**Exhibit 10.8**

 

Confidential Treatment Requested.

 

Certain material (indicated by asterisks) has been omitted from thisdocument and filed separately with the Securities and Exchange Commissionpursuant to a request for confidential treatment.

 

EXECUTION COPY
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CREDIT AGREEMENT

 

Dated as of October 6, 2005

 

Among

 

THE FINANCIAL INSTITUTIONS PARTY HERETO

 

as the Lenders

 

and

 

CREDIT SUISSE

 

as Administrative Agent and Collateral Agent,

 

and

 

NEWTON ACQUISITION, INC.,

 

and

 

NEWTON ACQUISITION MERGER SUB, INC. (to be merged with and into TheNeiman Marcus Group, Inc.)

 

and

 

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

 

CREDIT SUISSEDEUTSCHE BANK SECURITIES INC.as Joint Lead Arrangers

 

BANC OF AMERICA SECURITIES LLCGOLDMAN SACHS CREDIT PARTNERS L.P.as Co-Arrangers

 

CREDIT SUISSEDEUTSCHE BANK SECURITIES INC.BANC OF AMERICA SECURITIES LLCGOLDMAN SACHS CREDIT PARTNERS L.P.as Joint Bookrunners

 

and

 

DEUTSCHE BANK SECURITIES INC.BANC OF AMERICA SECURITIES LLCGOLDMAN SACHS CREDIT PARTNERS L.P.as Co-Syndication Agents
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TABLE OF CONTENTS

 
| ARTICLE I                                                                      |   |   |
|-------------------------------------------------------------------------------------|--------|--------|
|                                                                                |   |   |
| Definitions                                                                         |   |   |
|                                                                                |   |   |
| SECTION 1.01.  Defined Terms                                                   |   |   |
| SECTION 1.02.  Classification of Loans and Borrowings                          |   |   |
| SECTION 1.03.  Terms Generally                                                 |   |   |
| SECTION 1.04.  Effectuation of Transactions                                    |   |   |
|                                                                                |   |   |
| ARTICLE II                                                                     |   |   |
|                                                                                |   |   |
| The Credits                                                                         |   |   |
|                                                                                |   |   |
| SECTION 2.01.  Commitments                                                     |   |   |
| SECTION 2.02.  Loans and Borrowings                                            |   |   |
| SECTION 2.03.  Request for Borrowing on the Closing Date                       |   |   |
| SECTION 2.04.  Funding of the Borrowing on the Closing Date                    |   |   |
| SECTION 2.05.  Type; Interest Elections                                        |   |   |
| SECTION 2.06.  Termination of Commitments                                      |   |   |
| SECTION 2.07.  Repayment of Loans; Evidence of Debt                            |   |   |
| SECTION 2.08.  Optional Prepayment of Loans                                    |   |   |
| SECTION 2.09.  Mandatory Prepayment of Loans                                   |   |   |
| SECTION 2.10.  Fees                                                            |   |   |
| SECTION 2.11.  Interest                                                        |   |   |
| SECTION 2.12.  Alternate Rate of Interest                                      |   |   |
| SECTION 2.13.  Increased Costs                                                 |   |   |
| SECTION 2.14.  Break Funding Payments                                          |   |   |
| SECTION 2.15.  Taxes                                                           |   |   |
| SECTION 2.16.  Payments Generally; Allocation of Proceeds; Sharing of Set-offs |   |   |
| SECTION 2.17.  Mitigation Obligations; Replacement of Lenders                  |   |   |
| SECTION 2.18.  Illegality                                                      |   |   |
| SECTION 2.19.  Change of Control                                               |   |   |
| SECTION 2.20.  Asset Sale Offer                                                |   |   |
| SECTION 2.21.  Repricing Protection                                            |   |   |
|                                                                                |   |   |
| ARTICLE III                                                                    |   |   |
|                                                                                |   |   |
| Representations and  Warranties                                                     |   |   |
|                                                                                |   |   |
| SECTION 3.01.  Organization; Powers                                            |   |   |
| SECTION 3.02.  Authorization; Enforceability                                   |   |   |
| SECTION 3.03.  Governmental Approvals; No Conflicts                            |   |   |
| SECTION 3.04.  Financial Condition; No Material Adverse Change                 |   |   |
| SECTION 3.05.  Properties                                                      |   |   |

 

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| SECTION 3.06.  Litigation and Environmental Matters                                                             |   |   |
|----------------------------------------------------------------------------------------------------------------------|--------|--------|
| SECTION 3.07.  Compliance with Laws and Agreements; Licenses and Permits                                        |   |   |
| SECTION 3.08.  Investment and Holding Company Status                                                            |   |   |
| SECTION 3.09.  Taxes                                                                                            |   |   |
| SECTION 3.10.  ERISA                                                                                            |   |   |
| SECTION 3.11.  Disclosure                                                                                       |   |   |
| SECTION 3.12.  Material Agreements                                                                              |   |   |
| SECTION 3.13.  Solvency                                                                                         |   |   |
| SECTION 3.14.  Insurance                                                                                        |   |   |
| SECTION 3.15.  Capitalization and Subsidiaries                                                                  |   |   |
| SECTION 3.16.  Security Interest in Collateral                                                                  |   |   |
| SECTION 3.17.  Labor Disputes                                                                                   |   |   |
| SECTION 3.18.  Federal Reserve Regulations                                                                      |   |   |
| SECTION 3.19.  Transaction Documents                                                                            |   |   |
| SECTION 3.20.  Senior Indebtedness                                                                              |   |   |
|                                                                                                                 |   |   |
| ARTICLE IV                                                                                                      |   |   |
|                                                                                                                 |   |   |
| Conditions                                                                                                           |   |   |
|                                                                                                                 |   |   |
| ARTICLE V                                                                                                       |   |   |
|                                                                                                                 |   |   |
| Affirmative Covenants                                                                                                |   |   |
|                                                                                                                 |   |   |
| SECTION 5.01.  Financial Statements and Other Information                                                       |   |   |
| SECTION 5.02.  Notices of Material Events                                                                       |   |   |
| SECTION 5.03.  Existence; Conduct of Business                                                                   |   |   |
| SECTION 5.04.  Payment of Obligations                                                                           |   |   |
| SECTION 5.05.  Maintenance of Properties                                                                        |   |   |
| SECTION 5.06.  Books and Records; Inspection Rights                                                             |   |   |
| SECTION 5.07.  Maintenance of Ratings                                                                           |   |   |
| SECTION 5.08.  Compliance with Laws                                                                             |   |   |
| SECTION 5.09.  Use of Proceeds                                                                                  |   |   |
| SECTION 5.10.  Insurance                                                                                        |   |   |
| SECTION 5.11.  Additional Collateral; Further Assurances                                                        |   |   |
| SECTION 5.12.  Maintenance of Corporate Separateness                                                            |   |   |
| SECTION 5.13.  2008 Notes Redemption                                                                            |   |   |
|                                                                                                                 |   |   |
| ARTICLE VI                                                                                                      |   |   |
|                                                                                                                 |   |   |
| Negative Covenants                                                                                                   |   |   |
|                                                                                                                 |   |   |
| SECTION 6.01.  Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock  and Preferred Stock |   |   |
| SECTION 6.02.  Limitation on Liens                                                                              |   |   |
| SECTION 6.03.  Merger, Consolidation or Sale of All or Substantially All Assets                                 |   |   |
| SECTION 6.04.  Limitation on Restricted Payments                                                                |   |   |
| SECTION 6.05.  Limitations on Transactions with Affiliates                                                      |   |   |

 

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| SECTION 6.06.  Limitations on Asset Sales                                                          |   |   |
|---------------------------------------------------------------------------------------------------------|--------|--------|
| SECTION 6.07.  Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries          |   |   |
| SECTION 6.08.  Limitations on Guarantees of Indebtedness by Restricted Subsidiaries                |   |   |
| SECTION 6.09.  Limitations on Sale and Lease-Back Transactions                                     |   |   |
| SECTION 6.10.  Amendments to Subordination Provisions                                              |   |   |
| SECTION 6.11.  Obligations of the Borrower and the Restricted Subsidiaries Relating to Kate  Spade |   |   |
| SECTION 6.12.  Impairment of Security Interest                                                     |   |   |
| SECTION 6.13.  Business of Borrower and Restricted Subsidiaries                                    |   |   |
|                                                                                                    |   |   |
| ARTICLE VII                                                                                        |   |   |
|                                                                                                    |   |   |
| Events of Default                                                                                       |   |   |
|                                                                                                    |   |   |
| ARTICLE VIII                                                                                       |   |   |
|                                                                                                    |   |   |
| The Agent                                                                                               |   |   |
|                                                                                                    |   |   |
| ARTICLE IX                                                                                         |   |   |
|                                                                                                    |   |   |
| Miscellaneous                                                                                           |   |   |
|                                                                                                    |   |   |
| SECTION 9.01.  Notices                                                                             |   |   |
| SECTION 9.02.  Waivers; Amendments                                                                 |   |   |
| SECTION 9.03.  Expenses; Indemnity; Damage Waiver                                                  |   |   |
| SECTION 9.04.  Successors and Assigns                                                              |   |   |
| SECTION 9.05.  Survival                                                                            |   |   |
| SECTION 9.06.  Counterparts; Integration; Effectiveness                                            |   |   |
| SECTION 9.07.  Severability                                                                        |   |   |
| SECTION 9.08.  Right of Setoff                                                                     |   |   |
| SECTION 9.09.  Governing Law; Jurisdiction; Consent to Service of Process                          |   |   |
| SECTION 9.10.  WAIVER OF JURY TRIAL                                                                |   |   |
| SECTION 9.11.  Headings                                                                            |   |   |
| SECTION 9.12.  Confidentiality                                                                     |   |   |
| SECTION 9.13.  Several Obligations; Nonreliance; Violation of Law                                  |   |   |
| SECTION 9.14.  USA PATRIOT Act                                                                     |   |   |
| SECTION 9.15.  Disclosure                                                                          |   |   |
| SECTION 9.16.  Appointment for Perfection                                                          |   |   |
| SECTION 9.17.  Interest Rate Limitation                                                            |   |   |
| SECTION 9.18.  Effectiveness of the Merger                                                         |   |   |
| SECTION 9.19.  INTERCREDITOR AGREEMENT                                                             |   |   |
|                                                                                                    |   |   |
| ARTICLE X                                                                                          |   |   |
|                                                                                                    |   |   |
| Loan Guaranty                                                                                           |   |   |
|                                                                                                    |   |   |
| SECTION 10.01.  Guaranty                                                                           |   |   |
| SECTION 10.02.  Guaranty of Payment                                                                |   |   |

 

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| SECTION 10.03.  No Discharge or Diminishment of Loan Guaranty |   |                                             |
|--------------------------------------------------------------------|--------|--------------------------------------------------|
| SECTION 10.04.  Defenses Waived                               |   |                                             |
| SECTION 10.05.  Rights of Subrogation                         |   |                                             |
| SECTION 10.06.  Reinstatement; Stay of Acceleration           |   |                                             |
| SECTION 10.07.  Information                                   |   |                                             |
| SECTION 10.08.  Taxes                                         |   |                                             |
| SECTION 10.09.  Maximum Liability                             |   |                                             |
| SECTION 10.10.  Contribution                                  |   |                                             |
| SECTION 10.11.  Liability Cumulative                          |   |                                             |
| SECTION 10.12.  Release of Loan Guarantors                    |   |                                             |
|                                                               |   |                                             |
| SCHEDULES:                                                         |   |                                             |
|                                                               |
| 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:                                                          |
|                                                               |   |                                             |
| 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                    |
|                                                                    |        |                                                  |  |  |  |  |

 

v

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CREDIT AGREEMENT dated as ofOctober 6, 2005 (this “Agreement”), among NEWTON ACQUISITION MERGERSUB, INC. (“Merger Sub” and, prior to the Merger (as defined below), the“Borrower”), a Delaware corporation to be merged with and into THENEIMAN MARCUS GROUP, INC., a Delaware corporation (“Neiman Marcus” and,after the Merger, the “Borrower”), NEWTON ACQUISITION, INC., a Delawarecorporation (“Holdings”), each subsidiary of Neiman Marcus from time totime party hereto, the Lenders (as defined in Article I) and CREDITSUISSE, as administrative agent and collateral agent for the Lenders hereunder(in such capacities, the “Agent”).

 

Pursuant to or in connectionwith the Merger Agreement (such term and each other capitalized term used butnot defined in this introductory statement having the meaning given it in Article I),(a) Merger Sub will merge (the “Merger”) with and into NeimanMarcus, with (i) the outstanding capital stock of Neiman Marcus beingconverted into (and certain outstanding options to purchase, and outstandingstock unit awards representing the right to receive, shares of capital stock ofNeiman Marcus being canceled in exchange for) the right to receive an aggregateamount of approximately $5,110,800,000 in cash (the “Merger Consideration”),subject to dissenters’ rights,  (ii) NeimanMarcus surviving as a Wholly-Owned Subsidiary of Holdings and (iii) NeimanMarcus assuming by operation of law all of the Obligations of Merger Sub underthis Agreement and the other Loan Documents, (b) the Borrower will obtainthe Senior Secured Asset-Based Revolving Credit Facility in an aggregateprincipal amount of up to $600,000,000, (c) the Borrower will issue, in apublic offering or in a Rule 144A or other private placement, (i) $700,000,000aggregate principal amount of its Senior Notes and (ii) $500,000,000aggregate principal amount of its Senior Subordinated Notes, (d) theEquity Contribution will be made, (e) the Existing Bank Debt Refinancingwill be effected, (f) the 2008 Notes Call for Redemption will be effected,(g) the 2028 Debentures and the 2008 Notes will be secured by the PariPassu Liens and (h) the Transaction Costs will be paid.

 

In connection with theforegoing, the Borrower has requested the Lenders to extend credit in the formof Loans on the Closing Date, in an aggregate principal amount not inexcess of $1,975,000,000. The proceeds of the Loans are to be used solely tofinance, in part, the Merger Consideration, the Existing Bank Debt Refinancing,the redemption after the Closing Date of the 2008 Notes and the TransactionCosts.

 

The Lenders are willing toextend such credit to the Borrower on the terms and subject to the conditionsset forth herein.  Accordingly, theparties hereto agree as follows:

 

ARTICLE I

 

# Definitions

 

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

##  

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

 

“ABR”, when used inreference to any Loan or Borrowing, refers to whether such Loan, or the Loanscomprising such Borrowing, are bearing interest at a rate determined byreference to the Alternate Base Rate.

 

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

 

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

 

“Additional Interest”means all liquidated damages then owing pursuant to the Registration RightsAgreement.

 

“Adjusted LIBOR Rate”means, for any Interest Period, the rate obtained by dividing (a) theLIBOR Rate for such Interest Period by (b) a percentage equal to 1 minusthe stated maximum rate (stated as a decimal) of all reserves, if any, requiredto be maintained against “Eurocurrency liabilities” as specified in RegulationD (including any marginal, emergency, special or supplemental reserves).

 

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

 

“Affiliate” of anyspecified Person means any other Person directly or indirectly controlling orcontrolled by or under direct or indirect common control with such specifiedPerson.  For purposes of this Agreement, “control”(including, with correlative meanings, the terms “controlling”, “controlledby” and “under common control with”), as used with respect to anyPerson, shall mean the possession, directly or indirectly, of the power todirect 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 themeaning 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 PrimeRate in effect on such day and (b) the Federal Funds Effective Rate ineffect on such day plus 1⁄2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rateor the Federal Funds Effective Rate shall be effective from and including theeffective date of such change in the Prime Rate or the Federal Funds EffectiveRate, respectively.

 

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

 

2

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“Applicable Rate”means, for any day, (a) with respect to any ABR Loan, 1.50%, or (b) withrespect to any LIBOR Rate Loan, 2.50%.

 

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

 

“Asset Sale” means (a) thesale, conveyance, transfer or other disposition, whether in a singletransaction 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 RestrictedSubsidiary (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 eachcase, other than:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(ix) any issuance or sale of Equity Interestsin, or Indebtedness or other securities of, an Unrestricted Subsidiary (otherthan 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, orparticipations therein, in connection with any Receivables Facility; and

 

3

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(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 otherform approved by the Agent.

 

“Attributable Debt”in respect of a Sale and Lease-Back Transaction means, as at the time ofdetermination, the present value (discounted at the interest rate then borne bythe Loans, compounded annually) of the total obligations of the lessee forrental payments during the remaining term of the lease included in such Saleand Lease-Back Transaction (including any period for which such lease has beenextended); provided, however, that if such Sale and Lease-BackTransaction results in a Capitalized Lease Obligation, the amount ofIndebtedness represented thereby will be determined in accordance with thedefinition of “Capitalized Lease Obligation”.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Business Day” meansany day that is not a Saturday, Sunday or other day on which commercial banksin New York City are authorized or required by law to remain closed; providedthat, 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 dollardeposits in the London interbank market.

 

“Capital Expenditures” means, for any period, the aggregate of (a) allexpenditures (whether paid in cash or accrued as liabilities) by the Borrowerand the Restricted Subsidiaries during such period that, in conformity withGAAP, are or are required to be included as additions during such period toproperty, plant or equipment reflected in the consolidated balance sheet of theBorrower and the Restricted Subsidiaries and (b) the value of all assetsunder Capitalized Lease Obligations incurred by the 

 

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Borrower and its RestrictedSubsidiaries during such period; *provided* thatthe term “Capital Expenditures” shall not include:

 

(i) expenditures made in connection with thereplacement, substitution, restoration or repair of assets to the extentfinanced with (x) insurance proceeds paid on account of the loss of or damageto the assets being replaced, restored or repaired or (y) awards ofcompensation arising from the taking by eminent domain or condemnation of theassets being replaced,

 

(ii) the purchase price of equipment that ispurchased simultaneously with the trade-in of existing equipment to the extentthat the gross amount of such purchase price is reduced by the credit grantedby the seller of such equipment for the equipment being traded in at such time,

 

(iii) the purchase of plant, property orequipment to the extent financed with the proceeds of Asset Sales that are notapplied to prepay Loans pursuant to Section 2.20,

 

(iv) expenditures that constitute ConsolidatedLease Expense,

 

(v) expenditures that are accounted for ascapital expenditures by the Borrower or any Restricted Subsidiary and that actuallyare paid for by a Person other than the Borrower or any Restricted Subsidiaryand for which neither the Borrower nor any Restricted Subsidiary has providedor is required to provide or incur, directly or indirectly, any considerationor obligation to such Person or any other Person (whether before, during orafter such period),

 

(vi) the book value of any asset owned by theBorrower or any Restricted Subsidiary prior to or during such period to theextent that such book value is included as a capital expenditure during suchperiod as a result of such Person reusing or beginning to reuse such assetduring such period without a corresponding expenditure actually having beenmade in such period, provided that (x) any expenditure necessary in orderto permit such asset to be reused shall be included as a Capital Expenditureduring the period in which such expenditure actually is made and (y) suchbook value shall have been included in Capital Expenditures when such asset wasoriginally acquired, or

 

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

 

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

 

“CapitalizedLease Obligation”**means, at the time any determination thereofis to be made, the amount of the liability in respect of a capital lease thatwould at such time be required to be capitalized and reflected as a liabilityon a balance sheet (excluding the footnotes thereto) in accordance with GAAP.

 

5

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“Cash Equivalents”means:

 

(a) Dollars;

 

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

 

(c) securities issuedor directly and fully and unconditionally guaranteed or insured by thegovernment of the United States of America or any agency or instrumentalitythereof the securities of which are unconditionally guaranteed as a full faithand credit obligation of such government with maturities of 24 months or lessfrom the date of acquisition;

 

(d) certificates ofdeposit, time deposits and eurodollar time deposits with maturities of one yearor less from the date of acquisition, bankers’ acceptances with maturities notexceeding one year and overnight bank deposits, in each case with anycommercial bank having capital and surplus in excess of $250,000,000;

 

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

 

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

 

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

 

(h) readily marketabledirect obligations issued by any state of the United States of America or anypolitical subdivision thereof having one of the two highest rating categoriesobtainable from either Moody’s or S&P with maturities of 24 months or lessfrom the date of acquisition; and

 

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

 

Notwithstanding theforegoing, Cash Equivalents shall include amounts denominated in currenciesother than those set forth in clauses (a) and (b) above; providedthat such amounts are converted into one or more of the currencies set forth inclauses (a) and (b) above as promptly as practicable and in anyevent within ten (10) Business Days following the receipt of such amounts.

 

“Change of Control” meansthe occurrence of (a) the sale, lease or transfer, in one or a series ofrelated transactions, of all or substantially all of the assets of the Borrowerand its subsidiaries, taken as a whole, to any Person other than a Permitted Holderor (b) the Borrower becomes aware of (by way of a report or any otherfiling pursuant to Section 13(d) of the Exchange Act, proxy, vote,written notice or otherwise) the acquisition by any Person or group (within themeaning of Section 13(d)(3) or Section 14(d)(2) of theExchange Act, or any successor provision), including any group acting for thepurpose of acquiring, holding or disposing of securities (within the meaning ofRule 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 ofrelated transactions, by way of merger, consolidation or other businesscombination or

 

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purchase of beneficialownership (within the meaning of Rule 13d-3 under the Exchange Act, or anysuccessor provision) of 50% or more of the total voting power of the VotingStock 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 date ofthis Agreement, (b) any change in any law, rule or regulation or inthe interpretation or application thereof by any Governmental Authority afterthe date of this Agreement or (c) compliance by any Lender (or, forpurposes of Section 2.13(b), by any lending office of such Lender or bysuch 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 orissued after the date of this Agreement (other than any such request, guidelineor directive to comply with any law, rule or regulation that was in effecton the date of this Agreement).

 

“Closing Date” meansthe date on which the conditions specified in Article IV are satisfied (orwaived in accordance with Section 9.02).

 

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

 

“Co-Investors” meansthe investment funds associated with each of Credit Suisse First Boston andLeonard Green & Partners, L.P., which are making a portion of theEquity Contribution, and their respective Affiliates.

 

“Collateral” meansany and all property owned, leased or operated by a Person subject to a securityinterest or Lien under the Collateral Documents and any and all other propertyof any Loan Party, now existing or hereafter acquired, that may at any time beor become subject to a security interest or Lien in favor of Agent, on behalfof 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 otherdocuments granting a Lien upon the Collateral as security for payment of theSecured Obligations.

 

“Commitment” means (a) withrespect to each Lender, the commitment of such Lender to make Loans as setforth in the Commitment Schedule or in the most recent Assignment andAssumption executed by such Lender and (b) as to all Lenders, theaggregate commitment of all Lenders to make Loans, which aggregate commitmentshall be $1,975,000,000 on the Closing Date.

 

“Commitment Schedule”means the Schedule attached hereto identified as such.

 

“ConsolidatedDepreciation and Amortization Expense” means with respect to any Person forany period, the total amount of depreciation and amortization expense,including the amortization of deferred financing fees and other related noncashcharges of such Person and its Restricted Subsidiaries for such period on aconsolidated basis and otherwise determined in accordance with GAAP.

 

“Consolidated InterestExpense” means, with respect to any Person for any period, the sum, withoutduplication, of (a) consolidated interest expense of such Person and its RestrictedSubsidiaries for such period, to the extent such expense was deducted incomputing Consolidated Net Income (including (i) amortization of originalissue discount resulting from the issuance of Indebtedness 

 

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at less than par, (ii) allcommissions, discounts and other fees and charges owed with respect to lettersof credit or bankers’ acceptances, (iii) noncash interest payments (butexcluding any noncash interest expense attributable to the movement in themark-to-market valuation of Hedging Obligations or other derivative instrumentspursuant to GAAP), (iv) the interest component of Capitalized LeaseObligations and (v) net payments, if any, pursuant to interest rateHedging Obligations with respect to Indebtedness, and excluding (A) anyexpense resulting from the discounting of the 2028 Debentures as a result ofthe application of purchase accounting in connection with the Transactions, (B) AdditionalInterest, (C) amortization of deferred financing fees, debt issuancecosts, commissions, fees and expenses, (D) any expensing of bridge,commitment and other financing fees, (E) commissions, discounts, yield andother fees and charges (including any interest expense) related to anyReceivables Facility and (F) any redemption premiums paid in connectionwith the redemption of the 2008 Notes), plus (b) consolidatedcapitalized interest of such Person and its Restricted Subsidiaries for suchperiod, 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 aninterest rate reasonably determined by such Person to be the rate of interestimplicit in such Capitalized Lease Obligation in accordance with GAAP.

 

“Consolidated LeaseExpense” means for any period, all rental expenses of the Borrower and itsRestricted Subsidiaries during such period under operating leases for real orpersonal property (including in connection with Sale and Lease-Back Transactionspermitted hereunder), excluding real estate taxes, insurance costs and commonarea maintenance charges and net of sublease income, other than (a) obligationsunder vehicle leases entered into in the ordinary course of business, (b) allsuch rental expenses associated with assets acquired pursuant to an acquisitionof a Person or business unit to the extent such rental expenses relate tooperating leases in effect at the time of (and immediately prior to) suchacquisition and related to periods prior to such acquisition and (c) allCapitalized Lease Obligations, all as determined on a consolidated basis inaccordance with GAAP.

 

“Consolidated Leverage Ratio”, with respect to any Person asof any date of determination, means the ratio of (a) Consolidated TotalIndebtedness of such Person as of the end of the most recent fiscal quarter forwhich internal financial statements are available immediately preceding thedate on which such event for which such calculation is being made shall occurto (b) the aggregate amount of EBITDA of such Person for the period of themost recently ended four full consecutive fiscal quarters for which internalfinancial statements are available immediately preceding the date on which suchevent for which such calculation is being made shall occur, in each case withsuch pro forma adjustments toConsolidated Total Indebtedness and EBITDA as are appropriate and consistentwith the pro forma adjustmentprovisions 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 NetIncome of such Person and its Restricted Subsidiaries for such period, on aconsolidated basis, and otherwise determined in accordance with GAAP; providedthat, without duplication:

 

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

#####  

##### (b) the Net Income forsuch period shall not include the cumulative effect of a change in accountingprinciples during such period, whether effected through a cumulative effectadjustment or a retroactive application in each case in accordance with GAAP,

#####  

##### (c) any net after-taxincome (loss) from disposed or discontinued operations and any net after-taxgains or losses on disposal of disposed or discontinued operations shall beexcluded,

 

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##### (d) any net after-taxgains or losses (less all fees and expenses relating thereto) attributable toasset dispositions or the sale or other disposition of any Capital Stock of anyPerson other than in the ordinary course of business, as determined in goodfaith by the Borrower, shall be excluded,

#####  

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

#####  

##### (f) solely for thepurpose 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 anySubsidiary Guarantor) shall be excluded if the declaration or payment ofdividends or similar distributions by that Restricted Subsidiary of its NetIncome is not at the date of determination wholly permitted without any priorgovernmental 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 applicableto that Restricted Subsidiary or its stockholders, unless such restriction withrespect to the payment of dividends or similar distributions has been legallywaived; provided that Consolidated Net Income of the Borrower will be increasedby the amount of dividends or other distributions or other payments actuallypaid in cash (or to the extent converted into cash) to the Borrower or a RestrictedSubsidiary thereof in respect of such period, to the extent not alreadyincluded therein,

#####  

##### (g) any increase inamortization or depreciation or other noncash charges resulting from theapplication of purchase accounting in relation to the Transactions or anyacquisition that is consummated after the Closing Date, net of taxes, shall beexcluded,

#####  

##### (h) any net after-taxincome (loss) from the early extinguishment of Indebtedness or HedgingObligations or other derivative instruments shall be excluded,

#####  

##### (i) any impairmentcharge or asset write-off, in each case pursuant to GAAP, and the amortizationof intangibles arising pursuant to GAAP shall be excluded, and

#####  

##### (j) any noncash compensationexpense recorded from grants of stock appreciation or similar rights, stockoptions, restricted stock or other rights to officers, directors or employeesshall be excluded.

#####  

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

 

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“Consolidated SecuredDebt Ratio” as of any date of determination means the ratio of (a) ConsolidatedTotal Indebtedness of the Borrower and the Restricted Subsidiaries that issecured by Liens as of the end of the most recent fiscal quarter for whichinternal financial statements are available immediately preceding the date onwhich such event for which such calculation is being made shall occur to (b) theaggregate amount of EBITDA of the Borrower and the Restricted Subsidiaries forthe period of the most recently ended consecutive four full fiscal quarters forwhich internal financial statements are available immediately preceding thedate on which such event for which such calculation is being made shall occur,in each case with such pro forma adjustments to Consolidated Total Indebtednessand EBITDA as are appropriate and consistent with the pro forma adjustmentprovisions set forth in the definition of “Fixed Charge Coverage Ratio”.

 

“Consolidated TotalIndebtedness” means, as at any date of determination, an amount equal tothe sum of (a) the aggregate amount of all outstanding Indebtedness of theBorrower and the Restricted Subsidiaries ona consolidated basis consisting of Indebtedness for borrowed money, obligationsin respect of Capitalized Lease Obligations, Attributable Debt in respect ofSale 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 theordinary course of business and (y) all obligations relating toReceivables Facilities) and (b) the aggregate amount of alloutstanding Disqualified Stock of the Borrower and all Disqualified Stock andPreferred Stock of the Restricted Subsidiaries (excluding items eliminated inconsolidation), with the amount of such Disqualified Stock and Preferred Stockequal to the greater of their respective voluntary or involuntary liquidationpreferences and Maximum Fixed Repurchase Prices, in each case determined on aconsolidated 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 fixedrepurchase price shall be calculated in accordance with the terms of suchDisqualified Stock or Preferred Stock as if such Disqualified Stock orPreferred Stock were purchased on any date on which Consolidated TotalIndebtedness shall be required to be determined pursuant to this Agreement, andif such price is based upon, or measured by, the fair market value of suchDisqualified Stock or Preferred Stock, such fair market value shall bedetermined reasonably and in good faith by the Borrower.

 

“Consolidated WorkingCapital” 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, beset forth opposite the caption “total current assets” (or any like caption) ona consolidated balance sheet of the Borrower and its Restricted Subsidiaries atsuch date over (b) the sum of all amounts that would, in conformity withGAAP, be set forth opposite the caption “total current liabilities” (or anylike caption) on a consolidated balance sheet of the Borrower and itsRestricted Subsidiaries on such date, including deferred revenue but excluding,without duplication, (i) the current portion of any Funded Debt, (ii) thecurrent portion of interest and (iii) the current portion of current anddeferred income taxes.

 

“Contingent Obligations”means, with respect to any Person, any obligation of such Person guaranteeingany 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 suchPerson, whether or not contingent, (a) to purchase any such primaryobligation or any property constituting direct or indirect security therefor, (b) toadvance or supply funds (i) for the purchase or payment of any suchprimary obligation or (ii) to maintain working capital or equity capitalof the primary obligor or otherwise to maintain the net worth or solvency ofthe primary obligor, or (c) to purchase property, securities or servicesprimarily for the purpose of assuring the owner of any such primary obligationof the ability of the primary obligor to make payment of such primary obligationagainst loss in respect thereof.

 

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“Credit Card Sale” means the salefrom the Borrower to HSBC Bank Nevada, N.A., of the private label credit cardaccounts of Neiman Marcus and related receivables and other assets, pursuant tothe HSBC Agreements (it being understood that such sale was consummated on July 7,2005).

 

“Default” means anyevent that is, or with the passage of time or the giving of notice or bothwould 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 thatgives rise to similar credit risks (including when-issued securities andforward deposits accepted), (b) an exchange-rate transaction, including across-currency interest-rate swap, a forward foreign-exchange contract, acurrency option, and any other instrument linked to exchange rates that givesrise to similar credit risks, (c) an equity derivative transaction,including an equity-linked swap, an equity-linked option, a forwardequity-linked contract, and any other instrument linked to equities that givesrise to similar credit risk and (d) a commodity (including precious metal)derivative transaction, including a commodity-linked swap, a commodity-linkedoption, a forward commodity-linked contract, and any other instrument linked tocommodities that gives rise to similar credit risks; provided that nophantom stock or similar plan providing for payments only on account ofservices provided by current or former directors, officers, employees orconsultants of the Borrower or its subsidiaries shall be a DerivativeTransaction.

 

“Designated Asset SaleProceeds” means net cash proceeds in an aggregate amount not to exceed $100,000,000received by the Borrower or any Restricted Subsidiary from the sale, transfer,lease or other disposition of any asset or assets so designated as DesignatedAsset Sale Proceeds pursuant to an Officers’ Certificate delivered to the Agenton or prior to the date on which such asset or assets are sold.

 

“DesignatedNoncash Consideration”**means the fair market value of noncashconsideration received by the Borrower or a Restricted Subsidiary in connectionwith an Asset Sale that is so designated as Designated Noncash Considerationpursuant to an Officers’ Certificate, setting forth the basis of suchvaluation, executed by an executive vice president and the principal financialofficer of the Borrower, less the amount of cash or Cash Equivalents receivedin connection with a subsequent sale of such Designated Noncash Consideration.

 

“Designated PreferredStock” means Preferred Stock of the Borrower or any parent company thereof(in each case other than Disqualified Stock) that is issued for cash (otherthan to a Restricted Subsidiary) and is so designated as Designated PreferredStock pursuant to an Officers’ Certificate executed by an executive vice presidentand the principal financial officer of the Borrower or the applicable parentcompany thereof, as the case may be, on the issuance date thereof, the cashproceeds 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 mattersdisclosed in Schedule 3.06.

 

“Disqualified Stock” means,with respect to any Person, any Capital Stock of such Person which, by itsterms, or by the terms of any security into which it is convertible or forwhich it is putable or exchangeable, or upon the happening of any event,matures or is mandatorily redeemable (other than solely for Capital Stock thatis not Disqualified Stock), other than as a result of a change of control orasset sale, pursuant to a sinking fund obligation or otherwise, or isredeemable at the option of the holder thereof, other than as a result of achange of control or asset sale, in whole or in part, in each case prior to thedate that is ninety-one (91) days after the earlier of the Maturity Dateand the date the Loans are no longer outstanding; provided**thatif such Capital Stock is issued to any plan for the benefit of employees 

 

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of the Borrower or its subsidiariesor by any such plan to such employees, such Capital Stock shall not constituteDisqualified Stock solely because it may be required to be repurchased by theBorrower or its subsidiaries in order to satisfy applicable statutory orregulatory obligations.

 

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

 

“Domestic Subsidiary”means, with respect to any Person, any Restricted Subsidiary of such Personother than (a) a Foreign Subsidiary or (b) any Domestic Subsidiary ofa Foreign Subsidiary, but, in each case, including any subsidiary thatguarantees or otherwise provides direct credit support for any indebtedness of theBorrower.

 

“EBITDA” means, withrespect to any Person for any period, the Consolidated Net Income of suchPerson 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 incomputing Consolidated Net Income, plus (ii) consolidated Fixed Chargesof such Person for such period to the extent the same was deducted incalculating Consolidated Net Income, plus(iii) Consolidated Depreciation and Amortization Expense of such Personfor such period to the extent such depreciation and amortization were deductedin computing Consolidated Net Income, plus**(iv) any expenses or charges relatedto any Equity Offering, Permitted Investment, acquisition, disposition,recapitalization or the incurrence of Indebtedness permitted to be incurred hereunderincluding a refinancing thereof (whether or not successful) and any amendmentor modification to the terms of any such transactions, including such fees,expenses or charges related to the Transactions and the Credit Card Sale (includingany one-time costs associated with entering into any program agreements orservicing agreements directly related to the Credit Card Sale, but not anypayments required or contemplated by such agreements , other than payments inrespect of transition services provided thereunder prior to the firstanniversary of the Credit Card Sale), in each case, deducted in computingConsolidated Net Income, plus (v) the amount of anyrestructuring charge or reserve deducted in such period in computingConsolidated Net Income, including any one-time costs incurred in connectionwith (A) acquisitions after the Closing Date or (B) the closing ofany stores or distribution centers after the Closing Date, plus (vi) anywrite offs, write downs or other noncash charges reducing Consolidated NetIncome for such period, excluding any such charge that represents an accrual orreserve for a cash expenditure for a future period, plus (vii) theamount of any minority interest expense deducted in calculating ConsolidatedNet Income, plus (viii) the amount ofmanagement, 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 theextent permitted under Section 6.05, plus (ix) the amount ofnet cost savings projected by the Borrower in good faith to be realized as aresult of specified actions taken during such period (calculated on a pro forma**basis as though such cost savings had been realized on thefirst day of such period), net of the amount of actual benefits realized duringsuch period from such actions; provided**that (A) such cost savings arereasonably identifiable and factually supportable, (B) such actions aretaken within 36 months after the Closing Date and (C) the aggregate amountof cost savings added pursuant to this clause (ix) shall not exceed $50,000,000for any four consecutive quarter period (which adjustments may be incrementalto pro forma adjustments madepursuant to the second paragraph of the definition of “Fixed Charge CoverageRatio”), plus (x) any costs or expensesincurred by the Borrower or a Restricted Subsidiary pursuant to any managementequity plan or stock option plan or any other management or employee benefitplan or agreement or any stock subscription or stockholders agreement, to theextent that such costs or expenses are funded with cash proceeds contributed tothe capital of the Borrower or net cash proceeds of issuance of EquityInterests of the Borrower 

 

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(other than DisqualifiedStock that is Preferred Stock) in each case, solely to the extent that suchcash 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 suchPerson for such period, excluding any gains that represent the reversal of anyaccrual of, or cash reserve for, anticipated cash charges in any prior period(other than such cash charges that have been added back to Consolidated NetIncome in calculating EBITDA in accordance with this definition); and

 

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

 

“Eligible Assignee”means (i) a Lender, (ii) a commercial bank, insurance company, orcompany engaged in the business of making commercial loans or a commercialfinance company, which Person, together with its Affiliates, has a combinedcapital and surplus in excess of $1,000,000,000, (iii) any Affiliate of aLender under common control with such Lender or (iv) an Approved Fund of aLender, provided that in any event, “Eligible Assignee” shall notinclude (w) any natural person, (x) Holdings or the Borrower or anyAffiliate (which for this purpose shall not include the Agent or any of itsbranches 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”, withinthe meaning of Regulation X; provided, however, that uponthe occurrence of an Event of Default, no Person (other than a Lender) shall bean “Eligible Assignee” if the assignment of any Commitment or Loan to suchPerson would cause such Person to have Commitments or Loans in excess oftwenty-five percent (25%) of the then outstanding total aggregate Commitmentsor Loans, as the case may be.

 

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

 

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

 

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

 

“Equity Contribution”means the contribution by the Sponsors, the Co-Investors and the ManagementStockholders and certain other Persons investing through Newton Co-Invest I LLCor Newton Co-Invest II LLC, in an aggregate amount of not less than 25% of thetotal consolidated capitalization of Holdings on the Closing Date, after givingpro forma effect to the consummation of the 

 

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Transactions and theredemption after the Closing Date of the 2008 Notes, in cash to Holdings (orany direct or indirect parent thereof) as common equity and/or preferred equityhaving terms reasonably satisfactory to the Joint Lead Arrangers, and the cashcontribution by Holdings (or any direct or indirect parent thereof) of theamount so received to Merger Sub (or if by a direct or indirect parent ofHoldings, by such parent to Holdings and by Holdings to Merger Sub) in respectof Holdings’ common equity and/or preferred equity in Merger Sub having termsreasonably satisfactory to the Joint Lead Arrangers or in exchange for theissuance to Holdings of Equity Interests of Merger Sub.

 

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

 

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

 

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

 

“ERISA Affiliate”means any trade or business (whether or not incorporated) that, together withthe 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 412of the Code, is treated as a single employer under Section 414 of theCode.

 

“ERISA Event” means (a) any“reportable event”, as defined in Section 4043 of ERISA or the regulationsissued thereunder with respect to a Plan (other than an event for which the 30-daynotice period is waived); (b) the existence with respect to any Plan of an“accumulated funding deficiency” (as defined in Section 412 of the Code orSection 302 of ERISA), whether or not waived; (c) the filing pursuantto Section 412(d) of the Code or Section 303(d) of ERISA ofan application for a waiver of the minimum funding standard with respect to anyPlan; (d) the incurrence by the Borrower or any of its ERISA Affiliates ofany liability under Title IV of ERISA with respect to the termination ofany Plan; (e) the receipt by the Borrower or any ERISA Affiliate from thePBGC or a plan administrator of any notice of an intent to terminate any Planor Plans or to appoint a trustee to administer any Plan; (f) theincurrence by the Borrower or any of its ERISA Affiliates of any liability withrespect to the withdrawal or partial withdrawal from any Plan or MultiemployerPlan; or (g) the receipt by the Borrower or any ERISA Affiliate of anynotice, or the receipt by any Multiemployer Plan from the Borrower or any ERISAAffiliate of any notice, concerning the imposition of Withdrawal Liability or adetermination 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(or, in the case of the fiscal year of the Borrower ended July 30, 2006(except for purposes of determining changes in Consolidated Working Capital),the portion thereof commencing on the Closing Date and ending on July 30,2006), an amount equal to the excess of:

 

(a) the sum, withoutduplication, of:

 

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(i) Consolidated NetIncome for such period,

 

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

 

(iii) decreases in ConsolidatedWorking Capital and long-term account receivables for such period (other thanany such decreases arising from acquisitions by the Borrower and its RestrictedSubsidiaries completed during such period), and

 

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

 

(b) the sum, withoutduplication, of:

 

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

 

(ii) withoutduplication of amounts deducted pursuant to clause (xi) below in prior periods,the amount of Capital Expenditures made in cash during such period, except tothe extent that such Capital Expenditures were financed with the proceeds ofIndebtedness of the Borrower or its Restricted Subsidiaries,

 

(iii) the aggregateamount of all principal payments of Indebtedness of the Borrower and itsRestricted Subsidiaries (including (x) the principal component of payments inrespect of Capitalized Lease Obligations and (y) the amount of any prepaymentof Loans pursuant to Section 2.08 or 2.20 made with the proceeds of anAsset Sale to the extent such Asset Sale resulted in an increase toConsolidated Net Income and not in excess of the amount of such increase, butexcluding all other prepayments of the Loans) made during such period (otherthan in respect of any revolving credit facility to the extent there is not anequivalent permanent reduction in commitments thereunder), except to the extentfinanced with the proceeds of other Indebtedness of the Borrower or itsRestricted Subsidiaries,

 

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

 

(v) increases in ConsolidatedWorking Capital and long-term account receivables for such period (other thanany such increases arising from acquisitions of a Person or business unit bythe Borrower and its Restricted Subsidiaries during such period),

 

(vi) cash payments bythe Borrower and its Restricted Subsidiaries during such period in respect oflong-term liabilities of the Borrower and its Restricted Subsidiaries otherthan Indebtedness,

 

(vii) withoutduplication of amounts deducted pursuant to clause (xi) below in prior periods,the amount of Investments and acquisitions made during such period to theextent 

 

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permitted under Section 6.04,to the extent that such Investments and acquisitions were financed withinternally generated cash flow of the Borrower and its Restricted Subsidiaries,

 

(viii) the amount ofRestricted 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 internallygenerated cash flow of the Borrower and its Restricted Subsidiaries,

 

(ix) the aggregateamount of expenditures actually made by the Borrower and the RestrictedSubsidiaries in cash during such period (including expenditures for the paymentof financing fees) to the extent that such expenditures are not expensed duringsuch period,

 

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

 

(xi) without duplication ofamounts deducted from Excess Cash Flow in prior periods, the aggregateconsideration required to be paid in cash by the Borrower or any of itsRestricted Subsidiaries pursuant to binding contracts (the “Contract Consideration”) enteredinto prior to or during such period relating to acquisitions or CapitalExpenditures to be consummated or made during the period of four consecutivefiscal quarters of the Borrower following the end of such period, *provided* that to the extent the aggregate amount ofinternally generated cash actually utilized to finance such acquisitions orCapital Expenditures during such period of four consecutive fiscal quarters isless than the Contract Consideration, the amount of such shortfall shall be addedto the calculation of Excess Cash Flow at the end of such period of fourconsecutive fiscal quarters, and

 

(xii) the amount of cashtaxes paid in such period to the extent they exceed the amount of tax expensededucted in determining Consolidated Net Income for such period.

 

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

 

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

 

“Excluded Taxes”means, with respect to the Agent, any Lender or any other recipient of anypayment to be made by or on account of any obligation of the Borrower or anyother Loan Party hereunder, (a) income or franchise taxes imposed on (ormeasured by) its net income by the United States of America, or by thejurisdiction under the laws of which such recipient is organized or in whichits principal office is located or, in the case of any Lender, in which itsapplicable lending office is located, (b) any branch profits taxes imposedby the United States of America or any similar tax imposed by any otherjurisdiction in which the Borrower or any other Loan Party is located and (c) inthe case of a Foreign Lender (other than an assignee pursuant to a request bythe Borrower under Section 2.17(b)), any withholding tax that is imposedon amounts payable to such Foreign Lender at the time such Foreign 

 

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Lender becomes a party tothis Agreement (or designates a new lending office) or is attributable to suchForeign Lender’s failure to comply with Section 2.15(e), except to theextent that such Foreign Lender (or its assignor, if any) was entitled, at thetime of designation of a new lending office (or assignment), to receiveadditional amounts from the Borrower or any other Loan Party with respect tosuch withholding tax pursuant to Section 2.15(a).

 

“Existing Bank DebtRefinancing” means the payment in full of all amounts, if any, due or owingunder the Existing Credit Agreement, the termination of all commitmentsthereunder and the release and discharge of all guarantees thereof (if any) andall security therefor (if any).

 

“Existing CreditAgreement” means the $350,000,000 Credit Agreement dated June 9, 2004among Neiman Marcus, the lenders party thereto, Bank of America, N.A., assyndication agent, Wachovia Bank, N.A., Wells Fargo Bank National Associationand BNP Paribas, as documentation agents, and JPMorgan Chase Bank, asadministrative agent.

 

“ExtraordinaryDistribution” means any dividends, distributions or other payments made byKate Spade to the Borrower or a Restricted Subsidiary (a) to the extentgenerated by (i) borrowings other than working capital borrowings, (ii) thesale of debt or equity securities or (iii) sales or other dispositions orassets, other than inventory, accounts receivable and other assets sold in theordinary course of business or as part of the normal retirement or replacementof assets or (b) representing a liquidating distribution or payment inconnection with the liquidation or winding up of Kate Spade.

 

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

 

“Fee Letter” meansthat certain Amended and Restated Fee Letter dated as of May 26, 2005, byand 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 SecuritiesLLC and Goldman Sachs Credit Partners L.P.

 

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

 

“Fixed Charge CoverageRatio” means, with respect to any Person for any period, the ratio ofEBITDA of such Person for such period to the Fixed Charges of such Person forsuch period.  In the event that theBorrower or any Restricted Subsidiary incurs, assumes, guarantees, redeems,retires or extinguishes any Indebtedness (other than Indebtedness incurredunder any revolving credit facility that has been permanently repaid and hasnot been replaced) or issues or redeems Disqualified Stock or Preferred Stocksubsequent to the commencement of the period for which the Fixed ChargeCoverage Ratio is being calculated but prior to or simultaneously with theevent 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 formaeffect to such incurrence, assumption, guarantee, redemption, retirement orextinguishing of Indebtedness, or such issuance or redemption of DisqualifiedStock or Preferred Stock, as if the same had occurred at the beginning of theapplicable four-quarter period (the “reference period”).

 

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For purposes of making thecomputation referred to above, Investments, acquisitions, dispositions,mergers, consolidations and disposed operations (as determined in accordancewith GAAP) that have been made by the Borrower or any Restricted Subsidiary duringthe four-quarter reference period or subsequent to such reference period and onor prior to or simultaneously with the Calculation Date shall be calculated ona pro forma basis assuming that all such Investments, acquisitions,dispositions, mergers, consolidations and disposed operations (and the changein 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 anyPerson (that subsequently became a Restricted Subsidiary or was merged with orinto the Borrower or any Restricted Subsidiary since the beginning of suchperiod) shall have made any Investment, acquisition, disposition, merger,consolidation or disposed operation that would have required adjustmentpursuant to this definition, then the Fixed Charge Coverage Ratio shall becalculated giving pro forma effect thereto for such period as if suchInvestment, acquisition, disposition, merger, consolidation or disposedoperation had occurred at the beginning of the reference period.

 

For purposes of thisdefinition, whenever pro forma effect is to be given to a transaction, the proforma calculations shall be made in good faith by a responsible financial oraccounting officer of the Borrower.  Ifany Indebtedness bears a floating rate of interest and is being given pro formaeffect, the interest on such Indebtedness shall be calculated as if the rate ineffect on the Calculation Date had been the applicable rate for the entireperiod (taking into account any Hedging Obligations applicable to suchIndebtedness).  Interest on a CapitalizedLease Obligation shall be deemed to accrue at an interest rate reasonablydetermined by a responsible financial or accounting officer of the Borrower tobe the rate of interest implicit in such Capitalized Lease Obligation inaccordance with GAAP.  For purposes ofmaking the computation referred to above, interest on any Indebtedness under arevolving credit facility computed on a pro forma basis shall be computed basedupon the average daily balance of such Indebtedness during the applicableperiod.  Interest on Indebtedness thatmay optionally be determined at an interest rate based upon a factor of a primeor similar rate, a eurocurrency interbank offered rate, or other rate, shall bedeemed to have been based upon the rate actually chosen, or, if none, thenbased upon such optional rate chosen as the Borrower may designate.

 

“Fixed Charges” means,with respect to any Person for any period, the sum of (a) ConsolidatedInterest Expense of such Person for such period, (b) all cash dividendpayments (excluding items eliminated in consolidation) on any series ofPreferred Stock during such period, and (c) all cash dividend payments(excluding items eliminated in consolidation) on any series of DisqualifiedStock 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 isnot organized or existing under the laws of the United States of America, anystate thereof, the District of Columbia, or any territory thereof.

 

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

 

“Funded Debt” meansall Indebtedness of the Borrower and its Restricted Subsidiaries for borrowedmoney that matures more than one year from the date of its creation or matureswithin one year from such date that is renewable or extendable, at the optionof such Person, to a date more than one year from such date or arises under arevolving credit or similar agreement that obligates the lender or lenders

 

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to extend credit during a period of more thanone year from such date, including Indebtedness in respect of the Loans.

 

“GAAP” meansgenerally accepted accounting principles in the United States of America thatare in effect on the Closing Date.

 

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

 

“guarantee” means aguarantee (other than by endorsement of negotiable instruments for collectionin 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 asa 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 substancesor wastes and all hazardous or toxic substances, wastes or other pollutants,including petroleum or petroleum distillates, asbestos or asbestos containingmaterials, polychlorinated biphenyls, radon gas, infectious or medical wastesand all other substances or wastes of any nature regulated pursuant to anyEnvironmental Law.

 

“Hedge Agreement” means any agreement with respect to anyDerivative Transaction between the Borrower or any Subsidiary and any otherPerson.

