid or
caused to be paid all Taxes required to have been paid by it, except (a) Taxes
that are being contested in good faith by appropriate proceedings and for which
such Loan Party or such Subsidiary, as applicable, has set aside on its books
adequate reserves in accordance with GAAP or (b) to the extent that the
failure to do so, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect.


 


SECTION 3.10.  ERISA. 
No ERISA Event has occurred in the five year period prior to the date on
which this representation is made or deemed made and is continuing or is
reasonably expected to occur that, when taken together with all other such
ERISA Events for which liability is reasonably expected to occur, would
reasonably be expected to result in a Material Adverse Effect.  Except as would not reasonably be expected to
have a Material Adverse Effect, the present value of all accumulated benefit
obligations under all Plans (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the
date of the most recent financial statements reflecting such amounts, exceed
the fair market value of the assets of such Plans, in the aggregate.


 


SECTION 3.11.  Disclosure.  (a)  All written information (other than
the Projections, the pro forma financial statements and estimates and
information of a general economic nature) concerning Holdings, the Borrower,
the Subsidiaries, the Transactions and any other transactions contemplated
hereby included in the Information Memorandum or otherwise prepared by or on
behalf of the foregoing or their representatives and made available to any
Lenders or the Agent in connection with the Transactions on or before the
Closing Date (the “Information”), when taken as a whole, as of the date
such Information was furnished to the Lenders, did not contain any untrue
statement of a material fact as of any such date or omit to state a material
fact necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements were made.


 


(b) 
The Projections, pro forma financial statements and estimates and information
of a general economic nature prepared by or on behalf of the Borrower or any of
its representatives and that have been made available to any Lenders or the
Agent in connection with the Transactions on or before the Closing Date (the “Other
Information”) (i) have been prepared in good faith based upon
assumptions believed by the Borrower to be reasonable as of the date thereof
(it being understood that actual results may vary materially from the Other
Information), and (ii) as of the Closing Date, have not been modified in any
material respect by the Borrower.


 


SECTION 3.12.  Material Agreements.  No Loan Party is in default in any material
respect in the performance, observance or fulfillment of any of its obligations
contained in (i) any material agreement to which it is a party or
(ii) any agreement or instrument to which it is a party evidencing or
governing Indebtedness, except where any such default would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.


 


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SECTION 3.13.  Solvency.  (a)  Immediately after the consummation
of the Transactions to occur on the Closing Date, (i) the fair value of
the assets of the Loan Parties on a consolidated basis, at a fair valuation,
will exceed the debts and liabilities, direct, subordinated, contingent or
otherwise, of the Loan Parties on a consolidated basis; (ii) the present
fair saleable value of the property of the Loan Parties on a consolidated basis
will be greater than the amount that will be required to pay the probable
liability of the Loan Parties on a consolidated basis, on their debts and other
liabilities, direct, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (iii) the Loan Parties on a
consolidated basis will be able to pay their debts and liabilities, direct,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) the Loan Parties on a consolidated basis
will not have unreasonably small capital with which to conduct the businesses
in which they are engaged as such businesses are now conducted and are proposed
to be conducted following the Closing Date.


 


(b) 
The Loan Parties do not intend to incur debts beyond their ability to pay such
debts as they mature, taking into account the timing and amounts of cash to be
received by the Loan Parties and the timing and amounts of cash to be payable
by the Loan Parties on or in respect of their Indebtedness.


 


SECTION 3.14.  Insurance.  Schedule 3.14 sets forth a true,
complete and correct description of all insurance maintained by or on behalf of
the Loan Parties and the Subsidiaries as of the Closing Date.  As of the Closing Date, all such insurance is
in full force and effect and all premiums in respect of such insurance have
been duly paid.  The Borrower believes
that the insurance maintained by or on behalf of the Borrower and the
Subsidiaries is adequate and is in accordance with normal industry practice.


 


SECTION 3.15.  Capitalization and Subsidiaries.  As of the Closing Date, Schedule 3.15
sets forth (a) a correct and complete list of the name and relationship to
the Borrower of each and all of the Borrower’s Subsidiaries, (b) a true
and complete listing of each class of each of the Borrower’s authorized Equity
Interests, of which all of such issued shares are validly issued, outstanding,
fully paid and non-assessable, and owned beneficially and of record by the
Persons identified on Schedule 3.15, and (c) the type of entity of
the Borrower  and each of its
Subsidiaries.  All of the issued and
outstanding Equity Interests of the Subsidiaries owned by any Loan Party have
been (to the extent such concepts are relevant with respect to such ownership
interests) duly authorized and issued and are fully paid and non-assessable
free and clear of all Liens (other than Liens created under the Loan Documents
and the ABL Security Documents).


 


SECTION 3.16.  Security Interest in Collateral.  The provisions of this Agreement and the
other Loan Documents create legal and valid Liens on all the Collateral in
favor of the Agent, for the benefit of the Agent and the Lenders; and upon the
proper filing of UCC financing statements required pursuant to paragraph (l) of
Article IV of the Original Credit Agreement and any Mortgages with respect
to Mortgaged Properties, such Liens constitute perfected and continuing Liens
on the Collateral, securing the Secured Obligations, enforceable against the
applicable Loan Party and all third parties, and having priority over all other
Liens on the Collateral except in the case of (a) Permitted Liens, to the
extent any such Permitted Liens would have priority over the Liens in favor of
the Agent pursuant to any applicable law, (b) Liens perfected only by
possession (including possession of any certificate of title) to the extent the
Agent has not obtained or does not maintain possession of such Collateral and (c) subject
to and as provided for under the terms of the Intercreditor Agreement, the
Liens granted under the ABL Security Documents.


 


SECTION 3.17.  Labor Disputes.  As of the Closing Date and as of the
Restatement Effective Date, except as, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect: (a) there
are no strikes, lockouts or slowdowns against any Loan Party pending 


 


57

















 


or, to the knowledge of
the Borrower, threatened, (b) the hours worked by and payments made to
employees of the Loan Parties and the Subsidiaries have not been in violation
of the Fair Labor Standards Act or any other applicable Federal, state, local
or foreign law dealing with such matters and (c) all payments due from any
Loan Party or any Subsidiary, on account of wages and employee health and welfare
insurance and other benefits, have been paid or accrued as a liability on the
books of the Loan Party or such Subsidiary to the extent required by GAAP.  Except (i) as, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
or (ii) as set forth on Schedule 3.17, the consummation of the
Transactions will not give rise to a right of termination or right of
renegotiation on the part of any union under any collective bargaining
agreement to which Holdings, the Borrower or any of the Subsidiaries (or any
predecessor) is a party or by which Holdings, the Borrower or any of the
Subsidiaries (or any predecessor) is bound.


 


SECTION 3.18.  Federal Reserve Regulations.  (a)  On the Closing Date and on the
Restatement Effective Date, none of the Collateral is Margin Stock.


 


(b) 
None of Holdings, the Borrower and the Subsidiaries is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of buying or carrying Margin Stock.


 


(c) 
No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, (i) to
purchase or carry Margin Stock (other than pursuant to, or in connection with,
the Merger) or to extend credit to others for the purpose of purchasing or
carrying Margin Stock or to refund indebtedness originally incurred for such
purpose, or (ii) for any purpose that entails a violation of, or that is
inconsistent with, the provisions of Regulation T, U or X.


 


SECTION 3.19.  Transaction Documents.  Holdings and the Borrower have delivered to
the Agent a complete and correct copy of the Merger Agreement (including all
schedules, exhibits, amendments, supplements and modifications thereto).
Neither Holdings, the Borrower nor any other Loan Party or, to the knowledge of
Holdings, the Borrower or each Loan Party, any other Person party thereto is in
default in the performance or compliance with any material provisions thereof.  Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, all
representations and warranties set forth in the Merger Agreement were true and
correct in all material respects at the time as of which such representations
and warranties were made (or deemed made).


 


SECTION 3.20.  Senior Indebtedness.  The Obligations constitute “Senior
Indebtedness” and “Designated Senior Indebtedness” under and as defined in the
Senior Subordinated Note Documents.


 


ARTICLE IV


 


[Reserved]


 


ARTICLE V


 


Affirmative
Covenants


 


Until
the principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full, each Loan Party executing this Agreement covenants and
agrees, jointly and severally with all of the Loan Parties, with the Lenders
that:


 


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SECTION 5.01.  Financial Statements and Other
Information.  The Borrower will
furnish to the Agent (which will promptly furnish such information to the
Lenders):


 


(a) within ninety (90) days after the end
of each fiscal year of the Borrower, its audited consolidated balance sheet and
related statements of earnings, shareholders’ equity and cash flows as of the
end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by Deloitte &
Touche LLP or other independent public accountants of recognized national
standing and reasonably acceptable to the Agent (without a “going concern” or
like qualification or exception or exception as to the scope of such audit) to
the effect that such consolidated financial statements present fairly, in all
material respects, the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP;


 


(b) within forty-five (45) days after the
end of each of the first three fiscal quarters of each fiscal year of the
Borrower, its consolidated balance sheet and related statements of earnings,
shareholders’ equity and cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth in each
case in comparative form the figures for the corresponding period or periods of
(or, in the case of the balance sheet, as of the end of) the previous fiscal
year, all certified by one of its Financial Officers as presenting fairly, in
all material respects, the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP, subject to normal year-end audit adjustments and the absence of
footnotes;


 


(c) concurrently with any delivery of
financial statements under clause (a) or (b) above, a certificate of
a Financial Officer of the Borrower in substantially the form of Exhibit C
(i) certifying that no Event of Default or Default has occurred and, if an
Event of Default or Default has occurred, specifying the details thereof and
any action taken or proposed to be taken with respect thereto and
(ii) setting forth, in the case of the financial statements delivered
under clause (a), (x) the Borrower’s calculation of Excess Cash Flow
for such fiscal year and (y) a list of names of all Immaterial
Subsidiaries (if any), that each Subsidiary set forth on such list individually
qualifies as an Immaterial Subsidiary and that all Domestic Subsidiaries listed
as Immaterial Subsidiaries in the aggregate comprise less than 5% of Total
Assets of the Borrower and the Subsidiaries at the end of the period to which
such financial statements relate and represented (on a contribution basis) less
than 5% of EBITDA for the period to which such financial statements relate;


 


(d) concurrently with any delivery of
financial statements under clause (a) above, a certificate of the
accounting firm that reported on such financial statements stating whether they
obtained knowledge during the course of their examination of such financial
statements of any Default or Event of Default (which certificate may be limited
to the extent required by accounting rules or guidelines);


 


(e) concurrently with any delivery of
consolidated financial statements under clause (a) or (b) above, the
related unaudited consolidating financial statements reflecting the adjustments
necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from
such consolidated financial statements;


 


(f) within ninety (90) days after the
beginning of each fiscal year, a detailed consolidated budget of the Borrower
and its Subsidiaries for such fiscal year (including a projected consolidated
balance sheet and the related consolidated statements of projected cash flows
and projected income as of the end of and for such fiscal year), including a
summary of the 


 


59

















 


underlying
material assumptions with respect thereto (collectively, the “Budget”),
and, as soon as available, significant revisions, if any, of such Budget, which
Budget or revisions thereto shall in each case be accompanied by the statement
of a Financial Officer of the Borrower to the effect that, to the best of his
knowledge, the Budget is a reasonable estimate for the period covered thereby;


 


(g) as soon as practicable upon the reasonable
request of the Agent, deliver an updated Perfection Certificate (or, to the
extent such request relates to specified information contained in the
Perfection Certificate, such information) reflecting all changes since the date
of the information most recently received pursuant to this clause (g) or
Section 5.11;


 


(h) promptly after the same become publicly
available, copies of all periodic and other reports, proxy statements and other
materials publicly filed by the Borrower or any Subsidiary with the SEC, or
with any national securities exchange, or, after an initial public offering of shares
of Capital Stock of the Borrower, distributed by the Borrower to its
shareholders generally, as the case may be;


 


(i) promptly, a copy of any final “management
letter” received from the Borrower’s independent public accountants to the
extent such independent public accountants have consented to the delivery of
such management letter to the Agent upon the request of the Borrower;


 


(j) promptly following the Agent’s request
therefor, all documentation and other information that the Agent reasonably requests
on its behalf or on behalf of any Lender in order to comply with its ongoing
obligations under applicable “know your customer” and anti-money laundering rules and
regulations, including the USA PATRIOT Act; and


 


(k) as promptly as reasonably practicable from
time to time following the Agent’s request therefor, such other information
regarding the operations, business affairs and financial condition of Holdings,
the Borrower or any Subsidiary, or compliance with the terms of any Loan
Document, as the Agent may reasonably request (on behalf of itself or any
Lender).


 


Notwithstanding
the foregoing, the obligations in clauses (a) and (b) of this Section 5.01
may be satisfied with respect to financial information of the Borrower and its
Subsidiaries by furnishing (A) the applicable financial statements of
Holdings (or any direct or indirect parent of Holdings) or (B) the
Borrower’s or Holdings’ (or any direct or indirect parent thereof), as
applicable, Form 10-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to
each of clauses (A) and (B), (i) to the extent such information
relates to Holdings (or a parent thereof), such information is accompanied by
consolidating information that explains in reasonable detail the differences
between the information relating to Holdings (or such parent), on the one hand,
and the information relating to the Borrower and its Subsidiaries on a
standalone basis, on the other hand and (ii) to the extent such
information is in lieu of information required to be provided under
clause (a) of this Section 5.01, such materials are accompanied
by a report and opinion of Deloitte & Touche LLP or other independent
public accountants of recognized national standing and reasonably acceptable to
the Agent, which report and opinion shall be prepared in accordance with
generally accepted auditing standards and shall not be subject to any “going
concern” or like qualification or exception or any qualification or exception
as to the scope of such audit.


 


Documents
required to be delivered pursuant to clauses (a), (b) or (h) of this
Section 5.01 may be delivered electronically and if so delivered, shall be
deemed to have been delivered on the date (i) on which the Borrower posts
such documents, or provides a link thereto on the Borrower’s website on the
Internet at the website address listed on Schedule 9.01; or (ii) on
which such documents are posted on the Borrower’s behalf on
IntraLinks/IntraAgency or another relevant website, if any, to which each 


 


60

















 


Lender
and the Agent have access (whether a commercial, third-party website or whether
sponsored by the Agent); provided that: 
(i) upon written request by the Agent, the Borrower shall deliver
paper copies of such documents to the Agent for further distribution to each
Lender until a written request to cease delivering paper copies is given by the
Agent and (ii) the Borrower shall notify (which may be by facsimile or
electronic mail) the Agent of the posting of any such documents and provide to
the Agent by electronic mail electronic versions (i.e., soft copies) of
such documents.  Notwithstanding anything
contained herein, in every instance the Borrower shall be required to provide
paper copies of the compliance certificates required by clause (c) of
this Section 5.01 to the Agent.


 


SECTION 5.02.  Notices of Material Events.  The Borrower will furnish to the Agent
written notice of the following promptly after any Responsible Officer of
Holdings or the Borrower obtains knowledge thereof:


 


(a) the occurrence of any Event of Default or
Default;


 


(b) the filing or commencement of, or any
written threat or notice of intention of any person to file or commence, any
action, suit or proceeding, whether at law or in equity or by or before any
Governmental Authority or in arbitration, against Holdings, the Borrower or any
of the Subsidiaries as to which an adverse determination is reasonably probable
and which, if adversely determined, would reasonably be expected to have a
Material Adverse Effect;


 


(c) any loss, damage, or destruction to the
Collateral in the amount of $10,000,000 or more, whether or not covered by
insurance;


 


(d) any and all default notices received under
or with respect to any leased location or public warehouse where any material
Collateral is located;


 


(e) the occurrence of any ERISA Event that,
together with all other ERISA Events that have occurred and are continuing,
would reasonably be expected to have a Material Adverse Effect; and


 


(f) any other development that results in, or
would reasonably be expected to result in, a Material Adverse Effect.


 


Each
notice delivered under this Section 5.02 shall be accompanied by a
statement of a Responsible Officer of the Borrower setting forth the details of
the event or development requiring such notice and any action taken or proposed
to be taken with respect thereto.


 


SECTION 5.03.  Existence; Conduct of Business.  Each Loan Party will, and will cause each
Subsidiary to, do or cause to be done all things reasonably necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, qualifications, licenses, permits, franchises, governmental
authorizations, intellectual property rights, licenses and permits (except as
such would otherwise reasonably expire, be abandoned or permitted to lapse in
the ordinary course of business), necessary or desirable in the normal conduct
of its business, and maintain all requisite authority to conduct its business
in each jurisdiction in which its business is conducted, except (i) other
than with respect to Holdings’ or the Borrower’s existence, to the extent such
failure to do so would not reasonably be expected to have a Material Adverse
Effect or (ii) pursuant to a transaction permitted by Section 6.03.


 


SECTION 5.04.  Payment of Obligations.  Each Loan Party will, and will cause
each  Subsidiary to, pay or discharge all
material Tax liabilities, before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate


 


61
















 


proceedings,
(b) such Loan Party or such Subsidiary has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (c) the failure
to make payment pending such contest would not reasonably be expected to result
in a Material Adverse Effect.


 


SECTION 5.05.  Maintenance of Properties.  Each Loan Party will, and will cause each
Subsidiary to (a) at all times maintain and preserve all material property
necessary to the normal conduct of its business in good repair, working order and
condition, ordinary wear and tear excepted and casualty or condemnation
excepted and (b) make, or cause to be made, all needful and proper
repairs, renewals, additions, improvements and replacements thereto as
necessary in accordance with prudent industry practice in order that the
business carried on in connection therewith, if any, may be properly conducted
at all times, except, in each case, where the failure to do so, individually or
in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect.


