**Exhibit 4.4**

 

NEWTON ACQUISITION MERGER SUB, INC.

 

to be merged with and into

 

THE NEIMAN MARCUS GROUP, INC.

 

NEWTON ACQUISITION, INC., as a guarantor

 

the SUBSIDIARY GUARANTORS named in Schedule I hereto

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

 

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SENIOR SUBORDINATED INDENTURE

 

Dated as of October 6, 2005

 

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$500,000,000

 

103/8% Senior Subordinated NotesDue 2015

 

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**Reconciliation and tie between Trust Indenture Actof 1939 and Indenture, dated as of October 6, 2005***

 
| **Trust  Indenture Act Section** | ** **                | **Indenture  Section** |
|----------------------------------|---------------------------|------------------------|
| § 310                  | (a)(1)                    |                   | 608 |
|                             | (a)(2)                    |                   | 608 |
|                             | (a)(3)                    |                   | N.A. |
|                             | (a)(4)                    |                   | N.A. |
|                             | (b)                       |                   | 608,  609 |
|                             | (c)                       |                   | N.A. |
| § 311                  | (a)                       |                   | 605 |
|                             | (b)                       |                   | 605 |
|                             | (c)                       |                   | N.A. |
| § 312                  | (a)                       |                   | 701 |
|                             | (b)                       |                   | 702 |
|                             | (c)                       |                   | 702 |
| § 313                  | (a)                       |                   | 703 |
|                             | (a)(4)                    |                   | 1008 |
|                             | (b)(1)                    |                   | N.A. |
|                             | (b)(2)                    |                   | 703 |
|                             | (c)(1)                    |                   | 102 |
|                             | (c)(2)                    |                   | 102 |
|                             | (d)                       |                   | 703 |
|                             | (e)                       |                   | 102 |
| § 314                  | (a)                       |                   | 1009 |
|                             | (b)                       |                   | N.A. |
|                             | (c)(1)                    |                   | 102 |
|                             | (c)(2)                    |                   | 102 |
|                             | (c)(3)                    |                   | N.A. |
|                             | (d)                       |                   | N.A. |
|                             | (e)                       |                   | 102 |
|                             | (f)                       |                   | 1017 |
| § 315                  | (a)                       |                   | 601 |
|                             | (b)                       |                   | 602 |
|                             | (c)                       |                   | 601 |
|                             | (d)                       |                   | 601 |
|                             | (e)                       |                   | 514 |
| § 316                  | (a) (last  sentence) |                   | 101(“Outstanding”) |
|                             | (a)(1)(A)                 |                   | 502,  512 |
|                             | (a)(1)(B)                 |                   | 513 |
|                             | (a)(2)                    |                   | N.A. |
|                             | (b)                       |                   | 508 |
|                             | (c)                       |                   | 104(d) |
| § 317                  | (a)(1)                    |                   | 503 |
|                             | (a)(2)                    |                   | 504 |
|                             | (b)                       |                   | 1003 |
| § 318                  | (a)                       |                   | 111 |

 

N.A. means Not Applicable.

 

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*              This reconciliation and tie shallnot, for any purpose, be deemed to be a part of this Indenture.

 

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**Table of Contents***

 
| **ARTICLE ONE**

** **

**DEFINITIONS AND OTHER PROVISIONS OF GENERAL  APPLICATION**             |
|------------------------------------------------------------------------------------------------------------|
| ** **                                                                                                 | ** ** |
| SECTION 101.   Rules of Construction and Incorporation by Reference of Trust  Indenture Act |   |
| SECTION 102.   Definitions                                                                       |   |
| SECTION 103.   Compliance Certificates and Opinions                                              |   |
| SECTION 104.   Form of Documents Delivered to Trustee                                       |   |
| SECTION 105.   Acts of Holders                                                                   |   |
| SECTION 106.   Notices, Etc., to Trustee, Company, any Guarantor and Agent                  |   |
| SECTION 107.   Notice to Holders; Waiver                                                         |   |
| SECTION 108.   Effect of Headings and Table of Contents                                          |   |
| SECTION 109.   Successors and Assigns                                                            |   |
| SECTION 110.   Separability Clause                                                               |   |
| SECTION 111.   Benefits of Indenture                                                             |   |
| SECTION 112.   Governing Law                                                                     |   |
| SECTION 113.   Legal Holidays                                                                    |   |
| SECTION 114.   No Personal Liability of Directors, Officers, Employees and  Stockholders         |   |
| SECTION 115.   Trust Indenture Act Controls                                                      |   |
| SECTION 116.   Counterparts                                                                      |   |
|                                                                                                       |   |
| **ARTICLE TWO**

** **

**NOTE FORMS**                                                           |
| ** **                                                                                                 | ** ** |
| SECTION 201.   Form and Dating                                                              |   |
| SECTION 202.   Execution, Authentication, Delivery and Dating                                    |   |
|                                                                                                       |   |
| **ARTICLE THREE**

** **

**THE NOTES**                                                          |
| ** **                                                                                                 | ** ** |
| SECTION 301.   Title and Terms                                                                   |   |
| SECTION 302.   Denominations                                                                     |   |
| SECTION 303.   Temporary Notes                                                                   |   |
| SECTION 304.   Note Registrar; Paying Agent; Registration of Transfer and Exchange               |   |
| SECTION 305.   Mutilated, Destroyed, Lost and Stolen Notes                                       |   |

 

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*              This table of contents shall not,for any purpose, be deemed to be a part of this Indenture.

 

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| SECTION 306.   Payment of Interest; Interest Rights Preserved                             |       |
|-----------------------------------------------------------------------------------------------------|------------|
| SECTION 307.   Persons Deemed Owners                                                      |       |
| SECTION 308.   Cancellation                                                               |       |
| SECTION 309.   Computation of Interest                                                    |       |
| SECTION 310.   Transfer and Exchange                                                      |       |
| SECTION 311.   CUSIP Numbers                                                              |       |
| SECTION 312.   Issuance of Additional Notes                                               |       |
|                                                                                                |       |
| **ARTICLE FOUR**

** **

**SATISFACTION AND DISCHARGE**                                   |
| ** **                                                                                          | ** ** |
| SECTION 401.   Satisfaction and Discharge of Indenture                                    |       |
| SECTION 402.   Application of Trust Money                                                 |       |
|                                                                                                |       |
| **ARTICLE FIVE**

** **

**REMEDIES**                                                     |
| ** **                                                                                          | ** ** |
| SECTION 501.   Events of Default                                                          |       |
| SECTION 502.   Acceleration of Maturity; Rescission and Annulment                         |       |
| SECTION 503.   Collection of Indebtedness and Suits for Enforcement by Trustee            |       |
| SECTION 504.   Trustee May File Proofs of Claim                                      |       |
| SECTION 505.   Trustee May Enforce Claims Without Possession of Notes                |       |
| SECTION 506.   Application of Money Collected                                             |       |
| SECTION 507.   Limitation on Suits                                                        |       |
| SECTION 508.   Unconditional Right of Holders to Receive Principal, Premium and  Interest |       |
| SECTION 509.   Restoration of Rights and Remedies                                         |       |
| SECTION 510.   Rights and Remedies Cumulative                                             |       |
| SECTION 511.   Delay or Omission Not Waiver                                               |       |
| SECTION 512.   Control by Holders                                                         |       |
| SECTION 513.   Waiver of Defaults                                                         |       |
| SECTION 514.   Waiver of Stay or Extension Laws                                           |       |
|                                                                                                |       |
| **ARTICLE SIX**

** **

**THE TRUSTEE**                                                   |
| ** **                                                                                          | ** ** |
| SECTION 601.   Duties of the Trustee                                                      |       |
| SECTION 602.   Notice of Defaults                                                         |       |
| SECTION 603.   Certain Rights of Trustee                                                  |       |
| SECTION 604.   Trustee Not Responsible for Recitals or Issuance of Notes                  |       |
| SECTION 605.   May Hold Notes                                                        |       |
| SECTION 606.   Money Held in Trust                                                        |       |
| SECTION 607.   Compensation and Reimbursement                                             |       |
| SECTION 608.   Corporate Trustee Required; Eligibility                                    |       |

 

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| SECTION 609.   Resignation and Removal; Appointment of Successor                                |       |
|-----------------------------------------------------------------------------------------------------------|------------|
| SECTION 610.   Acceptance of Appointment by Successor                                           |       |
| SECTION 611.   Merger, Conversion, Consolidation or Succession to Business                      |       |
| SECTION 612.   Appointment of Authenticating Agent                                              |       |
|                                                                                                      |       |
| **ARTICLE SEVEN**

** **

**HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY**                  |
| ** **                                                                                                | ** ** |
| SECTION 701.   Holder Lists                                                                     |       |
| SECTION 702.   Disclosure of Names and Addresses of Holders                                     |       |
| SECTION 703.   Reports by Trustee                                                               |       |
|                                                                                                      |       |
| **ARTICLE EIGHT**

** **

**MERGER, CONSOLIDATION OR SALE OF ALL OR SUBSTANTIALLY  ALL ASSETS** |
| ** **                                                                                                | ** ** |
| SECTION 801.   Company May Consolidate, Etc., Only on Certain Terms                   |       |
| SECTION 802.  Subsidiary Guarantors May Consolidate, Etc., Only on Certain Terms           |       |
| SECTION 803.   Holdings May Consolidate, Etc., Only on Certain Terms                  |       |
| SECTION 804.   Successor Substituted                                                            |       |
| SECTION 805.   The Merger Permitted                                                             |       |
| SECTION 806.   Assets of Subsidiary Apply to Company and Holdings                               |       |
|                                                                                                      |       |
| **ARTICLE NINE**

** **

**AMENDMENT, SUPPLEMENT AND WAIVER**                                   |
| ** **                                                                                                | ** ** |
| SECTION 901.   Amendments or Supplements Without Consent of Holders                             |       |
| SECTION 902.   Amendments or Supplements With Consent of Holders                                |       |
| SECTION 903.   Execution of Amendments, Supplements or Waivers                                  |       |
| SECTION 904.   Effect of Amendments, Supplements or Waivers                                     |       |
| SECTION 905.   Compliance with Trust Indenture Act                                              |       |
| SECTION 906.   Reference in Notes to Supplemental Indentures                                    |       |
| SECTION 907.   Notice of Supplemental Indentures                                                |       |
|                                                                                                      |       |
| **ARTICLE TEN**

** **

**COVENANTS**                                                           |
| ** **                                                                                                | ** ** |
| SECTION 1001.   Payment of Principal, Premium, if any, and Interest                             |       |
| SECTION 1002.   Maintenance of Office or Agency                                                 |       |
| SECTION 1003.   Paying Agent to Hold Money in Trust                                             |       |
| SECTION 1004.   Corporate Existence                                                             |       |
| SECTION 1005.   Payment of Taxes and Other Claims                                               |       |
| SECTION 1006.   Reserved                                                                        |       |
| SECTION 1007.   Reserved                                                                        |       |

 

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| SECTION 1008.   Statement by Officers as to Default                                                              |       |
|----------------------------------------------------------------------------------------------------------------------------|------------|
| SECTION 1009.   Reports and Other Information                                                                    |       |
| SECTION 1010.   Limitation on Restricted Payments                                                                |       |
| SECTION 1011.   Limitation on Incurrence of Indebtedness and Issuance of Disqualified  Stock and Preferred Stock |       |
| SECTION 1012.   Liens                                                                                            |       |
| SECTION 1013.   Limitations on Transactions with Affiliates                                                      |       |
| SECTION 1014.   Limitations on Dividend and Other Payment Restrictions Affecting  Restricted Subsidiaries        |       |
| SECTION 1015.   Limitation on Guarantees of Indebtedness by Restricted Subsidiaries                              |       |
| SECTION 1016.   Limitation on Other Senior Subordinated Indebtedness                                             |       |
| SECTION 1017.   Change of Control                                                                                |       |
| SECTION 1018.   Asset Sales                                                                                      |       |
| SECTION 1019.   Additional Interest Notice                                                                       |       |
| SECTION 1020.   Obligations of the Company and the Restricted Subsidiaries Relating to  Kate Spade               |       |
|                                                                                                                       |       |
| **ARTICLE ELEVEN**

** **

**REDEMPTION OF NOTES**                                                               |
| ** **                                                                                                                 | ** ** |
| SECTION 1101.   Right of Redemption                                                                              |       |
| SECTION 1102.   Applicability of Article                                                                         |       |
| SECTION 1103.   Election to Redeem; Notice to Trustee                                                            |       |
| SECTION 1104.   Selection by Trustee of Notes to Be Redeemed                                                     |       |
| SECTION 1105.   Notice of Redemption                                                                             |       |
| SECTION 1106.   Effect of Notice of Redemption                                                                   |       |
| SECTION 1107.   Deposit of Redemption Price                                                                      |       |
| SECTION 1108.   Notes Payable on Redemption Date                                                                 |       |
| SECTION 1109.   Notes Redeemed in Part                                                                           |       |
|                                                                                                                       |       |
| **ARTICLE TWELVE**

** **

**GUARANTEES**                                                                        |
| ** **                                                                                                                 | ** ** |
| SECTION 1201.   Guarantees                                                                                       |       |
| SECTION 1202.   Severability                                                                                     |       |
| SECTION 1203.   Subordination of Guarantees                                                                      |       |
| SECTION 1204.   Limitation of Guarantors’ Liability                                                         |       |
| SECTION 1205.   Contribution                                                                                     |       |
| SECTION 1206.   Subrogation                                                                                      |       |
| SECTION 1207.   Reinstatement                                                                                    |       |
| SECTION 1208.   Release of a Guarantor                                                                           |       |
| SECTION 1209.   Benefits Acknowledged                                                                            |       |

 

iv

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| **ARTICLE THIRTEEN**

** **

**LEGAL DEFEASANCE AND COVENANT DEFEASANCE**                                                                               |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                        | ** ** |
| SECTION 1301.   Company’s Option to Effect Legal Defeasance or Covenant Defeasance                                                                 |   |
| SECTION 1302.   Legal Defeasance and Discharge                                                                                                          |   |
| SECTION 1303.   Covenant Defeasance                                                                                                                     |   |
| SECTION 1304.   Conditions to Legal Defeasance or Covenant Defeasance                                                                                   |   |
| SECTION 1305.   Deposited Money and Government Securities to Be Held in Trust; Other  Miscellaneous Provisions                                          |   |
| SECTION 1306.   Reinstatement                                                                                                                           |   |
| SECTION 1307.   Repayment to Company                                                                                                                    |   |
|                                                                                                                                                              |   |
| **ARTICLE FOURTEEN**

 

**SUBORDINATION**                                                                                                              |
| ** **                                                                                                                                                        | ** ** |
| SECTION 1401.   Agreement To Subordinate                                                                                                                |   |
| SECTION 1402.   Liquidation, Dissolution, Bankruptcy                                                                                                    |   |
| SECTION 1403.   Default on Designated Senior Indebtedness of the Company                                                                                |   |
| SECTION 1404.   Acceleration of Payment of Securities                                                                                                   |   |
| SECTION 1405.   When Distribution Must Be Paid Over                                                                                                     |   |
| SECTION 1406.   Subrogation                                                                                                                             |   |
| SECTION 1407.   Relative Rights                                                                                                                         |   |
| SECTION 1408.   Subordination May Not Be Impaired by Company                                                                                       |   |
| SECTION 1409.   Rights of Trustee and Paying Agent                                                                                                      |   |
| SECTION 1410.   Distribution or Notice to Representative                                                                                                |   |
| SECTION 1411.   Article Fourteen Not To Prevent Events of Default or Limit Right  To Accelerate                                                    |   |
| SECTION 1412.   Trust Moneys Not Subordinated                                                                                                           |   |
| SECTION 1413.   Trustee Entitled To Rely                                                                                                                |   |
| SECTION 1414.   Trustee To Effectuate Subordination                                                                                                     |   |
| SECTION 1415.   Trustee Not Fiduciary for Holders of Senior Indebtedness of the  Company                                                           |   |
| SECTION 1416.   Reliance by Holders of Senior Indebtedness of the Company on  Subordination Provisions                                                  |   |
|                                                                                                                                                              |   |
| APPENDIX & EXHIBITS                                                                                                                                      |   |
|                                                                                                                                                              |   |
| Rule 144A / Regulation S Appendix                                                                                                                            |   |
| EXHIBIT 1 to Rule 144A / Regulation S  Appendix — Form of Initial Note                                                                        |   |
| EXHIBIT 2 to Rule 144A / Regulation S  Appendix — Form of Transferee Letter of Representation                                                 |   |
| EXHIBIT 3 to Rule 144A / Regulation S Appendix —  Form of Non-U.S. Beneficial Ownership Certification by Euroclear or  Clearstream Luxembourg |   |

 

v

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| EXHIBIT A — Form of Exchange Security or  Private Exchange Security |   |
|------------------------------------------------------------------------------------|--------|
| EXHIBIT B — Form of Supplemental  Indenture                         |   |

 

vi

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SENIORSUBORDINATED INDENTURE dated as of October 6, 2005 (this “*Indenture*”), among NEWTON ACQUISITIONMERGER SUB, INC., a Delaware corporation that shall be merged with andinto THE NEIMAN MARCUS GROUP, INC., a Delaware corporation, with TheNeiman Marcus Group, Inc. continuing as the surviving corporation (the “*Company*”), NEWTON ACQUISITION INC., aDelaware corporation (“*Holdings*”),and certain of The Neiman Marcus Group, Inc.’s direct and indirectDomestic Subsidiaries (as defined below), each named in Schedule I hereto(each, a “*Subsidiary Guarantor*”and collectively, the “*Subsidiary Guarantors*”),and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee (the “*Trustee*”).

 

**RECITALS**

 

TheCompany has duly authorized the creation of an issue of (i) 103/8% Senior Subordinated Notes Due 2015 issued on thedate hereof (the “*Initial Notes*”)and (ii) if and when issued as required by the Exchange and RegistrationRights Agreement dated the date hereof, among the Company, Holdings, theSubsidiary Guarantors and the Purchasers (as defined therein) (the “*Registration Rights Agreement*”), 103/8% Senior Subordinated Exchange Notes Due 2015 issuedin an Exchange Offer in exchange for any Initial Notes (the “*Exchange Notes*”, and collectively with theInitial Notes, the “*Notes*”), ofsubstantially the tenor and amount hereinafter set forth, and to providetherefor the Company, Holdings and the Subsidiary Guarantors have dulyauthorized the execution and delivery of this Indenture.  On or after thedate hereof, Newton Acquisition Merger Sub, Inc. shall be merged with andinto The Neiman Marcus Group, Inc., with The Neiman MarcusGroup, Inc. continuing as the surviving corporation and assuming all ofthe obligations of Newton Acquisition Merger Sub, Inc. under thisIndenture.

 

Holdingsand the Subsidiary Guarantors have each duly authorized their Guarantee of theInitial Notes and, if and when issued, the Exchange Notes, and to providetherefor Holdings and the Subsidiary Guarantors have each duly authorized theexecution and delivery of this Indenture.

 

Allthings necessary have been done to make the Notes, when executed by the Companyand authenticated and delivered hereunder and duly issued by the Company, thevalid and legally binding obligations of the Company and to make this Indenturea valid and legally binding agreement of the Company, in accordance with theirand its terms.

 

Allthings necessary have been done to make the Guarantees, upon execution anddelivery of this Indenture, the valid obligations of each Guarantor and to makethis Indenture a valid and legally binding agreement of each Guarantor, inaccordance with their and its terms.

 

**NOW, THEREFORE, THIS INDENTURE WITNESSETH:**

 

Forand in consideration of the premises and the purchase of the Notes by theHolders thereof, it is mutually covenanted and agreed, for the equal andratable benefit of all Holders, as follows:

 

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**ARTICLE ONE**

 

**DEFINITIONSAND OTHER PROVISIONS**

**OF GENERALAPPLICATION**

 

SECTION 101.  Rules ofConstruction and Incorporation by Reference of Trust Indenture Act. For all purposes of this Indenture, except as otherwise expressly provided orunless the context otherwise requires:

 

(1)  the terms defined in this Article have the meaningsassigned to them in this Article, and words in the singular include the pluraland words in the plural include the singular;

 

(2)  all accounting terms not otherwise defined herein havethe meanings assigned to them in accordance with GAAP (as herein defined);

 

(3)  the words “herein”, “hereof” and “hereunder” and other wordsof similar import refer to this Indenture as a whole and not to any particularArticle, Section or other subdivision;

 

(4)  all references to Articles, Sections, Exhibits andAppendices shall be construed to refer to Articles and Sections of, and Exhibitsand Appendices to, this Indenture;

 

(5)  “or” is not exclusive;

 

(6)  “including” means including without limitation;

 

(7)  all references to the date the Notes were originallyissued shall refer to the Issue Date; and

 

(8)  all references, in any context, to any interest or otheramount payable on or with respect to the Notes shall be deemed to include anyAdditional Interest (as herein defined) pursuant to the Registration RightsAgreement.

 

ThisIndenture is subject to the mandatory provisions of the TIA (as herein defined)which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

 

(1)           “Commission”means the SEC;

 

(2)           “indenturesecurities” means the Notes and the Guarantees;

 

(3)           “indenturesecurity holder” means a Holder;

 

(4)           “indenture tobe qualified” means this Indenture;

 

(5)           “indenturetrustee” or “institutional trustee” means the Trustee; and

 

2

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(6)           “obligor” onthe indenture securities means the Company, each Guarantor and any otherobligor on the indenture securities.

 

Allother TIA terms used in this Indenture that are defined by the TIA, defined byTIA reference to another statute or defined by SEC rule have the meaningsassigned to them by such definitions.

 

SECTION 102.  Definitions.

 

“*Acquired Indebtedness*” means, with respectto any specified Person,

 

(1)           Indebtedness ofany other Person existing at the time such other Person is merged with or intoor became a Restricted Subsidiary of such specified Person, includingIndebtedness incurred in connection with, or in contemplation of, such otherPerson merging with or into, or becoming a Restricted Subsidiary of suchspecified Person, and

 

(2)           Indebtednesssecured by a Lien encumbering any asset acquired by such specified Person.

 

“*Act*”, when used with respect to anyHolder, has the meaning specified in Section 105 of this Indenture.

 

“*Additional Interest*” means all liquidateddamages then owing pursuant to the Registration Rights Agreement.

 

“*Additional Interest Notice*” has themeaning specified in Section 1019 of this Indenture.

 

“*Additional Notes*” means any Notes issuedby the Company pursuant to Section 312.

 

“*Adjusted Net Assets*” has the meaningspecified in Section 1205 of this Indenture.

 

“*Affiliate*” of any specified Person meansany other Person directly or indirectly controlling or controlled by or underdirect or indirect common control with such specified Person. For purposes ofthis definition, “control” (including, with correlative meanings, the terms “controlling”,“controlled by” 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 meaningspecified in Section 1013 of this Indenture.

 

3

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“*Applicable Premium*” means, with respect toany Note on any Redemption Date, the greater of:

 

(1)           1.0% of theprincipal amount of the Note; or

 

(2)           the excess, ifany, of:

 

(a)           the presentvalue at such Redemption Date of (i) the redemption price of the Note atOctober 15, 2010 (such redemption price being set forth in the tableappearing in Section 1101(b)), *plus*(ii) all required interest payments due on the Note throughOctober 15, 2010 (excluding accrued but unpaid interest to the RedemptionDate), computed using a discount rate equal to the Treasury Rate as of suchRedemption Date plus 50 basis points; over

 

(b)           the principalamount of the Note.

 

“*Asset Sale*” means

 

(1)           the sale,conveyance, transfer or other disposition, whether in a single transaction or aseries of related transactions, of property or assets (including by way of aSale and Lease-Back Transaction) of the Company or any Restricted Subsidiary(each referred to in this definition as a “disposition”); and

 

(2)           the issuance orsale of Equity Interests of any Restricted Subsidiary, whether in a singletransaction or a series of related transactions,

 

ineach case, other than:

 

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

 

(b)           the dispositionof all or substantially all of the assets of the Company in a manner permittedpursuant to the provisions described under Section 801 of this Indentureor any disposition that constitutes a Change of Control pursuant to thisIndenture;

 

(c)           the making ofany Permitted Investment or the making of any Restricted Payment that is notprohibited by Section 1010 of this Indenture;

 

(d)           any dispositionof assets or issuance or sale of Equity Interests of any Restricted Subsidiaryin any transaction or series of transactions with an aggregate fair marketvalue of less than $25.0 million;

 

(e)           any dispositionof property or assets or issuance of securities by a Restricted Subsidiary tothe Company or by the Company or a Restricted Subsidiary to a RestrictedSubsidiary;

 

4

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(f)            to the extentallowable under Section 1031 of the Internal Revenue Code of 1986, anyexchange of like property (excluding any boot thereon) for use in a SimilarBusiness;

 

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

 

(h)           any issuance orsale of Equity Interests in, or Indebtedness or other securities of, anUnrestricted Subsidiary (other than any sale of Equity Interests in, orIndebtedness or other securities of, Kate Spade held by the Company or anyRestricted Subsidiary);

 

(i)            foreclosures onassets;

 

(j)            sales ofaccounts receivable, or participations therein, in connection with anyReceivables Facility; and

 

(k)           the unwindingof any Hedging Obligations.

 

“*Asset Sale Offer*” has the meaningspecified in Section 1018 of this Indenture.

 

“*Attributable Debt*” in respect of a Saleand Lease-Back Transaction means, as at the time of determination, the presentvalue (discounted at the interest rate borne by the Notes, compounded annually)of the total obligations of the lessee for rental payments during the remainingterm of the lease included in such Sale and Lease-Back Transaction (includingany period for which such lease has been extended); *provided, however*, that if such Sale and Lease-BackTransaction results in a Capitalized Lease Obligation, the amount ofIndebtedness represented thereby shall be determined in accordance with thedefinition of “Capitalized Lease Obligation”.

 

“*Bankruptcy Law*” means Title 11, UnitedStates Bankruptcy Code of 1978, as amended, or any similar United Statesfederal or state or foreign law relating to bankruptcy, insolvency,receivership, winding-up, liquidation, reorganization or relief of debtors orany amendment to, succession to or change in any such law.

 

“*Blockage Notice*” has the meaning specifiedin Section 1403 of this Indenture.

 

“*Board of Directors*” means:

 

(1)           with respect toa corporation, the board of directors of the corporation;

 

(2)           with respect toa partnership, the board of directors of the general partner of thepartnership; and

 

5

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(3)           with respect toany other Person, the board or committee of such Person serving a similarfunction.

 

“*Board Resolution*” means, with respect tothe Company, a duly adopted resolution of the Board of Directors of the Companyor any committee thereof.

 

“*Business Day*” means each day that is not aLegal Holiday.

 

“*Capital Stock*” means

 

(1)           in the case ofa corporation, corporate stock,

 

(2)           in the case ofan association or business entity, any and all shares, interests,participations, rights or other equivalents (however designated) of corporatestock,

 

(3)           in the case ofa partnership or limited liability company, partnership or membership interests(whether general or limited), and

 

(4)           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.

 

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

 

“*Cash Equivalents*” means

 

(1)           United Statesof America dollars,

 

(2)           (a)           Canadian dollars,

 

(b)           Japanese yen,

 

(c)           pounds sterling,

 

(d)           euro or

 

(e)           in the case of any ForeignSubsidiary that is a Restricted Subsidiary, such local currencies held by itfrom time to time in the ordinary course of business,

 

(3)           securitiesissued or 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 orless from the date of acquisition,

 

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(4)           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 $250.0 million,

 

(5)           repurchaseobligations for underlying securities of the types described in clauses(3) and (4) entered into with any financial institution meeting thequalifications specified in clause (4) above,

 

(6)           commercialpaper rated 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,

 

(7)           investmentfunds investing at least 95% of their assets in securities of the typesdescribed in clauses (1) through (6) above,

 

(8)           readilymarketable direct obligations issued by any state of the United States ofAmerica or any political subdivision thereof having one of the two highestrating categories obtainable from either Moody’s or S&P with maturities of24 months or less from the date of acquisition and

 

(9)           Indebtedness orPreferred Stock issued by Persons with a rating of “A” or higher from S&Por “A2” or higher from Moody’s with maturities of 12 months or less fromthe date of acquisition.

 

Notwithstandingthe foregoing, Cash Equivalents shall include amounts denominated in currenciesother than those set forth in clauses (1) and (2) above; *provided* that such amounts are convertedinto one or more of the currencies set forth in clauses (1) and(2) above as promptly as practicable and in any event within ten BusinessDays following the receipt of such amounts.