 

“HedgingObligations”**means, with respect to any Person, theobligations of such Person under currency exchange, interest rate or commodityswap agreements, currency exchange, interest rate or commodity cap agreementsand currency exchange, interest rate or commodity collar agreements and otheragreements or arrangements, in each case designed to protect such Personagainst fluctuations in currency exchange, interest rates or commodity prices.

 

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

 

“HSBC Agreements”means the Purchase, Sale and Servicing Transfer Agreement dated as of June 8,2005, among HSBC Bank Nevada, N.A., HSBC Finance Corporation (together withtheir Affiliates, “HSBC”), Neiman Marcus and Bergdorf Goodman, Inc.,and all material agreements and instruments entered into in connectiontherewith, including the Credit Card Program Agreement and the related ServicesAgreement, in each case, as amended from time to time.

 

“HSBC Arrangements”means the private label credit card program between the Borrower and HSBCpursuant to the terms of the HSBC Agreements.

 

“Immaterial Subsidiary”means, at any date of determination, any Restricted Subsidiary designated assuch in writing by the Borrower that (i) contributed 2.5% or less ofEBITDA of the Borrower and the Restricted Subsidiaries for the period of fourfiscal quarters most recently ended more than forty-five (45) days prior to thedate 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 endedmore than forty-five (45) days prior to the date of determination.  The Immaterial Subsidiaries as of the ClosingDate are listed on Schedule 1.01(a).

 

“incur” has themeaning set forth in Section 6.01.

 

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“incurrence” has themeaning set forth in Section 6.01.

 

“Indebtedness” means,with respect to any Person, (a) any indebtedness (including principal andpremium) of such Person, whether or not contingent (i) in respect ofborrowed money, (ii) evidenced by bonds, notes, debentures or similarinstruments or letters of credit or bankers’ acceptances (or, without doublecounting, reimbursement agreements in respect thereof), (iii) representingthe balance deferred and unpaid of the purchase price of any property(including Capitalized Lease Obligations), except any such balance thatconstitutes a trade payable or similar obligation to a trade creditor, in eachcase accrued in the ordinary course of business, or (iv) representing anyHedging Obligations, if and to the extent that any of the foregoingIndebtedness (other than letters of credit and Hedging Obligations) wouldappear as a liability upon a balance sheet (excluding the footnotes thereto) ofsuch Person prepared in accordance with GAAP; (b) to the extent nototherwise 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 toin clause (a) of another Person (whether or not such items wouldappear upon the balance sheet of such obligor or guarantor), other than byendorsement of negotiable instruments for collection in the ordinary course ofbusiness; (c) to the extent not otherwise included, the obligations of thetype referred to in clause (a) of another Person secured by a Lien onany asset owned by such Person, whether or not such obligations are assumed bysuch Person and whether or not such obligations would appear upon the balancesheet of such Person;**provided that the amount of suchIndebtedness will be the lesser of the fair market value of such asset at thedate of determination and the amount of Indebtedness so secured; and (d) AttributableDebt in respect of Sale and Lease-Back Transactions; provided*,*however*,* that notwithstanding the foregoing, Indebtedness will bedeemed not to include (A) Contingent Obligations incurred in the ordinarycourse of business and (B) Obligations under, or in respect of,Receivables Facilities.

 

“Indemnified Taxes”means Taxes other than Excluded Taxes.

 

“Independent FinancialAdvisor” means an accounting, appraisal, investment banking firm orconsultant to Persons engaged in Similar Businesses of nationally recognizedstanding that is, in the good faith judgment of the Borrower, qualified toperform the task for which it has been engaged and that is independent of theBorrower and its Affiliates.

 

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

 

“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 date hereof,among Holdings, the Borrower, the subsidiaries of the Borrower party from timeto time thereto, the Agent and the Revolving Facility Agent (as defined therein).

 

“Interest ElectionRequest” means a request by the Borrower to convert or continue a Borrowingin 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 and (b) withrespect to any LIBOR Rate Loan, the last day of the Interest Period applicableto the Borrowing of which such Loan is a part and, in the case of a LIBOR RateBorrowing with an Interest Period of more than three months’ duration, each dayprior to the last day of such Interest Period that occurs at intervals of threemonths’ duration after the first day of such Interest Period (or if such day isnot a Business Day, the next succeeding Business Day).

 

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“Interest Period”means (a) with respect to any LIBOR Rate Borrowing, the period commencingon the date of such Borrowing and ending on the numerically corresponding dayin the calendar month that is one, two, three or six months (or, to theextent available to each Lender, nine or twelve months) thereafter, as theBorrower may elect; provided, that (i) if any Interest Period wouldend on a day other than a Business Day, such Interest Period shall be extendedto the next succeeding Business Day unless such next succeeding Business Daywould fall in the next calendar month, in which case such Interest Period shallend on the next preceding Business Day and (ii) any Interest Period thatcommences on the last Business Day of a calendar month (or on a day for whichthere is no numerically corresponding day in the last calendar month of suchInterest Period) shall end on the last Business Day of the last calendar monthof such Interest Period.  For purposeshereof, the date of a Borrowing initially shall be the date on which suchBorrowing is made and thereafter shall be the effective date of the most recentconversion or continuation of such Borrowing.

 

“Investment GradeSecurities” means (a) securities issued or directly and fullyguaranteed or insured by the government of the United States of America or anyagency or instrumentality thereof (other than Cash Equivalents), (b) debtsecurities or debt instruments with a rating of BBB- or higher by S&P orBaa3 or higher by Moody’s or the equivalent of such rating by such ratingorganization, or, if no rating of S&P or Moody’s then exists, theequivalent of such rating by any other nationally recognized securities ratingagency, but excluding any debt securities or instruments constituting loans oradvances among the Borrower and its subsidiaries, (c) investments in anyfund that invests exclusively in investments of the type described inclauses (a) and (b), which fund may also hold immaterial amounts ofcash pending investment or distribution and (d) corresponding instrumentsin countries other than the United States of America customarily utilized forhigh quality investments.

 

“Investments” means, with respect to any Person, allinvestments by such Person in other Persons (including Affiliates) in the formof loans (including guarantees), advances or capital contributions (includingby means of any transfer of cash or other property to others or any payment forproperty or services for the account or use of others, but excluding accountsreceivable, trade credit, advances to customers, commission, travel and similaradvances to officers and employees, in each case made in the ordinary course ofbusiness), purchases or other acquisitions for consideration of Indebtedness,Equity Interests or other securities issued by any other Person and investmentsthat are required by GAAP to be classified on the balance sheet (excluding thefootnotes) of such Person in the same manner as the other investments includedin this definition to the extent such transactions involve the transfer of cashor other property.  For purposes of thedefinition of “Unrestricted Subsidiary” and Section 6.04, (a) “Investments”shall include the portion (proportionate to the Borrower’s equity interest insuch subsidiary) of the fair market value of the net assets of a subsidiary of theBorrower at the time that such subsidiary is designated an UnrestrictedSubsidiary; provided**that upon a redesignation of such subsidiaryas a Restricted Subsidiary, the Borrower shall be deemed to continue to have apermanent “Investment” in an Unrestricted Subsidiary in an amount (if positive)equal to (i) the Borrower’s “Investment” in such subsidiary at the time ofsuch redesignation, less (ii) the portion (proportionateto the Borrower’s equity interest in such subsidiary) of the fair market valueof the net assets of such subsidiary at the time of such redesignation, and (b) anyproperty transferred to or from an Unrestricted Subsidiary shall be valued atits fair market value at the time of such transfer, in each case as determinedin good faith by the Borrower.

 

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

 

“Joint Lead Arrangers”means Credit Suisse and Deutsche Bank Securities Inc.

 

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

 

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“Lenders” means thePersons listed on the Commitment Schedule and any other Person thatshall 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 anAssignment and Assumption.

 

“LIBOR Rate” means,with respect to any Interest Period, (a) the rate per annum determined bythe Agent at approximately 11:00 a.m. (London time) on the date that istwo Business Days prior to the commencement of such Interest Period byreference to the British Bankers’ Association Interest Settlement Rates fordeposits in dollars (as set forth by any service selected by the Agent that hasbeen nominated by the British Bankers’ Association as an authorized informationvendor for the purpose of displaying such rates) for a period equal to suchInterest Period; provided that, to the extent that an interest rate isnot ascertainable pursuant to the foregoing provisions of this definition, the “LIBORRate” shall be the interest rate per annum determined by the Agent to be theaverage of the rates per annum at which deposits in dollars are offered forsuch relevant Interest Period to major banks in the London interbank market inLondon, England by the Agent at approximately 11:00 a.m. (London time) onthe date that is two Business Days prior to the beginning of such InterestPeriod.

 

“Lien” means, withrespect to any asset, any mortgage, lien, pledge, charge, security interest orencumbrance of any kind in respect of such asset, whether or not filed,recorded or otherwise perfected under applicable law, including any conditionalsale or other title retention agreement, any lease in the nature thereof, anyoption or other agreement to sell or give a security interest in and any filingof or agreement to give any financing statement under the UCC (or equivalentstatutes) of any jurisdiction; provided**that in no event shall an operating leasebe deemed to constitute a Lien.

 

“Loan Documents” meansthis Agreement, any promissory notes issued pursuant to the Agreement, theCollateral Documents and the Intercreditor Agreement. Any reference in thisAgreement or any other Loan Document to a Loan Document shall include allappendices, exhibits or schedules thereto, and all amendments, restatements,supplements or other modifications thereto.

 

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

 

“Loan Guaranty” meansArticle X of this Agreement.

 

“Loan Parties” meansHoldings, the Borrower, each Domestic Subsidiary (other than (i) subjectto compliance with Section 5.11, any Domestic Subsidiary that is anImmaterial Subsidiary and (ii) any Unrestricted Subsidiary), and any otherPerson who becomes a party to this Agreement as a Loan Party pursuant to aJoinder Agreement, and their respective successors and assigns.

 

“Loans” means the termloans made by the Lenders pursuant to this Agreement.

 

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

 

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

 

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

 

“Material Adverse Effect”means a material adverse effect on (a) the business, assets, operations orfinancial condition of the Borrower and the Subsidiaries taken as a whole, (b) theability of 

 

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the Borrower and the otherLoan Parties (taken as a whole) to perform their obligations under the LoanDocuments or (c) the rights of, or remedies available to the Agent or theLenders under, the Loan Documents.

 

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

 

“Maturity Date” meansApril 6, 2013.

 

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

 

“Merger” has themeaning assigned to such term in the introductory statement to this Agreement.

 

“Merger Agreement”means the Agreement and Plan of Merger dated as of May 1, 2005, amongHoldings, Merger Sub and Neiman Marcus, as amended from time to time.

 

“Merger Consideration”has the meaning assigned to such term in the introductory statement to thisAgreement.

 

“Merger Sub” has themeaning assigned to such term in the preamble to this Agreement.

 

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

 

“Mortgaged Properties”means, initially, the owned real properties and leasehold and subleaseholdinterests of the Loan Parties specified on Schedule 1.01(b), andshall include each other parcel of real property and improvements thereto withrespect to which a Mortgage is granted pursuant to Section 5.11.

 

“Mortgages” means anymortgage, deed of trust or other agreement which conveys or evidences a Lien infavor of the Agent, for the benefit of the Agent and the Lenders, on realproperty of a Loan Party, including any amendment, modification or supplementthereto.

 

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

 

“Neiman Marcus” hasthe meaning assigned to such term in the preamble to this Agreement.

 

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

 

“Net Proceeds” meansthe aggregate cash proceeds received by the Borrower or any Restricted Subsidiaryin respect of any Asset Sale, including any cash received upon the sale orother disposition of any Designated Noncash Consideration received in any AssetSale, net of the direct costs relating to such Asset Sale and the sale ordisposition of such Designated Noncash Consideration, including legal,accounting and investment banking fees, and brokerage and sales commissions,any 

 

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relocation expenses incurredas a result thereof, taxes paid or payable as a result thereof (after takinginto account any available tax credits or deductions and any tax sharingarrangements), amounts required to be applied to the repayment of principal,premium, if any, and interest on Indebtedness required (other than as requiredby Section 2.20(a)(i) or Section 2.20(b)(i)(A)) to be paid as aresult of such transaction and any deduction of appropriate amounts to beprovided by the Borrower as a reserve in accordance with GAAP against anyliabilities associated with the asset disposed of in such transaction andretained by the Borrower after such sale or other disposition thereof,including pension and other post-employment benefit liabilities and liabilitiesrelated to environmental matters or against any indemnification obligationsassociated with such transaction.

 

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

 

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

 

“Non-ConsentingLender” has themeaning assigned to such term in Section 9.02(e).

 

“Non-PayingGuarantor” has themeaning assigned to such term in Section 10.10.

 

“ObligatedParty” has themeaning assigned to such term in Section 10.02.

 

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

 

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

 

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

 

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

 

“Other Pari Passu LienObligations” means (i) any Indebtedness constituting debt securitiesincurred pursuant to an indenture with an institutional trustee or loansincurred in the bank credit market (including institutional investorparticipation therein) and (ii) all obligations with respect to suchIndebtedness.

 

“Other Taxes” meansany and all present or future stamp or documentary taxes or any other excise orproperty taxes, charges or similar levies arising from any payment madehereunder or from the execution, delivery or enforcement of, or otherwise withrespect to, this Agreement.

 

“Pari Passu Liens”means any Lien on the Collateral granted for the benefit of the holders of the2028 Debentures and the holders of the 2008 Notes, in each case that isrequired by the terms of the indenture applicable thereto as a result of thegrant of security interests pursuant to any Loan Document, the ABL SecurityDocuments or otherwise.

 

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

 

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“PayingGuarantor” has themeaning assigned to such term in Section 10.10.

 

“PBGC” means thePension Benefit Guaranty Corporation referred to and defined in ERISA and anysuccessor entity performing similar functions.

 

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

 

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

 

“Permitted CollateralLiens” means:

 

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

 

(b) Liens existing onthe Closing Date;

 

(c) Pari Passu Liens;

 

(d) Liens described inclauses (c), (d), (f), (h), (i), (l), (m), (o), (q) (but only with respectto clauses (h), (i) and (r) (but only with respect to Section 6.01(b)(vi) referredto therein) referred to therein), (r) (but only with respect to Sections6.01(b)(vi) and (b)(xxii)(A) referred to therein), (t), (u) and (aa)(but only with respect to obligations secured by Liens described inclauses (a) or (c) set forth above) of the definition of “PermittedLiens”; and

 

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

 

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

 

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

 

“Permitted Investments”means:

 

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

 

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

 

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

 

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

 

(e) any Investmentexisting on the Closing Date or made pursuant to legally binding writtencommitments in existence on the Closing Date;

 

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

 

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

 

(h) Hedging Obligationspermitted under Section 6.01(b)(xii);

 

(i) loans and advancesto officers, directors and employees for business-related travel expenses,moving expenses and other similar expenses, in each case incurred in theordinary course of business or consistent with past practice or to fund suchPerson’s purchase of Equity Interests of the Borrower or any direct or indirectparent company thereof under compensation plans approved by the Board ofDirectors of the Borrower in good faith;

 

(j) Investments the payment for whichconsists 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 forRestricted Payments under Section 6.04(a)(iii);

 

(k) guarantees ofIndebtedness permitted under Section 6.01 and performance guarantees inthe ordinary course of business;

 

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

 

(m) Investments consistingof purchases and acquisitions of inventory, supplies, material or equipment orthe licensing or contribution of intellectual property pursuant to jointmarketing arrangements with other Persons;

 

(n) Investments in a SimilarBusiness having an aggregate fair market value, taken together with all otherInvestments made pursuant to this clause (n) that are at that time 

 

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outstanding (without givingeffect to the sale of an Unrestricted Subsidiary to the extent the proceeds ofsuch sale do not consist of cash or marketable securities), not to exceed thegreater of (x) $100,000,000 and (y) 1.50% of Total Assets at the time ofsuch Investment (with the fair market value of each Investment being measuredat the time made and without giving effect to subsequent changes in value);

 

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

 

(p) additional Investmentshaving an aggregate fair market value, taken together with all otherInvestments made pursuant to this clause (p) that are at that time outstanding(without giving effect to the sale of an Unrestricted Subsidiary to the extentthe proceeds of such sale do not consist of cash or marketable securities), notto exceed $150,000,000 (with the fair market value of each Investment beingmeasured at the time made and without giving effect to subsequent changes invalue)

 

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

 

(a) Liens to secureIndebtedness incurred under Sections 6.01(b)(i) or (b)(ii), the 2008Notes and the 2028 Debentures (and, in each case, any related obligations);

 

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

 

(c) Liens imposed bylaw, such as carriers’, warehousemen’s and mechanics’ Liens and other similarLiens, 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 orother Liens arising out of judgments or awards against such Person with respectto which such Person shall then be proceeding with an appeal or otherproceedings for review, if adequate reserves with respect thereto aremaintained 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 aperiod of more than thirty (30) days or payable or subject to penaltiesfor nonpayment or which are being contested in good faith by appropriateproceedings diligently conducted, if adequate reserves with respect thereto aremaintained on the books of such Person in accordance with GAAP;

 

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

 

(f) minor surveyexceptions, minor encumbrances, easements or reservations of, or rights ofothers for, licenses, rights-of-way, sewers, electric lines, telegraph andtelephone lines and other similar purposes, or zoning or other restrictions asto the use of real properties or Liens 

 

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incidentalto the conduct of the business of such Person or to the ownership of itsproperties, in each case, which were not incurred in connection withIndebtedness and which do not in the aggregate materially adversely affect thevalue of said properties or materially impair their use in the operation of thebusiness of such Person;

 

(g) Liens existing onthe Closing Date;

 

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

 

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

 

(j) Liens securingIndebtedness or other obligations of a Restricted Subsidiary owing to theBorrower or another Restricted Subsidiary permitted to be incurred inaccordance with Section 6.01;

 

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

 

(l) leases and subleasesgranted to others in the ordinary course of business which do not materiallyinterfere with the ordinary conduct of the business of the Borrower or any ofthe Restricted Subsidiaries and do not secure any Indebtedness;

 

(m) Liens arising fromfinancing statement filings under the UCC or similar state laws regardingoperating leases entered into by the Borrower and its Restricted Subsidiariesin the ordinary course of business;

 

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

 

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

 

(p) Liens on accountsreceivable and related assets incurred in connection with a ReceivablesFacility;

 

(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 anyIndebtedness 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 limitedto all or part of the same property that secured the original Lien (plusimprovements on such property), and (y) the Indebtedness secured by suchLien at such time is not increased to any amount greater than the sum of (A) theoutstanding principal amount or, if greater, committed amount of theIndebtedness described 

 

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under clauses (a), (g),(h), (i), (r) and (aa) of this definition at the time the original Lienbecame a Permitted Lien pursuant this Agreement, and (B) an amountnecessary to pay any fees and expenses, including premiums, related to suchrefinancing, refunding, extension, renewal or replacement;

 

(r) Liens securingIndebtedness 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 permittedto be incurred pursuant to Section 6.01(b)(vi) do not at any timeencumber any property other than the property financed by such Indebtedness andthe proceeds and the products thereof, (B) Liens securing Indebtednesspermitted to be incurred pursuant to Section 6.01(b)(xix) are solely onacquired property or the assets of the acquired entity, as the case may be and (C) Lienssecuring Indebtedness permitted to be incurred pursuant to Section 6.01(b)(xx)extend only to the assets of Foreign Subsidiaries;

 

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

 

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

 

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

 

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

 

(w) Liens that arecontractual rights of set-off (i) relating to the establishment ofdepository relations with banks not given in connection with the issuance ofIndebtedness, (ii) relating to pooled deposit or sweep accounts of theBorrower or any of its Restricted Subsidiaries to permit satisfaction ofoverdraft or similar obligations incurred in the ordinary course of business ofthe Borrower and its Restricted Subsidiaries or (iii) relating to purchaseorders and other agreements entered into with customers of the Borrower or anyof its Restricted Subsidiaries in the ordinary course of business;

 

(x) Liens encumberingreasonable customary initial deposits and margin deposits and similar Liensattaching to commodity trading accounts or other brokerage accounts incurred inthe ordinary course of business and not for speculative purposes;

 

(y) Liens deemed to exist inconnection with Investments in repurchase agreements permitted under Section 6.01;provided**that such Liens donot extend to any assets other than those assets that are the subject of suchrepurchase agreement;

 

(z) other Liens securingobligations incurred in the ordinary course of business which obligations donot exceed $50,000,000 at any one time outstanding;

 

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

 

(bb) Liens incurred to secure obligationsin respect of anyIndebtedness permitted to be incurred pursuant to Section 6.01; provided that, at the timeof incurrence and after giving pro forma effect thereto, the ConsolidatedSecured Debt Ratio would be no greater than 4.00 to 1.00.

 

“Person” means anyindividual, 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 anyemployee pension benefit plan (other than a Multiemployer Plan) subject to theprovisions of Title IV of ERISA or Section 412 of the Code or Section 302of 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 deemedto be) an “employer” as defined in Section 3(5) of ERISA.

 

“Preferred Stock” meansany Equity Interest with preferential rights of payment of dividends or uponliquidation, dissolution, or winding up.

 

“Prime Rate” meansthe rate of interest per annum determined from time to time by Credit Suisse asits prime rate in effect at its principal office in New York City andnotified to the Borrower.

 

“Projections” meansthe projections of the Borrower and the Subsidiaries included in theInformation Memorandum and any other projections and any forward-lookingstatements of such entities furnished to the Lenders or the Agent by or onbehalf of Holdings, the Borrower or any of the Subsidiaries prior to theClosing Date.

 

“QualifiedProceeds” meansassets that are used or useful in, or Capital Stock of any Person engaged in, aSimilar Business; provided**that the fair market value of any suchassets 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 fromtime to time, the Indebtedness of which is non-recourse (except for standardrepresentations, warranties, covenants and indemnities made in connection withsuch facilities) to the Borrower and its Restricted Subsidiaries pursuant towhich the Borrower or any of its Restricted Subsidiaries sells its accountsreceivable to either (a) a Person that is not a Restricted Subsidiary or (b) aReceivables Subsidiary that in turn sells its accounts receivable to a Personthat is not a Restricted Subsidiary.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Regulation T” meansRegulation T of the Board as from time to time in effect and all officialrulings and interpretations thereunder or thereof, and any successor provisionthereto.

 

“Regulation U” meansRegulation U of the Board as from time to time in effect and all officialrulings and interpretations thereunder or thereof, and any successor provisionthereto.

 

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

 

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

 

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

 

“Required Lenders”means at any time (i) prior to the making of the Loans on the ClosingDate, Lenders holding more than 50% of the total Commitments and (ii) thereafter,the Lenders holding more than 50% of the aggregate principal amount of Loansoutstanding at such time.

 

“Requirement of Law”means, as to any Person, the Certificate of Incorporation and By-Laws or otherorganizational or governing documents of such Person, and any law, treaty, rule orregulation or determination of an arbitrator or a court or other GovernmentalAuthority, in each case applicable to or binding upon such Person or any of itsproperty 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 vicepresident, the chief operating officer or any Financial Officer of such Personand any other officer or similar official thereof responsible for theadministration of the obligations of such Person in respect of this Agreement,and, as to any document delivered on the Closing Date (but subject to theexpress requirements set forth in Article IV), shall include any secretaryor assistant secretary of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officerof a Loan Party shall be conclusively presumed to have been authorized by allnecessary corporate, partnership and/or other action on the part of such LoanParty and such Responsible Officer shall be conclusively presumed to have actedon behalf of such Loan Party.

 

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

 

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

 

“RestrictedSubsidiary”**means, at any time, any direct or indirect subsidiaryof the Borrower (including any Foreign Subsidiary) that is not then anUnrestricted Subsidiary; provided**that 

 

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upon the occurrence of anUnrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such subsidiaryshall 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 FirstLien Collateral” has the meaning set forth in the Intercreditor Agreement.

 

“Sale and Lease-BackTransaction” means any arrangement with any Person providing for theleasing by the Borrower or any Restricted Subsidiary of any real or tangiblepersonal property, which property has been or is to be sold or transferred by theBorrower or such Restricted Subsidiary to such Person in contemplation of suchleasing.

 

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

 

“SEC” means theSecurities and Exchange Commission, or any Governmental Authority succeeding toany or all of its functions.

 

“Secured HedgingObligations” means all Hedging Obligations owing to the Agent, a Joint LeadArranger or a co-arranger, a Lender or any Affiliate of any of the foregoing andwith respect to which, at or prior to the time that the Hedge Agreementrelating to such Hedging Obligation is entered into, the Borrower (or anotherLoan 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 havedelivered written notice to the Agent that such a transaction has been enteredinto and that it constitutes a Secured Hedging Obligation entitled to thebenefits of the Collateral Documents and the Intercreditor Agreement.

 

“SecuredIndebtedness” means any Indebtedness secured by a Lien.

 

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

 

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

 

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

 

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

 

“Senior Indebtedness” means with respect to any Person (a) allIndebtedness of such Person, whether outstanding on the Closing Date or thereafterincurred and (b) all other obligations of such Person (including interestaccruing on or after the filing of any petition in bankruptcy or forreorganization relating to such Person whether or not post-filing interest isallowed in such proceeding) in respect of Indebtedness described in clause (a) aboveunless, in the case of clauses (a) and (b), the instrument creating orevidencing the same or pursuant to which the same is outstanding expresslyprovides that such Indebtedness or other obligations are subordinate in rightof payment to the Obligations or the Loan Guarantee of such Person, as the casemay be; provided that Senior Indebtedness shall not include (i) anyobligation of such Person to the Borrower or any subsidiary or to any jointventure in which the Borrower or any Restricted Subsidiary has aninterest,  (ii) any liability forFederal, state, local or other Taxes owed or owing by such Person, (iii) anyaccounts payable or other liability to 

 

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trade creditors in theordinary course of business (including guarantees thereof as instruments evidencingsuch liabilities), (iv) any Indebtedness or other obligation of suchPerson that is subordinate or junior in any respect to any other Indebtednessor other obligation of such Person or (v) that portion of any Indebtednessthat 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 andother documents evidencing the Senior Notes or providing for any guarantee orother right in respect thereof.

 

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

 

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

 

“Senior SecuredAsset-Based Revolving Credit Agreement” means the Credit Agreement dated asof the date hereof, among Holdings, Merger Sub, the subsidiaries of theBorrower from time to time party thereto, Deutsche Bank Trust Company Americas,as administrative agent and collateral agent, and the lenders from time to timeparty thereto.

 

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

 

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

 

“Senior Subordinated NotesIndenture” means the Indenture dated as of the date hereof, among theBorrower, as issuer, certain of its subsidiaries, as guarantors, and WellsFargo Bank, National Association, as trustee, pursuant to which the SeniorSubordinated Notes are issued.

 

“Senior SubordinatedNotes” means the Borrower’s 103/2% Senior Subordinated Notes due 2015, in an initial aggregate principalamount of $500,000,000.

 

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

 

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“SignificantSubsidiary”**means any Restricted Subsidiary of theBorrower 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 date hereof.

 

“SimilarBusiness” means**any business conducted by the Borrower andits Restricted Subsidiaries on the Closing Date or any business that issimilar, reasonably related, incidental or ancillary thereto.

 

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

 

“SubordinatedIndebtedness” means (a) with respect to the Borrower, any Indebtednessof 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 LoanGuarantor that is by its terms subordinated in right of payment to the LoanGuaranty of such Loan Guarantor.

 

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

 

“Subsidiary” means, unlessthe 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 bereferences to Unrestricted Subsidiaries.

 

“Subsidiary Guarantor”means each Restricted Subsidiary of the Borrower that is a Loan Party and that executesthis Agreement as a Loan Guarantor on the Closing Date and each otherRestricted Subsidiary of the Borrower that thereafter guarantees the SecuredObligations 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 andall present or future taxes, levies, imposts, duties, deductions, charges orwithholdings imposed by any Governmental Authority.

 

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

 

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

 

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

 

“TotalAssets”**means the total amount of all assets of theBorrower and the Restricted Subsidiaries, determined on a consolidated basis inaccordance with GAAP as shown on the most recent balance sheet of the Borrower.

 

“Transaction Costs”means fees and expenses payable or otherwise borne by Holdings, the Borrowerand its subsidiaries in connection with the Transactions and the transactionscontemplated thereby (including redemption or other premiums payable inconnection with the redemption after the Closing Date of the 2008 Notes inaccordance with Section 5.13).

 

“Transactions” means,collectively, (a) the execution, delivery and performance by Holdings andMerger Sub of the Merger Agreement and the consummation of the transactionscontemplated thereby, (b) the execution, delivery and performance by theLoan Parties of the Loan Documents to which they are a party and the making ofthe Borrowings hereunder, (c) the execution, delivery and performance byHoldings, the Borrower and the subsidiaries of the Borrower party thereto ofthe New Note Documents and the issuance of the New Notes, (d) theexecution, delivery and performance of the Senior Secured Asset-Based RevolvingCredit Agreement and all other instruments, agreements and other documentsevidencing or governing the Senior Secured Asset-Based Revolving CreditFacility or providing for any guarantee or other right in respect thereof andthe making of borrowings thereunder, (e) the execution, delivery andperformance by all parties thereto of the Intercreditor Agreement, (f) theExisting Bank Debt Refinancing, (g) the 2008 Notes Call for Redemption, (h) thegranting of Pari Passu Liens, (i) the making of the Equity Contribution(j) the entering into of the HSBC Arrangements and (k) the payment of theTransaction Costs.

 

“2008 Notes” meansthe 6.65% Senior Unsecured Notes due 2008 of Neiman Marcus outstanding on theClosing Date.

 

“2008Notes Call for Redemption” means the call for redemption of, and the deposit into a segregatedaccount of the estimated amount of the redemption payment related to, alloutstanding 2008 Notes in accordance with the indenture governing the 2008 Notesand applicable law, and the securing of the 2008 Notes by the Pari Passu Lienson the Closing Date.

 

“2028 Debentures”means the 7.125% Senior Debentures due 2028 of Neiman Marcus outstanding on theClosing Date.

 

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

 

“UCC” means theUniform Commercial Code as in effect from time to time in the state of New Yorkor any other state the laws of which are required to be applied in connectionwith the issue of perfection of security interests.

 

“Unliquidated Obligations”means, at any time, any Secured Obligations (or portion thereof) that arecontingent in nature or unliquidated at such time, including any SecuredObligation that is: (i) an obligation to reimburse a bank for drawings notyet 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) anobligation to provide collateral to secure any of the foregoing types ofobligations, but excluding 

 

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unripened or contingentobligations related to indemnification under Section 9.03 for which nowritten demand has been made.

 

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

 

The Borrower may designateany subsidiary of the Borrower (including any existing subsidiary and any newlyacquired or newly formed subsidiary) to be an Unrestricted Subsidiary unless suchsubsidiary or any of its subsidiaries owns any Equity Interests or Indebtednessof, or owns or holds any Lien on, any property of, the Borrower or any subsidiaryof the Borrower (other than any subsidiary of the subsidiary to be sodesignated); provided**that (i) any Unrestricted Subsidiarymust be an entity of which shares of the capital stock or other equityinterests (including partnership interests) entitled to cast at least amajority of the votes that may be cast by all shares or equity interests havingordinary voting power for the election of directors or other governing body areowned, directly or indirectly, by the Borrower, (ii) such designationcomplies with Section 6.04 and (iii) each of (A) the subsidiaryto be so designated and (B) its subsidiaries has not at the time ofdesignation, and does not thereafter, create, incur, issue, assume, guaranteeor otherwise become directly or indirectly liable with respect to anyIndebtedness pursuant to which the lender has recourse to any of the assets ofthe Borrower or any Restricted Subsidiary.

 

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

 

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

 

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

 

“VotingStock”**of any Person as of any date means theCapital Stock of such Person that is at the time entitled to vote in theelection of the Board of Directors of such Person.

 

“Weighted Average Life toMaturity” means, when applied to any Indebtedness, Disqualified Stock orPreferred Stock, as the case may be, at any date, the quotient obtained by dividing**(1) the sum of the products of thenumber of years from the date of determination to the date of each successivescheduled principal payment of such Indebtedness or redemption or similarpayment with respect to such Disqualified Stock or Preferred Stock multipliedby the amount of such payment, by (2) the sum of all such payments.

 

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“Wholly-Owned Subsidiary”of any Person means a subsidiary of such Person, 100% of the outstandingCapital Stock or other ownership interests of which (other than directors’qualifying shares) shall at the time be owned by such Person or by one or moreWholly-Owned Subsidiaries of such Person.

 

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

 

## SECTION 1.02.  Classification of Loans and Borrowings.  For purposes of this Agreement, Loans may beclassified and referred to by Type (e.g., a “LIBOR Rate Loan” or a “LIBORRate Borrowing”).

##  

## SECTION 1.03.  Terms Generally.  The definitions of terms herein shall applyequally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronounshall 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, theterm “consolidated” with respect to any Person refers to such Personconsolidated with its Restricted Subsidiaries, and excludes from suchconsolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiarywere not an Affiliate of such Person.  Theword “will” shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) anydefinition of or reference to any agreement, instrument or other documentherein shall be construed as referring to such agreement, instrument or otherdocument as from time to time amended, supplemented or otherwise modified(subject to any restrictions on such amendments, supplements or modificationsset forth herein), (b) any reference herein to any Person shall beconstrued to include such Person’s successors and assigns, (c) the words “herein”,“hereof” and “hereunder”, and words of similar import, shall be construed torefer to this Agreement in its entirety and not to any particular provisionhereof, (d) all references herein to Articles, Sections, Exhibits andSchedules shall be construed to refer to Articles and Sections of, and Exhibitsand 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 andall tangible and intangible assets and properties, including cash, securities,accounts and contract rights.

##  

## SECTION 1.04.  Effectuation of Transactions.  Each of the representations and warranties ofthe Loan Parties contained in this Agreement (and all correspondingdefinitions) are made after giving effect to the Transactions, unless thecontext otherwise requires. References to the Transactions in Sections 3.02and 3.03 shall be deemed not to include the Transactions described in clause (j)of the definition of the term “Transactions” set forth in Section 1.01.

##  

ARTICLE II

 

# The Credits

 

## SECTION 2.01.  Commitments.  Subject to the terms and conditions set forthherein, each Lender agrees, severally and not jointly, to make a Loan to theBorrower on the Closing Date, in a principal amount not to exceed itsCommitment.  Amounts prepaid or repaid in respect of Loansmay not be reborrowed.

##  

## SECTION 2.02.  Loans and Borrowings.  (a)  Each Loan shall be made as part ofa Borrowing consisting of Loans of the same Type made by the Lenders ratably inaccordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by itshall not 

 

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## relieve any other Lender of its obligations hereunder; providedthat the Commitments of the Lenders are several and no Lender shall beresponsible for any other Lender’s failure to make Loans as required.

##  

### (b)  Subject to Section 2.12,each Borrowing shall be comprised entirely of ABR Loans or LIBOR Rate Loans asthe Borrower may request in accordance herewith.  Each Lender at its option may make any LIBORRate Loan by causing any domestic or foreign branch or Affiliate of such Lenderto make such Loan; provided that (i) any exercise of such option shall notaffect the obligation of the Borrower to repay such Loan in accordance with theterms of this Agreement, (ii)in exercising such option, such Lender shall usereasonable efforts to minimize any increase in the Adjusted LIBOR Rate orincreased costs to the Borrower resulting therefrom (which obligation of suchLender shall not require it to take, or refrain from taking, actions that itdetermines would result in increased costs for which it will not be compensatedhereunder or that it otherwise determines would be disadvantageous to it and inthe event of such request for costs for which compensation is provided underthis Agreement, the provisions of Section 2.13 shall apply) and (iii) suchbranch or Affiliate of such Lender would not be included in clause (z) of the firstproviso to the definition of the term “Eligible Assignee” set forth in Section 1.01.

###  

### (c)  At thecommencement of each Interest Period for any LIBOR Rate Borrowing, suchBorrowing shall comprise an aggregate principal amount that is an integralmultiple of $1,000,000 and not less than $5,000,000.  Each ABR Borrowing when made shall be in aminimum principal amount of $1,000,000; provided that an ABR Borrowing may be maintainedin a lesser amount equal to the difference between the aggregate principalamount of all other Borrowings and the total amount of Loans at such timeoutstanding.  Borrowings of more than oneType may be outstanding at the same time; provided that there shall not at anytime be more than a total of ten different Interest Periods in effect for LIBORRate Borrowings at any time outstanding.

###  

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

###  

## SECTION 2.03.  Request for Borrowing on the Closing Date.  (a)  To request the making of the Loanshereunder on the Closing Date, the Borrower shall notify the Agent of suchrequest either in writing by delivery of a Borrowing Request (by hand orfacsimile) signed by the Borrower or by telephone not later than 11:00 a.m.,New York City time, two (2) Business Days before the proposed Closing Date(or such later time as shall be acceptable to the Agent).  A telephonic Borrowing Request shall beirrevocable and shall be confirmed promptly by hand delivery or facsimile tothe Agent of a written Borrowing Request signed by the Borrower.  Each such telephonic and written BorrowingRequest shall specify the following information in compliance with Section 2.01:

##  

#### (i) the aggregate amountof the requested Borrowing;

####  

#### (ii) the date of theBorrowing, which shall be a Business Day;

####  

#### (iii) whether the Borrowingis to be an ABR Borrowing or a LIBOR Rate Borrowing;

####  

#### (iv) in the case of aLIBOR Rate Borrowing, the initial Interest Period to be applicable thereto,which shall be a period contemplated by the definition of the term “InterestPeriod”; and

####  

#### (v) the location andnumber of the Borrower’s account to which funds are to be disbursed.

 

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### (b)  If no election asto the Type of Borrowing is specified, then the requested Borrowing shall be anABR Borrowing.  If no Interest Period isspecified with respect to any LIBOR Rate Borrowing, then the Borrower shall bedeemed to have selected an Interest Period of one month’s duration.  Promptly following receipt of the BorrowingRequest in accordance with this Section, the Agent shall advise each Lender ofthe details thereof and of the amount of such Lender’s Loan to be made as partof the requested Borrowing.

###  

## SECTION 2.04.  Funding of the Borrowing on the ClosingDate.  (a)  Each Lender shallmake the Loan to be made by it hereunder on the Closing Date by wire transferof immediately available funds by 12:00 (noon), New York City time, to theaccount of the Agent most recently designated by it for such purpose by noticeto the Lenders, in an amount equal to such Lender’s Applicable Percentage ofthe aggregate principal amount of the Loans made on the Closing Date.

##  

### (b)  Unless the Agentshall have received notice from a Lender prior to the Closing Date that suchLender will not make available to the Agent such Lender’s share of theBorrowing on the Closing Date, the Agent may assume that such Lender has made suchshare available on the Closing Date in accordance with paragraph (a) ofthis Section and may, in reliance upon such assumption, make available tothe Borrower a corresponding amount.  Insuch event, if a Lender has not in fact made its share of the Borrowingavailable to the Agent, then the applicable Lender and the Borrower severallyagree to pay to the Agent forthwith on demand (without duplication) suchcorresponding amount with interest thereon, for each day from and including thedate such amount is made available to the Borrower to but excluding the date ofpayment to the Agent, at (i) in the case of such Lender, the greater ofthe Federal Funds Effective Rate and a rate determined by the Agent inaccordance with banking industry rules on interbank compensation or (ii) inthe case of the Borrower, the interest rate applicable to ABR Loans.  If such Lender pays such amount to the Agent,then such amount shall constitute such Lender’s Loan included in the Borrowingon the Closing Date.  Nothing hereinshall be deemed to relieve any Lender from its obligation to fulfill itsCommitment or to prejudice any rights which the Agent or the Borrower or anyLoan Party may have against any Lender as a result of any default by suchLender hereunder.

###  

## SECTION 2.05.  Type; Interest Elections.  (a)  The Loans initially shall be of theType specified in the Borrowing Request and, in the case of a LIBOR RateBorrowing, shall have an initial Interest Period (not to exceed two (2) months’duration) as specified in such Borrowing Request.  Thereafter, the Borrower may elect to convertall or any portion of any Borrowing (subject to the minimum amounts for Borrowingsof the applicable Type specified in Section 2.02(c)) to a different Typeor to continue such Borrowing and, in the case of a LIBOR Rate Borrowing, mayelect Interest Periods therefor, all as provided in this Section.  The Borrower may elect different options withrespect to different portions of the affected Borrowing, in which case eachsuch portion shall be allocated ratably among the Lenders holding the Loanscomprising such Borrowing, and the Loans comprising each such portion shall beconsidered a separate Borrowing.

##  

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

 

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### (c)  Each telephonicand written Interest Election Request shall specify the following informationin compliance with Section 2.02:

###  

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

####  

#### (ii) the effective dateof the election made pursuant to such Interest Election Request, which shall bea Business Day;

####  

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

####  

#### (iv) if the resultingBorrowing is a LIBOR Rate Borrowing, the Interest Period to be applicablethereto after giving effect to such election, which shall be a periodcontemplated by the definition of the term “Interest Period”.

####  

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

 

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

###  

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

###  

## SECTION 2.06.  Termination of Commitments.  The Commitments shall automatically terminateupon earlier to occur of (i) the making of the Loans on the Closing Dateand (ii) 5:00 p.m., New York City time, on the Termination Date (asdefined in the Merger Agreement).

##  

## SECTION 2.07.  Repayment of Loans; Evidence of Debt.  (a)  The Borrower hereby unconditionallypromises to pay to the Agent for the account of each Lender the then unpaidprincipal amount of each Loan on the Maturity Date.

##  

### (b)  Each Lender shallmaintain in accordance with its usual practice an account or accountsevidencing the indebtedness of the Borrower to such Lender resulting from eachLoan made by such Lender, including the amounts of principal and interestpayable and paid to such Lender from time to time hereunder.

###  

### (c)  The Agent shallmaintain accounts in which it shall record (i) the amount of each Loanmade hereunder, the Type thereof and the Interest Period (if any) applicablethereto, (ii) the amount of any principal or interest due and payable orto become due and payable from the Borrower to each 

 

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### Lender hereunder and (iii) the amount of any sum received by the Agenthereunder for the account of the Lenders and each Lender’s share thereof.

###  

### (d)  The entries madein the accounts maintained pursuant to paragraph (b) or (c) of this Section shallbe prima facie evidence of the existence and amounts of the obligationsrecorded therein; provided that the failure of any Lender or the Agent tomaintain such accounts or any error therein shall not in any manner affect theobligation of the Borrower to repay the Loans in accordance with the terms ofthis Agreement.

###  

### (e)  Any Lender mayrequest 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 andits registered assigns and in substantially the form of Exhibit Fhereto.  Thereafter, the Loans evidencedby such promissory note and interest thereon shall at all times (including afterassignment pursuant to Section 9.04) be represented by one or morepromissory notes in such form payable to the payee named therein and itsregistered assigns.

###  

## SECTION 2.08.  Optional Prepayment of Loans.  (a)  Upon prior notice in accordancewith paragraph (b) of this Section, the Borrower shall have the right atany time and from time to time to prepay any Borrowing in whole or in partwithout premium or penalty (but subject to Section 2.14); providedthat any optional prepayment of Loans pursuant to this paragraph (a) (otherthan any such prepayment that is made with Designated Asset Sale Proceeds) madeprior to the first anniversary of the Closing Date shall be accompanied by aprepayment fee in an amount (expressed as a percentage of the principal amountof Loans to be prepaid) equal to 1.00% of the principal amount of the Loans tobe prepaid.

##  

### (b)  The Borrower shallnotify the Agent by telephone (confirmed by facsimile) of any prepaymenthereunder (i) in the case of prepayment of a LIBOR Rate Borrowing, notlater than 11:00 a.m., New York City time, three (3) Business Daysbefore the date of prepayment or (ii) in the case of prepayment of an ABRBorrowing, not later than 10:00 a.m., New York City time, on the day ofprepayment. Each such notice shall be irrevocable and shall specify theprepayment date and the principal amount of each Borrowing or portion thereofto be prepaid. Promptly following receipt of any such notice relating to aBorrowing, the Agent shall advise the Lenders of the contents thereof. Eachpartial prepayment of any Borrowing shall be in an amount that would bepermitted 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 includedin the prepaid Borrowing. Prepayments shall be accompanied by accrued interestas required by Section 2.11.

###  

## SECTION 2.09.  Mandatory Prepayment of Loans.  (a)  No later than the earlier of (i) ninety(90) days after the end of each fiscal year of the Borrower, commencing withthe fiscal year ending on July 30, 2006, and (ii) the date on whichthe 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 amountequal to 50% of Excess Cash Flow for the fiscal year then ended; providedthat the amount of such prepayment shall be reduced to 25% of such Excess CashFlow if the Consolidated Leverage Ratio at the end of such fiscal year shall beequal to or less than 5.00 to 1.00, but greater than 4.50 to 1.00, and (ii) suchprepayment shall not be required if the Consolidated Leverage Ratio at the endof such fiscal year shall be equal to or less than 4.50 to 1.00.

##  

### (b)  The Borrower shalldeliver 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 settingforth in reasonable detail the calculation of the amount of such prepayment and(ii) to the extent practicable, at least three (3) days prior writtennotice of such prepayment. Each notice of prepayment shall specify the 

 

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### prepayment date, the Type of each Loan being prepaid and the principalamount of each Loan (or portion thereof) to be prepaid. Each prepayment of aBorrowing shall be applied ratably to the Loans included in the prepaidBorrowing. 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.

###  

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

##  

## SECTION 2.11.  Interest.  (a)  The Loans comprising eachABR Borrowing shall bear interest at the Alternate Base Rate plus theApplicable Rate.

##  

### (b)  The Loanscomprising each LIBOR Rate Borrowing shall bear interest at the Adjusted LIBORRate for the Interest Period in effect for such Borrowing plus the ApplicableRate.

###  

### (c)  Notwithstandingthe foregoing, if any principal of or interest on any Loan or any fee or otheramount payable by the Borrower hereunder is not paid when due, whether atstated maturity, upon acceleration or otherwise, such overdue amount shall bearinterest, after as well as before judgment, at a rate per annum equal to (i) inthe case of overdue principal of any Loan, 2% plus the rate otherwiseapplicable 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 ABRLoans as provided in paragraph (a) of this Section.

###  

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

###  

### (e)  All interesthereunder shall be computed on the basis of a year of 360 days, except thatinterest computed by reference to the Alternate Base Rate at times when theAlternate Base Rate is based on the Prime Rate shall be computed on the basisof a year of 365 days (or 366 days in a leap year), and in each case shall bepayable for the actual number of days elapsed (including the first day butexcluding the last day).  The applicableAlternate Base Rate, Adjusted LIBOR Rate or LIBOR Rate shall be determined bythe Agent, and such determination shall be conclusive absent manifest error.

###  

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

##  

##### (a) the Agentdetermines (which determination shall be conclusive absent manifest error) thatadequate and reasonable means do not exist for ascertaining the Adjusted LIBORRate or the LIBOR Rate, as applicable, for such Interest Period; or

#####  

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

 

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then the Agent shall promptlygive notice thereof to the Borrower and the Lenders by telephone or facsimileas promptly as practicable thereafter and, until the Agent notifies theBorrower and the Lenders that the circumstances giving rise to such notice nolonger exist, any Interest Election Request that requests the conversion of anyBorrowing to, or continuation of any Borrowing as, a LIBOR Rate Borrowing shallbe ineffective and such Borrowing shall be converted to an ABR Borrowing on thelast day of the Interest Period applicable thereof.

 

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

##  

#### (i) impose, modify ordeem applicable any reserve, special deposit or similar requirement againstassets of, deposits with or for the account of, or credit extended by, anyLender (except any such reserve requirement reflected in the Adjusted LIBORRate); or

####  

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

####  

and the result of any of theforegoing shall be to increase the cost to such Lender of making or maintainingany LIBOR Rate Loan or to reduce the amount of any sum received or receivableby such Lender hereunder (whether of principal, interest or otherwise), then,following delivery of the certificate contemplated by paragraph (c) ofthis Section, the Borrower will pay to such Lender such additional amount oramounts as will compensate such Lender for such additional costs incurred orreduction suffered (except for any Taxes, which shall be dealt with exclusivelypursuant to Section 2.15).

 

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

###  

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

###  

### (d)  Failure or delayon the part of any Lender to demand compensation pursuant to this Section shallnot constitute a waiver of such Lender’s right to demand such compensation; providedthat the Borrower shall not be required to compensate a Lender pursuant to thisSection for any increased costs or reductions incurred more than 180 daysprior to the date that such Lender notifies the Borrower of the Change in Lawgiving rise to such increased costs or reductions and of such Lender’sintention to claim compensation therefor; providedfurther that,if the Change in Law giving rise to such increased costs or reductions isretroactive, then the 180-day period referred to above shall be extended toinclude the period of retroactive effect thereof.

###  

## SECTION 2.14.  Break Funding Payments.  In the event of (a) the payment of anyprincipal of any LIBOR Rate Loan other than on the last day of an InterestPeriod applicable thereto 

 

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## (including as a result of an Event of Default), (b) the conversionof any LIBOR Rate Loan other than on the last day of the Interest Periodapplicable thereto, (c) the failure to borrow, convert, continue or prepayany LIBOR Rate Loan on the date specified in any notice delivered pursuanthereto, or (d) the assignment of any LIBOR Rate Loan other than on thelast day of the Interest Period applicable thereto as a result of a request bythe Borrower pursuant to Section 2.17, then, in any such event, theBorrower shall compensate each Lender for the loss, cost and expenseattributable to such event.  In the caseof a LIBOR Rate Loan, such loss, cost or expense to any Lender shall be deemedto be the amount determined by such Lender to be the excess, if any, of (i) theamount of interest which would have accrued on the principal amount of suchLoan had such event not occurred, at the Adjusted LIBOR Rate that would havebeen applicable to such Loan, for the period from the date of such event to thelast day of the then current Interest Period therefor (or, in the case of afailure to borrow, convert or continue, for the period that would have been theInterest Period for such Loan), over (ii) the amount of interest whichwould accrue on such principal amount for such period at the interest ratewhich 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 theeurodollar market.  A certificate of anyLender setting forth any amount or amounts that such Lender is entitled toreceive pursuant to this Section and the basis therefor and setting forthin reasonable detail the manner in which such amount or amounts was determinedshall be delivered to the Borrower and shall be conclusive absent manifesterror.  The Borrower shall pay suchLender the amount shown as due on any such certificate within ten (10) daysafter receipt thereof.

##  

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

##  

### (b)  In addition, theLoan Parties shall pay any Other Taxes to the relevant Governmental Authorityin accordance with applicable law.

###  

### (c)  Each Loan Partyshall indemnify the Agent and each Lender, within ten (10) days afterwritten demand therefor, for the full amount of any Indemnified Taxes or OtherTaxes paid by the Agent or such Lender, as applicable, on or with respect toany payment by or on account of any obligation of such Loan Party hereunder(including Indemnified Taxes or Other Taxes imposed or asserted on orattributable to amounts payable under this Section) and any penalties, interestand reasonable expenses arising therefrom or with respect thereto, whether ornot such Indemnified Taxes or Other Taxes were correctly or legally imposed orasserted by the relevant Governmental Authority.  A certificate as to the amount of suchpayment or liability delivered to the Borrower by a Lender, or by the Agent onits own behalf or on behalf of a Lender, shall be conclusive absent manifesterror.