 


SECTION 5.06.  Books and Records; Inspection Rights.  Each Loan Party will, and will cause each
Subsidiary to, (i) keep proper books of record and account in accordance
with GAAP in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities and (ii) permit
any representatives designated by the Agent (including employees of the Agent
or any consultants, accountants, lawyers and appraisers retained by the Agent),
upon reasonable prior notice, to visit and inspect its properties, to examine
and make extracts from its books and records, including environmental
assessment reports and Phase I or Phase II studies, and to discuss its affairs,
finances and condition with its officers and independent accountants, all at
such reasonable times during normal business hours and as often as reasonably
requested.


 


SECTION 5.07.  Maintenance of Ratings.  Holdings and the Borrower shall use their
commercially reasonable efforts to cause the credit facilities provided for
herein to be continuously rated by S&P and Moody’s.


 


SECTION 5.08.  Compliance with Laws.  Each Loan Party will, and will cause each
Subsidiary to, comply in all material respects with all Requirements of Law
applicable to it or its property, except where the failure to do so,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect.


 


SECTION 5.09.  Use of Proceeds.  The proceeds of the Loans will be used only
for the purposes specified in the introductory statement to the Original Credit
Agreement.  No part of the proceeds of
any Loan will be used, whether directly or indirectly, for any purpose that
would entail a violation of Regulations T, U or X.


 


SECTION 5.10.  Insurance.  Each Loan Party will, and will cause each
Subsidiary to, maintain, with financially sound and reputable insurance
companies (a) insurance in such amounts and against such risks, as are
customarily maintained by similarly situated companies engaged in the same or
similar businesses operating in the same or similar locations (after giving
effect to any self-insurance reasonable and customary for similarly situated
companies) and (b) all insurance required pursuant to the Collateral
Documents (and shall cause the Agent to be listed as a loss payee (together
with any other loss payee in accordance with the Intercreditor Agreement) on
property and casualty policies covering loss or damage to Collateral and as an
additional insured on liability policies). 
The Borrower will furnish to the Agent, upon request, information in
reasonable detail as to the insurance so maintained.


 


SECTION 5.11.  Additional Collateral; Further Assurances.  (a)  Subject to applicable law, the
Borrower and each Subsidiary that is a Loan Party shall cause (i) each of
its Domestic Subsidiaries (other than any Immaterial Subsidiary (except as
otherwise provided in paragraph (e) of this Section 5.11) or
Unrestricted Subsidiary) formed or acquired after the Closing Date in
accordance with 


 


62

















 


the terms of this
Agreement that is required to become a Subsidiary Guarantor pursuant to
Section 6.08 and (ii) any such Domestic Subsidiary that was an
Immaterial Subsidiary but, as of the end of the most recently ended fiscal
quarter of the Borrower has ceased to qualify as an Immaterial Subsidiary, to
become a Loan Party as promptly thereafter as reasonably practicable by
executing a Joinder Agreement in substantially the form set forth as Exhibit D
hereto (the “Joinder Agreement”). Upon execution and delivery thereof,
each such Person (i) shall automatically become a Loan Guarantor hereunder
and thereupon shall have all of the rights, benefits, duties, and obligations
in such capacity under the Loan Documents and (ii) will simultaneously
therewith or as soon as practicable thereafter grant Liens to the Agent, for
the benefit of the Agent and the Lenders and each other Secured Party at such
time party to or benefiting from the Intercreditor Agreement or the Security
Agreement (including, if applicable, the holders of the 2028 Debentures), in
each case to the extent required by the terms thereof, in any property (subject
to the limitations with respect to Equity Interests set forth in paragraph (b) of
this Section 5.11, the limitations with respect to real property set forth
in paragraph (f) of this Section 5.11 and any other limitations
set forth in the Security Agreement) of such Loan Party which constitutes
Collateral, on such terms as may be required pursuant to the terms of the
Collateral Documents and in such priority as may be required pursuant to the
terms of the Intercreditor Agreement.


 


(b) 
The Borrower and each Subsidiary that is a Loan Party will cause (i) 100%
of the issued and outstanding Equity Interests of each of its Domestic
Subsidiaries, other than any Domestic Subsidiary taxed as a partnership for
federal income tax purposes that holds Capital Stock of a Foreign Subsidiary
whose Equity Interests are pledged pursuant to clause (ii) below, and (ii) 65%
of the issued and outstanding Equity Interests entitled to vote (within the
meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and
outstanding Equity Interests not entitled to vote (within the meaning of Treas.
Reg. Section 1.956-2(c)(2)) in each Foreign Subsidiary directly owned by
the Borrower or any Subsidiary that is a Loan Party to be subject at all times
to a first priority perfected Lien in favor of the Agent pursuant to the terms
and conditions of the Loan Documents or other security documents as the Agent
shall reasonably request; provided, however this paragraph (b) shall
not require the Borrower or any Subsidiary to grant a security interest in
(i) any Equity Interests of a Subsidiary to the extent a pledge of such
Equity Interests in favor of the Agent or to secure any debt securities of the
Borrower or any Subsidiary that would be entitled to such a security interest
would require separate financial statements of a Subsidiary to be filed with
the SEC (or any other government agency) under Rule 3-10 or Rule 3-16
of Regulation S-X under the Securities Act (or any successor thereto) or any
other law, rule or regulation or (ii) the Equity Interests of any
Unrestricted Subsidiary.


 


(c) 
Without limiting the foregoing, each Loan Party will, and will cause each
Subsidiary that is a Loan Party to, execute and deliver, or cause to be
executed and delivered, to the Agent such documents, agreements and
instruments, and will take or cause to be taken such further actions (including
the filing and recording of financing statements, fixture filings, mortgages,
deeds of trust and other documents and such other actions or deliveries of the
type required by Article IV of the Original Credit Agreement, as
applicable (including the delivery of the items contemplated by paragraph (m) thereof
to the extent the Borrower has been unable to deliver such items by the Closing
Date after having used its commercially reasonable efforts to obtain and
deliver such items by the Closing Date)), which may be required by law or which
the Agent may, from time to time, reasonably request to carry out the terms and
conditions of this Agreement and the other Loan Documents and to ensure
perfection and priority of the Liens created or intended to be created by the
Collateral Documents, all at the expense of the Loan Parties.


 


(d) 
Subject to the limitations set forth or referred to in this Section 5.11,
if any material assets (including any real property or improvements thereto or
any interest therein) are acquired by the Borrower or any Subsidiary that is a
Loan Party after the Closing Date (other than assets constituting 


 


63

















 


Collateral under the
Security Agreement that become subject to the Lien in favor of the Agent upon
acquisition thereof), the Borrower will notify the Agent and the Lenders
thereof, and, if requested by the Agent or the Required Lenders, the Borrower
will cause such assets to be subjected to a Lien securing the Secured
Obligations and will take, and cause the Loan Parties that are Subsidiaries to
take, such actions as shall be necessary or reasonably requested by the Agent
to grant and perfect such Liens, including actions described in paragraph (c) of
this Section, all at the expense of the Loan Parties.


 


(e) 
If, at any time and from time to time after the Closing Date, Subsidiaries that
are not Loan Parties because they are Immaterial Subsidiaries comprise in the
aggregate more than 5% of Total Assets as of the end of the most recently ended
fiscal quarter of the Borrower or more than 5% of EBITDA of the Borrower and
the Restricted Subsidiaries for the period of four consecutive fiscal quarters
as of the end of the most recently ended fiscal quarter of the Borrower, then
the Borrower shall, not later than 45 days after the date by which financial
statements for such quarter are required to be delivered pursuant to this
Agreement, cause one or more such Subsidiaries to become additional Loan
Parties (notwithstanding that such Subsidiaries are, individually, Immaterial
Subsidiaries) such that the foregoing condition ceases to be true.


 


(f) 
Notwithstanding anything to the contrary in this Section 5.11, real
property required to be mortgaged under this Section 5.11 shall be limited
to real property located in the U.S. that are full-line Neiman Marcus retail
stores owned in fee by a Loan Party or leased by a Loan Party pursuant to a
financeable lease or other real property owned in fee by a Loan Party having a
fair market value at the time of the acquisition thereof of $5,000,000 or more
(provided that the cost of perfecting such Lien is not unreasonable in
relation to the benefits to the Lenders of the security afforded thereby in the
Agent’s reasonable judgment after consultation with the Borrower; provided
further that the Borrower shall use commercially reasonable efforts to
ensure that all leases entered into after the Closing Date by the Borrower and
the other Loan Parties will be financeable leases).


 


(g) 
Notwithstanding anything to the contrary contained herein, the Loan Parties
shall not be required to include as Collateral any Excluded Assets (as defined
in the Security Agreement).


 


SECTION 5.12.  Maintenance of Corporate Separateness.  Each Loan Party will, and will cause each
Subsidiary to, satisfy customary corporate or limited liability company
formalities, including the maintenance of corporate and business records.


 


ARTICLE VI


 


Negative
Covenants


 


Until
the principal of and interest on each Loan and all fees, expenses and other
amounts payable under any Loan Document have been paid in full, the Loan
Parties covenant and agree, jointly and severally, with the Lenders that:


 


SECTION 6.01.  Limitation on Incurrence of Indebtedness
and Issuance of Disqualified Stock and Preferred Stock.  (a)  The Borrower will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise (collectively, “incur” and collectively, an “incurrence”)
with respect to any Indebtedness (including Acquired Indebtedness), and the
Borrower will not issue any shares of Disqualified Stock and will not permit
any Restricted Subsidiary to issue any shares of Disqualified Stock or
Preferred Stock; provided  that
the Borrower may incur Indebtedness (including Acquired


 


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Indebtedness) or issue
shares of Disqualified Stock, and any Restricted Subsidiary may incur
Indebtedness (including Acquired Indebtedness), issue shares of Disqualified
Stock or issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio on
a consolidated basis for the Borrower’s and its Restricted Subsidiaries’ most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or Preferred
Stock is issued would have been at least 2.00 to 1.00, determined on a pro
forma basis (including a pro forma application of the net proceeds therefrom),
as if the additional Indebtedness had been incurred, or the Disqualified Stock
or Preferred Stock had been issued, as the case may be, and the application of
the proceeds therefrom had occurred at the beginning of such four-quarter
period; provided that the amount of Indebtedness (including Acquired
Indebtedness), Disqualified Stock and Preferred Stock that may be incurred or
issued, as applicable, pursuant to the foregoing by Restricted Subsidiaries
that are not Subsidiary Guarantors shall not exceed $100,000,000 at any
one time outstanding;


 


(b) 
The limitations set forth in paragraph (a) of this Section 6.01 shall
not apply to any of the following items (collectively, “Permitted Debt”):


 


(i) Indebtedness
incurred pursuant to the Senior Secured Asset-Based Revolving Credit Facility
by the Borrower or any Restricted Subsidiary; provided that immediately
after giving effect to any such incurrence, the aggregate principal amount of
all Indebtedness incurred under this clause (i) and then outstanding
does not exceed the greater of (A) $800,000,000 less up to
$150,000,000 in the aggregate of all principal payments with respect to such
Indebtedness made pursuant to Section 2.20(b)(i)(A) and (B) the
lesser of (1) 80% of the value of the eligible inventory of the Borrower
and its Restricted Subsidiaries valued at the lower of cost or market value and
(2) 85% of the net orderly liquidation value of the eligible inventory of
the Borrower and its Restricted Subsidiaries;


 


(ii) Indebtedness
incurred pursuant to the Senior Secured Term Loan Facility by the Borrower or
any Restricted Subsidiary; provided that after giving effect to any such
incurrence, the aggregate principal amount of all Indebtedness incurred under
this clause (ii) and then outstanding does not exceed $1,975,000,000
less up to $250,000,000 in the aggregate of all principal payments with respect
to such Indebtedness made pursuant to Section 2.20(a)(i) or
Section 2.20(b)(i)(A);


 


(iii) the
incurrence by the Borrower and any Subsidiary Guarantor of Indebtedness
represented by the Senior Notes issued on the Closing Date (including any
guarantees thereof) and the exchange notes and related exchange guarantees to
be issued in exchange for the Senior Notes pursuant to the Registration Rights
Agreement (other than any Additional Senior Notes (as defined in the Senior
Notes Indenture));


 


(iv) the
incurrence by the Borrower and any Subsidiary Guarantor of Indebtedness
represented by the Senior Subordinated Notes issued on the Closing Date
(including any guarantees thereof) and the exchange notes and related exchange
guarantees to be issued in exchange for the Senior Subordinated Notes pursuant
to the Registration Rights Agreement (other than any Additional Senior
Subordinated Notes (as defined in the Senior Subordinated Notes Indenture));


 


(v) Indebtedness
existing on the Closing Date and set forth in Schedule 6.01;


 


(vi) Indebtedness
(including Capitalized Lease Obligations), Disqualified Stock and Preferred Stock
incurred by the Borrower or any of the Restricted Subsidiaries, to finance the 


 


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development, construction,
purchase, lease (other than the lease, pursuant to Sale and Lease-Back
Transactions, of property (real or personal), equipment or other fixed or
capital assets owned by the Borrower or any Restricted Subsidiary as of the
Closing Date or acquired by the Borrower or any Restricted Subsidiary after the
Closing Date in exchange for, or with the proceeds of the sale of, such assets
owned by the Borrower or any Restricted Subsidiary as of the Closing Date),
repairs, additions or improvement of property (real or personal), equipment or
other fixed or capital assets that are used or useful in a Similar Business,
whether through the direct purchase of assets or the Capital Stock of any
Person owning such assets; provided that the aggregate amount of
Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this
clause (vi) does not exceed $250,000,000 at any one time outstanding;


 


(vii) Indebtedness
incurred by the Borrower or any Restricted Subsidiary constituting
reimbursement obligations with respect to letters of credit issued in the
ordinary course of business, including letters of credit in respect of workers’
compensation claims, or other Indebtedness with respect to reimbursement type
obligations regarding workers’ compensation claims; provided  that upon the drawing of such letters of credit or the
incurrence of such Indebtedness, such obligations are reimbursed within thirty
(30) days following such drawing or incurrence;


 


(viii) Indebtedness
arising from agreements of the Borrower or a Restricted Subsidiary providing
for indemnification, adjustment of purchase price or similar obligations, in
each case, incurred or assumed in connection with the disposition of any
business, assets or a subsidiary, other than guarantees of Indebtedness
incurred by any Person acquiring all or any portion of such business, assets or
subsidiary for the purpose of financing such acquisition; provided  that (A) such Indebtedness is not reflected on the
balance sheet of the Borrower or any Restricted Subsidiary (contingent
obligations referred to in a footnote to financial statements and not otherwise
reflected on the balance sheet shall not be deemed to be reflected on such
balance sheet for purposes of this clause (A)) and (B) the maximum
assumable liability in respect of all such Indebtedness shall at no time exceed
the gross proceeds including noncash proceeds (the fair market value of such
noncash proceeds being measured at the time received and without giving effect
to any subsequent changes in value) actually received by the Borrower and the
Restricted Subsidiaries in connection with such disposition;


 


(ix) Indebtedness
of the Borrower to a Restricted Subsidiary; provided  that
any such Indebtedness owing to a Restricted Subsidiary that is not a Subsidiary
Guarantor is subordinated in right of payment to the Obligations; provided, further, that that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other
subsequent transfer of any such Indebtedness (except to the Borrower or another
Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of
such Indebtedness;


 


(x) Indebtedness
of a Restricted Subsidiary to the Borrower or another Restricted Subsidiary; provided  that if a Subsidiary Guarantor incurs such Indebtedness to
a Restricted Subsidiary that is not a Subsidiary Guarantor such Indebtedness is
subordinated in right of payment to the obligations of such Subsidiary
Guarantor under its Loan Guaranty; provided,  further,
that any subsequent issuance or transfer of Capital Stock or any other event
that results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of any such Indebtedness (except to the
Borrower or another Restricted Subsidiary) shall be deemed, in each case, to be
an incurrence of such Indebtedness;


 


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(xi) shares
of Preferred Stock of a Restricted Subsidiary issued to the Borrower or another
Restricted Subsidiary; provided  that any
subsequent issuance or transfer of any Capital Stock or any other event which
results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any other subsequent transfer of any such shares of Preferred Stock (except
to the Borrower or another Restricted Subsidiary) shall be deemed, in each
case, to be an issuance of such shares of Preferred Stock;


 


(xii) Hedging
Obligations (excluding Hedging Obligations entered into for speculative
purposes) for the purpose of limiting: (A) interest rate risk with respect
to any Indebtedness that is permitted under this Agreement to be outstanding,
(B) exchange rate risk with respect to any currency exchange or
(C) commodity pricing risk with respect to any commodity;


 


(xiii) obligations
in respect of performance, bid, appeal and surety bonds and completion
guarantees and similar obligations provided by the Borrower or any Restricted
Subsidiary in the ordinary course of business;


 


(xiv) (A) any
guarantee by the Borrower or a Restricted Subsidiary of Indebtedness or other
obligations of any Restricted Subsidiary, so long as the incurrence of such
Indebtedness by such Restricted Subsidiary is permitted under the terms of this
Agreement or (B) any guarantee by a Restricted Subsidiary of Indebtedness
of the Borrower permitted to be incurred under the terms of this Agreement; provided  that such guarantee is incurred in accordance with
Section 6.08;


 