 

“*Change of Control*” means the occurrence ofany of the following:

 

(1)           the sale, leaseor transfer, in one or a series of related transactions, of all orsubstantially all of the assets of the Company and its Subsidiaries, taken as awhole, to any Person other than a Permitted Holder; or

 

(2)           the Companybecomes aware of (by way of a report or any other filing pursuant toSection 13(d) of the Exchange Act, proxy, vote, written notice orotherwise) the acquisition by any Person or group (within the meaning ofSection 13(d)(3) or Section 14(d)(2) of the Exchange Act,or any successor provision), including any group acting for the purpose ofacquiring, 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 purchase of beneficial ownership (within the meaning ofRule 13d-3 under the Exchange Act, or any successor

 

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provision)of 50% or more of the total voting power of the Voting Stock of the Company orany of its direct or indirect parent companies.

 

“*Change of Control Offer*” has the meaningspecified in Section 1017 of this Indenture.

 

“*Change of Control Payment*” has the meaningspecified in Section 1017 of this Indenture.

 

“*Change of Control Payment Date*” has themeaning specified in Section 1017 of this Indenture.

 

“*Co-Investors*” means the investment fundsassociated with each of Credit Suisse First Boston and Leonard Green &Partners, L.P., which are making a portion of the equity contribution inconnection with the Merger, and their respective Affiliates.

 

“*Common Stock*” means, with respect to anyPerson, any and all shares, interest, participations and other equivalents(however designated, whether voting or non-voting) of such Person’s commonequity interests, whether now outstanding or issued after the date of thisIndenture, and includes all series or classes of such common equity interests.

 

“*Company*” means the Person named as the “Company”in the first paragraph of this Indenture, until a successor Person shall havebecome such pursuant to the applicable provisions of this Indenture, andthereafter, “Company” shall mean such successor Person; *provided* that when used in the context ofdetermining the fair market value of an asset or liability under thisIndenture, “Company” shall, unless otherwise expressly stated, be deemed tomean the Board of Directors of the Company when the fair market value of suchasset or liability is equal to or in excess of $100.0 million.

 

“*Company Request*” or “*Company Order*” means a written request ororder signed in the name of the Company by two Officers or one Officer andeither an Assistant Treasurer or an Assistant Secretary of the Company, anddelivered to the Trustee.

 

“*consolidated*” or “Consolidated” means,with respect to any Person, such Person consolidated with its RestrictedSubsidiaries, and excludes from such consolidation any Unrestricted Subsidiaryas if such unrestricted subsidiary were not an Affiliate of such Person.

 

“*Consolidated Depreciation and Amortization Expense*”means with respect to any Person for any period, the total amount ofdepreciation and amortization expense, including the amortization of deferredfinancing fees and other related noncash charges of such Person and itsRestricted Subsidiaries for such period on a consolidated basis and otherwisedetermined in accordance with GAAP.

 

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“*Consolidated Interest Expense*” means, withrespect to any Person for any period, the sum, without duplication, of:

 

(a)           consolidatedinterest expense of such Person and its Restricted Subsidiaries for suchperiod, to the extent such expense was deducted in computing Consolidated NetIncome (including (a) amortization of original issue discount resultingfrom the issuance of Indebtedness at less than par, (b) all commissions,discounts and other fees and charges owed with respect to letters of credit orbankers’ acceptances, (c) noncash interest payments (but excluding anynoncash interest expense attributable to the movement in the mark-to-marketvaluation of Hedging Obligations or other derivative instruments pursuant toGAAP), (d)  the interest component of Capitalized Lease Obligations and(e) net payments, if any, pursuant to interest rate Hedging Obligationswith respect to Indebtedness, and excluding (i) any expense resulting fromthe discounting of the Existing 2028 Debentures as a result of the applicationof purchase accounting in connection with the Transactions,(ii) Additional Interest, (iii) amortization of deferred financingfees, debt issuance costs, commissions, fees and expenses, (iv) anyexpensing of bridge, commitment and other financing fees, (v) commissions,discounts, yield and other fees and charges (including any interest expense)related to any Receivables Facility and (vi) any redemption premiums paidin connection with the redemption of the Existing 2008 Notes), *plus*

 

(b)           consolidatedcapitalized interest of such Person and its Restricted Subsidiaries for suchperiod, whether paid or accrued,*less*

 

(c)           interest incomefor such period.

 

Forpurposes of this definition, interest on a Capitalized Lease Obligation shallbe deemed to accrue at an interest rate reasonably determined by such Person tobe the rate of interest implicit in such Capitalized Lease Obligation inaccordance with GAAP.

 

“*Consolidated Leverage Ratio*”, with respectto any Person as of any date of determination, means the ratio of(x) Consolidated Total Indebtedness of such Person as of the end of themost recent fiscal quarter for which internal financial statements are availableimmediately preceding the date on which such event for which such calculationis being made shall occur to (y) the aggregate amount of EBITDA of suchPerson for the period of the most recently ended four full consecutive fiscalquarters for which internal financial statements are available immediatelypreceding the date on which such event for which such calculation is being madeshall occur, in each case with such *proforma* adjustments to Consolidated Total Indebtedness and EBITDA asare appropriate and consistent with the *proforma* adjustment provisions set forth in the definition of FixedCharge Coverage Ratio.

 

“*Consolidated Net Income*” means, withrespect to any Person for any period, the aggregate of the Net Income of suchPerson and its Restricted Subsidiaries for

 

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suchperiod, on a consolidated basis, and otherwise determined in accordance withGAAP; *provided* that, withoutduplication,

 

(1)           any netafter-tax extraordinary, non-recurring or unusual gains or losses (less allfees and expenses relating thereto) or expenses (including relating toseverance, relocation, one-time compensation charges and the Transactions)shall be excluded,

 

(2)           the Net Incomefor such period shall not include the cumulative effect of a change inaccounting principles during such period, whether effected through a cumulativeeffect adjustment or a retroactive application in each case in accordance withGAAP,

 

(3)           any netafter-tax income (loss) from disposed or discontinued operations and any netafter-tax gains or losses on disposal of disposed or discontinued operationsshall be excluded,

 

(4)           any netafter-tax gains or losses (less all fees and expenses relating thereto)attributable to asset dispositions or the sale or other disposition of anyCapital Stock of any Person other than in the ordinary course of business, asdetermined in good faith by the Company, shall be excluded,

 

(5)           the Net Incomefor such 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* thatConsolidated Net Income of the Company shall be increased by the amount ofdividends or distributions or other payments that are actually paid in cash (orto the extent converted into cash) to the referent Person or a RestrictedSubsidiary thereof in respect of such period (subject in the case of dividends,distributions or other payments made to a Restricted Subsidiary to thelimitations contained in clause (6) below),

 

(6)           solely for thepurpose of determining the amount available for Restricted Payments underclause (C)(1) of Section 1010(a) of this Indenture, the NetIncome for such period of any Restricted Subsidiary (other than any SubsidiaryGuarantor) shall be excluded if the declaration or payment of dividends orsimilar distributions by that Restricted Subsidiary of its Net Income is not atthe date of determination wholly permitted without any prior governmentalapproval (which has not been obtained) or, directly or indirectly, by theoperation of the terms of its charter or any agreement, instrument, judgment,decree, order, statute, rule, or governmental regulation applicable to thatRestricted Subsidiary or its stockholders, unless such restriction with respectto the payment of dividends or similar distributions has been legally waived; *provided* that Consolidated Net Income ofthe Company shall be increased by the amount of dividends or otherdistributions or other payments actually paid in cash (or to the extentconverted into cash) to the Company or a Restricted Subsidiary thereof inrespect of such period, to the extent not already included therein,

 

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(7)           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 Issue Date, net of taxes, shall beexcluded,

 

(8)           any netafter-tax income (loss) from the early extinguishment of Indebtedness orHedging Obligations or other derivative instruments shall be excluded,

 

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

 

(10)         any noncashcompensation expense recorded from grants of stock appreciation or similarrights, stock options, restricted stock or other rights to officers, directorsor employees shall be excluded.

 

Notwithstandingthe foregoing, for the purpose of Section 1010(a) of this Indentureonly (other than clause (C)(4) thereof), there shall be excluded fromConsolidated Net Income any income arising from any sale or other dispositionof Restricted Investments made by the Company and the Restricted Subsidiaries,any repurchases and redemptions of Restricted Investments from the Company andthe Restricted Subsidiaries, any repayments of loans and advances thatconstitute Restricted Investments by the Company or any Restricted Subsidiary,any sale of the stock of an Unrestricted Subsidiary or any distribution ordividend from an Unrestricted Subsidiary, in each case only to the extent suchamounts increase the amount of Restricted Payments permitted underSection 1010(a) of this Indenture pursuant toclause (C)(4) thereof; *provided,however*, that any income arising from any sale or other dispositionof Equity Interests in Kate Spade or any Extraordinary Distribution shall beexcluded from Consolidated Net Income for the purpose of Section 1010 ofthis Indenture only.

 

“*Consolidated Total Indebtedness*” means, asat any date of determination, an amount equal to the sum of (1) theaggregate amount of all outstanding Indebtedness of the Company and the RestrictedSubsidiaries on a consolidated basis consisting of Indebtedness for borrowedmoney, Obligations in respect of Capitalized Lease Obligations, AttributableDebt in respect of Sale and Lease-Back Transactions and debt obligationsevidenced by bonds, notes, debentures or similar instruments or letters ofcredit or bankers’ acceptances (and excluding (x) any undrawn letters ofcredit issued in the ordinary course of business and (y) all obligationsrelating to Receivables Facilities) and (2) the aggregate amount of alloutstanding Disqualified Stock of the Company 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.

 

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Forpurposes hereof, the “*Maximum FixedRepurchase Price*” of any Disqualified Stock or Preferred Stock thatdoes not have a fixed repurchase price shall be calculated in accordance withthe terms of such Disqualified Stock or Preferred Stock as if such DisqualifiedStock or Preferred Stock were purchased on any date on which Consolidated TotalIndebtedness shall be required to be determined pursuant to this Indenture, 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 Company.

 

“*Contingent Obligations*” means, withrespect to any Person, any obligation of such Person guaranteeing any leases,dividends or other obligations that do not constitute Indebtedness (the “*primary obligations*”) of any other Person(the “*primary obligor*”) in anymanner, whether directly or indirectly, including any obligation of suchPerson, whether or not contingent,

 

(1)           to purchase anysuch primary obligation or any property constituting direct or indirectsecurity therefor,

 

(2)           to advance orsupply funds

 

(A)          for thepurchase or payment of any such primary obligation or

 

(B)           to maintainworking capital or equity capital of the primary obligor or otherwise tomaintain the net worth or solvency of the primary obligor, or

 

(3)           to purchaseproperty, securities or services primarily for the purpose of assuring theowner of any such primary obligation of the ability of the primary obligor tomake payment of such primary obligation against loss in respect thereof.

 

“*Corporate Trust Office*” means theprincipal corporate trust office of the Trustee, at which at any particulartime its corporate trust business shall be administered, which office at thedate of execution of this Indenture is located at 213 Court Street,Suite 703, Middletown, CT 06457, except that with respect to presentationof the Notes for payment or for registration of transfer or exchange, such termshall mean the office or agency of the Trustee at which, at any particulartime, its corporate agency business shall be conducted.

 

“*Covenant Defeasance*” has the meaningspecified in Section 1303 of this Indenture.

 

“*Credit Card Sale*” means the sale from TheNeiman Marcus Group, Inc. to HSBC Bank Nevada, N.A., of The Neiman MarcusGroup, Inc.’s private label credit card accounts and related receivablesand other assets, pursuant to a Purchase, Sale and Servicing TransferAgreement, dated as of June 8, 2005, among HSBC Bank Nevada, N.A., HSBCFinance Corporation, The Neiman Marcus Group, Inc. and BergdorfGoodman, Inc. (it being understood that such sale was consummated onJuly 7, 2005).

 

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

 

“*Defaulted Interest*” has the meaningspecified in Section 306(b) of this Indenture.

 

“*Depository*” means The Depository TrustCompany, its nominees and their respective successors.

 

“*Designated Noncash Consideration*” meansthe fair market value of noncash consideration received by the Company or aRestricted Subsidiary in connection with an Asset Sale that is so designated asDesignated Noncash Consideration pursuant to an Officers’ Certificate, settingforth the basis of such valuation, executed by an executive vice president andthe principal financial officer of the Company,*less* the amount of cash or Cash Equivalents received in connectionwith a subsequent sale of such Designated Noncash Consideration.

 

“*Designated Preferred Stock*” meansPreferred Stock of the Company or any parent company thereof (in each caseother than Disqualified Stock) that is issued for cash (other than to aRestricted Subsidiary) and is so designated as Designated Preferred Stockpursuant to an Officers’ Certificate executed by an executive vice presidentand the principal financial officer of the Company 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 inclause (C) of Section 1010(a) of this Indenture.

 

“*Designated Senior Indebtedness*” means:

 

(1)           anyIndebtedness outstanding under the Senior Credit Facilities;

 

(2)           anyIndebtedness outstanding under the Senior Indenture; and

 

(3)           any otherSenior Indebtedness permitted under this Indenture that, at the date ofdetermination, has an aggregate principal amount outstanding of at least$35.0 million and is specifically designated by the issuer thereof in theinstrument evidencing or governing such Senior Indebtedness as “DesignatedSenior Indebtedness” for purposes of this Indenture.

 

“*Disqualified Stock*” means, with respect toany Person, any Capital Stock of such Person which, by its terms, or by theterms of any security into which it is convertible or for which it is putableor exchangeable, or upon the happening of any event, matures or is mandatorilyredeemable (other than solely for Capital Stock that is not DisqualifiedStock), other than as a result of a change of control or asset sale, pursuantto a sinking fund obligation or otherwise, or is redeemable at the option ofthe holder thereof, other than as a result of a change of control or assetsale, in whole or in part, in each case prior to the date that is 91 daysafter the earlier of the maturity date of the Notes and the date the Notes areno longer Outstanding; *provided*that if such Capital Stock is issued to any plan for the benefit of employeesof the Company or its Subsidiaries or by any such plan to such employees, suchCapital Stock shall not

 

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constituteDisqualified Stock solely because it may be required to be repurchased by theCompany or its Subsidiaries in order to satisfy applicable statutory orregulatory obligations.

 

“*Domestic Subsidiary*” means, with respectto any Person, any Restricted Subsidiary of such Person other than (i) aForeign Subsidiary or (ii) a Domestic Subsidiary of a Foreign Subsidiary,but, in each case, including any Subsidiary that guarantees or otherwiseprovides direct credit support for any indebtedness of the Company.

 

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

 

(1)           increased by(without duplication):

 

(a)           provision fortaxes based on income or profits, *plus*franchise or similar taxes, of such Person for such period deducted incomputing Consolidated Net Income, *plus*

 

(b)           consolidatedFixed Charges of such Person for such period to the extent the same wasdeducted in calculating Consolidated Net Income, *plus*

 

(c)           ConsolidatedDepreciation and Amortization Expense of such Person for such period to theextent such depreciation and amortization were deducted in computingConsolidated Net Income, *plus*

 

(d)           any expenses orcharges related to any Equity Offering, Permitted Investment, acquisition,disposition, recapitalization or the incurrence of Indebtedness permitted to beincurred by this Indenture including a refinancing thereof (whether or notsuccessful) and any amendment or modification to the terms of any suchtransactions, including such fees, expenses or charges related to theTransactions and the Credit Card Sale (including any one-time costs associatedwith entering into any program agreements or servicing agreements directlyrelated to the Credit Card Sale, but not any payments required or contemplatedby such agreements, other than payments in respect of transition servicesprovided thereunder prior to the first anniversary of the Credit Card Sale), ineach case, deducted in computing Consolidated Net Income, *plus*

 

(e)           the amount ofany restructuring charge or reserve deducted in such period in computingConsolidated Net Income, including any one-time costs incurred in connectionwith (x) acquisitions after the Issue Date or (y) the closing of anystores or distribution centers after the Issue Date, *plus*

 

(f)             any writeoffs, write downs or other noncash charges reducing Consolidated Net Income forsuch period, excluding any such charge that represents an accrual or reservefor a cash expenditure for a future period, *plus*

 

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(g)           the amount ofany minority interest expense deducted in calculating Consolidated Net Income, *plus*

 

(h)           the amount ofmanagement, monitoring, consulting and advisory fees and related expenses paid(or any accruals related to such fees or related expenses) during such periodto the Sponsors to the extent permitted under Section 1013 of thisIndenture, *plus*

 

(i)             the amount ofnet cost savings projected by the Company in good faith to be realized as aresult of specified actions taken during such period (calculated on a *pro forma* basis as though such costsavings had been realized on the first day of such period), net of the amountof actual benefits realized during such period from such actions; *provided* that (x) such cost savingsare reasonably identifiable and factually supportable, (y) such actionsare taken within 36 months after the Issue Date and (z) the aggregateamount of cost savings added pursuant to this clause (i) shall notexceed $50.0 million for any four consecutive quarter period (whichadjustments may be incremental to *pro forma*adjustments made pursuant to the second paragraph of the definition of “FixedCharge Coverage Ratio”), *plus*

 

(j)             any costs orexpenses incurred by the Company or a Restricted Subsidiary pursuant to anymanagement equity plan or stock option plan or any other management or employeebenefit plan or agreement or any stock subscription or stockholders agreement,to the extent that such costs or expenses are funded with cash proceedscontributed to the capital of the Company or net cash proceeds of issuance ofEquity Interests of the Company (other than Disqualified Stock that is PreferredStock) in each case, solely to the extent that such cash proceeds are excludedfrom the calculation set forth in clause (C) ofSection 1010(a) of this Indenture;

 

(2)           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

 

(3)           increased ordecreased, as applicable, by (without duplication):

 

(a)           any net gain orloss resulting in such period from Hedging Obligations and the application ofStatement of Financial Accounting Standards #133;

 

(b)           any net gain orloss resulting in such period from currency translation gains or losses relatedto currency remeasurements of Indebtedness; and

 

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(c)           the amount ofgain or loss resulting in such period from a sale of receivables and relatedassets to a Receivables Subsidiary in connection with a Receivables Facility.

 

“*EMU*” means the economic and monetary unioncontemplated by the Treaty of the European Union.

 

“*Equity Interests*” means Capital Stock andall warrants, options or other rights to acquire Capital Stock, but excludingany debt security that is convertible into, or exchangeable for, Capital Stock.

 

“*Equity Offering*” means any public orprivate sale of Common Stock or Preferred Stock of the Company or any of itsdirect or indirect parent companies (excluding Disqualified Stock), other than

 

(a)           publicofferings with respect to the Company’s or any direct or indirect parentcompany’s Common Stock registered on Form S-4 or Form S-8;

 

(b)           any such publicor private sale that constitutes an Excluded Contribution; and

 

(c)           an issuance toany Subsidiary of the Company.

 

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

 

“*Event of Default*” has the meaning specifiedin Section 501 of this Indenture.

 

“*Excess Proceeds*” has the meaning specifiedin Section 1018 of this Indenture.

 

“*Exchange Act*” means the SecuritiesExchange Act of 1934, as amended, and the rules and regulations of the SECpromulgated thereunder.

 

“*Exchange Notes*” has the meaning specifiedin the first recital of this Indenture.  Unless the context otherwiserequires, all references to the Exchange Notes shall include 103/8% Senior Subordinated Exchange Notes Due 2015 issuedin exchange for any Additional Notes.

 

“*Exchange Offer*” means the Exchange Offeras defined in the Registration Rights Agreement.

 

“*Exchange Offer Registration Statement*”means the Exchange Offer Registration Statement as defined in the RegistrationRights Agreement.

 

“*Excluded Contribution*” means net cashproceeds, marketable securities or Qualified Proceeds received by the Companyfrom

 

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(a)           contributionsto its common equity capital, and

 

(b)           the sale (otherthan to a Subsidiary of the Company or to any management equity plan or stockoption plan or any other management or employee benefit plan or agreement ofthe Company) of Capital Stock (other than Disqualified Stock and DesignatedPreferred Stock) of the Company,

 

ineach case designated as Excluded Contributions pursuant to an Officers’Certificate executed by an executive vice president and the principal financialofficer of the Company on the date such capital contributions are made or thedate such Equity Interests are sold, as the case may be, which are excludedfrom the calculation set forth in clause (C) ofSection 1010(a) of this Indenture.

 

“*Existing Indebtedness*” means Indebtednessof the Company or the Restricted Subsidiaries in existence on the Issue Date,plus interest accruing thereon.

 

“*Existing Indenture*” means the Indenturedated as of May 27, 1998, by and between The Neiman MarcusGroup, Inc. and The Bank of New York, as trustee, pursuant to which theExisting 2008 Notes and the Existing 2028 Debentures have beenissued, as the same may be amended from time to time.

 

“*Existing 2008 Notes*” means the$125,000,000 aggregate principal amount of 6.65% senior notes due 2008 issuedby The Neiman Marcus Group, Inc. pursuant to the Existing Indenture.

 

“*Existing 2028 Debentures*” means the$125,000,000 aggregate principal amount of 7.125% senior debentures due 2028issued by The Neiman Marcus Group, Inc. pursuant to the ExistingIndenture.

 

“*Extraordinary Distribution*” means anydividends, distributions or other payments made by Kate Spade to the Company ora Restricted Subsidiary (a) to the extent generated by (i) borrowingsother than working capital borrowings, (ii) the sale of debt or equitysecurities or (iii) sales or other dispositions of assets, other than inventory,accounts receivable and other assets sold in the ordinary course of business aspart of the normal retirement or replacement of assets or (b) representinga liquidating distribution or payment in connection with the liquidation orwinding up of Kate Spade.

 

“*Fixed Charge Coverage Ratio*” means, withrespect to any Person for any period, the ratio of EBITDA of such Person forsuch period to the Fixed Charges of such Person for such period. In the eventthat the Company or any Restricted Subsidiary incurs, assumes, guarantees,redeems, retires or extinguishes any Indebtedness (other than Indebtednessincurred under any revolving credit facility that has been permanently repaidand has not been replaced) or issues or redeems Disqualified Stock or PreferredStock subsequent 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 theFixed Charge Coverage Ratio shall be calculated giving *pro forma* effect to such incurrence,assumption, guarantee, redemption, retirement or extinguishing of

 

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Indebtedness,or such issuance or redemption of Disqualified Stock or Preferred Stock, as ifthe same had occurred at the beginning of the applicable four-quarter period(the “*reference period*”).

 

Forpurposes of making the computation referred to above, Investments,acquisitions, dispositions, mergers, consolidations and disposed operations (asdetermined in accordance with GAAP) that have been made by the Company or anyRestricted Subsidiary during the four-quarter reference period or subsequent tosuch reference period and on or prior to or simultaneously with the CalculationDate shall be calculated on a *pro forma*basis assuming that all such Investments, acquisitions, dispositions, mergers,consolidations and disposed operations (and the change in any associated fixedcharges and the change in EBITDA resulting therefrom) had occurred on the firstday of the reference period. If since the beginning of such period any Person(that subsequently became a Restricted Subsidiary or was merged with or intothe Company or any Restricted Subsidiary since the beginning of such period)shall have made any Investment, acquisition, disposition, merger, consolidationor disposed operation that would have required adjustment pursuant to thisdefinition, then the Fixed Charge Coverage Ratio shall be calculated giving *pro forma* effect thereto for such periodas if such Investment, acquisition, disposition, merger, consolidation ordisposed operation had occurred at the beginning of the reference period.

 

Forpurposes of this definition, whenever *proforma* effect is to be given to a transaction, the *pro forma* calculations shall be made ingood faith by a responsible financial or accounting officer of the Company. Ifany Indebtedness bears a floating rate of interest and is being given *pro forma* effect, the interest on suchIndebtedness shall be calculated as if the rate in effect on the CalculationDate had been the applicable rate for the entire period (taking into accountany Hedging Obligations applicable to such Indebtedness). Interest on aCapitalized Lease Obligation shall be deemed to accrue at an interest ratereasonably determined by a responsible financial or accounting officer of theCompany to be the rate of interest implicit in such Capitalized LeaseObligation in accordance with GAAP. For purposes of making the computationreferred to above, interest on any Indebtedness under a revolving creditfacility computed on a *pro forma*basis shall be computed based upon the average daily balance of suchIndebtedness during the applicable period. Interest on Indebtedness that mayoptionally be determined at an interest rate based upon a factor of a prime orsimilar rate, a eurocurrency interbank offered rate, or other rate, shall bedeemed to have been based upon the rate actually chosen, or, if none, then basedupon such optional rate chosen as the Company may designate.

 

“*Fixed Charges*” means, with respect to anyPerson for any period, the sum of

 

(a)           ConsolidatedInterest Expense of such Person for such period,

 

(b)           all cashdividend payments (excluding items eliminated in consolidation) on any seriesof Preferred Stock during such period, and

 

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(c)           all cashdividend payments (excluding items eliminated in consolidation) on any seriesof Disqualified Stock made during such period.

 

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

 

“*Foreign Subsidiary Total Assets*” means thetotal amount of all assets of Foreign Subsidiaries of the Company and theRestricted Subsidiaries, determined on a consolidated basis in accordance withGAAP as shown on the most recent balance sheet of the Company.

 

“*Funding Guarantor*” has the meaningspecified in Section 1205 of this Indenture.

 

“*GAAP*” means generally accepted accountingprinciples in the United States of America that are in effect on the IssueDate.

 

“*Government Securities*” means securitiesthat are

 

(a)           directobligations of the United States of America for the timely payment of which itsfull faith and credit is pledged or

 

(b)           obligations ofa Person controlled or supervised by and acting as an agency or instrumentalityof the United States of America the timely payment of which is unconditionallyguaranteed as a full faith and credit obligation by the United States ofAmerica,

 

which,in either case, are not callable or redeemable at the option of the issuersthereof, and shall also include a depository receipt issued by a bank (asdefined in Section 3(a)(2) of the Securities Act), as custodian withrespect to any such Government Securities or a specific payment of principal ofor interest on any such Government Securities held by such custodian for theaccount of the holder of such depository receipt; *provided* that (except as required by law) such custodian isnot authorized to make any deduction from the amount payable to the holder ofsuch depository receipt from any amount received by the custodian in respect ofthe Government Securities or the specific payment of principal of or intereston the Government Securities evidenced by such depository receipt.

 

“*guarantee*” means a guarantee (other thanby endorsement of negotiable instruments for collection in the ordinary courseof business), direct or indirect, in any manner (including letters of creditand reimbursement agreements in respect thereof), of all or any part of anyIndebtedness or other obligations, and, when used as a verb, shall have acorresponding meaning.

 

“*Guarantee*” means the guarantee by anyGuarantor of the Company’s Obligations under this Indenture and the Notes.

 

“*Guarantor*” means any of the SubsidiaryGuarantors and Holdings.

 

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“*Hedging Obligations*” means, with respectto any Person, the obligations of such Person under currency exchange, interestrate or commodity swap agreements, currency exchange, interest rate orcommodity cap agreements and currency exchange, interest rate or commoditycollar agreements and other agreements or arrangements, in each case designedto protect such Person against fluctuations in currency exchange, interestrates or commodity prices.

 

“*Holder*” means the Person in whose name aNote is registered on the books of the Note Registrar.

 

“*Holdings*” means NewtonAcquisition, Inc. and its successors.

 

“*incur*” has the meaning specified inSection 1011 of this Indenture.

 

“*incurrence*” has the meaning specified inSection 1011 of this Indenture.

 

“*Indebtedness*” means, with respect to anyPerson,

 

(a)                                  anyindebtedness (including principal and premium) of such Person, whether or notcontingent

 

(1)                                  in respect ofborrowed money,

 

(2)                                  evidenced bybonds, notes, debentures or similar instruments or letters of credit or bankers’acceptances (or, without double counting, reimbursement agreements in respectthereof),

 

(3)                                  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

 

(4)                                  representingany Hedging Obligations,

 

ifand to the extent that any of the foregoing Indebtedness (other than letters ofcredit and Hedging Obligations) would appear as a liability upon a balancesheet (excluding the footnotes thereto) of such Person prepared in accordancewith GAAP,

 

(b)                                 to the extentnot otherwise included, any obligation by such Person to be liable for, or topay, as obligor, guarantor or otherwise, on the obligations of the typereferred to in clause (a) of another Person (whether or not suchitems would appear upon the balance sheet of such obligor or guarantor), otherthan by endorsement of negotiable instruments for collection in the ordinarycourse of business,

 

(c)                                  to the extentnot otherwise included, the obligations of the type referred to inclause (a) of another Person secured by a Lien on any asset owned

 

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bysuch Person, whether or not such obligations are assumed by such Person andwhether or not such obligations would appear upon the balance sheet of suchPerson; *provided* that the amountof such Indebtedness shall be the lesser of the fair market value of such assetat the date of determination and the amount of Indebtedness so secured, and

 

(d)                                 AttributableDebt in respect of Sale and Lease-Back Transactions; 

 

*provided, however*, that notwithstanding theforegoing, Indebtedness shall be deemed not to include (A) ContingentObligations incurred in the ordinary course of business and(B) Obligations under, or in respect of, Receivables Facilities.