###  

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

 

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### (e)  Any Foreign Lenderthat is entitled to an exemption from or reduction of withholding tax under thelaw of the jurisdiction in which the Borrower is located, or any treaty towhich such jurisdiction is a party, with respect to payments under this Agreementshall deliver to the Borrower (with a copy to the Agent), at the time or timesprescribed by applicable law, such properly completed and executeddocumentation prescribed by applicable law or reasonably requested by theBorrower as will permit such payments to be made without withholding or at areduced rate.  In particular, on or priorto the date which is ten (10) Business Days after the Closing Date, eachForeign Lender shall deliver to the Borrower (with a copy to the Agent) twoduly signed, properly completed copies of either IRS Form W- 8BEN orany successor thereto (relating to such Foreign Lender and entitling it to anexemption from, or reduction of, United States withholding tax on all paymentsto be made to such Foreign Lender by the Borrower or any other Loan Partypursuant to this Agreement or any other Loan Document) or IRS Form W-8ECIor any successor thereto (relating to all payments to be made to such ForeignLender by the Borrower or any other Loan Party pursuant to this Agreement or anyother Loan Document) or such other evidence reasonably satisfactory to theBorrower and the Agent that such Foreign Lender is entitled to an exemptionfrom, or reduction of, United States withholding tax, including any exemptionpursuant to Section 871(h) or 881(c) of the Code, and in thecase of a Foreign Lender claiming such an exemption under Section 881(c) ofthe Code, a certificate that establishes in writing to the Borrower and theAgent that such Foreign Lender is not (i) a “bank” as defined in Section 881(c)(3)(A) ofthe Code, (ii) a 10-percent stockholder within the meaning of Section 871(h)(3)(B) ofthe Code, or (iii) a controlled foreign corporation related to theBorrower with the meaning of Section 864(d) of the Code.  Thereafter and from time to time, each suchForeign Lender shall (A) promptly submit to the Borrower (with a copy tothe Agent) such additional duly completed and signed copies of one or more ofsuch forms or certificates (or such successor forms or certificates as shall beadopted from time to time by the relevant United States taxing authorities) asmay then be available under then current United States Laws and regulations toavoid, or such evidence as is reasonably satisfactory to the Borrower and theAgent of any available exemption from, or reduction of, United Stateswithholding taxes in respect of all payments to be made to such Foreign Lenderby the Borrower or other Loan Party pursuant to this Agreement, or any otherLoan Document, in each case, (1) on or before the date that any such form,certificate or other evidence expires or becomes obsolete, (2) after theoccurrence of any event requiring a change in the most recent form, certificateor evidence previously delivered by it to the Borrower and (3) from timeto time thereafter if reasonably requested by the Borrower or the Agent, and (B) promptlynotify the Borrower and the Administrative Agent of any change in circumstanceswhich would modify or render invalid any claimed exemption or reduction.

###  

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

###  

### (g)  If the Agent or aLender determines, in good faith in its sole discretion, that it has received arefund of any Indemnified Taxes or OtherTaxes as to which it has been indemnified by a Loan Party or with respect towhich 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 ofindemnity payments made, or additional amounts paid, by such Loan Party underthis Section 2.15 with respect to the Taxes or Other Taxes giving rise tosuch refund), net of all out-of-pocket expenses of the Agent or such Lender (includingany Taxes imposed with respect to such refund) as is determined by the Agent orsuch Lender in good faith in its sole discretion, and without interest (other than any interest paid by the relevantGovernmental Authority with respect to such refund); provided, that suchLoan Party, upon the request of the Agent or such Lender, agrees to repay assoon as reasonably practicable the amount paid over to such Loan Party (plusany penalties, interest or other charges imposed by the relevant Governmental 

 

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### Authority) to the Agent or such Lender in theevent the Agent or such Lender is required to repay such refund to suchGovernmental Authority. This Section shall not be construed to require theAgent or any Lender to make available its tax returns (or any other informationrelating to its taxes which it deems confidential) to such Loan Party or anyother Person.

###  

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

###  

## SECTION 2.16.  Payments Generally; Allocation ofProceeds; Sharing of Set-offs.  (a) Unless otherwise specified, the Borrower shall make each payment required to bemade by it hereunder (whether of principal, interest or fees, or of amountspayable 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 availablefunds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretionof the Agent, be deemed to have been received on the next succeeding BusinessDay for purposes of calculating interest thereon.  All such payments shall be made to the Agentto the applicable account designated to the Borrower by the Agent, except thatpayments pursuant to Sections 2.13, 2.14, 2.15 and 9.03 shall be made directlyto the Persons entitled thereto.  The Agentshall distribute any such payments received by it, except as otherwiseprovided, for the account of any other Person to the appropriate recipientpromptly following receipt thereof.  Ifany payment hereunder shall be due on a day that is not a Business Day, thedate for payment shall be extended to the next succeeding Business Day, and, inthe case of any payment accruing interest, interest thereon shall be payablefor the period of such extension.  Allpayments hereunder shall be made in Dollars. Any payment required to be made by the Agent hereunder shall be deemedto have been made by the time required if the Agent shall, at or before suchtime, have taken the necessary steps to make such payment in accordance withthe regulations or operating procedures of the clearing or settlement systemused by the Agent to make such payment.

##  

### (b)  Subject in allrespects to the provisions of the Intercreditor Agreement, all proceeds ofCollateral received by the Agent after an Event of Default has occurred and iscontinuing and all or any portion of the Loans shall have been acceleratedhereunder pursuant to Article VII, shall upon election by the Agent or atthe direction of the Required Lenders be applied, first, to, ratably,pay any fees, indemnities, or expense reimbursements then due to the Agent fromthe Borrower (other than in connection with Hedging Obligations), second,ratably, to pay any fees or expense reimbursements then due to the Lenders fromthe 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 HedgingObligations, ratably, fifth, to the payment of any other SecuredObligation due to the Agent or any Lender by the Borrower, sixth, asprovided for under the Intercreditor Agreement, and seventh, to theBorrower or as the Borrower shall direct.

###  

### (c)  If any Lendershall, by exercising any right of set-off or counterclaim or otherwise, obtainpayment in respect of any principal of or interest on any of its Loansresulting in such Lender receiving payment of a greater proportion of theaggregate amount of its Loans and accrued interest thereon than the proportionreceived by any other Lender, then the Lender receiving such greater proportionshall purchase (for cash at face value) participations in the Loans of otherLenders at such time outstanding to the extent necessary so that the benefit ofall such payments shall be shared by the Lenders ratably in accordance with theaggregate amount of principal of and accrued interest on their respectiveLoans; provided that (i) if any such participations are purchased and allor any portion of the payment giving rise thereto is recovered,  such participations shall be rescinded andthe purchase price restored to the extent of such recovery, without interest,and (ii) the provisions of this paragraph shall not be construed to applyto any payment made by the Borrower pursuant to and in accordance with theexpress 

 

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### terms of this Agreement or any payment obtained by a Lender asconsideration for the assignment of or sale of a participation in any of itsLoans to any assignee or participant, other than to the Borrower or any subsidiaryor Affiliate thereof (as to which the provisions of this paragraph shallapply).  The Borrower consents to theforegoing and agrees, to the extent it may effectively do so under applicablelaw, that any Lender acquiring a participation pursuant to the foregoingarrangements may exercise against the Borrower rights of set-off andcounterclaim with respect to such participation as fully as if such Lender werea direct creditor of the Borrower in the amount of such participation.

###  

### (d)  Unless the Agentshall have received notice from the Borrower prior to the date on which anypayment is due to the Agent for the account of the Lenders that the Borrowerwill not make such payment, the Agent may assume that the Borrower has madesuch payment on such date in accordance herewith and may, in reliance upon suchassumption, distribute to the Lenders the amount due.  In such event, if the Borrower has not infact made such payment, then each of the Lenders severally agrees to repay tothe Agent forthwith on demand the amount so distributed to such Lender withinterest thereon, for each day from and including the date such amount isdistributed to it to but excluding the date of payment to the Agent, at thegreater of the Federal Funds Effective Rate and a rate determined by the Agentin accordance with banking industry rules on interbank compensation.

###  

### (e)  If any Lendershall fail to make any payment required to be made by it pursuant to Sections2.03(a), 2.16(c) or 9.03(c), then the Agent may, in its discretion(notwithstanding any contrary provision hereof), apply any amounts thereafterreceived by the Agent for the account of such Lender to satisfy such Lender’sobligations under such Sections until all such unsatisfied obligations arefully paid.

###  

## SECTION 2.17.  Mitigation Obligations; Replacement ofLenders.  (a)  If any Lenderrequests compensation under Section 2.13, or if the Borrower isrequired to pay any additional amount to any Lender or any Governmental Authorityfor the account of any Lender pursuant to Section 2.15, then such Lendershall use reasonable efforts to designate a different lending office forfunding or booking its Loans hereunder or to assign its rights and obligationshereunder to another of its offices, branches or affiliates, if, in thereasonable judgment of such Lender, such designation or assignment (i) wouldeliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, asapplicable, in the future and (ii) would not subject such Lender to anymaterial unreimbursed cost or expense and would not otherwise bedisadvantageous to such Lender in any material respect.  The Borrower hereby agrees to pay allreasonable costs and expenses incurred by any Lender in connection with anysuch designation or assignment.

##  

### (b)  If any Lenderrequests compensation under Section 2.13, or if the Borrower is requiredto pay any additional amount to any Lender or any Governmental Authority forthe 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, replacesuch Lender by requiring such Lender to assign and delegate (and such Lendershall be obligated to assign and delegate), without recourse (in accordancewith and subject to the restrictions contained in Section 9.04), all itsinterests, rights and obligations under this Agreement to an assignee thatshall assume such obligations (which assignee may be another Lender, if aLender accepts such assignment); provided that (i) the Borrower shall havereceived the prior written consent of the Agent, which consent shall notunreasonably be withheld, (ii) such Lender shall have received payment ofan amount equal to the outstanding principal of its Loans, accrued interestthereon, accrued fees and all other amounts payable to it hereunder, from theassignee (to the extent of such outstanding principal and accrued interest andfees) or the Borrower (in the case of all other amounts) and (iii) in thecase of any such assignment resulting from a claim for compensation under Section 2.13or payments required to be made pursuant to Section 2.15, such assignmentwill result in a reduction in such compensation or payments.  A Lender shall not be required to make anysuch assignment and delegation 

 

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### if, prior thereto, as a result of a waiver by such Lender or otherwise,the circumstances entitling the Borrower to require such assignment anddelegation cease to apply.

###  

## SECTION 2.18.  Illegality.  If any Lender reasonably determines that any Changein Law has made it unlawful, or that any Governmental Authority has assertedafter the Closing Date that it is unlawful, for such Lender or its applicablelending office to make or maintain any LIBOR Rate Loans, then, on noticethereof by such Lender to the Borrower through the Agent, any obligations ofsuch Lender to make or continue LIBOR Rate Loans or to convert ABR Borrowingsto LIBOR Rate Borrowings shall be suspended until such Lender notifies the Agentand the Borrower that the circumstances giving rise to such determination nolonger exist.  Upon receipt of suchnotice, 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 maylawfully continue to maintain such LIBOR Rate Borrowings to such day, orimmediately, if such Lender may not lawfully continue to maintain suchLoans.  Upon any such prepayment orconversion, the Borrower shall also pay accrued interest on the amount soprepaid or converted.  Each Lender agreesto designate a different lending office if such designation will avoid the needfor such notice and will not, in the determination of such Lender, otherwise bedisadvantageous 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 allLenders to prepay all Loans pursuant to a Change in Control Offer (as definedin paragraph (b) of this Section 2.19) at a purchase price incash equal to 101% of the principal amount thereof, plus accrued and unpaidinterest to the date of prepayment, in accordance with the terms contemplatedin this Section 2.19; and (ii) prepay all the Loans of all Lenders properlyaccepting such offer of prepayment in accordance with such Change of ControlOffer.

##  

### (b)  A “Change ofControl Offer” means a notice delivered to the Agent (which will promptlyfurnish such notice to the Lenders) stating:

###  

#### (i) that a Change ofControl has occurred and that such Lender has the right to require the Borrowerto prepay all or a portion of such Lender’s Loans at a purchase price in cashequal to 101% of the principal amount thereof, plus accrued and unpaid interestto the date of prepayment;

####  

#### (ii) the Change ofControl prepayment date (which shall be no earlier than thirty (30) days norlater than sixty (60) days from the date such notice is delivered);

####  

#### (iii) that any Loans asto which such offer is not properly accepted will remain outstanding andcontinue to accrue interest;

####  

#### (iv) unless theBorrower defaults in the payment of the purchase price of any Loans as to whichthe Change of Control Offer shall have been accepted, all Loans accepted forpayment pursuant to the Change of Control Offer will cease to accrue intereston the Change of Control prepayment date;

####  

#### (v) Lenders electing tohave any Loans purchased pursuant to a Change of Control Offer will be requiredto notify the Agent prior to the close of business on the third Business Daypreceding the Change of Control prepayment date; and

####  

#### (vi) that Lenders willbe entitled to withdraw their election to require the Borrower to prepay theirLoans; provided**that the Agent receives, not later thanthe close of business on the last day of the offer period, a notice settingforth the name of the Lender, the principal amount of Loans 

 

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#### tenderedfor prepayment, and a statement that such Lender is withdrawing its election tohave such Loans prepaid.

####  

### (c)  On the prepaymentdate, the Borrower shall prepay the Loans of all Lenders who accept the Changeof Control Offer at a purchase price in cash equal to 101% of the principalamount thereof, plus accrued and unpaid interest, if any, to the date ofprepayment.  If at the time of anyprepayment pursuant to this Section 2.19 there shall be outstandingBorrowings of different Types or LIBOR Rate Borrowings with different InterestPeriods, and if some but not all Lenders shall have accepted such Change ofControl Offer, then the aggregate amount of such prepayment shall be allocatedratably to each outstanding Borrowing that comprises the Loans of the acceptingLenders.  All prepayments of Loans underthis Section 2.19 shall be subject to Section 2.14.

###  

### (d)  Notwithstandingthe foregoing provisions of this Section, the Borrower shall be deemed to havemade a Change of Control Offer upon a Change of Control if a third party makesthe Change of Control Offer in the manner, at the times and otherwise incompliance with the requirements set forth in Section 2.19(b) applicableto a Change of Control Offer made by the Borrower and prepays all Loans as towhich offers for prepayment have been validly accepted and not withdrawn pursuantto the terms of such Change of Control Offer.

###  

### (e)  A Change ofControl Offer may be made in advance of a Change of Control, conditional uponsuch Change of Control, if a definitive agreement is in place for such Changeof 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’sreceipt of the Net Proceeds of any Asset Sale of Term Loan First LienCollateral, the Borrower or the applicable Restricted Subsidiary may, at itsoption, apply the Net Proceeds from such Asset Sale (i) (A) to makean offer to the Lenders to prepay Loans or (B) to make an offer topurchase, prepay or permanently reduce Other Pari Passu Lien Obligationssecured by a Permitted Collateral Lien; provided, however, thatin connection with any prepayment, repayment or purchase of Indebtednesspursuant to this clause (i), the Borrower or such Restricted Subsidiary shallpermanently retire such Indebtedness and, in the case of obligations underrevolving credit facilities or other similar Indebtedness, shallcorrespondingly permanently reduce commitments with respect thereto (other thanobligations owed to the Borrower or a Restricted Subsidiary); provided, further,however, that if the Borrower or any Restricted Subsidiary shall soreduce obligations under any such Other Pari Passu Lien Obligations, theBorrower or such Restricted Subsidiary will, equally and ratably, reduce theamount 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 belowfor an Asset Sale Offer) to all Lenders to prepay their Loans at 100% of the principalamount thereof, plusthe amount of accrued and unpaid interest on the principal amount of Loans tobe prepaid; or (ii) to acquire Additional Assets; provided, however,that such Additional Assets are concurrently with their acquisition added to theCollateral securing the Secured Obligations in accordance with the provisionsof Section 5.11 and the Collateral Documents, and provided, further,that to the extent such Additional Assets constitute the Capital Stock of anyPerson, the assets of such Person that may be used or useful in a SimilarBusiness are, in accordance with the provisions of Section 5.11 and the CollateralDocuments, concurrently with the acquisition added to the Collateral securingthe Secured Obligations.  Notwithstandingthe foregoing, if during such 450-day period the Borrower or a RestrictedSubsidiary enters into a definitive binding agreement committing it to applysuch Net Proceeds of any Asset Sale of Term Loan First Lien Collateral toacquire Additional Assets pursuant to clause (ii) of this paragraph(a), such 450-day period will be extended with respect to the amount of NetProceeds so committed until such Net Proceeds are required to be applied in 

 

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## accordance with such agreement (but such extension will in no event befor a period longer than 180 days) (or, if earlier, the date of termination ofsuch agreement).

##  

### (b)  Within450 days after any of the Borrower’s or any Restricted Subsidiary’sreceipt of the Net Proceeds of any Asset Sale (other than an Asset Sale of TermLoan First Lien Collateral), the Borrower or such Restricted Subsidiary may, atits option, apply the Net Proceeds from such Asset Sale (i) to permanentlyreduce (A) obligations under any Senior Indebtedness of the Borrower orany Subsidiary Guarantor and, in the case of obligations under revolving creditfacilities or other similar Indebtedness, to correspondingly permanently reducecommitments with respect thereto (other than obligations owed to the Borroweror a Restricted Subsidiary); providedthat if the Borrower or any Restricted Subsidiary shall so reduce obligationsunder any Senior Indebtedness (other than Senior Indebtedness under the SeniorSecured Asset-Based Revolving Credit Facility secured by the Revolving FacilityFirst Lien Collateral), the Borrower or such Subsidiary Guarantor will, equallyand ratably, reduce the amount of Indebtedness outstanding under this Agreementby, at its option, (I) prepaying Loans in accordance with Section 2.08or (II) making an offer (in accordance with the procedures set forth belowfor an Asset Sale Offer) to all Lenders to prepay their Loans at 100% of theprincipal amount thereof, plusthe amount of accrued and unpaid interest on the principal amount of Loans tobe prepaid, or (B) Indebtedness of a Restricted Subsidiary that is not a SubsidiaryGuarantor, other than Indebtedness owed to the Borrower or another RestrictedSubsidiary; or (ii) to an investment in (A) any one or morebusinesses; provided**that such investment in any business isin the form of the acquisition of Capital Stock and results in the Borrower orany Restricted Subsidiary owning an amount of the Capital Stock of suchbusiness such that it constitutes a Restricted Subsidiary, (B) properties,(C) capital expenditures or (D) acquisitions of other assets, that ineach of (A), (B), (C) and (D), are used or useful in a Similar Business orreplace the businesses, properties and assets that are the subject of suchAsset Sale.  Notwithstanding the foregoing,if during such 450-day period the Borrower or a Restricted Subsidiary entersinto a definitive binding agreement committing it to apply such Net Proceeds inaccordance with the requirements of clause (ii) of this paragraph (b),such 450-day period will be extended with respect to the amount of Net Proceedsso committed until such Net Proceeds are required to be applied in accordancewith such agreement (but such extension will in no event be for a period longerthan 180 days) (or, if earlier, until termination of such agreement).

###  

### (c)  Any Net Proceedsfrom an Asset Sale that are not invested or applied in accordance withparagraph (a) or (b) of this Section 2.20 within 450 daysfrom the date of the receipt of such Net Proceeds will be deemed to constitute “ExcessProceeds”.  When the aggregate amountof Excess Proceeds exceeds $45,000,000, the Borrower shall (i) make anoffer within ten (10) Business Days after the date that Excess Proceedsexceed $45,000,000 to all Lenders and, if required by the terms of any otherSenior Indebtedness, to the holders of such Senior Indebtedness (other thanwith respect to Hedging Obligations) in accordance with the procedures setforth below for prepayment or an Asset Sale Offer, to prepay the maximumaggregate principal amount of Loans and prepay or purchase the maximumprincipal 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 purchaseprice in cash equal to 100% of the principal amount thereof, plus accrued andunpaid interest to the date of prepayment or repurchase, in accordance with theterms contemplated in this Section 2.20; and (ii) prepay all theLoans of Lenders properly accepting such offer of prepayment in accordance withsuch Asset Sale Offer (subject to the proration provisions set forth inparagraph (f) of this Section 2.20).  The Borrower may satisfy the foregoingobligations with respect to any Net Proceeds from an Asset Sale by making anAsset Sale Offer with respect to such Net Proceeds prior to the expiration ofthe relevant 450 day period or with respect to Excess Proceeds of $45,000,000or less.

 

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### (d)  An “Asset SaleOffer” means a notice delivered to the Agent (which will promptly furnishsuch notice to the Lenders) stating:

###  

#### (i) that an Asset Sale Offeris being made pursuant to this Section 2.20 and that such Lender has theright 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) ofthis Section 2.20) at a purchase price in cash equal to 100% of theprincipal amount thereof, plus accrued and unpaid interest to the date ofprepayment; and

####  

#### (ii) the prepaymentdate (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 prepaymentdate, the Borrower (subject to the proration provisions set forth inparagraph (f) of this Section 2.20) shall prepay the Loans ofall Lenders who accept the Asset Sale Offer at a purchase price in cash equalto 100% of the principal amount thereof, plus accrued and unpaid interest tothe date of prepayment.  If at the timeof any prepayment pursuant to this Section 2.20 there shall be outstandingBorrowings of different Types or LIBOR Rate Borrowings with different InterestPeriods, and if some but not all Lenders shall have accepted such Asset SaleOffer, then the aggregate amount of such prepayment shall be allocated ratablyto each outstanding Borrowing that comprises the Loans of the acceptingLenders.  All prepayments of Loans underthis Section 2.20 shall be subject to Section 2.14.

###  

### (f)  To the extent thatthe aggregate amount of Loans and other Senior Indebtedness tendered pursuantto an Asset Sale Offer is less than the Excess Proceeds, the Borrower may useany remaining Excess Proceeds for general corporate purposes, subject to theterms of this Agreement.  If theaggregate principal amount of Loans and other Senior Indebtedness tenderedpursuant to an Asset Sale Offer exceeds the amount of Excess Proceeds, theBorrower shall select or cause to be selected the Loans and such other SeniorIndebtedness to be prepaid or purchased on a pro rata basis based on theprincipal amount (or accreted value) of the Loans and other Senior Indebtednesstendered.  Upon completion of any suchAsset Sale Offer, the amount of Excess Proceeds related to such Asset SaleOffer shall be reset at zero.

###  

### (g)  Pending the finalapplication of any Net Proceeds pursuant to this Section 2.20, theBorrower or the applicable Restricted Subsidiary may apply such Net Proceedstemporarily to reduce Indebtedness outstanding under a revolving creditfacility or otherwise invest such Net Proceeds in any manner not prohibitedhereunder.

###  

## SECTION 2.21.  Repricing Protection.  In the event that, prior to the firstanniversary of the Closing Date, any Lender receives a Repricing Prepayment (asdefined below), then, at the time thereof, the Borrower shall pay to suchLender a prepayment premium equal to 1.00% of the amount of such RepricingPrepayment.  As used herein, with respectto any Lender, a “Repricing Prepayment” is the amount of principal ofthe Loans of such Lender that is received by such Lender as a result of themandatory assignment of such Loans in the circumstances described in Section 9.02(e) followingthe failure of such Lender to consent to an amendment of this Agreement thatwould have the effect of reducing the Applicable Rate with respect to suchLoans.

 

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ARTICLE III

 

# Representations and Warranties

 

Each Loan Party representsand warrants to the Lenders that:

 

## SECTION 3.01.  Organization; Powers.  Each of the Loan Parties and each of itsSubsidiaries is duly organized, validly existing and in good standing under thelaws of the jurisdiction of its organization, has all requisite power andauthority to own its property and assets and to carry on its business as nowconducted and, except where the failure to do so, individually or in theaggregate, would not reasonably be expected to result in a Material AdverseEffect, is qualified to do business in, and is in good standing in, everyjurisdiction where such qualification is required.

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## SECTION 3.02.  Authorization; Enforceability.  The Transactions are within each applicableLoan Party’s corporate powers and have been duly authorized by all necessarycorporate and, if required, stockholder action of such Loan Party.  Each Loan Document to which each Loan Partyis a party have been duly executed and delivered by such Loan Party and is alegal, valid and binding obligation of such Loan Party, enforceable inaccordance with its terms, subject to applicable bankruptcy, insolvency orsimilar laws affecting creditors’ rights generally and to general principles ofequity.

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## SECTION 3.03.  Governmental Approvals; No Conflicts.  The Transactions (a) do not require anyconsent or approval of, registration or filing with, or any other action by,any Governmental Authority, except such as have been obtained or made and arein full force and effect, except for filings necessary to perfect Liens createdpursuant to the Loan Documents and the ABL Security Documents and except forfilings in connection with consummating the Merger and filings as may berequired under the Exchange Act and applicable stock exchange rules inconnection therewith, (b) will not violate any Requirement of Lawapplicable to any Loan Party or any of its Subsidiaries, (c) will notviolate or result in a default under any indenture, agreement or otherinstrument binding upon any Loan Party or any of its Subsidiaries or itsassets, or (except for the Merger Consideration and the 2008 Notes Call forRedemption) give rise to a right thereunder to require any payment to be madeby any Loan Party or any of its Subsidiaries, and (d) will not result inthe creation or imposition of any Lien on any asset of any Loan Party or any ofits Subsidiaries, except Liens created pursuant to the Loan Documents and the ABLSecurity Documents; except, in each case other than with respect to thecreation of Liens, to the extent that any such violation, default or right, orany 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.

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## SECTION 3.04.  Financial Condition; No Material AdverseChange.  (a)  The Borrower hasheretofore furnished to the Lenders its consolidated balance sheet andstatements of earnings, shareholders’ equity and cash flows (i) as of andfor the fiscal years ended July 31, 2004 and July 30, 2005, eachreported on by Deloitte & Touche LLP, independent public accountants,and (ii) to the extent possible in the exercise of the Borrower’scommercially reasonable efforts, as of and for each subsequent fiscal monthended at least thirty (30) days before the Closing Date, certified by its chieffinancial officer.  Such financialstatements present fairly, in all material respects, the financial position andresults of operations and cash flows of the Borrower and its consolidatedSubsidiaries 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 caseof the statements referred to in clause (ii) above.

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### (b)  The Borrower hasheretofore delivered to the Lenders its unaudited pro forma consolidatedbalance sheet and related pro forma statements of earnings, shareholder’sequity and cash flows as of July 30, 2005, prepared giving effect to theTransactions as if they had occurred, with respect to such balance sheet, onsuch date and, with respect to such other financial statements, on the firstday of 

 

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### the 12-month period ending on such date. Such pro forma financialstatements have been prepared in good faith by the Borrower, based on theassumptions used to prepare the pro forma financial information contained inthe Information Memorandum (which assumptions are believed by the Borrower on thedate hereof and on the Closing Date to be reasonable), are based on the bestinformation available to the Borrower as of the date of delivery thereof,accurately reflect all adjustments required to be made to give effect to theTransactions and present fairly on a pro forma basis the estimated consolidatedfinancial position of the Borrower and its consolidated Subsidiaries as of suchdate and for such period, assuming that the Transactions had actually occurredat such date or at the beginning of such period, as the case may be.

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

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## SECTION 3.05.  Properties.  (a)  As of the date of this Agreement, Schedule 3.05(a) setsforth the address of each parcel of real property (or each set of parcels thatcollectively comprise one operating property) that is owned or leased by eachLoan Party, together with a list of the lessors with respect to all such leasedproperty.  Schedule 3.05(a) alsoidentifies the principal place of business and chief executive office of eachLoan Party.  The books and records ofeach Loan Party, and all of their respective chattel paper and records ofAccounts, are maintained exclusively at such locations. There is no location atwhich any Loan Party has any Collateral (except for vehicles and inventory intransit in the ordinary course of business) other than those locationsidentified on Schedule 3.05(a).

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

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

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### (d)  As of the ClosingDate, none of Holdings, the Borrower or any Subsidiary has received any noticeof, nor has any knowledge of, any pending or contemplated condemnationproceeding affecting any of the Mortgaged Properties or any sale or dispositionthereof in lieu of condemnation.

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### (e)  To the Borrower’sknowledge, as of the Closing Date, none of the Borrower or any Subsidiary isobligated under any right of first refusal, option or other contractual rightto sell, assign or otherwise dispose of any Mortgaged Property or any interesttherein.

 

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### (f)  Copies ofcertificates of occupancy relating to each Mortgaged Property that the mortgagorhas in its possession have been delivered to the Agent as mortgagee withrespect to each Mortgaged Property.

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

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## 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 orGovernmental Authority pending against or, to the knowledge of any Loan Party,threatened against or affecting the Loan Parties or any of their Subsidiaries (i) asto which there is a reasonable possibility of an adverse determination andthat, if adversely determined, would reasonably be expected, individually or inthe aggregate, to result in a Material Adverse Effect or (ii) that involveany Loan Documents or the Transactions.

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

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### (c)  Since the date ofthis Agreement, there has been no change in the status of the Disclosed Mattersthat, individually or in the aggregate, has resulted in, or materiallyincreased the likelihood of, a Material Adverse Effect.

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## SECTION 3.07.  Compliance with Laws and Agreements; Licensesand Permits.  (a)  Each Loan Party is in compliance with all Requirements of Lawapplicable to it or its property and all indentures, agreements and otherinstruments 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 ina Material Adverse Effect.

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### (b)  Each Loan Partyand its Subsidiaries has obtained and holds in full force and effect, allfranchises, licenses, leases, permits, certificates, authorizations,qualifications, easements, rights of way and other rights and approvals whichare necessary or advisable for the operation of its businesses as presentlyconducted and as proposed to be conducted, except where the failure to have soobtained or hold or to be in force, individually or in the aggregate, would notreasonably be expected to result in a Material Adverse Effect.  No Loan Party or any of its Subsidiaries isin violation of the terms of any such franchise, license, lease, permit, certificate,authorization, qualification, easement, right of way, right or approval, exceptwhere any such violation, individually or in the aggregate, would notreasonably be expected to result in a Material Adverse Effect.

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

 

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

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

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

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### (b)  The Projections, proforma financial statements and estimates and information of a general economicnature prepared by or on behalf of the Borrower or any of its representativesand that have been made available to any Lenders or the Agent in connectionwith the Transactions on or before the date hereof (the “Other Information”)(i) have been prepared in good faith based upon assumptions believed bythe Borrower to be reasonable as of the date thereof (it being understood thatactual results may vary materially from the Other Information), and (ii) asof the Closing Date, have not been modified in any material respect by theBorrower.

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## SECTION 3.12.  Material Agreements.  No Loan Party is in default in any materialrespect in the performance, observance or fulfillment of any of its obligationscontained in (i) any material agreement to which it is a party or (ii) anyagreement or instrument to which it is a party evidencing or governingIndebtedness, 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 consummationof the Transactions to occur on the Closing Date, (i) the fair value ofthe assets of the Loan Parties on a consolidated basis, at a fair valuation,will exceed the debts and liabilities, direct, subordinated, contingent orotherwise, of the Loan Parties on a consolidated basis; (ii) the presentfair saleable value of the property of the Loan Parties on a consolidated basiswill be greater than the amount that will be required to pay the probableliability of the Loan Parties on a consolidated basis, on their debts and otherliabilities, direct, subordinated, contingent or otherwise, as such debts andother liabilities become absolute and matured; (iii) the Loan Parties on aconsolidated basis will be able to pay their debts and liabilities, direct,subordinated, contingent or otherwise, as such debts and liabilities becomeabsolute and matured; and (iv) the Loan Parties on a consolidated basiswill not have unreasonably small capital with which to conduct the 

 

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## businesses in which they are engaged as such businesses are nowconducted and are proposed to be conducted following the Closing Date.

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

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

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## SECTION 3.15.  Capitalization and Subsidiaries.  Schedule 3.15 sets forth (a) acorrect and complete list of the name and relationship to the Borrower of eachand all of the Borrower’s Subsidiaries, (b) a true and complete listing ofeach class of each of the Borrower’s authorized Equity Interests, of which allof such issued shares are validly issued, outstanding, fully paid andnon-assessable, and owned beneficially and of record by the Persons identifiedon Schedule 3.15, and (c) the type of entity of the Borrowerand each of its Subsidiaries.  All of theissued and outstanding Equity Interests of the Subsidiaries owned by any LoanParty have been (to the extent such concepts are relevant with respect to suchownership interests) duly authorized and issued and are fully paid andnon-assessable free and clear of all Liens (other than Liens created under theLoan Documents and the ABL Security Documents).

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## SECTION 3.16.  Security Interest in Collateral.  The provisions of this Agreement and theother Loan Documents create legal and valid Liens on all the Collateral infavor of the Agent, for the benefit of the Agent and the Lenders; and upon theproper filing of UCC financing statements required pursuant to paragraph (l) ofArticle IV and any Mortgages with respect to Mortgaged Properties, suchLiens constitute perfected and continuing Liens on the Collateral, securing theSecured Obligations, enforceable against the applicable Loan Party and allthird parties, and having priority over all other Liens on the Collateralexcept in the case of (a) Permitted Liens, to the extent any suchPermitted Liens would have priority over the Liens in favor of the Agent pursuantto any applicable law, (b) Liens perfected only by possession (includingpossession of any certificate of title) to the extent the Agent has notobtained or does not maintain possession of such Collateral and (c) subjectto and as provided for under the terms of the Intercreditor Agreement, theLiens granted under the ABL Security Documents.

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## SECTION 3.17.  Labor Disputes.  As of the Closing Date, except as,individually or in the aggregate, would not reasonably be expected to have aMaterial Adverse Effect: (a) there are no strikes, lockouts or slowdownsagainst any Loan Party pending or, to the knowledge of the Borrower,threatened, (b) the hours worked by and payments made to employees of theLoan Parties and the Subsidiaries have not been in violation of the Fair LaborStandards Act or any other applicable Federal, state, local or foreign lawdealing with such matters and (c) all payments due from any Loan Party orany Subsidiary, on account of wages and employee health and welfare insuranceand other benefits, have been paid or accrued as a liability on the books ofthe Loan Party or such Subsidiary to the extent required by GAAP.  Except (i) as, individually or in theaggregate, would not reasonably be expected to have a Material Adverse Effect or(ii) as set forth on Schedule 3.17, the consummation of theTransactions will not give rise to a right of termination or right ofrenegotiation on the part of any union under any collective bargainingagreement to which Holdings, the Borrower or any of the Subsidiaries (or anypredecessor) is a party or by which Holdings, the Borrower or any of theSubsidiaries (or any predecessor) is bound.

 

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## SECTION 3.18.  Federal Reserve Regulations.  (a)  On the Closing Date, none of theCollateral is Margin Stock.

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

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### (c)  No part of theproceeds of any Loan will be used, whether directly or indirectly, and whetherimmediately, incidentally or ultimately, (i) to purchase or carry MarginStock (other than pursuant to, or in connection with, the Merger) or to extendcredit to others for the purpose of purchasing or carrying Margin Stock or torefund indebtedness originally incurred for such purpose, or (ii) for anypurpose that entails a violation of, or that is inconsistent with, theprovisions of Regulation T, U or X.

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## SECTION 3.19.  Transaction Documents.  Holdings and the Borrower have delivered tothe Agent a complete and correct copy of the Merger Agreement (including allschedules, exhibits, amendments, supplements and modifications thereto).Neither Holdings, the Borrower nor any other Loan Party or, to the knowledge ofHoldings, the Borrower or each Loan Party, any other Person party thereto is indefault in the performance or compliance with any material provisionsthereof.  Except as would not reasonablybe expected, individually or in the aggregate, to have a Material AdverseEffect, all representations and warranties set forth in the Merger Agreementwere true and correct in all material respects at the time as of which suchrepresentations and warranties were made (or deemed made).

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

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ARTICLE IV

 

# Conditions

 

The obligations of theLenders to make Loans hereunder shall not become effective until the date onwhich each of the following conditions is satisfied (or waived in accordancewith Section 9.02):

 

##### (a) Credit Agreementand Loan Documents.  The Agent (orits counsel) shall have received (i) from each party hereto either (A) acounterpart of this Agreement signed on behalf of such party or (B) writtenevidence satisfactory to the Agent (which may include facsimile transmission ofa signed signature page of this Agreement) that such party has signed acounterpart of this Agreement and (ii) duly executed copies of the LoanDocuments and such other certificates, documents, instruments and agreements asthe Agent shall reasonably request in connection with the transactions contemplatedby this Agreement and the other Loan Documents, including any promissory notesrequested by a Lender pursuant to Section 2.07.

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##### (b) Legal Opinions.  The Agent shall have received, on behalf ofitself and the Lenders on the Closing Date, a favorable written opinion of (i) ClearyGottlieb Steen & Hamilton LLP, special counsel for Holdings and theBorrower, in form and substance reasonably satisfactory to the Agent and (ii) localor other counsel reasonably satisfactory to the Agent as specified on Schedule 4.01(b),in each case (A) dated the Closing Date, (B) addressed to the Agentand the Lenders and (C) in form and substance reasonably satisfactory tothe Agent and covering such other matters relating to the Loan Documents andthe Transactions as the Agent shall reasonably request.

 

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##### (c) FinancialStatements and Projections.  TheLenders shall have received (i) the financial statements and opinionreferred to in Section 3.04(a) and (b) and (ii)  projectionsin customary form for the Borrower and its Subsidiaries on a pro forma basisfor completion of the Transactions for the fiscal years 2006 through 2010.

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##### (d) ClosingCertificates; Certified Certificate of Incorporation; Good StandingCertificates.  The Agent shall havereceived (i) a certificate of each Loan Party, dated the Closing Date andexecuted by its Secretary or Assistant Secretary (or, in the case of NM NevadaTrust, its Clerk), which shall (A) certify the resolutions of its Board ofDirectors, members or other body authorizing the execution, delivery andperformance of the Loan Documents to which it is a party, (B) identify byname and title and bear the signatures of the Financial Officers and any otherofficers of such Loan Party authorized to sign the Loan Documents to which itis a party, and (C) contain appropriate attachments, including thecertificate or articles of incorporation or organization of each Loan Partycertified by the relevant authority of the jurisdiction of organization of suchLoan Party and a true and correct copy of its by-laws or operating, managementor partnership agreement, and (ii) a good standing certificate for eachLoan Party from its jurisdiction of organization.

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##### (e) No DefaultCertificate.  The Agent shall have receiveda certificate, signed by the chief financial officer of the Borrower, dated theClosing Date (i) stating that no Default has occurred and is continuing (otherthan any Default arising pursuant to clause (c) of Article VII withrespect to any of the representations enumerated clause (ii) below) and (ii) statingthat the representations and warranties contained in Article III (exceptthe representations contained in Sections 3.04, 3.05, 3.06, 3.07, 3.09,3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.17 and 3.19) are true and correct in allmaterial respects as of such date.

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##### (f) Fees. TheLenders and the Agent shall have received all fees required to be paid, and allexpenses for which invoices have been presented (including the reasonabledocumented fees and expenses of legal counsel), on or before the Closing Date.

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##### (g) Lien andJudgment Searches.  The Agent shallhave received the results of recent lien and judgment searches in each of thejurisdictions contemplated by the Perfection Certificate, and such search shallreveal no material judgments and no liens on any of the assets of the LoanParties except for Permitted Liens or Liens discharged on or prior to theClosing Date pursuant to a pay-off letter or other documentation reasonablysatisfactory to the Agent.

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##### (h) Pay-Off Letter.  The Agent shall have received a pay-offletter reasonably satisfactory to it in respect of the repayment of theExisting Credit Agreement from the proceeds of the Loans, confirming that allLiens upon any of the property of the Loan Parties constituting Collateralarising under the Existing Credit Agreement, if any, will be terminatedconcurrently with such payment and all letters of credit issued or guaranteedas part of such Indebtedness shall have been cash collateralized or supportedby a letter of credit issued under the Senior Secured Asset-Based RevolvingCredit Facility.

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##### (i) Solvency.  The Agent shall have received a customarycertificate from the chief financial officer of the Borrower certifying thatHoldings and its Subsidiaries, on a consolidated basis after giving effect tothe Transactions to occur on the Closing Date, are solvent (within the meaningof Section 3.13).

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##### (j) Equity Contribution.  The Equity Contribution shall have been madein full.

 

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##### (k) Pledged Stock; StockPowers; Pledged Notes.  The Agentshall have received (i) the certificates representing the shares ofCapital Stock pledged pursuant to the Security Agreement, together with anundated stock power for each such certificate executed in blank by a dulyauthorized officer of the pledgor thereof and (ii) each promissory note(if any) pledged to the Agent pursuant to the Security Agreement endorsed(without recourse) in blank (or accompanied by an executed transfer form inblank) by the pledgor thereof.

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##### (l) PerfectionCertificate; Filings, Registrations and Recordings.  The Agent shall have received a completedPerfection Certificate dated the Closing Date and signed by a ResponsibleOfficer of the Borrower, together with all attachments contemplatedthereby.  Each document (including anyUniform Commercial Code financing statement) required by the CollateralDocuments or under law or reasonably requested by the Agent to be filed,registered or recorded in order to create in favor of the Agent, for thebenefit of the Lenders, a perfected Lien on the Collateral described therein,prior and superior in right to any other Person (other than with respect toPermitted Liens), shall be in proper form for filing, registration orrecordation. The Agent, on behalf of the Lenders, shall have a securityinterest in the Collateral of the type and priority described in the CollateralDocuments (subject to Liens expressly permitted by Section 6.02 and,subject to the terms of the Intercreditor Agreement, the Liens granted underthe ABL Security Documents).

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##### (m) Mortgages, etc.  The Agent shall have received, with respectto each Mortgaged Property, each of the following, in form and substancereasonably satisfactory to the Agent:

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(i) a Mortgage on such property;

 

(ii) evidence that a counterpart of theMortgage has been recorded or delivered to the appropriate title insurancecompany subject to arrangements reasonably satisfactory to the Agent for recordingpromptly following the closing hereunder, in each case, in the place necessary,in the Agent’s reasonable judgment, to create a valid and enforceable firstpriority Lien (subject to the Intercreditor Agreement) in favor of the Agentfor the benefit of itself and the Lenders;

 

(iii) ALTA or other mortgagee’s title policy;

 

(iv) an opinion of counsel in the state inwhich such parcel of real property is located in form and substance and fromcounsel reasonably satisfactory to the Agent; and

 

(v) such other information, documentation, andcertifications as may be reasonably required by the Agent.

 

provided, that, (i) the amount of debt securedby each Mortgage in any State that imposes a mortgage tax shall be reasonablylimited to an amount less than the Commitments so as to avoid multiple mortgagetax assessments and (ii) notwithstanding the foregoing, the conditions setforth in this clause (m) shall be considered satisfied even if theBorrower does not deliver such items by the Closing Date, so long as theBorrower has used commercially reasonable efforts to obtain and deliver suchitems to Agent by the Closing Date.

 

##### (n) Closing Date MaterialAdverse Effect.  Since July 31,2004 and except as contemplated by the Merger Agreement, there shall not havebeen any event, condition, development or occurrence that, has had, or wouldreasonably be expected to have, individually or in the aggregate, any change,circumstance, effect, event or occurrence that would be 

 

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##### materiallyadverse to the assets, liabilities, business, financial condition or results ofoperations of Neiman Marcus and its subsidiaries taken as a whole, other thanany change or effect resulting from (i) changes in general economicconditions, (ii) general changes or developments in the industries inwhich Neiman Marcus and its subsidiaries operate, (iii) the announcementof the Merger Agreement and the transactions contemplated thereby, includingany termination of, reduction in or similar negative impact on relationships,contractual or otherwise, with any customers, suppliers, distributors, partnersor employees of Neiman Marcus and its subsidiaries to the extent due to theannouncement and performance of the Merger Agreement or the identity of theparties to the Merger Agreement, or the performance of the Merger Agreement andthe transactions contemplated thereby, including compliance with the covenantsset forth therein, (iv) any actions required under the Merger Agreement toobtain any approval or authorization under applicable antitrust or competitionlaws for the consummation of the merger contemplated by the Merger Agreement or(v) changes in any tax laws or regulations or applicable accountingregulations or principles, unless, in the case of the foregoing clauses (i) and(ii), such changes referred to therein have a disproportionate effect on NeimanMarcus and its subsidiaries taken as a whole relative to other participants inthe industries in which Neiman Marcus and its subsidiaries operate.  For the purposes of this clause (n), “industriesin which Neiman Marcus and its subsidiaries operate” means the luxury retailsegments of the apparel, accessories, jewelry, beauty and decorative homeproducts industries.

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##### (o) Other Indebtedness.  The 2008 Notes Call for Redemption and theExisting Bank Debt Refinancing shall have been effected.  After giving effect to the Transactions andthe other transactions contemplated hereby, Holdings, the Borrower and theSubsidiaries shall not have any outstanding Indebtedness or preferred stockother than (a) the Obligations, (b) Indebtedness under the SeniorSecured Asset-Based Revolving Credit Facility, (c) the New Notes, (d) the2028 Debentures, (e) preferred Equity Interests issued in connection withthe Equity Contribution, if any, (f) the 2008 Notes and (g) Indebtedness set forth on Schedule 6.01.

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##### (p) Insurance.  The Agent shall have received evidence ofinsurance coverage in form, scope, and substance reasonably satisfactory to theAgent and otherwise in compliance with the terms of Section 5.10 and Section 4.11of the Security Agreement.

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##### (q) Merger.  The Merger shall be consummated substantiallysimultaneously with the making of the Loans, in accordance with the MergerAgreement (which shall not have been amended or modified prior to the ClosingDate in a manner adverse to the Lenders in any material respect without theprior written consent of the Joint Lead Arrangers).

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##### (r) Other Financing.  The Borrower shall have (i) receivedgross cash proceeds of not less than $1,200,000,000 from the issuance of theNew Notes and (ii) obtained the Senior Secured Asset-Based RevolvingCredit Facility.  The terms andconditions of the New Notes and the Senior Secured Asset-Based Revolving CreditFacility shall be reasonably satisfactory to the Agent.

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##### (s) IntercreditorAgreement.  The IntercreditorAgreement shall have been duly executed and delivered by each party thereto,and shall be in full force and effect.

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##### (t) PATRIOT Act.  The Agent shall have received alldocumentation and other information reasonably requested by it that is requiredby regulatory authorities under applicable “know your customer” and anti-moneylaundering rules and regulations, including the USA PATRIOT Act.

 

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The Agent shall notify theBorrower and the Lenders of the Closing Date, and such notice shall beconclusive and binding.  Notwithstandingthe foregoing, the obligations of the Lenders to make Loans hereunder shall notbecome effective unless each of the foregoing conditions is satisfied (orwaived pursuant to Section 9.02) at or prior to 5:00 p.m.,New York City time, on the Termination Date (as defined in the MergerAgreement) (and, in the event such conditions are not so satisfied or waived,the Commitments shall terminate at such time).

 

ARTICLE V

 

# Affirmative Covenants

 

Until the Commitments haveexpired or been terminated and the principal of and interest on each Loan andall fees payable hereunder shall have been paid in full, each Loan Party executingthis Agreement covenants and agrees, jointly and severally with all of the LoanParties, with the Lenders that:

 

## SECTION 5.01.  Financial Statements and OtherInformation.  The Borrower willfurnish to the Agent (which will promptly furnish such information to theLenders):

##  

##### (a) within ninety(90) days after the end of each fiscal year of the Borrower, its auditedconsolidated balance sheet and related statements of earnings, shareholders’equity and cash flows as of the end of and for such year, setting forth in eachcase in comparative form the figures for the previous fiscal year, all reportedon by Deloitte & Touche LLP or other independent public accountants ofrecognized national standing and reasonably acceptable to the Agent (without a “goingconcern” or like qualification or exception or exception as to the scope ofsuch audit) to the effect that such consolidated financial statements presentfairly, in all material respects, the financial condition and results ofoperations of the Borrower and its consolidated Subsidiaries on a consolidatedbasis in accordance with GAAP;

#####  

##### (b) within forty-five(45) days after the end of each of the first three fiscal quarters of eachfiscal year of the Borrower, its consolidated balance sheet and relatedstatements of earnings, shareholders’ equity and cash flows as of the end ofand for such fiscal quarter and the then elapsed portion of the fiscal year,setting forth in each case in comparative form the figures for thecorresponding period or periods of (or, in the case of the balance sheet, as ofthe end of) the previous fiscal year, all certified by one of its FinancialOfficers as presenting fairly, in all material respects, the financialcondition and results of operations of the Borrower and its consolidatedSubsidiaries on a consolidated basis in accordance with GAAP, subject to normalyear-end audit adjustments and the absence of footnotes;

#####  

##### (c) concurrently withany delivery of financial statements under clause (a) or (b) above, acertificate of a Financial Officer of the Borrower in substantially the form ofExhibit C (i) certifying that no Event of Default or Default hasoccurred and, if an Event of Default or Default has occurred, specifying thedetails thereof and any action taken or proposed to be taken with respectthereto and (ii) setting forth, in the case of the financial statementsdelivered under clause (a), (x) the Borrower’s calculation of Excess CashFlow for such fiscal year and (y) a list of names of all ImmaterialSubsidiaries (if any), that each Subsidiary set forth on such list individuallyqualifies as an Immaterial Subsidiary and that all Domestic Subsidiaries listedas Immaterial Subsidiaries in the aggregate comprise less than 5% of Total Assetsof the Borrower and the Subsidiaries at the end of the period to which suchfinancial statements relate and 

 

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##### represented (on a contribution basis) less than 5% of EBITDA for theperiod to which such financial statements relate;

#####  

##### (d) concurrently withany delivery of financial statements under clause (a) above, a certificateof the accounting firm that reported on such financial statements statingwhether they obtained knowledge during the course of their examination of suchfinancial statements of any Default or Event of Default (which certificate maybe limited to the extent required by accounting rules or guidelines);

#####  

##### (e) concurrently withany delivery of consolidated financial statements under clause (a) or (b) above,the related unaudited consolidating financial statements reflecting theadjustments 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 ofthe Borrower and its Subsidiaries for such fiscal year (including a projectedconsolidated balance sheet and the related consolidated statements of projectedcash flows and projected income as of the end of and for such fiscal year),including a summary of the underlying material assumptions with respect thereto(collectively, the “Budget”), and, as soon as available, significantrevisions, if any, of such Budget, which Budget or revisions thereto shall ineach case be accompanied by the statement of a Financial Officer of theBorrower to the effect that, to the best of his knowledge, the Budget is areasonable estimate for the period covered thereby;

#####  

##### (g) as soon aspracticable upon the reasonable request of the Agent, deliver an updatedPerfection Certificate (or, to the extent such request relates to specifiedinformation contained in the Perfection Certificate, such information)reflecting all changes since the date of the information most recently receivedpursuant to this clause (g) or Section 5.11;

#####  

##### (h) promptly after thesame become publicly available, copies of all periodic and other reports, proxystatements and other materials publicly filed by the Borrower or any Subsidiarywith the SEC, or with any national securities exchange, or, after an initialpublic offering of shares of Capital Stock of the Borrower, distributed by theBorrower to its shareholders generally, as the case may be;

#####  

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

#####  

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

#####  

##### (k) as promptly asreasonably practicable from time to time following the Agent’s requesttherefor, such other information regarding the operations, business affairs andfinancial condition of Holdings, the Borrower or any Subsidiary, or compliancewith the terms of any Loan Document, as the Agent may reasonably request (onbehalf of itself or any Lender).