(xv) the
incurrence by the Borrower or any Restricted Subsidiary of Indebtedness,
Disqualified Stock or Preferred Stock that serves to extend, replace, refund,
refinance, renew or defease  any
Indebtedness, Disqualified Stock or Preferred Stock incurred as permitted under
paragraph (a) of this Section 6.01 and clauses (iii), (iv), (v) and
(vi) above, this clause (xv) and clauses  (xvi) and
(xxii)(B) of this paragraph (b) or any Indebtedness,
Disqualified Stock or Preferred Stock issued to so extend, replace, refund,
refinance, renew or defease such Indebtedness, Disqualified Stock or Preferred
Stock including additional Indebtedness, Disqualified Stock or Preferred Stock
incurred to pay premiums and fees in connection therewith (the “Refinancing
Indebtedness”) prior to its respective maturity;  provided,
however, that such Refinancing Indebtedness (A) has a Weighted
Average Life to Maturity at the time such Refinancing Indebtedness is incurred
which is not less than the remaining Weighted Average Life to Maturity of the
Indebtedness, Disqualified Stock or Preferred Stock being extended, replaced,
refunded, refinanced, renewed or defeased (provided that this clause (A) shall
not apply to any refunding or refinancing of any Senior Indebtedness
outstanding under the 2028 Debentures), (B) to the extent such Refinancing
Indebtedness extends, replaces, refunds, refinances, renews or defeases
(1) Indebtedness subordinated to the Obligations or the Loan Guaranty of
any Subsidiary Guarantor, such Refinancing Indebtedness is subordinated to the
Obligations or such Loan Guaranty at least to the same extent as the
Indebtedness being extended, replaced, refunded, refinanced, renewed or
defeased or (2) Disqualified Stock or Preferred Stock, such Refinancing
Indebtedness must be Disqualified Stock or Preferred Stock, respectively, and (C) shall
not include (1) Indebtedness, Disqualified Stock or Preferred Stock of a
subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness,
Disqualified Stock or Preferred Stock of the Borrower, (2) Indebtedness,
Disqualified Stock or Preferred Stock of a subsidiary that is not a Subsidiary
Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock
of a Subsidiary Guarantor or (3) Indebtedness, Disqualified Stock or
Preferred Stock of the Borrower or a Restricted Subsidiary that refinances
Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;


 


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(xvi) Indebtedness,
Disqualified Stock or Preferred Stock (x) of the Borrower or any of its
Restricted Subsidiaries incurred to finance the acquisition of any Person or
assets or (y) of Persons that are acquired by the Borrower or any
Restricted Subsidiary or merged into the Borrower or a Restricted Subsidiary in
accordance with the terms of this Agreement; provided  that either (A) after giving effect to such
acquisition or merger, either (1) the Borrower would be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in paragraph (a) of this Section 6.01; or (2) the
Fixed Charge Coverage Ratio of the Borrower and the Restricted Subsidiaries on
a consolidated basis is greater than immediately prior to such acquisition or
merger; or (B) such Indebtedness, Disqualified Stock or Preferred Stock
(1) is not Secured Indebtedness and is Subordinated Indebtedness with
subordination terms no more favorable to the holders thereof than the
subordination terms set forth in the indenture governing the Senior
Subordinated Notes as in effect on the Closing Date, (2) is not incurred
while a Default exists and no Default shall result therefrom, (3) (x) if
incurred prior to the Restatement Effective Date, does not mature (and is not
mandatorily redeemable in the case of Disqualified Stock or Preferred Stock)
and does not require any payment of principal prior to the Tranche B-1 Loan
Maturity Date or (y) if incurred after the Restatement Effective Date,
does not mature (and is not mandatorily redeemable in the case of Disqualified
Stock or Preferred Stock) and does not require any payment of principal prior
to the Tranche B-2 Loan Maturity Date and (4) in the case of clause (y) above
only, is not incurred in contemplation of such acquisition or merger;


 


(xvii) Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument drawn against insufficient funds in the ordinary
course of business; provided  that such
Indebtedness is extinguished within two (2) Business Days of its
incurrence;


 


(xviii) Indebtedness
of the Borrower or any Restricted Subsidiary supported by a letter of credit
issued pursuant to the Senior Secured Asset-Based Revolving Credit Facility, in
a principal amount not in excess of the stated amount of such letter of credit;


 


(xix) Indebtedness,
Disqualified Stock or Preferred Stock of a Restricted Subsidiary incurred to
finance or assumed in connection with an acquisition which, when aggregated
with the principal amount of all other Indebtedness, Disqualified Stock and
Preferred Stock incurred pursuant to this clause (xix) and then
outstanding, does not exceed $75,000,000 (it being understood that any
Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this
clause (xix) shall cease to be deemed incurred or outstanding for
purposes of this clause (xix) but shall be deemed incurred pursuant
to paragraph (a) of this Section 6.01 from and after the first
date on which the Borrower or such Restricted Subsidiary could have incurred
such Indebtedness, Disqualified Stock or Preferred Stock pursuant to
paragraph (a) of this Section 6.01 without reliance on this
clause (xix));


 


(xx) Indebtedness
incurred by a Foreign Subsidiary which, when aggregated with the principal
amount of all other Indebtedness incurred pursuant to this clause (xx) and
then outstanding, does not exceed 5.0% of Foreign Subsidiary Total Assets (it
being understood that any Indebtedness, Disqualified Stock and Preferred Stock
incurred pursuant to this clause (xx) shall cease to be deemed
incurred or outstanding for purposes of this clause (xx) but shall be
deemed incurred pursuant to paragraph (a) of this Section 6.01 from
and after the first date on which the Borrower or such Restricted Subsidiary
could have incurred such Indebtedness, Disqualified Stock or Preferred Stock
pursuant to paragraph (a) of this Section 6.01 without reliance
on this clause (xx));


 


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(xxi) Indebtedness
consisting of Indebtedness issued by the Borrower or any Restricted Subsidiary
to current or former officers, managers, directors and employees thereof, their
respective estates, spouses or former spouses, in each case to finance the
purchase or redemption of Equity Interests of the Borrower or any direct or
indirect parent company of the Borrower to the extent described in Section 6.04(b)(iv);


 


(xxii) Indebtedness,
Disqualified Stock and Preferred Stock of the Borrower or any Restricted
Subsidiary not otherwise permitted hereunder in an aggregate principal amount
or liquidation preference, which, when aggregated with the principal amount and
liquidation preference of all other Indebtedness, Disqualified Stock and
Preferred Stock incurred pursuant to this clause (xxii) and then
outstanding, does not at any one time outstanding exceed the sum of
(A) $175,000,000 (it being understood that any Indebtedness, Disqualified
Stock and Preferred Stock incurred pursuant to this clause (xxii)(A) shall
cease to be deemed incurred or outstanding for purposes of this
clause (xxii)(A) but shall be deemed incurred pursuant to paragraph (a) of
this Section 6.01 from and after the first date on which the Borrower or
such Restricted Subsidiary could have incurred such Indebtedness, Disqualified
Stock or Preferred Stock pursuant to paragraph (a) of this Section 6.01
without reliance on this clause (xxii)(A)), plus (B) 200% of
the net cash proceeds received by the Borrower since after the Closing Date
from the issue or sale of Equity Interests of the Borrower or cash contributed
to the capital of the Borrower (in each case, other than proceeds of
Disqualified Stock or sales of Equity Interests to the Borrower or any of its
subsidiaries) as determined in accordance with Sections 6.04(a)(iii)(B) and
(a)(iii)(C) to the extent such net cash proceeds or cash have not been
applied pursuant to such clauses to make Restricted Payments or to make other
investments, payments or exchanges pursuant to Section 6.04(b) or to
make Permitted Investments (other than Permitted Investments specified in
clauses (a) and (c) of the definition thereof);


 


(xxiii) Attributable
Debt incurred by the Borrower or any Restricted Subsidiary pursuant to Sale and
Lease-Back Transactions of property (real or personal), equipment or other
fixed or capital assets owned by the Borrower or any Restricted Subsidiary as
of the Closing Date or acquired by the Borrower or any Restricted Subsidiary
after the Closing Date in exchange for, or with the proceeds of the sale of,
such assets owned by the Borrower or any Restricted Subsidiary as of the
Closing Date, provided that the aggregate amount of Attributable Debt
incurred under this clause (xxiii) does not exceed $100,000,000; and


 


(xxiv) Indebtedness
that is Permitted Loan Refinancing Indebtedness.


 


(c) 
For purposes of determining compliance with this Section 6.01, in the
event that an item of Indebtedness, Disqualified Stock or Preferred Stock meets
the criteria of more than one of the categories of Permitted Debt described in
clauses (i) through (xxiii) of paragraph (b) of this Section 6.01
or is entitled to be incurred pursuant to paragraph (a) of this Section 6.01,
the Borrower, in its sole discretion, shall classify or reclassify, or later
divide, classify or reclassify, such item of Indebtedness, Disqualified Stock
or Preferred Stock (or any portion thereof) and shall only be required to
include the amount and type of such Indebtedness, Disqualified Stock or
Preferred Stock in one or more of the above clauses; provided that all
Indebtedness outstanding under the Senior Secured Asset-Based Revolving Credit
Facility and the term loan facility provided for herein on the Closing Date
shall be deemed to have been incurred on such date in reliance on the exception
in clauses (i) and (ii) of the definition of “Permitted Debt”.


 


69

















 


(d) 
The accrual of interest, the accretion of accreted value and the payment of
interest in the form of additional Indebtedness, Disqualified Stock or
Preferred Stock shall not be deemed to be an incurrence of Indebtedness,
Disqualified Stock or Preferred Stock for purposes of this Section 6.01.


 


(e) 
For purposes of determining compliance with any Dollar-denominated restriction
on the incurrence of Indebtedness, the Dollar-equivalent principal amount of
Indebtedness denominated in a foreign currency shall be calculated based on the
relevant currency exchange rate in effect on the date such Indebtedness was
incurred, in the case of term debt, or first committed, in the case of
revolving credit debt; provided that if such Indebtedness is incurred to
extend, replace, refund, refinance, renew or defease other Indebtedness
denominated in a foreign currency, and such extension, replacement, refunding,
refinancing, renewal or defeasance would cause the applicable
Dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such extension, replacement,
refunding, refinancing, renewal or defeasance, such Dollar-denominated
restriction shall be deemed not to have been exceeded so long as the principal
amount of such refinancing Indebtedness does not exceed the principal amount of
such Indebtedness being extended, replaced, refunded, refinanced, renewed or
defeased.


 


(f) 
The principal amount of any Indebtedness incurred to extend, replace, refund,
refinance, renew or defease other Indebtedness, if incurred in a different
currency from the Indebtedness being extended, replaced, refunded, refinanced,
renewed or defeased, shall be calculated based on the currency exchange rate
applicable to the currencies in which such respective Indebtedness is
denominated that is in effect on the date of such extension, replacement,
refunding, refinancing, renewal or defeasance.


 


SECTION 6.02.  Limitation on Liens.  Holdings and the Borrower will not, and the
Borrower will not permit any of the Subsidiary Guarantors to, directly or
indirectly, create, incur, assume or suffer to exist any Lien (the “Initial
Lien”) that secures obligations under any Indebtedness on any asset or
property of Holdings, the Borrower or any Subsidiary Guarantor now owned or
hereafter acquired, or any income or profits therefrom, or assign or convey any
right to receive income therefrom, except:


 


(a) in the case of the Term Loan First Lien
Collateral, any Initial Lien if (i) such Initial Lien expressly ranks
junior to the first-priority security interest intended to be created in favor
of the Agent for the benefit of the Term Loan Secured Parties (as defined in
the Intercreditor Agreement) pursuant to the Collateral Documents; provided,
however, that the terms of such junior interest shall be no more favorable to
the beneficiaries thereof than the terms contained in the Intercreditor
Agreement; or (ii) such Initial Lien is a Permitted Collateral Lien;


 


(b) in the case of the Revolving Facility
First Lien Collateral, any Initial Lien if (i) the Obligations or the
applicable Loan Guaranty of a Loan Party, as the case may be, are equally and
ratably secured on a second-priority basis by such Revolving Facility First
Lien Collateral until such time as such Initial Lien is released (other than
through the exercise of remedies with respect thereto) or (ii) such
Initial Lien is a Permitted Lien; and


 


(c) in the case of any other asset or
property, any Initial Lien if (i) the Obligations or the applicable Loan
Guaranty of a Loan Party, as the case may be, are equally and ratably secured
with (or on a senior basis to, in the case such Initial Lien secures any
Subordinated Indebtedness) the obligations secured by such Initial Lien or (ii) such
Initial Lien is a Permitted Lien.


 


Any Lien created for the benefit of the Secured Parties pursuant to
clause (b) or (c) of the preceding paragraph shall provide by its
terms that such Lien shall be automatically and 


 


70

















 


unconditionally
released and discharged upon the release and discharge of the Initial Lien (other
than through the exercise of remedies with respect thereto).


 


SECTION 6.03.  Merger, Consolidation or Sale of All or
Substantially All Assets.  (a) 
The Borrower shall not consolidate or merge with or into or wind up into
(whether or not the Borrower is the surviving entity), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to any Person
unless:


 


(i) the
Borrower is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than the Borrower) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made is a corporation  organized
or existing under the laws of the United States of America, any state thereof,
the District of Columbia, or any territory thereof (the Borrower or such
Person, as the case may be, being herein called the “Successor Borrower”);


 


(ii) the
Successor Borrower, if other than the Borrower, expressly assumes all the
obligations of the Borrower under this Agreement and the other Loan Documents
pursuant to supplements to the Loan Documents or other documents or instruments
in form reasonably satisfactory to the Agent;


 


(iii) immediately
after such transaction, no Default exists;


 


(iv) immediately
after giving pro forma effect to such transaction, as if such transaction had
occurred at the beginning of the applicable four-quarter period, (A) the
Successor Borrower would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 6.01(a) or
(B) the Fixed Charge Coverage Ratio for the Successor Borrower and the
Restricted Subsidiaries on a consolidated basis would be greater than such
ratio for the Borrower and the Restricted Subsidiaries immediately prior to
such transaction;


 


(v) each
Loan Guarantor, unless it is the other party to the transactions described
above (in which case clause (i)(B) of paragraph (c) of this
Section 6.03 or clause (ii) of paragraph (e) of this
Section 6.03, as applicable, shall apply) shall have by supplement to the
Loan Documents confirmed that its guarantee of the Obligations shall apply to
such Person’s obligations under the Loan Documents and the Loans; and


 


(vi) the
Borrower shall have delivered to the Agent an Officers’ Certificate and an
opinion of counsel, each stating that such consolidation, merger or transfer
and such supplements to the Loan Documents, if any, comply with this Agreement
and the other Loan Documents.


 


(b) 
The Successor Borrower shall succeed to, and be substituted for, the Borrower
under this Agreement and the other Loan Documents and, except in the case of a
lease transaction, the predecessor Borrower will be released from its obligations
hereunder and thereunder. 
Notwithstanding clauses (iii) and (iv) of paragraph (a) of
this Section 6.03, (i) any Restricted Subsidiary may consolidate
with, merge into or transfer all or part of its properties and assets to, the
Borrower, and (ii) the Borrower may merge with an Affiliate of the
Borrower incorporated solely for the purpose of reincorporating the Borrower in
another state of the United States of America so long as the amount of
Indebtedness of the Borrower and the Restricted Subsidiaries is not increased
thereby.


 


(c) 
Subject to Section 10.12, no Subsidiary Guarantor shall, and the Borrower
shall not permit any Subsidiary Guarantor to, consolidate or merge with or into
or wind up into (whether or not


 


71
















 


such Subsidiary Guarantor
is the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions to, any Person unless:


 


(i) (A) such
Subsidiary Guarantor is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than such Subsidiary
Guarantor) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States of America, any state thereof, the District
of Columbia, or any territory thereof (such Subsidiary Guarantor or such
Person, as the case may be, being herein called the “Successor Person”), (B) the Successor Person, if
other than such Subsidiary Guarantor, expressly assumes all the obligations of
such Subsidiary Guarantor under such Subsidiary Guarantor’s Loan Guaranty and
the other Loan Documents, pursuant to a Joinder Agreement and supplements to
the Loan Documents or other documents or instruments in form reasonably
satisfactory to the Agent, (C) immediately after such transaction, no
Default exists and (D) the Borrower shall have delivered to the Agent an
Officers’ Certificate and an opinion of counsel, each stating that such
consolidation, merger or transfer and such Joinder Agreement and supplements,
if any, comply with this Agreement and the other Loan Documents; or


 


(ii) the
transaction is made in compliance with Section 2.20.


 


(d) 
The Successor Person shall succeed to, and be substituted for, such Subsidiary
Guarantor under such Subsidiary Guarantor’s Loan Guaranty and the other Loan
Documents and, except in the case of a lease transaction, such Subsidiary
Guarantor will be released from its obligations thereunder.  Notwithstanding the foregoing, any Subsidiary
Guarantor may merge into or transfer all or part of its properties and assets
to another Subsidiary Guarantor or the Borrower.


 


(e) 
Holdings will not consolidate or merge with or into or wind up into (whether or
not Holdings is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person unless
(i) Holdings is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than Holdings) or to which
such sale, assignment, transfer, lease, conveyance or other disposition shall
have been made is a corporation organized or existing under the laws of the
United States of America, any state thereof, the District of Columbia, or any
territory thereof (Holdings or such Person, as the case may be, being herein
called the “Successor Holdings
Guarantor”), (ii) the Successor Holdings Guarantor, if other
than Holdings, expressly assumes all the obligations of Holdings under Holdings’
Loan Guaranty and the other Loan Documents, pursuant to a Joinder Agreement or
other supplements or other documents or instruments in form reasonably
satisfactory to the Agent, (iii) immediately after such transaction, no
Event of Default or payment Default exists and (iv) the Borrower shall
have delivered to the Agent an Officers’ Certificate and an opinion of counsel,
each stating that such consolidation, merger or transfer and the Joinder
Agreement and such supplements or other documents or instruments, if any,
comply with this Agreement.