 

“*Indenture*” means this instrument asoriginally executed and as it may from time to time be supplemented or amendedby one or more indentures supplemental hereto entered into pursuant to theapplicable provisions hereof, including, for all purposes of this Indenture andany such supplemental indenture, the provisions of the Trust Indenture Act thatare deemed to be part of and govern this instrument and any such supplementalindenture, respectively.

 

“*Independent Financial Advisor*” means anaccounting, appraisal, investment banking firm or consultant to Persons engagedin Similar Businesses of nationally recognized standing that is, in the goodfaith judgment of the Company, qualified to perform the task for which it hasbeen engaged and that is independent of the Company and its Affiliates.

 

“*Initial Notes*” has the meaning stated inthe first recital of this Indenture.

 

“*Initial Purchasers*” means (1) withrespect to the Initial Notes issued on the Issue Date,****Credit Suisse First Boston LLC, DeutscheBank Securities Inc., Banc of America Securities LLC, and Goldman,Sachs & Co., and (2) with respect to each issuance ofAdditional Notes, the Persons purchasing such Additional Notes under therelated Purchase Agreement**.**

 

“*Interest Payment Date*” means the StatedMaturity of an installment of interest on the Notes.

 

“*Investment Grade Securities*” means:

 

(1)                                  securitiesissued or directly and fully guaranteed or insured by the government of theUnited States of America or any agency or instrumentality thereof (other thanCash Equivalents),

 

(2)                                  debt securitiesor debt instruments with a rating of BBB- or higher by S&P or Baa3 orhigher by Moody’s or the equivalent of such rating by such rating organization,or, if no rating of S&P or Moody’s then exists, the equivalent of suchrating by any other nationally recognized securities rating agency, but excludingany debt securities or instruments constituting loans or advances among theCompany and its Subsidiaries,

 

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(3)                                  investments inany fund that invests exclusively in investments of the type described inclauses (1) and (2), which fund may also hold immaterial amounts of cashpending investment or distribution and

 

(4)                                  correspondinginstruments in countries other than the United States of America customarilyutilized for high quality investments.

 

“*Investments*” means, with respect to anyPerson, all investments by such Person in other Persons (including Affiliates)in the form of loans (including guarantees), advances or capital contributions(including by means of any transfer of cash or other property to others or anypayment for property or services for the account or use of others, butexcluding accounts receivable, trade credit, advances to customers, commission,travel and similar advances to officers and employees, in each case made in theordinary course of business), purchases or other acquisitions for considerationof Indebtedness, Equity Interests or other securities issued by any otherPerson and investments that are required by GAAP to be classified on thebalance sheet (excluding the footnotes) of such Person in the same manner asthe other investments included in this definition to the extent suchtransactions involve the transfer of cash or other property. For purposes ofthe definition of “Unrestricted Subsidiary” and Section 1010 of this Indenture,

 

(1)                                  “Investments”shall include the portion (proportionate to the Company’s equity interest insuch Subsidiary) of the fair market value of the net assets of a Subsidiary ofthe Company at the time that such Subsidiary is designated an UnrestrictedSubsidiary; *provided* that upon aredesignation of such Subsidiary as a Restricted Subsidiary, the Company shallbe deemed to continue to have a permanent “Investment” in an UnrestrictedSubsidiary in an amount (if positive) equal to

 

(x)                                   the Company’s “Investment”in such Subsidiary at the time of such redesignation,*less*

 

(y)                                 the portion(proportionate to the Company’s equity interest in such Subsidiary) of the fairmarket value of the net assets of such Subsidiary at the time of suchredesignation; and

 

(2)                                  any propertytransferred to or from an Unrestricted Subsidiary shall be valued at its fairmarket value at the time of such transfer, in each case as determined in goodfaith by the Company.

 

“*Issue Date*” means October 6, 2005.

 

“*Kate Spade*” means Kate Spade LLC, aDelaware limited liability company, and its successors.

 

“*Legal Defeasance*” has the meaningspecified in Section 1302 of this Indenture.

 

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“*Legal Holiday*” means a Saturday, a Sundayor a day on which banking institutions are not required to be open in the Stateof New York.

 

“*Lien*” means, with respect to any asset,any mortgage, lien, pledge, charge, security interest or encumbrance of anykind in respect of such asset, whether or not filed, recorded or otherwiseperfected under applicable law, including any conditional sale or other titleretention agreement, any lease in the nature thereof, any option or otheragreement to sell or give a security interest in and any filing of or agreementto give any financing statement under the Uniform Commercial Code (orequivalent statutes) of any jurisdiction; *provided*that in no event shall an operating lease be deemed to constitute a Lien.

 

“*Letter of Transmittal*” means the letter oftransmittal to be prepared by the Company and sent to all Holders for use bysuch Holders in connection with the Exchange Offer.

 

“*Management Services Agreement*” means theManagement Services Agreement as in effect on the Issue Date by and between TheNeiman Marcus Group, Inc. and the Sponsors.

 

“*Maturity*”, when used with respect to anyNote, means the date on which the principal of such Note or an installment ofprincipal becomes due and payable as therein or herein provided, whether at theStated Maturity or by declaration of acceleration, notice of redemption orotherwise.

 

“*Merger*” means the merger of NewtonAcquisition Merger Sub, Inc. with and into The Neiman MarcusGroup, Inc. pursuant to the Merger Agreement.

 

“*Merger Agreement*” means the agreement andPlan of Merger among Holdings, Newton Acquisition Merger Sub, Inc. and TheNeiman Marcus Group, Inc., dated as of May 1, 2005.

 

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

 

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

 

“*Net Proceeds*” means the aggregate cashproceeds received by the Company or any Restricted Subsidiary in respect of anyAsset Sale, including any cash received upon the sale or other disposition ofany Designated Noncash Consideration received in any Asset Sale, net of thedirect costs relating to such Asset Sale and the sale or disposition of suchDesignated Noncash Consideration, including legal, accounting and investmentbanking fees, and brokerage and sales commissions, any relocation expensesincurred as a result thereof, taxes paid or payable as a result thereof (aftertaking into 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

 

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intereston Indebtedness required (other than by clause (1) of Section 1018(b) ofthis Indenture) to be paid as a result of such transaction and any deduction ofappropriate amounts to be provided by the Company as a reserve in accordancewith GAAP against any liabilities associated with the asset disposed of in suchtransaction and retained by the Company after such sale or other dispositionthereof, including pension and other post-employment benefit liabilities andliabilities related to environmental matters or against any indemnificationobligations associated with such transaction.

 

“*New Indentures*” means the Senior Indentureand this Indenture.

 

“*New Notes*” means the Senior Notes and theNotes.

 

“*Non-U.S. Person*” means a Person who is nota U.S. Person.

 

“*Note Register*” and “*Note Registrar*” have the respective meaningsspecified in Section 304.

 

“*Notes*” has the meaning stated in the firstrecital of this Indenture and more particularly means any Notes authenticatedand delivered under this Indenture.  The Initial Notes and the AdditionalNotes shall be treated as a single class for all purposes of this Indenture,and unless the context otherwise requires, all references to the Notes shallinclude the Initial Notes, any Additional Notes and the Exchange Notes issuedin exchange for the Initial Notes and any Additional Notes.

 

“*Obligations*” means any principal(including reimbursement obligations with respect to letters of credit whetheror not drawn), interest (including, to the extent legally permitted, allinterest accrued thereon after the commencement of any insolvency orliquidation proceeding at the rate, including any applicable post-default rate,specified in the applicable agreement), premium (if any), guarantees ofpayment, fees, indemnifications, reimbursements, expenses, damages and otherliabilities payable under the documentation governing any Indebtedness; *provided* that Obligations with respect tothe Notes shall not include fees or indemnification in favor of the Trustee andany other third parties other than the Holders.

 

“*Offering Circular*” means the OfferingCircular dated September 28, 2005 relating to the Notes.

 

“*Officer*” means the Chairman of the Board,the Chief Executive Officer, the Chief Financial Officer, the President, anyExecutive Vice President, Senior Vice President or Vice President, the Treasureror the Secretary of the Company.

 

“*Officers*’*Certificate*” means a certificate signed on behalf of the Company bytwo Officers of the Company, one of whom must be the principal executiveofficer, the principal financial officer, the treasurer or the principalaccounting officer of the Company, that meets the requirements set forth inthis Indenture.

 

“*Opinion of Counsel*” means a writtenopinion from legal counsel. The counsel may be an employee of or counsel to theCompany.

 

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“*Outstanding*”, when used with respect toNotes, means, as of the date of determination, all Notes theretoforeauthenticated and delivered under this Indenture, except:

 

(1)                                  Notestheretofore cancelled by the Trustee or delivered to the Trustee forcancellation;

 

(2)                                  Notes, orportions thereof, for whose payment or redemption money in the necessary amounthas been theretofore deposited with the Trustee or any Paying Agent (other thanthe Company) in trust or set aside and segregated in trust by the Company (ifthe Company shall act as its own Paying Agent) for the Holders of such Notes; *provided* that, if such Notes are to beredeemed, notice of such redemption has been duly given pursuant to thisIndenture or provision therefor satisfactory to the Trustee has been made;

 

(3)                                  Notes, exceptto the extent provided in Sections 1302 and 1303, with respect to whichthe Company has effected Legal Defeasance or Covenant Defeasance as provided inArticle Thirteen; and

 

(4)                                  Notes whichhave been paid pursuant to Section 305 or in exchange for or in lieu ofwhich other Notes have been authenticated and delivered pursuant to thisIndenture, other than any such Notes in respect of which there shall have beenpresented to the Trustee proof satisfactory to it that such Notes are held by aProtected Purchaser in whose hands the Notes are valid obligations of theCompany; 

 

*provided, however*, that in determiningwhether the Holders of the requisite principal amount of Outstanding Notes havegiven any request, demand, authorization, direction, consent, notice or waiverhereunder, and for the purpose of making the calculations required by TIASection 313, Notes owned by the Company or any other obligor upon theNotes or any Affiliate of the Company or such other obligor shall bedisregarded and deemed not to be Outstanding, except that, in determiningwhether the Trustee shall be protected in making such calculation or in relyingupon any such request, demand, authorization, direction, notice, consent orwaiver, only Notes which a Responsible Officer of the Trustee actually knows tobe so owned shall be so disregarded.

 

“*pay the Notes*” has the meaning specifiedin Section 1403 of this Indenture.

 

“*Paying Agent*” means any Person (includingthe Company acting as Paying Agent) authorized by the Company to pay theprincipal of (and premium, if any) or interest on any Notes on behalf of theCompany.

 

“*Payment Blockage Period*” has the meaningspecified in Section 1403 of this Indenture.

 

“*Payment Default*” has the meaning specifiedin Section 1403 of this Indenture.

 

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“*Permitted Asset Swap*” means the concurrentpurchase and sale or exchange of Related Business Assets or a combination ofRelated Business Assets and cash or Cash Equivalents between the Company or anyof its Restricted Subsidiaries and another Person that is not the Company orany of its Restricted Subsidiaries; *provided*that any cash or Cash Equivalents received must be applied in accordance withSection 1018 of this Indenture.

 

“*Permitted Holders*” means each of theSponsors, the Co-Investors and members of management of the Company (or itsdirect parent) who are holders of Equity Interests of the Company (or any ofits direct or indirect parent companies) on the Issue Date and any group(within the meaning of Section 13(d)(3) orSection 14(d)(2) of the Exchange Act, or any successor provision) ofwhich any of the foregoing are members; *provided*that, in the case of such group and without giving effect to the existence ofsuch group or any other group, the Sponsors, the Co-Investors and members ofmanagement, collectively, have beneficial ownership of more than 50% of thetotal voting power of the Voting Stock of the Company or any of its direct orindirect parent companies. Any Person or group whose acquisition of beneficialownership constitutes a Change of Control in respect of which a Change ofControl Offer is made in accordance with the requirements of this Indentureshall thereafter, together with its Affiliates, constitute an additionalPermitted Holder.

 

“*Permitted Investments*” means:

 

(a)                                  any Investmentin the Company or any Restricted Subsidiary;

 

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

 

(c)                                  (i) anyInvestment by the Company or any Restricted Subsidiary of the Company in aPerson that is engaged in a Similar Business if as a result of such Investment

 

(1)                                  such Personbecomes a Restricted Subsidiary of the Company or

 

(2)                                  such Person, inone transaction or a series of related transactions, is merged, consolidated oramalgamated with or into, or transfers or conveys substantially all of itsassets to, or is liquidated into, the Company or a Restricted Subsidiary of theCompany and

 

(ii)                                  any Investmentheld by such Person;

 

(d)                                 any Investmentin securities or other assets not constituting cash, Cash Equivalents orInvestment Grade Securities and received in connection with an Asset Sale madepursuant to the provisions of Section 1018 of this Indenture or any otherdisposition of assets not constituting an Asset Sale;

 

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

 

(f)                                    loans andadvances to, and guarantees of Indebtedness of, employees not in excess of$10.0 million outstanding at any one time, in the aggregate;

 

(g)                                 any Investmentacquired by the Company or any Restricted Subsidiary

 

(1)                                  in exchange for any otherInvestment or accounts receivable held by the Company 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

 

(2)                                  as a result of a foreclosureby the Company or any Restricted Subsidiary with respect to any securedInvestment or other transfer of title with respect to any secured Investment indefault;

 

(h)                                 HedgingObligations permitted under clause (12) of Section 1011(b) ofthis Indenture;

 

(i)                                     loans andadvances to officers, directors and employees for business-related travelexpenses, moving expenses and other similar expenses, in each case incurred inthe ordinary course of business or consistent with past practice or to fundsuch Person’s purchase of Equity Interests of the Company or any direct orindirect parent company thereof under compensation plans approved by the Boardof Directors of the Company in good faith;

 

(j)                                     Investments thepayment for which consists of Equity Interests of the Company, or any of itsdirect or indirect parent companies (exclusive of Disqualified Stock); *provided* that such Equity Interests shallnot increase the amount available for Restricted Payments underclause (C) of Section 1010(a) of this Indenture;

 

(k)                                  guarantees ofIndebtedness permitted under Section 1011 of this Indenture andperformance guarantees in the ordinary course of business;

 

(l)                                     any transactionto the extent it constitutes an investment that is permitted and made inaccordance with the provisions of Section 1013(b) of this Indenture(except transactions described in clauses (2), (6) and (11) therein);

 

(m)                               Investmentsconsisting of purchases and acquisitions of inventory, supplies, material orequipment or the licensing or contribution of intellectual property pursuant tojoint marketing arrangements with other Persons;

 

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(n)                                 Investments ina Similar Business having an aggregate fair market value, taken together withall other Investments made pursuant to this clause (n) that are atthat 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) $100.0 million and (y) 1.5% 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)                                 Investmentsrelating to a Receivables Facility; *provided*that in the case of Receivables Facilities established after the Issue Date,such Investments are necessary or advisable (in the good faith determination ofthe Company) to effect such Receivables Facility; and

 

(p)                                 additionalInvestments having an aggregate fair market value, taken together with allother Investments made pursuant to this clause (p) that are at thattime 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 $150.0 million (with the fair marketvalue of each Investment being measured at the time made and without givingeffect to subsequent changes in value).

 

“*Permitted Junior Securities*” means:

 

(1)                                  EquityInterests in the Company, any Subsidiary Guarantor or any direct or indirectparent of the Company; or

 

(2)                                  unsecured debtsecurities that are subordinated to all Senior Indebtedness (and any debtsecurities issued in exchange for Senior Indebtedness) to substantially thesame extent as, or to a greater extent than, the Notes and the relatedGuarantees are subordinated to Senior Indebtedness under this Indenture;

 

*provided* that the term “PermittedJunior Securities” shall not include any securities distributed pursuant to aplan of reorganization if the Indebtedness under the Senior Credit Facilitiesis, or any of the Senior Notes, the Existing 2008 Notes and the Existing 2028Debentures are, treated as part of the same class as the Notes for purposes ofsuch plan of reorganization.

 

“*Permitted Liens*” means, with respect toany Person:

 

(1)                                  Liens securingHedging Obligations, so long as the related Indebtedness is, and is permittedto be under this Indenture, secured by a Lien on the same property securingsuch Hedging Obligation;

 

(2)                                  pledges ordeposits by such Person under workmen’s compensation laws, unemploymentinsurance laws or similar legislation, or good faith deposits to secure bids,tenders, contracts (other than for the payment of Indebtedness) or leases towhich such Person is a party, or deposits to secure

 

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publicor statutory obligations of such Person or deposits of cash or U.S. governmentbonds to secure surety or appeal bonds to which such Person is a party, ordeposits as security for contested taxes or import duties or for the payment ofrent, in each case incurred in the ordinary course of business;

 

(3)                                  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 than30 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;

 

(4)                                  Liens fortaxes, assessments or other governmental charges or claims not yet overdue fora period of more than 30 days or payable or subject to penalties fornonpayment 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;

 

(5)                                  Liens in favorof issuers of performance and surety bonds or bid bonds or with respect toother regulatory requirements or letters of credit issued pursuant to therequest of and for the account of such Person in the ordinary course of itsbusiness;

 

(6)                                  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 incidental to the conduct of thebusiness of such Person or to the ownership of its properties, in each case, whichwere not incurred in connection with Indebtedness and which do not in theaggregate materially adversely affect the value of said properties ormaterially impair their use in the operation of the business of such Person;

 

(7)                                  Liens existingon the Issue Date;

 

(8)                                  Liens onproperty or shares of stock of a Person at the time such Person becomes aSubsidiary; *provided* that suchLiens are not created or incurred in connection with, or in contemplation of,such other Person becoming such a Subsidiary; *provided,further*, that such Liens may not extend to any other property ownedby the Company or any Restricted Subsidiary;

 

(9)                                  Liens onproperty at the time the Company or a Restricted Subsidiary acquired theproperty, including any acquisition by means of a merger or consolidation withor into the Company 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 notextend to any other property owned by the Company or any Restricted Subsidiary;

 

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(10)                            Liens securingIndebtedness or other obligations of a Restricted Subsidiary owing to theCompany or another Restricted Subsidiary permitted to be incurred in accordancewith Section 1011 of this Indenture;

 

(11)                            Liens onspecific items of inventory or other goods and proceeds of any Person securingsuch Person’s obligations in respect of bankers’ acceptances issued or createdfor the account of such Person to facilitate the purchase, shipment or storageof such inventory or other goods;

 

(12)                            leases andsubleases granted to others in the ordinary course of business which do notmaterially interfere with the ordinary conduct of the business of the Companyor any of the Restricted Subsidiaries and do not secure any Indebtedness;

 

(13)                            Liens arisingfrom financing statement filings under the Uniform Commercial Code or similarstate laws regarding operating leases entered into by the Company and itsRestricted Subsidiaries in the ordinary course of business;

 

(14)                            Liens in favorof the Company or any Subsidiary Guarantor;

 

(15)                            Liens oninventory or equipment of the Company or any Restricted Subsidiary granted inthe ordinary course of business to the Company’s client at which such inventoryor equipment is located;

 

(16)                            Liens onaccounts receivable and related assets incurred in connection with aReceivables Facility;

 

(17)                            Liens to secureany refinancing, refunding, extension, renewal or replacement (or successiverefinancing, refunding, extensions, renewals or replacements) as a whole, or inpart, of any Indebtedness secured by any Lien referred to in the foregoingclauses (1), (7), (8) and (9) and the following clause (18); *provided* that (x) such new Lien shallbe limited to all or part of the same property that secured the original Lien(plus improvements on such property), and (y) the Indebtedness secured bysuch Lien at such time is not increased to any amount greater than the sum of(A) the outstanding principal amount or, if greater, committed amount ofthe Indebtedness described under clauses (1), (7), (8), (9) and thefollowing clause (18) at the time the original Lien became a PermittedLien under this Indenture, and (B) an amount necessary to pay any fees andexpenses, including premiums, related to such refinancing, refunding,extension, renewal or replacement;

 

(18)                            Liens securingIndebtedness permitted to be incurred pursuant to clauses (6), (19), (20),(22)(i) and (23) of Section 1011(b) of this Indenture; *provided* that (A) Liens securingIndebtedness permitted to be incurred pursuant to clause (19) thereof aresolely on acquired property or the assets of the acquired entity, as the casemay be and (B) Liens securing Indebtedness permitted to be incurredpursuant to clause (20) thereof extend only to the assets of ForeignSubsidiaries;

 

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(19)                            deposits in theordinary course of business to secure liability to insurance carriers;

 

(20)                            Liens securingjudgments for the payment of money not constituting an Event of Default underclause (5) of Section 501 of this Indenture, so long as such Liensare adequately bonded and any appropriate legal proceedings that may have beenduly initiated for the review of such judgment have not been finally terminatedor the period within which such proceedings may be initiated has not expired;

 

(21)                            Liens in favorof customs and revenue authorities arising as a matter of law to secure paymentof customs duties in connection with the importation of goods in the ordinarycourse of business;

 

(22)                            Liens(i) of a collection bank arising under Section 4-210 of the UniformCommercial Code on items in the course of collection, (ii) attaching tocommodity trading accounts or other commodity brokerage accounts incurred inthe ordinary course of business and (iii) in favor of banking institutionsarising as a matter of law encumbering deposits (including the right ofset-off) and which are within the general parameters customary in the bankingindustry;

 

(23)                            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 theCompany or any of its Restricted Subsidiaries to permit satisfaction ofoverdraft or similar obligations incurred in the ordinary course of business ofthe Company and its Restricted Subsidiaries or (iii) relating to purchaseorders and other agreements entered into with customers of the Company or anyof its Restricted Subsidiaries in the ordinary course of business;

 

(24)                            Liensencumbering reasonable customary initial deposits and margin deposits andsimilar Liens attaching to commodity trading accounts or other brokerageaccounts incurred in the ordinary course of business and not for speculativepurposes;

 

(25)                            Liens deemed toexist in connection with Investments in repurchase agreements permitted underSection 1011 of this Indenture; *provided*that such Liens do not extend to any assets other than those assets that arethe subject of such repurchase agreement; and

 

(26)                            other Lienssecuring obligations incurred in the ordinary course of business whichobligations do not exceed $50.0 million at any one time outstanding.

 

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

 

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“*Predecessor Note*” of any particular Notemeans every previous Note evidencing all or a portion of the same debt as thatevidenced by such particular Note; and, for the purposes of this definition,any Note authenticated and delivered under Section 305 in exchange for amutilated Note or in lieu of a lost, destroyed or stolen Note shall be deemedto evidence the same debt as the mutilated, lost, destroyed or stolen Note.

 

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

 

“*Protected Purchaser*” has the meaningspecified in Section 305 of this Indenture.

 

“*Qualified Proceeds*” means assets that areused or useful in, or Capital Stock of any Person engaged in, a SimilarBusiness; *provided* that the fairmarket value of any such assets or Capital Stock shall be determined by theCompany in good faith.

 

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

 

“*Receivables Fees*” means distributions orpayments made directly or by means of discounts with respect to anyparticipation interest issued or sold in connection with, and other fees paidto a Person that is not a Restricted Subsidiary in connection with, anyReceivables Facility.

 

“*Receivables Subsidiary*” means anySubsidiary formed solely for the purpose of engaging, and that engages only, inone or more Receivables Facilities.

 

“*Redemption Date*”, when used with respectto any Note to be redeemed, in whole or in part, means the date fixed for suchredemption by or pursuant to this Indenture.

 

“*Redemption Price*”, when used with respectto any Note to be redeemed, means the price at which it is to be redeemedpursuant to this Indenture.

 

“*Refinancing Indebtedness*” has the meaningspecified in Section 1011 of this Indenture.

 

“*Refunding Capital Stock*” has the meaningspecified in Section 1010 of this Indenture.

 

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“*Registration Rights Agreement*” means theRegistration Rights Agreement dated as of the Issue Date, among the Company,Holdings, the Subsidiary Guarantors and the Initial Purchasers and, withrespect to any Additional Notes, one or more registration rights agreementsamong the Company, Holdings, the Subsidiary Guarantors and the other partiesthereto, as such agreement(s) may be amended, modified or supplementedfrom time to time, relating to rights given by the Company to the purchasers ofAdditional Notes to register such Additional Notes under the Securities Act.

 

“*Regular Record Date*” has the meaningspecified in Section 301 of this Indenture.

 

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

 

“*Representative*” means, with respect to aperson, any trustee, agent or representative (if any) for an issue of SeniorIndebtedness of such Person.

 

“*Responsible Officer*”, when used withrespect to the Trustee, means any vice president, any assistant treasurer, anytrust officer or assistant trust officer, or any other officer of the Trusteecustomarily performing functions similar to those performed by any of theabove-designated officers, and also means, with respect to a particular corporatetrust matter, any other officer to whom such matter is referred because of hisknowledge of and familiarity with the particular subject and who shall havedirect responsibility for the administration of this Indenture.

 

“*Restricted Investment*” means an Investmentother than a Permitted Investment.

 

“*Restricted Payments*” has the meaningspecified in Section 1010 of this Indenture.

 

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

 

“*Retired Capital Stock*” has the meaningspecified in Section 1010 of this Indenture.

 

“*Revolving Credit Facility*” means thecredit facility provided under the Senior Secured Asset-Based Revolving CreditAgreement, to be entered into as of the Issue Date, among the Company,Holdings, the lenders party thereto in their capacity as

 

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lendersthereunder and Deutsche Bank Trust Company Americas, as Administrative Agent,including any guarantees, collateral documents, instruments and agreementsexecuted in connection therewith, and any amendments, supplements,modifications, extensions, replacements, renewals, restatements, refundings orrefinancings thereof and any indentures or credit facilities or commercialpaper facilities with banks or other institutional lenders or investors thatextend, replace, refund, refinance, renew or defease any part of the loans,notes, other credit facilities or commitments thereunder, including any suchreplacement, refunding or refinancing facility or indenture that increases theamount borrowable thereunder or alters the maturity thereof (*provided* that such increase in borrowingsis permitted under Section 1011 of this Indenture).

 

“*S&P*” means Standard and Poor’s, adivision of the McGraw-Hill Companies, Inc., and any successor to itsrating agency business.

 

“*Sale and Lease-Back Transaction*” means anyarrangement with any Person providing for the leasing by the Company or anyRestricted Subsidiary of any real or tangible personal property, which propertyhas been or is to be sold or transferred by the Company or such RestrictedSubsidiary to such Person in contemplation of such leasing.

 

“*SEC*” means the Securities and ExchangeCommission.

 

“*Secured Indebtedness*” means anyIndebtedness secured by a Lien.

 

“*Securities Act*” means the Securities Actof 1933, as amended, and the rules and regulations of the SEC promulgatedthereunder.

 

“*Senior Credit Facilities*” means theRevolving Credit Facility and the Term Loan Facility.

 

“*Senior Indebtedness*” means with respect toany Person:

 

(1)                                  allIndebtedness of such Person, whether outstanding on the Issue Date orthereafter incurred; and

 

(2)                                  all otherObligations of such Person (including interest accruing on or after the filingof any petition in bankruptcy or for reorganization relating to such Personwhether or not post-filing interest is allowed in such proceeding) in respectof Indebtedness described in clause (1) above

 

unless,in the case of clauses (1) and (2), the instrument creating or evidencingthe same or pursuant to which the same is outstanding expressly provides thatsuch Indebtedness or other Obligations are subordinate in right of payment toor *pari passu* in right of paymentwith the Notes or the Guarantee of such Person, as the case may be; *provided* that Senior Indebtedness shallnot include:

 

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(1)                                  any obligationof such Person to the Company or any Subsidiary or to any joint venture inwhich the Company or any Restricted Subsidiary has an interest;

 

(2)                                  any liabilityfor Federal, state, local or other taxes owed or owing by such Person;

 

(3)                                  any accountspayable or other liability to trade creditors in the ordinary course ofbusiness (including guarantees thereof as instruments evidencing suchliabilities);

 

(4)                                  anyIndebtedness or other Obligation of such Person that is subordinate or juniorin any respect to any other Indebtedness or other Obligation of such Person; or

 

(5)                                  that portion ofany Indebtedness that at the time of Incurrence is Incurred in violation ofthis Indenture.