#####  

Notwithstanding theforegoing, the obligations in clauses (a) and (b) of this Section 5.01may be satisfied with respect to financial information of the Borrower and itsSubsidiaries by furnishing 

 

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(A) the applicablefinancial statements of Holdings (or any direct or indirect parent of Holdings)or (B) the Borrower’s or Holdings’ (or any direct or indirect parentthereof), as applicable, Form 10-K or 10-Q, as applicable, filed with theSEC; provided that, withrespect to each of clauses (A) and (B), (i) to the extent suchinformation relates to Holdings (or a parent thereof), such information isaccompanied by consolidating information that explains in reasonable detail thedifferences between the information relating to Holdings (or such parent), onthe one hand, and the information relating to the Borrower and its Subsidiarieson a standalone basis, on the other hand and (ii) to the extent suchinformation is in lieu of information required to be provided underclause (a) of this Section 5.01, such materials are accompaniedby a report and opinion of Deloitte & Touche LLP or other independentpublic accountants of recognized national standing and reasonably acceptable tothe Agent, which report and opinion shall be prepared in accordance withgenerally accepted auditing standards and shall not be subject to any “goingconcern” or like qualification or exception or any qualification or exceptionas to the scope of such audit.

 

Documents required to bedelivered pursuant to clauses (a), (b) or (h) of this Section 5.01may be delivered electronically and if so delivered, shall be deemed to havebeen 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 thewebsite address listed on Schedule 9.01; or (ii) on which suchdocuments are posted on the Borrower’s behalf on IntraLinks/IntraAgency oranother relevant website, if any, to which each Lender and the Agent haveaccess (whether a commercial, third-party website or whether sponsored by theAgent); provided that:  (i) uponwritten request by the Agent, the Borrower shall deliver paper copies of suchdocuments to the Agent for further distribution to each Lender until a writtenrequest to cease delivering paper copies is given by the Agent and (ii) theBorrower shall notify (which may be by facsimile or electronic mail) the Agentof the posting of any such documents and provide to the Agent by electronicmail electronic versions (i.e., soft copies) of such documents.  Notwithstanding anything contained herein, inevery instance the Borrower shall be required to provide paper copies of thecompliance certificates required by clause (c) of this Section 5.01to the Agent.

 

The financial statementsrequired to be delivered pursuant to clause (b) of this Section 5.01with respect to the first fiscal quarter after the Closing Date shall not berequired to contain all purchase accounting adjustments relating to theTransactions to the extent it is not practicable to include any suchadjustments in such financial statements.

 

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

##  

##### (a) the occurrence ofany Event of Default or Default;

#####  

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

#####  

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

#####  

##### (d) any and all defaultnotices received under or with respect to any leased location or publicwarehouse where any material Collateral is located;

 

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

#####  

##### (f) any otherdevelopment that results in, or would reasonably be expected to result in, aMaterial Adverse Effect.

#####  

Each notice delivered underthis Section 5.02 shall be accompanied by a statement of a ResponsibleOfficer of the Borrower setting forth the details of the event or developmentrequiring such notice and any action taken or proposed to be taken with respectthereto.

 

## SECTION 5.03.  Existence; Conduct of Business.  Each Loan Party will, and will cause eachSubsidiary to, do or cause to be done all things reasonably necessary topreserve, renew and keep in full force and effect its legal existence and therights, qualifications, licenses, permits, franchises, governmentalauthorizations, intellectual property rights, licenses and permits (except assuch would otherwise reasonably expire, be abandoned or permitted to lapse inthe ordinary course of business), necessary or desirable in the normal conductof its business, and maintain all requisite authority to conduct its businessin each jurisdiction in which its business is conducted, except (i) otherthan with respect to Holdings’ or the Borrower’s existence, to the extent suchfailure to do so would not reasonably be expected to have a Material AdverseEffect or (ii) pursuant to a transaction permitted by Section 6.03.

##  

## SECTION 5.04.  Payment of Obligations.  Each Loan Party will, and will cause eachSubsidiary to, pay or discharge all material Tax liabilities, before the sameshall become delinquent or in default, except where (a) the validity oramount thereof is being contested in good faith by appropriate proceedings, (b) suchLoan Party or such Subsidiary has set aside on its books adequate reserves withrespect thereto in accordance with GAAP and (c) the failure to makepayment pending such contest would not reasonably be expected to result in aMaterial Adverse Effect.

##  

## SECTION 5.05.  Maintenance of Properties.  Each Loan Party will, and will cause eachSubsidiary to (a) at all times maintain and preserve all material propertynecessary to the normal conduct of its business in good repair, working orderand condition, ordinary wear and tear excepted and casualty or condemnationexcepted and (b) make, or cause to be made, all needful and properrepairs, renewals, additions, improvements and replacements thereto asnecessary in accordance with prudent industry practice in order that thebusiness carried on in connection therewith, if any, may be properly conductedat all times, except, in each case, where the failure to do so, individually orin the aggregate, would not reasonably be expected to result in a MaterialAdverse Effect.

##  

## SECTION 5.06.  Books and Records; Inspection Rights.  Each Loan Party will, and will cause eachSubsidiary to, (i) keep proper books of record and account in accordancewith GAAP in which full, true and correct entries are made of all dealings andtransactions in relation to its business and activities and (ii) permitany representatives designated by the Agent (including employees of the Agentor any consultants, accountants, lawyers and appraisers retained by the Agent),upon reasonable prior notice, to visit and inspect its properties, to examineand make extracts from its books and records, including environmentalassessment reports and Phase I or Phase II studies, and to discuss its affairs,finances and condition with its officers and independent accountants, all atsuch reasonable times during normal business hours and as often as reasonablyrequested.

##  

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

 

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

##  

## SECTION 5.09.  Use of Proceeds.  The proceeds of the Loans will be used onlyfor the purposes specified in the introductory statement to thisAgreement.  No part of the proceeds ofany Loan will be used, whether directly or indirectly, for any purpose thatwould entail a violation of Regulations T, U or X.

##  

## SECTION 5.10.  Insurance.  Each Loan Party will, and will cause eachSubsidiary to, maintain, with financially sound and reputable insurancecompanies (a) insurance in such amounts and against such risks, as arecustomarily maintained by similarly situated companies engaged in the same orsimilar businesses operating in the same or similar locations (after givingeffect to any self-insurance reasonable and customary for similarly situatedcompanies) and (b) all insurance required pursuant to the CollateralDocuments (and shall cause the Agent to be listed as a loss payee (togetherwith any other loss payee in accordance with the Intercreditor Agreement) onproperty and casualty policies covering loss or damage to Collateral and as anadditional insured on liability policies). The Borrower will furnish to the Agent, upon request, information inreasonable detail as to the insurance so maintained.

##  

## SECTION 5.11.  Additional Collateral; Further Assurances.  (a)  Subject to applicable law, theBorrower and each Subsidiary that is a Loan Party shall cause (i) each ofits Domestic Subsidiaries (other than any Immaterial Subsidiary (except asotherwise provided in paragraph (e) of this Section 5.11) orUnrestricted Subsidiary) formed or acquired after the date of this Agreement inaccordance with the terms of this Agreement that is required to become aSubsidiary Guarantor pursuant to Section 6.08 and (ii) any such DomesticSubsidiary that was an Immaterial Subsidiary but, as of the end of the mostrecently ended fiscal quarter of the Borrower has ceased to qualify as anImmaterial Subsidiary, to become a Loan Party as promptly thereafter asreasonably practicable by executing a Joinder Agreement in substantially theform set forth as Exhibit D hereto (the “Joinder Agreement”).Upon execution and delivery thereof, each such Person (i) shallautomatically become a Loan Guarantor hereunder and thereupon shall have all ofthe rights, benefits, duties, and obligations in such capacity under the LoanDocuments and (ii) will simultaneously therewith or as soon as practicablethereafter grant Liens to the Agent, for the benefit of the Agent and theLenders and each other Secured Party at such time party to or benefiting fromthe Intercreditor Agreement or the Security Agreement (including, ifapplicable, the holders of the 2028 Debentures or the 2008 Notes), in each caseto the extent required by the terms thereof, in any property (subject to thelimitations with respect to Equity Interests set forth in paragraph (b) ofthis Section 5.11, the limitations with respect to real property set forthin paragraph (f) of this Section 5.11 and any other limitationsset forth in the Security Agreement) of such Loan Party which constitutesCollateral, on such terms as may be required pursuant to the terms of the CollateralDocuments and in such priority as may be required pursuant to the terms of the IntercreditorAgreement.

##  

### (b)  The Borrower andeach Subsidiary that is a Loan Party will cause (i) 100% of the issued andoutstanding Equity Interests of each of its Domestic Subsidiaries, other thanany Domestic Subsidiary taxed as a partnership for federal income tax purposesthat holds Capital Stock of a Foreign Subsidiary whose Equity Interests arepledged pursuant to clause (ii) below, and (ii) 65% of the issued andoutstanding Equity Interests entitled to vote (within the meaning of Treas.Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding EquityInterests 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 Subsidiarythat is a Loan Party to be subject at all times to a first priority perfectedLien in favor of the Agent pursuant to the terms and conditions of the LoanDocuments or other security documents as the Agent shall reasonably request; provided,however this paragraph (b) shall not require the Borrower or 

 

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### any Subsidiary to grant a security interest in (i) any EquityInterests of a Subsidiary to the extent a pledge of such Equity Interests infavor of the Agent or to secure any debt securities of the Borrower or anySubsidiary that would be entitled to such a security interest would requireseparate financial statements of a Subsidiary to be filed with the SEC (or anyother government agency) under Rule 3-10 or Rule 3-16 of Regulation S-Xunder the Securities Act (or any successor thereto) or any other law, rule orregulation or (ii) the Equity Interests of any Unrestricted Subsidiary.

###  

### (c)  Without limitingthe foregoing, each Loan Party will, and will cause each Subsidiary that is aLoan Party to, execute and deliver, or cause to be executed and delivered, tothe Agent such documents, agreements and instruments, and will take or cause tobe taken such further actions (including the filing and recording of financingstatements, fixture filings, mortgages, deeds of trust and other documents andsuch other actions or deliveries of the type required by Article IV, asapplicable (including the delivery of the items contemplated by paragraph (m)thereof to the extent the Borrower has been unable to deliver such items by theClosing Date after having used its commercially reasonable efforts to obtainand deliver such items by the Closing Date)), which may be required by law orwhich the Agent may, from time to time, reasonably request to carry out theterms and conditions of this Agreement and the other Loan Documents and toensure perfection and priority of the Liens created or intended to be createdby the Collateral Documents, all at the expense of the Loan Parties.

###  

### (d)  Subject to thelimitations set forth or referred to in this Section 5.11, if any materialassets (including any real property or improvements thereto or any interesttherein) are acquired by the Borrower or any Subsidiary that is a Loan Partyafter the Closing Date (other than assets constituting Collateral under theSecurity Agreement that become subject to the Lien in favor of the Agent uponacquisition thereof), the Borrower will notify the Agent and the Lendersthereof, and, if requested by the Agent or the Required Lenders, the Borrowerwill cause such assets to be subjected to a Lien securing the SecuredObligations and will take, and cause the Loan Parties that are Subsidiaries totake, such actions as shall be necessary or reasonably requested by the Agentto grant and perfect such Liens, including actions described in paragraph (c) ofthis Section, all at the expense of the Loan Parties.

###  

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

###  

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

###  

### (g)  Notwithstandinganything to the contrary contained herein, the Loan Parties shall not berequired to include as Collateral any Excluded Assets (as defined in theSecurity Agreement).

 

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## SECTION 5.12.  Maintenance of Corporate Separateness.  Each Loan Party will, and will cause eachSubsidiary to, satisfy customary corporate or limited liability companyformalities, including the maintenance of corporate and business records.

##  

## SECTION 5.13.  2008 Notes Redemption.  Within forty (40) days after the ClosingDate, the Borrower shall deposit with the trustee under the indenture governingthe 2008 Notes sufficient funds for the full satisfaction and discharge of theentire outstanding principal amount of the 2008 Notes.

##  

ARTICLE VI

 

# Negative Covenants

 

Until the Commitments haveexpired or terminated and the principal of and interest on each Loan and allfees, expenses and other amounts payable under any Loan Document have been paidin full, the Loan Parties covenant and agree, jointly and severally, with theLenders that:

 

## SECTION 6.01.  Limitation on Incurrence of Indebtednessand Issuance of Disqualified Stock and Preferred Stock.  (a)  The Borrower will not, and will notpermit 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 theBorrower will not issue any shares of Disqualified Stock and will not permitany Restricted Subsidiary to issue any shares of Disqualified Stock orPreferred Stock; provided**thatthe Borrower may incur Indebtedness (including Acquired Indebtedness) or issueshares of Disqualified Stock, and any Restricted Subsidiary may incur Indebtedness(including Acquired Indebtedness), issue shares of Disqualified Stock or issueshares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidatedbasis for the Borrower’s and its Restricted Subsidiaries’ most recently endedfour full fiscal quarters for which internal financial statements are availableimmediately preceding the date on which such additional Indebtedness isincurred or such Disqualified Stock or Preferred Stock is issued would havebeen at least 2.00 to 1.00, determined on a pro forma basis (including a proforma application of the net proceeds therefrom), as if the additionalIndebtedness had been incurred, or the Disqualified Stock or Preferred Stockhad been issued, as the case may be, and the application of the proceedstherefrom had occurred at the beginning of such four-quarter period; providedthat the amount of Indebtedness (including Acquired Indebtedness), DisqualifiedStock and Preferred Stock that may be incurred or issued, as applicable,pursuant to the foregoing by Restricted Subsidiaries that are not SubsidiaryGuarantors shall not exceed $100,000,000 at any one time outstanding;

##  

### (b)  The limitationsset forth in paragraph (a) of this Section 6.01 shall not apply toany of the following items (collectively, “Permitted Debt”):

###  

#### (i) Indebtednessincurred pursuant to the Senior Secured Asset-Based Revolving Credit Facilityby the Borrower or any Restricted Subsidiary; provided that immediatelyafter giving effect to any such incurrence, the aggregate principal amount ofall Indebtedness incurred under this clause (i) and then outstandingdoes 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 suchIndebtedness made pursuant to Section 2.20(b)(i)(A) and (B) thelesser of (1) 80% of the value of the eligible inventory of the Borrowerand 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 ofthe Borrower and its Restricted Subsidiaries;

 

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

####  

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

####  

#### (iv) the incurrence bythe Borrower and any Subsidiary Guarantor of Indebtedness represented by theSenior Subordinated Notes issued on the Closing Date (including any guaranteesthereof) and the exchange notes and related exchange guarantees to be issued inexchange for the Senior Subordinated Notes pursuant to the Registration RightsAgreement (other than any Additional Senior Subordinated Notes (as defined inthe Senior Subordinated Notes Indenture));

####  

#### (v) Indebtednessexisting on the date hereof and set forth in Schedule 6.01;

####  

#### (vi) Indebtedness(including Capitalized Lease Obligations), Disqualified Stock and PreferredStock incurred by the Borrower or any of the Restricted Subsidiaries, tofinance the 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 RestrictedSubsidiary as of the Closing Date or acquired by the Borrower or any RestrictedSubsidiary after the Closing Date in exchange for, or with the proceeds of thesale of, such assets owned by the Borrower or any Restricted Subsidiary as ofthe Closing Date), repairs, additions or improvement of property (real orpersonal), equipment or other fixed or capital assets that are used or usefulin a Similar Business, whether through the direct purchase of assets or theCapital Stock of any Person owning such assets; provided that theaggregate amount of Indebtedness, Disqualified Stock and Preferred Stockincurred pursuant to this clause (vi) does not exceed $250,000,000 atany one time outstanding;

####  

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

####  

#### (viii) Indebtednessarising from agreements of the Borrower or a Restricted Subsidiary providingfor indemnification, adjustment of purchase price or similar obligations, ineach case, incurred or assumed in connection with the disposition of anybusiness, assets or a subsidiary, other than guarantees of Indebtednessincurred by any Person acquiring all or any portion of such business, assets orsubsidiary for the purpose of financing such acquisition; provided**that (A) such Indebtedness is not reflected on thebalance sheet of the Borrower or any Restricted Subsidiary (contingentobligations referred to in a footnote to financial statements and not 

 

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#### otherwisereflected on the balance sheet shall not be deemed to be reflected on suchbalance sheet for purposes of this clause (A)) and (B) the maximumassumable liability in respect of all such Indebtedness shall at no time exceedthe gross proceeds including noncash proceeds (the fair market value of suchnoncash proceeds being measured at the time received and without giving effectto any subsequent changes in value) actually received by the Borrower and the RestrictedSubsidiaries in connection with such disposition;

####  

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

####  

#### (x) Indebtedness of a RestrictedSubsidiary to the Borrower or another Restricted Subsidiary; provided**that if a Subsidiary Guarantor incurs such Indebtedness toa Restricted Subsidiary that is not a Subsidiary Guarantor such Indebtedness issubordinated in right of payment to the obligations of such Subsidiary Guarantorunder its Loan Guaranty; provided,**further,that any subsequent issuance or transfer of Capital Stock or any other eventthat results in any such Restricted Subsidiary ceasing to be a RestrictedSubsidiary or any subsequent transfer of any such Indebtedness (except to the Borroweror another Restricted Subsidiary) shall be deemed, in each case, to be anincurrence of such Indebtedness;

####  

#### (xi) shares of PreferredStock of a Restricted Subsidiary issued to the Borrower or another RestrictedSubsidiary; provided**that anysubsequent issuance or transfer of any Capital Stock or any other event whichresults in any such Restricted Subsidiary ceasing to be a Restricted Subsidiaryor any other subsequent transfer of any such shares of Preferred Stock (exceptto the Borrower or another Restricted Subsidiary) shall be deemed, in eachcase, to be an issuance of such shares of Preferred Stock;

####  

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

####  

#### (xiii) obligations inrespect of performance, bid, appeal and surety bonds and completion guaranteesand similar obligations provided by the Borrower or any Restricted Subsidiaryin the ordinary course of business;

####  

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

####  

#### (xv) the incurrence by theBorrower or any Restricted Subsidiary of Indebtedness, Disqualified Stock orPreferred Stock that serves to extend, replace, refund, refinance, renew ordefease****any Indebtedness,Disqualified Stock or Preferred Stock incurred as permitted under 

 

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#### 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) orany Indebtedness, Disqualified Stock or Preferred Stock issued to so extend,replace, refund, refinance, renew or defease such Indebtedness, DisqualifiedStock or Preferred Stock including additional Indebtedness, Disqualified Stockor Preferred Stock incurred to pay premiums and fees in connection therewith(the “Refinancing Indebtedness”) prior to its respective maturity;**provided, however, that such RefinancingIndebtedness (A) has a Weighted Average Life to Maturity at the time suchRefinancing Indebtedness is incurred which is not less than the remainingWeighted Average Life to Maturity of the Indebtedness, Disqualified Stock orPreferred Stock being extended, replaced, refunded, refinanced, renewed ordefeased (provided that this clause (A) shall not apply to anyrefunding or refinancing of any Senior Indebtedness outstanding under the 2028Debentures), (B) to the extent such Refinancing Indebtedness extends,replaces, refunds, refinances, renews or defeases (1) Indebtednesssubordinated to the Obligations or the Loan Guaranty of any SubsidiaryGuarantor, such Refinancing Indebtedness is subordinated to the Obligations orsuch Loan Guaranty at least to the same extent as the Indebtedness beingextended, replaced, refunded, refinanced, renewed or defeased or (2) DisqualifiedStock or Preferred Stock, such Refinancing Indebtedness must be DisqualifiedStock or Preferred Stock, respectively, and (C) shall not include (1) Indebtedness,Disqualified Stock or Preferred Stock of a subsidiary that is not a SubsidiaryGuarantor that refinances Indebtedness, Disqualified Stock or Preferred Stockof the Borrower, (2) Indebtedness, Disqualified Stock or Preferred Stockof a subsidiary that is not a Subsidiary Guarantor that refinancesIndebtedness, Disqualified Stock or Preferred Stock of a Subsidiary Guarantoror (3) Indebtedness, Disqualified Stock or Preferred Stock of the Borroweror a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock orPreferred Stock of an Unrestricted Subsidiary;

####  

#### (xvi) Indebtedness,Disqualified Stock or Preferred Stock (x) of the Borrower or any of its RestrictedSubsidiaries incurred to finance the acquisition of any Person or assets or(y) of Persons that are acquired by the Borrower or any RestrictedSubsidiary or merged into the Borrower or a Restricted Subsidiary in accordancewith the terms of this Agreement; provided**thateither (A) after giving effect to such acquisition or merger, either (1) theBorrower would be permitted to incur at least $1.00 of additional Indebtednesspursuant to the Fixed Charge Coverage Ratio test set forth in paragraph (a) ofthis Section 6.01; or (2) the Fixed Charge Coverage Ratio of theBorrower and the Restricted Subsidiaries on a consolidated basis is greaterthan immediately prior to such acquisition or merger; or (B) suchIndebtedness, Disqualified Stock or Preferred Stock (1) is not SecuredIndebtedness and is Subordinated Indebtedness with subordination terms no morefavorable to the holders thereof than the subordination terms set forth in theindenture governing the Senior Subordinated Notes as in effect on the ClosingDate, (2) is not incurred while a Default exists and no Default shallresult therefrom, (3) does not mature (and is not mandatorily redeemablein the case of Disqualified Stock or Preferred Stock) and does not require anypayment of principal prior to Maturity Date and (4) in the case ofclause (y) above only, is not incurred in contemplation of suchacquisition or merger;

####  

#### (xvii) Indebtedness arisingfrom the honoring by a bank or other financial institution of a check, draft orsimilar instrument drawn against insufficient funds in the ordinary course ofbusiness; provided**that suchIndebtedness is extinguished within two (2) Business Days of itsincurrence;

####  

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

 

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####  

#### (xix) Indebtedness,Disqualified Stock or Preferred Stock of a Restricted Subsidiary incurred tofinance or assumed in connection with an acquisition which, when aggregatedwith the principal amount of all other Indebtedness, Disqualified Stock andPreferred 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 thisclause (xix) but shall be deemed incurred pursuant to paragraph (a) ofthis Section 6.01 from and after the first date on which the Borrower orsuch Restricted Subsidiary could have incurred such Indebtedness, DisqualifiedStock or Preferred Stock pursuant to paragraph (a) of this Section 6.01without reliance on this clause (xix));

####  

#### (xx) Indebtedness incurredby a Foreign Subsidiary which, when aggregated with the principal amount of allother Indebtedness incurred pursuant to this clause (xx) and thenoutstanding, does not exceed 5.0% of Foreign Subsidiary Total Assets (it beingunderstood that any Indebtedness, Disqualified Stock and Preferred Stockincurred pursuant to this clause (xx) shall cease to be deemed incurred oroutstanding for purposes of this clause (xx) but shall be deemed incurredpursuant to paragraph (a) of this Section 6.01 from and after thefirst date on which the Borrower or such Restricted Subsidiary could haveincurred such Indebtedness, Disqualified Stock or Preferred Stock pursuant toparagraph (a) of this Section 6.01 without reliance on thisclause (xx));

####  

#### (xxi) Indebtednessconsisting of Indebtedness issued by the Borrower or any Restricted Subsidiaryto current or former officers, managers, directors and employees thereof, theirrespective estates, spouses or former spouses, in each case to finance thepurchase or redemption of Equity Interests of the Borrower or any direct orindirect 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 RestrictedSubsidiary not otherwise permitted hereunder in an aggregate principal amountor liquidation preference, which, when aggregated with the principal amount andliquidation preference of all other Indebtedness, Disqualified Stock andPreferred Stock incurred pursuant to this clause (xxii) and thenoutstanding, does not at any one time outstanding exceed the sum of (A) $175,000,000(it being understood that any Indebtedness, Disqualified Stock and PreferredStock incurred pursuant to this clause (xxii)(A) shall cease to bedeemed incurred or outstanding for purposes of this clause (xxii)(A) butshall be deemed incurred pursuant to paragraph (a) of this Section 6.01from and after the first date on which the Borrower or such RestrictedSubsidiary could have incurred such Indebtedness, Disqualified Stock orPreferred Stock pursuant to paragraph (a) of this Section 6.01without reliance on this clause (xxii)(A)), plus (B) 200% ofthe net cash proceeds received by the Borrower since after the Closing Datefrom the issue or sale of Equity Interests of the Borrower or cash contributedto the capital of the Borrower (in each case, other than proceeds of DisqualifiedStock 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) tothe extent such net cash proceeds or cash have not been applied pursuant tosuch clauses to make Restricted Payments or to make other investments, paymentsor exchanges pursuant to Section 6.04(b) or to make PermittedInvestments (other than Permitted Investments specified in clauses (a) and(c) of the definition thereof); and

####  

#### (xxiii) Attributable Debtincurred by the Borrower or any Restricted Subsidiary pursuant to Sale andLease-Back Transactions of property (real or personal), equipment or otherfixed or capital assets owned by the Borrower or any Restricted Subsidiary asof the Closing Date or 

 

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#### acquired by the Borrower or any Restricted Subsidiary after the ClosingDate in exchange for, or with the proceeds of the sale of, such assets owned bythe Borrower or any Restricted Subsidiary as of the Closing Date, providedthat the aggregate amount of Attributable Debt incurred under thisclause (xxiii) does not exceed $100,000,000.

####  

### (c)  For purposes ofdetermining compliance with this Section 6.01, in the event that an itemof Indebtedness, Disqualified Stock or Preferred Stock meets the criteria ofmore 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 beincurred pursuant to paragraph (a) of this Section 6.01, theBorrower, in its sole discretion, shall classify or reclassify, or laterdivide, classify or reclassify, such item of Indebtedness, Disqualified Stockor Preferred Stock (or any portion thereof) and shall only be required toinclude the amount and type of such Indebtedness, Disqualified Stock orPreferred Stock in one or more of the above clauses; provided that allIndebtedness outstanding under the Senior Secured Asset-Based Revolving CreditFacility and the term loan facility provided for herein on the Closing Dateshall be deemed to have been incurred on such date in reliance on the exceptionin clauses (i) and (ii) of the definition of “Permitted Debt”.

###  

### (d)  The accrual ofinterest, the accretion of accreted value and the payment of interest in theform of additional Indebtedness, Disqualified Stock or Preferred Stock shallnot be deemed to be an incurrence of Indebtedness, Disqualified Stock orPreferred Stock for purposes of this Section 6.01.

###  

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

###  

### (f)  The principalamount of any Indebtedness incurred to extend, replace, refund, refinance,renew or defease other Indebtedness, if incurred in a different currency fromthe Indebtedness being extended, replaced, refunded, refinanced, renewed ordefeased, shall be calculated based on the currency exchange rate applicable tothe currencies in which such respective Indebtedness is denominated that is ineffect 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 theBorrower will not permit any of the Subsidiary Guarantors to, directly orindirectly, create, incur, assume or suffer to exist any Lien (the “InitialLien”) that secures obligations under any Indebtedness on any asset orproperty of Holdings, the Borrower or any Subsidiary Guarantor now owned orhereafter acquired, or any income or profits therefrom, or assign or convey anyright to receive income therefrom, except:

##  

##### (a) in the case of the TermLoan First Lien Collateral, any Initial Lien if (i) such Initial Lienexpressly ranks junior to the first-priority security interest intended to becreated in favor of the Agent for the benefit of the Term Loan Secured Parties(as defined in the Intercreditor Agreement) pursuant to the CollateralDocuments; provided, however, that the terms of such 

 

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##### juniorinterest shall be no more favorable to the beneficiaries thereof than the termscontained in the Intercreditor Agreement; or (ii) such Initial Lien is aPermitted Collateral Lien;

#####  

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

#####  

##### (c) in the case of anyother asset or property, any Initial Lien if (i) the Obligations or theapplicable Loan Guaranty of a Loan Party, as the case may be, are equally andratably secured with (or on a senior basis to, in the case such Initial Liensecures any Subordinated Indebtedness) the obligations secured by such InitialLien or (ii) such Initial Lien is a Permitted Lien.

#####  

Any Lien created for thebenefit of the Secured Parties pursuant to clause (b) or (c) of thepreceding paragraph shall provide by its terms that such Lien shall beautomatically and unconditionally released and discharged upon the release anddischarge of the Initial Lien (other than through the exercise of remedies withrespect thereto).

 

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

##  

#### (i) the Borrower is thesurviving corporation or the Person formed by or surviving any suchconsolidation or merger (if other than the Borrower) or to which such sale,assignment, transfer, lease, conveyance or other disposition shall have beenmade is a corporation****organized or existing underthe laws of the United States of America, any state thereof, the District ofColumbia, or any territory thereof (the Borrower or such Person, as the casemay be, being herein called the “SuccessorBorrower”);

####  

#### (ii) the SuccessorBorrower, if other than the Borrower, expressly assumes all the obligations ofthe Borrower under this Agreement and the other Loan Documents pursuant tosupplements to the Loan Documents or other documents or instruments in formreasonably satisfactory to the Agent;

####  

#### (iii) immediately aftersuch transaction, no Default exists;

####  

#### (iv) immediately aftergiving pro forma effect to such transaction, as if such transaction hadoccurred at the beginning of the applicable four-quarter period, (A) the SuccessorBorrower would be permitted to incur at least $1.00 of additional Indebtednesspursuant 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 RestrictedSubsidiaries on a consolidated basis would be greater than such ratio for theBorrower and the Restricted Subsidiaries immediately prior to such transaction;

####  

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

 

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

####  

### (b)  The SuccessorBorrower shall succeed to, and be substituted for, the Borrower under thisAgreement and the other Loan Documents and, except in the case of a leasetransaction, the predecessor Borrower will be released from its obligationshereunder and thereunder. Notwithstanding clauses (iii) and (iv) of paragraph (a) ofthis Section 6.03, (i) any Restricted Subsidiary may consolidatewith, merge into or transfer all or part of its properties and assets to, theBorrower, and (ii) the Borrower may merge with an Affiliate of theBorrower incorporated solely for the purpose of reincorporating the Borrower inanother state of the United States of America so long as the amount of Indebtednessof 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 SubsidiaryGuarantor to, consolidate or merge with or into or wind up into (whether or notsuch Subsidiary Guarantor is the surviving corporation), or sell, assign,transfer, lease, convey or otherwise dispose of all or substantially all of itsproperties or assets in one or more related transactions to, any Person unless:

###  

#### (i) (A) suchSubsidiary Guarantor is the surviving corporation or the Person formed by orsurviving any such consolidation or merger (if other than such SubsidiaryGuarantor) or to which such sale, assignment, transfer, lease, conveyance orother disposition shall have been made is a corporation organized or existingunder the laws of the United States of America, any state thereof, the Districtof Columbia, or any territory thereof (such Subsidiary Guarantor or suchPerson, as the case may be, being herein called the “Successor Person”), (B) the Successor Person, ifother than such Subsidiary Guarantor, expressly assumes all the obligations ofsuch Subsidiary Guarantor under such Subsidiary Guarantor’s Loan Guaranty andthe other Loan Documents, pursuant to a Joinder Agreement and supplements tothe Loan Documents or other documents or instruments in form reasonablysatisfactory to the Agent, (C) immediately after such transaction, noDefault 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, complywith this Agreement and the other Loan Documents; or

####  

#### (ii) the transaction ismade in compliance with Section 2.20.

####  

### (d)  The SuccessorPerson shall succeed to, and be substituted for, such Subsidiary Guarantorunder such Subsidiary Guarantor’s Loan Guaranty and the other Loan Documentsand, except in the case of a lease transaction, such Subsidiary Guarantor willbe released from its obligations thereunder. Notwithstanding the foregoing, any Subsidiary Guarantor may merge intoor transfer all or part of its properties and assets to another SubsidiaryGuarantor or the Borrower.

###  

### (e)  Holdings will notconsolidate or merge with or into or wind up into (whether or not Holdings isthe surviving corporation), or sell, assign, transfer, lease, convey orotherwise dispose of all or substantially all of its properties or assets inone or more related transactions to, any Person unless (i) Holdings is thesurviving corporation or the Person formed by or surviving any suchconsolidation or merger (if other than Holdings) or to which such sale,assignment, transfer, lease, conveyance or other disposition shall have beenmade is a corporation organized or existing under the laws of the United Statesof America, any state thereof, the District of Columbia, or any territorythereof (Holdings or such Person, as the case may be, being herein called the “Successor Holdings Guarantor”), (ii) theSuccessor Holdings Guarantor, if other than Holdings, expressly assumes all theobligations of Holdings under 

 

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### Holdings’ Loan Guaranty and the other Loan Documents, pursuant to aJoinder Agreement or other supplements or other documents or instruments inform reasonably satisfactory to the Agent, (iii) immediately after suchtransaction, no Event of Default or payment Default exists and (iv) the Borrowershall have delivered to the Agent an Officers’ Certificate and an opinion ofcounsel, each stating that such consolidation, merger or transfer and theJoinder Agreement and such supplements or other documents or instruments, ifany, comply with this Agreement.

###  

### (f)  The SuccessorHoldings Guarantor will succeed to, and be substituted for, Holdings underHoldings’ Loan Guaranty and the other Loan Documents and, except in the case ofa lease transaction, the predecessor Holdings will be released from itsobligations thereunder.  Notwithstandingthe foregoing, Holdings may merge into or transfer all or part of itsproperties and assets to a Subsidiary Guarantor or the Borrower, and Holdingsmay merge with an Affiliate of the Borrower incorporated solely for the purposeof reincorporating Holdings in another state of the United States of America solong as the amount of Indebtedness of Holdings, the Borrower and the RestrictedSubsidiaries is not increased thereby.

###  

### (g)  Notwithstandingthe foregoing, the Merger shall be permitted without compliance with this Section 6.03.

###  

### (h)  For purposes ofthis Section 6.03, the sale, lease, conveyance, assignment, transfer orother disposition of all or substantially all of the properties and assets ofone or more subsidiaries of the Borrower or Holdings, as applicable, whichproperties and assets, if held by the Borrower or Holdings, as applicable, insteadof such subsidiaries, would constitute all or substantially all of theproperties and assets of the Borrower and its subsidiaries on a consolidatedbasis or Holdings and its subsidiaries on a consolidated basis, as applicable,shall be deemed to be the transfer of all or substantially all of theproperties and assets of the Borrower or Holdings, as applicable.

###  

## SECTION 6.04.  Limitation on Restricted Payments.  (a)  The Borrower shall not, and shallnot permit any Restricted Subsidiary to, directly or indirectly (w) declareor pay any dividend or make any distribution on account of the Borrower’s orany Restricted Subsidiary’s Equity Interests, including any dividend ordistribution 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 distributionsby a Restricted Subsidiary so long as, in the case of any dividend ordistribution payable on or in respect of any class or series of securitiesissued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, theBorrower or a Restricted Subsidiary receives at least its pro rata**share of such dividend or distribution inaccordance with its Equity Interests in such class or series of securities, (x) purchase,redeem, defease or otherwise acquire or retire for value any Equity Interestsof the Borrower or any direct or indirect parent of the Borrower, including inconnection with any merger or consolidation, (y) make any principalpayment on, or redeem, repurchase, defease or otherwise acquire or retire forvalue in each case, prior to any scheduled repayment, sinking fund payment ormaturity, any Subordinated Indebtedness other than (A) Indebtednesspermitted under clauses (ix) and (x) of Section 6.01(b) or (B) thepurchase, repurchase or other acquisition of Subordinated Indebtedness purchasedin anticipation of satisfying a sinking fund obligation, principal installmentor final maturity, in each case due within one year of the date of purchase, repurchaseor acquisition or (z) make any Restricted Investment (all such paymentsand other actions set forth in clauses (w) through (z) above beingcollectively referred to as “Restricted Payments”), unless, at the timeof such Restricted Payment:

##  

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

 

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#### (ii) immediately aftergiving effect to such transaction on a pro forma basis, the Borrower couldincur $1.00 of additional Indebtedness under Section 6.01(a); and

####  

#### (iii) such RestrictedPayment, together with the aggregate amount of all other Restricted Paymentsmade by the Borrower and the Restricted Subsidiaries after the Closing Datepursuant paragraph (a) of this Section 6.04 or clauses (i), (ii) (withrespect to the payment of dividends on Refunding Capital Stock pursuant toclause (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 theBorrower 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 whichinternal financial statements are available at the time of such RestrictedPayment, or, in the case such Consolidated Net Income for such period is adeficit, minus 100% of such deficit, providedthat if, at the time of a proposed Restricted Payment under paragraph (a) ofthis Section 6.04, the Consolidated Leverage Ratio of the Borrower is lessthan 4.50 to 1.00, for purposes of calculating availability of amountshereunder for such Restricted Payment only, the reference to 50% in thisclause (A) above shall be deemed to be 75%, plus

 

(B) 100% of the aggregate net cash proceeds andthe fair market value, as determined in good faith by the Borrower, ofmarketable securities or other property received by the Borrower after theClosing Date (less the amount of such net cash proceeds to the extentsuch amount has been relied upon to permit the incurrence of Indebtedness orissuance 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, includingRetired Capital Stock, but excluding cash proceeds and the fair market value,as determined in good faith by the Borrower, of marketable securities or otherproperty received from the sale of (1) Equity Interests to any future,present or former employees, directors, managers or consultants of theBorrower, any direct or indirect parent company of the Borrower or any of theBorrower’s subsidiaries after the Closing Date to the extent such amounts havebeen applied to Restricted Payments made in accordance with clause (iv) ofparagraph (b) of this Section 6.04 and (2) DesignatedPreferred Stock, and to the extent actually contributed to the Borrower, EquityInterests of the Borrower’s direct or indirect parent companies (excludingcontributions of the proceeds from the sale of Designated Preferred Stock ofsuch companies or contributions to the extent such amounts have been applied toRestricted Payments made in accordance with clause (iv) of paragraph (b) ofthis Section 6.04) or (y) debt securities of the Borrower that havebeen converted into or exchanged for such Equity Interests of the Borrower; provided**that this clause (B) shall notinclude the proceeds from (I) Refunding Capital Stock, (II) EquityInterests of the Borrower or debt securities of the Borrower that have beenconverted into or exchanged for Equity Interests of the Borrower sold to a RestrictedSubsidiary or the Borrower, as the case may be, (III) Disqualified Stockor debt securities that have been converted into or exchanged for DisqualifiedStock or (IV) Excluded Contributions, plus

 

(C) 100% of the aggregate amount of cash andthe fair market value, as determined in good faith by the Borrower, ofmarketable securities or other property contributed to the capital of theBorrower after the Closing Date (less the amount of such net cashproceeds to the extent such amount has been relied upon to permit theincurrence 

 

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of Indebtedness or issuance of Disqualified Stock orPreferred Stock pursuant to Section 6.01(b)(xxii)(B)) (other than by a RestrictedSubsidiary and other than by any Excluded Contributions), plus

 

(D) to the extent not already included inConsolidated Net Income, 100% of the aggregate amount received in cash and thefair market value, as determined in good faith by the Borrower, of marketablesecurities or other property received after the Closing Date by means of (1) thesale or other disposition (other than to the Borrower or a RestrictedSubsidiary) of Restricted Investments made by the Borrower or any RestrictedSubsidiary and repurchases and redemptions of such Restricted Investments fromthe Borrower or any Restricted Subsidiary and repayments of loans or advancesthat constitute Restricted Investments by the Borrower or any RestrictedSubsidiary or (2) the sale (other than to the Borrower or a RestrictedSubsidiary) of the Capital Stock of an Unrestricted Subsidiary (other than KateSpade) or a distribution from an Unrestricted Subsidiary (other than anExtraordinary Distribution) (other than in each case to the extent theInvestment in such Unrestricted Subsidiary was made by the Borrower or a RestrictedSubsidiary pursuant to clauses (ix) or (xiii) of paragraph (b) ofthis Section 6.04 or to the extent such Investment constituted a PermittedInvestment) or a dividend from an Unrestricted Subsidiary (other than anExtraordinary Distribution), plus

 

(E) in the case of the redesignation of anUnrestricted Subsidiary (other than Kate Spade) as a Restricted Subsidiaryafter the Closing Date, the fair market value of the Investment in suchUnrestricted Subsidiary, as determined by the Borrower in good faith or if, inthe 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 theredesignation of such Unrestricted Subsidiary as a Restricted Subsidiary, otherthan an Unrestricted Subsidiary to the extent the Investment in suchUnrestricted Subsidiary was made by the Borrower or a Restricted Subsidiary pursuantto clauses (ix) or (xiii) of paragraph (b) of this Section 6.04or to the extent such Investment constituted a Permitted Investment.

 

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

###  

#### (i) the payment of anydividend or distribution within 60 days after the date of declarationthereof, if at the date of declaration such payment would have complied withthe provisions of this Agreement;

####  

#### (ii) (A) theredemption, repurchase, retirement or other acquisition of any Equity Interests(“Retired Capital Stock”)**or Subordinated Indebtedness ofthe Borrower or any Equity Interests of any direct or indirect parent companyof the Borrower, in exchange for, or out of the proceeds of the substantiallyconcurrent sale (other than to a Restricted Subsidiary) of, Equity Interests ofthe Borrower (in each case, other than any Disqualified Stock) (“Refunding Capital Stock”) and(B) if immediately prior to the retirement of Retired Capital Stock, thedeclaration and payment of dividends thereon was permitted under clause (vi) ofthis paragraph (b), the declaration and payment of dividends on the RefundingCapital Stock (other than Refunding Capital Stock the proceeds of which wereused to redeem, repurchase, retire or otherwise acquire any Equity Interests ofany direct or indirect parent company of the Borrower) in an aggregate amountper year no greater than the aggregate amount of dividends per annum that wasdeclarable and payable on such Retired Capital Stock immediately prior to suchretirement;

 

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#### (iii) the defeasance,redemption, repurchase or other acquisition or retirement of SubordinatedIndebtedness of the Borrower or a Subsidiary Guarantor made by exchange for, orout of the proceeds of the substantially concurrent sale of, new Indebtednessof 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 theprincipal amount (or accreted value, if applicable) of the SubordinatedIndebtedness being so defeased, redeemed, repurchased, acquired or retired forvalue, plus the amount of any reasonable premium required to be paidunder the terms of the instrument governing the Subordinated Indebtedness beingso defeased, redeemed, repurchased, acquired or retired and any reasonable feesand expenses incurred in connection with the issuance of such new Indebtedness,(B) such Indebtedness is subordinated to the Obligations at least to thesame extent as such Subordinated Indebtedness so defeased, redeemed,repurchased, acquired or retired, (C) such Indebtedness has a finalscheduled maturity date equal to or later than the final scheduled maturitydate of the Subordinated Indebtedness being so defeased, redeemed, repurchased,acquired or retired and (D) such Indebtedness has a Weighted Average Lifeto Maturity equal to or greater than the remaining Weighted Average Life toMaturity of the Subordinated Indebtedness being so defeased, redeemed,repurchased, acquired or retired;

####  

#### (iv) a RestrictedPayment to pay for the repurchase, retirement or other acquisition orretirement for value of Equity Interests (other than Disqualified Stock) of theBorrower 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 companiespursuant to any management equity plan or stock option plan or any othermanagement or employee benefit plan or agreement; provided**thatthe aggregate Restricted Payments made under this clause (iv) do notexceed in any calendar year $10,000,000 (with unused amounts in any calendaryear being carried over to succeeding calendar years subject to a maximum(without giving effect to the following proviso) of $20,000,000 in any calendaryear); provided,**further,**that such amount in any calendar year maybe increased by an amount not to exceed (A) the cash proceeds from thesale of Equity Interests (other than Disqualified Stock) of the Borrower and,to the extent contributed to the Borrower, Equity Interests of any of theBorrower’s direct or indirect parent companies, in each case to members ofmanagement, directors, managers or consultants of the Borrower, any of its subsidiariesor any of its direct or indirect parent companies that occurs after the ClosingDate, to the extent the cash proceeds from the sale of such Equity Interestshave not otherwise been applied to the payment of Restricted Payments by virtueof clause (iii) of paragraph (a) of this Section 6.04, plus (B) the cash proceedsof key man life insurance policies received by the Borrower and the RestrictedSubsidiaries after the Closing Date, less(C) the amount of any Restricted Payments previously made pursuant toclauses (A) and (B) of this clause (iv); and provided,**further,**that cancellation of Indebtedness owingto the Borrower from members of management, directors, managers or consultantsof the Borrower, any of its direct or indirect parent companies or any RestrictedSubsidiary in connection with a repurchase of Equity Interests of the Borroweror any of its direct or indirect parent companies shall not be deemed toconstitute a Restricted Payment for purposes of this Section 6.04 or anyother provision of this Agreement;

####  

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

####  

#### (vi) the declarationand payment of dividends (A) to holders of any class or series ofDesignated Preferred Stock (other than Disqualified Stock) issued by theBorrower after the Closing Date, (B) to a direct or indirect parentcompany of the Borrower, the proceeds of which 

 

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#### willbe used to fund the payment of dividends to holders of any class or series ofDesignated Preferred Stock (other than Disqualified Stock) of such parentcompany issued after the Closing Date; provided that the amount of dividends paid pursuant to thisclause (B) shall not exceed the aggregate amount of cash actuallycontributed to the Borrower from the sale of such Designated Preferred Stock,or (C) on Refunding Capital Stock that is Preferred Stock in excess of thedividends declarable and payable thereon pursuant to clause (ii) ofthis 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 internalfinancial statements are available immediately preceding the date of issuanceof such Designated Preferred Stock or the declaration of such dividends onRefunding Capital Stock that is Preferred Stock, after giving effect to suchissuance or declaration on a pro forma basis, the Borrower and the Restricted Subsidiarieson a consolidated basis would have had a Fixed Charge Coverage Ratio of atleast 2.00 to 1.00;

####  

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

####  

#### (viii) the declarationand payment of dividends on the Borrower’s common stock following the first publicoffering of the Borrower’s common stock or the common stock of any of itsdirect or indirect parent companies after the Closing Date, of up to 6% perannum of the net proceeds received by or contributed to the Borrower in or fromany such public offering, other than public offerings with respect to theBorrower’s common stock registered on Form S-4 or Form S-8 and otherthan any public sale constituting an Excluded Contribution;

####  

#### (ix) RestrictedPayments that are made with Excluded Contributions;

####  

#### (x) the declaration andpayment of dividends by the Borrower to, or the making of loans to, its directparent company in amounts required for the Borrower’s direct or indirect parentcompanies to pay (A) franchise taxes and other fees, taxes and expensesrequired to maintain their corporate existence, (B) Federal, state andlocal income taxes, to the extent such income taxes are attributable to theincome of the Borrower and the Restricted Subsidiaries and, to the extent ofthe amount actually received from its Unrestricted Subsidiaries, in amountsrequired to pay such taxes to the extent attributable to the income of suchUnrestricted Subsidiaries, (C) customary salary, bonus and other benefitspayable to officers and employees of any direct or indirect parent company ofthe Borrower to the extent such salaries, bonuses and other benefits areattributable to the ownership or operation of the Borrower and the Restricted Subsidiaries,(D) general corporate overhead expenses of any direct or indirect parentcompany of the Borrower to the extent such expenses are attributable to theownership or operation of the Borrower and the Restricted Subsidiaries, and (E) reasonablefees and expenses incurred in connection with any unsuccessful debt or equityoffering by such direct or indirect parent company of the Borrower;

####  

#### (xi) any Restricted Paymentsused 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 SubordinatedIndebtedness pursuant to provisions similar to those set forth in Sections 2.19and 2.20; provided that, prior to such repurchase, redemption or otheracquisition, the Borrower (or a third party to the extent permitted by thisAgreement) shall have made a Change of Control Offer or Asset Sale Offer, asthe case may be, with respect to the outstanding Loans and shall have 

 

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#### repaidall such Loans validly tendered for prepayment and not withdrawn in connectionwith such Change of Control Offer or Asset Sale Offer;

####  

#### (xiii) Investments inUnrestricted Subsidiaries having an aggregate fair market value, taken togetherwith all other Investments made pursuant to this clause (xiii) that are atthe time outstanding, without giving effect to the sale of an UnrestrictedSubsidiary to the extent the proceeds of such sale do not consist of cash ormarketable 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 fairmarket value of each Investment being measured at the time such Investment ismade and without giving effect to subsequent changes in value);

####  

#### (xiv) distributions or paymentsof Receivables Fees;

####  

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

####  

#### (xvi) other RestrictedPayments in an amount which, when taken together with all other RestrictedPayments made pursuant to this clause (xvi), does not exceed $75,000,000;

####  

provided, however, that at the time of, and after giving effectto, 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 aconsequence thereof.

 

### (c)  Notwithstandinganything to the contrary herein, the Borrower will not, and will not permit anyRestricted Subsidiary to, directly or indirectly, make any (i) RestrictedPayment covered in clauses (w) through (y) of the definition of RestrictedPayments set forth in paragraph (a) of this Section 6.04 to theholders of Equity Interests of the Borrower or any of its direct or indirectparent companies (which shall include the Sponsors, the Co-Investors and theirrespective Affiliates) other than to the Borrower and its RestrictedSubsidiaries, future, present or former employees, directors, managers orconsultants of the Borrower, any of its subsidiaries or any of its direct orindirect parent companies with respect to Equity Interests held by them in suchcapacities and other than a Restricted Payment made pursuant to clause (x) ofparagraph (b) of this Section 6.04 or (ii)  Investment in theSponsors, 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) ofthe Exchange Act or any successor provision) with the Sponsors or anyCo-Investors or any Person or group who becomes a Permitted Holder following aChange of Control as provided for in the definition of “Permitted Holders” ortheir respective Affiliates (other than in the Borrower and its subsidiariesand members of management of the Borrower (or its direct parent)), in each caseduring any period beginning on the date on which the Borrower makes an electionto pay interest on the Senior Notes by increasing the principal amount of theoutstanding Senior Notes or by issuing additional Senior Notes pursuant to theSenior Notes Indenture (or an election under any similar provision set forth inany instrument governing any Indebtedness refinancing, refunding, extending,renewing or replacing the Senior Notes) with respect to any interest periodrelating thereto and ending on the first date after such interest period onwhich the Borrower makes a payment of interest in cash on the Senior Notespursuant to the Senior Notes Indenture (or pursuant to any such otherinstrument) with respect to a subsequent interest period relating thereto onthe Senior Notes pursuant to the Senior Notes Indenture with respect to asubsequent interest period.

###  

### (d)  The Borrower shallnot permit any Unrestricted Subsidiary to become a Restricted Subsidiary exceptpursuant to the penultimate paragraph of the definition of “UnrestrictedSubsidiary”.