 


(f) 
The Successor Holdings Guarantor will succeed to, and be substituted for,
Holdings under Holdings’ Loan Guaranty and the other Loan Documents and, except
in the case of a lease transaction, the predecessor Holdings will be released
from its obligations thereunder. 
Notwithstanding the foregoing, Holdings may merge into or transfer all
or part of its properties and assets to a Subsidiary Guarantor or the Borrower,
and Holdings may merge with an Affiliate of the Borrower incorporated solely
for the purpose of reincorporating Holdings in another state of the United
States of America so


 


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long as the amount of
Indebtedness of Holdings, the Borrower and the Restricted Subsidiaries is not
increased thereby.


 


(g) 
For purposes of this Section 6.03, the sale, lease, conveyance,
assignment, transfer or other disposition of all or substantially all of the
properties and assets of one or more subsidiaries of the Borrower or Holdings,
as applicable, which properties and assets, if held by the Borrower or
Holdings, as applicable, instead of such subsidiaries, would constitute all or
substantially all of the properties and assets of the Borrower and its
subsidiaries on a consolidated basis or Holdings and its subsidiaries on a
consolidated basis, as applicable, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Borrower or Holdings, as
applicable.


 


SECTION 6.04.  Limitation on Restricted Payments.  (a)  The Borrower shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly (w) declare
or pay any dividend or make any distribution on account of the Borrower’s or
any Restricted Subsidiary’s Equity Interests, including any dividend or
distribution payable in connection with any merger or consolidation, other than
(A) dividends or distributions by the Borrower payable in Equity Interests
(other than Disqualified Stock) of the Borrower or (B) dividends or
distributions by a Restricted Subsidiary so long as, in the case of any
dividend or distribution payable on or in respect of any class or series of
securities issued by a Restricted Subsidiary other than a Wholly-Owned
Subsidiary, the Borrower or a Restricted Subsidiary receives at least its pro
rata  share of such dividend or
distribution in accordance with its Equity Interests in such class or series of
securities, (x) purchase, redeem, defease or otherwise acquire or retire
for value any Equity Interests of the Borrower or any direct or indirect parent
of the Borrower, including in connection with any merger or consolidation, (y) make
any principal payment on, or redeem, repurchase, defease or otherwise acquire
or retire for value in each case, prior to any scheduled repayment, sinking
fund payment or maturity, any Subordinated Indebtedness other than
(A) Indebtedness permitted under clauses (ix) and (x) of
Section 6.01(b) or (B) the purchase, repurchase or other
acquisition of Subordinated Indebtedness purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of purchase, repurchase or
acquisition or (z) make any Restricted Investment (all such payments and
other actions set forth in clauses (w) through (z) above being
collectively referred to as “Restricted Payments”), unless, at the time
of such Restricted Payment:


 


(i) no
Default shall have occurred and be continuing or would occur as a consequence
thereof;


 


(ii) immediately
after giving effect to such transaction on a pro forma basis, the Borrower
could incur $1.00 of additional Indebtedness under Section 6.01(a); and


 


(iii) such
Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Borrower and the Restricted Subsidiaries after the Closing
Date pursuant paragraph (a) of this Section 6.04 or clauses (i),
(ii) (with respect to the payment of dividends on Refunding Capital Stock
pursuant to clause (B) thereof only), (vi)(C), (viii) and (xii) of
paragraph (b) of this Section 6.04 (and excluding, for the avoidance
of doubt, all other Restricted Payments made pursuant to paragraph (b) of
this Section 6.04), is less than the sum, without duplication, of:


 


(A) 50% of the Consolidated Net Income of the
Borrower for the period (taken as one accounting period) from August 1,
2005 to the end of the Borrower’s most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment, or, in the case such Consolidated Net Income for such period is a
deficit, minus 100% of such deficit, provided
that if, at the time of a proposed Restricted Payment under paragraph (a) of
this Section 6.04, the Consolidated Leverage Ratio of the Borrower is less
than 4.50 to 1.00, for purposes of calculating availability of


 


73

















 


amounts
hereunder for such Restricted Payment only, the reference to 50% in this
clause (A) above shall be deemed to be 75%, plus


 


(B) 100% of the aggregate net cash proceeds and
the fair market value, as determined in good faith by the Borrower, of
marketable securities or other property received by the Borrower after the
Closing Date (less the amount of such net cash proceeds to the extent
such amount has been relied upon to permit the incurrence of Indebtedness or
issuance of Disqualified Stock or Preferred Stock pursuant to
Section 6.01(b)(xxii)(B)) from the issue or sale of (x) Equity
Interests of the Borrower, including Retired Capital Stock, but excluding cash
proceeds and the fair market value, as determined in good faith by the
Borrower, of marketable securities or other property received from the sale of
(1) Equity Interests to any future, present or former employees,
directors, managers or consultants of the Borrower, any direct or indirect
parent company of the Borrower or any of the Borrower’s subsidiaries after the
Closing Date to the extent such amounts have been applied to Restricted
Payments made in accordance with clause (iv) of paragraph (b) of
this Section 6.04 and (2) Designated Preferred Stock, and to the
extent actually contributed to the Borrower, Equity Interests of the Borrower’s
direct or indirect parent companies (excluding contributions of the proceeds
from the sale of Designated Preferred Stock of such companies or contributions
to the extent such amounts have been applied to Restricted Payments made in
accordance with clause (iv) of paragraph (b) of this
Section 6.04) or (y) debt securities of the Borrower that have been
converted into or exchanged for such Equity Interests of the Borrower; provided  that this clause (B) shall not
include the proceeds from (I) Refunding Capital Stock, (II) Equity
Interests of the Borrower or debt securities of the Borrower that have been
converted into or exchanged for Equity Interests of the Borrower sold to a
Restricted Subsidiary or the Borrower, as the case may be,
(III) Disqualified Stock or debt securities that have been converted into
or exchanged for Disqualified Stock or (IV) Excluded Contributions, plus


 


(C) 100% of the aggregate amount of cash and
the fair market value, as determined in good faith by the Borrower, of
marketable securities or other property contributed to the capital of the
Borrower after the Closing Date (less the amount of such net cash
proceeds to the extent such amount has been relied upon to permit the
incurrence of Indebtedness or issuance of Disqualified Stock or Preferred Stock
pursuant to Section 6.01(b)(xxii)(B)) (other than by a Restricted
Subsidiary and other than by any Excluded Contributions), plus


 


(D) to the extent not already included in
Consolidated Net Income, 100% of the aggregate amount received in cash and the
fair market value, as determined in good faith by the Borrower, of marketable
securities or other property received after the Closing Date by means of
(1) the sale or other disposition (other than to the Borrower or a
Restricted Subsidiary) of Restricted Investments made by the Borrower or any
Restricted Subsidiary and repurchases and redemptions of such Restricted
Investments from the Borrower or any Restricted Subsidiary and repayments of
loans or advances that constitute Restricted Investments by the Borrower or any
Restricted Subsidiary or (2) the sale (other than to the Borrower or a
Restricted Subsidiary) of the Capital Stock of an Unrestricted Subsidiary
(other than Kate Spade) or a distribution from an Unrestricted Subsidiary
(other than an Extraordinary Distribution) (other than in each case to the
extent the Investment in such Unrestricted Subsidiary was made by the Borrower
or a Restricted Subsidiary pursuant to clauses (ix) or (xiii) of
paragraph (b) of this


 


74

















 


Section 6.04
or to the extent such Investment constituted a Permitted Investment) or a
dividend from an Unrestricted Subsidiary (other than an Extraordinary
Distribution), plus


 


(E) in the case of the redesignation of an
Unrestricted Subsidiary (other than Kate Spade) as a Restricted Subsidiary
after the Closing Date, the fair market value of the Investment in such
Unrestricted Subsidiary, as determined by the Borrower in good faith or if, in
the case of an Unrestricted Subsidiary, such fair market value may exceed
$125,000,000, in writing by an Independent Financial Advisor, at the time of
the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary,
other than an Unrestricted Subsidiary to the extent the Investment in such
Unrestricted Subsidiary was made by the Borrower or a Restricted Subsidiary
pursuant to clauses (ix) or (xiii) of paragraph (b) of
this Section 6.04 or to the extent such Investment constituted a Permitted
Investment.


 


(b) 
The provisions of paragraph (a) of this Section 6.04 shall not
prohibit:


 


(i) the
payment of any dividend or distribution within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of this Agreement;


 


(ii) (A) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
(“Retired Capital Stock”)  or Subordinated Indebtedness of
the Borrower or any Equity Interests of any direct or indirect parent company
of the Borrower, in exchange for, or out of the proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests of
the Borrower (in each case, other than any Disqualified Stock) (“Refunding Capital Stock”) and
(B) if immediately prior to the retirement of Retired Capital Stock, the
declaration and payment of dividends thereon was permitted under clause (vi) of
this paragraph (b), the declaration and payment of dividends on the Refunding
Capital Stock (other than Refunding Capital Stock the proceeds of which were
used to redeem, repurchase, retire or otherwise acquire any Equity Interests of
any direct or indirect parent company of the Borrower) in an aggregate amount
per year no greater than the aggregate amount of dividends per annum that was
declarable and payable on such Retired Capital Stock immediately prior to such
retirement;


 


(iii) the
defeasance, redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of the Borrower or a Subsidiary Guarantor made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
new Indebtedness of such Person that is incurred in compliance with Section 6.01
so long as (A) the principal amount of such new Indebtedness does not
exceed the principal amount (or accreted value, if applicable) of the
Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or
retired for value, plus the amount of any reasonable premium required to
be paid under the terms of the instrument governing the Subordinated
Indebtedness being so defeased, redeemed, repurchased, acquired or retired and
any reasonable fees and expenses incurred in connection with the issuance of
such new Indebtedness, (B) such Indebtedness is subordinated to the
Obligations at least to the same extent as such Subordinated Indebtedness so
defeased, redeemed, repurchased, acquired or retired, (C) such
Indebtedness has a final scheduled maturity date equal to or later than the
final scheduled maturity date of the Subordinated Indebtedness being so
defeased, redeemed, repurchased, acquired or retired and (D) such
Indebtedness has a Weighted Average Life to Maturity equal to or greater than
the remaining Weighted Average Life to Maturity of the Subordinated
Indebtedness being so defeased, redeemed, repurchased, acquired or retired;


 


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(iv) a
Restricted Payment to pay for the repurchase, retirement or other acquisition
or retirement for value of Equity Interests (other than Disqualified Stock) of
the Borrower or any of its direct or indirect parent companies held by any
future, present or former employee, director, manager or consultant of the
Borrower, any of its subsidiaries or any of its direct or indirect parent
companies pursuant to any management equity plan or stock option plan or any
other management or employee benefit plan or agreement; provided  that the aggregate Restricted Payments
made under this clause (iv) do not exceed in any calendar year $10,000,000
(with unused amounts in any calendar year being carried over to succeeding
calendar years subject to a maximum (without giving effect to the following
proviso) of $20,000,000 in any calendar year); provided,  further,  that such amount in any calendar year may
be increased by an amount not to exceed (A) the cash proceeds from the
sale of Equity Interests (other than Disqualified Stock) of the Borrower and,
to the extent contributed to the Borrower, Equity Interests of any of the
Borrower’s direct or indirect parent companies, in each case to members of
management, directors, managers or consultants of the Borrower, any of its
subsidiaries or any of its direct or indirect parent companies that occurs
after the Closing Date, to the extent the cash proceeds from the sale of such
Equity Interests have not otherwise been applied to the payment of Restricted
Payments by virtue of clause (iii) of paragraph (a) of this Section 6.04,
plus (B) the cash
proceeds of key man life insurance policies received by the Borrower and the
Restricted Subsidiaries after the Closing Date, less (C) the amount of any Restricted Payments
previously made pursuant to clauses (A) and (B) of this
clause  (iv); and provided,  further,  that cancellation of Indebtedness owing
to the Borrower from members of management, directors, managers or consultants
of the Borrower, any of its direct or indirect parent companies or any
Restricted Subsidiary in connection with a repurchase of Equity Interests of
the Borrower or any of its direct or indirect parent companies shall not be
deemed to constitute a Restricted Payment for purposes of this Section 6.04
or any other provision of this Agreement;


 


(v) the
declaration and payment of dividends to holders of any class or series of
Disqualified Stock of the Borrower or any Restricted Subsidiary issued in
accordance Section 6.01 to the extent such dividends are included in the
definition of “Fixed Charges”;


 


(vi) the
declaration and payment of dividends (A) to holders of any class or series
of Designated Preferred Stock (other than Disqualified Stock) issued by the
Borrower after the Closing Date, (B) to a direct or indirect parent
company of the Borrower, the proceeds of which will be used to fund the payment
of dividends to holders of any class or series of Designated Preferred Stock
(other than Disqualified Stock) of such parent company issued after the Closing
Date; provided that the
amount of dividends paid pursuant to this clause (B) shall not exceed the
aggregate amount of cash actually contributed to the Borrower from the sale of
such Designated Preferred Stock, or (C) on Refunding Capital Stock that is
Preferred Stock in excess of the dividends declarable and payable thereon
pursuant to clause (ii) of this paragraph (b); provided,  however,
in the case of each of (A), (B) and (C) of this clause (vi),
that for the most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date of issuance
of such Designated Preferred Stock or the declaration of such dividends on
Refunding Capital Stock that is Preferred Stock, after giving effect to such
issuance or declaration on a pro forma basis, the Borrower and the Restricted
Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage
Ratio of at least 2.00 to 1.00;


 


(vii) repurchases
of Equity Interests deemed to occur upon exercise of stock options or warrants
if such Equity Interests represent a portion of the exercise price of such
options or warrants;


 


76

















 


(viii) the
declaration and payment of dividends on the Borrower’s common stock following
the first public offering of the Borrower’s common stock or the common stock of
any of its direct or indirect parent companies after the Closing Date, of up to
6% per annum of the net proceeds received by or contributed to the Borrower in
or from any such public offering, other than public offerings with respect to
the Borrower’s common stock registered on Form S-4 or Form S-8 and
other than any public sale constituting an Excluded Contribution;


 


(ix) Restricted
Payments that are made with Excluded Contributions;


 


(x) the
declaration and payment of dividends by the Borrower to, or the making of loans
to, its direct parent company in amounts required for the Borrower’s direct or
indirect parent companies to pay (A) franchise taxes and other fees, taxes
and expenses required to maintain their corporate existence, (B) Federal,
state and local income taxes, to the extent such income taxes are attributable
to the income of the Borrower and the Restricted Subsidiaries and, to the
extent of the amount actually received from its Unrestricted Subsidiaries, in
amounts required to pay such taxes to the extent attributable to the income of
such Unrestricted Subsidiaries, (C) customary salary, bonus and other
benefits payable to officers and employees of any direct or indirect parent
company of the Borrower to the extent such salaries, bonuses and other benefits
are attributable to the ownership or operation of the Borrower and the
Restricted Subsidiaries, (D) general corporate overhead expenses of any
direct or indirect parent company of the Borrower to the extent such expenses
are attributable to the ownership or operation of the Borrower and the
Restricted Subsidiaries, and (E) reasonable fees and expenses incurred in
connection with any unsuccessful debt or equity offering by such direct or
indirect parent company of the Borrower;


 


(xi) any
Restricted Payments used to fund the Transactions and the fees and expenses
related thereto, including those owed to Affiliates, in each case to the extent
permitted under Section 6.05;


 


(xii) the
repurchase, redemption or other acquisition or retirement for value of any
Subordinated Indebtedness pursuant to provisions similar to those set forth in
Sections 2.19 and 2.20; provided that, prior to such repurchase,
redemption or other acquisition, the Borrower (or a third party to the extent
permitted by this Agreement) shall have made a Change of Control Offer or Asset
Sale Offer, as the case may be, with respect to the outstanding Loans and shall
have repaid all such Loans validly tendered for prepayment and not withdrawn in
connection with such Change of Control Offer or Asset Sale Offer;


 


(xiii) Investments
in Unrestricted Subsidiaries having an aggregate fair market value, taken
together with all other Investments made pursuant to this clause (xiii) that
are at the time outstanding, without giving effect to the sale of an
Unrestricted Subsidiary to the extent the proceeds of such sale do not consist
of cash or marketable securities, not to exceed the greater of
(x) $75,000,000 and (y) 1.00% of Total Assets at the time of such
Investment (with the fair market value of each Investment being measured at the
time such Investment is made and without giving effect to subsequent changes in
value);


 


(xiv) distributions
or payments of Receivables Fees;


 


(xv) the
distribution, as a dividend or otherwise (and the declaration of such
dividend), of shares of Capital Stock of, or Indebtedness owed to the Borrower
or a Restricted Subsidiary by, any Unrestricted Subsidiary (other than Kate
Spade); and


 


77

















 


(xvi) other
Restricted Payments in an amount which, when taken together with all other Restricted
Payments made since the Closing Date pursuant to this clause (xvi), does
not exceed $75,000,000;


 


provided,
however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (xv) and (xvi) of
this paragraph (b), no Default shall have occurred and be continuing or would
occur as a consequence thereof.