 

“*Senior Indenture*” means the SeniorIndenture dated as of the Issue Date, among the Company, as issuer, certain ofits Subsidiaries and Holdings, as guarantors and Wells Fargo Bank, NationalAssociation, as trustee, pursuant to which the Senior Notes are issued.

 

“*Senior Notes*” means the $700,000,000aggregate principal amount of 9%/93⁄4% Senior Notes due 2015 issued by theCompany under the Senior Indenture on the Issue Date and any PIK Senior Notesor any increase in the outstanding principal amount of Senior Notes, in eachcase issued in lieu of the payment of cash interest on outstanding SeniorNotes.

 

“*Senior Subordinated Indebtedness*” means,with respect to a Person, the Notes (in the case of the Company), a Guarantee(in the case of a Guarantor) and any other Indebtedness of such Person thatspecifically provides that such Indebtedness is to rank *pari passu*with the Notes or suchGuarantee, as the case may be, in right of payment and is not subordinated byits terms in right of payment to any Indebtedness or other obligation of suchPerson that is not Senior Indebtedness of such Person.

 

“*Shelf Registration Statement*” means theshelf registration statement as defined in the Registration Rights Agreement.

 

“*Significant Subsidiary*” means anyRestricted Subsidiary of the Company 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 onthe date hereof.

 

“*Similar Business*” means any businessconducted by the Company and its Restricted Subsidiaries on the Issue Date orany business that is similar, reasonably related, incidental or ancillarythereto.

 

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“*Special Record Date*” for the payment ofany Defaulted Interest means a date fixed by the Trustee pursuant toSection 306.

 

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

 

“*Stated Maturity*”, when used with respectto any Note or any installment of principal thereof or interest thereon, meansthe date specified in such Note as the fixed date on which the principal ofsuch Note or such installment of principal or interest is due and payable.

 

“*Subordinated Indebtedness*” means:

 

(a)                                  with respect tothe Company, any Indebtedness of the Company that is by its terms subordinatedin right of payment to the Notes, and

 

(b)                                 with respect toany Guarantor, any Indebtedness of such Guarantor that is by its termssubordinated in right of payment to the Guarantee of such Guarantor.

 

“*Subsidiary*” means, with respect to anyPerson,

 

(1)                                  anycorporation, association, or other business entity (other than a partnership,joint venture, limited liability company or similar entity) of which more than50% of the total voting power of shares of Capital Stock entitled (withoutregard to the occurrence of any contingency) to vote in the election ofdirectors, managers or trustees thereof is at the time of determination ownedor controlled, directly or indirectly, by such Person or one or more of theother Subsidiaries of that Person or a combination thereof and

 

(2)                                  anypartnership, joint venture, limited liability company or similar entity ofwhich

 

(x)                                   more than 50% of the capitalaccounts, distribution rights, total equity and voting interests or general orlimited partnership interests, as applicable, are owned or controlled, directlyor indirectly, by such Person or one or more of the other Subsidiaries of thatPerson or a combination thereof whether in the form of membership, general,special or limited partnership or otherwise, and

 

(y)                                 such Person or anyRestricted Subsidiary of such Person is a controlling general partner orotherwise controls such entity.

 

“*Subsidiary Guarantee*” means the guaranteeby any Subsidiary Guarantor of the Company’s Obligations under this Indentureand the Notes.

 

“*Subsidiary Guarantor*” means eachRestricted Subsidiary of the Company that executes this Indenture as aguarantor on the Issue Date and each other

 

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RestrictedSubsidiary of the Company that thereafter guarantees the Notes pursuant to theterms of this Indenture.

 

“*Successor Company*” has the meaningspecified in Section 801 of this Indenture.

 

“*Successor Person*” has the meaningspecified in Section 802 of this Indenture.

 

“*Term Loan Facility*” means the creditfacility provided under the Senior Secured Term Loan Agreement, to be enteredinto as of the Issue Date, among the Company, Holdings, the lenders partythereto in their capacity as lenders and Credit Suisse, as AdministrativeAgent, including any guarantees, collateral documents, instruments andagreements executed in connection therewith, and any amendments, supplements,modifications, extensions, replacements, renewals, restatements, refundings orrefinancings thereof and any indentures or credit facilities or commercialpaper facilities with banks or other institutional lenders or investors thatextend, replace, refund, refinance, renew or defease any part of the loans,notes, other credit facilities or commitments thereunder, including any suchreplacement, refunding or refinancing facility or indenture that increases theamount borrowable thereunder or alters the maturity thereof (*provided* that such increase in borrowingsis permitted under Section 1011 of this Indenture).

 

“*Total Assets*” means the total amount ofall assets of the Company and the Restricted Subsidiaries, determined on aconsolidated basis in accordance with GAAP as shown on the most recent balancesheet of the Company.

 

“*Transactions*” means the Merger, includingthe payment of the merger consideration in connection therewith, the investmentby the Sponsors, members of management and the Co-Investors, the issuance ofthe New Notes and the execution of, and borrowings on the Issue Date under, theSenior Credit Facilities as in effect on the Issue Date, the pledge andsecurity arrangements in connection with the foregoing, the refinancing ofcertain Indebtedness in connection with the foregoing (including the redemptionof the Existing 2008 Notes) and the related transactions described in theOffering Circular, in particular as described under the section thereofentitled “The Transactions”.

 

“*Treasury Rate*” means, as of any RedemptionDate, the yield to maturity as of such Redemption Date of United StatesTreasury securities with a constant maturity (as compiled and published in themost recent Federal Reserve Statistical Release H.15 (519) that has becomepublicly available at least two Business Days prior to the Redemption Date (or,if such Statistical Release is no longer published, any publicly availablesource of similar market data)) most nearly equal to the period from theRedemption Date to October 15, 2010; *provided,however*, that if the period from the Redemption Date toOctober 15, 2010, is less than one year, the weekly average yield onactually traded United States Treasury securities adjusted to a constantmaturity of one year shall be used.

 

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“*Trust Indenture Act*” or “*TIA*” means the Trust Indenture Act of 1939as in force at the date as of which this Indenture was executed, except asprovided in Section 905.

 

“*Trustee*” means Wells Fargo Bank, NationalAssociation until a successor replaces it and, thereafter, means the successor.

 

“*Uniform Commercial Code*” means the NewYork Uniform Commercial Code as in effect from time to time.

 

“*Unrestricted Subsidiary*” means:

 

(1)                                  any Subsidiaryof the Company that at the time of determination is an Unrestricted Subsidiary(as designated by the Company, as provided below) and

 

(2)                                  any Subsidiaryof an Unrestricted Subsidiary.

 

TheCompany may designate any Subsidiary of the Company (including any existingSubsidiary and any newly acquired or newly formed Subsidiary) to be anUnrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries ownsany Equity Interests or Indebtedness of, or owns or holds any Lien on, anyproperty of, the Company or any Subsidiary of the Company (other than anySubsidiary of the Subsidiary to be so designated); *provided* that

 

(a)                                  anyUnrestricted Subsidiary must be an entity of which shares of the capital stockor other equity interests (including partnership interests) entitled to cast atleast a majority of the votes that may be cast by all shares or equityinterests having ordinary voting power for the election of directors or othergoverning body are owned, directly or indirectly, by the Company,

 

(b)                                 suchdesignation complies with Section 1010 of this Indenture and

 

(c)                                  each of

 

(1)                                  the Subsidiaryto be so designated and

 

(2)                                  itsSubsidiaries

 

hasnot at the time of designation, and does not thereafter, create, incur, issue,assume, guarantee or otherwise become directly or indirectly liable with respectto any Indebtedness pursuant to which the lender has recourse to any of theassets of the Company or any Restricted Subsidiary.

 

TheCompany may designate any Unrestricted Subsidiary to be a RestrictedSubsidiary; *provided* that,immediately after giving effect to such designation no Default shall haveoccurred and be continuing and either

 

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(1)                                  the Companycould incur at least $1.00 of additional Indebtedness pursuant to the FixedCharge Coverage Ratio test described in Section 1011(a) of thisIndenture or

 

(2)                                  the FixedCharge Coverage Ratio for the Company and its Restricted Subsidiaries would begreater than such ratio for the Company and its Restricted Subsidiariesimmediately prior to such designation, in each case on a *pro forma* basis taking into account suchdesignation.

 

Anysuch designation by the Company shall be notified by the Company to the Trusteeby promptly filing with the Trustee a copy of any applicable Board Resolutiongiving effect to such designation and an Officers’ Certificate certifying thatsuch designation complied with the foregoing provisions.

 

“*U.S. Person*” means a U.S. Person asdefined in Rule 902(k) promulgated under the Securities Act.

 

“*Vice President*”, when used with respect tothe Company or the Trustee, means any vice president, whether or not designatedby a number or a word or words added before or after the title “vice president”.

 

“*Voting Stock*” of any Person as of any datemeans the Capital Stock of such Person that is at the time entitled to vote inthe election of the Board of Directors of such Person.

 

“*Weighted Average Life to Maturity*” means,when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as thecase may be, at any date, the quotient obtained by dividing

 

(1)                                  the sum of theproducts of the number of years from the date of determination to the date ofeach successive scheduled principal payment of such Indebtedness or redemptionor similar payment with respect to such Disqualified Stock or Preferred Stockmultiplied by the amount of such payment, by

 

(2)                                  the sum of allsuch payments.

 

“*Wholly-Owned Subsidiary*” of any Personmeans a Subsidiary of such Person, 100% of the outstanding Capital Stock orother ownership interests of which (other than directors’ qualifying shares)shall at the time be owned by such Person or by one or more Wholly-OwnedSubsidiaries of such Person.

 

SECTION 103.  Compliance Certificatesand Opinions.  Upon any application or request by the Company to theTrustee to take or refrain from taking any action under this Indenture, theCompany shall furnish to the Trustee an Officers’ Certificate stating that allconditions precedent, if any, provided for in this Indenture (including anycovenant compliance with which constitutes a condition precedent) relating tothe proposed action have been complied with and, other than in connection withthe authentication of the Initial Notes, an Opinion of Counsel stating that inthe

 

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opinionof such counsel all such conditions precedent, if any, have been complied with,except that in the case of any such application or request as to which thefurnishing of such documents is specifically required by any provision of thisIndenture relating to such particular application or request, no additionalcertificate or opinion need be furnished.

 

Everycertificate or opinion with respect to compliance with a condition or covenantprovided for in this Indenture (other than pursuant to Section 1008(a) ofthis Indenture or Section 314(a)(4) of the TIA) shall include:

 

(1)                                  a statementthat each individual signing such certificate or opinion has read such covenantor condition and the definitions herein relating thereto;

 

(2)                                  a briefstatement as to the nature and scope of the examination or investigation uponwhich the statements or opinions contained in such certificate or opinion arebased;

 

(3)                                  a statementthat, in the opinion of each such individual, he or she has made suchexamination or investigation as is necessary to enable him or her to express aninformed opinion as to whether or not such covenant or condition has beencomplied with; and

 

(4)                                  a statement asto whether, in the opinion of each such individual, such condition or covenanthas been complied with.

 

SECTION 104.  Form of DocumentsDelivered to Trustee.  In any case where several matters are requiredto be certified by, or covered by an opinion of, any specified Person, it isnot necessary that all such matters be certified by, or covered by the opinionof, only one such Person, or that they be so certified or covered by only onedocument, but one such Person may certify or give an opinion with respect tosome matters and one or more other such Persons as to other matters, and any suchPerson may certify or give an opinion as to such matters in one or severaldocuments.

 

Anycertificate or opinion of an officer of the Company may be based, insofar as itrelates to legal matters, upon a certificate or opinion of, or representationsby, counsel, unless such officer knows, or in the exercise of reasonable careshould know, that the certificate or opinion or representations with respect tothe matters upon which his certificate or opinion is based are erroneous. Anysuch certificate or opinion may be based, insofar as it relates to factualmatters, upon a certificate or opinion of, or representations by, an officer orofficers of the Company stating that the information with respect to suchfactual matters is in the possession of the Company, unless such counsel knows,or in the exercise of reasonable care should know, that the certificate oropinion or representations with respect to such matters are erroneous.

 

Whereany Person is required to make, give or execute two or more applications, requests,consents, certificates, statements, opinions or other instruments under thisIndenture, they may, but need not, be consolidated and form one instrument.

 

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SECTION 105.  Acts of Holders. Any request, demand, authorization, direction, notice, consent, waiver or otheraction provided by this Indenture to be given or taken by Holders may beembodied in and evidenced by one or more instruments of substantially similartenor signed by such Holders in person or by agents duly appointed in writing;and, except as herein otherwise expressly provided, such action shall becomeeffective when such instrument or instruments are delivered to the Trustee and,where it is hereby expressly required, to the Company.  Such instrument orinstruments (and the action embodied therein and evidenced thereby) are hereinsometimes referred to as the “Act” of the Holders signing such instrument orinstruments.  Proof of execution of any such instrument or of a writingappointing any such agent shall be sufficient for any purpose of this Indentureand (subject to Section 601) conclusive in favor of the Trustee and theCompany, if made in the manner provided in this Section.

 

The fact and date of the execution by any Person ofany such instrument or writing may be proved by the affidavit of a witness ofsuch execution or by a certificate of a notary public or other officerauthorized by law to take acknowledgments of deeds, certifying that theindividual signing such instrument or writing acknowledged to him the executionthereof.  Where such execution is by a signer acting in a capacity otherthan his or her individual capacity, such certificate or affidavit shall alsoconstitute sufficient proof of authority.  The fact and date of theexecution of any such instrument or writing, or the authority of the Personexecuting the same, may also be proved in any other manner that the Trusteedeems sufficient.

 

The principal amount and serial numbers of Notesheld by any Person, and the date of holding the same, shall be proved by theNote Register.

 

If the Company shall solicit from the Holders anyrequest, demand, authorization, direction, notice, consent, waiver or otherAct, the Company may, at its option, fix in advance a record date for thedetermination of Holders entitled to give such request, demand, authorization,direction, notice, consent, waiver or other Act, but the Company shall have noobligation to do so.  Notwithstanding TIA Section 316(c), such recorddate shall be a date not earlier than the date 30 days prior to the firstsolicitation of Holders generally in connection therewith and not later thanthe date such solicitation is completed.  If such a record date is fixed,such request, demand, authorization, direction, notice, consent, waiver orother Act may be given before or after such record date, but only the Holdersof record at the close of business on such record date shall be deemed to beHolders for the purposes of determining whether Holders of the requisiteproportion of Outstanding Notes have authorized or agreed or consented to suchrequest, demand, authorization, direction, notice, consent, waiver or otherAct, and for that purpose the Outstanding Notes shall be computed as of suchrecord date; *provided* that nosuch authorization, agreement or consent by the Holders on such record dateshall be deemed effective unless it shall become effective pursuant to theprovisions of this Indenture not later than eleven months after the recorddate.  Any request, demand, authorization, direction, notice, consent,waiver or other Act of the Holder of any Note shall bind every future Holder ofthe same Note and the Holder of every Note issued upon the registration oftransfer thereof or in exchange therefor or in lieu thereof in respect ofanything done,

 

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omittedor suffered to be done by the Trustee, the Company or any Guarantor in reliancethereon, whether or not notation of such action is made upon such Note.

 

Without limiting the foregoing, a Holder entitled totake any action hereunder with regard to any particular Note may do so withregard to all or any part of the principal amount of such Note or by one ormore duly appointed agents, each of which may do so pursuant to suchappointment with regard to all or any part of such principal amount.  Anynotice given or action taken by a Holder or its agents with regard to differentparts of such principal amount pursuant to this paragraph shall have the sameeffect as if given or taken by separate Holders of each such different part.

 

Without limiting the generality of the foregoing, aHolder, including the Depository that is the Holder of a Global Note, may make,give or take, by a proxy or proxies duly appointed in writing, any request,demand, authorization, direction, notice, consent, waiver or other actionprovided in this Indenture to be made, given or taken by Holders, and theDepository that is the Holder of a Global Note may provide its proxy or proxiesto the beneficial owners of interests in any such Global Note through suchdepositary’s standing instructions and customary practices.

 

The Company may fix a record date for the purpose ofdetermining the Persons who are beneficial owners of interests in any GlobalNote held by the Depository entitled under the procedures of such depositary tomake, give or take, by a proxy or proxies duly appointed in writing, anyrequest, demand, authorization, direction, notice, consent, waiver or otheraction provided in this Indenture to be made, given or taken by Holders.

 

SECTION 106.  Notices, Etc., toTrustee, Company, any Guarantor and Agent.  Any request, demand,authorization, direction, notice, consent, waiver or Act of Holders or otherdocument provided or permitted by this Indenture to be made upon, given orfurnished to, or filed with,

 

(1)                                  the Trustee byany Holder or by the Company or any Guarantor shall be sufficient for everypurpose hereunder if made, given, furnished or filed in writing (which may bevia facsimile) to or with the Trustee at Wells Fargo Bank, NationalAssociation, 213 Court Street, Suite 703, Middletown, CT 06457,Attn:  Joseph P. O’Donnell, or

 

(2)                                  the Company orany Guarantor by the Trustee or by any Holder shall be sufficient for everypurpose hereunder (unless otherwise herein expressly provided) if made, given,furnished or delivered in writing and mailed, first-class postage prepaid, ordelivered by recognized overnight courier, to the Company or such Guarantoraddressed to it at The Neiman Marcus Group, Inc., 1618 Main Street,Dallas, TX 75201, Attention:  General Counsel, or at any other addresspreviously furnished in writing to the Trustee by the Company or suchGuarantor.

 

SECTION 107.  Notice to Holders;Waiver.  Where this Indenture provides for notice of any event toHolders by the Company or the Trustee, such notice

 

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shallbe sufficiently given (unless otherwise herein expressly provided) if inwriting and mailed, first-class postage prepaid, to each Holder affected bysuch event, at his address as it appears in the Note Register, within the timeprescribed for the giving of such notice.  In any case where notice toHolders is given by mail, neither the failure to mail such notice, nor anydefect in any notice so mailed, to any particular Holder shall affect thesufficiency of such notice with respect to other Holders.  Notices givenby publication shall be deemed given on the first date on which publication ismade and notices given by first-class mail, postage prepaid, shall be deemedgiven five calendar days after mailing.

 

Incase by reason of the suspension of or irregularities in regular mail serviceor by reason of any other cause, it shall be impracticable to mail notice ofany event to Holders when such notice is required to be given pursuant to anyprovision of this Indenture, then any manner of giving such notice as shall besatisfactory to the Trustee shall be deemed to be a sufficient giving of suchnotice for every purpose hereunder.

 

Wherethis Indenture provides for notice in any manner, such notice may be waived inwriting by the Person entitled to receive such notice, either before or afterthe event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filingshall not be a condition precedent to the validity of any action taken inreliance upon such waiver.

 

SECTION 108.  Effect of Headings andTable of Contents.  The Article and Section headings herein,the Table of Contents and the reconciliation and tie between the TIA and thisIndenture are for convenience of reference only, are not intended to beconsidered a part hereof and shall in no way affect the construction of, ormodify or restrict, any of the terms or provisions hereof.

 

SECTION 109.  Successors and Assigns. All agreements of the Company in this Indenture and the Notes shall bind itssuccessors.  All agreements of the Trustee in this Indenture shall bindits successors.  All agreements of each Guarantor in this Indenture shallbind its successors, except as otherwise provided in Section 1208 hereof.

 

SECTION 110.  Separability Clause. In case any provision in this Indenture or in the Notes shall be invalid,illegal or unenforceable, the validity, legality and enforceability of theremaining provisions shall not in any way be affected or impaired thereby.

 

SECTION 111.  Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give toany Person, other than the parties hereto, any Paying Agent, any Note Registrarand their successors hereunder and the Holders any benefit or any legal orequitable right, remedy or claim under this Indenture.

 

SECTION 112.  Governing Law. This Indenture, the Notes and any Guarantee shall be governed by and construedin accordance with the laws of the State of New York.  This Indentureis subject to the provisions of the Trust Indenture Act that are

 

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requiredto be part of this Indenture and shall, to the extent applicable, be governedby such provisions.

 

SECTION 113.  Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturityor Maturity of any Note shall not be a Business Day, then (notwithstanding anyother provision of this Indenture or of the Notes) payment of principal (orpremium, if any) or interest need not be made on such date, but may be made onthe next succeeding Business Day with the same force and effect as if made onthe Interest Payment Date, Redemption Date, or at the Stated Maturity orMaturity; *provided* that nointerest shall accrue for purposes of such payment for the period from andafter such Interest Payment Date, Redemption Date, Stated Maturity or Maturity,as the case may be.

 

SECTION 114.  No Personal Liability ofDirectors, Officers, Employees and Stockholders.  No director,officer, employee, incorporator or stockholder of the Company or any SubsidiaryGuarantor (other than in the case of stockholders of any Subsidiary Guarantor,the Company or another Subsidiary Guarantor or in the case of stockholders ofthe Company, Holdings) or any of their parent companies shall have anyliability for any obligations of the Company, Holdings or the SubsidiaryGuarantors under the Notes, the Guarantees and this Indenture or for any claimbased on, in respect of, or by reason of such obligations or their creation tothe extent permitted by applicable law.  Each Holder by accepting a Noteand the related Guarantee waives and releases all such liability to the extentpermitted by applicable law.  The waiver and release are part of theconsideration for issuance of the Notes and the Guarantees.

 

SECTION 115.  Trust Indenture ActControls.  Upon qualification of this Indenture under the TIA, if anyprovision of this Indenture limits, qualifies or conflicts with anotherprovision which is required to be included in this Indenture by the TIA, theprovision required by the TIA shall control.  If any provision of thisIndenture modifies or excludes any provision of the TIA that may be so modifiedor excluded, the latter provision shall be deemed to apply to this Indenture asso modified or excluded, as the case may be.

 

SECTION 116.  Counterparts. This Indenture may be executed in any number of counterparts, each of whichshall be original; but such counterparts shall together constitute but one andthe same instrument.  One signed copy is enough to prove this Indenture.

 

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**ARTICLE TWO**

 

**NOTE FORMS**

 

SECTION 201.  Form and Dating. Provisions relating to the Initial Notes, the Private Exchange Notes and theExchange Notes are set forth in the Rule 144A / Regulation S Appendixattached hereto (the “*Appendix*”)which is hereby incorporated in, and expressly made part of, this Indenture.The Initial Notes and the Trustee’s certificate of authentication shall besubstantially in the form of Exhibit 1 to the Appendix which is herebyincorporated in, and expressly made a part of, this Indenture.  TheExchange Notes, the Private Exchange Notes and the Trustee’s certificate ofauthentication shall be substantially in the form of Exhibit A, which ishereby incorporated in and expressly made a part of this Indenture.  TheNotes may have notations, legends or endorsements required by law, stockexchange rule, agreements to which the Company is subject, if any, or usage (*provided* that any such notation, legend orendorsement is in a form reasonably acceptable to the Company).  Each Noteshall be dated the date of its authentication.  The terms of the Note setforth in the Appendix and Exhibit A are part of the terms of thisIndenture.

 

SECTION 202.  Execution,Authentication, Delivery and Dating.  The Notes shall be executed onbehalf of the Company by any Officer.  The signature of an Officer on theNotes may be manual or facsimile signature of the present or any future suchauthorized officer and may be imprinted or otherwise reproduced on the Notes.

 

Notesbearing the manual or facsimile signature of an individual who was at any timea proper officer of the Company shall bind the Company, notwithstanding thatsuch individual ceased to hold such office prior to the authentication anddelivery of such Notes or did not hold such office at the date of such Notes.

 

Atany time and from time to time after the execution and delivery of thisIndenture, the Company may deliver Notes executed by the Company to the Trusteefor authentication, together with a Company Order for the authentication anddelivery of such Notes, and the Trustee in accordance with such Company Ordershall authenticate and deliver such Notes.

 

Onthe Issue Date, the Company shall deliver the Initial Notes in the aggregateprincipal amount of $500,000,000 executed by the Company to the Trustee forauthentication, together with a Company Order directing the Trustee toauthenticate the Notes and certifying that all conditions precedent to theissuance of Notes contained herein have been fully complied with, and theTrustee in accordance with such Company Order shall authenticate and deliversuch Initial Notes.  At any time and from time to time after the IssueDate, the Company may deliver Additional Notes executed by the Company to theTrustee for authentication, together with a Company Order for theauthentication and delivery of such Additional Notes, directing the Trustee toauthenticate the Additional Notes and certifying that the issuance of suchAdditional Notes is in compliance with Article Ten hereof and that allother conditions precedent to the issuance of Notes contained herein have beenfully complied with, and the Trustee in

 

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accordancewith such Company Order shall authenticate and deliver such Additional Notes.

 

Uponreceipt of a Company Order, the Trustee shall authenticate for original issueExchange Notes in an aggregate principal amount not to exceed $500,000,000 plusthe aggregate principal amount of any Additional Notes issued; *provided* that such Exchange Notes shall beissuable only upon the valid surrender for cancellation of Initial Notes andany Additional Notes of a like aggregate principal amount in accordance with anExchange Offer pursuant to the Registration Rights Agreement and a CompanyOrder for the authentication and delivery of such Exchange Notes and certifyingthat all conditions precedent to the issuance of such Exchange Notes arecomplied with.

 

Ineach case, the Trustee shall receive a Company Order and an Opinion of Counselof the Company that it may reasonably require in connection with suchauthentication of Notes.  Such Company Order shall specify the amount ofNotes to be authenticated and the date on which the original issue of Notes isto be authenticated.

 

EachNote shall be dated the date of its authentication.

 

NoNote shall be entitled to any benefit under this Indenture or be valid orobligatory for any purpose unless there appears on such Note a certificate ofauthentication substantially in the form provided for in Exhibit 1 to theAppendix, duly executed by the Trustee by manual signature of an authorizedofficer, and such certificate upon any Note shall be conclusive evidence, andthe only evidence, that such Note has been duly authenticated and delivered hereunderand is entitled to the benefits of this Indenture.

 

Incase the Company or any Guarantor, pursuant to Article Eight of thisIndenture, shall be consolidated or merged with or into any other Person orshall convey, transfer, lease or otherwise dispose of its properties and assetssubstantially as an entirety to any Person, and the successor Person resultingfrom such consolidation, or surviving such merger, or into which the Company orsuch Guarantor shall have been merged, or the Person which shall have receiveda conveyance, transfer, lease or other disposition as aforesaid, shall haveexecuted a supplemental indenture hereto with the Trustee pursuant toArticle Eight of this Indenture, any of the Notes authenticated ordelivered prior to such consolidation, merger, conveyance, transfer, lease orother disposition may, from time to time, at the request of the successorPerson, be exchanged for other Notes executed in the name of the successorPerson with such changes in phraseology and form as may be appropriate, butotherwise in substance of like tenor as the Notes surrendered for such exchangeand of like principal amount; and the Trustee, upon Company Request of thesuccessor Person, shall authenticate and deliver Notes as specified in such requestfor the purpose of such exchange.  If Notes shall at any time beauthenticated and delivered in any new name of a successor Person pursuant tothis Section in exchange or substitution for or upon registration oftransfer of any Notes, such successor Person, at the option of the Holders butwithout expense to them, shall provide for the exchange of all Notes at thetime outstanding for Notes authenticated and delivered in such new name.

 

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**ARTICLE THREE**

 

**THE NOTES**

 

SECTION 301.  Title and Terms. The aggregate principal amount of Notes which may be authenticated and issuedunder this Indenture is not limited; *provided,however* that any Additional Notes issued under this Indenture rank *pari passu* with the Initial Notes, areissued in accordance with Sections 202, 312 and 1011 hereof, form a singleclass with the Initial Notes and shall have the same terms as to status,redemption or otherwise as the Initial Notes.  Any Additional Notes shallbe issued pursuant to a supplemental indenture to this Indenture.

 

TheNotes shall be known and designated as the “103/8% Senior Subordinated Notes Due 2015” of the Company.  The StatedMaturity of the Notes shall be October 15, 2015, and the Notes shall bearinterest at the rate of 103/8% per annumfrom October 6, 2005, or from the most recent Interest Payment Date towhich interest has been paid or duly provided for, payable on April 15,2006 and semi-annually thereafter on April 15 and October 15 in eachyear and at said Stated Maturity, until the principal thereof is paid or dulyprovided for and to the Person in whose name the Note (or any predecessor Note)is registered at the close of business on the April 1 and October 1immediately preceding such Interest Payment Date (each, a “*Regular Record Date*”).