 

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### For purposes of designating any Restricted Subsidiary as an UnrestrictedSubsidiary, all outstanding Investments by the Borrower and the Restricted Subsidiaries(except to the extent repaid) in the subsidiary so designated shall be deemedto be Restricted Payments in an amount determined as set forth in the lastsentence of the definition of “Investment”. Such designation shall be permitted only if a Restricted Payment in suchamount would be permitted at such time, whether pursuant to paragraph (a) ofthis Section 6.04 or under clauses (ix), (xiii) or (xvi) of paragraph(b) of this Section 6.04, or pursuant to the definition of “PermittedInvestments”, and if such subsidiary otherwise meets the definition of an “UnrestrictedSubsidiary”.

###  

## SECTION 6.05.  Limitations on Transactions withAffiliates.  (a)  The Borrower shallnot, and shall not permit any Restricted Subsidiary to, make any payment to, orsell, lease, transfer or otherwise dispose of any of its properties or assetsto, or purchase any property or assets from, or enter into or make or amend anytransaction, contract, agreement, understanding, loan, advance or guaranteewith, or for the benefit of, any Affiliate of the Borrower (each of theforegoing, an “Affiliate Transaction”) involving aggregate payments orconsideration in excess of $10,000,000, unless (i) such AffiliateTransaction is on terms that are not materially less favorable to the Borroweror the relevant Restricted Subsidiary than those that would have been obtainedin a comparable transaction by the Borrower or such Restricted Subsidiary withan unrelated Person and (ii) the Borrower delivers to the Agent withrespect to any Affiliate Transaction or series of related AffiliateTransactions 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 Directorsof the Borrower approving such Affiliate Transaction and set forth in anOfficers’ Certificate certifying that such Affiliate Transaction complies withclause (i) above.

##  

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

###  

#### (i) transactionsbetween or among the Borrower or any of the Restricted Subsidiaries;

####  

#### (ii) RestrictedPayments that are permitted by the provisions of Section 6.04 and thedefinition of “Permitted Investments”;

####  

#### (iii) the payment ofmanagement, consulting, monitoring and advisory fees and related expenses tothe Sponsors and any termination or other fee payable to the Sponsors upon achange of control or initial public equity offering of the Borrower or anydirect or indirect parent company thereof pursuant to the Management ServicesAgreement as in effect on the Closing Date;

####  

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

####  

#### (v) payments by theBorrower or any Restricted Subsidiary to any of the Sponsors and theCo-Investors for any financial advisory, financing, underwriting or placementservices or in respect of other investment banking activities, including inconnection with acquisitions or divestitures, which payments are approved by amajority of the members of the Board of Directors of the Borrower in good faith;

####  

#### (vi) transactions inwhich the Borrower or any Restricted Subsidiary, as the case may be, deliversto the Agent a letter from an Independent Financial Advisor stating that suchtransaction is fair to the Borrower or such Restricted Subsidiary from afinancial point of view or meets the requirements of clause (i) ofparagraph (a) of this Section 6.05;

 

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

####  

#### (viii) any agreement,instrument or arrangement as in effect as of the Closing Date, or any amendmentthereto (so long as any such amendment is not disadvantageous to the Lenders inany material respect as compared to the applicable agreement as in effect onthe 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 itsobligations under the terms of, any stockholders agreement or its equivalent(including any registration rights agreement or purchase agreement relatedthereto) to which it is a party as of the Closing Date and any similar agreementswhich it may enter into thereafter; provided*,*however*,* that the existence of, or theperformance by the Borrower or any Restricted Subsidiary of obligations underany future amendment to any such existing agreement or under any similaragreement entered into after the Closing Date shall only be permitted by thisclause (ix) to the extent that the terms of any such existingagreement together with all amendments thereto, taken as a whole, or newagreement are not otherwise more disadvantageous to the Lenders in any materialrespect than the terms of the original agreement in effect on the Closing Dateas reasonably determined in good faith by the Borrower;

####  

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

####  

#### (xi) transactions withcustomers, clients, suppliers, or purchasers or sellers of goods or services,in each case in the ordinary course of business and otherwise in compliancewith the terms of this Agreement that are fair to the Borrower and the RestrictedSubsidiaries, in the reasonable determination of the Board of Directors or thesenior management of the Borrower, or are on terms at least as favorable asmight reasonably have been obtained at such time from an unaffiliated party;

####  

#### (xii) the issuance of EquityInterests (other than Disqualified Stock) of the Borrower to any PermittedHolder or to any director, manager, officer, employee or consultant of theBorrower or any direct or indirect parent company thereof;

####  

#### (xiii) sales of accountsreceivable, or participations therein, in connection with any ReceivablesFacility; and

####  

#### (xiv) investments by theSponsors and the Co-Investors in securities of the Borrower or any of its RestrictedSubsidiaries so long as (A) the investment is being offered generally toother investors on the same or more favorable terms and (B) the investmentconstitutes less than 5.0% of the proposed or outstanding issue amount of suchclass of securities.

####  

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

 

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

####  

#### (ii) except in the caseof a Permitted Asset Swap, at least 75% of the consideration therefor receivedby the Borrower or such Restricted Subsidiary, as the case may be, is in theform of cash or Cash Equivalents (provided**that the amount of (A) anyliabilities (as shown on the Borrower’s or such Restricted Subsidiary’s mostrecent balance sheet or in the notes thereto) of the Borrower or such RestrictedSubsidiary, 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 onbehalf of the transferee) and for which the Borrower or such RestrictedSubsidiary has been validly released by all creditors in writing, (B) anysecurities, notes or other obligations or assets received by the Borrower orsuch Restricted Subsidiary from such transferee that are converted by theBorrower or such Restricted Subsidiary into cash (to the extent of the cashreceived) within 180 days following the closing of such Asset Sale and (C) anyDesignated Noncash Consideration received by the Borrower or such RestrictedSubsidiary in such Asset Sale having an aggregate fair market value, takentogether with all other Designated Noncash Consideration received pursuant tothis clause (C) that is at that time outstanding, not to exceed thegreater of (I) $125,000,000 and (II) 1.75% of Total Assets at thetime of the receipt of such Designated Noncash Consideration, with the fairmarket value of each item of Designated Noncash Consideration being measured atthe 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 otherpurpose);

####  

#### (iii) an amount equalto 100% of the Net Proceeds of such Asset Sale (less, in the case of thesale of Capital Stock of a Person, the amount allocable to the inventory andrelated assets of such Person, as determined by the Borrower in good faith) is paiddirectly by the purchaser thereof to the Agent to be held in trust forapplication in accordance with Section 2.20; and

####  

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

###  

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

####  

#### (ii) except in the caseof a Permitted Asset Swap, at least 75% of the consideration therefor receivedby the Borrower or such Restricted Subsidiary, as the case may be, is in theform of cash or Cash Equivalents (provided**that the amount of (A) anyliabilities (as shown on the Borrower’s or such Restricted Subsidiary’s mostrecent balance sheet or in the notes thereto) of the Borrower or suchRestricted Subsidiary, other than liabilities that are by their termssubordinated to the Obligations, that are assumed by the transferee of any suchassets (or a third party on behalf of the transferee) and for which theBorrower or such Restricted Subsidiary has been validly released by allcreditors in writing, (B) any securities, notes or other obligations orassets received by the Borrower or such Restricted Subsidiary from suchtransferee that are converted by the Borrower or such Restricted Subsidiaryinto cash (to the extent of the cash received) within 180 days followingthe closing of such Asset Sale and (C) any Designated NoncashConsideration received by the Borrower or such Restricted Subsidiary in suchAsset Sale having an aggregate fair market value, taken together with all otherDesignated Noncash Consideration received pursuant to this clause (C) thatis 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 DesignatedNoncash Consideration, with the fair market value of each item of DesignatedNoncash 

 

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#### Considerationbeing measured at the time received and without giving effect to subsequentchanges in value, shall be deemed to be cash for purposes of this provision andfor no other purpose); and

####  

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

####  

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

##  

#### (i) (A) pay dividendsor make any other distributions to the Borrower or any Restricted Subsidiary onits Capital Stock or with respect to any other interest or participation in, ormeasured by, its profits, or (B) pay any Indebtedness owed to the Borroweror any Restricted Subsidiary;

####  

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

####  

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

####  

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

###  

#### (i) contractualencumbrances or restrictions in effect on the Closing Date, including pursuantto the Loan Documents, the Senior Secured Asset-Based Revolving Credit Facilityand the related documentation (including security documents and intercreditoragreements) and Hedging Obligations, the 2008 Notes and the 2028 Debentures;

####  

#### (ii) the New NoteDocuments and the New Notes and the subsidiary guarantees of the New Notesissued thereunder, the Collateral Documents, the ABL Security Documents and theIntercreditor Agreement;

####  

#### (iii) purchase moneyobligations for property acquired in the ordinary course of business andCapitalized Lease Obligations that impose restrictions of the nature discussedin clause (iii) of paragraph (a) of this Section 6.07on the property so acquired;

####  

#### (iv) applicable law orany applicable rule, regulation or order;

####  

#### (v) any agreement orother instrument of a Person acquired by the Borrower or any Restricted Subsidiaryin existence at the time of such acquisition (but not created in connectiontherewith or in contemplation thereof), which encumbrance or restriction is notapplicable to any Person, or the properties or assets of any Person, other thanthe Person, or the property or assets of the Person, so acquired;

 

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

####  

#### (vii) SecuredIndebtedness otherwise permitted to be incurred pursuant to Sections 6.01 and6.02 that limit the right of the debtor to dispose of the assets securing suchIndebtedness;

####  

#### (viii) restrictions oncash or other deposits or net worth imposed by customers under contractsentered into in the ordinary course of business;

####  

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

####  

#### (x) customary provisions injoint venture agreements and other similar agreements;

####  

#### (xi) customary provisionscontained in leases and other agreements entered into in the ordinary course ofbusiness;

####  

#### (xii) restrictions created inconnection with any Receivables Facility; provided that in the case of Receivables Facilitiesestablished after the Closing Date, such restrictions are necessary oradvisable, in the good faith determination of the Borrower, to effect suchReceivables Facility;

####  

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

####  

#### (xiv) any encumbrances orrestrictions of the type referred to in clauses (i), (ii) and (iii) ofparagraph (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 referredto 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 otherrestrictions than those prior to such amendment, modification, restatement,renewal, increase, supplement, refunding, replacement or refinancing; provided,further, that with respect to contracts, instruments or obligationsexisting on the Closing Date, any amendments, modifications, restatements,renewals, increases, supplements, refundings, replacements or refinancings arenot materially more restrictive with respect to such encumbrances and otherrestrictions than those contained in such contracts, instruments or obligationsas in effect on the Closing Date.

####  

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

 

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##### (a) such Restricted Subsidiarywithin thirty (30) days executes and delivers a Joinder Agreement providing fora Loan Guaranty by such Restricted Subsidiary, except that with respect to a guaranteeof Indebtedness of the Borrower or any Subsidiary Guarantor, that is by itsexpress terms subordinated in right of payment to the Obligations or the LoanGuaranty of such Restricted Subsidiary, any such guarantee by such Restricted Subsidiarywith respect to such Indebtedness shall be subordinated in right of payment tosuch Loan Guaranty substantially to the same extent as such Indebtedness issubordinated to the Obligations;

#####  

##### (b) such Restricted Subsidiarywaives and will not in any manner whatsoever claim or take the benefit oradvantage of, any rights of reimbursement, indemnity or subrogation or anyother rights against the Borrower or any other Restricted Subsidiary as aresult of any payment by such Restricted Subsidiary under its Loan Guaranty;and

#####  

##### (c) such Restricted Subsidiaryshall deliver to the Agent an opinion of counsel to the effect that (i) suchLoan Guaranty has been duly executed and authorized and (ii) such Loan Guarantyconstitutes a valid, binding and enforceable obligation of such Restricted Subsidiary,except insofar as enforcement thereof may be limited by bankruptcy, insolvencyor similar laws (including all laws relating to fraudulent transfers) andexcept insofar as enforcement thereof is subject to general principles ofequity;

#####  

provided**that this Section 6.08 shall not beapplicable to any guarantee of any Restricted Subsidiary that existed at thetime such Person became a Restricted Subsidiary and was not incurred inconnection with, or in contemplation of, such Person becoming a Restricted Subsidiary.

 

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

##  

##### (a) the Borrower orsuch Restricted Subsidiary would be entitled to (i) incur Indebtedness inan amount equal to the Attributable Debt with respect to such Sale andLease-Back Transaction pursuant to Section 6.01 and (ii) create aLien on such property securing such Attributable Debt without securing the Obligationspursuant to Section 6.02;

#####  

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

#####  

##### (c) the Borrowerapplies 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 Indenturein any way to:

##  

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

#####  

##### (b) increase theprincipal of, advance the final maturity date of or shorten the WeightedAverage Life to Maturity of any Senior Subordinated Notes;

 

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

#####  

##### (d) amend theprovisions of the Senior Subordinated Notes Indenture that relate tosubordination.

#####  

## SECTION 6.11.  Obligations of the Borrower and theRestricted Subsidiaries Relating to Kate Spade.  In the event that Kate Spade sells, conveys,transfers or otherwise disposes of, all or substantially all of its propertiesor assets, in one or more related transactions, the Borrower shall, subject toits fiduciary duties to the holders of minority Equity Interests in Kate Spade andsubject to any other obligations in the organizational documents of Kate Spade orother agreements with Kate Spade or holders of its Equity Interests (in eachcase, as in effect on the Closing Date), exercise its rights and powers as acontrolling holder of Equity Interests in Kate Spade to cause Kate Spade todistribute to the Borrower its pro rata share of the net proceeds of such sale,conveyance, transfer or other disposition, the Borrower shall apply suchproceeds in accordance with Section 2.20 and such proceeds will constituteNet Proceeds thereunder.  In addition,the Borrower will, and will cause its Restricted Subsidiaries to, apply theamount of any other Extraordinary Distribution in accordance with Section 2.20and such amount will constitute Net Proceeds thereunder.  Furthermore, the Borrower, in its capacity asa holder of Equity Interests in Kate Spade, will not, and will cause itsRestricted Subsidiaries not to, waive any of its rights to receive dividends,distributions or other payments from Kate Spade or consent to an amendment ofKate Spade’s organizational documents or other agreements that would restrictKate Spade’s ability to make any such distributions.

##  

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

##  

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

##  

ARTICLE VII

 

# Events of Default

 

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

 

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

#####  

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

 

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##### (c) any representationor warranty made or deemed made by or on behalf of any Loan Party herein or inany other Loan Document or any amendment or modification thereof or waiverthereunder, or in any report or other certificate, financial statement or otherdocument furnished pursuant to or in connection with this Agreement or any LoanDocument, shall prove to have been materially incorrect when made or deemedmade;

#####  

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

#####  

##### (e) (i) any LoanParty shall fail to make any payment beyond the applicable grace period(whether by scheduled maturity, required prepayment, acceleration, demand orotherwise) with respect to any Material Indebtedness, or (ii) any event orcondition occurs (other than with respect to Material Indebtedness constitutingDerivative Transactions, termination events or equivalent events pursuant to theterms of the related Hedge Agreements in accordance with the terms thereof andnot as a result of any default thereunder by any Loan Party) that results inany Material Indebtedness becoming due prior to its scheduled maturity or thatenables or permits (with the giving of notice, if required) the holder orholders of any such Material Indebtedness or any trustee or agent on its ortheir behalf to cause any such Material Indebtedness to become due, or torequire the prepayment, repurchase, redemption or defeasance thereof, prior toits scheduled maturity; provided that this paragraph (e) shall not applyto secured Indebtedness that becomes due as a result of the voluntary sale ortransfer of the property or assets securing such Indebtedness if such sale ortransfer is permitted hereunder and under the documents providing for suchIndebtedness;

#####  

##### (f) an involuntaryproceeding 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 thattogether would constitute a Significant Subsidiary) or its debts, or of asubstantial part of its assets, under any Federal, state or foreign bankruptcy,insolvency, receivership or similar law now or hereafter in effect or (ii) theappointment of a receiver, trustee, custodian, sequestrator, conservator orsimilar official for Holdings, the Borrower or any Significant Subsidiary (orany group of Subsidiaries that together would constitute a SignificantSubsidiary) or for a substantial part of its assets, and, in any such case ofclause (i) or (ii), such proceeding or petition shall continue undismissedand unstayed for sixty (60) days or an order or decree approving orordering any of the foregoing shall be entered;

#####  

##### (g) Holdings, theBorrower or any Significant Subsidiary (or any group of Subsidiaries thattogether would constitute a Significant Subsidiary) shall (i) voluntarilycommence 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) consentto 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) applyfor or consent to the appointment of a receiver, trustee, custodian,sequestrator, conservator or similar official for Holdings, the Borrower or anySignificant Subsidiary (or any group of Subsidiaries that together wouldconstitute a Significant Subsidiary) or for a substantial part of its assets, (iv) filean answer admitting the material allegations of a petition filed against it inany such proceeding or (v) make a general assignment for the benefit ofcreditors;

#####  

##### (h) failure by Holdings,the Borrower or any Significant Subsidiary (or any group of Subsidiaries thattogether would constitute a Significant Subsidiary) to pay final judgmentsaggregating in excess of $50,000,000, which final judgments remain unpaid,undischarged and 

 

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##### unstayedfor a period of more than sixty (60) days after such judgment becomesfinal, and in the event such judgment is covered by insurance, an enforcementproceeding has been commenced by any creditor upon such judgment or decreewhich is not promptly stayed;

#####  

##### (i) the Loan Guarantyof any Significant Subsidiary (or any group of Subsidiaries that together wouldconstitute a Significant Subsidiary) or Holdings shall for any reason cease tobe in full force and effect or be declared null and void or any Responsible Officerof any Subsidiary Guarantor that is a Significant Subsidiary (or theResponsible Officers of any group of Subsidiaries that together wouldconstitute a Significant Subsidiary) or Holdings, as the case may be, deniesthat it has any further liability under its Loan Guaranty or gives notice tosuch effect, other than by reason of the termination of this Agreement or therelease of any such Loan Guaranty in accordance with this Agreement;

#####  

##### (j) unless all of theCollateral has been released from the Liens in accordance with the provisionsof the Collateral Documents, any Collateral Document shall for any reason ceaseto be in full force and effect or the assertion by Holdings, the Borrower orany Restricted Subsidiary, in any pleading in any court of competentjurisdiction, that any security interest thereunder is invalid or unenforceableand, in the case of any such Restricted Subsidiary, the failure by the Borrowerto 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) daysafter receipt of written notice given by the Agent or the Required Lenders withits other agreements contained in the Collateral Documents, except for afailure that would not materially affect the value of the Collateral, or theremedies with respect thereto, in each case taken as a whole,

#####  

then, and in every suchevent (other than an event with respect to any Loan Party described inclause (f) or (g) of this Article), and at any time thereafterduring the continuance of such event, the Agent may, and at the request of theRequired Lenders shall, by notice to the Borrower, take any of the followingactions, at the same or different times:  (i) terminate theCommitments, and thereupon the Commitments shall terminate immediately and (ii) declarethe Loans then outstanding to be due and payable in whole (or in part, in whichcase any principal not so declared to be due and payable may thereafter bedeclared to be due and payable), and thereupon the principal of the Loans sodeclared to be due and payable, together with accrued interest thereon and allfees and other obligations of the Borrower accrued hereunder, shall become dueand payable immediately, without presentment, demand, protest or other noticeof any kind, all of which are hereby waived by the Borrower; providedthat upon the occurrence of an event with respect to any Loan Party describedin clause (f) or (g) of this Article, the Commitments shallautomatically terminate and the principal of the Loans then outstanding, togetherwith accrued interest thereon and all fees and other obligations of theBorrower accrued hereunder, shall automatically become due and payable, withoutpresentment, demand, protest or other notice of any kind, all of which arehereby waived by the Borrower, without further action of the Agent or anyLender.  Upon the occurrence and thecontinuance of an Event of Default, the Agent may, and at the request of theRequired Lenders shall, exercise any rights and remedies provided to the Agentunder the Loan Documents or at law or equity, including all remedies providedunder the UCC.

 

In the event of any Event ofDefault specified in clause (e) of the preceding paragraph of this Article,such Event of Default and all consequences thereof (excluding any resultingpayment default) shall be annulled, waived and rescinded automatically andwithout any action by the Agent or the Lenders if, within twenty (20) daysafter such Event of Default arose, (i) the Indebtedness or guarantee thatis the basis for such Event of Default has been discharged, (ii) theholders thereof have rescinded or waived the 

 

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acceleration, notice oraction (as the case may be) giving rise to such Event of Default or (iii) thedefault that is the basis for such Event of Default has been cured.

 

ARTICLE VIII

 

# The Agent

 

Each of the Lenders herebyirrevocably appoints the Agent as its agent and authorizes the Agent to takesuch 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 theLoan Documents, together with such actions and powers as are reasonablyincidental thereto.

 

The bank serving as the Agenthereunder shall have the same rights and powers in its capacity as a Lender asany other Lender and may exercise the same as though it were not the Agent, andsuch bank and its Affiliates may accept deposits from, lend money to andgenerally engage in any kind of business with the Loan Parties or any subsidiaryof a Loan Party or other Affiliate thereof as if it were not the Agenthereunder.

 

The Agent shall not have anyduties or obligations except those expressly set forth in the LoanDocuments.  Without limiting thegenerality of the foregoing, (a) the Agent shall not be subject to anyfiduciary or other implied duties, regardless of whether a Default has occurredand is continuing, (b) the Agent shall not have any duty to take anydiscretionary action or exercise any discretionary powers, except discretionaryrights and powers expressly contemplated by the Loan Documents that the Agentis required to exercise in writing as directed by the Required Lenders (or suchother number or percentage of the Lenders as shall be necessary under thecircumstances as provided in Section 9.02), and (c) except asexpressly set forth in the Loan Documents, the Agent shall not have any duty todisclose, and shall not be liable for the failure to disclose, any informationrelating to any Loan Party or any of its Subsidiaries that is communicated toor obtained by the bank serving as Agent or any of its Affiliates in anycapacity.  The Agent shall not be liablefor any action taken or not taken by it with the consent or at the request ofthe Required Lenders (or such other number or percentage of the Lenders asshall be necessary under the circumstances as provided in Section 9.02) orin the absence of its own gross negligence or willful misconduct.  The Agent shall be deemed not to haveknowledge of any Default unless and until written notice thereof is given tothe Agent by the Borrower or a Lender, and the Agent shall not be responsiblefor 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) thecontents of any certificate, report or other document delivered hereunder or inconnection with any Loan Document, (iii) the performance or observance ofany of the covenants, agreements or other terms or conditions set forth in anyLoan Document, (iv) the validity, enforceability, effectiveness orgenuineness of any Loan Document or any other agreement, instrument ordocument, (v) the creation, perfection or priority of Liens on theCollateral or the existence of the Collateral, or (vi) the satisfaction ofany condition set forth in Article IV or elsewhere in any Loan Document,other than to confirm receipt of items expressly required to be delivered tothe Agent.

 

The Agent shall be entitledto rely upon, and shall not incur any liability for relying upon, any notice,request, certificate, consent, statement, instrument, document or other writingbelieved by it to be genuine and to have been signed or sent by the properPerson.  The Agent also may rely upon anystatement made to it orally or by telephone and believed by it to be made bythe proper Person, and shall not incur any liability for relying thereon.  The Agent may consult with legal counsel (whomay be counsel for the Borrower), independent accountants and other expertsselected by it, and shall not be 

 

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liable for any action takenor not taken by it in accordance with the advice of any such counsel,accountants or experts.

 

The Agent may perform anyand all its duties and exercise its rights and powers by or through any one ormore sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all its duties andexercise its rights and powers through their respective Related Parties.  The exculpatory provisions of the precedingparagraphs shall apply to any such sub-agent and to the Related Parties of the Agentand any such sub-agent, and shall apply to their respective activities inconnection with the syndication of the credit facilities provided for herein aswell as activities as Agent.

 

Subject to the appointmentand acceptance of a successor Agent as provided in this paragraph, the Agentmay resign at any time by notifying the Lenders and the Borrower.  Upon any such resignation, the RequiredLenders shall have the right, with the consent (not to be unreasonably withheldor delayed) of the Borrower, to appoint a successor; provided that,during the existence and continuation of an Event of Default, no consent of theBorrower shall be required.  If no successorshall have been so appointed by the Required Lenders and shall have acceptedsuch appointment within thirty (30) days after the retiring Agent givesnotice of its resignation, then the retiring Agent may, on behalf of theLenders, appoint a successor Agent which shall be a commercial bank or anAffiliate of any such commercial bank reasonably acceptable to the Borrower.  Upon the acceptance of its appointment as Agenthereunder by a successor, such successor shall succeed to and become vestedwith all the rights, powers, privileges and duties of the retiring Agent, andthe retiring Agent shall be discharged from its duties and obligationshereunder.  The fees payable by theBorrower to a successor Agent shall be the same as those payable to its predecessorunless otherwise agreed between the Borrower and such successor.  After the Agent’s resignation hereunder, theprovisions of this Article and Section 9.03 shall continue in effectfor the benefit of such retiring Agent, its sub-agents and their respectiveRelated Parties in respect of any actions taken or omitted to be taken by anyof them while it was acting as Agent.

 

Each Lender acknowledgesthat it has, independently and without reliance upon the Agent or any otherLender and based on such documents and information as it has deemedappropriate, made its own credit analysis and decision to enter into thisAgreement.  Each Lender also acknowledgesthat it will, independently and without reliance upon the Agent or any otherLender and based on such documents and information as it shall from time totime deem appropriate, continue to make its own decisions in taking or nottaking action under or based upon this Agreement, any other Loan Document orrelated agreement or any document furnished hereunder or thereunder.

 

The co-arrangers, jointbookrunners, co-syndication agents and the documentation agent shall not haveany right, power, obligation, liability, responsibility or duty under thisAgreement other than those applicable to all Lenders as such.

 

ARTICLE IX

 

# Miscellaneous

 

## SECTION 9.01.  Notices.  (a)  Except in the case of notices andother communications expressly permitted to be given by telephone (and subjectto paragraph (b) below), all notices and other communications provided forherein shall be in writing and shall be delivered by hand or overnight courierservice, mailed by certified or registered mail or sent by facsimile, asfollows:

##  

#### (i) if to any LoanParty, to the Borrower at:

 

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OneMarcus Square1618 Main StreetDallas, Texas 75201Attention: General CounselFacsimile No: (214) 743-7611

 

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

####  

ElevenMadison AvenueNew York, NY 10010Attention: Agency GroupFacsimile No: (212) 325-8304

 

#### (iii) if to any otherLender, to it at its address or facsimile number set forth in itsAdministrative Questionnaire.

####  

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

 

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

###  

### (c)  Any party heretomay change its address or facsimile number for notices and other communicationshereunder by notice to the other parties hereto.

###  

## SECTION 9.02.  Waivers; Amendments.  (a)  No failure or delay by the Agent orany Lender in exercising any right or power hereunder or under any other LoanDocument shall operate as a waiver thereof, nor shall any single or partialexercise of any such right or power, or any abandonment or discontinuance ofsteps to enforce such a right or power, preclude any other or further exercisethereof or the exercise of any other right or power.  The rights and remedies of the Agent and theLenders hereunder and under any other Loan Document are cumulative and are notexclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of any LoanDocument or consent to any departure by any Loan Party therefrom shall in anyevent be effective unless the same shall be permitted by paragraph (b) ofthis Section, and then such waiver or consent shall be effective only in thespecific 

 

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## instance and for the purpose for which given.  Without limiting the generality of theforegoing, to the extent permitted by law, the making of a Loan shall not beconstrued as a waiver of any Default, regardless of whether the Agent or anyLender may have had notice or knowledge of such Default at the time.

##  

### (b)  Neither thisAgreement nor any other Loan Document nor any provision hereof or thereof maybe waived, amended or modified except (i) in the case of this Agreement,pursuant to an agreement or agreements in writing entered into by the Borrowerand the Required Lenders or, (ii) in the case of any other Loan Document(other than any such amendment to effectuate any modification thereto expresslycontemplated by the terms of such other Loan Documents), pursuant to anagreement or agreements in writing entered into by the Agent and the Loan Partyor Loan Parties that are parties thereto, with the consent of the RequiredLenders; provided that no such agreement shall (A) increase theCommitment of any Lender without the written consent of such Lender; it beingunderstood that a waiver of any condition precedent set forth in Article IVor the waiver of any Default or mandatory prepayment shall not constitute anincrease of any Commitment of any Lender, (B) reduce or forgive theprincipal amount of any Loan or reduce the rate of interest thereon, or reduceor forgive any interest or fees (including fees set forth in Sections 2.08, 2.19and 2.21) payable hereunder, without the written consent of each Lenderdirectly affected thereby, (C) postpone any scheduled date of payment ofthe 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 orexcuse any such payment, or postpone the scheduled date of expiration of anyCommitment, without the written consent of each Lender directly affectedthereby; provided that only the consent of the Required Lenders shall benecessary to amend the provisions of Section 2.11(c) providing forthe default rate of interest, or to waive any obligations of the Borrower topay 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 theprovisions of this Section or the definition of “Required Lenders” or anyother provision of any Loan Document specifying the number or percentage ofLenders required to waive, amend or modify any rights thereunder or make anydetermination or grant any consent thereunder, without the written consent ofeach Lender, (F) release any material Loan Guarantor from its obligationunder its Loan Guaranty (except as otherwise permitted herein or in the otherLoan Documents), without the written consent of each Lender, or (G) exceptas provided in clauses (c) and (d) of this Section or in anyCollateral Document, release all or substantially all of the Collateral,without the written consent of each Lender; provided further that nosuch agreement shall amend, modify or otherwise affect the rights or duties ofthe Agent hereunder without the prior written consent of the Agent.  The Agent may also amend the Commitment Schedule toreflect assignments entered into pursuant to Section 9.04.

###  

### (c)  The Lenders herebyirrevocably agree that the Liens granted to the Agent by the Loan Parties onany Collateral shall be automatically released (i) upon the termination ofthe Commitments, payment and satisfaction in full in cash of all SecuredObligations (other than Unliquidated Obligations), and the cashcollateralization of all Unliquidated Obligations in a manner satisfactory to theAgent, (ii) upon the sale or other disposition of the propertyconstituting such Collateral (including as part of or in connection with anyother sale or other disposition permitted hereunder) to any Person other thananother Loan Party, to the extent such sale or other disposition is made incompliance with the terms of this Agreement (and the Agent may relyconclusively on a certificate to that effect provided to it by any Loan Partyupon its reasonable request without further inquiry), (iii) to the extentsuch Collateral is comprised of property leased to a Loan Party, upontermination or expiration of such lease, (iv) subject to paragraph (b) ofthis Section 9.02, if the release of such Lien is approved, authorized orratified in writing by the Required Lenders, (v) to the extent theproperty constituting such Collateral is owned by any Loan Guarantor, upon therelease of such Guarantor from its obligations under its Loan Guaranty inaccordance with the provisions of this Agreement, (vi) as required toeffect any sale or other disposition of such 

 

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### Collateral in connection with any exercise of remedies of the Agent andthe Lenders pursuant to the Collateral Documents or (vii) as requiredpursuant to the terms of the Intercreditor Agreement; provided that the Agentmay, in its discretion, release the Lien on Collateral valued in the aggregatenot in excess of $5,000,000 during each fiscal year without consent of anyLender.  Any such release shall notin any manner discharge, affect, or impair the Obligations or any Liens (otherthan those expressly being released) upon (or obligations of the Loan Partiesin respect of) all interests retained by the Loan Parties, including theproceeds of any sale, all of which shall continue to constitute part of theCollateral to the extent required under the provisions of the Loan Documents.

###  

### (d)  Notwithstandinganything to the contrary contained in this Section 9.02, guarantees,collateral security documents and related documents executed by ForeignSubsidiaries in connection with this Agreement may be in a form reasonablydetermined by the Agent and may be amended and waived with the consent of theAgent at the request of the Borrower without the need to obtain the consent ofany other Lenders if such amendment or waiver is delivered in order (i) tocomply with local law or advice of local counsel, (ii) to cure ambiguitiesor defects or (iii) to cause such guarantee, collateral security documentor other document to be consistent with this Agreement and the other LoanDocuments.

###  

### (e)  If, in connectionwith any proposed amendment, waiver or consent requiring the consent of “each Lender”or “each Lender directly affected thereby”, the consent of the Required Lendersis obtained, but the consent of other necessary Lenders is not obtained (anysuch Lender whose consent is necessary but not obtained being referred toherein as a “Non-Consenting Lender”), then the Borrower may elect toreplace a Non-Consenting Lender as a Lender party to this Agreement, providedthat, concurrently with such replacement, (i) another bank or other entitywhich is reasonably satisfactory to the Borrower and the Agent shall agree, asof such date, to purchase for cash the Loans and other Obligations due to theNon-Consenting Lender pursuant to an Assignment and Assumption and to become aLender for all purposes under this Agreement and to assume all obligations ofthe Non-Consenting Lender to be terminated as of such date and to comply withthe requirements of clause (b) of Section 9.04, (ii) thereplacement 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) thereplacement Lender shall grant its consent with respect to the applicableproposed amendment, waiver or consent and (iv) the Borrower shall pay tosuch Non-Consenting Lender in same day funds on the day of such replacement (1) allinterest, fees and other amounts then accrued but unpaid to such Non-ConsentingLender by the Borrower hereunder to and including the date of termination,including without limitation payments due to such Non-Consenting Lender underSections 2.13, 2.15 and 2.21, and (2) an amount, if any, equal to thepayment which would have been due to such Lender on the day of such replacementunder Section 2.14 had the Loans of such Non-Consenting Lender beenprepaid on such date rather than sold to the replacement Lender.

###  

## SECTION 9.03.  Expenses; Indemnity; Damage Waiver.  (a)  The Borrower shall pay (i) allreasonable documented out-of-pocket expenses incurred by the Agent and itsAffiliates, including the reasonable fees, charges and disbursements ofCravath, Swaine & Moore LLP, counsel for the Agent, in connection withthe syndication and distribution (including, without limitation, via theinternet or through a service such as Intralinks) of the credit facilitiesprovided for herein, the preparation of the Loan Documents and relateddocumentation, (ii) all reasonable documented out-of-pocket expensesincurred by the Agent and its Affiliates, including the reasonable fees,charges and disbursements of outside legal counsel to the Agent, in connectionwith any amendments, modifications or waivers of the provisions of any LoanDocuments (whether or not the transactions contemplated thereby shall beconsummated), (iii) all reasonable documented out-of-pocket expensesincurred by the Agent or the Lenders, including the reasonable documented fees,charges and disbursements of any counsel for the Agent and for one law firmretained by the Lenders, in connection with the enforcement, collection or 

 

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## protection of its rights in connection with the Loan Documents,including its rights under this Section, or in connection with the Loans madehereunder, including all such reasonable documented out-of-pocket expensesincurred during any workout, restructuring or related negotiations in respectof 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 Borrowerand the Agent with respect thereto, all reasonable documented out-of-pocketexpenses incurred by the Agent in the administration of the LoanDocuments.  Expenses reimbursable by theBorrower under this Section include, without limiting the generality ofthe foregoing, subject to any other applicable provision of any Loan Document,reasonable documented out-of-pocket costs and expenses incurred in connectionwith:

##  

#### (i) lien and titlesearches and title insurance; and

####  

#### (ii) taxes, fees andother charges for recording the Mortgages, filing financing statements andcontinuations, and other actions to perfect, protect, and continue the Agent’sLiens.

####  

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

 

### (b)  The Borrower shallindemnify the Agent and each Lender, and each Related Party of any of theforegoing Persons (each such Person being called an “Indemnitee”) against, andhold each Indemnitee harmless from, any and all losses, claims, damages,penalties, liabilities and related expenses, including the fees, charges anddisbursements of any counsel for any Indemnitee, incurred by or assertedagainst any Indemnitee arising out of, in connection with, or as a result of (i) theexecution or delivery of the Loan Documents or any agreement or instrumentcontemplated thereby, the performance by the parties hereto of their respectiveobligations thereunder or the consummation of the Transactions or any othertransactions contemplated hereby, (ii) any Environmental Liability relatedin any way to the Borrower or any of its Subsidiaries or to any property ownedor operated by the Borrower or any of its Subsidiaries, or (iii) anyactual or prospective claim, litigation, investigation or proceeding relatingto any of the foregoing, whether based on contract, tort or any other theoryand regardless of whether any Indemnitee is a party thereto (and regardless ofwhether such matter is initiated by a third party or by the Borrower, any otherLoan Party or any of their respective Affiliates); provided that such indemnityshall not, as to any Indemnitee, be available to the extent that such losses,claims, damages, penalties, liabilities or related expenses are determined by acourt of competent jurisdiction by final and nonappealable judgment to haveresulted from the gross negligence or willful misconduct of such Indemnitee.

###  

### (c)  To the extent thatthe Borrower fails to pay any amount required to be paid by it to the Agentunder paragraph (a) or (b) of this Section, each Lender severallyagrees to pay to the Agent such Lender’s Applicable Percentage (determined asof the time that the applicable unreimbursed expense or indemnity payment issought) of such unpaid amount; provided that the unreimbursed expense orindemnified loss, claim, damage, penalty, liability or related expense, as thecase may be, was incurred by or asserted against the Agent in its capacity assuch.

###  

### (d)  To the extentpermitted by applicable law, no party to this Agreement shall assert, and eachhereby waives, any claim against any other party hereto or any Related Party thereof,on any theory of liability, for special, indirect, consequential or punitivedamages (as opposed to direct or actual damages) arising out of, in connectionwith, or as a result of, this Agreement or any agreement or instrumentcontemplated hereby, the Transactions, any Loan or the use of the proceedsthereof.

###  

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

 

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## SECTION 9.04.  Successors and Assigns.  (a)  The provisions of this Agreementshall be binding upon and inure to the benefit of the parties hereto and theirrespective successors and assigns permitted hereby, except that (i) theBorrower may not assign or otherwise transfer any of its rights or obligationshereunder without the prior written consent of each Lender (and any attemptedassignment or transfer by the Borrower without such consent shall be null andvoid) and (ii) no Lender may assign or otherwise transfer its rights orobligations hereunder except in accordance with this Section (anyattempted assignment or transfer not complying with the terms of this Section shallbe null and void).  Nothing in thisAgreement, expressed or implied, shall be construed to confer upon any Person(other than the parties hereto, their respective successors and assignspermitted hereby, Participants (to the extent provided in paragraph (c) ofthis Section) and, to the extent expressly contemplated hereby, the Related Partiesof each of the Agent and the Lenders) any legal or equitable right, remedy orclaim under or by reason of this Agreement.

##  

### (b)  (i) Subjectto the conditions set forth in paragraph (b)(ii) below, any Lender mayassign to one or more Eligible Assignees all or a portion of its rights andobligations under this Agreement (including all or a portion of its Commitment orthe Loans at the time owing to it) with the prior written consent (such consentnot to be unreasonably withheld or delayed) of:

###  

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

 

(B) the Agent.

 

(ii) Assignments shall be subject to the following additionalconditions:

 

(A) except in the case of an assignment to another Lender, anAffiliate of a Lender or an Approved Fund or an assignment of the entireremaining amount of the assigning Lender’s Commitment or Loans, the amount ofthe Commitment or the principal amount of Loans of the assigning Lender subjectto each such assignment (determined as of the date the Assignment and Assumptionwith respect to such assignment is delivered to the Agent and determined on anaggregate basis in the event of concurrent assignments to Related Funds (asdefined below)) shall not be less than $1,000,000 unless each of the Borrowerand the Agent otherwise consent, provided that no such consent of theBorrower 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 aproportionate part of all the assigning Lender’s rights and obligations underthis Agreement;

 

(C) the parties to each assignment shall execute and deliver tothe Agent an Assignment and Assumption via an electronic settlement systemacceptable 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 (whichfee may be waived or reduced in the sole discretion of the Agent and shall notbe payable in the case of any assignment by any Joint Lead Arranger or any ofits Affiliates); provided that only one such fee shall be payable in thecase of concurrent assignments to two or more Related Funds; and

 

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(D)  the assignee, if it shall not be a Lender, shall deliveron or prior to the effective date of such assignment, to the Agent (1) anAdministrative Questionnaire and (2) if applicable, an appropriateInternal Revenue Service form (such as Form W-8BEN or W-8ECI or anysuccessor form adopted by the relevant United States taxing authority) asrequired by applicable law supporting such assignee’s position that nowithholding by any Borrower or the Agent for United States income tax payableby such assignee in respect of amounts received by it hereunder is required.

 

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

 

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

 

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

 

(v) Upon its receipt of a duly completed Assignment and Assumptionexecuted by an assigning Lender and an assignee, the assignee’s completedAdministrative Questionnaire and tax certifications required by Section 9.04(b)(ii)(D)(2)(unlessthe assignee shall already be a Lender hereunder), the processing andrecordation fee referred to in paragraph (b) of this Section andany written consent to such assignment required by paragraph (b) of thisSection, the Agent shall accept such Assignment and Assumption and record theinformation contained therein in the Register; provided that if eitherthe assigning Lender or the assignee shall have failed to make any paymentrequired 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 andrecord the information therein in the Register unless and until such paymentshall have been made in full, together with all accrued interest thereon.  No assignment shall be effective for purposesof this Agreement unless it has been recorded in the Register as provided inthis paragraph.

 

(vi) By executing and delivering an Assignment and Assumption, theassigning Lender thereunder and the assignee thereunder shall be deemed toconfirm to and agree with each other and the 

 

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other parties hereto as follows:  (i) such assigningLender warrants that it is the legal and beneficial owner of the interest beingassigned thereby free and clear of any adverse claim and that its Commitment,and the outstanding balances of its Loans, in each case without giving effectto assignments thereof which have not become effective, are as set forth insuch Assignment and Assumption, (ii) except as set forth in (i) above,such assigning Lender makes no representation or warranty and assumes noresponsibility with respect to any statements, warranties or representationsmade 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 pursuanthereto, or the financial condition of the Borrower or any Subsidiary or theperformance or observance by the Borrower or any Subsidiary of any of itsobligations under this Agreement, any other Loan Document or any otherinstrument or document furnished pursuant hereto; (iii) such assigneerepresents and warrants that it is an Eligible Assignee, legally authorized toenter into such Assignment and Assumption; (iv) such assignee confirmsthat it has received a copy of this Agreement, together with copies of the mostrecent financial statements referred to in Section 3.04(a) ordelivered pursuant to Section 5.01 and such other documents andinformation as it has deemed appropriate to make its own credit analysis anddecision to enter into such Assignment and Assumption; (v) such assigneewill independently and without reliance upon the Agent, such assigning Lenderor any other Lender and based on such documents and information as it shalldeem appropriate at the time, continue to make its own credit decisions intaking or not taking action under this Agreement; (vi) such assigneeappoints and authorizes the Agent to take such action as agent on its behalfand to exercise such powers under this Agreement as are delegated to the Agent,by the terms hereof, together with such powers as are reasonably incidentalthereto; and (vii) such assignee agrees that it will perform in accordancewith their terms all the obligations which by the terms of this Agreement arerequired to be performed by it as a Lender.

 

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

###  

(ii)  AParticipant shall not be entitled to receive any greater payment under Section 2.13or 2.15 than the applicable Lender would have been entitled to receive withrespect to the participation sold to such Participant, unless the sale of theparticipation to such Participant is made with the Borrower’s prior writtenconsent.  A Participant that would be aForeign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15unless the Borrower is notified of the participation sold to 

 

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such Participant and suchParticipant agrees, for the benefit of the Borrower, to comply with Section 2.15(e) asthough it were a Lender.

 

### (d)  Any Lender may atany time pledge or assign a security interest in all or any portion of itsrights under this Agreement to secure obligations of such Lender, includingwithout limitation any pledge or assignment to secure obligations to a FederalReserve Bank, and this Section shall not apply to any such pledge orassignment of a security interest; provided that no such pledge orassignment of a security interest shall release a Lender from any of itsobligations hereunder or substitute any such pledgee or assignee for suchLender as a party hereto.

###  

### (e)  Notwithstandinganything to the contrary contained herein, any Lender (a “Granting Lender”)may grant to a special purpose funding vehicle (an “SPC”), identified assuch in writing from time to time by the Granting Lender to the Agent and theBorrower, the option to provide to the Borrower all or any part of any Loanthat such Granting Lender would otherwise be obligated to make to the Borrowerpursuant to this Agreement; provided that (i) nothing hereinshall constitute a commitment by any SPC to make any Loan, (ii) if an SPCelects not to exercise such option or otherwise fails to provide all or anypart of such Loan, the Granting Lender shall be obligated to make such Loanpursuant to the terms hereof and (iii) no SPC shall be a “creditor” asdefined in Regulation T or a “foreign branch of a broker-dealer” withinthe meaning of Regulation X.  Themaking of a Loan by an SPC hereunder shall utilize the Commitment of theGranting Lender to the same extent, and as if, such Loan were made by suchGranting Lender.  Each party heretohereby agrees that (i) neither the grant to any SPC nor the exercise byany SPC of such option shall increase the costs or expenses or otherwiseincrease or change the obligations of the Borrower under this Agreement(including its obligations under Section 2.13, 2.14 or 2.15), (ii) noSPC shall be liable for any indemnity or similar payment obligation under thisAgreement (all liability for which shall remain with the Granting Lender) and (iii) theGranting Lender shall for all purposes including approval of any amendment, waiveror other modification of any provision of the Loan Documents, remain the Lenderof record hereunder.  In furtherance ofthe foregoing, each party hereto hereby agrees (which agreement shall survivethe termination of this Agreement) that, prior to the date that is one year andone day after the payment in full of all outstanding commercial paper or othersenior indebtedness of any SPC, it will not institute against, or join anyother Person in instituting against, such SPC any bankruptcy, reorganization,arrangement, insolvency or liquidation proceedings under the laws of the UnitedStates or any state thereof.  Inaddition, 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 orto any financial institutions (consented to by the Borrower and Agent)providing liquidity and/or credit support to or for the account of such SPC tosupport the funding or maintenance of Loans and (ii) disclose on aconfidential basis any non-public information relating to its Loans to anyrating agency, commercial paper dealer or provider of any surety, guarantee orcredit or liquidity enhancement to such SPC.

###  

## SECTION 9.05.  Survival.  All covenants, agreements, representationsand warranties made by the Loan Parties in the Loan Documents and in thecertificates or other instruments delivered in connection with or pursuant tothis Agreement or any other Loan Document shall be considered to have beenrelied upon by the other parties hereto and shall survive the execution anddelivery of the Loan Documents and the making of any Loans, regardless of anyinvestigation made by any such other party or on its behalf and notwithstandingthat the Agent or any Lender may have had notice or knowledge of any Default orincorrect representation or warranty at the time any credit is extendedhereunder, and shall continue in full force and effect as long as the principalof or any accrued interest on any Loan or any fee or any other amount payableunder this Agreement is outstanding and unpaid and so long as the Commitmentshave not expired or terminated.  Theprovisions of Sections 2.13, 2.14, 2.15 and 9.03 and 

 

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## Article VIII shall survive and remain in full force and effectregardless of the consummation of the transactions contemplated hereby, the repaymentof the Loans, the expiration or termination of the Commitments or thetermination of this Agreement or any provision hereof.

##  

## SECTION 9.06.  Counterparts; Integration; Effectiveness.  This Agreement may be executed incounterparts (and by different parties hereto on different counterparts), eachof which shall constitute an original, but all of which when taken togethershall constitute a single contract.  ThisAgreement, the other Loan Documents and the Fee Letter and any separate letteragreements with respect to fees payable to the Agent constitute the entirecontract among the parties relating to the subject matter hereof and supersedeany and all previous agreements and understandings, oral or written, relatingto the subject matter hereof.  Except asprovided in Article IV, this Agreement shall become effective when itshall have been executed by the Agent and when the Agent shall have receivedcounterparts hereof which, when taken together, bear the signatures of each ofthe other parties hereto, and thereafter shall be binding upon and inure to thebenefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of asignature page of this Agreement by facsimile shall be effective asdelivery of a manually executed counterpart of this Agreement.

##  

## SECTION 9.07.  Severability.  To the extent permitted by law, any provisionof any Loan Document held to be invalid, illegal or unenforceable in anyjurisdiction shall, as to such jurisdiction, be ineffective to the extent ofsuch invalidity, illegality or unenforceability without affecting the validity,legality and enforceability of the remaining provisions thereof; and theinvalidity of a particular provision in a particular jurisdiction shall notinvalidate such provision in any other jurisdiction.

##  

## SECTION 9.08.  Right of Setoff.  If an Event of Default shall have occurredand be continuing, each Lender and each of its Affiliates is hereby authorizedat any time and from time to time, to the fullest extent permitted by law, toset 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 owingby such Lender or Affiliate to or for the credit or the account of the Borroweror any Loan Guarantor against any of and all the Secured Obligations held bysuch Lender, irrespective of whether or not such Lender shall have made anydemand under the Loan Documents and although such obligations may be unmatured.  The applicable Lender shall notify theBorrower and the Agent of such set-off or application, provided that anyfailure to give or any delay in giving such notice shall not affect thevalidity of any such set-off or application under this Section.  The rights of each Lender under this Section arein addition to other rights and remedies (including other rights of setoff)which such Lender may have. NOTWITHSTANDING THE FOREGOING, AT ANY TIME THAT ANYOF 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 ORTAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY PROCEEDING TO ENFORCEANY PROVISION OF THIS AGREEMENT OR ANY LOAN DOCUMENT UNLESS IT IS TAKEN WITHTHE CONSENT OF THE LENDERS REQUIRED BY SECTION 9.02 OF THIS AGREEMENT, IFSUCH 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 2924OF THE CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THEVALIDITY, PRIORITY, OR ENFORCEABILITY OF THE LIENS GRANTED TO THE AGENTPURSUANT TO THE COLLATERAL DOCUMENTS OR THE ENFORCEABILITY OF THE OBLIGATIONSHEREUNDER, AND ANY ATTEMPTED EXERCISE BY ANY LENDER OR ANY SUCH RIGHT WITHOUTOBTAINING SUCH CONSENT OF THE PARTIES AS REQUIRED ABOVE, SHALL BE NULL ANDVOID.  THIS PARAGRAPH SHALL BE SOLELY FORTHE BENEFIT OF EACH OF THE LENDERS.

 

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## SECTION 9.09.  Governing Law; Jurisdiction; Consent toService of Process.  (a)  THISAGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH INANY OTHER LOAN DOCUMENT) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BYTHE LAWS OF THE STATE OF NEW YORK.

##  

### (b)  Each Loan Partyhereby irrevocably and unconditionally submits, for itself and its property, tothe nonexclusive jurisdiction of any U.S. Federal or New York State courtsitting in the Borough of Manhattan, New York, New York in any action orproceeding arising out of or relating to any Loan Documents, or for recognitionor enforcement of any judgment, and each of the parties hereto herebyirrevocably and unconditionally agrees that all claims in respect of any suchaction or proceeding may be heard and determined in such New York State or, tothe extent permitted by law, in such Federal court.  Each of the parties hereto agrees that afinal judgment in any such action or proceeding shall be conclusive and may beenforced in other jurisdictions by suit on the judgment or in any other mannerprovided by law.  Nothing in thisAgreement or any other Loan Document shall affect any right that the Agent orany Lender may otherwise have to bring any action or proceeding relating tothis Agreement or any other Loan Document against any Loan Party or itsproperties in the courts of any jurisdiction.