 


(c) 
Notwithstanding anything to the contrary herein, the Borrower will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, make any (i) Restricted
Payment covered in clauses (w) through (y) of the definition of
Restricted Payments set forth in paragraph (a) of this Section 6.04
to the holders of Equity Interests of the Borrower or any of its direct or
indirect parent companies (which shall include the Sponsors, the Co-Investors
and their respective Affiliates) other than to the Borrower and its Restricted
Subsidiaries, future, present or former employees, directors, managers or
consultants of the Borrower, any of its subsidiaries or any of its direct or
indirect parent companies with respect to Equity Interests held by them in such
capacities and other than a Restricted Payment made pursuant to clause (x) of
paragraph (b) of this Section 6.04 or (ii)  Investment in the
Sponsors, the Co-Investors, any Permitted Holders who are members of a group
(within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act or any successor provision) with the Sponsors or any
Co-Investors or any Person or group who becomes a Permitted Holder following a
Change of Control as provided for in the definition of “Permitted Holders” or
their respective Affiliates (other than in the Borrower and its subsidiaries
and members of management of the Borrower (or its direct parent)), in each case
during any period beginning on the date on which the Borrower makes an election
to pay interest on the Senior Notes by increasing the principal amount of the
outstanding Senior Notes or by issuing additional Senior Notes pursuant to the
Senior Notes Indenture (or an election under any similar provision set forth in
any instrument governing any Indebtedness refinancing, refunding, extending,
renewing or replacing the Senior Notes) with respect to any interest period
relating thereto and ending on the first date after such interest period on
which the Borrower makes a payment of interest in cash on the Senior Notes
pursuant to the Senior Notes Indenture (or pursuant to any such other
instrument) with respect to a subsequent interest period relating thereto on
the Senior Notes pursuant to the Senior Notes Indenture with respect to a
subsequent interest period.


 


(d) 
The Borrower shall not permit any Unrestricted Subsidiary to become a
Restricted Subsidiary except pursuant to the penultimate paragraph of the
definition of “Unrestricted Subsidiary”. 
For purposes of designating any Restricted Subsidiary as an Unrestricted
Subsidiary, all outstanding Investments by the Borrower and the Restricted
Subsidiaries (except to the extent repaid) in the subsidiary so designated shall
be deemed to be Restricted Payments in an amount determined as set forth in the
last sentence of the definition of “Investment”.  Such designation shall be permitted only if a
Restricted Payment in such amount would be permitted at such time, whether pursuant
to paragraph (a) of this Section 6.04 or under clauses (ix), (xiii) or
(xvi) of paragraph (b) of this Section 6.04, or pursuant to the
definition of “Permitted Investments”, and if such subsidiary otherwise meets
the definition of an “Unrestricted Subsidiary”.


 


SECTION 6.05.  Limitations on Transactions with
Affiliates.  (a)  The Borrower
shall not, and shall not permit any Restricted Subsidiary to, make any payment
to, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate of the Borrower (each of
the foregoing, an “Affiliate Transaction”) involving aggregate payments
or consideration in excess of $10,000,000, unless (i) such Affiliate
Transaction is on terms that are not materially less favorable to the Borrower
or the relevant


 


78

















 


Restricted Subsidiary
than those that would have been obtained in a comparable transaction by the
Borrower or such Restricted Subsidiary with an unrelated Person and
(ii) the Borrower delivers to the Agent with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
payments or consideration in excess of $30,000,000, a Board Resolution adopted
by the majority of the members of the Board of Directors of the Borrower
approving such Affiliate Transaction and set forth in an Officers’ Certificate
certifying that such Affiliate Transaction complies with clause (i) above.


 


(b) 
The limitations set forth in paragraph (a) of this Section 6.05 shall
not apply to:


 


(i) transactions
between or among the Borrower or any of the Restricted Subsidiaries;


 


(ii) Restricted
Payments that are permitted by the provisions of Section 6.04 and the
definition of “Permitted Investments”;


 


(iii) the
payment of management, consulting, monitoring and advisory fees and related
expenses to the Sponsors and any termination or other fee payable to the
Sponsors upon a change of control or initial public equity offering of the
Borrower or any direct or indirect parent company thereof pursuant to the
Management Services Agreement as in effect on the Closing Date;


 


(iv) the
payment of reasonable and customary fees paid to, and indemnities provided on
behalf of, officers, directors, managers, employees or consultants of the
Borrower, any of its direct or indirect parent companies or any Restricted Subsidiary;


 


(v) payments
by the Borrower or any Restricted Subsidiary to any of the Sponsors and the
Co-Investors for any financial advisory, financing, underwriting or placement
services or in respect of other investment banking activities, including in
connection with acquisitions or divestitures, which payments are approved by a
majority of the members of the Board of Directors of the Borrower in good
faith;


 


(vi) transactions
in which the Borrower or any Restricted Subsidiary, as the case may be,
delivers to the Agent a letter from an Independent Financial Advisor stating
that such transaction is fair to the Borrower or such Restricted Subsidiary
from a financial point of view or meets the requirements of clause (i) of
paragraph (a) of this Section 6.05;


 


(vii) payments
or loans (or cancellations of loans) to employees or consultants of the
Borrower, any of its direct or indirect parent companies or any Restricted
Subsidiary and employment agreements, stock option plans and other compensatory
arrangements with such employees or consultants that are, in each case,
approved by the Borrower in good faith;


 


(viii) any
agreement, instrument or arrangement as in effect as of the Closing Date, or
any amendment thereto (so long as any such amendment is not disadvantageous to
the Lenders in any material respect as compared to the applicable agreement as
in effect on the Closing Date as reasonably determined in good faith by the
Borrower);


 


(ix) the
existence of, or the performance by the Borrower or any of the Restricted
Subsidiaries of its obligations under the terms of, any stockholders agreement
or its equivalent (including any registration rights agreement or purchase
agreement related thereto) to which it is a party as of the Closing Date and
any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the
performance by the Borrower or any Restricted


 


79

















 


Subsidiary of obligations
under any future amendment to any such existing agreement or under any similar
agreement entered into after the Closing Date shall only be permitted by this
clause (ix) to the extent that the terms of any such existing
agreement together with all amendments thereto, taken as a whole, or new
agreement are not otherwise more disadvantageous to the Lenders in any material
respect than the terms of the original agreement in effect on the Closing Date
as reasonably determined in good faith by the Borrower;


 


(x) the
Transactions, the Credit Card Sale and the payment of all fees and expenses
related to the Transactions and the Credit Card Sale, in each case as disclosed
in the offering circular relating to the New Notes;


 


(xi) transactions
with customers, clients, suppliers, or purchasers or sellers of goods or
services, in each case in the ordinary course of business and otherwise in
compliance with the terms of this Agreement that are fair to the Borrower and
the Restricted Subsidiaries, in the reasonable determination of the Board of
Directors or the senior management of the Borrower, or are on terms at least as
favorable as might reasonably have been obtained at such time from an
unaffiliated party;


 


(xii) the
issuance of Equity Interests (other than Disqualified Stock) of the Borrower to
any Permitted Holder or to any director, manager, officer, employee or
consultant of the Borrower or any direct or indirect parent company thereof;


 


(xiii) sales
of accounts receivable, or participations therein, in connection with any
Receivables Facility; and


 


(xiv) investments
by the Sponsors and the Co-Investors in securities of the Borrower or any of
its Restricted Subsidiaries so long as (A) the investment is being offered
generally to other investors on the same or more favorable terms and (B) the
investment constitutes less than 5.0% of the proposed or outstanding issue
amount of such class of securities.


 


SECTION 6.06.  Limitations on Asset Sales.  (a)  The Borrower shall not, and shall
not permit any Restricted Subsidiary to, cause, make or suffer to exist an
Asset Sale of any Term Loan First Lien Collateral, unless:


 


(i) the
Borrower or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Borrower) of the assets sold or
otherwise disposed of;


 


(ii) except
in the case of a Permitted Asset Swap, at least 75% of the consideration
therefor received by the Borrower or such Restricted Subsidiary, as the case
may be, is in the form of cash or Cash Equivalents (provided  that
the amount of (A) any liabilities (as shown on the Borrower’s or such
Restricted Subsidiary’s most recent balance sheet or in the notes thereto) of
the Borrower or such Restricted Subsidiary, other than liabilities that are by
their terms subordinated to the Obligations, that are assumed by the transferee
of any such assets (or a third party on behalf of the transferee) and for which
the Borrower or such Restricted Subsidiary has been validly released by all
creditors in writing, (B) any securities, notes or other obligations or
assets received by the Borrower or such Restricted Subsidiary from such
transferee that are converted by the Borrower or such Restricted Subsidiary
into cash (to the extent of the cash received) within 180 days following
the closing of such Asset Sale and (C) any Designated Noncash
Consideration received by the Borrower or such Restricted Subsidiary in such Asset


 


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Sale having an aggregate
fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (C) that is at that
time outstanding, not to exceed the greater of (I) $125,000,000 and
(II) 1.75% of Total Assets at the time of the receipt of such Designated Noncash
Consideration, with the fair market value of each item of Designated Noncash
Consideration being measured at the time received and without giving effect to
subsequent changes in value, shall be deemed to be cash for purposes of this
provision and for no other purpose);


 


(iii) an
amount equal to 100% of the Net Proceeds of such Asset Sale (less, in
the case of the sale of Capital Stock of a Person, the amount allocable to the
inventory and related assets of such Person, as determined by the Borrower in
good faith) is paid directly by the purchaser thereof to the Agent to be held
in trust for application in accordance with Section 2.20; and


 


(b) 
The Borrower shall not, and shall not permit any Restricted Subsidiary to,
cause, make or suffer to exist an Asset Sale (other than an Asset Sale of Term
Loan First Lien Collateral), unless:


 


(i) the
Borrower or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Borrower) of the assets sold or
otherwise disposed of;


 


(ii) except
in the case of a Permitted Asset Swap, at least 75% of the consideration
therefor received by the Borrower or such Restricted Subsidiary, as the case
may be, is in the form of cash or Cash Equivalents (provided  that
the amount of (A) any liabilities (as shown on the Borrower’s or such
Restricted Subsidiary’s most recent balance sheet or in the notes thereto) of
the Borrower or such Restricted Subsidiary, other than liabilities that are by
their terms subordinated to the Obligations, that are assumed by the transferee
of any such assets (or a third party on behalf of the transferee) and for which
the Borrower or such Restricted Subsidiary has been validly released by all
creditors in writing, (B) any securities, notes or other obligations or
assets received by the Borrower or such Restricted Subsidiary from such
transferee that are converted by the Borrower or such Restricted Subsidiary
into cash (to the extent of the cash received) within 180 days following
the closing of such Asset Sale and (C) any Designated Noncash
Consideration received by the Borrower or such Restricted Subsidiary in such
Asset Sale having an aggregate fair market value, taken together with all other
Designated Noncash Consideration received pursuant to this clause (C) that
is at that time outstanding, not to exceed the greater of (I) $125,000,000
and (II) 1.75% of Total Assets at the time of the receipt of such
Designated Noncash Consideration, with the fair market value of each item of
Designated Noncash Consideration being measured at the time received and
without giving effect to subsequent changes in value, shall be deemed to be
cash for purposes of this provision and for no other purpose); and


 


(iii) the
Net Proceeds of such Asset Sale are applied in accordance with
Section 2.20.


 


SECTION 6.07.  Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.  (a) 
The Borrower shall not, and shall not permit any Restricted Subsidiary that is
not a Subsidiary Guarantor to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
consensual restriction on the ability of any such Restricted Subsidiary to:


 


(i) (A) pay
dividends or make any other distributions to the Borrower or any Restricted
Subsidiary on its Capital Stock or with respect to any other interest or
participation in, or


 


81
















 


measured by, its profits,
or (B) pay any Indebtedness owed to the Borrower or any Restricted
Subsidiary;


 


(ii) make
loans or advances to the Borrower or any Restricted Subsidiary; or


 


(iii) sell,
lease or transfer any of its properties or assets to the Borrower or any
Restricted Subsidiary.


 


(b) 
The limitations set forth in paragraph (a) of this Section 6.07
shall not apply (in each case) to such encumbrances or restrictions existing
under or by reason of:


 


(i) contractual
encumbrances or restrictions in effect on the Closing Date, including pursuant
to the Loan Documents, the Senior Secured Asset-Based Revolving Credit Facility
and the related documentation (including security documents and intercreditor
agreements) and Hedging Obligations and the 2028 Debentures;


 


(ii) the
New Note Documents and the New Notes and the subsidiary guarantees of the New
Notes issued thereunder, the Collateral Documents, the ABL Security Documents
and the Intercreditor Agreement;


 


(iii) purchase
money obligations for property acquired in the ordinary course of business and
Capitalized Lease Obligations that impose restrictions of the nature discussed
in clause (iii) of paragraph (a) of this Section 6.07
on the property so acquired;


 


(iv) applicable
law or any applicable rule, regulation or order;


 


(v) any
agreement or other instrument of a Person acquired by the Borrower or any
Restricted Subsidiary in existence at the time of such acquisition (but not
created in connection therewith or in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired;


 


(vi) contracts
for the sale of assets, including customary restrictions with respect to a
subsidiary pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
subsidiary;


 


(vii) Secured
Indebtedness otherwise permitted to be incurred pursuant to Sections 6.01 and
6.02 that limit the right of the debtor to dispose of the assets securing such
Indebtedness;


 


(viii) restrictions
on cash or other deposits or net worth imposed by customers under contracts
entered into in the ordinary course of business;


 


(ix) other
Indebtedness, Disqualified Stock or Preferred Stock of Restricted Subsidiaries
permitted to be incurred after the Closing Date pursuant to Section 6.01;


 


(x) customary
provisions in joint venture agreements and other similar agreements;


 


(xi) customary
provisions contained in leases and other agreements entered into in the
ordinary course of business;


 


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(xii) restrictions
created in connection with any Receivables Facility; provided that in the case of Receivables Facilities
established after the Closing Date, such restrictions are necessary or
advisable, in the good faith determination of the Borrower, to effect such
Receivables Facility;


 


(xiii) restrictions
or conditions contained in any trading, netting, operating, construction,
service, supply, purchase or other agreement to which the Borrower or any of
its Restricted Subsidiaries is a party entered into in the ordinary course of
business; provided that such agreement prohibits the encumbrance of
solely the property or assets of the Borrower or such Restricted Subsidiary
that are the subject of such agreement, the payment rights arising thereunder
or the proceeds thereof and does not extend to any other asset or property of
the Borrower or such Restricted Subsidiary or the assets or property of any
other Restricted Subsidiary; and


 


(xiv) any
encumbrances or restrictions of the type referred to in clauses (i), (ii) and
(iii) of paragraph (a) of this Section 6.07 imposed by any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of the contracts, instruments or
obligations referred to in clauses (i) through (xiii) of this
paragraph (b); provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are, in the good faith
judgment of the Borrower, not materially more restrictive with respect to such
encumbrance and other restrictions than those prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing; provided, further, that with respect
to contracts, instruments or obligations existing on the Closing Date, any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are not materially more restrictive
with respect to such encumbrances and other restrictions than those contained
in such contracts, instruments or obligations as in effect on the Closing Date.


 


SECTION 6.08.  Limitations on Guarantees of Indebtedness
by Restricted Subsidiaries.  The
Borrower will not permit any of its Wholly-Owned Subsidiaries that are
Restricted Subsidiaries (and non-Wholly-Owned Subsidiaries if such
non-Wholly-Owned Subsidiaries guarantee other capital markets debt securities),
other than a Subsidiary Guarantor or a Foreign Subsidiary, to guarantee the
payment of any Indebtedness of the Borrower or any other Subsidiary Guarantor
unless:


 


(a) such Restricted Subsidiary within thirty
(30) days executes and delivers a Joinder Agreement providing for a Loan
Guaranty by such Restricted Subsidiary, except that with respect to a guarantee
of Indebtedness of the Borrower or any Subsidiary Guarantor, that is by its
express terms subordinated in right of payment to the Obligations or the Loan
Guaranty of such Restricted Subsidiary, any such guarantee by such Restricted
Subsidiary with respect to such Indebtedness shall be subordinated in right of
payment to such Loan Guaranty substantially to the same extent as such
Indebtedness is subordinated to the Obligations;


 


(b) such Restricted Subsidiary waives and will
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Borrower or any other Restricted Subsidiary as a result of any payment by
such Restricted Subsidiary under its Loan Guaranty; and


 


(c) such Restricted Subsidiary shall deliver
to the Agent an opinion of counsel to the effect that (i) such Loan
Guaranty has been duly executed and authorized and (ii) such Loan Guaranty
constitutes a valid, binding and enforceable obligation of such Restricted
Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy,
insolvency or similar laws 


 


83

















 


(including
all laws relating to fraudulent transfers) and except insofar as enforcement
thereof is subject to general principles of equity;


 


provided  that this Section 6.08
shall not be applicable to any guarantee of any Restricted Subsidiary that
existed at the time such Person became a Restricted Subsidiary and was not
incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary.


 


SECTION 6.09.  Limitations on Sale and Lease-Back
Transactions.  The Borrower will not,
and will not permit any Restricted Subsidiary to, enter into any Sale and
Lease-Back Transaction with respect to any property unless:


 


(a) the Borrower or such Restricted Subsidiary
would be entitled to (i) incur Indebtedness in an amount equal to the
Attributable Debt with respect to such Sale and Lease-Back Transaction pursuant
to Section 6.01 and (ii) create a Lien on such property securing such
Attributable Debt without securing the Obligations pursuant to Section 6.02;


 


(b) the consideration received by the Borrower
or any Restricted Subsidiary in connection with such Sale and Lease-Back
Transaction is at least equal to the fair market value (as determined in good
faith by the Borrower) of such property; and


 


(c) the Borrower applies the proceeds of such
transaction in compliance with Section 2.20.