 

Theprincipal of (and premium, if any), interest and Additional Interest, if any,on the Notes shall be payable at the office or agency of the Company maintainedfor such purpose in the City of Dallas, State of Texas or, at the option of theCompany, payment of interest may be made by check mailed to the Holders of theNotes at their respective addresses set forth in the Note Register; *provided* that all payments of principal,premium, if any, and interest and Additional Interest, if any, with respect toNotes represented by one or more permanent global Notes registered in the nameof or held by the Depository or its nominee shall be made by wire transfer ofimmediately available funds to the accounts specified by the Holder or Holdersthereof.

 

Holdersshall have the right to require the Company to purchase their Notes, in wholeor in part, in the event of a Change of Control pursuant toSection 1017.  The Notes shall be subject to repurchase pursuant toan Offer to Purchase as provided in Section 1018.

 

TheNotes shall be redeemable as provided in Article Eleven of this Indentureand Paragraph 5 of the Notes.

 

Thedue and punctual payment of principal of, premium, if any, and interest on theNotes payable by the Company is irrevocably unconditionally guaranteed, to theextent set forth herein, by each of the Guarantors.

 

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SECTION 302.  Denominations. The Notes shall be issuable only in registered form without coupons and only indenominations of $2,000 and any integral multiple of $1,000 in excess thereof.

 

SECTION 303.  Temporary Notes. Pending the preparation of definitive Notes, the Company may execute, and uponreceipt of a Company Order the Trustee shall authenticate and deliver,temporary Notes which are printed, lithographed, typewritten, mimeographed orotherwise produced, in any authorized denomination, substantially of the tenorof the definitive Notes in lieu of which they are issued and with suchappropriate insertions, omissions, substitutions and other variations as theofficers executing such Notes may determine, as conclusively evidenced by theirexecution of such Notes.

 

Iftemporary Notes are issued, the Company shall cause definitive Notes to beprepared without unreasonable delay.  Subject to the provisions set forthin the Rule 144A/Regulation S Appendix, after the preparation ofdefinitive Notes, the temporary Notes shall be exchangeable for definitiveNotes upon surrender of the temporary Notes at the office or agency of theCompany designated for such purpose pursuant to Section 1002, withoutcharge to the Holder.  Upon surrender for cancellation of any one or moretemporary Notes, the Company shall execute and the Trustee shall authenticateand deliver in exchange therefor a like principal amount of definitive Notes ofauthorized denominations.  Until so exchanged, the temporary Notes shallin all respects be entitled to the same benefits under this Indenture asdefinitive Notes.

 

SECTION 304.  Note Registrar; PayingAgent; Registration of Transfer and Exchange.  The Company shall causeto be kept at the Corporate Trust Office of the Trustee a register (theregister maintained in such office and in any other office or agency designatedpursuant to Section 1002 being herein sometimes referred to as the “*Note Register*”) in which, subject to suchreasonable regulations as it may prescribe, the Company shall provide for theregistration of Notes and of transfers of Notes.  The Note Register shallbe in written form or any other form capable of being converted into writtenform within a reasonable time.  At all reasonable times, the Note Registershall be open to inspection by the Trustee.  The Trustee is herebyinitially appointed as note registrar (the “*NoteRegistrar*”) for the purpose of registering Notes and transfers ofNotes as herein provided.  The Trustee is hereby initially appointed toact as the Paying Agent and to act as Custodian with respect to the GlobalNotes.

 

Uponsurrender for registration of transfer of any Note at the office or agency ofthe Company designated pursuant to Section 1002, the Company shallexecute, and the Trustee shall authenticate and deliver, in the name of thedesignated transferee or transferees, one or more new Notes of any authorizeddenomination or denominations of a like aggregate principal amount.

 

Atthe option of the Holder, Notes may be exchanged for other Notes of anyauthorized denomination and of a like aggregate principal amount, uponsurrender of the Notes to be exchanged at such office or agency.  Wheneverany Notes are so surrendered for exchange, the Company shall execute, and theTrustee shall authenticate

 

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anddeliver, the Notes which the Holder making the exchange is entitled to receive;*provided* that no exchange ofNotes for Exchange Notes shall occur until an Exchange Offer RegistrationStatement shall have been declared effective by the SEC, the Trustee shall havereceived an Officers’ Certificate confirming that the Exchange OfferRegistration Statement has been declared effective by the SEC and the InitialNotes to be exchanged for the Exchange Notes shall be cancelled by the Trustee.

 

AllNotes issued upon any registration of transfer or exchange of Notes shall bethe valid obligations of the Company, evidencing the same debt, and entitled tothe same benefits under this Indenture, as the Notes surrendered upon suchregistration of transfer or exchange.

 

EveryNote presented or surrendered for registration of transfer or for exchangeshall (if so required by the Company or the Note Registrar) be duly endorsed,or be accompanied by written instruments of transfer, in form satisfactory tothe Company and the Note Registrar, duly executed by the Holder thereof or hisattorney duly authorized in writing.

 

Noservice charge shall be made for any registration of transfer or exchange orredemption of Notes, but the Company may require payment of a sum sufficient tocover any taxes, fees or other governmental charge that may be imposed inconnection with any registration of transfer or exchange of Notes, other thanexchanges pursuant to Sections 202, 303, 906, 1017, 1018, or 1108 notinvolving any transfer.

 

SECTION 305.  Mutilated, Destroyed,Lost and Stolen Notes.  If (1) any mutilated Note is surrenderedto the Trustee, or (2) the Company and the Trustee receive evidence totheir satisfaction of the destruction, loss or theft of any Note, and there isdelivered to the Company and the Trustee such security or indemnity as may berequired to protect the Company, the Trustee, any agent and any authenticatingagent from any loss that any of them may suffer if a Note is replaced, then, inthe absence of notice to the Company or the Trustee that such Note has been acquiredby a Protected Purchaser (as defined in Section 8-303 of the UniformCommercial Code) (a “*Protected Purchaser*”),the Company shall execute and upon Company Order the Trustee shall authenticateand deliver, in exchange for any such mutilated Note or in lieu of any suchdestroyed, lost or stolen Note, a new Note of like tenor and principal amount,bearing a number not contemporaneously outstanding.

 

Incase any such mutilated, destroyed, lost or stolen Note has become or is aboutto become due and payable, the Company in its discretion may, instead ofissuing a new Note, pay such Note.

 

Uponthe issuance of any new Note under this Section, the Company may require thepayment of a sum sufficient to cover any tax or other governmental charge thatmay be imposed in relation thereto and any other expenses (including the feesand expenses of the Trustee) in replacing a Note.

 

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Everynew Note issued pursuant to this Section in lieu of any mutilated,destroyed, lost or stolen Note shall constitute an original additionalcontractual obligation of the Company and each Guarantor, whether or not themutilated, destroyed, lost or stolen Note shall be at any time enforceable byanyone, and shall be entitled to all benefits of this Indenture equally andproportionately with any and all other Notes duly issued hereunder.

 

Theprovisions of this Section are exclusive and shall preclude (to the extentlawful) all other rights and remedies with respect to the replacement or paymentof mutilated, destroyed, lost or stolen Notes.

 

SECTION 306.  Payment of Interest;Interest Rights Preserved.  (a)  Interest on any Note which is payable, and is punctually paid or dulyprovided for, on any Interest Payment Date shall be paid to the Person in whosename such Note (or one or more Predecessor Notes) is registered at the close ofbusiness on the Regular Record Date for such interest at the office or agencyof the Company maintained for such purpose pursuant to Section 1002; *provided*that, subject to Section 301hereof, each installment of interest may at the Company’s option be paid by(1) mailing a check for such interest, payable to or upon the writtenorder of the Person entitled thereto pursuant to Section 307, to theaddress of such Person as it appears in the Note Register or (2) transferto an account located in the United States maintained by the payee.

 

(b)                                 Any interest on any Notewhich is payable, but is not punctually paid or duly provided for, on anyInterest Payment Date shall forthwith cease to be payable to the Holder on theRegular Record Date by virtue of having been such Holder, and such defaultedinterest and (to the extent lawful) interest on such defaulted interest at therate borne by the Notes (such defaulted interest and interest thereon hereincollectively called “*Defaulted Interest*”)may be paid by the Company, at its election in each case, as provided inclause (1) or (2) below:

 

(1)                                  The Company mayelect to make payment of any Defaulted Interest to the Persons in whose namesthe Notes (or their respective Predecessor Notes) are registered at the closeof business on a Special Record Date for the payment of such DefaultedInterest, which shall be fixed in the following manner.  The Company shallnotify the Trustee in writing of the amount of Defaulted Interest proposed tobe paid on each Note and the date of the proposed payment, and at the same timethe Company shall deposit with the Trustee an amount of money equal to theaggregate amount proposed to be paid in respect of such Defaulted Interest orshall make arrangements satisfactory to the Trustee for such deposit prior tothe date of the proposed payment, such money when deposited to be held in trustfor the benefit of the Persons entitled to such Defaulted Interest as in thisclause provided.  Thereupon the Trustee shall fix a Special Record Datefor the payment of such Defaulted Interest which shall be not more than 15 daysand not less than 10 days prior to the date of the proposed payment and not lessthan 10 days after the receipt by the Trustee of the notice of the proposedpayment.  The Trustee shall promptly notify the Company of such SpecialRecord Date, and in the name and at the expense of the Company, shall causenotice of the proposed

 

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payment of such Defaulted Interest and the SpecialRecord Date therefor to be given in the manner provided for inSection 107, not less than 10 days prior to such Special RecordDate.  Notice of the proposed payment of such Defaulted Interest and theSpecial Record Date therefor having been so given, such Defaulted Interestshall be paid to the Persons in whose names the Notes (or their respectivePredecessor Notes) are registered at the close of business on such SpecialRecord Date and shall no longer be payable pursuant to the followingclause (2).

 

(2)                                  The Company maymake payment of any Defaulted Interest in any other lawful manner notinconsistent with the requirements of any securities exchange on which theNotes may be listed, and upon such notice as may be required by such exchange,if, after notice given by the Company to the Trustee of the proposed paymentpursuant to this clause, such manner of payment shall be deemed practicable bythe Trustee.

 

(c)                                  Subject to the foregoingprovisions of this Section, each Note delivered under this Indenture uponregistration of transfer of or in exchange for or in lieu of any other Noteshall carry the rights to interest accrued and unpaid, and to accrue, whichwere carried by such other Note.

 

SECTION 307.  Persons Deemed Owners. Prior to the due presentment of a Note for registration of transfer, theCompany, any Guarantor, the Trustee and any agent of the Company or the Trusteemay treat the Person in whose name such Note is registered as the owner of suchNote for the purpose of receiving payment of principal of (and premium, if any)and (subject to Sections 304 and 306) interest on such Note and for allother purposes whatsoever, whether or not such Note be overdue, and none of theCompany, the Trustee or any agent of the Company or the Trustee shall beaffected by notice to the contrary.

 

SECTION 308.  Cancellation. All Notes surrendered for payment, redemption, registration of transfer orexchange shall, if surrendered to any Person other than the Trustee, bedelivered to the Trustee and shall be promptly cancelled by it.  TheCompany may at any time deliver to the Trustee for cancellation any Notespreviously authenticated and delivered hereunder which the Company may haveacquired in any manner whatsoever, and may deliver to the Trustee (or to anyother Person for delivery to the Trustee) for cancellation any Notes previouslyauthenticated hereunder which the Company has not issued and sold, and allNotes so delivered shall be promptly cancelled by the Trustee.  If theCompany shall so acquire any of the Notes, however, such acquisition shall notoperate as a redemption or satisfaction of the indebtedness represented by suchNotes unless and until the same are surrendered to the Trustee forcancellation.  No Notes shall be authenticated in lieu of or in exchangefor any Notes cancelled as provided in this Section, except as expresslypermitted by this Indenture.  All cancelled Notes held by the Trusteeshall be disposed of by the Trustee in accordance with its customary procedures(subject to the record retention requirements of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered tothe Company by the Trustee.

 

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SECTION 309.  Computation of Interest. Interest on the Notes shall be computed on the basis of a 360-day year oftwelve 30-day months.

 

SECTION 310.  Transfer and Exchange. The Notes shall be issued in registered form and shall be transferable onlyupon the surrender of a Note for registration of transfer.  When a Note ispresented to the Note Registrar or a co-registrar with a request to register atransfer, the Note Registrar shall register the transfer as requested if therequirements of this Indenture and Section 8-401(a) of the UniformCommercial Code are met.  When Notes are presented to the Note Registraror a co-registrar with a request to exchange them for an equal principal amountof Notes of other denominations, the Note Registrar shall make the exchange asrequested if the same requirements are met.

 

SECTION 311.  CUSIP Numbers. The Company in issuing the Notes may use “CUSIP” numbers, ISINs and “CommonCode” numbers (in each case, if then generally in use) in addition to serialnumbers, and, if so, the Trustee shall use such “CUSIP” numbers, ISINs and“Common Code” numbers in addition to serial numbers in notices of redemption,repurchase or other notices to Holders as a convenience to Holders; *provided* that any such notice may statethat no representation is made as to the correctness of such “CUSIP” numbers, ISINsand “Common Code” numbers either as printed on the Notes or as contained in anynotice of a redemption or repurchase and that reliance may be placed only onthe serial or other identification numbers printed on the Notes, and any suchredemption or repurchase shall not be affected by any defect in or omission ofsuch numbers.  The Company shall promptly notify the Trustee in writing ofany change in the “CUSIP” numbers, ISINs and “Common Code” numbersapplicable to the Notes.

 

SECTION 312.  Issuance of AdditionalNotes.  The Company may, subject to Section 1011 of thisIndenture, issue additional Notes having identical terms and conditions to theInitial Notes issued on the Issue Date, other than with respect to the date ofissuance and issue price (the “*AdditionalNotes*”); *provided, however*,that no Additional Notes may be issued at a price that would cause suchAdditional Notes to have “original issue discount” within the meaning ofSection 1273 of the Code. The Initial Notes issued on the Issue Date andany Additional Notes subsequently issued shall be treated as a single class forall purposes under this Indenture.  Exchange Notes issued in exchange forInitial Notes issued on the Issue Date and Exchange Notes issued for anyAdditional Notes subsequently issued shall be treated as a single class for allpurposes under this Indenture.

 

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**ARTICLE FOUR**

 

**SATISFACTIONAND DISCHARGE**

 

SECTION 401.  Satisfaction andDischarge of Indenture.  This Indenture shall upon Company Request andat the Company’s expense cease to be of further effect (except as set forth inthe last paragraph of this Section and as to surviving rights ofregistration of transfer or exchange of Notes expressly provided for herein orpursuant hereto) and the Trustee, at the expense of the Company, shall executeproper instruments acknowledging satisfaction and discharge of this Indenturewhen:

 

(1)                                  either,

 

(A)  all Notestheretofore authenticated and delivered (other than (i) Notes which havebeen destroyed, lost or stolen and which have been replaced or paid as providedin Section 305 and (ii) Notes for whose payment money has theretoforebeen deposited in trust with the Trustee or any Paying Agent or segregated andheld in trust by the Company and thereafter repaid to the Company or dischargedfrom such trust, as provided in Section 1003) have been delivered to theTrustee for cancellation; or

 

(B)  all such Notes nottheretofore delivered to the Trustee for cancellation,

 

(i)                  have become due and payableby reason of the making of a notice of redemption pursuant to Section 1105or otherwise, or

 

(ii)               shall become due and payableat their Stated Maturity within one year, or

 

(iii)            are to be called forredemption within one year under arrangements satisfactory to the Trustee forthe giving of notice of redemption by the Trustee in the name, and at theexpense, of the Company,

 

andthe Company or any Guarantor, in the case of (i), (ii) or (iii) ofthis clause (B), has irrevocably deposited or caused to be deposited withthe Trustee as trust funds in trust solely for the benefit of the Holders, cashin U.S. dollars, non-callable Government Securities, or a combination thereof,in such amounts as shall be sufficient without consideration of anyreinvestment of interest to pay and discharge the entire indebtedness on suchNotes not theretofore delivered to the Trustee for cancellation for principal,premium, if any, and accrued interest to the date of maturity or redemption, asthe case may be;

 

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(2)                                  no Default(other than that resulting from borrowing funds to be applied to make suchdeposit and the granting of Liens in connection therewith) with respect to thisIndenture or the Notes issued hereunder shall have occurred and be continuingon the date of such deposit or shall occur as a result of such deposit and suchdeposit shall not result in a breach or violation of, or constitute a defaultunder, the Senior Credit Facilities, the Senior Indenture, the ExistingIndenture, the Senior Notes, the Existing 2028 Debentures or any other materialagreement or instrument (other than this Indenture) to which the Company,Holdings or any Subsidiary Guarantor is a party or by which the Company,Holdings or any Subsidiary Guarantor is bound;

 

(3)                                  the Company haspaid or caused to be paid all sums payable by it under this Indenture;

 

(4)                                  the Company hasdelivered irrevocable instructions to the Trustee under this Indenture to applythe deposited money toward the payment of such Notes at Maturity or theRedemption Date, as the case may be; and

 

(5)                                  the Company hasdelivered to the Trustee an Officers’ Certificate and an Opinion of Counsel,each stating that all conditions precedent herein to the satisfaction anddischarge of this Indenture have been complied with.

 

Notwithstandingthe satisfaction and discharge of this Indenture, if money or GovernmentSecurities shall have been deposited with the Trustee pursuant tosubclause (B) of clause (1) of this Section, theobligations of the Trustee under Section 402 and the last paragraph ofSection 1003 shall survive such satisfaction and discharge.  Inaddition, nothing in this Section 401 shall be deemed to discharge theobligations of the Company to the Trustee under Section 607 and theobligations of the Company to any Authenticating Agent under Section 612that, by their terms, survive the satisfaction and discharge of this Indenture.

 

SECTION 402.  Application of TrustMoney.  Subject to the provisions of the last paragraph ofSection 1003, all money or Government Securities deposited with theTrustee pursuant to Section 401 shall be held in trust and applied by it,in accordance with the provisions of the Notes and this Indenture, to thepayment, either directly or through any Paying Agent (including the Companyacting as its own Paying Agent) as the Trustee may determine, to the Personsentitled thereto, of the principal (and premium and Additional Interest, ifany) and interest for whose payment such money or Government Securities hasbeen deposited with the Trustee, but such money or Government Securities neednot be segregated from other funds except to the extent required by law.

 

Ifthe Trustee or Paying Agent is unable to apply any money or GovernmentSecurities in accordance with Section 401 by reason of any legalproceeding or by reason of any order or judgment of any court or governmentalauthority enjoining, restraining or otherwise prohibiting such application, theCompany’s and any Guarantor’s obligations under this Indenture and the Notesshall be revived and reinstated as though

 

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nodeposit had occurred pursuant to Section 401 until such time as theTrustee or Paying Agent is permitted to apply all such money or GovernmentSecurities in accordance with Section 401;*provided* that if the Company has made any payment of principal of,premium, if any, or interest on any Notes because of the reinstatement of itsobligations, the Company shall be subrogated to the rights of the Holders ofsuch Notes to receive such payment from the money or Government Securities heldby the Trustee or Paying Agent.

 

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**ARTICLE FIVE**

 

**REMEDIES**

 

SECTION 501.  Events of Default. “*Event of Default*”, wherever usedherein, means any one of the following events (whatever the reason for suchEvent of Default and whether it shall be occasioned by the provisions ofArticle Fourteen or be voluntary or involuntary or be effected byoperation of law or pursuant to any judgment, decree or order of any court orany order, rule or regulation of any administrative or governmental body):

 

(1)                                  default inpayment when due and payable, upon redemption, acceleration or otherwise, ofprincipal of, or premium, if any, on the Notes issued under this Indenture,whether or not such payment shall be prohibited by Article Fourteen hereofor Section 1203;

 

(2)                                  default for30 days or more in the payment when due of interest on or with respect tothe Notes issued under this Indenture, whether or not such payment shall beprohibited by Article Fourteen hereof or Section 1203;

 

(3)                                  failure by theCompany, Holdings or any Subsidiary Guarantor for 60 days after receipt ofwritten notice given by the Trustee or the Holders of at least 30% in principalamount of the then Outstanding Notes issued under this Indenture to comply withany of its other agreements contained in this Indenture or the Notes;

 

(4)                                  default underany mortgage, indenture or instrument under which there is issued or by whichthere is secured or evidenced any Indebtedness for money borrowed by theCompany or any Restricted Subsidiary or the payment of which is guaranteed bythe Company or any Restricted Subsidiary, other than Indebtedness owed to theCompany or a Restricted Subsidiary, whether such Indebtedness or guarantee nowexists or is created after the issuance of the Notes, if both

 

(A)  such defaulteither

 

(i)                                     results fromthe failure to pay any principal of such Indebtedness at its stated finalmaturity (after giving effect to any applicable grace periods) or

 

(ii)                                  relates to anobligation other than the obligation to pay principal of any such Indebtednessat its stated final maturity and results in the holder or holders of suchIndebtedness causing such Indebtedness to become due prior to its statedmaturity and

 

(B)  the principalamount of such Indebtedness, together with the principal amount of any othersuch Indebtedness in default for failure to pay principal at stated finalmaturity (after giving effect to any applicable

 

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grace periods), or the maturity of which has been soaccelerated, aggregate $50.0 million or more at any one time outstanding;

 

(5)                                  failure by theCompany or any Significant Subsidiary (or any group of Subsidiaries thattogether would constitute a Significant Subsidiary) to pay final judgmentsaggregating in excess of $50.0 million, which final judgments remainunpaid, undischarged and unstayed for a period of more than 60 days aftersuch judgment becomes final, and in the event such judgment is covered byinsurance, an enforcement proceeding has been commenced by any creditor uponsuch judgment or decree which is not promptly stayed;

 

(6)                                  any of thefollowing events with respect to the Company or any Significant Subsidiary:

 

(A)  the Company or anySignificant Subsidiary pursuant to or within the meaning of any Bankruptcy Law

 

(i)                                     commences avoluntary case;

 

(ii)                                  consents to theentry of an order for relief against it in an involuntary case;

 

(iii)                               consents to theappointment of a custodian of it or for any substantial part of its property;

 

(iv)                              takes any comparableaction under any foreign laws relating to insolvency; or

 

(B)  a court ofcompetent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

(i)                                     is for reliefagainst the Company or any Significant Subsidiary in an involuntary case;

 

(ii)                                  appoints acustodian of the Company or any Significant Subsidiary or for any substantialpart of its property; or

 

(iii)                               orders thewinding up or liquidation of the Company or any Significant Subsidiary;

 

andthe order or decree remains unstayed and in effect for 60 days;

 

*provided*, that for the purposes ofthis clause (6), a Significant Subsidiary shall include any group ofSubsidiaries that together would constitute a Significant Subsidiary; or

 

(7)                                  the Guaranteeof any Significant Subsidiary (or any group of Subsidiaries that together wouldconstitute a Significant Subsidiary) shall for any

 

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reason cease to be in full force and effect or bedeclared null and void or any responsible officer of any Subsidiary Guarantorthat is a Significant Subsidiary (or the responsible officers of any group ofSubsidiaries that together would constitute a Significant Subsidiary), as thecase may be, denies that it has any further liability under its Guarantee or givesnotice to such effect, other than by reason of the termination of thisIndenture or the release of any such Subsidiary Guarantee in accordance withthis Indenture.

 

SECTION 502.  Acceleration of Maturity;Rescission and Annulment.  (a)  If any Event of Default(other than an Event of Default specified in Section 501(6)) occurs and iscontinuing under this Indenture, the Trustee or the Holders of at least 30% inprincipal amount of the Outstanding Notes issued under this Indenture maydeclare the principal, premium, if any, interest and any other monetaryObligations on all the Outstanding Notes issued under this Indenture to be dueand payable immediately by a notice in writing to the Company (and to theTrustee if given by the Holders); *provided*that, so long as any Indebtedness permitted to be incurred under this Indentureas part of the Senior Credit Facilities or the Senior Notes shall beoutstanding, no such acceleration shall be effective until the earlier of

 

(1)                                  acceleration ofany such Indebtedness under the Senior Credit Facilities or the Senior Notes,and

 

(2)                                  five BusinessDays after the giving of written notice of such acceleration to the Company,the administrative agent under each of the Senior Credit Facilities and thetrustee under the Senior Indenture.

 

(b)                                   Upon theeffectiveness of such declaration, such principal of and premium, if any, andinterest shall be due and payable immediately.  Notwithstanding theforegoing, if an Event of Default specified in Section 501(6) occursand is continuing, then the principal amount of all Outstanding Notes shallipso facto become and be immediately due and payable without any notice,declaration or other act on the part of the Trustee or any Holder.

 

(c)                                  At any time after adeclaration of acceleration has been made and before a judgment or decree forpayment of the money due has been obtained by the Trustee as hereinafterprovided in this Article, the Holders of a majority in aggregate principalamount of the Outstanding Notes, by written notice to the Company and theTrustee, may rescind and annul such declaration and its consequences if:

 

(1)                                  the Company haspaid or deposited with the Trustee a sum sufficient to pay:

 

(A)  all overdueinterest on all Outstanding Notes,

 

(B)  all unpaidprincipal of (and premium, if any, on) any Outstanding Notes which has becomedue otherwise than by such declaration of acceleration, and interest on suchunpaid principal at the rate borne by the Notes,

 

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(C)  to the extent thatpayment of such interest is lawful, interest on overdue interest at the rateborne by the Notes, and

 

(D)  all sums paid oradvanced by the Trustee hereunder and the reasonable compensation, expenses,disbursements and advances of the Trustee, its agents and counsel; and

 

(2)                                  Events ofDefault, other than the non-payment of amounts of principal of (or premium, ifany, on) or interest on Notes which have become due solely by such declarationof acceleration, have been cured or waived as provided in Section 513.

 

Nosuch rescission shall affect any subsequent default or impair any rightconsequent thereon.

 

(d)                                 Notwithstanding thepreceding paragraph, in the event of any Event of Default specified inSection 501(4) above, such Event of Default and all consequencesthereof (excluding any resulting payment default) shall be annulled, waived andrescinded, automatically and without any action by the Trustee or the Holders,if within 20 days after such Event of Default arose,

 

(1)                                  theIndebtedness or guarantee that is the basis for such Event of Default has beendischarged, or

 

(2)                                  the holdersthereof have rescinded or waived the acceleration, notice or action (as thecase may be) giving rise to such Event of Default, or

 

(3)                                  the defaultthat is the basis for such Event of Default has been cured.

 

SECTION 503.  Collection ofIndebtedness and Suits for Enforcement by Trustee.  If an Event ofDefault specified in Section 501(1) or (2) occurs and iscontinuing, the Trustee, in its own name as trustee of an express trust, mayinstitute a judicial proceeding for the collection of the sums due hereunderpursuant to this Article 5 and unpaid, and, in addition thereto, suchfurther amount as shall be sufficient to cover the costs and expenses ofcollection, including the reasonable compensation, expenses, disbursements andadvances of the Trustee, its agents and counsel.  The Trustee mayprosecute such proceeding to judgment or final decree and may enforce the sameagainst the Company, any Guarantor or any other obligor upon the Notes andcollect the moneys adjudged or decreed to be payable in the manner provided bylaw out of the property of the Company, any Guarantor or any other obligor uponthe Notes, wherever situated.

 

Ifan Event of Default occurs and is continuing, the Trustee may in its discretionproceed to protect and enforce its rights and the rights of the Holders underthis Indenture and the Guarantees by the judicial proceedings discussed aboveas the Trustee shall deem necessary to protect and enforce any such rights,including seeking recourse against any Guarantor.

 

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SECTION 504.  Trustee May FileProofs of Claim.  In case of the pendency of any receivership,insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,composition or other judicial proceeding relative to the Company or any otherobligor including any Guarantor, upon the Notes or the property of the Companyor of such other obligor or their creditors, the Trustee (irrespective ofwhether the principal of the Notes shall then be due and payable as thereinexpressed or by declaration or otherwise and irrespective of whether theTrustee shall have made any demand on the Company for the payment of overdueprincipal, premium, if any, or interest) shall be entitled and empowered, byintervention in such proceeding or otherwise,

 

(1)                                  to file andprove a claim for the whole amount of principal (and premium, if any) andinterest owing and unpaid in respect of the Notes and to file such other papersor documents as may be necessary or advisable in order to have the claims ofthe Trustee (including any claim for the reasonable compensation, expenses,disbursements and advances of the Trustee, its agents and counsel) and of theHolders allowed in such judicial proceeding, and

 

(2)                                  to collect,receive and distribute any moneys or other property payable or deliverable onany such claims and to distribute the same;

 

andany custodian, receiver, assignee, trustee, liquidator, sequestrator or similarofficial in any such judicial proceeding is hereby authorized by each Holder tomake such payments to the Trustee and, in the event that the Trustee shallconsent to the making of such payments directly to the Holders, to pay theTrustee any amount due it for the reasonable compensation, expenses,disbursements and advances of the Trustee, its agents and counsel, and anyother amounts due the Trustee under Section 607.