###  

### (c)  Each Loan Partyhereby irrevocably and unconditionally waives, to the fullest extent it maylegally and effectively do so, any objection which it may now or hereafter haveto the laying of venue of any suit, action or proceeding arising out of orrelating to this Agreement or any other Loan Document in any court referred toin paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extentpermitted by law, the defense of an inconvenient forum to the maintenance ofsuch action or proceeding in any such court.

###  

### (d)  To the extentpermitted by law, each party to this Agreement hereby irrevocably waivespersonal service of any and all process upon it and agrees that all suchservice 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 LoanDocument will affect the right of any party to this Agreement to serve processin any other manner permitted by law.

###  

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

##  

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

##  

## SECTION 9.12.  Confidentiality.  The Agent and each Lender agrees (and eachLender agrees to cause its SPC, if any) to maintain the confidentiality of theInformation (as defined below), except that Information may be disclosed (a) toits and its Affiliates’ directors, officers, employees and agents, includingaccountants, legal counsel and other advisors (it being understood that thePersons to 

 

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## whom such disclosure is made will be informed of the confidentialnature of such Information and instructed to keep such Informationconfidential), (b) to the extent requested by any regulatory, governmentalor administrative authority, (c) to the extent required by law or by anysubpoena or similar legal process, (d) to any other party to thisAgreement, (e) in connection with the exercise of any remedies hereunderor any suit, action or proceeding relating to this Agreement or any other LoanDocument or the enforcement of rights hereunder or thereunder, (f) subjectto an agreement containing provisions substantially the same as those of thisSection, to (i) any assignee of or Participant in, or any prospectiveassignee of or Participant in, any of its rights or obligations under thisAgreement, including, without limitation, any SPC, (ii) any pledgeereferred to in Section 9.04(d) or (iii) any actual orprospective counterparty (or its advisors) to any swap or derivativetransaction relating to the Loan Parties and their obligations, (g) withthe consent of the Borrower or (h) to the extent such Information (i) becomespublicly available other than as a result of a breach of this Section or (ii) becomesavailable to the Agent or any Lender on a nonconfidential basis from a sourceother than the Borrower.  For thepurposes of this Section, “Information” means all information receivedfrom any Loan Party relating to the Loan Parties or their businesses, theSponsors or the Transactions other than any such information that is availableto the Agent or any Lender on a nonconfidential basis prior to disclosure by anyLoan Party.  Any Person required tomaintain the confidentiality of Information as provided in this Section shallbe considered to have complied with its obligation to do so if such Person hasexercised the same degree of care to maintain the confidentiality of suchInformation as such Person would accord to its own confidential information.

##  

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

##  

## SECTION 9.14.  USA PATRIOT Act.  Each Lender that is subject to therequirements of the USA Patriot Act hereby notifies the Borrower that pursuantto the requirements of the USA Patriot Act, it is required to obtain, verifyand record information that identifies the Borrower, which information includesthe name and address of the Borrower and other information that will allow suchLender to identify the Borrower in accordance with the USA Patriot Act.

##  

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

##  

## SECTION 9.16.  Appointment for Perfection.  Each Lender hereby appoints each other Lenderas its agent for the purpose of perfecting Liens, for the benefit of the Agentand the Lenders, in assets which, in accordance with Article 9 of the UCCor 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 Collateralto the Agent or otherwise deal with such Collateral in accordance with the Agent’sinstructions.

 

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## SECTION 9.17.  Interest Rate Limitation.  Notwithstanding anything herein to thecontrary, if at any time the interest rate applicable to any Loan, togetherwith all fees, charges and other amounts which are treated as interest on suchLoan under applicable law (collectively the “Charges”), shall exceed themaximum lawful rate (the “Maximum Rate”) which may be contracted for,charged, taken, received or reserved by the Lender holding such Loan inaccordance with applicable law, the rate of interest payable in respect of suchLoan hereunder, together with all Charges payable in respect thereof, shall belimited to the Maximum Rate and, to the extent lawful, the interest and Chargesthat would have been payable in respect of such Loan but were not payable as aresult of the operation of this Section shall be cumulated and theinterest and Charges payable to such Lender in respect of other Loans orperiods shall be increased (but not above the Maximum Rate therefor) until suchcumulated amount, together with interest thereon at the Federal Funds EffectiveRate to the date of repayment, shall have been received by such Lender.

##  

## SECTION 9.18.  Effectiveness of the Merger.  Neiman Marcus shall have no rights orobligations hereunder until the consummation of the Merger and any representationsand warranties of Neiman Marcus hereunder shall not become effective until suchtime.  Upon consummation of the Merger,Neiman Marcus succeed to all the rights and obligations of Merger Sub as theBorrower under this Agreement and all representations and warranties of NeimanMarcus as the Borrower shall become effective as of the date hereof, withoutany further action by any Person.

##  

## SECTION 9.19.  INTERCREDITOR AGREEMENT.  **REFERENCEIS MADE TO THE INTERCREDITOR AGREEMENT. EACH LENDER HEREUNDER (A) CONSENTS TO THE SUBORDINATION OF LIENSPROVIDED FOR IN THE INTERCREDITOR AGREEMENT, (B) AGREES THAT IT WILL BEBOUND BY AND WILL TAKE NO ACTIONS CONTRARY TO THE PROVISIONS OF THEINTERCREDITOR AGREEMENT AND (C) AUTHORIZES AND INSTRUCTS THE AGENT TO ENTERINTO THE INTERCREDITOR AGREEMENT AS TERM LOAN AGENT AND ON BEHALF OF SUCHLENDER.  THE FOREGOING PROVISIONS AREINTENDED AS AN INDUCEMENT TO THE LENDERS UNDER THIS AGREEMENT TO EXTEND CREDITAND SUCH LENDERS ARE INTENDED THIRD PARTY BENEFICIARIES OF SUCH PROVISIONS ANDTHE PROVISIONS OF THE INTERCREDITOR AGREEMENT.**

##  

ARTICLE X

 

# Loan Guaranty 

 

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

##  

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

 

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## SECTION 10.03.  No Discharge or Diminishment of LoanGuaranty.  (a)  Except asotherwise provided for herein, the obligations of each Loan Guarantor hereunderare unconditional and absolute and not subject to any reduction, limitation,impairment or termination for any reason (other than the indefeasible paymentin full in cash of the Guaranteed Obligations), including:  (i) any claim of waiver, release,extension, renewal, settlement, surrender, alteration, or compromise of any ofthe Guaranteed Obligations, by operation of law or otherwise; (ii) anychange in the corporate existence, structure or ownership of the Borrower orany other guarantor of or other Person liable for any of the GuaranteedObligations; (iii) any insolvency, bankruptcy, reorganization or other similarproceeding affecting any Obligated Party, or their assets or any resultingrelease or discharge of any obligation of any Obligated Party; or (iv) theexistence of any claim, setoff or other rights which any Loan Guarantor mayhave at any time against any Obligated Party, the Agent, any Lender, or anyother Person, whether in connection herewith or in any unrelated transactions.

##  

### (b)  The obligations ofeach Loan Guarantor hereunder are not subject to any defense or setoff,counterclaim, recoupment, or termination whatsoever by reason of theinvalidity, illegality, or unenforceability of any of the GuaranteedObligations or otherwise, or any provision of applicable law or regulationpurporting to prohibit payment by any Obligated Party, of the Guaranteed Obligationsor any part thereof.

###  

### (c)  Further, theobligations of any Loan Guarantor hereunder are not discharged or impaired or otherwiseaffected by: (i) the failure of the Agent or any Lender to assert anyclaim or demand or to enforce any remedy with respect to all or any part of theGuaranteed Obligations; (ii) any waiver or modification of or supplementto any provision of any agreement relating to the Guaranteed Obligations; (iii) anyrelease, non-perfection, or invalidity of any indirect or direct security forthe obligations of the Borrower for all or any part of the GuaranteedObligations or any obligations of any other guarantor of or other Person liablefor any of the Guaranteed Obligations; (iv) any action or failure to actby the Agent or any Lender with respect to any collateral securing any part ofthe Guaranteed Obligations; or (v) any default, failure or delay, willfulor otherwise, in the payment or performance of any of the GuaranteedObligations, or any other circumstance, act, omission or delay that might inany manner or to any extent vary the risk of such Loan Guarantor or that wouldotherwise operate as a discharge of any Loan Guarantor as a matter of law orequity (other than the indefeasible payment in full in cash of the GuaranteedObligations).

###  

## SECTION 10.04.  Defenses Waived.  To the fullest extent permitted by applicablelaw, each Loan Guarantor hereby waives any defense based on or arising out ofany defense of the Borrower or any Loan Guarantor or the unenforceability ofall or any part of the Guaranteed Obligations from any cause, or the cessationfrom any cause of the liability of the Borrower or any Loan Guarantor, otherthan the indefeasible payment in full in cash of the Guaranteed Obligations.Without limiting the generality of the foregoing, each Loan Guarantorirrevocably waives acceptance hereof, presentment, demand, protest and, to thefullest extent permitted by law, any notice not provided for herein, as well asany requirement that at any time any action be taken by any Person against anyObligated Party, or any other Person. The Agent may, at its election, foreclose on any Collateral held by itby one or more judicial or nonjudicial sales, accept an assignment of any suchCollateral in lieu of foreclosure or otherwise act or fail to act with respectto any collateral securing all or a part of the Guaranteed Obligations,compromise or adjust any part of the Guaranteed Obligations, make any otheraccommodation with any Obligated Party or exercise any other right or remedyavailable to it against any Obligated Party, without affecting or impairing inany way the liability of such Loan Guarantor under this Loan Guaranty except tothe extent the Guaranteed Obligations have been fully and indefeasibly paid incash.  To the fullest extent permitted byapplicable law, each Loan Guarantor waives any defense arising out of any suchelection even though that election 

 

104

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## may operate, pursuant to applicable law, to impair or extinguish anyright of reimbursement or subrogation or other right or remedy of any LoanGuarantor 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 ofsubrogation, contribution or indemnification that it has against any ObligatedParty, or any collateral, until the Loan Parties and the Loan Guarantors havefully 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 ofthe Guaranteed Obligations is rescinded or must otherwise be restored orreturned upon the insolvency, bankruptcy, or reorganization of the Borrower orotherwise, each Loan Guarantor’s obligations under this Loan Guaranty withrespect to that payment shall be reinstated at such time as though the paymenthad not been made. If acceleration of the time for payment of any of theGuaranteed Obligations is stayed upon the insolvency, bankruptcy orreorganization of the Borrower, all such amounts otherwise subject toacceleration under the terms of any agreement relating to the GuaranteedObligations shall nonetheless be payable by the Loan Guarantors forthwith ondemand by the Lender.

##  

## SECTION 10.07.  Information.  Each Loan Guarantor assumes allresponsibility for being and keeping itself informed of the Borrower’sfinancial condition and assets, and of all other circumstances bearing upon therisk of nonpayment of the Guaranteed Obligations and the nature, scope andextent of the risks that each Loan Guarantor assumes and incurs under this LoanGuaranty, and agrees that neither the Agent nor any Lender shall have any dutyto advise any Loan Guarantor of information known to it regarding thosecircumstances or risks.

##  

## SECTION 10.08.  Taxes. All payments of the Guaranteed Obligations will be made by each LoanGuarantor free and clear of and without deduction for any Indemnified Taxes orOther Taxes; provided that if any Loan Guarantor shall be required todeduct any Indemnified Taxes or Other Taxes from such payments, then (i) thesum payable shall be increased as necessary so that after making all requireddeductions (including deductions applicable to additional sums payable underthis Section) the Agent or Lender (as the case may be) receives an amount equalto the sum it would have received had no such deductions been made, (ii) suchLoan Guarantor shall make such deductions and (iii) such Loan Guarantorshall pay the full amount deducted to the relevant Governmental Authority inaccordance with applicable law.

##  

## SECTION 10.09.  Maximum Liability.  The provisions of this Loan Guaranty areseverable, and in any action or proceeding involving any state corporate law,or any state, Federal or foreign bankruptcy, insolvency, reorganization orother law affecting the rights of creditors generally, if the obligations ofany Loan Guarantor under this Loan Guaranty would otherwise be held ordetermined to be avoidable, invalid or unenforceable on account of the amountof such Loan Guarantor’s liability under this Loan Guaranty, then,notwithstanding any other provision of this Loan Guaranty to the contrary, theamount of such liability shall, without any further action by the LoanGuarantors or the Lenders, be automatically limited and reduced to the highestamount that is valid and enforceable as determined in such action or proceeding(such highest amount determined hereunder being the relevant Loan Guarantor’s “MaximumLiability”.  This Section withrespect to the Maximum Liability of each Loan Guarantor is intended solely topreserve the rights of the Lenders to the maximum extent not subject toavoidance under applicable law, and no Loan Guarantor nor any other Person orentity shall have any right or claim under this Section with respect tosuch Maximum Liability, except to the extent necessary so that the obligationsof any Loan Guarantor hereunder shall not be rendered voidable under applicablelaw. Each Loan Guarantor agrees that the Guaranteed Obligations may at any timeand from time to time exceed the Maximum Liability of each Loan Guarantorwithout impairing this Loan Guaranty or affecting the 

 

105

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## rights and remedies of the Lenders hereunder, provided that,nothing in this sentence shall be construed to increase any Loan Guarantor’sobligations hereunder beyond its Maximum Liability.

##  

## SECTION 10.10.  Contribution.  In the event any Loan Guarantor (a “PayingGuarantor”) shall make any payment or payments under this Loan Guaranty orshall suffer any loss as a result of any realization upon any collateralgranted by it to secure its obligations under this Loan Guaranty, each otherLoan Guarantor (each a “Non-Paying Guarantor”) shall contribute to suchPaying Guarantor an amount equal to such Non-Paying Guarantor’s “GuarantorPercentage” of such payment or payments made, or losses suffered, by suchPaying Guarantor.  For purposes of this Article X,each Non-Paying Guarantor’s “Guarantor Percentage” with respect to anysuch payment or loss by a Paying Guarantor shall be determined as of the dateon which such payment or loss was made by reference to the ratio of (i) suchNon-Paying Guarantor’s Maximum Liability as of such date (without giving effectto any right to receive, or obligation to make, any contribution hereunder) or,if such Non-Paying Guarantor’s Maximum Liability has not been determined, theaggregate amount of all monies received by such Non-Paying Guarantor from theBorrower after the date hereof (whether by loan, capital infusion or by othermeans) to (ii) the aggregate Maximum Liability of all Loan Guarantorshereunder (including such Paying Guarantor) as of such date (without givingeffect to any right to receive, or obligation to make, any contributionhereunder), or to the extent that a Maximum Liability has not been determinedfor any Loan Guarantor, the aggregate amount of all monies received by suchLoan Guarantors from the Borrower after the date hereof (whether by loan,capital infusion or by other means). Nothing in this provision shall affect any Loan Guarantor’s severalliability for the entire amount of the Guaranteed Obligations (up to such LoanGuarantor’s Maximum Liability).  Each ofthe Loan Guarantors covenants and agrees that its right to receive anycontribution under this Loan Guaranty from a Non-Paying Guarantor shall besubordinate and junior in right of payment to the payment in full in cash ofthe Guaranteed Obligations.  This provisionis for the benefit of both the Agent, the Lenders and the Loan Guarantors andmay be enforced by any one, or more, or all of them in accordance with theterms hereof.

##  

## SECTION 10.11.  Liability Cumulative.  The liability of each Loan Party as a LoanGuarantor under this Article X is in addition to and shall be cumulativewith all liabilities of each Loan Party to the Agent and the Lenders under thisAgreement and the other Loan Documents to which such Loan Party is a party orin respect of any obligations or liabilities of the other Loan Parties, withoutany limitation as to amount, unless the instrument or agreement evidencing orcreating such other liability specifically provides to the contrary.

##  

## SECTION 10.12.  Release of Loan Guarantors.  Notwithstanding anything in Section 9.02(b) tothe contrary (i) a Subsidiary Guarantor shall automatically be releasedfrom its obligations hereunder and its Loan Guaranty shall be automaticallyreleased upon the consummation of any transaction permitted hereunder as aresult of which such Subsidiary Guarantor ceases to be a subsidiary of theBorrower and (ii) so long as no Event of Default has occurred and iscontinuing (A) if a Loan Guarantor is or becomes an Immaterial Subsidiary,and such release would not result in any Immaterial Subsidiary being requiredpursuant to Section 5.11(e) to become a Loan Party hereunder (exceptto the extent that on and as of the date of such release, one or more otherImmaterial Subsidiaries become Loan Guarantors hereunder and the provisions of Section 5.11(e) aresatisfied upon giving effect to all such additions and releases), or (B) aRestricted Subsidiary is redesignated as an Unrestricted Subsidiary inaccordance with Section 6.04(d), then in the case of each of clauses (A) and(B), such Subsidiary Guarantor shall be automatically released from itsobligations hereunder and its Loan Guaranty shall be automatically releasedupon notification thereof from the Borrower to the Agent.  In connection with any such release, theAgent shall execute and deliver to any Subsidiary Guarantor, at such SubsidiaryGuarantor’s expense, all documents that such Subsidiary Guarantor shallreasonably 

 

106

----

 

## request to evidence such termination or release.  Any execution and delivery of documentspursuant to the preceding sentence of this Section 10.12 shall be withoutrecourse to or warranty by the Agent.

 

107

----

 

IN WITNESS WHEREOF, theparties hereto have caused this Agreement to be duly executed by theirrespective authorized officers as of the day and year first above written.

 

 
|   | NEWTON ACQUISITION MERGER  SUB, INC.,                                                                                                                                                                                                                                                                                                            |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                             |   |
|   | By                                                                                                                                                                                                                                                                                                                                               |   |
|   |                                                                                                                                                                                                                                                                                                                                             | /s/ Kewsong Lee |
|   |                                                                                                                                                                                                                                                                                                                                             | Name: | Kewsong Lee |
|   |                                                                                                                                                                                                                                                                                                                                             | Title: | Senior Vice President |
|   |                                                                                                                                                                                                                                                                                                                                             |   |
|   | NEWTON ACQUISITION, INC.,                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                             |   |
|   | By                                                                                                                                                                                                                                                                                                                                               |   |
|   |                                                                                                                                                                                                                                                                                                                                             | /s/ Nelson A. Bangs |
|   |                                                                                                                                                                                                                                                                                                                                             | Name: | Nelson A. Bangs |
|   |                                                                                                                                                                                                                                                                                                                                             | Title: | Senior Vice President |
|   |                                                                                                                                                                                                                                                                                                                                             |   | and General Counsel |
|   |                                                                                                                                                                                                                                                                                                                                             |   |
|   | THE NEIMAN MARCUS GROUP, INC.,                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                             |   |
|   | By                                                                                                                                                                                                                                                                                                                                               |   |
|   |                                                                                                                                                                                                                                                                                                                                             | /s/ Nelson A. Bangs |
|   |                                                                                                                                                                                                                                                                                                                                             | Name: | Nelson A. Bangs |
|   |                                                                                                                                                                                                                                                                                                                                             | Title: | Senior Vice President |
|   |                                                                                                                                                                                                                                                                                                                                             |   | and General Counsel |
|   |                                                                                                                                                                                                                                                                                                                                             |   |
|   |                                                                                                                                                                                                                                                                                                                                             |   |
|   | NEIMAN  MARCUS SPECIAL EVENTS, INC.

NEMA  BEVERAGE CORPORATION

NM  FINANCIAL SERVICES, INC.

NM  KITCHENS, INC.

BERGDORFGOODMAN.COM,  LLC

BERGDORF  GOODMAN, INC.

BERGDORF  GRAPHICS, INC.

NEIMAN  MARCUS HOLDINGS, INC.

NEMA  BEVERAGE HOLDING CORPORATION

NEMA  BEVERAGE PARENT CORPORATION

WORTH  AVENUE LEASING COMPANY

NMGP, LLC, |
|   |                                                                                                                                                                                                                                                                                                                                             |   |
|   | By                                                                                                                                                                                                                                                                                                                                               |   |
|   |                                                                                                                                                                                                                                                                                                                                             | /s/ Nelson A. Bangs |
|   |                                                                                                                                                                                                                                                                                                                                             | Name: | Nelson A. Bangs |
|   |                                                                                                                                                                                                                                                                                                                                             | Title: | Vice President |

 

108

----

 
|   | NM NEVADA TRUST, |
|--------|------------------|
|   |             |   |
|   | By               |   |
|   |             | /s/ Nelson A. Bangs |
|   |             | Name: | Nelson A. Bangs |
|   |             | Title: | Vice President |

 

109

----

 
|   | CREDIT SUISSE, CAYMAN ISLANDS BRANCH, individually and as Agent, |
|--------|------------------------------------------------------------------|
|   |                                                             |   |
|   | By                                                               |   |
|   |                                                             | /s/ Robert Hetu |
|   |                                                             | Name: | Robert Hetu |
|   |                                                             | Title: | Director |
|   |                                                             |   |
|   | By                                                               |   |
|   |                                                             | /s/ Vanessa Gomez |
|   |                                                             | Name: | Vanessa Gomez |
|   |                                                             | Title: | Vice President |

 

110

----

 

COMMITMENTSCHEDULE

 
| **Lender**                                                         | ** ** | **Commitment** | ** **        |
|--------------------------------------------------------------------|------------|----------------|-------------------|
| Credit Suisse                                                      |       | $              | 1,950,000,000     |   |
| Deutsche Bank Trust Company Americas                               |       | $              | 5,000,000         |   |
| Wachovia Bank, N.A.                                                |       | $              | 5,000,000         |   |
| LaSalle Retail Finance, a Division of LaSalle Business Credit, LLC |       | $              | 3,000,000         |   |
| National City Bank                                                 |       | $              | 3,000,000         |   |
| PNC Bank, N.A.                                                     |       | $              | 3,000,000         |   |
| The Bank of New York                                               |       | $              | 2,000,000         |   |
| U.S. Bank, National Association                                    |       | $              | 2,000,000         |   |
| Credit Industriel et Commercial                                    |       | $              | 2,000,000         |   |
| **Total**                                                          | ** ** | **$**          | **1,975,000,000** | ** ** |

 

----

 

**SCHEDULE 1.01(a)**

 

**Immaterial Subsidiaries**

 

Willow Bend BeverageCorporation

 

----

 

**SCHEDULE 1.01(b)**

 

**Mortgaged Properties**

 
| **Store**              | ** ** | **Address**                                                                            | ** ** | **County**           |
|------------------------|------------|----------------------------------------------------------------------------------------|------------|----------------------|
| ** **             | ** ** | ** **                                                                             | ** ** | ** **           |
| **Owned**              |       |                                                                                   |       |                 |
| ** **             |       |                                                                                   |       |                 |
| San Francisco          |       | 150 Stockton Street   San Francisco, CA 94108                                          |       | San Francisco County |
|                   |       |                                                                                   |       |                 |
| Tyson’s Corner II |       | 2255 International Drive   McLean, VA 22102                                            |       | Fairfax County       |
|                   |       |                                                                                   |       |                 |
| Plano Willowbend       |       | 2201 Dallas Pkwy   Plano, TX 75093                                                     |       | Collin County        |
|                   |       |                                                                                   |       |                 |
| Orlando                |       | 4170 Conroy Rd   Orlando, FL 32839                                                     |       | Orange County        |
|                   |       |                                                                                   |       |                 |
| San Antonio            |       | The Shops at La Cantera   15900 La Cantera Parkway   San Antonio, TX 78357             |       | Bexar County         |
|                   |       |                                                                                   |       |                 |
| **Leased**             |       |                                                                                   |       |                 |
| ** **             |       |                                                                                   |       |                 |
| Houston Galleria       |       | 2600 S. Post Oak Blvd.   Houston, TX 77056                                             |       | Harris County        |
|                   |       |                                                                                   |       |                 |
| Short Hills            |       | 1200 Morris Tnpke   Short Hills, NJ 07078                                              |       | Essex County         |
|                   |       |                                                                                   |       |                 |
| King of Prussia        |       | The Plaza   170 North Gulph Rd.   King of Prussia, PA 19406   Township of Upper Merion |       | Montgomery County    |
|                   |       |                                                                                   |       |                 |
| Scottsdale             |       | 6900 East Camelback Road   Scottsdale, AZ 85251                                        |       | Maricopa County      |
|                   |       |                                                                                   |       |                 |
| Troy                   |       | 2705 West Big Beaver Road   Troy, MI 48084                                             |       | Oakland County       |

 

2

----

 
| Paramus                            |   | 503 Garden State Plaza   Paramus, NJ 07652                                   |   | Bergen County       |
|------------------------------------|--------|------------------------------------------------------------------------------|--------|---------------------|
|                               |   |                                                                         |   |                |
| Fort Lauderdale                    |   | 2442 East Sunrise   Boulevard Ft.   Lauderdale, FL 33304                     |   | Broward County      |
|                               |   |                                                                         |   |                |
| Coral Gables                       |   | 390 San Lorenzo Avenue   Coral Gables, FL 33146                              |   | Miami-Dade County   |
|                               |   |                                                                         |   |                |
| Palo Alto                          |   | 400 Stamford Shop Center   Palo Alto, CA 94304                               |   | Santa Clara County  |
|                               |   |                                                                         |   |                |
| Denver                             |   | Cherry Creek Mall   3030 East 1st Avenue   Denver, CO 80206                  |   | Denver County       |
|                               |   |                                                                         |   |                |
| Tampa Bay                          |   | 2223 WestShore Blvd.   Tampa, FL 33607                                       |   | Hillsborough County |
|                               |   |                                                                         |   |                |
| Los Angeles                        |   | 9700 Wilshire Boulevard   Beverly Hills, CA 90212                            |   | Los Angeles County  |
|                               |   |                                                                         |   |                |
| Northpark                          |   | 400 Northpark Center   Dallas, TX 75225                                      |   | Dallas County       |
|                               |   |                                                                         |   |                |
| Atlanta                            |   | 3393 Peachtree Road, N.E.   Atlanta, GA 30326                                |   | Fulton County       |
|                               |   |                                                                         |   |                |
| Westchester                        |   | Maple & Paulding  Avenues   (2 Maple Ave.)   White Plains, NY 10601 |   | Westchester County  |
|                               |   |                                                                         |   |                |
| Fashion Island(1)                  |   | 601 Newport Center Drive   Newport Beach, CA 92660                           |   | Orange County       |
|                               |   |                                                                         |   |                |
| Washington                         |   | 5300 Wisconsin Avenue, N.W.  Washington DC 20015                             |   | Washington DC       |
|                               |   |                                                                         |   |                |
| Bergdorf Goodman Men’s  Store |   | 745 Fifth Avenue   New York, NY 10019                                        |   | New York County     |

 

----

(1) The executed mortgage for this site will bedelivered on the Closing Date to First American Title Insurance Company to beheld in escrow until such time as the Borrower may, using commerciallyreasonable efforts, obtain the landlord’s consent to grant the mortgage.

 

3

----

 

**SCHEDULE 3.05(a)**

 

**Properties**

 

I. Real Estate Owned orLeased

 

**The Neiman Marcus Group, Inc. (or “NMG”)**

 
| **ADDRESS**           | ** ** | **CITY**   | ** ** | **STATE**  | ** ** | **ZIP**    | ** ** | **LESSOR(S) (IF********APPLICABLE)**                                                  |
|-----------------------|------------|------------|------------|------------|------------|------------|------------|--------------------------------------------------------------------------------------------|
| ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                                                                 |
| 1618 Main Street      |       | Dallas     |       | TX         |       | 75201      |       | Trustees of the Estate ofJames Charles O’Connor                                       |
|                  |       |       |       |       |       |       |       |                                                                                       |
|                  |       |       |       |       |       |       |       | Trustee for S.P. CimiottiTrust Gregg Edwards                                               |
|                  |       |       |       |       |       |       |       |                                                                                       |
|                  |       |       |       |       |       |       |       | Cholly Edwards                                                                             |
|                  |       |       |       |       |       |       |       |                                                                                       |
|                  |       |       |       |       |       |       |       | Carolyn Edwards Kazmann                                                                    |
|                  |       |       |       |       |       |       |       |                                                                                       |
|                  |       |       |       |       |       |       |       | Dallas Foundation Trust                                                                    |
|                  |       |       |       |       |       |       |       |                                                                                       |
|                  |       |       |       |       |       |       |       | Trustees for C.C. Slaughter William Slaughter Rogers                                       |
|                  |       |       |       |       |       |       |       |                                                                                       |
|                  |       |       |       |       |       |       |       | Nancy MacGregor RogersO’Neil                                                          |
|                  |       |       |       |       |       |       |       |                                                                                       |
|                  |       |       |       |       |       |       |       | Richard Slaughter Bauer                                                                    |
|                  |       |       |       |       |       |       |       |                                                                                       |
|                  |       |       |       |       |       |       |       | SunTrust Bank N.A.                                                                         |
|                  |       |       |       |       |       |       |       |                                                                                       |
|                  |       |       |       |       |       |       |       | Pacifico Partners, Ltd.                                                                    |
|                  |       |       |       |       |       |       |       |                                                                                       |
| Commerce St.          |       | Dallas     |       | TX         |       | 75201      |       | Dalpark Partners, Ltd                                                                      |
|                  |       |       |       |       |       |       |       |                                                                                       |
| 400 North Park Center |       | Dallas     |       | TX         |       | 75225      |       | Raymond D. Nasher                                                                          |
|                  |       |       |       |       |       |       |       |                                                                                       |
| 2201 Dallas Parkway   |       | Plano      |       | TX         |       | 75093      |       | Owned by NMG                                                                               |
|                  |       |       |       |       |       |       |       |                                                                                       |
| 2100 Green Oaks Rd.   |       | Ft. Worth  |       | TX         |       | 76116      |       | Eversan Limited Partnership(77%) and SusanSandelman, as Trustee of theSansteve Trust (23%) |
|                  |       |       |       |       |       |       |       |                                                                                       |
| 2600 S. Post Oak Road |       | Houston    |       | TX         |       | 77056      |       | Galleria Limited, Inc.                                                                |

 

4

----

 
| **ADDRESS**                                   | ** ** | **CITY**        | ** ** | **STATE**  | ** ** | **ZIP**    | ** ** | **LESSOR(S) (IF********APPLICABLE)**               |
|-----------------------------------------------|------------|-----------------|------------|------------|------------|------------|------------|---------------------------------------------------------|
| ** **                                    | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                              |
| 3393 Peachtree Rd.,NE                         |       | Atlanta         |       | GA         |       | 30326      |       | The Retail Property TrustBroad Atlantic PropertiesCorp. |
|                                          |       |            |       |       |       |       |       |                                                    |
| 9700 Collins Avenue                           |       | Bal Harbour     |       | FL         |       | 33154      |       | Bal Harbour Shops, Inc.                            |
|                                          |       |            |       |       |       |       |       |                                                    |
| 2442 E. Sunrise Blvd.                         |       | Ft. Lauderdale  |       | FL         |       | 33304      |       | Keystone-Florida PropertyHolding Corp.                  |
|                                          |       |            |       |       |       |       |       |                                                    |
| 151 Worth Avenue                              |       | Palm Beach      |       | FL         |       | 33480      |       | 151 Worth AvenuePartnership, Ltd.                       |
|                                          |       |            |       |       |       |       |       |                                                    |
| 2223 Westshore Blvd.                          |       | Tampa           |       | FL         |       | 33607      |       | Tampa WestshoreAssociates, LLP                          |
|                                          |       |            |       |       |       |       |       |                                                    |
| The Mall at Millenia  4170 Conroy Road        |       | Orlando         |       | FL         |       | 32839      |       | NMG Owned Property                                      |
|                                          |       |            |       |       |       |       |       |                                                    |
| Village of MerrickPark   390 San Lorenzo      |       | Coral Gables    |       | FL         |       | 33146      |       | Rouse-Coral Gables, LLC                                 |
|                                          |       |            |       |       |       |       |       |                                                    |
| Maple & PauldingAve.                 |       | White Plains    |       | NY         |       | 10601      |       | Fashion Mall Partners, LP                               |
|                                          |       |            |       |       |       |       |       |                                                    |
| 2255 International Dr.                        |       | McLean          |       | VA         |       | 22102      |       | Owned by NMG                                            |
|                                          |       |            |       |       |       |       |       |                                                    |
| 503 Garden State Plaza                        |       | Paramus         |       | NJ         |       | 07652      |       | Westland Garden StatePlaza, LP                          |
|                                          |       |            |       |       |       |       |       |                                                    |
| The Plaza @ King ofPrussia,  170 N. GulphRoad |       | King of Prussia |       | PA         |       | 19406      |       | King of Prussia Associates                              |
|                                          |       |            |       |       |       |       |       |                                                    |
| 1200 Morris Turnpike                          |       | Short Hills     |       | NJ         |       | 07078      |       | Short Hills Associates                                  |
|                                          |       |            |       |       |       |       |       |                                                    |
| 5 Copley Place                                |       | Boston          |       | MA         |       | 02116      |       | 7611- Copley PlaceAssociates, LLC                       |
|                                          |       |            |       |       |       |       |       |                                                    |
| 5300 Wisconsin Ave.,N.W.                      |       | Washington      |       | DC         |       | 20015      |       | TIAA-CREF                                               |
|                                          |       |            |       |       |       |       |       |                                                    |
| 2705 W. Big Beaver                            |       | Troy            |       | MI         |       | 48048      |       | Somerset Collection LimitedPartnership                  |
|                                          |       |            |       |       |       |       |       |                                                    |
| 100 Plaza Frontenac                           |       | St. Louis       |       | MO         |       | 63131      |       | BROAD FRONTENACASSOC                                    |
|                                          |       |            |       |       |       |       |       |                                                    |
| 505 Nicollet Mallon 5th St.                   |       | Minneapolis     |       | MN         |       | 55402      |       | Brookfield DB Inc.                                      |
|                                          |       |            |       |       |       |       |       |                                                    |
| 737 N. Michigan Avenue                        |       | Chicago         |       | IL         |       | 60611      |       | M & J Wilkow, Ltd.                             |

 

5

----

 
| **ADDRESS**                                  | ** ** | **CITY**      | ** ** | **STATE**  | ** ** | **ZIP**    | ** ** | **LESSOR(S) (IF********APPLICABLE)**                                                                                                             |
|----------------------------------------------|------------|---------------|------------|------------|------------|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                   | ** ** | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                                                                                                                            |
| 6 Oakbrook Center                            |       | Oak Brook     |       | IL         |       | 60523      |       | Urban Investment andDevelopment Company                                                                                                               |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
|                                         |       |          |       |       |       |       |       | ML Dover Associates                                                                                                                                   |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
| 5000 Northbrook Ct.                          |       | Northbrook    |       | IL         |       | 60062      |       | General Growth Properties                                                                                                                             |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
|                                         |       |          |       |       |       |       |       | Westcoast Estates                                                                                                                                     |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
| 9700 Wilshire Blvd.                          |       | Beverly Hills |       | CA         |       | 90212      |       | Joan Keller Selznick, LarryLarson, and asAdministrator of the Estatesof Melissa Oshier andFlorence Selznick Howard, Susan Archer  and BarbaraSelznick |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
|                                         |       |          |       |       |       |       |       | Larry Larson                                                                                                                                          |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
|                                         |       |          |       |       |       |       |       | Estate of Melissa OshierLarson                                                                                                                        |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
|                                         |       |          |       |       |       |       |       | Barbara Smalley-Selznick                                                                                                                              |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
|                                         |       |          |       |       |       |       |       | Joan Keller-Selznick                                                                                                                                  |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
|                                         |       |          |       |       |       |       |       | Larry Larson as SpecialAdministrator Re: theEstate of Florence SelznickHoward                                                                         |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
| 150 Stockton St.                             |       | San Francisco |       | CA         |       | 94108      |       | Owned by NMG                                                                                                                                          |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
| Scottsdale FashionSquare6900 E. CamelbackRd. |       | Scottsdale    |       | AZ         |       | 85251      |       | Business Realty of Arizona,Inc.                                                                                                                       |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
|                                         |       |          |       |       |       |       |       | Scottsdale Fashion SquarePartnership                                                                                                                  |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
| 601 Newport CenterDr.                        |       | Newport Beach |       | CA         |       | 92660      |       | The Irvine Company RetailProperties-Fashion Island                                                                                                    |
|                                         |       |          |       |       |       |       |       |                                                                                                                                                  |
| 400 Stanford Shop.Ctr.                       |       | Palo Alto     |       | CA         |       | 94304      |       | The Trustees of The LelandStandford Junior University                                                                                                 |

 

6

----

 
| **ADDRESS**                                | ** ** | **CITY**       | ** ** | **STATE**  | ** ** | **ZIP**    | ** ** | **LESSOR(S) (IF  APPLICABLE)**                          |
|--------------------------------------------|------------|----------------|------------|------------|------------|------------|------------|--------------------------------------------------------------|
| ** **                                 | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                                   |
| 1450 Ala Moana Blvd.                       |       | Honolulu       |       | HI         |       | 96814      |       | D/E Hawaii Joint VentureHawaii CentralDevelopment, Inc. |
|                                       |       |           |       |       |       |       |       |                                                         |
|                                       |       |           |       |       |       |       |       | Fujiyama, Duffy &Fujiyama                           |
|                                       |       |           |       |       |       |       |       |                                                         |
| Fashion Valley Center7027 Friars Road      |       | San Diego      |       | CA         |       | 92108      |       | I.T.C. Fashion ValleyCorporation                             |
|                                       |       |           |       |       |       |       |       |                                                         |
|                                       |       |           |       |       |       |       |       | ML Dover Associates                                          |
|                                       |       |           |       |       |       |       |       |                                                         |
| Cherry Creek Mall3030 E. 1st Avenue        |       | Denver         |       | CO         |       | 80206      |       | Taubman—Cherry Creek, LP                                |
|                                       |       |           |       |       |       |       |       |                                                         |
| 15900 LaCanteraParkway, Suite 14      |       | San Antonio    |       | TX         |       | 78256      |       | Owned by NMG                                                 |
|                                       |       |           |       |       |       |       |       |                                                         |
| 5860 Glades Road                           |       | Boca Raton     |       | FL         |       | 33431      |       | The Town Center at BocaRaton Trust                           |
|                                       |       |           |       |       |       |       |       |                                                         |
| 32100 Las VegasBlvd. South, Suite 116 |       | Primm          |       | NV         |       | 89019      |       | Fashion Outlet of Las VegasAssociates                        |
|                                       |       |           |       |       |       |       |       |                                                         |
| 934 Grapevine Court                        |       | Central Valley |       | NY         |       | 10917      |       | Chelsea GCA RealtyPartnership, LP                            |
|                                       |       |           |       |       |       |       |       |                                                         |
| 651 Kapkowski Rd.,Suite 0200          |       | Elizabeth      |       | NJ         |       | 07201      |       | JG Elizabeth, LLC                                            |
|                                       |       |           |       |       |       |       |       |                                                         |
| 4115 Capital of TexasHwy. S.               |       | Austin         |       | TX         |       | 78704      |       | Austin Retail BOA I & II                            |
|                                       |       |           |       |       |       |       |       |                                                         |
| 5000 Arizona MillsCir.                     |       | Tempe          |       | AZ         |       | 85282      |       | Arizona Mills, LLC                                           |
|                                       |       |           |       |       |       |       |       |                                                         |
| 4030 Baldwin Road                          |       | Auburn Hills   |       | MI         |       | 48326      |       | Taubman Auburn HillsAssociates LimitedPartnership            |
|                                       |       |           |       |       |       |       |       |                                                         |
| 1634 Franklin MillsCir.                    |       | Philadelphia   |       | PA         |       | 19154      |       | Franklin Mills Associates,L.P.                               |
|                                       |       |           |       |       |       |       |       |                                                         |
| 12801 W. SunriseBlvd.                      |       | Sunrise        |       | FL         |       | 33323      |       | Sawgrass Mills Phase II, LP                                  |
|                                       |       |           |       |       |       |       |       |                                                         |
| 5900 Sugarloaf Pkwy.Space 235/A4           |       | Lawrenceville  |       | GA         |       | 30043      |       | Sugarloaf Mills, L.P.                                        |

 

7

----

 
| **ADDRESS**                                  | ** ** | **CITY**        | ** ** | **STATE**  | ** ** | **ZIP**    | ** ** | **LESSOR(S) (IF  APPLICABLE)**               |
|----------------------------------------------|------------|-----------------|------------|------------|------------|------------|------------|---------------------------------------------------|
| ** **                                   | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                        |
| 3000 Grapevine MillsPkwy. Suite 233     |       | Grapevine Mills |       | TX         |       | 76051      |       | Grapevine Mills IV LimitedPartnership             |
|                                         |       |            |       |       |       |       |       |                                              |
| 14500 W. Colfax Ave.Space 241                |       | Lakewood        |       | CO         |       | 80401      |       | Colorado Mills LimitedPartnership                 |
|                                         |       |            |       |       |       |       |       |                                              |
| 11441 NW 12th St.#D100                       |       | Miami           |       | FL         |       | 33172      |       | Taubman-Dolphin MallAssociates, LLC               |
|                                         |       |            |       |       |       |       |       |                                              |
| 5000 Katy Mills CircleSuite 321         |       | Katy            |       | TX         |       | 77494      |       | Katy Mills, LimitedPartnership                    |
|                                         |       |            |       |       |       |       |       |                                              |
| 4061 Camino de laPlaza — Suite 490 |       | San Diego       |       | CA         |       | 92173      |       | PCCP/SB Las Americas,LLC                          |
|                                         |       |            |       |       |       |       |       |                                              |
| Prime Outlets @ SanMarcos 3939-IH-35South    |       | San Marcos      |       | TX         |       | 78666      |       | Prime Outlets at San MarcosII Limited Partnership |
|                                         |       |            |       |       |       |       |       |                                              |
| 7000 Arundel Mills Cir. — Suite D-2     |       | Hanover         |       | MD         |       | 21076      |       | Arundel Mills LimitedPartnership                  |
|                                         |       |            |       |       |       |       |       |                                              |
| 3046 Mockingbird Ln.                         |       | Dallas          |       | TX         |       | 75205      |       | Park Cities Village JointVenture                  |
|                                         |       |            |       |       |       |       |       |                                              |
| 3400 Preston Rd.Suite 210               |       | Plano           |       | TX         |       | 75093      |       | Thames Financial Services,LTD.                    |
|                                         |       |            |       |       |       |       |       |                                              |
| 754 5th Avenue                               |       | New York        |       | NY         |       | 10019      |       | 754 Fifth Avenue Associates                       |
|                                         |       |            |       |       |       |       |       |                                              |
| 745 5th Avenue                               |       | New York        |       | NY         |       | 10022      |       | 745 AssociatesWvF-Paramount 745Property, LP       |
|                                         |       |            |       |       |       |       |       |                                              |
| 625 Madison Avenue                           |       | New York        |       | NY         |       | 10022      |       | 625 Madison AvenueAssociates, L.P.                |
|                                         |       |            |       |       |       |       |       |                                              |
| 43-30 24th Street                            |       | Long IslandCity |       | NY         |       | 11101      |       | Leon Levin & Sons, Inc.             |
|                                         |       |            |       |       |       |       |       |                                              |
| 1201 Elm Street                              |       | Dallas          |       | TX         |       | 75270      |       | Trizechahn RenaissanceTower, LP                   |
|                                         |       |            |       |       |       |       |       |                                              |
| 1700 Pacific                                 |       | Dallas          |       | TX         |       | 75201      |       | Berkeley First City, LP                           |
|                                         |       |            |       |       |       |       |       |                                              |
| 1450 Broadway                                |       | New York        |       | NY         |       | 10018      |       | 1450 Broadway Associates,LLC                      |
|                                         |       |            |       |       |       |       |       |                                              |
| 125 Worth Avenue                             |       | Palm Beach      |       | FL         |       | 33480      |       | 125 Worth Ave. Ltd.Partnership                    |

 

8

----

 
| **ADDRESS**                          | ** ** | **CITY**      | ** ** | **STATE** | ** ** | **ZIP** | ** ** | **LESSOR(S) (IF  APPLICABLE)**                                              |
|--------------------------------------|------------|---------------|------------|-----------|------------|---------|------------|----------------------------------------------------------------------------------|
|                                 |       |          |       |      |       |    |       |                                                                             |
| Space I-2A, 670 AuahiStreet          |       | Honolulu      |       | HI        |       | 96813   |       | Campbell Hawaii Investor, LLC                                                    |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 9701 Wilshire Blvd.                  |       | Beverly Hills |       | CA        |       | 90212   |       | Lantana Wilshire Associates, LP                                                  |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 400 E. Royal LaneSuite 112      |       | Irving        |       | TX        |       | 75039   |       | Charter DCC Partners                                                             |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 5044 Sharp Street                    |       | Dallas        |       | TX        |       | 75247   |       | ProLogis LimitedPartnership II                                                   |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 2301 Neiman MarcusPkwy.              |       | Longview      |       | TX        |       | 75602   |       | Longview Warehouse andStorage, Ltd.                                              |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 5950 Colwell Blvd.                   |       | Irving        |       | TX        |       | 75039   |       | Owned by NMG                                                                     |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 4121 Pinnacle PointDr.               |       | Dallas        |       | TX        |       | 75211   |       | PDC Properties, Inc.Pinnacle West Land, L.P.                                |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 2784 Executive Way                   |       | Miramar       |       | FL        |       | 33025   |       | Sunbeam Properties, Inc.                                                    |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 9501 Winona                          |       | Schiller Park |       | IL        |       | 60175   |       | Northern Equities, LLC,Trustee U/T   26-2649-00

 

Winona Building Account |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 2500 S. Workman MillCity of Industry |       | Whittier      |       | CA        |       | 90601   |       | RR&C Development Co.                                                         |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 3302 Miller Road,Suite 700      |       | Garland       |       | TX        |       | 75041   |       | Duke-Weeks Realty LimitedPartnership                                             |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 727 Regal Row                        |       | Dallas        |       | TX        |       | 75247   |       | Charter Asset Management,LP                                                      |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 1125 Globe Avenue                    |       | Mountainside  |       | NJ        |       | 07092   |       | Jackal Holdings, LLC                                                             |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 8919 Diplomacy Row                   |       | Dallas        |       | TX        |       | 75247   |       | Cullum-Thomas                                                                    |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 3832 Green IndustrialWay             |       | Chamblee      |       | GA        |       | 30341   |       | MDM Family, LP                                                                   |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 3393 Peachtree RoadNE                |       | Atlanta       |       | GA        |       | 30326   |       | Lenox Square                                                                     |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 3225 Third Street                    |       | San Francisco |       | CA        |       | 94124   |       | William D SpencerSpencer Properties                                              |
|                                 |       |          |       |      |       |    |       |                                                                             |
| 261 S. KenmoreAvenue                 |       | Los Angeles   |       | CA        |       | 90004   |       | Mr. Young Hoon Choi                                                         |

 

9

----

 
| **ADDRESS**                                           | ** ** | **CITY**       | ** ** | **STATE**  | ** ** | **ZIP**    | ** ** | **LESSOR(S) (IF  APPLICABLE)**    |
|-------------------------------------------------------|------------|----------------|------------|------------|------------|------------|------------|----------------------------------------|
| ** **                                            | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                             |
| Opakapaka Street                                      |       | Kapolai        |       | HI         |       |       |       | Fort Street InvestmentCorporation      |
|                                                  |       |           |       |       |       |       |       |                                   |
| 2700 Post Oak                                         |       | Houston        |       | TX         |       | 77056      |       | Walton Houston GalleriaOffice, L.P.    |
|                                                  |       |           |       |       |       |       |       |                                   |
| 1499 N. Post Oak                                      |       | Houston        |       | TX         |       | 77055      |       | Warehouse Associates                   |
|                                                  |       |           |       |       |       |       |       |                                   |
| 3585 S. HighlandDrive                                 |       | Las Vegas      |       | NV         |       | 89103      |       | Plaza Vegas Ministorage                |
|                                                  |       |           |       |       |       |       |       |                                   |
| Storage Room M1 @Galleria                        |       | Ft. Lauderdale |       | FL         |       | 33304      |       | Keystone-Florida PropertyHolding Corp. |
|                                                  |       |           |       |       |       |       |       |                                   |
| Storage Space 2137-S@ Scottsdale FashionSquare Center |       | Scottsdale     |       | AZ         |       | 85251      |       | Scottsdale Fashion SquarePartnership   |

 

**NM Nevada Trust**

 
| **ADDRESS**             | ** ** | **CITY**  | ** ** | **STATE** | ** ** | **ZIP** | ** ** | **LESSORS**                                                                     |
|-------------------------|------------|-----------|------------|-----------|------------|---------|------------|---------------------------------------------------------------------------------|
|                    |       |      |       |      |       |    |       |                                                                            |
| 3200 Las VegasBlvd. So. |       | Las Vegas |       | NV        |       | 89109   |       | H-S Las Vegas Associates

 

Rouse FS, LLC and Fashion Show Expansion, LLC |

 

10

----

 

II.Principal Place of Business and Chief Executive Office of each Loan Party

 
| **Loan Party**                          | ** ** | **Principal place of business**                              | ** ** | **Chief executive office**                                 |
|-----------------------------------------|------------|--------------------------------------------------------------|------------|------------------------------------------------------------|
| ** **                              | ** ** | ** **                                                   | ** ** | ** **                                                 |
| Newton  Acquisition, Inc.          |       | 301 Commerce Street,  Suite 3300  Forth Worth, TX 76102 |       | 301 Commerce Street,  Suite 3300Forth Worth, TX 76102 |
|                                    |       |                                                         |       |                                                       |
| Newton Acquisition  Sub, Inc. (2)  |       | 301 Commerce Street,  Suite 3300Forth Worth, TX 76102   |       | 301 Commerce Street,  Suite 3300Forth Worth, TX 76102 |
|                                    |       |                                                         |       |                                                       |
| The Neiman Marcus  Group, Inc.     |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| Bergdorf Goodman, Inc.             |       | 754 Fifth AvenueNew York, NY 10019                           |       | 754 Fifth AvenueNew York, NY 10019                         |
|                                    |       |                                                         |       |                                                       |
| Bergdorf  Graphics, Inc.           |       | 754 Fifth AvenueNew York, NY 10019                           |       | 754 Fifth AvenueNew York, NY 10019                         |
|                                    |       |                                                         |       |                                                       |
| BergdorfGoodman.com, LLC                |       | 5950 Colwell Blvd.Irving, TX 75039                           |       | 5950 Colwell Blvd.Irving, TX 75039                         |
|                                    |       |                                                         |       |                                                       |
| NEMA Beverage Corporation               |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| NEMA Beverage Holding Corporation       |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| NEMA Beverage Parent Corporation        |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| NM Financial  Services, Inc.       |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| NMGP, LLC                               |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| NM Kitchens, Inc.                  |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| NM Nevada Trust                         |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| Neiman Marcus  Holdings, Inc.      |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| Neiman Marcus Special Events, Inc. |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| Willow Bend Beverage Corporation        |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |
|                                    |       |                                                         |       |                                                       |
| Worth Avenue Leasing  Company           |       | 1618 Main StreetDallas, TX 75201                             |       | 1618 Main StreetDallas, TX 75201                           |

 

----

(2) Is a Loan Party (theBorrower) prior to the Merger.