 


SECTION 6.10.  Amendments to Subordination Provisions.  Without the consent of the Required Lenders,
the Borrower will not amend, modify or alter the Senior Subordinated Notes
Indenture in any way to:


 


(a) increase the rate of or change the time
for payment of interest on any Senior Subordinated Notes;


 


(b) increase the principal of, advance the
final maturity date of or shorten the Weighted Average Life to Maturity of any
Senior Subordinated Notes;


 


(c) alter the redemption provisions or the
price or terms at which the Borrower is required to offer to purchase any
Senior Subordinated Notes; or


 


(d) amend the provisions of the Senior
Subordinated Notes Indenture that relate to subordination.


 


SECTION 6.11.  Obligations of the Borrower and the
Restricted Subsidiaries Relating to Kate Spade.  In the event that Kate Spade sells, conveys,
transfers or otherwise disposes of, all or substantially all of its properties
or assets, in one or more related transactions, the Borrower shall, subject to
its fiduciary duties to the holders of minority Equity Interests in Kate Spade
and subject to any other obligations in the organizational documents of Kate
Spade or other agreements with Kate Spade or holders of its Equity Interests
(in each case, as in effect on the Closing Date), exercise its rights and
powers as a controlling holder of Equity Interests in Kate Spade to cause Kate
Spade to distribute to the Borrower its pro rata share of the net proceeds of
such sale, conveyance, transfer or other disposition, the Borrower shall apply
such proceeds in accordance with Section 2.20 and such proceeds will
constitute Net Proceeds thereunder.  In
addition, the Borrower will, and will cause its Restricted Subsidiaries to,
apply the amount of any other Extraordinary Distribution in accordance with
Section 2.20 and such amount will constitute Net Proceeds thereunder.  Furthermore, the Borrower, in its capacity as
a holder of 


 


84

















 


Equity Interests in Kate
Spade, will not, and will cause its Restricted Subsidiaries not to, waive any
of its rights to receive dividends, distributions or other payments from Kate
Spade or consent to an amendment of Kate Spade’s organizational documents or
other agreements that would restrict Kate Spade’s ability to make any such
distributions.


 


SECTION 6.12.  Impairment of Security Interest.  Subject to the rights of the holders of Permitted
Liens or Permitted Collateral Liens and except as permitted by this Agreement
or the Loan Documents, the Borrower shall not, and shall not permit any of its
Restricted Subsidiaries to, take or knowingly or negligently omit to take, any
action which action or omission would reasonably be expected to have the result
of materially impairing the security interest with respect to the Collateral
for the benefit of the Secured Parties.


 


SECTION 6.13.  Business of Borrower and Restricted
Subsidiaries.  The Borrower will not,
and will not permit any Restricted Subsidiary to, engage to any material extent
in any material line of business substantially different from those lines of
business conducted by the Borrower and the Restricted Subsidiaries on the date
of execution of this Agreement or businesses reasonably related or ancillary
thereto.


 


ARTICLE VII


 


Events
of Default


 


If
any of the following events (“Events of Default”) shall occur:


 


(a) the Borrower shall fail to pay any
principal of any Loan when and as the same shall become due and payable,
whether at the due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;


 


(b) the Borrower shall fail to pay any
interest on any Loan or any fee or any other amount (other than an amount
referred to in clause (a) of this Article) payable under this Agreement or
any other Loan Document, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of thirty (30) days;


 


(c) any representation or warranty made or
deemed made by or on behalf of any Loan Party herein or in any other Loan
Document or any amendment or modification thereof or waiver thereunder, or in
any report or other certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement or any Loan Document, shall
prove to have been materially incorrect when made or deemed made;


 


(d) failure by Holdings, the Borrower or any
Subsidiary Guarantor for sixty (60) days after receipt of written notice given
by the Agent or the Required Lenders to comply with any of its other agreements
in this Agreement or any Loan Document;


 


(e) (i) any Loan Party shall fail to make
any payment beyond the applicable grace period (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) with respect to any
Material Indebtedness, or (ii) any event or condition occurs (other than
with respect to Material Indebtedness constituting Derivative Transactions,
termination events or equivalent events pursuant to the terms of the related
Hedge Agreements in accordance with the terms thereof and not as a result of
any default thereunder by any Loan Party) that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits 


 


85

















 


(with
the giving of notice, if required) the holder or holders of any such Material
Indebtedness or any trustee or agent on its or their behalf to cause any such
Material Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; provided
that this paragraph (e) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness if such sale or transfer is permitted
hereunder and under the documents providing for such Indebtedness;


 


(f) an involuntary proceeding shall be
commenced or an involuntary petition shall be filed seeking
(i) liquidation, reorganization or other relief in respect of Holdings,
the Borrower or any Significant Subsidiary (or any group of Subsidiaries that
together would constitute a Significant Subsidiary) or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or
(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Holdings, the Borrower or any Significant
Subsidiary (or any group of Subsidiaries that together would constitute a
Significant Subsidiary) or for a substantial part of its assets, and, in any
such case of clause (i) or (ii), such proceeding or petition shall
continue undismissed and unstayed for sixty (60) days or an order or
decree approving or ordering any of the foregoing shall be entered;


 


(g) Holdings, the Borrower or any Significant
Subsidiary (or any group of Subsidiaries that together would constitute a
Significant Subsidiary) shall (i) voluntarily commence any proceeding or
file any petition seeking liquidation, reorganization or other relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
described in clause (f) of this Article, (iii) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Holdings, the Borrower or any Significant
Subsidiary (or any group of Subsidiaries that together would constitute a
Significant Subsidiary) or for a substantial part of its assets, (iv) file
an answer admitting the material allegations of a petition filed against it in
any such proceeding or (v) make a general assignment for the benefit of
creditors;


 


(h) failure by Holdings, the Borrower or any
Significant Subsidiary (or any group of Subsidiaries that together would
constitute a Significant Subsidiary) to pay final judgments aggregating in
excess of $50,000,000, which final judgments remain unpaid, undischarged and
unstayed for a period of more than sixty (60) days after such judgment
becomes final, and in the event such judgment is covered by insurance, an
enforcement proceeding has been commenced by any creditor upon such judgment or
decree which is not promptly stayed;


 


(i) the Loan Guaranty of any Significant
Subsidiary (or any group of Subsidiaries that together would constitute a
Significant Subsidiary) or Holdings shall for any reason cease to be in full
force and effect or be declared null and void or any Responsible Officer of any
Subsidiary Guarantor that is a Significant Subsidiary (or the Responsible
Officers of any group of Subsidiaries that together would constitute a
Significant Subsidiary) or Holdings, as the case may be, denies that it has any
further liability under its Loan Guaranty or gives notice to such effect, other
than by reason of the termination of this Agreement or the release of any such
Loan Guaranty in accordance with this Agreement;


 


(j) unless all of the Collateral has been
released from the Liens in accordance with the provisions of the Collateral
Documents, any Collateral Document shall for any reason cease to be in full
force and effect or the assertion by Holdings, the Borrower or any Restricted
Subsidiary, in any pleading in any court of competent jurisdiction, that any
security interest thereunder is invalid 


 


86

















 


or
unenforceable and, in the case of any such Restricted Subsidiary, the failure
by the Borrower to cause such Restricted Subsidiary to rescind such assertions
within thirty (30) days after the Borrower has actual knowledge of such
assertions; or


 


(k) the failure by Holdings, the Borrower or
any Restricted Subsidiary to comply for sixty (60) days after receipt of
written notice given by the Agent or the Required Lenders with its other
agreements contained in the Collateral Documents, except for a failure that
would not materially affect the value of the Collateral, or the remedies with
respect thereto, in each case taken as a whole,


 


then,
and in every such event (other than an event with respect to any Loan Party
described in clause (f) or (g) of this Article), and at any time
thereafter during the continuance of such event, the Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take any of
the following actions, at the same or different times:  (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately and
(ii) declare the Loans then outstanding to be due and payable in whole (or
in part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; provided
that upon the occurrence of an event with respect to any Loan Party described
in clause (f) or (g) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of
the Borrower accrued hereunder, shall automatically become due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower, without further action of the Agent or any
Lender.  Upon the occurrence and the
continuance of an Event of Default, the Agent may, and at the request of the
Required Lenders shall, exercise any rights and remedies provided to the Agent
under the Loan Documents or at law or equity, including all remedies provided
under the UCC.


 


In
the event of any Event of Default specified in clause (e) of the preceding
paragraph of this Article, such Event of Default and all consequences thereof
(excluding any resulting payment default) shall be annulled, waived and
rescinded automatically and without any action by the Agent or the Lenders if,
within twenty (20) days after such Event of Default arose, (i) the
Indebtedness or guarantee that is the basis for such Event of Default has been
discharged, (ii) the holders thereof have rescinded or waived the
acceleration, notice or action (as the case may be) giving rise to such Event
of Default or (iii) the default that is the basis for such Event of
Default has been cured.


 


ARTICLE VIII


 


The
Agent


 


Each
of the Lenders hereby irrevocably appoints the Agent as its agent and
authorizes the Agent to take such actions on its behalf, including execution of
the other Loan Documents, and to exercise such powers as are delegated to the
Agent by the terms of the Loan Documents, together with such actions and powers
as are reasonably incidental thereto.


 


The
bank serving as the Agent hereunder shall have the same rights and powers in
its capacity as a Lender as any other Lender and may exercise the same as
though it were not the Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of 


 


87

















 


business
with the Loan Parties or any subsidiary of a Loan Party or other Affiliate
thereof as if it were not the Agent hereunder.


 


The
Agent shall not have any duties or obligations except those expressly set forth
in the Loan Documents.  Without limiting
the generality of the foregoing, (a) the Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Loan Documents that the Agent
is required to exercise in writing as directed by the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02), and (c) except as
expressly set forth in the Loan Documents, the Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to any Loan Party or any of its Subsidiaries that is communicated to
or obtained by the bank serving as Agent or any of its Affiliates in any
capacity.  The Agent shall not be liable
for any action taken or not taken by it with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 9.02) or
in the absence of its own gross negligence or willful misconduct.  The Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to
the Agent by the Borrower or a Lender, and the Agent shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with any Loan Document,
(ii) the contents of any certificate, report or other document delivered
hereunder or in connection with any Loan Document, (iii) the performance
or observance of any of the covenants, agreements or other terms or conditions
set forth in any Loan Document, (iv) the validity, enforceability,
effectiveness or genuineness of any Loan Document or any other agreement,
instrument or document, (v) the creation, perfection or priority of Liens
on the Collateral or the existence of the Collateral, or (vi) the
satisfaction of any condition set forth in Article IV of the Original
Credit Agreement or elsewhere in any Loan Document, other than to confirm
receipt of items expressly required to be delivered to the Agent.


 


The
Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed
or sent by the proper Person.  The Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon.  The Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.


 


The
Agent may perform any and all its duties and exercise its rights and powers by
or through any one or more sub-agents appointed by the Agent.  The Agent and any such sub-agent may perform
any and all its duties and exercise its rights and powers through their
respective Related Parties.  The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of the Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication
of the credit facilities provided for herein as well as activities as Agent.


 


Subject
to the appointment and acceptance of a successor Agent as provided in this
paragraph, the Agent may resign at any time by notifying the Lenders and the Borrower.  Upon any such resignation, the Required
Lenders shall have the right, with the consent (not to be unreasonably withheld
or delayed) of the Borrower, to appoint a successor; provided that,
during the existence and continuation of an Event of Default, no consent of the
Borrower shall be required.  If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within thirty (30) days after 


 


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the
retiring Agent gives notice of its resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent which shall be a commercial
bank or an Affiliate of any such commercial bank reasonably acceptable to the
Borrower.  Upon the acceptance of its
appointment as Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder.  The fees payable
by the Borrower to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such
successor.  After the Agent’s resignation
hereunder, the provisions of this Article and Section 9.03 shall
continue in effect for the benefit of such retiring Agent, its sub-agents and
their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while it was acting as Agent.


 


Each
Lender acknowledges that it has, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement.  Each Lender also acknowledges
that it will, independently and without reliance upon the Agent or any other
Lender and based on such documents and information as it shall from time to
time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document or
related agreement or any document furnished hereunder or thereunder.


 


The
co-arrangers, joint bookrunners, co-syndication agents and the documentation
agent  shall not have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Lenders as such.


 


ARTICLE IX


 


Miscellaneous


 


SECTION 9.01.  Notices.  (a)  Except in the case of notices and
other communications expressly permitted to be given by telephone (and subject
to paragraph (b) below), all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by facsimile or e-mail,
as follows:


 


(i) if
to any Loan Party, to the Borrower at:


 


One
Marcus Square

1618 Main Street

Dallas, Texas 75201

Attention: General Counsel

Facsimile No: (214) 743-7611


 


(ii) if
to the Agent, to Credit Suisse AG at:


 


Eleven
Madison Avenue

New York, NY 10010

Attention: Agency Group

Facsimile No: (212) 322-2291

E-mail: agency.loanops@credit-suisse.com


 


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(iii) if to any other
Lender, to it at its address or facsimile number set forth in its Administrative
Questionnaire.


 


All
such notices and other communications (i) sent by hand or overnight
courier service, or mailed by certified or registered mail, shall be deemed to
have been given when received or (ii) sent by facsimile shall be deemed to
have been given when sent and when receipt has been confirmed by telephone, provided
that if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next Business Day
for the recipient.


 


(b) 
Notices and other communications to the Lenders hereunder may be delivered or
furnished by electronic communications (including e-mail and internet or
intranet websites) pursuant to procedures approved by the Agent; provided
that the foregoing shall not apply to notices pursuant to Article II or to
compliance and no Event of Default certificates delivered pursuant to Section 5.01(d) unless
otherwise agreed by the Agent and the applicable Lender.  The Agent or the Borrower (on behalf of the
Loan Parties) may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications. All such notices and other
communications (i) sent to an e-mail address shall be deemed received upon
the sender’s receipt of an acknowledgement from the intended recipient (such as
by the “return receipt requested” function, as available, return e-mail or
other written acknowledgement), provided that if not given during the normal
business hours of the recipient, such notice or communication shall be deemed
to have been given at the opening of business on the next Business Day for the
recipient, and (ii) posted to an Internet or intranet website shall be
deemed received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (b)(i) of notification
that such notice or communication is available and identifying the website
address therefor.


 


(c) 
Any party hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other parties hereto.


 


SECTION 9.02.  Waivers; Amendments.  (a)  No failure or delay by the Agent or
any Lender in exercising any right or power hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.  The rights and remedies of the Agent and the
Lenders hereunder and under any other Loan Document are cumulative and are not
exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of any Loan
Document or consent to any departure by any Loan Party therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of
this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.  Without limiting the generality of the
foregoing, to the extent permitted by law, the making of a Loan shall not be
construed as a waiver of any Default, regardless of whether the Agent or any
Lender may have had notice or knowledge of such Default at the time.


 


(b) 
Neither this Agreement nor any other Loan Document nor any provision hereof or
thereof may be waived, amended or modified except (i) in the case of this
Agreement, pursuant to an agreement or agreements in writing entered into by
the Borrower and the Required Lenders or, (ii) in the case of any other
Loan Document (other than any such amendment to effectuate any modification
thereto expressly contemplated by the terms of such other Loan Documents),
pursuant to an agreement or agreements in writing entered into by the Agent and
the Loan Party or Loan Parties that are parties thereto, with the consent of
the Required Lenders; provided that no such agreement shall (A) increase
the Commitment of any Lender without the written consent of such Lender; it
being understood that a waiver 


 


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of any condition precedent
set forth in Article IV or the waiver of any Default or mandatory
prepayment shall not constitute an increase of any Commitment of any Lender, (B) reduce
or forgive the principal amount of any Loan or reduce the rate of interest
thereon, or reduce or forgive any interest or fees (including fees set forth in
Sections 2.08, 2.19 and 2.21) payable hereunder, without the written consent of
each Lender directly affected thereby, (C) postpone any scheduled date of
payment of the principal amount of any Loan, or any date for the payment of any
interest, fees or other Obligations payable hereunder, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of expiration
of any Commitment, without the written consent of each Lender directly affected
thereby; provided that only the consent of the Required Lenders shall be
necessary to amend the provisions of Section 2.11(c) providing for
the default rate of interest, or to waive any obligations of the Borrower to
pay interest at such default rate, (D) change Section 2.16(b) or
(c) in a manner that would alter the manner in which payments are shared,
without the written consent of each Lender, (E) change any of the
provisions of this Section or the definition of “Required Lenders” or any
other provision of any Loan Document specifying the number or percentage of
Lenders required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender, (F) release any material Loan Guarantor from its obligation
under its Loan Guaranty (except as otherwise permitted herein or in the other
Loan Documents), without the written consent of each Lender, or (G) except
as provided in clauses (c) and (d) of this Section or in any
Collateral Document, release all or substantially all of the Collateral,
without the written consent of each Lender; provided further that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Agent hereunder without the prior written consent of the Agent.  The Agent may also amend the Commitment
Schedule to reflect assignments entered into pursuant to Section 9.04.