 

Nothingherein contained shall be deemed to authorize the Trustee to authorize orconsent to or accept or adopt on behalf of any Holder any plan ofreorganization, arrangement, adjustment or composition affecting the Notes orthe rights of any Holder thereof, or to authorize the Trustee to vote inrespect of the claim of any Holder in any such proceeding.

 

SECTION 505.  Trustee May EnforceClaims Without Possession of Notes.  All rights of action and claimsunder this Indenture or the Notes may be prosecuted and enforced by the Trusteewithout the possession of any of the Notes or the production thereof in anyproceeding relating thereto, and any such proceeding instituted by the Trusteeshall be brought in its own name and as trustee of an express trust, and anyrecovery of judgment shall, after provision for the payment of the reasonablecompensation, expenses, disbursements and advances of the Trustee, its agentsand counsel, be for the ratable benefit of the Holders in respect of which suchjudgment has been recovered.

 

SECTION 506.  Application of MoneyCollected.  Subject to Article Fourteen hereof andSection 1203, any money or property collected by the Trustee pursuant tothis Article shall be applied in the following order, at the date or datesfixed

 

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bythe Trustee and, in case of the distribution of such money on account ofprincipal (or premium, if any) or interest, upon presentation of the Notes andthe notation thereon of the payment if only partially paid and upon surrenderthereof if fully paid:

 

FIRST:  To the payment of all amounts due theTrustee under Section 607;

 

SECOND:  To holders of Senior Indebtedness of theCompany and, if such money or property has been collected from a Guarantor, toholders of Senior Indebtedness of such Guarantor, in each case to the extentrequired by Article Fourteen hereof and Section 1203 hereof, asapplicable;

 

THIRD:  To the payment of the amounts then due andunpaid for principal of (and premium, if any) and interest on the Notes inrespect of which or for the benefit of which such money has been collected,ratably, without preference or priority of any kind, according to the amountsdue and payable on such Notes for principal (and premium, if any) and interest,respectively; and

 

FOURTH:  The balance, if any, to the Company or theapplicable Guarantor or as a court of competent jurisdiction may direct inwriting; *provided* that all sumsdue and owing to the Holders and the Trustee have been paid in full as requiredby this Indenture.

 

TheTrustee may fix a record date and payment date for any payment to Holders ofNotes pursuant to this Section 506.

 

SECTION 507.  Limitation on Suits. Subject to Section 508, no Holder of any Notes shall have any right toinstitute any proceeding, judicial or otherwise, with respect to thisIndenture, or for the appointment of a receiver or trustee, or for any otherremedy hereunder, unless:

 

(1)                                  such Holder haspreviously given the Trustee notice that an Event of Default is continuing;

 

(2)                                  Holders of atleast 30% in principal amount of the Outstanding Notes have requested theTrustee to pursue the remedy;

 

(3)                                  such Holdershave offered the Trustee reasonable security or indemnity reasonablysatisfactory to it against any loss, liability or expense;

 

(4)                                  the Trustee hasnot complied with such request within 60 days after the receipt thereofand the offer of security or indemnity; and

 

(5)                                  Holders of amajority in principal amount of the Outstanding Notes have not given theTrustee a direction inconsistent with such request within such 60-day period,

 

itbeing understood and intended that no one or more Holders shall have any rightin any manner whatever by virtue of, or by availing of, any provision of thisIndenture or the

 

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Guaranteesto affect, disturb or prejudice the rights of any other Holders, or to obtainor to seek to obtain priority or preference over any other Holders or toenforce any right under this Indenture or the Guarantees, except in the mannerherein provided and for the equal and ratable benefit of all the Holders (itbeing further understood that the Trustee does not have an affirmative duty toascertain whether or not such actions or forbearances are unduly prejudicial tosuch Holders).

 

SECTION 508.  Unconditional Right ofHolders to Receive Principal, Premium and Interest.  Notwithstandingany other provision in this Indenture, the Holder of any Note shall have theright, which is absolute and unconditional, to receive payment, as providedherein (including, if applicable, Article Eleven) and in such Note of theprincipal of (and premium, if any) and (subject to Section 306) intereston such Note on the respective Stated Maturities expressed in such Note (or, inthe case of redemption, on the Redemption Date) and to institute suit for theenforcement of any such payment on or after such respective dates, and suchrights shall not be impaired without the consent of such Holder.

 

SECTION 509.  Restoration of Rights andRemedies.  If the Trustee or any Holder has instituted any proceedingto enforce any right or remedy under this Indenture or the Guarantees and suchproceeding has been discontinued or abandoned for any reason, or has beendetermined adversely to the Trustee or to such Holder, then and in every suchcase, subject to any determination in such proceeding, the Company, anyGuarantor, any other obligor of the Notes, the Trustee and the Holders shall berestored severally and respectively to their former positions hereunder andthereafter all rights and remedies of the Trustee and the Holders shallcontinue as though no such proceeding had been instituted.

 

SECTION 510.  Rights and RemediesCumulative.  Except as otherwise provided with respect to thereplacement or payment of mutilated, destroyed, lost or stolen Notes in thelast paragraph of Section 305, no right or remedy herein conferred upon orreserved to the Trustee or to the Holders is intended to be exclusive of anyother right or remedy, and every right and remedy shall, to the extentpermitted by law, be cumulative and in addition to every other right and remedygiven hereunder or now or hereafter existing at law or in equity orotherwise.  The assertion or employment of any right or remedy hereunder,or otherwise, shall not prevent the concurrent assertion or employment of anyother appropriate right or remedy.

 

SECTION 511.  Delay or Omission NotWaiver.  No delay or omission of the Trustee or of any Holder of anyNote to exercise any right or remedy accruing upon any Event of Default shallimpair any such right or remedy or constitute a waiver of any such Event ofDefault or an acquiescence therein.  Every right and remedy given by thisArticle or by law to the Trustee or to the Holders may be exercised fromtime to time, and as often as may be deemed expedient, by the Trustee or by theHolders, as the case may be.

 

SECTION 512.  Control by Holders. The Holders of not less than a majority in principal amount of the OutstandingNotes shall have the right to direct the

 

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time,method and place of conducting any proceeding for any remedy available to theTrustee, or exercising any trust or power conferred on the Trustee, *provided* that:

 

(1)                                  such directionshall not be in conflict with any rule of law or with this Indenture,

 

(2)                                  subject toSection 315 of the Trust Indenture Act, the Trustee may take any otheraction deemed proper by the Trustee which is not inconsistent with suchdirection, and

 

(3)                                  the Trusteeneed not take any action which might involve it in personal liability or beunduly prejudicial to the Holders not consenting.

 

SECTION 513.  Waiver of Defaults. Subject to Sections 508 and 902, the Holders of not less than a majority inprincipal amount of the Outstanding Notes may on behalf of the Holders of allsuch Notes waive any Default hereunder and its consequences, except acontinuing Default or Event of Default (1) in respect of the payment ofinterest on, premium, if any, or the principal of any such Note held by anon-consenting Holder or (2) in respect of a covenant or provision hereofwhich under Article Nine cannot be modified or amended without the consentof the Holder of each Outstanding Note affected.

 

Uponany such waiver, such Default shall cease to exist, and any Event of Defaultarising therefrom shall be deemed to have been cured, for every purpose of thisIndenture, but no such waiver shall extend to any subsequent or other Defaultor impair any right consequent thereon.

 

SECTION 514.  Waiver of Stay orExtension Laws.  Each of the Company, the Guarantors and any otherobligor on the Notes covenants (to the extent that it may lawfully do so) thatit shall not at any time insist upon, or plead, or in any manner whatsoeverclaim or take the benefit or advantage of, any stay or extension law wherever enacted,now or at any time hereafter in force that would prohibit or forgive theCompany or a Guarantor from paying any portion of the principal of, andpremium, if any, and interest on the Notes.

 

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** **

**ARTICLE SIX**

 

**THE TRUSTEE**

 

SECTION 601.  Duties of the Trustee. (a)  Except during the continuance of an Event of Default,

 

(1)           the Trusteeundertakes to perform such duties and only such duties as are specifically setforth in this Indenture, and no implied covenants or obligations shall be readinto this Indenture against the Trustee; and

 

(2)           in the absenceof bad faith or willful misconduct on its part, the Trustee may conclusivelyrely, as to the truth of the statements and the correctness of the opinionsexpressed therein, upon certificates or opinions furnished to the Trustee andconforming to the requirements of this Indenture; but in the case of any suchcertificates or opinions specifically required by any provision hereof to beprovided to it, the Trustee shall be under a duty to examine the same todetermine whether or not they conform to the requirements of this Indenture,but not to verify the contents thereof.

 

(b)           If an Event ofDefault has occurred and is continuing of which a Responsible Officer of theTrustee has actual knowledge or of which written notice of such Event ofDefault shall have been given to the Trustee by the Company, any other obligorof the Notes or by any Holder, the Trustee shall exercise such of the rightsand powers vested in it by this Indenture, and use the same degree of care andskill in their exercise, as a prudent Person would exercise or use under thecircumstances in the conduct of such Person’s own affairs.

 

(c)           No provision ofthis Indenture shall be construed to relieve the Trustee from liability for itsown negligent action, its own negligent failure to act, or its own willfulmisconduct, except that

 

(1)           this paragraph(c) shall not be construed to limit the effect of paragraph (a) ofthis Section;

 

(2)           the Trusteeshall not be liable for any error of judgment made in good faith by aResponsible Officer, unless it shall be proved that the Trustee was negligentin ascertaining the pertinent facts;

 

(3)           the Trusteeshall not be liable with respect to any action taken or omitted to be taken byit in good faith in accordance with the direction of the Holders of a majorityin aggregate principal amount of the Outstanding Notes relating to the time,method and place of conducting any proceeding for any remedy available to theTrustee, or exercising any trust or power conferred upon the Trustee, underthis Indenture; and

 

(4)           no provision ofthis Indenture shall require the Trustee to expend or risk its own funds orotherwise incur any financial liability in the performance

 

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of any of its duties hereunder, or in the exerciseof any of its rights or powers, if it shall have reasonable grounds forbelieving that repayment of such funds or adequate indemnity against such riskor liability is not reasonably assured to it.

 

(d)           Whether or nottherein expressly so provided, every provision of this Indenture relating tothe conduct or affecting the liability of or affording protection to theTrustee shall be subject to the provisions of this Section.

 

SECTION 602.  Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known tothe Trustee, the Trustee shall transmit, in the manner and to the extentprovided in TIA Section 313(c), notice of such Default or Event of Defaultwithin 90 days after it occurs unless such Default or Event of Default shallhave been cured or waived.  Except in the case of a Default or Event ofDefault in the payment of the principal of (or premium, if any, on) or intereston any Note, the Trustee shall be protected in withholding such notice if itdetermines that the withholding of such notice is in the interest of theHolders.  In addition, the Trustee shall have no obligation to acceleratethe Notes if in the best judgment of the Trustee acceleration is not in thebest interest of the Holders of such Notes.

 

SECTION 603.  Certain Rights ofTrustee.  Subject to the provisions of TIASections 315(a) through 315(d):

 

(1)           the Trustee mayconclusively rely and shall be fully protected in acting or refraining fromacting upon any resolution, certificate, statement, instrument, opinion,report, notice, request, direction, consent, order, bond, debenture, note,other evidence of indebtedness or other paper or document (whether in originalor facsimile form) believed by it to be genuine and to have been signed orpresented by the proper party or parties;

 

(2)           any request ordirection of the Company mentioned herein shall be sufficiently evidenced by aCompany Request or Company Order and any resolution of the Board of Directorsmay be sufficiently evidenced by a Board Resolution;

 

(3)           whenever in theadministration of this Indenture the Trustee shall deem it desirable that amatter be proved or established prior to taking, suffering or omitting anyaction hereunder, the Trustee (unless other evidence be herein specificallyprescribed) may, in the absence of bad faith on its part, rely upon an Officers’Certificate and an Opinion of Counsel;

 

(4)           the Trustee mayconsult with counsel of its own selection and the advice of such counsel or anyOpinion of Counsel shall be full and complete authorization and protection inrespect of any action taken, suffered or omitted by it hereunder in good faithand in accordance with the advice or opinion of such counsel;

 

(5)           the Trusteeshall be under no obligation to exercise any of the rights or powers vested init by this Indenture at the request or direction of any of

 

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the Holders pursuant to this Indenture, unless suchHolders shall have offered to the Trustee reasonable security or indemnitysatisfactory to it against the costs, expenses, losses and liabilities whichmight be incurred by it in compliance with such request or direction;

 

(6)           the Trusteeshall not be bound to make any investigation into the facts or matters statedin any resolution, certificate, statement, instrument, opinion, report, notice,request, direction, consent, order, bond, debenture, note, other evidence ofindebtedness or other paper or document, but the Trustee, in its discretion,may make such further inquiry or investigation into such facts or matters as itmay see fit, and, if the Trustee shall determine to make such further inquiryor investigation, it shall be entitled to examine the books, records andpremises of the Company, personally or by agent or attorney at the expense ofthe Company and shall incur no liability of any kind by reason of such inquiryor investigation;

 

(7)           the Trustee mayexecute any of the trusts or powers hereunder or perform any duties hereundereither directly or by or through agents or attorneys and the Trustee shall notbe responsible for any misconduct or negligence on the part of any agent orattorney appointed with due care by it hereunder;

 

(8)           the Trusteeshall not be liable for any action taken, suffered or omitted by it in goodfaith and believed by it to be authorized or within the discretion or rights orpowers conferred upon it by this Indenture; *provided,however*, that the Trustee’s conduct does not constitute wilfulmisconduct or negligence.

 

(9)           the rights,privileges, protections, immunities and benefits given to the Trustee,including its right to be indemnified, are extended to, and shall beenforceable by, the Trustee in each of its capacities hereunder, and eachagent, custodian and other Person employed to act hereunder; and

 

(10)         in no eventshall the Trustee be responsible or liable for special, indirect, orconsequential loss or damage of any kind whatsoever (including, but not limitedto, loss of profit) irrespective of whether the Trustee has been advised of thelikelihood of such loss or damage and regardless of the form of action.

 

SECTION 604.  Trustee Not Responsiblefor Recitals or Issuance of Notes.  The recitals contained herein andin the Notes, except for the Trustee’s certificates of authentication, shall betaken as the statements of the Company, and the Trustee assumes noresponsibility for their correctness.  The Trustee makes norepresentations as to the validity or sufficiency of this Indenture or of theNotes, except that the Trustee represents that it is duly authorized to executeand deliver this Indenture, authenticate the Notes and perform its obligationshereunder and that the statements made by it in a Statement of Eligibility onForm T-1 supplied to the Company are true and accurate, subject to thequalifications set forth therein.  The Trustee shall not be accountablefor the use or application by the Company of Notes or the proceeds thereof.

 

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SECTION 605.  May Hold Notes. The Trustee, any Paying Agent, any Note Registrar or any other agent of theCompany or of the Trustee, in its individual or any other capacity, may becomethe owner or pledgee of Notes and, subject to TIA Sections 310(b) and311, may otherwise deal with the Company with the same rights it would have ifit were not the Trustee, Paying Agent, Note Registrar or such other agent; *provided, however*, that, if it acquiresany conflicting interest, it must eliminate such conflict within 90 days, applyto the SEC for permission to continue or resign.

 

SECTION 606.  Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from otherfunds except to the extent required by law.  The Trustee shall be under noliability for interest on any money received by it hereunder except asotherwise agreed in writing with the Company.

 

SECTION 607.  Compensation andReimbursement.  The Company and the Guarantors, jointly and severally,agree:

 

(1)           to pay to theTrustee from time to time such compensation as shall be agreed in writingbetween the Company and the Trustee for all services rendered by it hereunder(which compensation shall not be limited by any provision of law in regard tothe compensation of a trustee of an express trust);

 

(2)           except asotherwise expressly provided herein, to reimburse the Trustee upon its requestfor all reasonable expenses, disbursements and advances incurred or made by theTrustee in accordance with any provision of this Indenture (including thereasonable compensation and the expenses and disbursements of its agents andcounsel), except any such expense, disbursement or advance as shall bedetermined to have been caused by its own negligence or willful misconduct; and

 

(3)           to indemnifythe Trustee and any predecessor Trustee for, and to hold it harmless against,any and all loss, liability, claim, damage or expense, including taxes (otherthan the taxes based on the income of the Trustee) incurred without negligenceor willful misconduct on its part, arising out of or in connection with theacceptance or administration of this trust, including the costs and expenses ofdefending itself against any claim regardless of whether the claim is assertedby the Company, a Guarantor, a Holder or any other Person or liability inconnection with the exercise or performance of any of its powers or dutieshereunder.

 

Theobligations of the Company under this Section to compensate the Trustee,to pay or reimburse the Trustee for expenses, disbursements and advances and toindemnify and hold harmless the Trustee shall constitute additionalindebtedness hereunder and shall survive the satisfaction and discharge of thisIndenture and resignation or removal of the Trustee.  As security for theperformance of such obligations of the Company, the Trustee shall have a claimprior to the Notes upon all property and funds held or collected by the Trusteeas such, except funds held in trust for the payment of principal of (andpremium, if any) or interest on particular Notes.

 

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Whenthe Trustee incurs expenses or renders services in connection with an Event ofDefault specified in Section 501(8), the expenses (including thereasonable charges and expenses of its counsel) of and the compensation forsuch services are intended to constitute expenses of administration under anyapplicable Bankruptcy Law.

 

Theprovisions of this Section shall survive the termination of this Indentureand resignation or removal of the Trustee.

 

SECTION 608.  Corporate TrusteeRequired; Eligibility.  There shall be at all times a Trusteehereunder which shall be eligible to act as Trustee under TIASection 310(a)(1) and shall have a combined capital and surplus of atleast $50,000,000.  If such corporation publishes reports of condition atleast annually, pursuant to law or to the requirements of Federal, State,territorial or District of Columbia supervising or examining authority, thenfor the purposes of this Section, the combined capital and surplus of suchcorporation shall be deemed to be its combined capital and surplus as set forthin its most recent report of condition so published.  If at any time theTrustee shall cease to be eligible in accordance with the provisions of thisSection, it shall resign immediately in the manner and with the effecthereinafter specified in this Article.

 

SECTION 609.  Resignation and Removal;Appointment of Successor.  (a)  No resignation or removal ofthe Trustee and no appointment of a successor Trustee pursuant to thisArticle shall become effective until the acceptance of appointment by thesuccessor Trustee in accordance with the applicable requirements ofSection 610.

 

(b)           The Trustee mayresign at any time by giving written notice thereof to the Company.  Uponreceiving such notice of resignation, the Company shall promptly appoint asuccessor trustee by written instrument executed by authority of the Board ofDirectors, a copy of which shall be delivered to the resigning Trustee and acopy to the successor Trustee.  If the instrument of acceptance by asuccessor Trustee required by Section 610 shall not have been delivered tothe Trustee within 30 days after the giving of such notice of resignation, theresigning Trustee may petition, at the expense of the Company, any court ofcompetent jurisdiction for the appointment of a successor Trustee.

 

(c)           The Trustee maybe removed at any time by Act of the Holders of not less than a majority inprincipal amount of the Outstanding Notes, delivered to the Trustee and to theCompany.  If the instrument of acceptance by a successor Trustee requiredby Section 610 shall not have been delivered to the Trustee within 30 daysafter the giving of such notice of resignation, the resigning Trustee maypetition, at the expense of the Company, any court of competent jurisdictionfor the appointment of a successor Trustee.

 

(d)           The Trusteeshall comply with TIA Section 310(b); *provided,however*, that there shall be excluded from the operation of TIASection 310(b)(1) any indenture or indentures under which othersecurities or certificates of interest or participation in other securities ofthe Company are outstanding if the requirements for such exclusion set forth inTIA Section 310(b)(1) are met.

 

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(e)           If the Trusteeshall resign, be removed or become incapable of acting, or if a vacancy shalloccur in the office of Trustee for any cause, the Company, by a Board Resolution,shall promptly appoint a successor Trustee.  If, within one year aftersuch resignation, removal or incapability, or the occurrence of such vacancy, asuccessor Trustee shall be appointed by Act of the Holders of a majority inprincipal amount of the Outstanding Notes delivered to the Company and theretiring Trustee, the successor Trustee so appointed shall, forthwith upon itsacceptance of such appointment, become the successor Trustee and supersede thesuccessor Trustee appointed by the Company.  If no successor Trustee shallhave been so appointed by the Company or the Holders and accepted appointmentin the manner hereinafter provided, any Holder who has been a bona fide Holderof a Note for at least six months may, on behalf of himself and all otherssimilarly situated, petition any court of competent jurisdiction for theappointment of a successor Trustee.

 

(f)            The Companyshall give notice of each resignation and each removal of the Trustee and eachappointment of a successor Trustee to the Holders in the manner provided for inSection 107.  Each notice shall include the name of the successorTrustee and the address of its Corporate Trust Office.

 

SECTION 610.  Acceptance of Appointmentby Successor.  (a)  Every successor Trustee appointed hereundershall execute, acknowledge and deliver to the Company and to the retiringTrustee an instrument accepting such appointment, and thereupon the resignationor removal of the retiring Trustee shall become effective and such successorTrustee, without any further act, deed or conveyance, shall become vested withall the rights, powers, trusts and duties of the retiring Trustee; but, onrequest of the Company or the successor Trustee, such retiring Trustee shall,upon payment of its charges, execute and deliver an instrument transferring tosuch successor Trustee all the rights, powers and trusts of the retiringTrustee and shall duly assign, transfer and deliver to such successor Trusteeall property and money held by such retiring Trustee hereunder.  Uponrequest of any such successor Trustee, the Company shall execute any and allinstruments for more fully and certainly vesting in and confirming to suchsuccessor Trustee all such rights, powers and trusts.

 

(b)           No successorTrustee shall accept its appointment unless at the time of such acceptance suchsuccessor Trustee shall be qualified and eligible under this Article.

 

SECTION 611.  Merger, Conversion,Consolidation or Succession to Business.  Any corporation into whichthe Trustee may be merged or converted or with which it may be consolidated, orany corporation resulting from any merger, conversion or consolidation to whichthe Trustee shall be a party, or any corporation succeeding to all orsubstantially all of the corporate trust business of the Trustee, shall be thesuccessor of the Trustee hereunder; *provided*that such corporation shall be otherwise qualified and eligible under thisArticle, without the execution or filing of any paper or any further act on thepart of any of the parties hereto.  In case any Notes shall have beenauthenticated, but not delivered, by the Trustee then in office, any successorby merger, conversion or consolidation to such authenticating Trustee may adoptsuch authentication and deliver

 

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theNotes so authenticated with the same effect as if such successor Trustee haditself authenticated such Notes.  In case at that time any of the Notesshall not have been authenticated, any successor Trustee may authenticate such Noteseither in the name of any predecessor hereunder or in the name of the successorTrustee.  In all such cases such certificates shall have the full forceand effect which this Indenture provides for the certificate of authenticationof the Trustee shall have; *provided, however*,that the right to adopt the certificate of authentication of any predecessorTrustee or to authenticate Notes in the name of any predecessor Trustee shallapply only to its successor or successors by merger, conversion or consolidation.

 

SECTION 612.  Appointment ofAuthenticating Agent.  At any time when any of the Notes remainOutstanding, the Trustee may appoint an Authenticating Agent or Agents withrespect to the Notes which shall be authorized to act on behalf of the Trusteeto authenticate Notes and the Trustee shall give written notice of suchappointment to all Holders of Notes with respect to which such AuthenticatingAgent shall serve, in the manner provided for in Section 107.  Notesso authenticated shall be entitled to the benefits of this Indenture and shallbe valid and obligatory for all purposes as if authenticated by the Trusteehereunder.  Any such appointment shall be evidenced by an instrument inwriting signed by a Responsible Officer of the Trustee, and a copy of suchinstrument shall be promptly furnished to the Company.  Wherever referenceis made in this Indenture to the authentication and delivery of Notes by theTrustee or the Trustee’s certificate of authentication, such reference shall bedeemed to include authentication and delivery on behalf of the Trustee by anAuthenticating Agent and a certificate of authentication executed on behalf ofthe Trustee by an Authenticating Agent.  Each Authenticating Agent shallbe acceptable to the Company and shall at all times be a corporation organizedand doing business under the laws of the United States of America, any statethereof or the District of Columbia, authorized under such laws to act asAuthenticating Agent, having a combined capital and surplus of not less than$50,000,000 and subject to supervision or examination by Federal or stateauthority.  If such corporation publishes reports of condition at leastannually, pursuant to law or to the requirements of said supervising orexamining authority, then for the purposes of this Section, the combinedcapital and surplus of such corporation shall be deemed to be its combinedcapital and surplus as set forth in its most recent report of condition sopublished.  If at any time an Authenticating Agent shall cease to beeligible in accordance with the provisions of this Section, it shall resignimmediately in the manner and with the effect specified in this Section.

 

Anycorporation into which an Authenticating Agent may be merged or converted orwith which it may be consolidated, or any corporation resulting from anymerger, conversion or consolidation to which such Authenticating Agent shall bea party, or any corporation succeeding to all or substantially all thecorporate agency or corporate trust business of an Authenticating Agent, shallcontinue to be an Authenticating Agent; *provided*that such corporation shall be otherwise eligible under this Section, withoutthe execution or filing of any paper or any further act on the part of theTrustee or the Authenticating Agent.

 

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AnAuthenticating Agent may resign at any time by giving written notice thereof tothe Trustee and to the Company.  The Trustee may at any time terminate theagency of an Authenticating Agent by giving written notice thereof to suchAuthenticating Agent and to the Company.  Upon receiving such a notice ofresignation or upon such a termination, or in case at any time suchAuthenticating Agent shall cease to be eligible in accordance with the provisionsof this Section, the Trustee may appoint a successor Authenticating Agent whichshall be acceptable to the Company and shall give written notice of suchappointment to all Holders of Notes, in the manner provided for inSection 107.  Any successor Authenticating Agent upon acceptance ofits appointment hereunder shall become vested with all the rights, powers andduties of its predecessor hereunder, with like effect as if originally named asan Authenticating Agent.  No successor Authenticating Agent shall beappointed unless eligible under the provisions of this Section.

 

TheCompany agrees to pay to each Authenticating Agent from time to time suchcompensation for its services under this Section as shall be agreed inwriting between the Company and such Authenticating Agent.

 

Ifan appointment is made pursuant to this Section, the Notes may have endorsedthereon, in addition to the Trustee’s certificate of authentication, analternate certificate of authentication in the following form:

 

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Thisis one of the Notes designated therein referred to in the within-mentionedIndenture.

 
|   | WELLS  FARGO BANK, NATIONAL  ASSOCIATION |
|--------|------------------------------------------|
|   | as Trustee                               |
|   |                                     |
|   | By:                                      |   |
|   |                                     | as Authenticating Agent |
|   |                                     |   |
|   | By:                                      |   |
|   |                                     | as Authorized Officer |

 

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**ARTICLE SEVEN**

 

**HOLDERSLISTS AND REPORTS BY TRUSTEE AND COMPANY**

 

SECTION 701.  Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicablethe most recent list available to it of the names and addresses of all Holdersand shall otherwise comply with Trust Indenture Act Section 312(a). If the Trustee is not the Note Registrar, the Company shall furnish to theTrustee at least two Business Days before each Interest Payment Date and atsuch other times as the Trustee may request in writing, a list in such form andas of such date as the Trustee may reasonably require of the names andaddresses of the Holders of Notes and the Company shall otherwise comply withTrust Indenture Act Section 312(a).

 

SECTION 702.  Disclosure of Names andAddresses of Holders.  Every Holder, by receiving and holding Notes,agrees with the Company and the Trustee that none of the Company or the Trusteeor any agent of either of them shall be held accountable by reason of thedisclosure of any such information as to the names and addresses of the Holdersin accordance with TIA Section 312, regardless of the source from whichsuch information was derived, and that the Trustee shall not be heldaccountable by reason of mailing any material pursuant to a request made underTIA Section 312(b).