 

11

----

 

**SCHEDULE 3.05(g)**

 

Intellectual Property

 

NONE

 

12

----

** **

**SCHEDULE 3.06**

 

**Disclosed Matters**

 

NECA-IBEW Pension Fund (TheDecatur Plan) v. The Neiman Marcus Group, Inc. et al. (CA No. 3-05CV-0898B)

 

13

----

 

**SCHEDULE 3.14**

 

**Insurance**

 

SEE FOLLOWING PAGES

 

14

----

0
| **N****AME**                    | **THE  NEIMAN MARCUS GROUP, INC.**         | ** ** | **Aon Risk  Services**                 |       |  |
|---------------------------------|--------------------------------------------|------------|----------------------------------------|------------|--|
|                            |                                       |       | **Cityplace  Center East**             |       |
| **A****DDRESS**                 | **1618 Main  Street, Dallas, Texas 75201** | ** ** | **2711 N.  Haskell Avenue**            |       |
|                            |                                       |       | **Suite 800  – Lock Box #8** |       |
| **D****ATE OF****A****NALYSIS** | **September 12,  2005**               | ** ** | **Dallas,  Texas 75204-2999**          |       |
|                            | ** **                                 | ** ** | **Telephone  214 989-0000**            | ** ** |
| **N****AME OF****A****NALYST**  | **Annie K.  McCarley**                     | ** ** | ** **                             | ** ** |

 
| **Company/Policy Number**       | ** ** | **Policy Term**      | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                    |
|---------------------------------|------------|----------------------|------------|------------|------------|------------|------------|-------------|------------|---------------------------------------------------------------------------------|
|                            |       |                 |       |       |       |       | ** ** | ** **  | ** ** | ** **                                                                      |   |   |
| Liberty Mutual  Insurance Group |       | August 1,  2005 |       | See        |       |       |       | $           | [***]      | ** **                                                                      | **COMMERCIAL GENERAL LIABILITY** |
| [***]                           |       | to                   |       | Coverage   |       |       |       |        |       | Policy provides legal liability coverage for bodily  injury and property damage |
|                            |       | August 1,  2006 |       |       |       |       |       |        |       | claims from the public. Limits of Liability are:                                |
|                            |       |                 |       |       |       |       |       |        |       |                                                                            |
|                            |       |                 |       |       |       |       |       |        |       | **Limits  of Liability:**                                                       |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | General Aggregate |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Products/Completed Operations Aggregate |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Personal & Advertising Injury |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Each Occurrence |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Damages to Premises Rented to You Limit |
|                            |       |                 |       |       |       |       |       |        |       |                                                                            |   | (subject to occurrence limit) |
|                            |       |                 |       |       |       |       |       |        |       | Excess Employers  Liability – Maritime Coverage:                           |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Bodily Injury by Accident Annual Aggregate |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Bodily Injury Each Accident |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Bodily Injury by Disease Annual Aggregate |
|                            |       |                 |       |       |       |       |       |        |       | Excess Employers  Liability – Other than Maritime Coverage:                |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Bodily Injury by Accident Annual Aggregate |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Bodily Injury Each Accident |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Bodily Injury by Disease Annual Aggregate |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Bodily Injury by Disease Each Employee |
|                            |       |                 |       |       |       |       |       |        |       |                                                                            |   | ** ** |
|                            |       |                 |       |       |       |       |       |        |       | **Deductible:**                                                                 |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Employee Benefit Liability Each Claim |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                               | [***] |   | Bodily Injury, Property Damage, Advertising Injury  Each |
|                            |       |                 |       |       |       |       |       |        |       |                                                                            |   | Occurrence |
|                                 |            |                      |            |            |            |            |            |             |            |                                                                                 |  |  |  |  |  |

 

15

----

 
| **Company/Policy Number**       | ** ** | **Policy Term**         | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                            | ** **                                      |
|---------------------------------|------------|-------------------------|------------|------------|------------|------------|------------|-------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|
|                            |       |                    |       |       |       |       | ** ** | ** **  |       |                                                                                                                                    |                                            |
|                            |       |                    |       |       |       |       |       |        | ** ** | **Coverage is generally described as  your liability arising from:**                                                                    | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Premises/Operations                                                                                                                     | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Acts of  Independent Contractors                                                                                                        | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Products/Completed  Operations                                                                                                          | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Contractual  Liability                                                                                                                  | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Personal &  Advertising Injury                                                                                                 | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Host Liquor                                                                                                                             | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Fire Legal                                                                                                                              | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Broad  Form Property Damage                                                                                                        | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Incidental  Medical Malpractice                                                                                                         | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Non-Owned  Watercraft                                                                                                                   | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Limited  Worldwide Liability                                                                                                            | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Additional  Persons Insured                                                                                                             | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Extended Bodily  Injury                                                                                                                 | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Automatic  Coverage on Newly Acquired Organizations (90 Days)                                                                           | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | Terrorism Per  the Terrorism Risk Insurance Act of 2002                                                                                 | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** |                                                                                                                                    | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** | The policy is  subject to audit for final determination of premium.                                                                     | ** **                                      |
|                            |       |                    |       |       |       |       |       |        | ** ** |                                                                                                                                    | ** **                                      |
| Liberty Mutual  Insurance Group |       | August 1,  2005    |       | See        |       |       |       |        | [***]      | ** **                                                                                                                              | **COMMERCIAL  GENERAL LIABILITY – CANADA** | ** ** |
| [***]                           |       | to  August 1, 2006 |       | Coverage   |       |       |       |        | ** ** | Policy provides legal  liability coverage for bodily injury and property  damage claims from the public. Limits of Liability  are: | ** **                                      |
|                                 |            |                         |            |            |            |            |            |             |            |                                                                                                                                         |                                                 |  |

 

16

----

 
| **Company/Policy Number** | ** ** | **Policy Term** | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                         |
|---------------------------|------------|-----------------|------------|------------|------------|------------|------------|-------------|------------|----------------------------------------------------------------------|
|                      |       |            |       |       |       |       | ** ** | ** **  | ** ** | ** **                                                           |   |   |
|                      |       |            |       |       |       |       |       |        |       | **Limits  of Liability:**                                            |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | General Aggregate (at inception) |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Products/Completed Operations Aggregate |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Personal & Advertising Injury |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Each Occurrence |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Fire Damage (any one fire) |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Each Occurrence and Aggregate |
|                      |       |            |       |       |       |       |       |        |       | Excess Employers  Liability – Maritime Coverage:                |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Bodily Injury by Accident Annual Aggregate |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Bodily Injury Each Accident |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Bodily Injury by Disease Annual Aggregate |
|                      |       |            |       |       |       |       |       |        |       | Excess Employers  Liability – Other than Maritime Coverage:     |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Bodily Injury by Accident Annual Aggregate |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Bodily Injury Each Accident |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Bodily Injury by Disease Annual Aggregate |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Bodily Injury by Disease Each Employee |
|                      |       |            |       |       |       |       |       |        |       |                                                                 |   | ** ** |
|                      |       |            |       |       |       |       |       |        |       | **Deductible:**                                                      |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Employee Benefit  Liability Each Claim |
|                      |       |            |       |       |       |       |       |        |       | $                                                                    | [***] |   | Bodily Injury,  Property Damage, Advertising Injury Each Occurrence |
|                      |       |            |       |       |       |       |       |        |       |                                                                 |   | ** ** |
|                      |       |            |       |       |       |       |       |        |       | **Coverage  is generally described as your liability arising from:** |
|                      |       |            |       |       |       |       |       |        |       | Premises/Operations                                                  |
|                      |       |            |       |       |       |       |       |        |       | Acts of  Independent Contractors                                     |
|                      |       |            |       |       |       |       |       |        |       | ** **                                                           |
|                      |       |            |       |       |       |       |       |        |       | Products/Completed  Operations                                       |
|                           |            |                 |            |            |            |            |            |             |            |                                                                      |  |  |  |  |

 

17

----

 
| **Company/Policy Number**       | ** ** | **Policy Term**      | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                                                      |
|---------------------------------|------------|----------------------|------------|------------|------------|------------|------------|-------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |       |                 |       |       |       |       | ** ** | ** **  |       |                                                                                                                                                              |
|                            |       |                 |       |       |       |       |       |        |       | Contractual  Liability                                                                                                                                            |
|                            |       |                 |       |       |       |       |       |        |       | Personal &  Advertising Injury                                                                                                                           |
|                            |       |                 |       |       |       |       |       |        |       | Premises Medical  Payments                                                                                                                                        |
|                            |       |                 |       |       |       |       |       |        |       | Host Liquor                                                                                                                                                       |
|                            |       |                 |       |       |       |       |       |        |       | Fire Legal                                                                                                                                                        |
|                            |       |                 |       |       |       |       |       |        |       | Broad Form Property  Damage                                                                                                                                  |
|                            |       |                 |       |       |       |       |       |        |       | Incidental  Medical Malpractice                                                                                                                                   |
|                            |       |                 |       |       |       |       |       |        |       | Non-Owned  Watercraft                                                                                                                                             |
|                            |       |                 |       |       |       |       |       |        |       | Limited  Worldwide Liability                                                                                                                                      |
|                            |       |                 |       |       |       |       |       |        |       | Additional  Persons Insured                                                                                                                                       |
|                            |       |                 |       |       |       |       |       |        |       | Extended Bodily  Injury                                                                                                                                           |
|                            |       |                 |       |       |       |       |       |        |       | Automatic  Coverage on Newly Acquired Organizations (90 Days)                                                                                                     |
|                            |       |                 |       |       |       |       |       |        |       | Terrorism Per  the Terrorism Risk Insurance Act of 2002                                                                                                           |
|                            |       |                 |       |       |       |       |       |        |       |                                                                                                                                                              |
|                            |       |                 |       |       |       |       |       |        |       | The policy is subject to audit for final  determination of premium.                                                                                               |
|                            |       |                 |       |       |       |       |       |        |       |                                                                                                                                                              |
| Liberty Mutual  Insurance Group |       | August 1,  2005 |       | See        |       |       |       | $           | [***]      |                                                                                                                                                              | **COMMERCIAL  AUTOMOBILE LIABILITY** |
| [***]                           |       | to                   |       | Coverage   |       |       |       |        |       | Policy provides  liability to the public arising from All Owned, Nonowned and Hired                                                                               |
|                            |       | August 1,  2006 |       |       |       |       |       |        |       | automobiles.  Coverages are briefly described as follows:                                                                                                         |
|                            |       |                 |       |       |       |       |       |        |       |                                                                                                                                                              |
|                            |       |                 |       |       |       |       |       |        |       | Public Liability with bodily injury and property damage  [***] should the public be injured or their property damaged.                                            |
|                            |       |                 |       |       |       |       |       |        |       |                                                                                                                                                              |
|                            |       |                 |       |       |       |       |       |        |       | Medical Payments providing [***] each passenger for  medical, hospital, first aid, and funeral expenses on passengers injured in  owned automobiles owned by you. |
|                            |       |                 |       |       |       |       |       |        |       |                                                                                                                                                              |
|                            |       |                 |       |       |       |       |       |        |       | Personal Injury  Protection  providing Minimum Required Limits each passenger for                                                                                 |
|                                 |            |                      |            |            |            |            |            |             |            |                                                                                                                                                                   |  |

 

18

----

 
| **Company/Policy Number**      | ** ** | **Policy Term**      | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                                                                                           |
|--------------------------------|------------|----------------------|------------|------------|------------|------------|------------|-------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |       |                 |       |       |       |       | ** ** | ** **  |       |                                                                                                                                                                                                   |
|                           |       |                 |       |       |       |       |       |        |       | medical, loss wages,  and services for persons occupying automobiles  owned by you and subject to No Fault benefits in the  state where the  automobile is licensed or principally  garaged. |
|                           |       |                 |       |       |       |       |       |        |       | ** **                                                                                                                                                                                             |
|                           |       |                 |       |       |       |       |       |        |       | Drive Other Car  Coverage:                                                                                                                                                                             |
|                           |       |                 |       |       |       |       |       |        |       | Provided for all  employees who are furnished company vehicles.                                                                                                                                        |
|                           |       |                 |       |       |       |       |       |        |       | ** **                                                                                                                                                                                             |
|                           |       |                 |       |       |       |       |       |        |       | Uninsured/Underinsured  Motorist:                                                                                                                                                                      |
|                           |       |                 |       |       |       |       |       |        |       | Rejected except  vehicles that are licensed in states that require you to have andwhere you cannot reject the coverage.                                                                                |
|                           |       |                 |       |       |       |       |       |        |       | ** **                                                                                                                                                                                             |
|                           |       |                 |       |       |       |       |       |        |       | VEHICLES INSURED:                                                                                                                                                                                      |
|                           |       |                 |       |       |       |       |       |        |       | All Owned,  Nonowned and Hired                                                                                                                                                                         |
|                           |       |                 |       |       |       |       |       |        |       | ** **                                                                                                                                                                                             |
|                           |       |                 |       |       |       |       |       |        |       | The policy is  subject to audit for final determination of premium.                                                                                                                                    |
|                           |       |                 |       |       |       |       |       |        |       | ** **                                                                                                                                                                                             |
| Liberty Mutual Insurance Group |       | August 1,  2005 |       | See        |       |       |       | $           | [***]      |                                                                                                                                                                                                   | **WORKERS’  COMPENSATION** |
|                           |       | to                   |       | Coverage   |       |       |       |        |       | Policy provides  medical, disability and death benefits to injured employees pursuant                                                                                                                  |
|                                |            |                      |            |            |            |            |            |             |            |                                                                                                                                                                                                        |  |

 

19

----

 
| **Company/Policy Number**       | ** ** | **Policy Term**      | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                                                                                                                                                                                                                                             |
|---------------------------------|------------|----------------------|------------|------------|------------|------------|------------|-------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |       |                 |       |       |       |       | ** ** | ** **  |       |                                                                                                                                                                                                                                                                                                                                                     |
| [***]                           |       | August 1,  2006 |       |       |       |       |       |        |       | to the Workers’  Compensation statutory requirement of states scheduled in thepolicy. declaration. Section C of  the policy provides an extension for still otherstates, except monopolistic state fund  states (North Dakota, Ohio, Washington, WestVirginia and Wyoming). The policy is  subject to audit for final determination ofpremium. |
|                            |       |                 |       |       |       |       |       |        |       | ** **                                                                                                                                                                                                                                                                                                                                               |
|                            |       |                 |       |       |       |       |       |        |       | Employer’s  Liability included for limits of:                                                                                                                                                                                                                                                                                                       |
|                            |       |                 |       |       |       |       |       |        |       | Bodily Injury by  Accident -                                                                                                                                                                                                                                                                                                                             | [***]   each  accident |
|                            |       |                 |       |       |       |       |       |        |       | Bodily Injury by  Disease -                                                                                                                                                                                                                                                                                                                              | [***]   policy  limit |
|                            |       |                 |       |       |       |       |       |        |       | Bodily Injury by  Disease -                                                                                                                                                                                                                                                                                                                              | [***]   each  employee |
|                            |       |                 |       |       |       |       |       |        |       | ** **                                                                                                                                                                                                                                                                                                                                               |
|                            |       |                 |       |       |       |       |       |        |       | Deductible:                                                                                                                                                                                                                                                                                                                                              |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                                                                                                                                                                                                                                                                                                        | [***] | Bodily Injury by  Accident Each Occurrence |
|                            |       |                 |       |       |       |       |       |        |       | $                                                                                                                                                                                                                                                                                                                                                        | [***] | Bodily Injury By  Disease Each Claim |
|                            |       |                 |       |       |       |       |       |        |       | ** **                                                                                                                                                                                                                                                                                                                                               |
|                            |       |                 |       |       |       |       |       |        |       | Additional  Coverage Included:                                                                                                                                                                                                                                                                                                                           |
|                            |       |                 |       |       |       |       |       |        |       | · United States Longshore and Harbor Workers  Compensation Act                                                                                                                                                                                                                                                                                      |
|                            |       |                 |       |       |       |       |       |        |       | · Terrorism Risk Insurance Act of 2002                                                                                                                                                                                                                                                                                                              |
|                            |       |                 |       |       |       |       |       |        |       | · Waiver of Subrogation as required by contract                                                                                                                                                                                                                                                                                                     |
|                            |       |                 |       |       |       |       |       |        |       | · Voluntary Compensation and Employers Liability                                                                                                                                                                                                                                                                                                    |
|                            |       |                 |       |       |       |       |       |        |       | · Unintentional Errors & Omissions                                                                                                                                                                                                                                                                                                         |
|                            |       |                 |       |       |       |       |       |        |       | · Unintentional Failure to Disclose                                                                                                                                                                                                                                                                                                                 |
|                            |       |                 |       |       |       |       |       |        |       | · Inclusion of Sports and Recreational Activities                                                                                                                                                                                                                                                                                                   |
|                            |       |                 |       |       |       |       |       |        |       | · Maritime Coverage                                                                                                                                                                                                                                                                                                                                 |
|                            |       |                 |       |       |       |       |       |        |       | · Foreign Employers Liability [***]                                                                                                                                                                                                                                                                                                                 |
|                            |       |                 |       |       |       |       |       |        |       | ** **                                                                                                                                                                                                                                                                                                                                               |
| St. Paul Fire & Marine |       | August 1,  2005 |       | See        |       |       |       | [***]       |       | **COMPREHENSIVE  CATASTROPHE LIABILITY (UMBRELLA)**                                                                                                                                                                                                                                                                                                      |
| [***]                           |       | to                   |       | Coverage   |       |       |       |        |       | ** **                                                                                                                                                                                                                                                                                                                                               |
|                                 |            |                      |            |            |            |            |            |             |            |                                                                                                                                                                                                                                                                                                                                                          |  |  |  |

 

20

----

 
| **Company/Policy Number**       | ** ** | **Policy Term**      | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                                                                                                                                                                                                                                                                                                            |
|---------------------------------|------------|----------------------|------------|------------|------------|------------|------------|-------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |       |                 |       |       |       |       | ** ** | ** **  |       |                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                            |       | August 1,  2006 |       |       |       |       | ** ** | ** **  |       | Policy provides  liability limit(s) of $[***] should the public be injured or theirproperty damaged for which the insured  is legally liable. The coverage is essentially excess over Employer’s,  General, Automobile and other primary liability as designated in the schedule  of underlying insurance. Retained limit $[***] applies when coverage is  afforded by Umbrella but not by primary liability. |
|                            |       |                 |       |       |       |       | ** ** | ** **  |       |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Federal Insurance Company       |       | August 1,  2005 |       | See        |       |       | ** ** |        | [***]      |                                                                                                                                                                                                                                                                                                                                                                                                                    | **EXCESS  LIABILITY** |
| [***]                           |       | to                   |       | Coverage   |       |       | ** ** |        |       | Policy provides  liability limits of $[***] excess of $  [***]                                                                                                                                                                                                                                                                                                                                                |
|                            |       | August 1,  2006 |       |       |       |       | ** ** |        |       |
|                            |       |                 |       |       |       |       | ** ** |        |       |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| XL Insurance America, Inc. |       | August 1,  2005 |       | See        |       |       | ** ** |        | [***]      |                                                                                                                                                                                                                                                                                                                                                                                                                    | **EXCESS  LIABILITY** |
| [***]                           |       | to                   |       | Coverage   |       |       | ** ** |        |       | Policy provides  liability limits of [***] Part of $50,000,000 excess of [***]                                                                                                                                                                                                                                                                                                                                     |
|                            |       | August 1,  2006 |       |       |       |       | ** ** |        |       |
|                            |       |                 |       |       |       |       | ** ** |        |       |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Great American Ins. Co.         |       | August 1,  2005 |       | See        |       |       | ** ** |        | [***]      |                                                                                                                                                                                                                                                                                                                                                                                                                    | **EXCESS  LIABILITY** |
| [***]                           |       | to                   |       | Coverage   |       |       | ** ** |        |       | Policy provides  liability limits of [***] Part of $50,000,000 excess of [***]                                                                                                                                                                                                                                                                                                                                     |
|                            |       | August 1,  2006 |       |       |       |       | ** ** |        |       |
|                            |       |                 |       |       |       |       | ** ** |        |       |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| American Guarantee and          |       | August 1,  2005 |       | See        |       |       | ** ** |        | [***]      |                                                                                                                                                                                                                                                                                                                                                                                                                    | **EXCESS  LIABILITY** |
| Liability Ins. Co.              |       | to                   |       | Coverage   |       |       | ** ** |        |       | Policy provides  liability limits of $[***] Part of $100,000,000 excess of $[***]                                                                                                                                                                                                                                                                                                                                  |
| [***]                           |       | August 1,  2006 |       |       |       |       | ** ** |        |       |
|                            |       |                 |       |       |       |       | ** ** |        |       |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| RSUI Indemnity Company          |       | August 1,  2005 |       | See        |       |       | ** ** |        | [***]      |                                                                                                                                                                                                                                                                                                                                                                                                                    | **EXCESS  LIABILITY** |
| [***]                           |       | to                   |       | Coverage   |       |       | ** ** |        |       | Policy provides  liability limits of [***] Part of [***] excess of [***]                                                                                                                                                                                                                                                                                                                                           |
|                            |       | August 1,  2006 |       |       |       |       | ** ** |        |       |
|                            |       |                 |       |       |       |       | ** ** |        |       |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Fireman’s Fund Ins. Co.    |       | August 1,  2005 |       | See        |       |       | ** ** |        | [***]      |                                                                                                                                                                                                                                                                                                                                                                                                                    | **EXCESS  LIABILITY** |
| [***]                           |       | to                   |       | Coverage   |       |       | ** ** |        |       | Policy provides  liability limits of [***] Part of [***] excess of $[***]                                                                                                                                                                                                                                                                                                                                          |
|                            |       | August 1,  2006 |       |       |       |       | ** ** |        |       |
|                            |       |                 |       |       |       |       | ** ** |        |       |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| FM Global Ins. Co.              |       | December 1, 2004     |       | See        |       |       | ** ** |        | [***]      |                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| [***]                           |       | to                   |       | Coverage   |       |       | ** ** | ** **  |       | *PRIMARY  PROPERTY & BOILER & MACHINERY POLICY*                                                                                                                                                                                                                                                                                                                                                       |
|                            |       | December 1, 2005     |       |       |       |       | ** ** | ** **  |       |                                                                                                                                                                                                                                                                                                                                                                                                                    |

 

21

----

 
| **Company/Policy Number** | ** ** | **Policy Term** | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                                                                                               |
|---------------------------|------------|-----------------|------------|------------|------------|------------|------------|-------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                                                                                                                                                                                 |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | PROPERTY  COVERAGE:                                                                                                                                                                                        |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | All Risk subject  to policy terms, conditions and exclusions.                                                                                                                                              |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** |                                                                                                                                                                                                       |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | VALUATION BASIS:                                                                                                                                                                                           |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | Replacement Cost  - Furniture, Fixtures, Equipment and Building                                                                                                                                            |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | Selling Price –  Inventory                                                                                                                                                                            |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** |                                                                                                                                                                                                       |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | LIMITS:                                                                                                                                                                                                    |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | per occurrence for Real  Property, Personal Property, Leasehold Interest, Business Interruption and  Extra Expense subject to a separate annual aggregate limit for flood and  earthquake of [***] except: |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | per occurrence and annual aggregate – California  Earthquake |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | per occurrence – Accounts Receivable |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | per occurrence – Contingent Business Income |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | per occurrence Fine Arts |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | per occurrence Off Premises Power/Service  Interruption |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | Unintentional Errors & Omissions |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | per occurrence – Valuable Papers & Records |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | per occurrence – Automatic Coverage (90 Days  Reporting) |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | per occurrence – Miscellaneous Unnamed Locations |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | per occurrence – Pollution Cleanup and Removal |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | Earth Movement Except $[***] for California |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $                                                                                                                                                                                                          | [***] |   | Flood Except $[***] for property located below grade  and/or bin |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | basements.                                                                                                                                                                                                 |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** |                                                                                                                                                                                                       |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | DEDUCTIBLES                                                                                                                                                                                                |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $       [***] - Per loss except                                                                                                                                         |
| ** **                | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $       [***] Furs of Customers combined all  losses                                                                                                                    |

 

22

----

 
| **Company/Policy Number**     | ** ** | **Policy Term**        | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                                                                                 |
|-------------------------------|------------|------------------------|------------|------------|------------|------------|------------|-------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                                                                                                                                                                   |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | **With  respects to California Earthquake**                                                                                                                                                  |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | [***] of the 100%  Property Damage value of the locations sustaining lossor damage each applied separately: Each  Building or Structure,Contents & PPof each building or structure, |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                                                                                                                                                                   |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | [***] of the full 12  month Time Element values at the location where thephysical damage occurred and all other  locations where Time Element loss ensues                                    |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                                                                                                                                                                   |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ***The above deductibles are subject to a minimum of***[***]***per location***                                                                                                               |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                                                                                                                                                                   |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | **With  respects to Flood**                                                                                                                                                                  |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $[***] Combined all  coverages except as follows:                                                                                                                                            |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | For locations in  Honolulu, Hawaii, Boca Raton, Fort Lauderdale, Palm Beach, Sunrise, Bal Habor  and Orlando Florida:                                                                        |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $[***] per building  Real Property                                                                                                                                                           |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $[***] per building  Personal Property                                                                                                                                                       |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | $[***] Time Element                                                                                                                                                                          |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                                                                                                                                                                   |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | LOCATIONS  COVERED:                                                                                                                                                                          |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | Per schedule on file with  the Insurance Company                                                                                                                                             |
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                                                                                                                                                                   |
| Insurance Company of the West | ** ** | December 1,  2004 | ** ** | See        | ** ** | ** ** | ** ** | ** **  | [***]      | ** **                                                                                                                                                                                   | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                         | ** ** | to                     | ** ** | Coverage   | ** ** | ** ** | ** ** | ** **  | ** ** | **(Excess  Flood and Earth Movement)**                                                                                                                                                       |
|                          | ** ** | December 1,  2005 | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                                                                                                                                                                   |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | LOCATIONS:                                                                                                                                                                                   |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | Per schedule on  file with the insurance company                                                                                                                                             |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                                                                                                                                                                   |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | LIMIT:                                                                                                                                                                                       |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | [***] Part of  $[***] Excess of Primary [***]                                                                                                                                           |
|                               |            |                        |            |            |            |            |            |             |            |                                                                                                                                                                                              |  |

 

23

----

 
| **Company/Policy Number** | ** ** | **Policy Term**  | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                         |
|---------------------------|------------|------------------|------------|------------|------------|------------|------------|-------------|------------|------------------------------------------------------|
| ** **                | ** ** | ** **       | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                           |
| Underwriters at Lloyds    | ** ** | December 1, 2004 | ** ** | See        | ** ** | ** ** | ** ** |        | [***]      | ** **                                           | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                     | ** ** | to               | ** ** | Coverage   | ** ** | ** ** | ** ** |        | ** ** | **(Excess  Flood and Earth Movement)**               |
|                      | ** ** | December 1, 2005 | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                                 |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LOCATIONS:                                           |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | Per schedule on  file with the insurance company     |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                                 |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LIMIT:                                               |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | $[***] Part of  $[***] Excess of Primary $[***] |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                                 |
| Westchester Surplus Lines | ** ** | December 1, 2004 | ** ** | See        | ** ** | ** ** | ** ** |        | [***]      | ** **                                           | **DIFFERENCE  IN CONDITIONS - 1****ST**** Layer** |
| [***]                     | ** ** | to               | ** ** | Coverage   | ** ** | ** ** | ** ** |        | ** ** | **(Excess  Flood and Earth Movement)**               |
|                      | ** ** | December 1, 2005 | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                                 |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LOCATIONS:                                           |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | Per schedule on  file with the insurance company     |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                                 |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LIMIT:                                               |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | $[***] Part of  $[***] Excess of Primary [***]  |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                                 |
| Essex Ins. Co.            | ** ** | December 1, 2004 | ** ** | See        | ** ** | ** ** | ** ** |        | [***]      | ** **                                           | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                     | ** ** | to               | ** ** | Coverage   | ** ** | ** ** | ** ** |        | ** ** | **(Excess  Flood and Earth Movement)**               |
|                      | ** ** | December 1, 2005 | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                                 |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LOCATIONS:                                           |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | Per schedule on  file with the insurance company     |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                                 |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LIMIT:                                               |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | [***] Part of  $[***] Excess of Primary $[***]  |
|                      | ** ** |             | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                                 |
| Alea London LTD           | ** ** | December 1, 2004 | ** ** | See        | ** ** | ** ** | ** ** |        | [***]      | ** **                                           | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
|                      | ** ** | to               | ** ** |       | ** ** | ** ** | ** ** |        |       | ** **                                           | ** ** |
|                           |            |                  |            |            |            |            |            |             |            |                                                      |  |  |

 

24

----

 
| **Company/Policy Number** | ** ** | **Policy Term**        | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                     |
|---------------------------|------------|------------------------|------------|------------|------------|------------|------------|-------------|------------|--------------------------------------------------|
| ** **                | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                       |
| [***]                     | ** ** | December 1,  2005 | ** ** | Coverage   | ** ** | ** ** | ** ** | ** **  | ** ** | **(Excess  Flood and Earth Movement)**           |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** |                                             |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** | LOCATIONS:                                       |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** | Per schedule on  file with the insurance company |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** |                                             |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** | LIMIT:                                           |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** | [***] Part of  $[***] Excess of $[***]      |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** |                                             |
| Greenwich Ins. Co.        | ** ** | December 1,  2004 | ** ** | See        | ** ** | ** ** | ** ** |        | [***]      | ** **                                       | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                     | ** ** | to                     | ** ** | Coverage   | ** ** | ** ** | ** ** |        | ** ** | **(Excess  Flood and Earth Movement)**           |
|                      | ** ** | December 1,  2005 | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LOCATIONS:                                       |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | Per schedule on  file with the insurance company |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LIMIT:                                           |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | [***] Part of  $[***] Excess of $[***]      |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
| Westchester Surplus Lines | ** ** | December 1,  2004 | ** ** | See        | ** ** | ** ** | ** ** |        | [***]      | ** **                                       | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                     | ** ** | to                     | ** ** | Coverage   | ** ** | ** ** | ** ** | ** **  | ** ** | **(Excess  Flood and Earth Movement)**           |
|                      | ** ** | December 1,  2005 | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** |                                             |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** | LOCATIONS:                                       |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** | Per schedule on  file with the insurance company |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** |                                             |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** | LIMIT:                                           |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** | [***] Part of  $[***] Excess of [***]       |
|                      | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** | ** **  | ** ** |                                             |

 

25

----

 
| **Company/Policy Number**     | ** ** | **Policy Term**        | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                     |
|-------------------------------|------------|------------------------|------------|------------|------------|------------|------------|-------------|------------|--------------------------------------------------|
| ** **                    | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                       |
| Insurance Company of the West | ** ** | December 1,  2004 | ** ** | See        | ** ** | ** ** | ** ** |        | [***]      | ** **                                       | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                         | ** ** | to                     | ** ** | Coverage   | ** ** | ** ** | ** ** |        | ** ** | **(Excess  Flood and Earth Movement)**           |
|                          | ** ** | December 1,  2005 | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LOCATIONS:                                       |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | Per schedule on  file with the insurance company |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LIMIT:                                           |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | [***] Part of  [***] Excess of [***]        |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
| Essex Ins. Co.                | ** ** | December 1,  2004 | ** ** | See        | ** ** | ** ** | ** ** |        | [***]      | ** **                                       | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                         | ** ** | to                     | ** ** | Coverage   | ** ** | ** ** | ** ** |        | ** ** | **(Excess  Flood and Earth Movement)**           |
|                          | ** ** | December 1,  2005 | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LOCATIONS:                                       |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | Per schedule on  file with the insurance company |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | LIMIT:                                           |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** | [***] Part of  $[***] Excess of $[***]      |
|                          | ** ** |                   | ** ** |       | ** ** | ** ** | ** ** |        | ** ** |                                             |
| Insurance Company of the West | ** ** | December 1,  2004 | ** ** | See        | ** ** | ** ** | ** ** | $           | [***]      | ** **                                       | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                         | ** ** | to                     | ** ** | Coverage   | ** ** | ** ** | ** ** | ** **  | ** ** | **(Excess  Flood and Earth Movement)**           |
|                          | ** ** | December 1,  2005 | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** |                                             |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | LOCATIONS:                                       |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | Per schedule on  file with the insurance company |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** |                                             |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | LIMIT:                                           |
|                          | ** ** |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** | [***] Part of  $[***] Excess of $[***]      |

 

26

----

 
| **Company/Policy Number**  | ** ** | **Policy Term**        | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                     |
|----------------------------|------------|------------------------|------------|------------|------------|------------|------------|-------------|------------|--------------------------------------------------|
|                       |       |                   |       |       |       |       | ** ** | ** **  |       |                                             |
| Westchester  Surplus Lines |       | December 1,  2004 |       | See        |       |       | ** ** |        | [***]      |                                             | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                      |       | to                     |       | Coverage   | ** ** |       |       |        |       | **(Excess  Flood and Earth Movement)**           |
|                       |       | December 1,  2005 |       |       |       |       |       |        |       |                                             |
|                       |       |                   |       |       |       |       |       |        |       | LOCATIONS:                                       |
|                       |       |                   |       |       |       |       |       |        |       | Per schedule on  file with the insurance company |
|                       |       |                   |       |       |       |       |       |        |       |                                             |
|                       |       |                   |       |       |       |       |       |        |       | LIMIT:                                           |
|                       |       |                   |       |       |       |       |       |        |       | [***]  Part of [***] Excess of [***]        |
|                       |       |                   |       |       |       |       | ** ** |        |       | ** **                                       |
| Lloyds of London           |       | December 1,  2004 |       | See        |       |       | ** ** |        | [***]      |                                             | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                      |       | to                     |       | Coverage   | ** ** |       |       |        |       | **(Excess  Flood and Earth Movement)**           |
|                       |       | December 1,  2005 |       |       |       |       |       |        |       |                                             |
|                       |       |                   |       |       |       |       |       |        |       | LOCATIONS:                                       |
|                       |       |                   |       |       |       |       |       |        |       | Per schedule on  file with the insurance company |
|                       |       |                   |       |       |       |       |       |        |       |                                             |
|                       |       |                   |       |       |       |       |       |        |       | LIMIT:                                           |
|                       |       |                   |       |       |       |       |       |        |       | [***]  Part of [***] Excess of $[***]       |
|                       |       |                   |       |       |       |       | ** ** |        |       | ** **                                       |
| Lloyds of London           |       | December 1,  2004 |       | See        |       |       | ** ** |        | [***]      |                                             | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                      |       | to                     |       | Coverage   | ** ** |       |       |        |       | **(Excess  Flood and Earth Movement)**           |
|                       |       | December 1,  2005 |       |       |       |       |       |        |       |                                             |
|                       |       |                   |       |       |       |       |       |        |       | LOCATIONS:                                       |
|                       |       |                   |       |       |       |       |       |        |       | Per schedule on  file with the insurance company |
|                       |       |                   |       |       |       |       |       |        |       |                                             |
|                       |       |                   |       |       |       |       |       |        |       | LIMIT:                                           |
|                       |       |                   |       |       |       |       |       |        |       | [***]  Part of [***] Excess of $[***]       |

 

27

----

 
| **Company/Policy  Number** | ** ** | **Policy Term**        | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                                                                                                                                                             |
|----------------------------|------------|------------------------|------------|------------|------------|------------|------------|-------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |       |                   |       |       |       |       | ** ** | ** **  |       |                                                                                                                                                                                                                                                                     |
| Essex Insurance Company    |       | December 1,  2004 |       | See        |       |       |       |        | [***]      | ** **                                                                                                                                                                                                                                                               | **DIFFERENCE  IN CONDITIONS – 1****ST**** Layer** |
| [***]                      |       | to                     |       | Coverage   | ** ** |       |       |        |       | **(Excess  Flood and Earth Movement)**                                                                                                                                                                                                                                   |
|                       |       | December 1,  2005 |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                     |
|                       |       |                   |       |       |       |       |       |        |       | LOCATIONS:                                                                                                                                                                                                                                                               |
|                       |       |                   |       |       |       |       |       |        |       | Per schedule on  file with the insurance company                                                                                                                                                                                                                         |
|                       |       |                   |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                     |
|                       |       |                   |       |       |       |       |       |        |       | LIMIT:                                                                                                                                                                                                                                                                   |
|                       |       |                   |       |       |       |       |       |        |       | $[***]  Part of $[***] Excess of $[***]                                                                                                                                                                                                                             |
|                       |       |                   |       |       |       |       | ** ** |        |       | ** **                                                                                                                                                                                                                                                               |
| Affiliated FM Ins. Co.     |       | December 1,  2002 |       |       | ** ** |       |       | Adjustable  |       | **OCEAN  CARGO POLICY**                                                                                                                                                                                                                                                  |
| [***]                      |       | Until Canceled         |       |       |       |       |       | Annually    |       |                                                                                                                                                                                                                                                                     |
|                       |       |                   |       |       |       |       |       |        |       | Limits of  Insurance:                                                                                                                                                                                                                                                    |
|                       |       |                   |       |       |       |       | ** ** |        |       | $                                                                                                                                                                                                                                                                        | [***] |   | Any one aircraft or connecting conveyance |
|                       |       |                   |       |       | ** ** |       |       |        |       | $                                                                                                                                                                                                                                                                        | [***] |   | While on deck of any one vessel |
|                       |       |                   |       |       |       |       |       |        |       | $                                                                                                                                                                                                                                                                        | [***] |   | Any one parcel post or mail package |
|                       |       |                   |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                     |
|                       |       |                   |       |       |       |       |       |        |       | Valuation:                                                                                                                                                                                                                                                               |
|                       |       |                   |       |       |       |       |       |        |       | Amount of invoice  including all charges therein, including any prepaid and/or advanced and/or  guaranteed freight, plus 10%, except the Assured’s selling price on pre-sold  catalog items.                                                                        |
|                       |       |                   |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                     |
|                       |       |                   |       |       |       |       |       |        |       | Deductible:                                                                                                                                                                                                                                                              |
|                       |       |                   |       |       |       |       |       |        |       | $                                                                                                                                                                                                                                                                        | [***] |   |
|                       |       |                   |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                     |
| AIG WorldSource            |       | August 1,  2005   | ** ** |       |       |       |       |        |       | **FOREIGN  LIABILITY PACKAGE**                                                                                                                                                                                                                                           |
| [***]                      |       | to                     |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                     |
|                       | ** ** | August 1,  2006   |       |       |       |       |       |        |       | **Coverage  Territory****:**                                                                                                                                                                                                                                             |
|                       |       |                   |       |       |       |       |       |        |       | Anywhere in the  world, including international waters or airspace, but excluding:                                                                                                                                                                                       |
|                       |       |                   |       |       |       |       |       |        |       | The United States of  America (including its territories or possessions), Puerto Rico and Canada;  and those countries against which the Office of Foreign Asses Control of the  U.S. Department of the Treasury administers and enforces economic and trade  sanctions. |
|                            |            |                        |            |            |            |            |            |             |            |                                                                                                                                                                                                                                                                          |  |  |  |  |

 

28

----

 
| **Company/Policy  Number** | ** ** | **Policy Term** | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                        | ** ** |
|----------------------------|------------|-----------------|------------|------------|------------|------------|------------|-------------|------------|-----------------------------------------------------|------------|
|                       |       |            |       |       |       |       | ** ** | ** **  |       |                                                |       |
|                       |       |            |       |       |       |       |       |        | ** ** | (GENERAL  LIABILITY)                                |       |
|                       |       |            |       |       |       |       |       |        | ** ** |                                                |       |
|                       |       |            |       |       |       |       |       |        | ** ** | Limits of  Liability:                               |       |
|                       |       |            |       |       | ** ** |       |       |        |       | $                                                   | [***]      |   | Master Control Program Aggregate |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | General Aggregate |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Products Completed Operations Aggregate |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Personal & Advertising Injury |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Each Occurrence |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Damages to Premises Rented to You |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Medical Expense |   |
|                       |       |            |       |       |       |       |       |        |       |                                                |       |
|                       |       |            |       |       |       |       |       |        |       | (EMPLOYEE  BENEFITS LIABILITY)                      |       |
|                       |       |            |       |       |       |       |       |        |       |                                                |       |
|                       |       |            |       |       |       |       |       |        |       | Limits of  Liability:                               |       |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Each Wrongful Act or series of related wrongful acts |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Each Annual Aggregate |   |
|                       |       |            |       |       |       |       |       |        |       |                                                |       |
|                       |       |            |       |       |       |       |       |        |       | Deductible:                                         |       |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Each Wrongful Act or series of related wrongful acts |   |
|                       |       |            |       |       |       |       |       |        |       |                                                |       |   |   |
|                       |       |            |       |       |       |       |       |        |       | (COMMERCIAL  AUTOMOBILE LIABILITY)                  |       |
|                       |       |            |       |       |       |       |       |        |       |                                                |       |
|                       |       |            |       |       |       |       |       |        |       | Limits of  Liability:                               |       |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Bodily Injury Each Person |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Bodily Injury Each Occurrence |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Property Damage Each Occurrence |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Medical Expense Coverage Each Person |   |
|                       |       |            |       |       |       |       |       |        |       | $                                                   | [***]      |   | Medical Expense Coverage Each Accident |   |
|                       |       |            |       |       |       |       |       |        |       |                                                |       |   |   |
|                       |       |            |       |       |       |       |       |        |       | Covered Vehicles:                                   |       |
|                       |       |            |       |       |       |       |       |        |       | All Owned,  Leased, Hired and Non Owned Automobiles |       |

 

29

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| **Company/Policy  Number** | ** ** | **Policy Term**      | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                                                                                                                                                                                                                                                        |
|----------------------------|------------|----------------------|------------|------------|------------|------------|------------|-------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |       |                 |       |       |       |       | ** ** | ** **  |       |                                                                                                                                                                                                                                                                                                                                                                |
|                       |       |                 |       |       |       |       |       |        | ** ** | ***Additional Coverage Territory exclusions: Cuba, North  Korea, Libya, Iran, Iraq and territorial waters of the U.S. its territories  or possessions, Canada, Puerto Rico, Gulf of Mexico and international waters  or air space when the BI or PD occurs in the course of travel or  transportation which is both to or from any country or place named above.*** |
|                       |       |                 |       |       |       |       |       |        | ** ** |                                                                                                                                                                                                                                                                                                                                                                |
|                       |       |                 |       |       |       |       |       |        | ** ** | (VOLUNTARY  WORKERS’ COMPENSATION/EMPLOYERS LIABILITY)                                                                                                                                                                                                                                                                                                         |
|                       |       |                 |       |       |       |       |       |        | ** ** |                                                                                                                                                                                                                                                                                                                                                                |
|                       |       |                 |       |       |       |       |       |        | ** ** | Employers  Liability Limits of Liability:                                                                                                                                                                                                                                                                                                                           |
|                       |       |                 |       |       | ** ** |       |       |        |       |                                                                                                                                                                                                                                                                                                                                                                | [***] |   | Per Occurrence |
|                       |       |                 |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                                                                                                                | [***] |   | Excess Repatriation Expenses Per Person |
|                       |       |                 |       |       |       |       |       |        |       | State of Hire  Benefits for U.S. Hired and/or U.S. Citizens                                                                                                                                                                                                                                                                                                         |
|                       |       |                 |       |       |       |       |       |        |       | Workers’ Compensation  Limits:                                                                                                                                                                                                                                                                                                                                 |
|                       |       |                 |       |       |       |       |       |        |       | Country of Hire  for Third Country Nationals                                                                                                                                                                                                                                                                                                                        |
|                       |       |                 |       |       |       |       |       |        |       | Excludes Local  Nationals                                                                                                                                                                                                                                                                                                                                           |
|                       |       |                 |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                                                                                                                |
| Federal  Insurance Company |       | July 31,  2005  |       | See        |       |       |       |        | [***]      |                                                                                                                                                                                                                                                                                                                                                                | **DIRECTORS &  OFFICERS** (Claims-Made Policy) |
| [***]                      |       | toJuly 31, 2006 |       | Coverage   |       |       |       |        |       | Policy provides  coverage for losses arising from claims made against a Director or Officer  for any wrongful act while acting in their capacity as officers or directors  of the company.                                                                                                                                                                          |
|                       |       |                 |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                                                                                                                |
|                       |       |                 |       |       |       |       |       |        |       | Limits of Liability:                                                                                                                                                                                                                                                                                                                                                |
|                       |       |                 |       |       |       |       |       |        |       | $                                                                                                                                                                                                                                                                                                                                                                   | [***] |   | Each Loss |
|                       |       |                 |       |       |       |       |       |        |       | $                                                                                                                                                                                                                                                                                                                                                              |   | [***]   Each  Policy Period |
|                       |       |                 |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                                                                                                                |
|                       |       |                 |       |       |       |       |       |        |       | Deductible:                                                                                                                                                                                                                                                                                                                                                         |
|                       |       |                 |       |       |       |       |       |        |       |                                                                                                                                                                                                                                                                                                                                                                | [***] |   | Executive Indemnification |
|                       |       |                 |       |       |       |       |       |        |       | Pending or Prior Date:                                                                                                                                                                                                                                                                                                                                              |
|                       |       |                 |       |       |       |       |       |        |       | August 26,  1987                                                                                                                                                                                                                                                                                                                                               |
|                       |       |                 |       |       |       |       |       |        |       | Continuity Date:                                                                                                                                                                                                                                                                                                                                                    |
|                       |       |                 |       |       |       |       |       |        |       | August 26,  1987                                                                                                                                                                                                                                                                                                                                               |
|                            |            |                      |            |            |            |            |            |             |            |                                                                                                                                                                                                                                                                                                                                                                     |  |  |  |  |

 

30

----

 
| **Company/Policy  Number**           | ** ** | **Policy Term**     | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**          |
|--------------------------------------|------------|---------------------|------------|------------|------------|------------|------------|-------------|------------|-----------------------|
|                                 |       |                |       |       |       |       | ** ** | ** **  |       |                  |
| Illinois  National Insurance Company |       | July 31,  2005 |       | See        |       |       |       |        | [***]      | ** **            | **EXCESS  DIRECTORS & OFFICERS******(Claims-Made Policy) |
| [***]                                |       | to                  |       | Coverage   |       |       |       |        | ** ** |                  |
|                                 |       | July 31,  2006 |       |       |       |       |       |        | ** ** | Limits of  Liability: |
|                                 |       |                |       |       | ** ** |       |       |        |       | $           | [***] | Each Loss |
|                                 |       |                |       |       | ** ** |       |       |        |       | $           | [***] | Each Policy Period |
|                                 |       |                |       |       | ** ** |       |       |        |       |                  |
| Arch Insurance  Company              |       | July 31,  2005 |       | See        | ** ** |       |       |        | [***]      |                  | **EXCESS DIRECTORS &  OFFICERS******(Claims-Made Policy) |
| [***]                                |       | to                  |       | Coverage   |       |       |       |        |       |                  |
|                                 |       | July 31,  2006 |       |       |       |       |       |        |       | Limits of  Liability: |
|                                 |       |                |       |       |       |       |       |        |       | $           | [***] | Each Loss |
|                                 |       |                |       |       |       |       |       |        |       | $           | [***] | Each Policy Period |
|                                 |       |                |       |       |       |       |       |        |       |                  |
| Twin City Fire  Ins. Co.             |       | July 31,  2005 |       | See        |       |       |       |        | [***]      |                  | **EXCESS DIRECTORS &  OFFICERS******(Claims-Made Policy) |
| [***]                                |       | to                  |       | Coverage   |       |       |       |        |       |                  |
|                                 |       | July 31,  2005 |       |       |       |       |       |        |       | Limits of  Liability: |
|                                 |       |                |       |       |       |       |       |        |       | $           | [***] | Each Loss |
|                                 |       |                |       |       |       |       |       |        |       | $           | [***] | Each Policy Period |
|                                 |       |                |       |       |       |       |       |        |       |                  |
| Great American  Ins. Co.             |       | July 31,  2005 |       | See        |       |       |       |        | [***]      |                  | **EXCESS DIRECTORS &  OFFICERS******(Claims-Made Policy) |
| [***]                                |       | to                  |       | Coverage   |       |       |       |        |       |                  |
|                                 |       | July 31,  2006 |       |       |       |       |       |        |       | Limits of  Liability: |
|                                 |       |                |       |       |       |       |       |        |       | $           | [***] | Each Loss |
|                                 |       |                |       |       |       |       |       |        |       | $           | [***] | Each Policy Period |

 

31

----

 
| **Company/Policy  Number** | ** ** | **Policy Term**     | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                                                                                                                                  |
|----------------------------|------------|---------------------|------------|------------|------------|------------|------------|-------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
|                       |       |                |       |       |       |       | ** ** | ** **  |       |                                                                                                                                          |
| AXIS Reinsurance  Compamy  |       | July 31,  2005 |       | See        |       |       |       |        | [***]      | ** **                                                                                                                                    | **EXCESS DIRECTORS &  OFFICERS******(Claims-Made Policy) |
| [***]                      |       | to                  |       | Coverage   |       |       |       |        | ** ** |                                                                                                                                          |
|                       |       | July 31,  2006 |       |       |       |       |       |        | ** ** | Limits of Liability:                                                                                                                          |
|                       |       |                |       |       | ** ** |       |       |        |       | $                                                                                                                                             | [***] | Each Loss |
|                       |       |                |       |       | ** ** |       |       |        |       | $                                                                                                                                             | [***] | Each Policy Period |
|                       |       |                |       |       | ** ** |       |       |        |       |                                                                                                                                          |
| Federal  Insurance Company |       | July 31,  2005 |       | See        |       |       |       | $           | [***]      |                                                                                                                                          | **FIDUCIARY  LIABILITY******(Claims-Made Policy) |
| [***]                      |       | to                  |       | Coverage   |       |       |       |        |       | Provides coverages for  any breach of Fiduciary Duty for which the Insured is legally liable to pay  as damages for any claim or claims made. |
|                       |       | July 31,  2006 |       |       |       |       |       |        |       |
|                       |       |                |       |       |       |       |       |        |       |                                                                                                                                          |
|                       |       |                |       |       |       |       |       |        |       | Limit of  Liability:                                                                                                                          |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] | Each Claim Limit |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] | Each Policy Period Limit |
|                       |       |                |       |       |       |       |       |        |       |                                                                                                                                          |
|                       |       |                |       |       |       |       |       |        |       | Retention:                                                                                                                                    |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] |   |
|                       |       |                |       |       |       |       |       |        |       |                                                                                                                                          |
| Federal  Insurance Company |       | July 31,  2005 |       | See        |       |       |       | $           | [***]      |                                                                                                                                          | **CRIME  COVERAGE** |
| [***]                      |       | to                  |       | Coverage   |       |       |       |        |       |                                                                                                                                          |
|                       |       | July 31,  2006 |       |       |       |       |       |        |       | Limit of  Liability:                                                                                                                          |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] | Employee Theft |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] | Premises Theft |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] | In Transit |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] | Forgery |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] | Computer Theft and Funds Transfer Fraud |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] | Money Orders and Counterfeit Fraud |
|                       |       |                |       |       |       |       |       |        |       | $                                                                                                                                             | [***] | Credit Card Fraud |

 

32

----

 
| **Company/Policy  Number**     | ** ** | **Policy Term**         | ** ** | **Limits** | ** ** | **Coins.** | ** ** | **Premium** | ** ** | **Coverage**                      |
|--------------------------------|------------|-------------------------|------------|------------|------------|------------|------------|-------------|------------|-----------------------------------|
|                           |       |                    |       |       |       |       | ** ** | ** **  |       |                              |
|                           |       |                    |       |       | ** ** |       |       |        |       | $                       | [***] |   | Client |
|                           |       |                    |       |       |       |       |       |        |       | $                       | [***] |   | Expense |
|                           |       |                    |       |       |       |       |       |        |       |                              |
|                           |       |                    |       |       |       |       |       |        |       | Retention:                        |
|                           |       |                    |       |       |       |       |       |        |       | $                       | [***] |   |   |
|                           |       |                    |       |       |       |       |       |        |       |                              |
| Executive Risk  Indemnity Inc. |       | July 1,  2005      |       | See        |       |       |       | $           | [***]      |                              | **ERRORS &  OMISSIONS** |
| [***]                          |       | to                      |       | Coverage   |       |       |       |        |       |                              |
|                           |       | July 1,  2006      |       |       |       |       |       |        |       | Limit of  Liability:              |
|                           |       |                    |       |       |       |       |       |        |       | $                       | [***] |   | Each Claim or Related Claims |
|                           |       |                    |       |       |       |       |       |        |       | $                       | [***] |   | Aggregate |
|                           |       |                    |       |       |       |       |       |        |       |                              |
|                           |       |                    |       |       |       |       |       |        |       | Deductible:                       |
|                           |       |                    |       |       |       |       |       |        |       |                              |
|                           |       |                    |       |       |       |       |       |        |       | $                       | [***] |   | Each Claim or Related Claim |
|                           |       |                    |       |       |       |       |       |        |       |                              |
|                           |       |                    |       |       |       |       |       |        |       | Retroactive Date:                 |
|                           |       |                    |       |       |       |       |       |        |       | July 1,  2005                |
|                           |       |                    |       |       |       |       |       |        |       |                              |
| National Union  Fire Ins. Co.  |       | December 21,  2004 |       | See        |       |       |       | $           | [***]      |                              | **NON  OWNED AIRCRAFT LIABILITY:** |
| [***]                          |       | to                      |       | Coverage   |       |       |       |        |       |                              |
|                           |       | December 21,  2005 |       |       |       |       |       |        |       | Limit of  Liability:              |
|                           |       |                    |       |       |       |       |       |        |       |                              |
|                           |       |                    |       |       |       |       |       |        |       | $                       | [***] |   | Single Limit Including Passengers |
|                           |       |                    |       |       |       |       |       |        |       |                              |
| National Union  Fire           |       | December 31,  2002 |       | See        |       |       |       | $           | [***]      |                              | **SPECIAL  CRIME:** |
| [***]                          |       | to                      |       | Coverage   |       |       |       |        |       |                              |
|                           |       | December 31,  2005 |       |       |       |       |       |        |       | Limits of  Liability: SEE  POLICY |

 

33

----

** **

**SCHEDULE 3.15**

 

**Capitalization and Subsidiaries**

 
| **Subsidiary   (unless otherwise indicated)**                              | ** ** | **Type of  Entity**     | ** ** | **Each  Class of   Authorized and   Validly Issued   Equity Interests** | ** ** | **Record  and   Beneficial   Owner** | ** ** | **Percentage    Ownership** | ** ** |
|----------------------------------------------------------------------------|------------|-------------------------|------------|-------------------------------------------------------------------------|------------|--------------------------------------|------------|-----------------------------|------------|
| ** **                                                                 | ** ** | ** **              | ** ** | ** **                                                              | ** ** | ** **                           | ** ** | ** **                  | ** ** |
| Newton Acquisition MergerSub, Inc.  (the Borrower priorto the Merger) |       | Corporation             |       | 900 shares ofCommon Stock $0.01  par value                              |       | NewtonAcquisition, Inc.         |       | 100                         | %          |
|                                                                       |       |                    |       |                                                                    |       |                                 |       |                        |       |
| The Neiman Marcus Group,Inc. (the  Borrower after theMerger)               |       | Corporation             |       | 900 shares ofCommon Stock $0.01  par value                              |       | Newton  Acquisition, Inc. (3)   |       | 100                         | %          |
|                                                                       |       |                    |       |                                                                    |       |                                 |       |                        |       |
| Bergdorf Goodman, Inc.                                                |       | Corporation             |       | 1,000 shares ofCommon Stock $1.00  par value                            |       | Neiman MarcusHoldings, Inc.     |       | 100                         | %          |
|                                                                       |       |                    |       |                                                                    |       |                                 |       |                        |       |
| Bergdorf Graphics, Inc.                                               |       | Corporation             |       | 1,000 shares ofCommon Stock $0.01  par value                            |       | BergdorfGoodman, Inc.           |       | 100                         | %          |
|                                                                       |       |                    |       |                                                                    |       |                                 |       |                        |       |
| BergdorfGoodman.com, LLC                                                   |       | LimitedLiabilityCompany |       | MembershipInterests                                                     |       | The NeimanMarcus Group,Inc.          |       | 100                         | %          |
|                                                                       |       |                    |       |                                                                    |       |                                 |       |                        |       |
| Neiman Marcus Holdings,Inc.                                                |       | Corporation             |       | 100 shares ofCommon Stock $1.00  par value                              |       | The Neiman Marcus Group,  Inc.       |       | 100                         | %          |
|                                                                       |       |                    |       |                                                                    |       |                                 |       |                        |       |
| Neiman Marcus SpecialEvents, Inc.                                     |       | Corporation             |       | 10 shares ofCommon Stock  No par value                                  |       | The NeimanMarcus Group,Inc.          |       | 100                         | %          |
|                                                                       |       |                    |       |                                                                    |       |                                 |       |                        |       |
| NEMA Beverage Corporation                                                  |       | Corporation             |       | 100 shares ofCommon Stock $1.00  par value                              |       | NEMA BeverageHoldingCorporation      |       | 100                         | %          |
|                                                                       |       |                    |       |                                                                    |       |                                 |       |                        |       |
| NEMA Beverage HoldingCorporation                                           |       | Corporation             |       | 100 shares ofCommon Stock $1.00  par value                              |       | NEMA BeverageParentCorporation       |       | 100                         | %          |
|                                                                       |       |                    |       |                                                                    |       |                                 |       |                        |       |
| NEMA Beverage Parent                                                       |       | Corporation             |       | 100 shares of                                                           |       | The Neiman                           |       | 100                         | %          |

 

----

(3) After the Merger.