 


(c) 
The Lenders hereby irrevocably agree that the Liens granted to the Agent by the
Loan Parties on any Collateral shall be automatically released (i) upon
the termination of the Commitments, payment and satisfaction in full in cash of
all Secured Obligations (other than Unliquidated Obligations), and the cash
collateralization of all Unliquidated Obligations in a manner satisfactory to
the Agent, (ii) upon the sale or other disposition of the property
constituting such Collateral (including as part of or in connection with any
other sale or other disposition permitted hereunder) to any Person other than
another Loan Party, to the extent such sale or other disposition is made in
compliance with the terms of this Agreement (and the Agent may rely
conclusively on a certificate to that effect provided to it by any Loan Party
upon its reasonable request without further inquiry), (iii) to the extent
such Collateral is comprised of property leased to a Loan Party, upon
termination or expiration of such lease, (iv) subject to paragraph (b) of
this Section 9.02, if the release of such Lien is approved, authorized or
ratified in writing by the Required Lenders, (v) to the extent the
property constituting such Collateral is owned by any Loan Guarantor, upon the
release of such Guarantor from its obligations under its Loan Guaranty in
accordance with the provisions of this Agreement, (vi) as required to
effect any sale or other disposition of such Collateral in connection with any
exercise of remedies of the Agent and the Lenders pursuant to the Collateral
Documents or (vii) as required pursuant to the terms of the Intercreditor
Agreement; provided that the Agent may, in its discretion, release the Lien on
Collateral valued in the aggregate not in excess of $5,000,000 during each
fiscal year without consent of any Lender. 
Any such release shall not in any manner discharge, affect, or
impair the Obligations or any Liens (other than those expressly being released)
upon (or obligations of the Loan Parties in respect of) all interests retained
by the Loan Parties, including the proceeds of any sale, all of which shall
continue to constitute part of the Collateral to the extent required under the
provisions of the Loan Documents.


 


(d) 
Notwithstanding anything to the contrary contained in this Section 9.02,
guarantees, collateral security documents and related documents executed by
Foreign Subsidiaries in connection with this Agreement may be in a form
reasonably determined by the Agent and may be amended and waived with the
consent of the Agent at the request of the Borrower without the need to obtain
the consent of any 


 


91

















 


other Lenders if such
amendment or waiver is delivered in order (i) to comply with local law or
advice of local counsel, (ii) to cure ambiguities or defects or (iii) to
cause such guarantee, collateral security document or other document to be
consistent with this Agreement and the other Loan Documents.


 


(e) 
If, in connection with any proposed amendment, waiver or consent requiring the
consent of “each Lender” or “each Lender directly affected thereby”, the
consent of the Required Lenders is obtained, but the consent of other necessary
Lenders is not obtained (any such Lender whose consent is necessary but not
obtained being referred to herein as a “Non-Consenting Lender”), then
the Borrower may elect to replace a Non-Consenting Lender as a Lender party to
this Agreement, provided that, concurrently with such replacement,
(i) another bank or other entity which is reasonably satisfactory to the
Borrower and the Agent shall agree, as of such date, to purchase for cash the
Loans and other Obligations due to the Non-Consenting Lender pursuant to an
Assignment and Assumption and to become a Lender for all purposes under this
Agreement and to assume all obligations of the Non-Consenting Lender to be
terminated as of such date and to comply with the requirements of clause (b) of
Section 9.04, (ii) the replacement Lender shall pay the processing
and recordation fee referred to in Section 9.04(b)(ii)(C), if applicable
in accordance with the terms of such Section, (iii) the replacement Lender
shall grant its consent with respect to the applicable proposed amendment,
waiver or consent and (iv) the Borrower shall pay to such Non-Consenting
Lender in same day funds on the day of such replacement (1) all interest,
fees and other amounts then accrued but unpaid to such Non-Consenting Lender by
the Borrower hereunder to and including the date of termination, including
without limitation payments due to such Non-Consenting Lender under Sections
2.13, 2.15 and 2.21, and (2) an amount, if any, equal to the payment which
would have been due to such Lender on the day of such replacement under Section 2.14
had the Loans of such Non-Consenting Lender been prepaid on such date rather
than sold to the replacement Lender.


 


SECTION 9.03.  Expenses; Indemnity; Damage Waiver.  (a)  The Borrower shall pay (i) all
reasonable documented out-of-pocket expenses incurred by the Agent and its
Affiliates, including the reasonable fees, charges and disbursements of
Cravath, Swaine & Moore LLP, counsel for the Agent, in connection with
the syndication and distribution (including, without limitation, via the
internet or through a service such as Intralinks) of the credit facilities
provided for herein, the preparation of the Loan Documents and related
documentation, (ii) all reasonable documented out-of-pocket expenses
incurred by the Agent and its Affiliates, including the reasonable fees,
charges and disbursements of outside legal counsel to the Agent, in connection
with any amendments, modifications or waivers of the provisions of any Loan
Documents (whether or not the transactions contemplated thereby shall be
consummated), (iii) all reasonable documented out-of-pocket expenses
incurred by the Agent or the Lenders, including the reasonable documented fees,
charges and disbursements of any counsel for the Agent and for one law firm
retained by the Lenders, in connection with the enforcement, collection or
protection of its rights in connection with the Loan Documents, including its
rights under this Section, or in connection with the Loans made hereunder,
including all such reasonable documented out-of-pocket expenses incurred during
any workout, restructuring or related negotiations in respect of such Loans,
and (iv) subject to any other provisions of this Agreement, of the Loan Documents
or of any separate agreement entered into by the Borrower and the Agent with
respect thereto, all reasonable documented out-of-pocket expenses incurred by
the Agent in the administration of the Loan Documents.  Expenses reimbursable by the Borrower under
this Section include, without limiting the generality of the foregoing,
subject to any other applicable provision of any Loan Document, reasonable
documented out-of-pocket costs and expenses incurred in connection with:


 


(i) lien and title
searches and title insurance; and


 


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(ii) taxes,
fees and other charges for recording the Mortgages, filing financing statements
and continuations, and other actions to perfect, protect, and continue the
Agent’s Liens.


 


Other
than to the extent required to be paid on the Closing Date, all amounts due
under this paragraph (a) shall be payable by the Borrower within ten (10) Business
Days of receipt of an invoice relating thereto and setting forth such expenses
in reasonable detail.


 


(b) 
The Borrower shall indemnify the Agent and each Lender, and each Related Party
of any of the foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, penalties, liabilities and related expenses, including the fees, charges
and disbursements of any counsel for any Indemnitee, incurred by or asserted
against any Indemnitee arising out of, in connection with, or as a result of
(i) the execution or delivery of the Loan Documents or any agreement or
instrument contemplated thereby, the performance by the parties hereto of their
respective obligations thereunder or the consummation of the Transactions or
any other transactions contemplated hereby, (ii) any Environmental
Liability related in any way to the Borrower or any of its Subsidiaries or to
any property owned or operated by the Borrower or any of its Subsidiaries, or
(iii) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory and regardless of whether any Indemnitee is a party thereto
(and regardless of whether such matter is initiated by a third party or by the
Borrower, any other Loan Party or any of their respective Affiliates); provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, penalties, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.


 


(c) 
To the extent that the Borrower fails to pay any amount required to be paid by
it to the Agent under paragraph (a) or (b) of this Section, each
Lender severally agrees to pay to the Agent such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, penalty, liability or
related expense, as the case may be, was incurred by or asserted against the
Agent in its capacity as such.


 


(d) 
To the extent permitted by applicable law, no party to this Agreement shall
assert, and each hereby waives, any claim against any other party hereto or any
Related Party thereof, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or the
use of the proceeds thereof.


 


(e) 
All amounts due under this Section shall be paid promptly after written
demand therefor.


 


SECTION 9.04.  Successors and Assigns.  (a)  The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that (i) the
Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and
void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section (any
attempted assignment or transfer not complying with the terms of this Section shall
be null and void).  Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby, Participants (to the extent provided in paragraph (c) of
this Section) and, to the extent expressly contemplated hereby, the 


 


93

















 


Related Parties of each
of the Agent and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.


 


(b) 
(i) Subject to the conditions set forth in paragraph (b)(ii) below,
any Lender may assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment or the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld or delayed) of:


 


(A) the Borrower, provided that no consent of the Borrower
shall be required for an assignment to another Lender, an Affiliate of a
Lender, an Approved Fund or, if an Event of Default specified in paragraphs
(a), (b), (f) or (g) of Article VII has occurred and is
continuing, any other Eligible Assignee and provided  further that
no consent of the Borrower shall be required for an assignment during the
primary syndication of the Loans to Persons identified by the Agent to the
Borrower on or prior to the Closing Date and reasonably acceptable to the
Borrower; and


 


(B) the Agent.


 


(ii) Assignments
shall be subject to the following additional conditions:


 


(A) except in the case of an assignment to another Lender, an
Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining
amount of the assigning Lender’s Commitment or Loans, the amount of the
Commitment or the principal amount of Loans of the assigning Lender subject to
each such assignment (determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Agent and determined on an
aggregate basis in the event of concurrent assignments to Related Funds (as
defined below)) shall not be less than $1,000,000 unless each of the Borrower
and the Agent otherwise consent, provided that no such consent of the
Borrower shall be required if an Event of Default specified in paragraphs (a),
(b), (f) or (g) of Article VII has occurred and is continuing;


 


(B) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement;


 


(C) the parties to each assignment shall execute and deliver to
the Agent an Assignment and Assumption via an electronic settlement system
acceptable to the Agent (or, if previously agreed with the Agent, manually),
and shall pay to the Agent a processing and recordation fee of $3,500 (which
fee may be waived or reduced in the sole discretion of the Agent and shall not
be payable in the case of any assignment by any Joint Lead Arranger or any of
its Affiliates); provided that only one such fee shall be payable in the
case of concurrent assignments to two or more Related Funds; and


 


(D)  the assignee, if it shall not be a Lender, shall deliver
on or prior to the effective date of such assignment, to the Agent (1) an
Administrative Questionnaire and (2) if applicable, an appropriate
Internal Revenue Service form (such as Form W-8BEN or W-8ECI or any
successor form adopted by the relevant United States taxing authority) as
required by applicable law supporting such assignee’s position that no
withholding by any Borrower or the Agent for United States income tax payable
by such assignee in respect of amounts received by it hereunder is required.


 


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The
term “Related Funds” shall mean with respect to any Lender that is an
Approved Fund, any other Approved Fund that is managed or advised by the same
investment advisor as such Lender or by an Affiliate of such investment
advisor.


 


(iii) Subject
to acceptance and recording thereof pursuant to paragraph (b)(iv) of
this Section, from and after the effective date specified in each Assignment
and Assumption the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease
to be a party hereto but shall continue to be entitled to the benefits of
Sections 2.13, 2.14, 2.15 and 9.03 with respect to facts and circumstances
occurring on or prior to the effective date of such assignment).  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
Section 9.04 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance
with paragraph (c) of this Section.


 


(iv) The
Agent, acting for this purpose as an agent of the Borrower, shall maintain at
one of its offices a copy of each Assignment and Assumption delivered to it and
a register for the recordation of the names and addresses of the Lenders, and
the Commitment of, or principal amount of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, absent manifest error, and the Borrower, the Agent and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. 
The Register shall be available for inspection by the Borrower and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.


 


(v) Upon
its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire and tax certifications required by
Section 9.04(b)(ii)(D)(2)(unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Agent shall accept such Assignment and
Assumption and record the information contained therein in the Register; provided
that if either the assigning Lender or the assignee shall have failed to make
any payment required to be made by it pursuant to Section 2.04(a), 2.16(c) or
9.03(c), the Agent shall have no obligation to accept such Assignment and
Assumption and record the information therein in the Register unless and until
such payment shall have been made in full, together with all accrued interest
thereon.  No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.


 


(vi) By
executing and delivering an Assignment and Assumption, the assigning Lender
thereunder and the assignee thereunder shall be deemed to confirm to and agree
with each other and the other parties hereto as
follows:  (i) such assigning Lender warrants that it is the
legal and beneficial owner of the interest being assigned thereby free and
clear of any adverse claim and that its Commitment, and the outstanding
balances of its Loans, in each case without giving effect to assignments
thereof which have not become effective, are as set forth in such Assignment
and Assumption, (ii) except as set forth in (i) above, such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto, or the
financial 


 


95

















 


condition
of the Borrower or any Subsidiary or the performance or observance by the
Borrower or any Subsidiary of any of its obligations under this Agreement, any
other Loan Document or any other instrument or document furnished pursuant
hereto; (iii) such assignee represents and warrants that it is an Eligible
Assignee, legally authorized to enter into such Assignment and Assumption;
(iv) such assignee confirms that it has received a copy of this Agreement,
together with copies of the most recent financial statements referred to in
Section 3.04(a) or delivered pursuant to Section 5.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Assumption;
(v) such assignee will independently and without reliance upon the Agent,
such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement;
(vi) such assignee appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent, by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.


 


(c) 
(i)  Any Lender may, without the consent of the Borrower or the
Agent, sell participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this
Agreement (including all or a portion of its Commitment or the Loans owing to
it); provided that (A) such Lender’s obligations under this
Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (C) the Borrower, the Agent, and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement and (D) no such
Participant shall be a “creditor” as defined in Regulation T or a “foreign
branch of a broker-dealer” within the meaning of Regulation X.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 9.02(b) that affects such
Participant.  Subject to
paragraph (c)(ii) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.13, 2.14 and
2.15 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section.  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 9.08 as
though it were a Lender, provided such Participant agrees to be subject to
Section 2.16(c) as though it were a Lender.


 


(ii)  A
Participant shall not be entitled to receive any greater payment under Section 2.13
or 2.15 than the applicable Lender would have been entitled to receive with
respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower’s prior written
consent.  A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 2.15 unless the Borrower is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the Borrower,
to comply with Section 2.15(e) as though it were a Lender.


 


(d) 
Any Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such
Lender, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to
any such pledge or assignment of a security interest; provided that no
such pledge or assignment of a security interest shall release a Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.


 


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(e) 
Notwithstanding anything to the contrary contained herein, any Lender (a “Granting
Lender”) may grant to a special purpose funding vehicle (an “SPC”),
identified as such in writing from time to time by the Granting Lender to the
Agent and the Borrower, the option to provide to the Borrower all or any part
of any Loan that such Granting Lender would otherwise be obligated to make to
the Borrower pursuant to this Agreement; provided
that (i) nothing herein shall constitute a commitment by any SPC to
make any Loan, (ii) if an SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting Lender
shall be obligated to make such Loan pursuant to the terms hereof and
(iii) no SPC shall be a “creditor” as defined in Regulation T or a “foreign
branch of a broker-dealer” within the meaning of Regulation X.  The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if, such Loan were made by such Granting Lender.  Each party hereto hereby agrees that (i) neither
the grant to any SPC nor the exercise by any SPC of such option shall increase
the costs or expenses or otherwise increase or change the obligations of the
Borrower under this Agreement (including its obligations under Section 2.13,
2.14 or 2.15), (ii) no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement (all liability for which shall remain
with the Granting Lender) and (iii) the Granting Lender shall for all
purposes including approval of any amendment, waiver or other modification of any
provision of the Loan Documents, remain the Lender of record hereunder.  In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior
indebtedness of any SPC, it will not institute against, or join any other
Person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of the United
States or any state thereof.  In
addition, notwithstanding anything to the contrary contained in this
Section 9.04, any SPC may (i) with notice to, but without the prior
written consent of, the Borrower and the Agent and without paying any
processing fee therefor, assign all or a portion of its interests in any Loans
to the Granting Lender or to any financial institutions (consented to by the
Borrower and Agent) providing liquidity and/or credit support to or for the
account of such SPC to support the funding or maintenance of Loans and
(ii) disclose on a confidential basis any non-public information relating
to its Loans to any rating agency, commercial paper dealer or provider of any
surety, guarantee or credit or liquidity enhancement to such SPC.


 


SECTION 9.05.  Survival.  All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Agent or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any fee or any other amount payable
under this Agreement is outstanding and unpaid and so long as the Commitments
have not expired or terminated.  The
provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article VIII
shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Commitments or the termination of
this Agreement or any provision hereof.


 


SECTION 9.06.  Effectiveness.  This Agreement shall become effective as
provided in the Amendment Agreement.


 


SECTION 9.07.  Severability.  To the extent permitted by law, any provision
of any Loan Document held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,



 


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legality and
enforceability of the remaining provisions thereof; and the invalidity of a
particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.


 


SECTION 9.08.  Right of Setoff.  If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrower
or any Loan Guarantor against any of and all the Secured Obligations held by
such Lender, irrespective of whether or not such Lender shall have made any
demand under the Loan Documents and although such obligations may be
unmatured.  The applicable Lender shall
notify the Borrower and the Agent of such set-off or application, provided
that any failure to give or any delay in giving such notice shall not affect
the validity of any such set-off or application under this Section.  The rights of each Lender under this Section are
in addition to other rights and remedies (including other rights of setoff)
which such Lender may have. NOTWITHSTANDING THE FOREGOING, AT ANY TIME THAT ANY
OF THE SECURED OBLIGATIONS SHALL BE SECURED BY REAL PROPERTY LOCATED IN
CALIFORNIA, NO LENDER SHALL EXERCISE A RIGHT OF SETOFF, LENDER’S LIEN OR
COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY
PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY LOAN DOCUMENT
UNLESS IT IS TAKEN WITH THE CONSENT OF THE LENDERS REQUIRED BY
SECTION 9.02 OF THIS AGREEMENT, IF SUCH SETOFF OR ACTION OR
PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b, 580d AND 726
OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE
CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE
VALIDITY, PRIORITY, OR ENFORCEABILITY OF THE LIENS GRANTED TO THE AGENT
PURSUANT TO THE COLLATERAL DOCUMENTS OR THE ENFORCEABILITY OF THE OBLIGATIONS
HEREUNDER, AND ANY ATTEMPTED EXERCISE BY ANY LENDER OR ANY SUCH RIGHT WITHOUT
OBTAINING SUCH CONSENT OF THE PARTIES AS REQUIRED ABOVE, SHALL BE NULL AND
VOID.  THIS PARAGRAPH SHALL BE SOLELY FOR
THE BENEFIT OF EACH OF THE LENDERS.