 

SECTION 703.  Reports by Trustee. Within 60 days after May 15 of each year commencing with the firstMay 15 after the Issue Date, and for so long as Notes remain outstanding,the Trustee shall mail to the Holders (with a copy to the Company at theaddress specified in Section 106), in the manner and to the extentprovided in TIA Section 313(c), a brief report dated as of suchMay 15 that complies with TIA Section 313(a).  The Trustee alsoshall comply with TIA Section 313(b).  The Trustee shall alsotransmit by mail all reports as required by the TIA Section 313(c).

 

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** **

**ARTICLE EIGHT**

 

**MERGER,CONSOLIDATION OR SALEOF ALL OR SUBSTANTIALLY ALL ASSETS**

 

SECTION 801.  CompanyMay Consolidate, Etc., Only on Certain Terms.  (a)  TheCompany may not consolidate or merge with or into or wind up into (whether ornot the Company is the surviving entity), or sell, assign, transfer, lease,convey or otherwise dispose of all or substantially all of its properties orassets, in one or more related transactions, to any Person unless:

 

(1)           the Company isthe surviving corporation or the Person formed by or surviving any suchconsolidation or merger (if other than the Company) 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 (the Company or such Person, as the case may be, being herein calledthe “*Successor Company*”);

 

(2)           the SuccessorCompany, if other than the Company, expressly assumes all the obligations ofthe Company under this Indenture and the Notes pursuant to supplementalindentures or other documents or instruments in form reasonably satisfactory tothe Trustee;

 

(3)           immediatelyafter such transaction, no Default exists;

 

(4)           immediatelyafter giving *pro forma* effect tosuch transaction, as if such transaction had occurred at the beginning of theapplicable four-quarter period,

 

(A)  the SuccessorCompany would be permitted to incur at least $1.00 of additional Indebtednesspursuant to the Fixed Charge Coverage Ratio test set forth inSection 1011(a) of this Indenture or

 

(B)  the Fixed ChargeCoverage Ratio for the Successor Company and the Restricted Subsidiaries on aconsolidated basis would be greater than such ratio for the Company and theRestricted Subsidiaries immediately prior to such transaction;

 

(5)           each Guarantor,unless it is the other party to the transactions described above, in which caseSection 802(A)(2) or Section 803(2), as applicable, shall apply,shall have by supplemental indenture confirmed that its Guarantee shall applyto such Person’s obligations under this Indenture and the Notes; and

 

(6)           the Companyshall have delivered to the Trustee an Officers’ Certificate and an Opinion ofCounsel, each stating that such consolidation,

 

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merger or transfer and such supplemental indentures,if any, comply with this Indenture.

 

(b)           Notwithstandingclauses (a)(3) and (a)(4) above,

 

(1)           any RestrictedSubsidiary may consolidate with, merge into or transfer all or part of itsproperties and assets to the Company and

 

(2)           the Company maymerge with an Affiliate of the Company incorporated solely for the purpose ofreincorporating the Company in another State of the United States so long asthe amount of Indebtedness of the Company and the Restricted Subsidiaries isnot increased thereby.

 

SECTION 802.  Subsidiary GuarantorsMay Consolidate, Etc., Only on Certain Terms.  Subject toSection 1208, each Subsidiary Guarantor shall not, and the Company shallnot permit any Subsidiary Guarantor to, consolidate or merge with or into orwind up into (whether or not such Subsidiary Guarantor is the survivingcorporation), or sell, assign, transfer, lease, convey or otherwise dispose ofall or substantially all of its properties or assets in one or more relatedtransactions to, any Person unless

 

(A)          (1) 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*”);

 

(2)           the SuccessorPerson, if other than such Subsidiary Guarantor, expressly assumes all theobligations of such Subsidiary Guarantor under this Indenture and suchSubsidiary Guarantor’s Subsidiary Guarantee, pursuant to supplementalindentures or other documents or instruments in form reasonably satisfactory tothe Trustee;

 

(3)           immediatelyafter such transaction, no Default exists; and

 

(4)           the Companyshall have delivered to the Trustee an Officers’ Certificate and an Opinion ofCounsel, each stating that such consolidation, merger or transfer and suchsupplemental indentures, if any, comply with this Indenture; or

 

(B)          the transaction is made incompliance with Section 1018 of this Indenture.

 

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Notwithstandingthe foregoing, any Subsidiary Guarantor may merge into or transfer all or partof its properties and assets to another Subsidiary Guarantor or the Company.

 

SECTION 803.  HoldingsMay Consolidate, Etc., Only on Certain Terms.  Holdingsshall not consolidate or merge with or into or wind up into (whether or notHoldings is the surviving corporation), or sell, assign, transfer, lease,convey or otherwise dispose of all or substantially all of its properties orassets in one or more related transactions to, any Person unless:

 

(1)           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*”);

 

(2)           the SuccessorHoldings Guarantor, if other than Holdings, expressly assumes all theobligations of Holdings under this Indenture and the Guarantee of Holdings,pursuant to supplemental indentures or other documents or instruments in formreasonably satisfactory to the Trustee;

 

(3)           immediatelyafter such transaction, no Event of Default or payment Default exists; and

 

(4)           the Companyshall have delivered to the Trustee an Officers’ Certificate and an Opinion ofCounsel, each stating that such consolidation, merger or transfer and suchsupplemental indentures, if any, comply with this Indenture.

 

Notwithstandingthe foregoing, Holdings may merge into or transfer all or part of its propertiesand assets to a Subsidiary Guarantor or the Company, and Holdings may mergewith an Affiliate of the Company incorporated solely for the purpose ofreincorporating Holdings in another state of the United States of America solong as the amount of Indebtedness of Holdings, the Company and the RestrictedSubsidiaries is not increased thereby.

 

SECTION 804.  Successor Substituted. Subject to Section 1208 hereof (with respect to any Subsidiary Guarantoronly), upon any consolidation or merger, or any sale, assignment, conveyance,transfer, lease or disposition of all or substantially all of the assets of theCompany, Holdings or any Subsidiary Guarantor in accordance withSections 801, 802 and 803 hereof, the successor Person formed by suchconsolidation or into which the Company, Holdings or such Subsidiary Guarantor,as the case may be, is merged or the successor Person to which such sale,assignment, conveyance, transfer, lease or disposition is made, shall succeedto, and be substituted for, and may exercise every right and power of, theCompany, Holdings or such Subsidiary Guarantor, as the

 

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casemay be, under this Indenture or the Guarantees, as the case may be, with thesame effect as if such successor Person had been named as the Company, Holdingsor such Subsidiary Guarantor, as the case may be, herein or the Guarantees, asthe case may be; *provided* thatthe predecessor Company, Holdings or any Subsidiary Guarantor shall not berelieved from the obligation to pay the principal of and interest andAdditional Interest, if any, on the Notes except in the case of a sale,assignment, transfer, conveyance or other disposition of all of the assets ofthe Company, Holdings or such Subsidiary Guarantor, as the case may be, thatmeets the requirements of Sections 801, 802 and 803 hereof, as applicable.

 

SECTION 805.  The Merger Permitted. Notwithstanding the foregoing, the Merger shall be permitted without compliancewith this Article Eight.

 

SECTION 806.  Assets of SubsidiaryApply to Company and Holdings.  For purposes of thisArticle Eight, the sale, lease, conveyance, assignment, transfer or otherdisposition of all or substantially all of the properties and assets of one ormore Subsidiaries of the Company or Holdings, as applicable, which propertiesand assets, if held by the Company or Holdings, as applicable, instead of suchSubsidiaries, would constitute all or substantially all of the properties andassets of the Company and its Subsidiaries on a consolidated basis or Holdingsand its Subsidiaries on a consolidated basis, as applicable, shall be deemed tobe the transfer of all or substantially all of the properties and assets of theCompany or Holdings, as applicable.

 

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**ARTICLE NINE**

 

**AMENDMENT,SUPPLEMENT AND WAIVER**

 

SECTION 901.  Amendments or SupplementsWithout Consent of Holders.  Notwithstanding Section 902 hereof,without the consent of any Holder, the Company, any Guarantor (with respect toa Guarantee or this Indenture to which it is a party), and the Trustee, at anytime and from time to time, may amend or supplement this Indenture, anyGuarantee or the Notes, in form satisfactory to the Trustee, for any of thefollowing purposes:

 

(1)           to cure anyambiguity, omission, mistake, defect or inconsistency;

 

(2)           to provide foruncertificated Notes in addition to or in place of certificated Notes;

 

(3)           to comply withArticle Eight hereof and to provide for the assumption of the Company’s orsuch Guarantor’s obligations to Holders in connection therewith;

 

(4)           to make anychange that would provide any additional rights or benefits to the Holders orthat does not adversely affect the legal rights of any such Holder under thisIndenture;

 

(5)           to add covenantsfor the benefit of the Holders or to surrender any right or power conferred inthis Indenture upon the Company, Holdings or any Subsidiary Guarantor;

 

(6)           to comply withrequirements of the SEC in order to effect or maintain the qualification ofthis Indenture under the Trust Indenture Act;

 

(7)           to evidence andprovide for the acceptance and appointment under this Indenture of a successorTrustee pursuant to the requirements of Sections 609 and 610 hereof;

 

(8)           to provide forthe issuance of Exchange Notes or private exchange notes, which are identicalto Exchange Notes except that they are not freely transferable;

 

(9)           to add aSubsidiary Guarantor or any other guarantor under this Indenture;

 

(10)         to conform thetext of this Indenture, Guarantees or the Notes to any provision of the “Descriptionof the Notes” section of the Offering Circular to the extent that suchprovision in the “Description of the Notes” was intended to be a verbatimrecitation of a provision of this Indenture, the Guarantees or the Notes; or

 

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(11)         to make anyamendment to the provisions of this Indenture relating to the transfer andlegending of Notes; *provided, however*,that (A) compliance with this Indenture as so amended would not result inNotes being transferred in violation of the Securities Act or any applicablesecurities law and (B) such amendment does not materially and adverselyaffect the rights of Holders to transfer Notes.

 

Uponthe request of the Company accompanied by a Board Resolution authorizing theexecution of any such amended or supplemental indenture, and upon receipt bythe Trustee of the documents described in Section 603 hereof, the Trusteeshall join with the Company and the Guarantors in the execution of any amendedor supplemental indenture authorized or permitted by the terms of thisIndenture and to make any further appropriate agreements and stipulations thatmay be therein contained, but the Trustee shall not be obligated to enter intosuch amended or supplemental indenture that affects its own rights, duties orimmunities under this Indenture or otherwise.  Notwithstanding theforegoing, no Opinion of Counsel shall be required in connection with theaddition of a Guarantor under this Indenture upon execution and delivery bysuch Guarantor and the Trustee of a supplemental indenture to this Indenture,the form of which is attached as Exhibit B hereto, and delivery ofan Officer’s Certificate.

 

SECTION 902.  Amendments or SupplementsWith Consent of Holders.  With the written consent of the Holders ofnot less than a majority in principal amount of the Outstanding Notes,delivered to the Company and the Trustee, the Company, any Guarantor (withrespect to any Guarantee or this Indenture to which it is a party) and theTrustee may (a) amend or supplement this Indenture, any Guarantee or theNotes (including consents obtained in connection with a purchase of, or tenderoffer or Exchange Offer for, the Notes) and (b) waive any existing Defaultor Event of Default or compliance with any provision of this Indenture or theNotes (including consents obtained in connection with a purchase of, or tenderoffer or Exchange Offer, for Notes).  Notwithstanding the foregoingsentence, no such amendment, supplement or waiver shall, without the consent ofeach Holder of the Outstanding Notes affected thereby:

 

(1)           reduce theprincipal amount of Notes whose Holders must consent to an amendment,supplement or waiver,

 

(2)           reduce theprincipal of or change the Maturity of any such Note or alter or waive theprovisions with respect to the redemption of the Notes (other than Sections1017 and 1018),

 

(3)           reduce the rateof or change the time for payment of interest on any Note,

 

(4)           waive a Defaultor Event of Default in the payment of principal of or premium, if any, orinterest on the Notes issued under this Indenture, except a rescission ofacceleration of the Notes by the Holders of at least a majority in aggregateprincipal amount of the Outstanding Notes and a waiver of the payment defaultthat resulted from such acceleration, or in respect of a covenant or

 

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provision contained in this Indenture or anyGuarantee that cannot be amended or modified without the consent of all Holders,

 

(5)           make any Notepayable in money other than that stated in the Notes,

 

(6)           make any changein the provisions of Section 508 or Section 513 of this Indenture,

 

(7)           make any changein Article Fourteen hereof or Section 1203 of this Indenture or inthe ranking of this Indenture and the Notes that would adversely affect theHolders,

 

(8)           except asotherwise expressly permitted by this Indenture, modify the Guarantee of anySignificant Subsidiary (or any group of Subsidiaries that together would constitutea Significant Subsidiary) in any manner adverse to the Holders,

 

(9)           make any changein these amendment and waiver provisions, or

 

(10)         impair theright of any Holder to receive payment of principal of, or interest on suchHolder’s Notes on or after the due dates therefor or to institute suit for theenforcement of any payment on or with respect to such Holder’s Notes.

 

Theconsent of the Holders is not necessary under this Indenture to approve theparticular form of any proposed amendment. It is sufficient if such consentapproves the substance of the proposed amendment.

 

SECTION 903.  Execution of Amendments,Supplements or Waivers.  The Trustee shall sign any amendment,supplement or waiver authorized pursuant to this Article Nine if theamendment or supplement does not adversely affect the rights, duties,liabilities or immunities of the Trustee.  The Company may not sign anamendment, supplement or waiver until the Board of Directors approves it. In executing any amendment, supplement or waiver, the Trustee shall be entitledto receive and (subject to Section 601 hereof) shall be fully protected inrelying upon, in addition to the documents required by Section 103 hereof,an Officers’ Certificate and an Opinion of Counsel stating that the executionof such amended or supplemental indenture is authorized or permitted by thisIndenture and that such amendment, supplement or waiver is the legal, valid andbinding obligation of the Company and any Guarantors party thereto, enforceableagainst them in accordance with its terms, subject to customary exceptions, andcomplies with the provisions hereof (including Section 905). Notwithstanding the foregoing, no Opinion of Counsel will be required for theTrustee to execute any amendment or supplement adding a new Guarantor underthis Indenture.

 

SECTION 904.  Effect of Amendments,Supplements or Waivers.  Upon the execution of any supplementalindenture under this Article, this Indenture shall be modified in accordancetherewith, and such amendment, supplement or waiver shall form

 

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apart of this Indenture for all purposes; and every Holder of Notes theretoforeor thereafter authenticated and delivered hereunder shall be bound thereby.

 

SECTION 905.  Compliance with TrustIndenture Act.  Every amendment or supplement to this Indenture or theNotes shall be set forth in an amended or supplemental indenture that complieswith the Trust Indenture Act as then in effect.

 

SECTION 906.  Reference in Notes toSupplemental Indentures.  Notes authenticated and delivered after theexecution of any supplemental indenture pursuant to this Article may, andshall if required by the Trustee, bear a notation in form approved by theTrustee as to any matter provided for in such supplemental indenture.  Ifthe Company shall so determine, new Notes so modified as to conform, in theopinion of the Trustee and the Company, to any such supplemental indenture maybe prepared and executed by the Company and authenticated and delivered by theTrustee in exchange for Outstanding Notes.

 

SECTION 907.  Notice of SupplementalIndentures.  Promptly after the execution by the Company, anyGuarantor and the Trustee of any supplemental indenture pursuant to theprovisions of Section 902, the Company shall give notice thereof to theHolders, in the manner provided for in Section 107, setting forth ingeneral terms the substance of such supplemental indenture.

 

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**ARTICLE TEN**

 

**COVENANTS**

 

SECTION 1001.  Payment of Principal,Premium, if any, and Interest.  The Company shall pay or cause to bepaid the principal of, premium, if any, Additional Interest, if any, andinterest on the Notes on the dates and in the manner provided in theNotes.  Principal, premium, if any, Additional Interest, if any, andinterest shall be considered paid on the date due if the Paying Agent, if otherthan the Company or a Subsidiary, holds as of noon Eastern Time on the due datemoney deposited by the Company in immediately available funds and designatedfor and sufficient to pay all principal, premium, if any, interest andAdditional Interest, if any, then due.

 

TheCompany shall pay interest on overdue principal at the rate equal to the thenapplicable interest rate on the Notes, and it shall pay interest on overdueinstallments of interest at the same rate, in any case to the extent lawful.

 

SECTION 1002.  Maintenance of Office orAgency.  The Company shall maintain, an office or agency where Notesmay be presented or surrendered for payment, where Notes may be surrendered forregistration of transfer or exchange and where notices and demands to or uponthe Company in respect of the Notes and this Indenture may be served.  TheCorporate Trust Office of the Trustee shall be such office or agency of theCompany, unless the Company shall designate and maintain some other office oragency for one or more of such purposes.  The Company shall give promptwritten notice to the Trustee of any change in the location of any such officeor agency.  If at any time the Company shall fail to maintain any suchrequired office or agency or shall fail to furnish the Trustee with the addressthereof, such presentations, surrenders, notices and demands may be made orserved at the Corporate Trust Office of the Trustee, and the Company herebyappoints the Trustee as its agent to receive all such presentations,surrenders, notices and demands.

 

TheCompany may also from time to time designate one or more other offices oragencies where the Notes may be presented or surrendered for any or all suchpurposes and may from time to time rescind any such designation.  TheCompany shall give prompt written notice to the Trustee of any such designationor rescission and any change in the location of any such other office oragency.

 

SECTION 1003.  Paying Agent to HoldMoney in Trust.  If the Company shall at any time act as its ownPaying Agent, it shall, on or before each due date of the principal of (orpremium, if any) or interest on any of the Notes, segregate and hold in trustfor the benefit of the Persons entitled thereto a sum sufficient to pay theprincipal of (or premium, if any) or interest so becoming due until such sumsshall be paid to such Persons or otherwise disposed of as herein provided andshall promptly notify the Trustee of its action or failure so to act.

 

Wheneverthe Company shall have one or more Paying Agents for the Notes, it shall, on orbefore each due date of the principal of (or premium, if any) or

 

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intereston any Notes, deposit with a Paying Agent a sum sufficient to pay the principal(and premium, if any) or interest so becoming due, such sum to be held in trustfor the benefit of the Persons entitled to such principal, premium or interest,and (unless such Paying Agent is the Trustee) the Company shall promptly notifythe Trustee of such action or any failure so to act.

 

TheCompany shall cause each Paying Agent (other than the Trustee) to execute anddeliver to the Trustee an instrument in which such Paying Agent shall agreewith the Trustee, subject to the provisions of this Section, that such PayingAgent shall:

 

(1)           hold all sumsheld by it for the payment of the principal of (and premium, if any) orinterest on Notes in trust for the benefit of the Persons entitled theretountil such sums shall be paid to such Persons or otherwise disposed of asherein provided;

 

(2)           give theTrustee notice of any Default by the Company (or any other obligor upon theNotes) in the making of any payment of principal (and premium, if any) orinterest; and

 

(3)           at any timeduring the continuance of any such Default, upon the written request of theTrustee, forthwith pay to the Trustee all sums so held in trust by such PayingAgent.

 

TheCompany may at any time, for the purpose of obtaining the satisfaction anddischarge of this Indenture or for any other purpose, pay, or by Company Orderdirect any Paying Agent to pay, to the Trustee all sums held in trust by theCompany or such Paying Agent, such sums to be held by the Trustee upon the sametrusts as those upon which such sums were held by the Company or such PayingAgent; and, upon such payment by any Paying Agent to the Trustee, such PayingAgent shall be released from all further liability with respect to such sums.

 

Subjectto applicable laws relating to abandoned property, any money deposited with theTrustee or any Paying Agent, or then held by the Company, in trust for thepayment of the principal of (or premium, if any) or interest on any Note andremaining unclaimed for two years after such principal, premium or interest hasbecome due and payable shall be paid to the Company on Company Request, or (ifthen held by the Company) shall be discharged from such trust; and the Holderof such Note shall thereafter, as an unsecured general creditor, look only tothe Company for payment thereof, and all liability of the Trustee or suchPaying Agent with respect to such trust money, and all liability of the Companyas Trustee thereof, shall thereupon cease.

 

SECTION 1004.  Corporate Existence. Subject to Article Eight, the Company shall do or cause to be done allthings necessary to preserve and keep in full force and effect the corporateexistence and that of each Restricted Subsidiary and the corporate rights(charter and statutory) and franchises of the Company and each RestrictedSubsidiary; *provided, however,*that the Company shall not be required to preserve any such right or franchiseif the Board of Directors of the Company shall

 

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determinethat the preservation thereof is no longer desirable in the conduct of thebusiness of the Company and its Subsidiaries as a whole.

 

SECTION 1005.  Payment of Taxes andOther Claims.  The Company shall pay or discharge or cause to be paidor discharged, before the same shall become delinquent, (1) all taxes,assessments and governmental charges levied or imposed upon the Company or anySubsidiary or upon the income, profits or property of the Company or anySubsidiary and (2) all lawful claims for labor, materials and supplies,which, if unpaid, might by law become a lien upon the property of the Companyor any Subsidiary; *provided, however*,that the Company shall not be required to pay or discharge or cause to be paidor discharged any such tax, assessment, charge or claim whose amount,applicability or validity is being contested in good faith by appropriateproceedings and for which appropriate reserves, if necessary (in the good faithjudgment of management of the Company) are being maintained in accordance withGAAP.

 

SECTION 1006.  Reserved.

 

SECTION 1007.  Reserved.

 

SECTION 1008.  Statement by Officers asto Default.  (a)  The Company shall deliver to the Trusteewithin 120 days after the end of each fiscal year, an Officers’ Certificatestating that a review of the activities of the Company and its RestrictedSubsidiaries during the preceding fiscal year has been made under thesupervision of the signing Officers with a view to determining whether it haskept, observed, performed and fulfilled, and has caused each of its RestrictedSubsidiaries to keep, observe, perform and fulfill its obligations under thisIndenture and further stating, as to each such Officer signing suchcertificate, that, to the best of his or her knowledge, the Company during suchpreceding fiscal year has kept, observed, performed and fulfilled, and hascaused each of its Restricted Subsidiaries to keep, observe, perform andfulfill each and every such covenant contained in this Indenture and no Defaultoccurred during such year and at the date of such certificate there is noDefault which has occurred and is continuing or, if such signers do know ofsuch Default that is continuing, the certificate shall describe its status andwhat action each is taking or proposes to take with respect thereto and that,to the best of his or her knowledge, no event has occurred and remains byreason of which payments on the account of the principal of or interest, ifany, on the Notes is prohibited or if such event has occurred, a description ofthe event.  The Officers’ Certificate shall also notify the Trustee shouldthe Company elect to change the manner in which it fixes its fiscalyear-end.  For purposes of this Section 1008(a), such complianceshall be determined without regard to any period of grace or requirement ofnotice under this Indenture.

 

(b)           (1)  Whenany Default has occurred and is continuing under this Indenture, or (2) ifthe trustee for or the holder of any other evidence of Indebtedness of theCompany or any Restricted Subsidiary gives any notice or takes any other actionwith respect to a claimed Default (other than with respect to Indebtedness inthe principal amount of less than $50,000,000), the Company shall deliver tothe Trustee by registered or certified mail or facsimile transmission anOfficers’ Certificate specifying such event,

 

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noticeor other action within five Business Days of its occurrence (with respect toclause (1)) or such notice or other action (with respect toclause (2)).

 

SECTION 1009.  Reports and OtherInformation.  Whether or not required by the SEC, so long as any Notesare outstanding, the Company shall furnish to the Holders, within the timeperiods specified in the SEC’s rules and regulations for non-acceleratedfilers:

 

(1)           all quarterlyand annual financial information that would be required to be contained in afiling with the SEC on Forms 10-Q and 10-K (or any successor or comparableforms) if the Company were required to file such forms, including a “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” and,with respect to the annual information only, a report on the annual financialstatements by the Company’s certified independent accountants; and

 

(2)           all currentreports that would be required to be filed with the SEC on Form 8-K if theCompany were required to file such reports.

 

Inaddition, whether or not required by the SEC, the Company shall file acopy of all of the information and reports referred to inclauses (1) and (2) above with the SEC for public availabilitywithin the time periods specified in the SEC’s rules and regulations(unless the SEC shall not accept such a filing) and make such informationavailable to securities analysts and prospective investors upon request. Inaddition, the Company has agreed that, for so long as any Notes remainoutstanding, it shall furnish to Holders and to securities analysts andprospective investors, upon their request, the information required to bedelivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

(b)           Delivery ofsuch reports, information and documents to the Trustee is for informationalpurposes only and the Trustee’s receipt of such shall not constituteconstructive notice of any information contained therein or determinable frominformation contained therein, including the Company’s compliance with any ofits covenants hereunder (as to which the Trustee is entitled to relyexclusively on Officers’ Certificates).

 

(c)           In addition,for so long as Holdings is a Guarantor under this Indenture or if at any timeany other direct or indirect parent company of the Company is a guarantor ofthe Notes, the reports, information and other documents required to be filedand furnished to the Holders pursuant to this Section 1009 may, at theoption of the Company, be filed by and be those of Holdings or such otherparent, as applicable, rather than the Company; *provided* that the same is accompanied by consolidatinginformation that explains in reasonable detail the differences between theinformation relating to Holdings or such other parent, on the one hand, and theinformation relating to the Company and its Restricted Subsidiaries on astandalone basis, on the other hand.

 

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(d)           Notwithstandingthe foregoing, the requirements of this Section 1009 shall be deemedsatisfied prior to the commencement of the Exchange Offer or the effectivenessof the Shelf Registration Statement by the filing with the SEC of the ExchangeOffer Registration Statement or Shelf Registration Statement within the timeperiods specified in the Registration Rights Agreement, and any amendmentsthereto, with such financial information that satisfies Regulation S-X ofthe Securities Act.