 

34

----

 
| Corporation                        |   |                    |   | Common Stock  $1.00 par value             |   | Marcus Group, Inc.                                            |   |         |         |
|------------------------------------|--------|-------------------------|--------|-------------------------------------------|--------|---------------------------------------------------------------|--------|--------------|--------------|
|                               |   |                    |   |                                      |   |                                                          |   |         |         |
| NM Financial  Services, Inc.  |   | Corporation             |   | 10 shares ofCommon Stock  No par value    |   | The NeimanMarcus Group,Inc.                                   |   | 100          | %            |
|                               |   |                    |   |                                      |   |                                                          |   |         |         |
| NM Nevada Trust                    |   | Business Trust          |   | 100 shares  No par value                  |   | 1. The NeimanMarcus Group,Inc.

2. BergdorfGoodman, Inc. |   | 1. 90  2. 10 | %

 

% |
|                               |   |                    |   |                                      |   |                                                          |   |         |         |
| NMGP, LLC                          |   | LimitedLiabilityCompany |   | MembershipInterests                       |   | The NeimanMarcus Group,Inc.                                   |   | 100          | %            |
|                               |   |                    |   |                                      |   |                                                          |   |         |         |
| NM Kitchens, Inc.             |   | Corporation             |   | 10 shares ofCommon Stock  No par value    |   | The NeimanMarcus Group,Inc.                                   |   | 100          | %            |
|                               |   |                    |   |                                      |   |                                                          |   |         |         |
| Willow Bend BeverageCorporation(4) |   | NonprofitCorporation    |   | N/A                                       |   | N/A                                                           |   | N/A          |         |
|                               |   |                    |   |                                      |   |                                                          |   |         |         |
| Worth Avenue LeasingCompany        |   | Corporation             |   | 10 shares ofCommon Stock $1.00  par value |   | The Neiman Marcus Group,  Inc.                                |   | 100          | %            |

 

----

(4) As a Texas nonprofit corporation, Willow BendBeverage Corporation does not issue equity interests.

 

35

----

 

**Name and Relationship to the Borrower of each ofBorrower’s Subsidiaries**

 

**THE NEIMAN MARCUS GROUP, INC.**

Delaware

 
| **NM Kitchens, Inc.**                  |       | **NEMA Beverage Parent Corporation**  |
|---------------------------------------------|------------|---------------------------------------|
| Delaware                                    |       | Texas                                 |
|                                        |       |                                  |
| **Gurwitch Products, L.L.C.**               |       | **NEMA Beverage Holding**             |
| Delaware(5)                                 |       | **Corporation**                       |
|                                        |       | Texas                                 |
|                                        |       |                                  |
| **Kate Spade LLC**                          |       | **NEMA Beverage Corporation**         |
| Delaware(6)                                 |       | Texas                                 |
| ** **                                  | ** ** | ** **                            |
| **NM Financial Services, Inc.**        |       | **Neiman Marcus Holdings, Inc.** |
| Delaware                                    |       | California                            |
|                                        |       |                                  |
| **NM Nevada Trust**                         |       | **Bergdorf Goodman, Inc.**       |
| Massachusetts(7)                            |       | New York                              |
|                                        |       |                                  |
| **Neiman Marcus Funding Corp.**             |       | **Bergdorf Graphics, Inc.**      |
| Delaware                                    |       | New York                              |
| ** **                                  | ** ** | ** **                            |
| **Neiman Marcus Special Events, Inc.** |       | **BergdorfGoodman.com, LLC**          |
| Delaware                                    |       | Delaware                              |
| ** **                                  | ** ** | ** **                            |
| **Quality Call Care Solutions, Inc.**  |       | **Worth Avenue Leasing**              |
| Ontario, Canada                             |       | **Company**                           |
|                                        |       | Florida                               |
| ** **                                  | ** ** | ** **                            |
| **NMGP, LLC**                               |       | **Willow Bend Beverage Corporation**  |
| Virginia                                    |       | Texas(8)                              |

 

----

(5) 51% NMG; 49%Others 

(6) 56% NMG; 44%Others 

(7) 90% NMG; 10% BG

(8) As a Texas nonprofit corporation, Willow BendBeverage Corporation does not issue equity interests.

 

36

----

 

**SCHEDULE 3.17**

 

**Labor Disputes**

 

NONE

 

37

----

 

**SCHEDULE 4.01(b)**

 

**Local Counsel**

 
| **Law Firm**                                               | ** **        | **State**           | ** **                                                   | **Street Address**  | ** **            | **Contact**      | ** **          | **Telephone/Fax**   | ** **           | **Email**           |
|------------------------------------------------------------|-------------------|---------------------|--------------------------------------------------------------|---------------------|-----------------------|------------------|---------------------|---------------------|----------------------|---------------------|
| **Quarles &****Brady**                            |              | **AZ**              |                                                         | One Renaissance     |                  | Jim Morrow,      |                | Tel: (602) 229-5644 |                 | jmorrow@quarles.com |
| Square Two                                                 | Partner           |                | Tel: (520) 770-8719                                          |                |                  |
| North Central                                              |              |                | Fax: (602) 420-5013                                          |                |                  |
| Ave., Phoenix,                                             |              |                |                                                         |                |                  |
| AZ 85004, One                                              |              |                |                                                         |                |                  |
| South Church  St.,                                         | Bob Bornhoft,     |                | Tel: (602) 230-5576                                          |                | rbornhoft@quarles.com |
| Suite                                                      | Partner           |                | Fax: (602) 229-5690                                          |                |                  |
| 1700,Tucson, AZ                                            |              |                |                                                         |                |                  |
| 85701                                                      |              |                |                                                         |                |                  |
|                                                       |              |                |                                                         |                |                  |             |                |                |                 |                |
| **Kirkpatrick  & Lockhart**

**Nicholson**

**Graham** |              | **CA**              |                                                         | 10100 Santa         |                  | Bill Bernfeld,   |                | Tel: (310) 552-5014 |                 | wbernfeld@klng.com  |
|                                                       | Monica            | Partner             |                                                         | Fax: (310) 552-5001 |                  |             |
|                                                       | Boulevard, 7th    | David Schack,       |                                                         | Tel: (310) 552-5061 |                  | dschack@klng.com |
|                                                       | Floor, Los        | Partner             |                                                         | Fax: (310) 552-5001 |                  |             |
|                                                       | Angeles, CA       |                |                                                         |                |                  |             |
|                                                       | 90067             |                |                                                         |                |                  |             |
|                                                       |              |                |                                                         |                |                  |             |                |                |                 |
|                                                       | **DC  &  VA** |                | 1800 Massachusetts                                           |                | Bruce Nielson,        |             | Tel: (202) 778-9256 |                | bnielson@klng.com    |
|                                                       | Ave, NW,          | Partner             |                                                         | Fax: (202) 778-9100 |                  |             |
|                                                       | Washington, D.C.  |                |                                                         |                |                  |             |
|                                                       | 20036             |                |                                                         |                |                  |             |
| ** **                                                 |              |                |                                                         |                |                  |             |                |                |                 |
|                                                       | **FL**            |                | 559 Lexington  Ave, New York,  NY 10022                      |                | Jon Grouf,            |             | Tel: (212) 536-3940 |                | jgrouf@klng.com      |
| Partner                                                    |              | Fax: (212) 536-3901 |                                                         |                |
| Jeffrey Kucera,                                            |              | Tel: (305) 539-3322 |                                                         | jkucera@klng.com    |
| Partner                                                    |              | Fax: (305) 358-7095 |                                                         |                |
|                                                       |              |                |                                                         |                |                  |             |                |                |                 |
|                                                       | **NJ**            |                | One Newark                                                   |                | John Marmora,         |             | Tel: (973) 848-4016 |                | jmarmora@klng.com    |
| Center, 10th                                               | Partner           |                | Fax: (973) 848-4001                                          |                |                  |
| Floor, Newark,                                             |              |                |                                                         |                |                  |
| NJ 07102                                                   |              |                |                                                         |                |                  |
|                                                       |              |                |                                                         |                |                  |             |                |                |                 |
|                                                       | **NY**            |                | 559 Lexington                                                |                | Jeff Weitzman,        |             | Tel: (212) 536-3956 |                | jweitzman@klng.com   |
| Ave, New York,                                             | Partner           |                | Fax: (212) 536-3901                                          |                |                  |
| NY 10022                                                   |              |                |                                                         |                |                  |
|                                                       |              |                |                                                         |                |                  |             |                |                |                 |
|                                                       | **PA**            |                | Henry W. Oliver                                              |                | Pierce Richardson,    |             | Tel: (412) 355-6786 |                | prichardson@klng.com |
| Bldg.                                                      | Partner           |                | Fax: (412) 355-6501                                          |                |                  |
| 535 Smithfield                                             | Charles Harris,   |                | Tel: (412) 355-6730                                          |                | charris@klng.com      |
| Street,  Pittsburgh,                                       | Partner           |                | Fax: (412) 355-6501                                          |                |                  |
| PA 15222                                                   |              |                |                                                         |                |                  |
|                                                       | ** **        |                |                                                         |                |                  |             |                |                |                 |
|                                                       | **TX**            |                | 2828 North  Harwood St.,

Suite 1800,

Dallas, TX 75201 |                | Eugene Segrest,       |             | Tel: (214) 939-4991 |                | esegrest@klng.com    |
| Partner                                                    |              | Fax: (214) 939-4949 |                                                         |                |
| John Dickey,                                               |              | Tel: (214) 939-4941 |                                                         | jdickey@klng.com    |
| Partner                                                    |              | Fax: (214) 939-4949 |                                                         |                |
|                                                       |              |                |                                                         |                |                  |             |                |                |                 |                |
| **Sutherland,  Asbill &  Brennan**                |              |                |                                                         | 999 Peachtree       |                  | Alfred G. Adams, |                | Tel: (404) 853-8014 |                 | al.adams@sablaw.com |
|                                                       | Street, NE,       | Jr., Partner        |                                                         | Fax: (404) 853-8806 |                  |             |
| **GA**                                                     | Atlanta, GA       |                |                                                         |                |                  |             |
|                                                       | 30309             |                |                                                         |                |                  |             |

 

38

----

 
| **Allen &****Vellone, PC**                                 |        | **CO**              |                | 1600 Stout  Street,                                                           |                      | Mike Vellone,      |   | Tel: (303) 534-4499 |   | mvellone@allen-vellone.com       |
|---------------------------------------------------------------------|-------------|---------------------|---------------------|-------------------------------------------------------------------------------|---------------------------|--------------------|--------|---------------------|--------|----------------------------------|
| Suite 1100,                                                    | Partner     |                | Fax: (303) 893-8332 |                                                                          |
| Denver, CO                                                          |        |                |                |                                                                          |                      |
| 80202                                                               |        |                |                |                                                                          |                      |
|                                                                |        |                |                |                                                                          |                      |               |   |                |   |                             |
| **Clark  Hill,****PLC**                                             |        | **MI**              |                | 500 Woodward                                                                  |                      | Bill Dunn,         |   | Tel: (313) 965-8511 |   | wdunn@clarkhill.com              |
| Ave.,  Suite 3500                                              | Partner     |                | Fax: (313) 965-8252 |                                                                          |                      |
| Detroit, MI  48226                                                  |        |                |                |                                                                          |                      |
|                                                                |        |                |                |                                                                          |                      |               |   |                |   |                             |
| **Morris,  James,**

**Hitchens &**

**Williams**

**LLP** |        | **DE**              |                | 222 Delaware  Ave, 10th floor  P.O. Box 2306  Wilmington, DE  19899-2306 |                      | Robert Symonds,    |   | Tel: (302) 888-6803 |   | rsymonds@morrisjames.com         |
| Partner                                                             |        | Fax: (302) 888-6989 |                |
|                                                                |        |                |                |                                                                          |
| Norman M. Powell,                                                   |        | Tel: (302) 888-6975 |                | npowell@morrisjames.com                                                       |
| Partner                                                             |        | Fax: (302) 888-6989 |                |
|                                                                |        |                |                |                                                                          |
| Matt O’Toole,                                                  |        | Tel: (302) 888-6875 |                | motoole@morrisjames.com                                                       |
| Partner                                                             |        | Fax: (302) 888-6989 |                |
|                                                                |        |                |                |                                                                          |                      |               |   |                |   |                             |
| **Wilmer  Cutler**

**Pickering**

**Hale  and**

**Dorr  LLP**     |        | **MA**              |                | 60 State Street  Boston, MA  02109                                            |                      | Jeffrey Hermanson, |   | Tel: (617) 526-6229 |   | Jeffrey.Hermanson@wilmerhale.com |
|                                                                | Partner     |                | Fax: (617) 526-5000 |                                                                          |
|                                                                |        |                |                |                                                                          |                      |
|                                                                | John Sigel, |                | Tel: (617) 526-6728 |                                                                          | john.sigel@wilmerhale.com |
|                                                                | Partner     |                | Fax: (617) 526-5000 |                                                                          |

 

39

----

 

**SCHEDULE 6.01**

 

**Existing Indebtedness**

 

2008 Notes

 

2028 Debentures

 

$1.4 million of otherindebtedness

 

40

----

 

**SCHEDULE 9.01**

 

**Borrower’s Website for Electronic Delivery**

 

www.neimanmarcusgroup.com

 

41

----

EXHIBIT A

 

[FORM OF]ADMINISTRATIVE QUESTIONNAIRE

 

NEIMAN MARCUS GROUP, INC.

 
| Agent Information     |   | Agent Closing Contact             |
|-----------------------|--------|-----------------------------------|
| Credit Suisse         |   | Jeannette Crespo                  |
| Eleven Madison Avenue |   | Tel: 212-325-5683                 |
| New York, NY 10010    |   | Fax: 212-325-8304                 |
|                  |   | E-Mail: jeannette.crespo@csfb.com |

 
| Agent Wire Instructions |
|-------------------------|
| Bank of New York        |
| ABA [***]               |
| Account Name: [***]     |
| Account Number: [***]   |

 

It is very important that **all** of therequested information be completed accurately and that this questionnaire bereturned promptly. If your institution is sub-allocating its allocation, pleasefill out an administrative questionnaire for each legal entity.

 
| Legal Name of Lender to appear in Documentation: |
|--------------------------------------------------|
|                                             |
|                                             |   |
| Signature  Block Information:                    |   |

 

·             SigningCredit Agreement o Yes                  oNo

 

·             Comingin via Assignment o Yes                 o No

 
| Type of Lender: |   |
|-----------------|--------|

 

(Bank, Asset Manager, Broker/Dealer, CLO/CDO; FinanceCompany, Hedge Fund, Insurance, Mutual Fund, Pension Fund, Other RegulatedInvestment Fund, Special Purpose Vehicle, Other-please specify)

 
| Lender Parent: |   |
|----------------|--------|

 
| Lender Domestic Address |   | Lender Eurodollar Address |
|-------------------------|--------|---------------------------|
|                    |   |                      |
|                    |   |                      |
|                    |   |                      |
|                    |   |                      |
|                    |   |                      |
|                    |   |                      |

 

----

 

**Contacts/Notification Methods:Borrowings, Paydowns, Interest, Fees, etc.**

 
|            |   | Primary Credit Contact |   | Secondary Credit Contact |   |
|-----------------|--------|------------------------|--------|--------------------------|--------|
|            |   |                   |   |                     |   |
| Name:           |   |                   |   |                     |   |
|            |   |                   |   |                     |   |
| Company:        |   |                   |   |                     |   |
|            |   |                   |   |                     |   |
| Title:          |   |                   |   |                     |   |
|            |   |                   |   |                     |   |
| Address:        |   |                   |   |                     |   |
|            |   |                   |   |                     |   |
|            |   |                   |   |                     |   |
|            |   |                   |   |                     |   |
| Telephone:      |   |                   |   |                     |   |
|            |   |                   |   |                     |   |
| Facsimile:      |   |                   |   |                     |   |
|            |   |                   |   |                     |   |
| E-Mail Address: |   |                   |   |                     |   |

 
|            |   | Primary Operations Contact |   | Secondary Operations Contact |   |
|-----------------|--------|----------------------------|--------|------------------------------|--------|
|            |   |                       |   |                         |   |
| Name:           |   |                       |   |                         |   |
|            |   |                       |   |                         |   |
| Company:        |   |                       |   |                         |   |
|            |   |                       |   |                         |   |
| Title:          |   |                       |   |                         |   |
|            |   |                       |   |                         |   |
| Address:        |   |                       |   |                         |   |
|            |   |                       |   |                         |   |
|            |   |                       |   |                         |   |
|            |   |                       |   |                         |   |
| Telephone:      |   |                       |   |                         |   |
|            |   |                       |   |                         |   |
| Facsimile:      |   |                       |   |                         |   |
|            |   |                       |   |                         |   |
| E-Mail Address: |   |                       |   |                         |   |

 

**Lender’s Domestic WireInstructions**

 
| Bank Name:        |   |   |   |
|-------------------|--------|--------|--------|
|              |   |   |   |
| ABA/Routing No.:  |   |   |   |
|              |   |   |   |
| Account Name:     |   |   |   |
|              |   |   |   |
| Account No.:      |   |   |   |
|              |   |   |   |
| FFC Account Name: |   |   |   |
|              |   |   |   |
| FFC Account No.:  |   |   |   |
|              |   |   |   |
| Attention:        |   |   |   |
|              |   |   |   |
| Reference:        |   |   |   |

 

2

----

 

**Tax Documents**

 

**NON-U.S. LENDER INSTITUTIONS****:**

 

***I.  Corporations:***

If your institution is incorporated outside of the UnitedStates for U.S. federal income tax purposes, and is the beneficial ownerof the interest and other income it receives, you must complete one of thefollowing three tax forms, as applicable to your institution: ***a.) Form W-8BEN****(Certificate of Foreign Status of Beneficial Owner),**b.) Form W-8ECI** (IncomeEffectively Connected to a U.S. Trade or Business)*, or ***c.) Form W-8EXP****(Certificate of Foreign Government or GovernmentalAgency)*.

 

A U.S. taxpayer identification number is required for anyinstitution submitting Form W-8ECI. It is also required on Form W-8BEN forcertain institutions claiming the benefits of a tax treaty with the U.S. Pleaserefer to the instructions when completing the form applicable to yourinstitution. In addition, please be advised that U.S. tax regulations do notpermit the acceptance of faxed forms. **Anoriginal tax form must be submitted**.

 

***II.  Flow-ThroughEntities:***

If your institution is organized outside the U.S., and isclassified for U.S. federal income tax purposes as either a Partnership, Trust,Qualified or Non-Qualified Intermediary, or other non-U.S. flow-through entity,an original ***Form W-8IMY****(Certificate of Foreign Intermediary, Foreign Flow-ThroughEntity, or Certain U.S. Branches for United States Tax Withholding)*mustbe completed by the intermediary together with a withholding statement.Flow-through entities other than Qualified Intermediaries are required toinclude tax forms for each of the underlying beneficial owners.

 

Please refer to the instructions when completing thisform. In addition, please be advised that U.S. tax regulations do not permitthe acceptance of faxed forms. **Original taxform(s) must be submitted**.

 

**U.S. LENDER INSTITUTIONS****:**

 

If your institution is incorporated or organized within the United States, you must complete and return ***Form W-9****(Request for Taxpayer Identification Number andCertification)*. **Please be advisedthat we request that you submit an original Form W-9**.

 

***Pursuant to thelanguage contained in the tax section of the Credit Agreement, the applicabletax form for your institution must be completed and returned prior to the firstpayment of income. Failure to provide the proper tax form when requested maysubject your institution to U.S. tax withholding***.

 

3

----

 

EXHIBIT B

 

[FORM OF]ASSIGNMENT AND ASSUMPTION

 

This Assignment and Assumption (the “Assignment andAssumption”) is dated as of the Effective Date set forth below and isentered into by and between [*Insert name ofAssignor*] (the “Assignor”) and [*Insert name of Assignee*] (the “Assignee”). Capitalizedterms used but not defined herein shall have the meanings given to them in theCredit Agreement identified below (as amended, supplemented or otherwisemodified from time to time, the “Credit Agreement”), receipt of a copyof which is hereby acknowledged by the Assignee. The Standard Terms andConditions set forth in Annex 1 attached hereto are hereby agreed to andincorporated herein by reference and made a part of this Assignment andAssumption as if set forth herein in full.

 

For an agreed consideration, the Assignor herebyirrevocably sells and assigns to the Assignee, and the Assignee herebyirrevocably purchases and assumes from the Assignor, subject to and inaccordance with the Standard Terms and Conditions and the Credit Agreement, asof the Effective Date inserted by the Agent as contemplated below (i) allof the Assignor’s rights and obligations in its capacity as a Lender under theCredit Agreement and any other documents or instruments delivered pursuantthereto to the extent related to the amount and percentage interest identifiedbelow of all of such outstanding rights and obligations of the Assignor underthe respective facilities identified below (including any guarantees includedin such facilities) and (ii) to the extent permitted to be assigned underapplicable law, all claims, suits, causes of action and any other right of theAssignor (in its capacity as a Lender) against any Person, whether known orunknown, arising under or in connection with the Credit Agreement, any otherdocuments or instruments delivered pursuant thereto or the loan transactionsgoverned thereby or in any way based on or related to any of the foregoing,including contract claims, tort claims, malpractice claims, statutory claimsand all other claims at law or in equity related to the rights and obligationssold and assigned pursuant to clause (i) above (the rights and obligationssold and assigned pursuant to clauses (i) and (ii) above beingreferred to herein collectively as the “Assigned Interest”). Such saleand assignment is without recourse to the Assignor and, except as expresslyprovided in this Assignment and Assumption, without representation or warrantyby the Assignor.

 
| 1.     |   | Assignor:         |   |                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
|--------|--------|-------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|   |   |              |   |                                                                                                                                                                                                                                                                                                                                                                                               |   |
| 2.     |   | Assignee:         |   |                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
|   |   |              |   | [and is an Affiliate/Approved Fund of [*identify Lender*](1)]                                                                                                                                                                                                                                                                                                                                      |   |
|   |   |              |   |                                                                                                                                                                                                                                                                                                                                                                                               |   |
| 3.     |   | Borrower(s)       |   | The Neiman Marcus Group, Inc.                                                                                                                                                                                                                                                                                                                                                                 |   |
|   |   |              |   |                                                                                                                                                                                                                                                                                                                                                                                               |   |
| 4.     |   | Agent:            |   | Credit Suisse as the administrative agent and collateral  agent under the Credit Agreement                                                                                                                                                                                                                                                                                                         |   |
|   |   |              |   |                                                                                                                                                                                                                                                                                                                                                                                               |   |
| 5.     |   | Credit Agreement: |   | The Credit Agreement dated as of October 6, 2005,  among The Neiman Marcus Group, Inc., a Delaware corporation (the “Borrower”,  formerly known as Newton Acquisition Merger Sub, Inc.), Newton  Acquisition, Inc., a Delaware corporation, the Subsidiaries of the Borrower  from time to time party thereto, the Lenders parties thereto, and Credit  Suisse, as Agent. |   |

 

----

(1) Select as applicable.

 

----

 
| 6. | Assigned Interest: |
|----|--------------------|

 
| **Aggregate Amount of  Commitment/Loans** | ** ** | **Amount of  Commitment/Loans  Assigned** | ** ** | **Percentage Assigned of  Commitments/Loans(****2)** | ** ** | **CUSIP** | ** ** |
|-------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------------------|------------|-----------|------------|
| $                                         |       |                                      | $          |                                                 |       |      | %          |   |   |
| $                                         |       |                                      | $          |                                                 |       |      | %          |   |   |
| $                                         |       |                                      | $          |                                                 |       |      | %          |   |   |

 

Effective Date:                               ,20        [TO BE INSERTED BY AGENT AND WHICHSHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTERTHEREFOR.]

 

The terms set forth in this Assignment and Assumption arehereby agreed to:

 
|   |   | ASSIGNOR |
|--------|--------|----------|
|   |   |     |
|   |   |     | [NAME OF ASSIGNOR] |
|   |   |     |   |
|   |   |     | by |
|   |   |     |   |
|   |   |     | Name: |
|   |   |     | Title: |
|        |        |          |  |  |

 

 
|   |   | ASSIGNEE |
|--------|--------|----------|
|   |   |     |
|   |   |     | [NAME OF ASSIGNEE] |
|   |   |     |   |
|   |   |     | by |
|   |   |     |   |
|   |   |     | Name: |
|   |   |     | Title: |
|        |        |          |  |  |

 

----

(2) Set forth, to at least 9decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

 

2

----

 

Consented to and Accepted:

 

CREDIT SUISSE, as Agent

 
| by:    |   |   |
|--------|--------|--------|
|   |   |   |
|   | Name:  |   |
|   | Title: |   |

 
| by:    |   |   |
|--------|--------|--------|
|   |   |   |
|   | Name:  |   |
|   | Title: |   |

 

[Consented to:](3)

 

[THE NEIMAN MARCUS GROUP, INC.]

 

 
| by:    |   |   |
|--------|--------|--------|
|   |   |   |
|   | Name:  |   |
|   | Title: |   |

 

----

(3) To be added only if the consentof the Borrower is required by the terms of the Credit Agreement.

 

3

----

 

ANNEX 1

 

STANDARD TERMS AND CONDITIONS FORASSIGNMENT AND ASSUMPTION

 

1.  Representations and Warranties.

 

1.1  Assignor.The Assignor (a) represents and warrants that (i) it is the legal andbeneficial owner of the Assigned Interest, (ii) the Assigned Interest isfree and clear of any lien, encumbrance or other adverse claim, (iii) itsCommitment, and the outstanding balances of its Loans, in each case withoutgiving effect to assignments thereof which have not become effective, are asset forth herein, and (iv) it has full power and authority, and has takenall action necessary, to execute and deliver this Assignment and Assumption andto consummate the transactions contemplated hereby; and (b) assumes noresponsibility with respect to (i) any statements, warranties orrepresentations made in or in connection with the Credit Agreement or any otherLoan Document, (ii) the execution, legality, validity, enforceability,genuineness, sufficiency or value of the Loan Documents or any collateralthereunder, (iii) the financial condition of the Borrower, any of itsSubsidiaries or Affiliates or any other Person obligated in respect of any LoanDocument or (iv) the performance or observance by the Borrower, any of itsSubsidiaries or Affiliates or any other Person of any of their respectiveobligations under any Loan Document.

 

1.2.  Assignee. The Assignee (a) representsand warrants that (i) it is an Eligible Assignee and has full power andauthority, and has taken all action necessary, to execute and deliver thisAssignment and Assumption and to consummate the transactions contemplatedhereby and to become a Lender under the Credit Agreement, (ii) itsatisfies the requirements, if any, specified in the Credit Agreement that arerequired to be satisfied by it in order to acquire the Assigned Interest andbecome a Lender, (iii) from and after the Effective Date, it shall bebound by the provisions of the Credit Agreement as a Lender thereunder and, tothe extent of the Assigned Interest, shall have the obligations of a Lenderthereunder, (iv) it has received a copy of the Credit Agreement, togetherwith copies of the most recent financial statements referred to in Section 3.04(a) ordelivered pursuant to Section 5.01 thereof, as applicable, and such otherdocuments and information as it has deemed appropriate to make its own creditanalysis and decision to enter into this Assignment and Assumption and topurchase the Assigned Interest on the basis of which it has made such analysisand decision independently and without reliance on the Agent or any otherLender, and (v) if it is a Foreign Lender, attached to the Assignment andAssumption is any documentation required to be delivered by it pursuant to theterms of the Credit Agreement, duly completed and executed by the Assignee; and(b) agrees that (i) it will, independently and without reliance onthe Agent, the Assignor or any other Lender, and based on such documents andinformation as it shall deem appropriate at the time, continue to make its owncredit decisions in taking or not taking action under the Loan Documents, (ii) itappoints and authorizes the Agent to take such action on its behalf and toexercise such powers under the Credit Agreement as are delegated to the Agent,by the terms thereof, together with such powers as are reasonably incidentalthereto, and (iii) it will perform in accordance with their terms all ofthe obligations which by the terms of the Loan Documents are required to beperformed by it as a Lender.

 

2.  Payments. From and after theEffective Date, the Agent shall make all payments in respect of the AssignedInterest (including payments of principal, interest, fees and other amounts) tothe Assignor for amounts which have accrued to but excluding the Effective Dateand to the Assignee for amounts which have accrued from and after the EffectiveDate.

 

3.  General Provisions. ThisAssignment and Assumption shall be binding upon, and inure to the benefit of,the parties hereto and their respective successors and assigns. This Assignmentand Assumption may be executed in any number of counterparts, which togethershall constitute one instrument. Delivery of an executed counterpart of asignature page of this Assignment and Assumption by facsimile shall beeffective as delivery of a manually executed counterpart of this Assignment andAssumption. This Assignment and Assumption shall be construed in accordancewith and governed by the laws of the State of New York.

 

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EXHIBIT C

 

[FORM OF]COMPLIANCE CERTIFICATE

 
| To:    | The Lenders parties to the       |
|--------|----------------------------------|
|   | Credit Agreement described below |

 

This Compliance Certificate is furnished pursuant to thatcertain Credit Agreement dated as of October 6, 2005 (as amended,supplemented or otherwise modified from time to time, the “Credit Agreement”),among The Neiman Marcus Group, Inc. (formerly known as Newton AcquisitionMerger Sub, Inc.) (the “Borrower”), the other Loan Parties, theLenders party thereto and Credit Suisse, as Agent for the Lenders. Unlessotherwise defined herein, capitalized terms used in this Compliance Certificatehave the meanings ascribed thereto in the Credit Agreement.

 

THE UNDERSIGNED HEREBY CERTIFIES THAT:

 

1.             I amthe duly elected                                 ofthe Borrower and a Financial Officer of the Borrower;

 

2.             I havereviewed the terms of the Credit Agreement and I have made, or have caused tobe made under my supervision, a detailed review of the transactions andconditions of the Borrower and its Subsidiaries during the accounting periodcovered by the attached financial statements;

 

3.             Theexaminations described in paragraph 2 did not disclose, except as set forthbelow, and I have no knowledge of (i) the existence of any condition orevent which constitutes a Default or Event of Default during or at the end ofthe accounting period covered by the attached financial statements or as of thedate of this Certificate and (ii) the disclosure set forth below specifiesthe details of any such condition or event and any action taken or proposed tobe taken with respect thereto;

 

4.  No Loan Party (a) has changed (i) itsname, (ii) the location of its chief executive office or its principalplace of business, (iii) its organizational legal entity designation orjurisdiction of incorporation or formation, or (iv) its Federal TaxpayerIdentification Number or organizational identification number assigned to it byits jurisdiction of incorporation or formation, or (b) has made anacquisition of any material property for which additional filings or recordingsare necessary to perfect and maintain the Agent’s security interest therein, ineach case, without having given the Agent the notice required by Section 4.1of the Security Agreement; and

 

5.             [Forannual certificates, add: Schedule I attached hereto sets forthreasonably detailed calculations of the Borrower’s Excess Cash Flow for suchfiscal year.] and

 

6.             [Forannual certificates, add: Schedule II sets forth a list of names of allImmaterial Subsidiaries, each Subsidiary set forth on Schedule II individuallyqualifies as an Immaterial Subsidiary and all Domestic Subsidiaries listed asImmaterial Subsidiaries in the aggregate comprise less than 5% of consolidatedtotal assets of the Borrower and the Subsidiaries at the end of the accountingperiod covered by the attached financial statements and represented (on acontribution basis) less than 5% of EBITDA for such period;] and

 

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The description below sets forth the exceptions, if any,to paragraph 3 by listing, in detail, the nature of the condition or event, theperiod during which it has existed and the action which the Borrower has taken,is taking, or proposes to take with respect to each such condition or event:

 
|   |   |
|--------|--------|
|   |   |
|   |   |

 

The foregoing certifications, together with theinformation set forth in the Schedules hereto and the financial statementsdelivered with this Certificate in support hereof, are made and delivered thisday of             ,     20    .

 

 
|   |   | THE NEIMAN MARCUS GROUP, INC. |
|--------|--------|-------------------------------|
|   |   |                          |
|   |   | by:                           |
|   |   |                          |   |
|   |   |                          | Name: |
|   |   |                          | Title: |

 

2

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SCHEDULEI

 

Calculations of the Borrower’sExcess Cash Flows

 

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SCHEDULEII

 

Immaterial Subsidiaries

 

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EXHIBIT D

 

[FORM OF]JOINDER AGREEMENT

 

THIS JOINDER AGREEMENT (this “Agreement”), dated asof                ,         , 20     ,is entered into between                                                    ,a                                 (the “New Subsidiary”) and CREDIT SUISSE, as Agent, under that certainCredit Agreement, dated as of October 6, 2005 (as the same may be amended,supplemented or otherwise modified from time to time, the “Credit Agreement”),among The Neiman Marcus Group, Inc., a Delaware corporation (the “Borrower”,formerly known as Newton Acquisition Merger Sub, Inc.), Newton Acquisition, Inc.,a Delaware corporation, the Subsidiaries of the Borrower from time to timeparty thereto, the other Loan Parties from time to time party thereto, theLenders from time to time party thereto and the Agent. All capitalized termsused herein and not otherwise defined shall have the meanings set forth in theCredit Agreement.

 

The New Subsidiary and the Agent, for the benefit of theLenders, hereby agree as follows:

 

1.             TheNew Subsidiary hereby acknowledges, agrees and confirms that, by its executionof this Agreement, the New Subsidiary will be deemed to be a Loan Party underthe Credit Agreement and a Loan Guarantor for all purposes of the CreditAgreement and shall have all of the obligations of a Loan Party and a LoanGuarantor thereunder as if it had executed the Credit Agreement. The NewSubsidiary hereby ratifies, as of the date hereof, and agrees to be bound by,all of the terms, provisions and conditions contained in the Credit Agreement,including without limitation (a) all of the representations and warrantiesof the Loan Parties set forth in Article III of the Credit Agreement (tothe extent made or deemed made on or after the effective date hereof), (b) allof the covenants set forth in Articles V and VI of the Credit Agreement and (c) allof the guaranty obligations set forth in Article X of the CreditAgreement. Without limiting the generality of the foregoing terms of this paragraph1, the New Subsidiary, subject to the limitations set forth in Section 10.09of the Credit Agreement, hereby absolutely and unconditionally guarantees,jointly and severally with the other Loan Guarantors, to the Agent and theLenders, the prompt payment of the Guaranteed Obligations in full when due(whether at stated maturity, upon acceleration or otherwise) to the extent ofand in accordance with Article X of the Credit Agreement.

 

2.             Ifrequired, the New Subsidiary is, simultaneously with the execution of thisAgreement, executing and delivering such Collateral Documents (and such otherdocuments and instruments) as requested by the Agent in accordance with theCredit Agreement.

 

3.             TheNew Subsidiary hereby waives acceptance by the Agent and the Lenders of the guarantyby the New Subsidiary upon the execution of this Agreement by the NewSubsidiary.

 

4.             ThisAgreement may be executed in any number of counterparts, each of which when so executedand delivered shall be an original, but all of which shall constitute one andthe same instrument.

 

5.             THISAGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BECONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

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IN WITNESS WHEREOF, the New Subsidiary has caused thisAgreement to be duly executed by its authorized officer, and the Agent, for thebenefit of the Lenders, has caused the same to be accepted by its authorizedofficer, as of the day and year first above written.

 

 
|   |   | [NEW SUBSIDIARY]           |
|--------|--------|----------------------------|
|   |   |                       |
|   |   | by:                        |
|   |   |                       |   |
|   |   |                       | Name: |
|   |   |                       | Title: |
|   |   |                       |
|   |   | Acknowledged and accepted: |
|   |   |                       |
|   |   | CREDIT SUISSE, as Agent    |
|   |   |                       |
|   |   | by:                        |
|   |   |                       |   |
|   |   |                       | Name: |
|   |   |                       | Title: |
|   |   |                       |   |
|   |   | by:                        |
|   |   |                       |   |
|   |   |                       | Name: |
|   |   |                       | Title: |

 

2

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EXHIBIT E

 

[FORM OF]BORROWING REQUEST

 

Credit Suisse,

as Agent for the Lenders referred to below,

Eleven Madison Avenue

New York, NY 10010

 

Attention: Agency Group

Fax: (212) 325-8304

 

[Date](1)

 

Ladies and Gentlemen:

 

Reference is made to the Credit Agreement dated as of October 6,2005, among Newton Acquisition Merger Sub, Inc., a Delaware corporation(prior to the Merger, the “Borrower”), The Neiman Marcus Group, Inc.,a Delaware corporation (after the Merger, the “Borrower”), NewtonAcquisition, Inc., a Delaware corporation, the Subsidiaries of theBorrower from time to time party thereto, the Lenders parties thereto, andCredit Suisse, as Agent (as amended, supplemented or otherwise modified fromtime to time, the “Credit Agreement”). Terms defined in the CreditAgreement are used herein with the same meanings.

 

The undersigned hereby gives you notice pursuant to Section 2.03of the Credit Agreement that it requests the Borrowing under the CreditAgreement to be made on the Closing Date, and in that connection sets forthbelow the terms on which the Borrowing is requested to be made:

 
| (A)    |   | Date of Borrowing                           |   |   |   |
|--------|--------|---------------------------------------------|--------|--------|--------|
|   |   | (which shall be a Business Day)             |   |   |   |
|   |   |                                        |   |   |   |
| (B)    |   | Principal Amount of Borrowing               |   |   |   |
|   |   |                                        |   |   |   |
| (C)    |   | Type of Borrowing(2)                        |   |   |   |
|   |   |                                        |   |   |   |
| (D)    |   | Interest Period and the last day thereof(3) |   |   |   |
|   |   |                                        |   |   |   |
| (E)    |   | Account Number and Location                 |   |   |   |

 

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(1)          Must be notified inwriting or by telephone (with such telephonic notification to be confirmedpromptly in writing) (i) in the case of a LIBOR Rate Borrowing, not laterthan 11:00 a.m., New York City time, two (2) Business Days before theClosing Date or (ii) in the case of an ABR Borrowing, not later than 10:00a.m., New York City time, on the Closing Date.

(2)          Specify a LIBOR RateBorrowing or an ABR Borrowing.

(3)          The initial InterestPeriod applicable to a LIBOR Rate Borrowing shall be subject to the definitionof “Interest Period”.

 

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|   |   | NEWTON ACQUISITION MERGER SUB,  INC. |
|--------|--------|--------------------------------------|
|   |   |                                 |
|   |   | by:                                  |
|   |   |                                 |   |
|   |   |                                 | Name: |
|   |   |                                 | Title: |

 

2

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EXHIBIT F

 

[FORM OF]PROMISSORY NOTE

 
| $[          ] | New York, New York     |
|-----------------------------------------------------------------|------------------------|
|                                                            | [·],  200[·] |

 

FOR VALUE RECEIVED, the undersigned, THE NEIMAN MARCUSGROUP, INC., a Delaware corporation (the “Borrower”), hereby promises topay to [ ] (the “Lender”) or its registered assigns, at the office ofCredit Suisse (the “Agent”) at Eleven Madison Avenue, New York, New York10010, on the dates and in the amounts set forth in the Credit Agreement datedas of October 6, 2005 (as the same may be amended, supplemented orotherwise modified from time to time, the “Credit Agreement”), among theBorrower, Newton Acquisition, Inc., the Subsidiaries from time to timeparty thereto, the Lenders party thereto and the Agent, in lawful money of theUnited States of America in immediately available funds, the aggregate unpaidprincipal amount of all Loans made by the Lender to the Borrower pursuant tothe Credit Agreement and to pay interest from the date of such Loans on theprincipal amount thereof from time to time outstanding, in like funds, at saidoffice, at the rate or rates per annum and payable on the dates provided in theCredit Agreement. Terms used but not defined herein shall have the meaningsassigned to them in the Credit Agreement.

 

The Borrower promises to pay interest, on demand, on anyoverdue principal and, to the extent permitted by law, overdue interest fromthe due dates at a rate or rates provided in the Credit Agreement.

 

The Borrower hereby waives diligence, presentment, demand,protest and notice of any kind whatsoever. The nonexercise by the holder hereofof any of its rights hereunder in any particular instance shall not constitutea waiver thereof in that or any subsequent instance.

 

All borrowings evidenced by this promissory note and allpayments and prepayments of the principal hereof and interest hereon and therespective dates thereof shall be endorsed by the holder hereof on theschedules attached hereto and made a part hereof or on a continuation thereofwhich shall be attached hereto and made a part hereof, or otherwise recorded bysuch holder in its internal records; provided, however, thatthe failure of the holder hereof to make such a notation or any error in suchnotation shall not affect the obligations of the Borrower under this Note.

 

This promissory note is one of the promissory notes referredto in the Credit Agreement that, among other things, contains provisions forthe acceleration of the maturity hereof upon the happening of certain events,for optional and mandatory prepayment of the principal hereof prior to thematurity hereof and for the amendment or waiver of certain provisions of theCredit Agreement, all upon the terms and conditions therein specified. Thispromissory note is entitled to the benefit of the Credit Agreement and isguaranteed and secured as provided therein and in the other Loan Documentsreferred to in the Credit Agreement. THIS PROMISSORY NOTE SHALL BE CONSTRUED INACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

 
|   |   | THE NEIMAN MARCUS GROUP, INC., |
|--------|--------|--------------------------------|
|   |   |                           |
|   |   | by:                            |
|   |   |                           |   |
|   |   |                           | Name: |
|   |   |                           | Title: |

 

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**Schedule A to Note**

 

LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS

 
| **Date**   | ** ** | **Amount of ABR Loans** | ** ** | **Amount Converted to ABR  Loans** | ** ** | **Amount of Principal of  ABR Loans Repaid** | ** ** | **Amount of ABR Loans  Converted to LIBOR Rate  Loans** | ** ** | **Unpaid Principal Balance  of ABR Loans** | ** ** | **Notation Made By** | ** ** |
|------------|------------|-------------------------|------------|------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------------------|------------|--------------------------------------------|------------|----------------------|------------|
| ** ** | ** ** | ** **              | ** ** | ** **                         | ** ** | ** **                                   | ** ** | ** **                                              | ** ** | ** **                                 | ** ** | ** **           | ** ** |
| ** ** | ** ** | ** **              | ** ** | ** **                         | ** ** | ** **                                   | ** ** | ** **                                              | ** ** | ** **                                 | ** ** | ** **           | ** ** |
| ** ** | ** ** | ** **              | ** ** | ** **                         | ** ** | ** **                                   | ** ** | ** **                                              | ** ** | ** **                                 | ** ** | ** **           | ** ** |

 

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**Schedule B to Note**

** **

LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OFLIBOR RATE LOANS

 
| **Date**   | ** ** | **Amount of LIBOR  Rate Loans** | ** ** | **Amount Converted  to LIBOR Rate  Loans** | ** ** | **Interest Period and  Adjusted LIBOR with  Respect Thereto** | ** ** | **Amount of Principal of  LIBOR Rate Loans  Repaid** | ** ** | **Amount of LIBOR  Rate Loans Converted  to ABR Loans** | ** ** | **Unpaid Principal  Balance of LIBOR  Rate Loans** | ** ** | **Notation Made By** | ** ** |
|------------|------------|---------------------------------|------------|--------------------------------------------|------------|---------------------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------------------|------------|----------------------------------------------------|------------|----------------------|------------|
| ** ** | ** ** | ** **                      | ** ** | ** **                                 | ** ** | ** **                                                    | ** ** | ** **                                           | ** ** | ** **                                              | ** ** | ** **                                         | ** ** | ** **           | ** ** |
| ** ** | ** ** | ** **                      | ** ** | ** **                                 | ** ** | ** **                                                    | ** ** | ** **                                           | ** ** | ** **                                              | ** ** | ** **                                         | ** ** | ** **           | ** ** |
| ** ** | ** ** | ** **                      | ** ** | ** **                                 | ** ** | ** **                                                    | ** ** | ** **                                           | ** ** | ** **                                              | ** ** | ** **                                         | ** ** | ** **           | ** ** |

 

2

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