 


SECTION 9.09.  Governing Law; Jurisdiction; Consent to
Service of Process.  (a)  THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN
ANY OTHER LOAN DOCUMENT) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.


 


(b) 
Each Loan Party hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any U.S. Federal or New York State
court sitting in the Borough of Manhattan, New York, New York in any action or
proceeding arising out of or relating to any Loan Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this
Agreement or any other Loan Document shall affect any right that the Agent or
any Lender may otherwise have to bring any action or proceeding relating to
this Agreement or any other Loan Document against any Loan Party or its
properties in the courts of any jurisdiction.


 


(c) 
Each Loan Party hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any other Loan Document in any court
referred to in paragraph (b) of this Section.  Each of the parties hereto hereby 


 


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irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.


 


(d) 
To the extent permitted by law, each party to this Agreement hereby irrevocably
waives personal service of any and all process upon it and agrees that all such
service of process may be made by registered mail (return receipt requested)
directed to it at its address for notices as provided for in
Section 9.01.  Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.


 


SECTION 9.10.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.


 


SECTION 9.11.  Headings.  Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.


 


SECTION 9.12.  Confidentiality.  The Agent and each Lender agrees (and each
Lender agrees to cause its SPC, if any) to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed
(a) to its and its Affiliates’ directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory, governmental
or administrative authority, (c) to the extent required by law or by any
subpoena or similar legal process, (d) to any other party to this
Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, including, without limitation, any SPC, (ii) any pledgee
referred to in Section 9.04(d) or (iii) any actual or
prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Loan Parties and their obligations, (g) with
the consent of the Borrower or (h) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this Section or
(ii) becomes available to the Agent or any Lender on a nonconfidential
basis from a source other than the Borrower. 
For the purposes of this Section, “Information” means all
information received from any Loan Party relating to the Loan Parties or their
businesses, the Sponsors or the Transactions other than any such information
that is available to the Agent or any Lender on a nonconfidential basis prior
to disclosure by any Loan Party.  Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.


 


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SECTION 9.13.  Several Obligations; Nonreliance;
Violation of Law.  The respective
obligations of the Lenders hereunder are several and not joint and the failure
of any Lender to make any Loan or perform any of its obligations hereunder
shall not relieve any other Lender from any of its obligations hereunder. Each
Lender hereby represents that (a) it is not relying on or looking to any
Margin Stock for the repayment of the Borrowings provided for herein and
acknowledges that the Collateral shall not include any Margin Stock and
(b) it is not and will not become a “creditor” as defined in
Regulation T or a “foreign branch of a broker-dealer” within the meaning
of Regulation X.  Anything contained
in this Agreement to the contrary notwithstanding, no Lender shall be obligated
to extend credit to the Borrower in violation of any Requirement of Law.


 


SECTION 9.14.  USA PATRIOT Act.  Each Lender that is subject to the
requirements of the USA Patriot Act hereby notifies the Borrower that pursuant
to the requirements of the USA Patriot Act, it is required to obtain, verify
and record information that identifies the Borrower, which information includes
the name and address of the Borrower and other information that will allow such
Lender to identify the Borrower in accordance with the USA Patriot Act.


 


SECTION 9.15.  Disclosure.  Each Loan Party and each Lender hereby
acknowledges and agrees that the Agent and/or its Affiliates from time to time
may hold investments in, make other loans to or have other relationships with
any of the Loan Parties and their respective Affiliates. In addition, each Loan
Party and each Lender hereby acknowledges that (i) the Agent or its
Affiliate may be a lender under the Senior Secured Asset-Based Revolving Credit
Facility and (ii) an Affiliate of the Agent will be an initial purchaser
of the New Notes.


 


SECTION 9.16.  Appointment for Perfection.  Each Lender hereby appoints each other Lender
as its agent for the purpose of perfecting Liens, for the benefit of the Agent
and the Lenders, in assets which, in accordance with Article 9 of the UCC
or any other applicable law can be perfected only by possession.  Should any Lender (other than the Agent)
obtain possession of any such Collateral, such Lender shall notify the Agent
thereof, and, promptly upon the Agent’s request therefor shall deliver such
Collateral to the Agent or otherwise deal with such Collateral in accordance
with the Agent’s instructions.


 


SECTION 9.17.  Interest Rate Limitation.  Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts which are treated as interest on such
Loan under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.


 


SECTION 9.18.  [Reserved].


 


SECTION 9.19.  INTERCREDITOR AGREEMENT.  REFERENCE
IS MADE TO THE INTERCREDITOR AGREEMENT. 
EACH LENDER HEREUNDER (A) CONSENTS TO THE SUBORDINATION OF LIENS
PROVIDED FOR IN THE INTERCREDITOR AGREEMENT, (B) AGREES THAT IT WILL BE
BOUND BY AND WILL TAKE NO ACTIONS CONTRARY TO THE PROVISIONS OF THE
INTERCREDITOR AGREEMENT AND (C) AUTHORIZES AND INSTRUCTS THE AGENT TO
ENTER INTO THE INTERCREDITOR 


 


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AGREEMENT AS TERM LOAN
AGENT AND ON BEHALF OF SUCH LENDER.  THE
FOREGOING PROVISIONS ARE INTENDED AS AN INDUCEMENT TO THE LENDERS UNDER THIS
AGREEMENT TO EXTEND CREDIT AND SUCH LENDERS ARE INTENDED THIRD PARTY
BENEFICIARIES OF SUCH PROVISIONS AND THE PROVISIONS OF THE INTERCREDITOR
AGREEMENT.


 


ARTICLE X


 


Loan
Guaranty


 


SECTION 10.01.  Guaranty.  Each Loan Guarantor hereby agrees that it is
jointly and severally liable for, and, as primary obligor and not merely as
surety, and absolutely and unconditionally guarantees to the Lenders the prompt
payment when due, whether at stated maturity, upon acceleration or otherwise,
and at all times thereafter, of the Secured Obligations (collectively the “Guaranteed
Obligations”). Each Loan Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed in whole or in part without notice to or
further assent from it, and that it remains bound upon its guarantee
notwithstanding any such extension or renewal.


 


SECTION 10.02.  Guaranty of Payment.  This Loan Guaranty is a guaranty of payment
and not of collection. Each Loan Guarantor waives any right to require the
Agent or any Lender to sue the Borrower, any Loan Guarantor, any other
guarantor, or any other Person obligated for all or any part of the Guaranteed
Obligations (each, an “Obligated Party”), or otherwise to enforce its
payment against any collateral securing all or any part of the Guaranteed
Obligations.


 


SECTION 10.03.  No Discharge or Diminishment of Loan
Guaranty.  (a)  Except as
otherwise provided for herein, the obligations of each Loan Guarantor hereunder
are unconditional and absolute and not subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment
in full in cash of the Guaranteed Obligations), including:  (i) any claim of waiver, release,
extension, renewal, settlement, surrender, alteration, or compromise of any of
the Guaranteed Obligations, by operation of law or otherwise; (ii) any
change in the corporate existence, structure or ownership of the Borrower or
any other guarantor of or other Person liable for any of the Guaranteed
Obligations; (iii) any insolvency, bankruptcy, reorganization or other
similar proceeding affecting any Obligated Party, or their assets or any
resulting release or discharge of any obligation of any Obligated Party; or
(iv) the existence of any claim, setoff or other rights which any Loan
Guarantor may have at any time against any Obligated Party, the Agent, any
Lender, or any other Person, whether in connection herewith or in any unrelated
transactions.


 


(b) 
The obligations of each Loan Guarantor hereunder are not subject to any defense
or setoff, counterclaim, recoupment, or termination whatsoever by reason of the
invalidity, illegality, or unenforceability of any of the Guaranteed
Obligations or otherwise, or any provision of applicable law or regulation
purporting to prohibit payment by any Obligated Party, of the Guaranteed
Obligations or any part thereof.


 


(c) 
Further, the obligations of any Loan Guarantor hereunder are not discharged or
impaired or otherwise affected by: (i) the failure of the Agent or any
Lender to assert any claim or demand or to enforce any remedy with respect to
all or any part of the Guaranteed Obligations; (ii) any waiver or
modification of or supplement to any provision of any agreement relating to the
Guaranteed Obligations; (iii) any release, non-perfection, or invalidity
of any indirect or direct security for the obligations of the Borrower for all
or any part of the Guaranteed Obligations or any obligations of any 


 


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other guarantor of or
other Person liable for any of the Guaranteed Obligations; (iv) any action
or failure to act by the Agent or any Lender with respect to any collateral
securing any part of the Guaranteed Obligations; or (v) any default,
failure or delay, willful or otherwise, in the payment or performance of any of
the Guaranteed Obligations, or any other circumstance, act, omission or delay
that might in any manner or to any extent vary the risk of such Loan Guarantor
or that would otherwise operate as a discharge of any Loan Guarantor as a
matter of law or equity (other than the indefeasible payment in full in cash of
the Guaranteed Obligations).


 


SECTION 10.04.  Defenses Waived.  To the fullest extent permitted by applicable
law, each Loan Guarantor hereby waives any defense based on or arising out of
any defense of the Borrower or any Loan Guarantor or the unenforceability of
all or any part of the Guaranteed Obligations from any cause, or the cessation
from any cause of the liability of the Borrower or any Loan Guarantor, other
than the indefeasible payment in full in cash of the Guaranteed Obligations.
Without limiting the generality of the foregoing, each Loan Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and, to the
fullest extent permitted by law, any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against any
Obligated Party, or any other Person.  The
Agent may, at its election, foreclose on any Collateral held by it by one or
more judicial or nonjudicial sales, accept an assignment of any such Collateral
in lieu of foreclosure or otherwise act or fail to act with respect to any
collateral securing all or a part of the Guaranteed Obligations, compromise or
adjust any part of the Guaranteed Obligations, make any other accommodation
with any Obligated Party or exercise any other right or remedy available to it
against any Obligated Party, without affecting or impairing in any way the
liability of such Loan Guarantor under this Loan Guaranty except to the extent
the Guaranteed Obligations have been fully and indefeasibly paid in cash.  To the fullest extent permitted by applicable
law, each Loan Guarantor waives any defense arising out of any such election
even though that election may operate, pursuant to applicable law, to impair or
extinguish any right of reimbursement or subrogation or other right or remedy
of any Loan Guarantor against any Obligated Party or any security.


 


SECTION 10.05.  Rights of Subrogation.  No Loan Guarantor will assert any right,
claim or cause of action, including, without limitation, a claim of
subrogation, contribution or indemnification that it has against any Obligated
Party, or any collateral, until the Loan Parties and the Loan Guarantors have
fully performed all their obligations to the Agent and the Lenders.


 


SECTION 10.06.  Reinstatement; Stay of Acceleration.  If at any time any payment of any portion of
the Guaranteed Obligations is rescinded or must otherwise be restored or
returned upon the insolvency, bankruptcy, or reorganization of the Borrower or
otherwise, each Loan Guarantor’s obligations under this Loan Guaranty with
respect to that payment shall be reinstated at such time as though the payment
had not been made. If acceleration of the time for payment of any of the
Guaranteed Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of any agreement relating to the Guaranteed
Obligations shall nonetheless be payable by the Loan Guarantors forthwith on
demand by the Lender.


 


SECTION 10.07.  Information.  Each Loan Guarantor assumes all
responsibility for being and keeping itself informed of the Borrower’s financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Guaranteed Obligations and the nature, scope and extent of
the risks that each Loan Guarantor assumes and incurs under this Loan Guaranty,
and agrees that neither the Agent nor any Lender shall have any duty to advise
any Loan Guarantor of information known to it regarding those circumstances or
risks.


 


SECTION 10.08.  Taxes. 
All payments of the Guaranteed Obligations will be made by each Loan
Guarantor free and clear of and without deduction for any Indemnified Taxes or
Other Taxes; provided that if any Loan Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes 


 


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from such payments, then
(i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section) the Agent or Lender (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Loan Guarantor shall make such deductions and
(iii) such Loan Guarantor shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.


 


SECTION 10.09.  Maximum Liability.  The provisions of this Loan Guaranty are
severable, and in any action or proceeding involving any state corporate law,
or any state, Federal or foreign bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the obligations of
any Loan Guarantor under this Loan Guaranty would otherwise be held or
determined to be avoidable, invalid or unenforceable on account of the amount
of such Loan Guarantor’s liability under this Loan Guaranty, then,
notwithstanding any other provision of this Loan Guaranty to the contrary, the
amount of such liability shall, without any further action by the Loan
Guarantors or the Lenders, be automatically limited and reduced to the highest
amount that is valid and enforceable as determined in such action or proceeding
(such highest amount determined hereunder being the relevant Loan Guarantor’s “Maximum
Liability”.  This Section with
respect to the Maximum Liability of each Loan Guarantor is intended solely to
preserve the rights of the Lenders to the maximum extent not subject to
avoidance under applicable law, and no Loan Guarantor nor any other Person or
entity shall have any right or claim under this Section with respect to
such Maximum Liability, except to the extent necessary so that the obligations
of any Loan Guarantor hereunder shall not be rendered voidable under applicable
law. Each Loan Guarantor agrees that the Guaranteed Obligations may at any time
and from time to time exceed the Maximum Liability of each Loan Guarantor
without impairing this Loan Guaranty or affecting the rights and remedies of
the Lenders hereunder, provided that, nothing in this sentence shall be
construed to increase any Loan Guarantor’s obligations hereunder beyond its
Maximum Liability.


 


SECTION 10.10.  Contribution.  In the event any Loan Guarantor (a “Paying
Guarantor”) shall make any payment or payments under this Loan Guaranty or
shall suffer any loss as a result of any realization upon any collateral
granted by it to secure its obligations under this Loan Guaranty, each other
Loan Guarantor (each a “Non-Paying Guarantor”) shall contribute to such
Paying Guarantor an amount equal to such Non-Paying Guarantor’s “Guarantor
Percentage” of such payment or payments made, or losses suffered, by such
Paying Guarantor.  For purposes of this
Article X, each Non-Paying Guarantor’s “Guarantor Percentage” with
respect to any such payment or loss by a Paying Guarantor shall be determined
as of the date on which such payment or loss was made by reference to the ratio
of (i) such Non-Paying Guarantor’s Maximum Liability as of such date
(without giving effect to any right to receive, or obligation to make, any
contribution hereunder) or, if such Non-Paying Guarantor’s Maximum Liability
has not been determined, the aggregate amount of all monies received by such
Non-Paying Guarantor from the Borrower after the Closing Date (whether by loan,
capital infusion or by other means) to (ii) the aggregate Maximum
Liability of all Loan Guarantors hereunder (including such Paying Guarantor) as
of such date (without giving effect to any right to receive, or obligation to
make, any contribution hereunder), or to the extent that a Maximum Liability
has not been determined for any Loan Guarantor, the aggregate amount of all
monies received by such Loan Guarantors from the Borrower after the Closing
Date (whether by loan, capital infusion or by other means).  Nothing in this provision shall affect any
Loan Guarantor’s several liability for the entire amount of the Guaranteed
Obligations (up to such Loan Guarantor’s Maximum Liability).  Each of the Loan Guarantors covenants and
agrees that its right to receive any contribution under this Loan Guaranty from
a Non-Paying Guarantor shall be subordinate and junior in right of payment to
the payment in full in cash of the Guaranteed Obligations.  This provision is for the benefit of both the
Agent, the Lenders and the Loan Guarantors and may be enforced by any one, or
more, or all of them in accordance with the terms hereof.


 


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SECTION 10.11.  Liability Cumulative.  The liability of each Loan Party as a Loan
Guarantor under this Article X is in addition to and shall be cumulative
with all liabilities of each Loan Party to the Agent and the Lenders under this
Agreement and the other Loan Documents to which such Loan Party is a party or
in respect of any obligations or liabilities of the other Loan Parties, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.


 


SECTION 10.12.  Release of Loan Guarantors.  Notwithstanding anything in Section 9.02(b) to
the contrary (i) a Subsidiary Guarantor shall automatically be released
from its obligations hereunder and its Loan Guaranty shall be automatically
released upon the consummation of any transaction permitted hereunder as a
result of which such Subsidiary Guarantor ceases to be a subsidiary of the
Borrower and (ii) so long as no Event of Default has occurred and is
continuing (A) if a Loan Guarantor is or becomes an Immaterial Subsidiary,
and such release would not result in any Immaterial Subsidiary being required
pursuant to Section 5.11(e) to become a Loan Party hereunder (except
to the extent that on and as of the date of such release, one or more other
Immaterial Subsidiaries become Loan Guarantors hereunder and the provisions of
Section 5.11(e) are satisfied upon giving effect to all such
additions and releases), or (B) a Restricted Subsidiary is redesignated as
an Unrestricted Subsidiary in accordance with Section 6.04(d), then in the
case of each of clauses (A) and (B), such Subsidiary Guarantor shall be
automatically released from its obligations hereunder and its Loan Guaranty
shall be automatically released upon notification thereof from the Borrower to
the Agent.  In connection with any such
release, the Agent shall execute and deliver to any Subsidiary Guarantor, at
such Subsidiary Guarantor’s expense, all documents that such Subsidiary
Guarantor shall reasonably request to evidence such termination or
release.  Any execution and delivery of
documents pursuant to the preceding sentence of this Section 10.12 shall
be without recourse to or warranty by the Agent.


 


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