 

SECTION 1010.  Limitation on RestrictedPayments.  (a)  The Company shall not, and shall not permitany Restricted Subsidiary to, directly or indirectly:

 

(1)           declare or payany dividend or make any distribution on account of the Company’s or anyRestricted Subsidiary’s Equity Interests, including any dividend ordistribution payable in connection with any merger or consolidation other than

 

(A)  dividends ordistributions by the Company payable in Equity Interests (other thanDisqualified Stock) of the Company or

 

(B)  dividends ordistributions by a Restricted Subsidiary so long as, in the case of anydividend or distribution payable on or in respect of any class or series ofsecurities issued by a Restricted Subsidiary other than a Wholly-OwnedSubsidiary, the Company or a Restricted Subsidiary receives at least its *pro rata* share of such dividend ordistribution in accordance with its Equity Interests in such class or series ofsecurities;

 

(2)           purchase,redeem, defease or otherwise acquire or retire for value any Equity Interestsof the Company or any direct or indirect parent of the Company, including inconnection with any merger or consolidation;

 

(3)           make anyprincipal payment on, or redeem, repurchase, defease or otherwise acquire orretire for value in each case, prior to any scheduled repayment, sinking fundpayment or maturity, any Subordinated Indebtedness, other than

 

(x)            Indebtednesspermitted under clauses (9) and (10) of Section 1011(b) ofthis Indenture or

 

(y)           the purchase,repurchase or other acquisition of Subordinated Indebtedness purchased inanticipation of satisfying a sinking fund obligation, principal installment orfinal maturity, in each case due within one year of the date of purchase,repurchase or acquisition; or

 

(4)           make anyRestricted Investment;

 

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(allsuch payments and other actions set forth in clauses (1) through(4) above being collectively referred to as “*Restricted Payments*”), unless, at the time of suchRestricted Payment:

 

(A)  no Default shall have occurred and be continuing orwould occur as a consequence thereof;

 

(B)  immediately after giving effect to such transaction on a*pro forma* basis, the Companycould incur $1.00 of additional Indebtedness under the provisions ofSection 1011(a) of this Indenture; and

 

(C)  such Restricted Payment, together with the aggregateamount of all other Restricted Payments made by the Company and the RestrictedSubsidiaries after the Issue Date pursuant to this Section 1010(a) orclauses (1), (2) (with respect to the payment of dividends on RefundingCapital Stock pursuant to clause (B) thereof only), (6)(C),(8) and (12) of Section 1010(b) (and excluding, for theavoidance of doubt, all other Restricted Payments made pursuant toSection 1010(b)), is less than the sum, without duplication, of

 

(1)           50% of theConsolidated Net Income of the Company for the period (taken as one accountingperiod) from August 1, 2005 to the end of the Company’s most recentlyended fiscal quarter for which internal financial statements are available atthe time of such Restricted Payment, or, in the case such Consolidated NetIncome for such period is a deficit, minus 100% of such deficit, *provided* that if, at the time of aproposed Restricted Payment under this Section 1010(a), the ConsolidatedLeverage Ratio of the Company is less than 4.50 to 1.00, for purposes ofcalculating availability of amounts hereunder for such Restricted Payment only,the reference to 50% in this clause (1) above shall be deemed to be75%, *plus*

 

(2)           100% of theaggregate net cash proceeds and the fair market value, as determined in goodfaith by the Company, of marketable securities or other property received bythe Company after the Issue Date (less the amount of such net cash proceeds tothe extent such amount has been relied upon to permit the incurrence ofIndebtedness, or issuance of Disqualified Stock or Preferred Stock pursuant toclause (22)(ii) of Section 1011(b) of this Indenture) fromthe issue or sale of

 

(x)            EquityInterests of the Company, including Retired Capital Stock (as defined below),but excluding cash proceeds and the fair market value, as determined in goodfaith by the Company, of marketable securities or other property received fromthe sale of

 

(A)          EquityInterests to any future, present or former employees, directors, managers orconsultants of the Company, any direct or indirect parent company of the

 

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Companyor any of the Company’s Subsidiaries after the Issue Date to the extent suchamounts have been applied to Restricted Payments made in accordance withclause (4) of Section 1010(b) and

 

(B)          DesignatedPreferred Stock

 

and,to the extent actually contributed to the Company, Equity Interests of theCompany’s direct or indirect parent companies (excluding contributions of theproceeds from the sale of Designated Preferred Stock of such companies orcontributions to the extent such amounts have been applied to RestrictedPayments made in accordance with clause (4) of Section 1010(b))or

 

(y)           debt securitiesof the Company that have been converted into or exchanged for such EquityInterests of the Company;

 

*provided* that thisclause (2) shall not include the proceeds from (a) RefundingCapital Stock (as defined below), (b) Equity Interests of the Company ordebt securities of the Company that have been converted into or exchanged forEquity Interests of the Company sold to a Restricted Subsidiary or the Company,as the case may be, (c) Disqualified Stock or debt securities that havebeen converted into or exchanged for Disqualified Stock or (d) ExcludedContributions, *plus*

 

(3)           100% of theaggregate amount of cash and the fair market value, as determined in good faithby the Company, of marketable securities or other property contributed to thecapital of the Company after the Issue Date (*less*the amount of such net cash proceeds to the extent such amount has been reliedupon to permit the incurrence of Indebtedness or issuance of Disqualified Stockor Preferred Stock pursuant to clause (22)(ii) ofSection 1011(b) of this Indenture) (other than by a RestrictedSubsidiary and other than by any Excluded Contributions), *plus*

 

(4)           to the extentnot already included in Consolidated Net Income, 100% of the aggregate amountreceived in cash and the fair market value, as determined in good faith by theCompany, of marketable securities or other property received after the IssueDate by means of

 

(A)  the sale or other disposition (otherthan to the Company or a Restricted Subsidiary) of Restricted Investments madeby the Company or any Restricted Subsidiary and repurchases and redemptions ofsuch Restricted Investments from the Company or any Restricted Subsidiary andrepayments of loans or advances that constitute Restricted Investments by theCompany or any Restricted Subsidiary or

 

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(B)  the sale (other than to the Companyor a Restricted Subsidiary) of the Capital Stock of an Unrestricted Subsidiary(other than Kate Spade) or a distribution from an Unrestricted Subsidiary(other than an Extraordinary Distribution) (other than in each case of suchsale or distribution to the extent the Investment in such UnrestrictedSubsidiary was made by the Company or a Restricted Subsidiary pursuant toclauses (9) or (13) of Section 1010(b) or to the extentsuch Investment constituted a Permitted Investment) or a dividend from an UnrestrictedSubsidiary (other than an Extraordinary Distribution), *plus*

 

(5)           in the case ofthe redesignation of an Unrestricted Subsidiary (other than Kate Spade) as aRestricted Subsidiary after the Issue Date, the fair market value of theInvestment in such Unrestricted Subsidiary, as determined by the Company ingood faith or if, in the case of an Unrestricted Subsidiary, such fair marketvalue may exceed $125.0 million, in writing by an Independent FinancialAdvisor, at the time of the redesignation of such Unrestricted Subsidiary as aRestricted Subsidiary, other than an Unrestricted Subsidiary to the extent theInvestment in such Unrestricted Subsidiary was made by the Company or aRestricted Subsidiary pursuant to clauses (9) or (13) ofSection 1010(b) or to the extent such Investment constituted aPermitted Investment.

 

(b)           The foregoingprovisions shall not prohibit:

 

(1)           the payment ofany dividend 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 Indenture;

 

(2)           (A) theredemption, repurchase, retirement or other acquisition of any Equity Interests(“*Retired Capital Stock*”) orSubordinated Indebtedness of the Company or any Equity Interests of any director indirect parent company of the Company, in exchange for, or out of theproceeds of the substantially concurrent sale (other than to a RestrictedSubsidiary) of, Equity Interests of the Company (in each case, other than anyDisqualified Stock) (“*Refunding CapitalStock*”) and (B) if immediately prior to the retirement ofRetired Capital Stock, the declaration and payment of dividends thereon waspermitted under clause (6) of this Section 1010(b), thedeclaration and payment of dividends on the Refunding Capital Stock (other thanRefunding Capital Stock the proceeds of which were used to redeem, repurchase,retire or otherwise acquire any Equity Interests of any direct or indirectparent company of the Company) in an aggregate amount per year no greater thanthe aggregate amount of dividends per annum that was declarable and payable onsuch Retired Capital Stock immediately prior to such retirement;

 

(3)           the defeasance,redemption, repurchase or other acquisition or retirement of SubordinatedIndebtedness of the Company or a Subsidiary

 

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Guarantor made by exchange for, or out of theproceeds of the substantially concurrent sale of, new Indebtedness of suchPerson that is incurred in compliance with Section 1011 of this Indentureso long as

 

(A)          the principalamount of such new Indebtedness does not exceed the principal amount (oraccreted value, if applicable) of the Subordinated Indebtedness being sodefeased, redeemed, repurchased, acquired or retired for value, *plus* the amount of any reasonable premiumrequired to be paid under the terms of the instrument governing theSubordinated Indebtedness being so defeased, redeemed, repurchased, acquired orretired and any reasonable fees and expenses incurred in connection with theissuance of such new Indebtedness,

 

(B)          suchIndebtedness is subordinated to the Notes at least to the same extent as suchSubordinated Indebtedness so defeased, redeemed, repurchased, acquired orretired,

 

(C)          suchIndebtedness has a final scheduled maturity date equal to or later than thefinal scheduled maturity date of the Subordinated Indebtedness being sodefeased, redeemed, repurchased, acquired or retired and

 

(D)          suchIndebtedness has a Weighted Average Life to Maturity equal to or greater thanthe remaining Weighted Average Life to Maturity of the SubordinatedIndebtedness being so defeased, redeemed, repurchased, acquired or retired;

 

(4)           a RestrictedPayment to pay for the repurchase, retirement or other acquisition orretirement for value of Equity Interests (other than Disqualified Stock) of theCompany or any of its direct or indirect parent companies held by any future,present or former employee, director, manager or consultant of the Company, anyof its Subsidiaries or any of its direct or indirect parent companies pursuantto any management equity plan or stock option plan or any other management oremployee benefit plan or agreement; *provided*that the aggregate Restricted Payments made under this clause (4) donot exceed in any calendar year $10.0 million (with unused amounts in anycalendar year being carried over to succeeding calendar years subject to amaximum (without giving effect to the following proviso) of $20.0 millionin any calendar year); *provided, further*,that such amount in any calendar year may be increased by an amount not toexceed

 

(A)          the cashproceeds from the sale of Equity Interests (other than Disqualified Stock) ofthe Company and, to the extent contributed to the Company, Equity Interests ofany of the Company’s direct or indirect parent companies, in each case tomembers of management, directors, managers or consultants of the Company, anyof its Subsidiaries or any of its direct or indirect parent companies thatoccurs after the Issue Date, to the extent the cash proceeds from the sale ofsuch Equity Interests have

 

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not otherwise been applied to the payment ofRestricted Payments by virtue of clause (C) of Section 1010(a), *plus*

 

(B)          the cashproceeds of key man life insurance policies received by the Company and theRestricted Subsidiaries after the Issue Date, *less*

 

(C)          the amount ofany Restricted Payments previously made pursuant to clauses (A) and(B) of this clause (4);

 

and*provided, further*, that cancellationof Indebtedness owing to the Company from members of management, directors,managers or consultants of the Company, any of its direct or indirect parentcompanies or any Restricted Subsidiary in connection with a repurchase ofEquity Interests of the Company or any of its direct or indirect parentcompanies shall not be deemed to constitute a Restricted Payment for purposesof this Section 1010 or any other provision of this Indenture;

 

(5)           the declarationand payment of dividends to holders of any class or series of DisqualifiedStock of the Company or any Restricted Subsidiary issued in accordance withSection 1011 of this Indenture to the extent such dividends are includedin the definition of Fixed Charges;

 

(6)           (A)  thedeclaration and payment of dividends to holders of any class or series ofDesignated Preferred Stock (other than Disqualified Stock) issued by theCompany after the Issue Date;

 

(B)          the declarationand payment of dividends to a direct or indirect parent company of the Company,the proceeds of which shall be used to fund the payment of dividends to holdersof any class or series of Designated Preferred Stock (other than DisqualifiedStock) of such parent company issued after the Issue Date; *provided* that the amount of dividends paidpursuant to this clause (B) shall not exceed the aggregate amount ofcash actually contributed to the Company from the sale of such DesignatedPreferred Stock; or

 

(C)          the declarationand payment of dividends on Refunding Capital Stock that is Preferred Stock inexcess of the dividends declarable and payable thereon pursuant toclause (2) of this Section 1010(b);

 

*provided, however*, in the case of each of(A), (B) and (C) of this clause (6), that for the most recentlyended four full fiscal quarters for which internal financial statements areavailable immediately preceding the date of issuance of such DesignatedPreferred Stock or the declaration of such dividends on Refunding Capital Stockthat is Preferred Stock, after giving effect to such issuance or declaration ona *pro forma* basis, the Companyand the Restricted Subsidiaries on a consolidated basis would have had a FixedCharge Coverage Ratio of at least 2.00 to 1.00;

 

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(7)           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;

 

(8)           the declarationand payment of dividends on the Company’s Common Stock following the firstpublic offering of the Company’s Common Stock or the Common Stock of any of itsdirect or indirect parent companies after the Issue Date, of up to 6% per annumof the net proceeds received by or contributed to the Company in or from anysuch public offering, other than public offerings with respect to the Company’sCommon Stock registered on Form S-4 or Form S-8 and other than anypublic sale constituting an Excluded Contribution;

 

(9)           RestrictedPayments that are made with Excluded Contributions;

 

(10)         the declarationand payment of dividends by the Company to, or the making of loans to, itsdirect parent company in amounts required for the Company’s direct or indirectparent companies to pay

 

(A)          franchise taxesand other fees, taxes and expenses required to maintain their corporateexistence,

 

(B)          Federal, stateand local income taxes, to the extent such income taxes are attributable to theincome of the Company and the Restricted Subsidiaries and, to the extent of theamount actually received from its Unrestricted Subsidiaries, in amountsrequired to pay such taxes to the extent attributable to the income of suchUnrestricted Subsidiaries,

 

(C)          customarysalary, bonus and other benefits payable to officers and employees of anydirect or indirect parent company of the Company to the extent such salaries,bonuses and other benefits are attributable to the ownership or operation ofthe Company and the Restricted Subsidiaries,

 

(D)          generalcorporate overhead expenses of any direct or indirect parent company of theCompany to the extent such expenses are attributable to the ownership oroperation of the Company and the Restricted Subsidiaries, and

 

(E)           reasonable feesand expenses incurred in connection with any unsuccessful debt or equityoffering by such direct or indirect parent company of the Company;

 

(11)         any RestrictedPayments used to fund the Transactions and the fees and expenses relatedthereto, including those owed to Affiliates, in each case to the extentpermitted by Section 1013 of this Indenture;

 

(12)         the repurchase,redemption or other acquisition or retirement for value of any SubordinatedIndebtedness pursuant to provisions similar to those

 

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described under Section 1017 andSection 1018 of this Indenture; *provided*that, prior to such repurchase, redemption or other acquisition, the Company(or a third party to the extent permitted by this Indenture) shall have made aChange of Control Offer or Asset Sale Offer, as the case may be, with respectto the Notes and shall have repurchased all Notes validly tendered and notwithdrawn in connection with such Change of Control Offer or Asset Sale Offer;

 

(13)         Investments inUnrestricted Subsidiaries, having an aggregate fair market value, takentogether with all other Investments made pursuant to this clause (13) thatare at the time outstanding, without giving effect to the sale of anUnrestricted Subsidiary to the extent the proceeds of such sale do not consist ofcash or marketable securities, not to exceed the greater of(x) $75.0 million and (y) 1.0% of Total Assets at the time ofsuch Investment (with the fair market value of each Investment being measuredat the time such Investment is made and without giving effect to subsequentchanges in value);

 

(14)         distributionsor payments of Receivables Fees;

 

(15)         thedistribution, as a dividend or otherwise (and the declaration of suchdividend), of shares of Capital Stock of, or Indebtedness owed to the Companyor a Restricted Subsidiary by, any Unrestricted Subsidiary (other than KateSpade); and

 

(16)         otherRestricted Payments in an amount which, when taken together with all otherRestricted Payments made pursuant to this clause (16), does not exceed$75.0 million;

 

*provided, however*, that at the time of, andafter giving effect to, any Restricted Payment permitted under clauses(15) and (16) of this Section 1010(b), no Default shall haveoccurred and be continuing or would occur as a consequence thereof.

 

(c)           As of the timeof issuance of the Notes, all of the Company’s Subsidiaries shall be RestrictedSubsidiaries other than Neiman Marcus Funding Corporation, Gurwitch Products,L.L.C., Kate Spade and their respective Subsidiaries. The Company shall notpermit any Unrestricted Subsidiary to become a Restricted Subsidiary exceptpursuant to the penultimate paragraph of the definition of “UnrestrictedSubsidiary”. For purposes of designating any Restricted Subsidiary as anUnrestricted Subsidiary, all outstanding Investments by the Company and theRestricted Subsidiaries (except to the extent repaid) in the Subsidiary sodesignated shall be deemed to be Restricted Payments in an amount determined asset forth in the last sentence of the definition of “Investments”. Such designationshall be permitted only if a Restricted Payment in such amount would bepermitted at such time, whether pursuant to Section 1010(a) or underclauses (9), (13) or (16) of Section 1010(b), or pursuant to thedefinition of “Permitted Investments”, and if such Subsidiary otherwise meetsthe definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries shallnot be subject to any of the restrictive covenants set forth in this Indenture.

 

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(d)           Notwithstandinganything to the contrary herein, the Company shall not, and shall not permitany Restricted Subsidiary to, directly or indirectly, make any (x) RestrictedPayment covered in clauses (1) through (3) of the definition ofRestricted Payments to the holders of Equity Interests of the Company or any ofits direct or indirect parent companies (which shall include the Sponsors, theCo-Investors and their respective Affiliates) (other than to the Company andits Restricted Subsidiaries, future, present or former employees, directors,managers, or consultants of the Company, any of its Subsidiaries or any of itsdirect or indirect parent companies with respect to Equity Interests held bythem in such capacities and other than a Restricted Payment made pursuant toclause (10) of Section 1010(b)) or (y) Investment in anySponsor, any Co-Investor, any Permitted Holders who are members of a group(within the meaning of Section 13(d)(3) orSection 14(d)(2) of the Exchange Act or any successor provision) withthe Sponsors or any Co-Investors or any Person or group who becomes a PermittedHolder following a Change of Control as provided for in the definition of “PermittedHolders” or their respective Affiliates (other than in the Company and itsSubsidiaries and members of management of the Company (or its direct parent)),in each case during any period when the Company is prohibited from making suchRestricted Payments or Investments pursuant to the Senior Indenture or anyother instrument governing Indebtedness, Disqualified Stock or Preferred Stockissued to extend, replace, refund, refinance, renew or defease the SeniorNotes.

 

SECTION 1011.  Limitation on Incurrenceof Indebtedness and Issuance of Disqualified Stock and Preferred Stock. (a)  The Company shall not, and shall not permit any Restricted Subsidiaryto, directly or indirectly, create, incur, issue, assume, guarantee orotherwise become directly or indirectly liable, contingently or otherwise(collectively, “*incur*” andcollectively, an “*incurrence*”)with respect to any Indebtedness (including Acquired Indebtedness), and theCompany shall not issue any shares of Disqualified Stock and shall not permitany Restricted Subsidiary to issue any shares of Disqualified Stock orPreferred Stock; *provided* thatthe Company may incur Indebtedness (including Acquired Indebtedness) or issueshares of Disqualified Stock, and any Restricted Subsidiary may incurIndebtedness (including Acquired Indebtedness), issue shares of DisqualifiedStock or issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio ona consolidated basis for the Company’s and its Restricted Subsidiaries’ mostrecently ended four full fiscal quarters for which internal financialstatements are available immediately preceding the date on which suchadditional Indebtedness is incurred or such Disqualified Stock or PreferredStock is issued would have been at least 2.00 to 1.00, determined on a *pro forma* basis (including a *pro forma* application of the net proceedstherefrom), as if the additional Indebtedness had been incurred, or theDisqualified Stock or Preferred Stock had been issued, as the case may be, andthe application of the proceeds therefrom had occurred at the beginning of suchfour-quarter period; and *provided, further*,that 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 $100.0 million at any one time outstanding**.**

 

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(b)           The foregoinglimitations shall not apply to any of the following items (collectively, “*Permitted Debt*”):

 

(1)           Indebtednessincurred pursuant to the Revolving Credit Facility by the Company or anyRestricted Subsidiary; *provided*that immediately after giving effect to any such incurrence, the aggregateprincipal amount of all Indebtedness incurred under thisclause (1) and then outstanding does not exceed the greater of(A) $800.0 million *less*up to $150.0 million in the aggregate of all principal payments withrespect to such Indebtedness made pursuant to clause (1)(x) ofSection 1018(b) of this Indenture and (B) the lesser of(x) 80.0% of the value of the eligible inventory of the Company and itsRestricted Subsidiaries valued at the lower of cost or market value and(y) 85.0% of the net orderly liquidation value of the eligible inventoryof the Company and its Restricted Subsidiaries;

 

(2)           Indebtednessincurred pursuant to the Term Loan Facility by the Company or any RestrictedSubsidiary; *provided* that aftergiving effect to any such incurrence, the aggregate principal amount of allIndebtedness incurred under this clause (2) and then outstanding doesnot exceed $1,975.0 million*less*up to $250.0 million in the aggregate of all principal payments withrespect to such Indebtedness made pursuant to clause (1)(x) ofSection 1018(b) of this Indenture;

 

(3)           the incurrenceby the Company and any Subsidiary Guarantor of Indebtedness represented by theNotes issued on the Issue Date (including any Subsidiary Guarantees thereof)and the Exchange Notes and related exchange guarantees to be issued in exchangefor the Notes and the Subsidiary Guarantees pursuant to the Registration RightsAgreement (other than any Additional Notes);

 

(4)           the incurrenceby the Company and any Subsidiary Guarantor of Indebtedness represented by theSenior Notes issued on the Issue Date (including any guarantee thereof) and theexchange notes and related exchange guarantees to be issued in exchange for theSenior Notes pursuant to the Registration Rights Agreement (other than anyAdditional Notes (as defined in the Senior Indenture));

 

(5)           ExistingIndebtedness (other than Indebtedness described in clauses (1), (2),(3) and (4) of this Section 1011(b)), including the Existing2008 Notes and the Existing 2028 Debentures;

 

(6)           Indebtedness(including Capitalized Lease Obligations), Disqualified Stock and PreferredStock incurred by the Company or any of the Restricted Subsidiaries, to financethe development, construction, purchase, lease (other than the lease, pursuantto Sale and Lease-Back Transactions, of property (real or personal), equipmentor other fixed or capital assets owned by the Company or any RestrictedSubsidiary as of the Issue Date or acquired by the Company or any RestrictedSubsidiary after the Issue Date in exchange for, or with the proceeds of thesale of, property (real or personal), equipment or other fixed or capitalassets owned by the Company or any Restricted Subsidiary as of

 

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the Issue Date), repairs, additions or improvementof property (real or personal), equipment or other fixed or capital assets thatare used or useful in a Similar Business, whether through the direct purchaseof assets or the Capital Stock of any Person owning such assets; *provided* that the aggregate amount ofIndebtedness, Disqualified Stock and Preferred Stock incurred pursuant to thisclause (6) does not exceed $250.0 million at any one time outstanding;

 

(7)           Indebtednessincurred by the Company or any Restricted Subsidiary constituting reimbursementobligations with respect to letters of credit issued in the ordinary course ofbusiness, including letters of credit in respect of workers’ compensationclaims, or other Indebtedness with respect to reimbursement type obligationsregarding workers’ compensation claims; *provided*that upon the drawing of such letters of credit or the incurrence of suchIndebtedness, such obligations are reimbursed within 30 days followingsuch drawing or incurrence;

 

(8)           Indebtednessarising from agreements of the Company or a Restricted Subsidiary providing forindemnification, adjustment of purchase price or similar obligations, in eachcase, incurred or assumed in connection with the disposition of any business,assets or a Subsidiary, other than guarantees of Indebtedness incurred by anyPerson acquiring all or any portion of such business, assets or Subsidiary forthe purpose of financing such acquisition; *provided*that

 

(A)          suchIndebtedness is not reflected on the balance sheet of the Company or anyRestricted Subsidiary (contingent obligations referred to in a footnote tofinancial statements and not otherwise reflected on the balance sheet shall notbe deemed to be reflected on such balance sheet for purposes of thisclause (8)(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 Company and theRestricted Subsidiaries in connection with such disposition;

 

(9)           Indebtedness ofthe Company to a Restricted Subsidiary; *provided*that any such Indebtedness owing to a Restricted Subsidiary that is not aSubsidiary Guarantor is subordinated in right of payment to the Notes; *provided, further*, that 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 Indebtedness (except to theCompany or another Restricted Subsidiary) shall be deemed, in each case, to bean incurrence of such Indebtedness;

 

(10)         Indebtedness ofa Restricted Subsidiary to the Company or another Restricted Subsidiary; *provided* that if a Subsidiary Guarantorincurs such

 

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Indebtedness to a Restricted Subsidiary that is nota Subsidiary Guarantor such Indebtedness is subordinated in right of payment tothe Subsidiary Guarantee of such Subsidiary Guarantor; *provided, further*, that any subsequentissuance or transfer of Capital Stock or any other event that results in anysuch Restricted Subsidiary ceasing to be a Restricted Subsidiary or anysubsequent transfer of any such Indebtedness (except to the Company or anotherRestricted Subsidiary) shall be deemed, in each case, to be an incurrence ofsuch Indebtedness;

 

(11)         shares ofPreferred Stock of a Restricted Subsidiary issued to the Company or anotherRestricted Subsidiary; *provided*that any subsequent issuance or transfer of any Capital Stock or any otherevent which results in any such Restricted Subsidiary ceasing to be aRestricted Subsidiary or any other subsequent transfer of any such shares ofPreferred Stock (except to the Company or another Restricted Subsidiary) shallbe deemed, in each case, to be an issuance of such shares of Preferred Stock;

 

(12)         HedgingObligations (excluding Hedging Obligations entered into for speculativepurposes) for the purpose of limiting: (A) interest rate risk with respectto any Indebtedness that is permitted by the terms of this Indenture to beoutstanding, (B) exchange rate risk with respect to any currency exchangeor (C) commodity pricing risk with respect to any commodity;

 

(13)         obligations inrespect of performance, bid, appeal and surety bonds and completion guaranteesand similar obligations provided by the Company or any Restricted Subsidiary inthe ordinary course of business;

 

(14)         (x) anyguarantee by the Company or a Restricted Subsidiary of Indebtedness or otherObligations of any Restricted Subsidiary, so long as the incurrence of suchIndebtedness by such Restricted Subsidiary is permitted under the terms of thisIndenture or (y) any guarantee by a Restricted Subsidiary of Indebtednessof the Company permitted to be incurred under the terms of this Indenture; *provided* that such guarantee is incurredin accordance with Section 1015 of this Indenture;

 

(15)         the incurrenceby the Company or any Restricted Subsidiary of Indebtedness, Disqualified Stockor Preferred Stock that serves to extend, replace, refund, refinance, renew ordefease any Indebtedness, Disqualified Stock or Preferred Stock incurred aspermitted under Section 1011(a) and clauses (3), (4), (5) and(6) above, this clause (15) and clauses (16) and(22)(ii) below of this Section 1011(b) or any Indebtedness,Disqualified Stock or Preferred Stock issued to so extend, replace, refund,refinance, renew or defease such Indebtedness, Disqualified Stock or PreferredStock including additional Indebtedness, Disqualified Stock or Preferred Stockincurred to pay premiums and fees in connection therewith (the “*Refinancing Indebtedness*”) prior to itsrespective maturity; *provided, however*,that such Refinancing Indebtedness:

 

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(A)          has a WeightedAverage Life to Maturity at the time such Refinancing Indebtedness is incurredwhich is not less than the remaining Weighted Average Life to Maturity of theIndebtedness, Disqualified Stock or Preferred Stock being extended, replaced,refunded, refinanced, renewed or defeased,

 

(B)          to the extentsuch Refinancing Indebtedness extends, replaces, refunds, refinances, renews ordefeases (i) Indebtedness subordinated or *paripassu* to the Notes or any Subsidiary Guarantee, such RefinancingIndebtedness is subordinated or *pari passu*to the Notes or such Subsidiary Guarantee at least to the same extent as theIndebtedness being extended, replaced, refunded, refinanced, renewed ordefeased or (ii) Disqualified Stock or Preferred Stock, such RefinancingIndebtedness must be Disqualified Stock or Preferred Stock, respectively and

 

(C)          shall notinclude

 

(x)           Indebtedness,Disqualified Stock or Preferred Stock of a Subsidiary that is not a SubsidiaryGuarantor that refinances Indebtedness, Disqualified Stock or Preferred Stockof the Company,

 

(y)           Indebtedness,Disqualified Stock or Preferred Stock of a Subsidiary that is not a SubsidiaryGuarantor that refinances Indebtedness, Disqualified Stock or Preferred Stockof a Subsidiary Guarantor or

 

(z)           Indebtedness,Disqualified Stock or Preferred Stock of the Company or a Restricted Subsidiarythat refinances Indebtedness, Disqualified Stock or Preferred Stock of anUnrestricted Subsidiary;

 

and*provided, further*, that subclause(A) of this clause (15) shall not apply to any refunding or refinancingof any Senior Indebtedness outstanding under the Senior Notes, the guaranteesof such Senior Notes or the Existing 2028 Debentures;

 

(16)         Indebtedness,Disqualified Stock or Preferred Stock (x) of the Company or any of itsRestricted Subsidiaries incurred to finance the acquisition of any Person orassets or (y) of Persons that are acquired by the Company or anyRestricted Subsidiary or merged into the Company or a Restricted Subsidiary inaccordance with the terms of this Indenture; *provided*that either

 

(A)          after givingeffect to such acquisition or merger, either

 

(i)            the Companywould be permitted to incur at least $1.00 of additional Indebtedness pursuantto the Fixed Charge Coverage Ratio test set forth in Section 1011(a); or

 

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(ii)           the FixedCharge Coverage Ratio of the Company and the Restricted Subsidiaries on aconsolidated basis is greater than immediately prior to such acquisition ormerger; or

 

(B)          suchIndebtedness, Disqualified Stock or Preferred Stock (i) is not SecuredIndebtedness and is Senior Subordinated Indebtedness or SubordinatedIndebtedness with subordination terms no more favorable to the holders thereofthan the subordination terms set forth in this Indenture as in effect on theIssue Date, (ii) is not incurred while a Default exists and no Defaultshall result therefrom, (iii) does not mature (and is not mandatorilyredeemable in the case of Disqualified Stock or Preferred Stock) and does notrequire any payment of principal prior to the final maturity of the Notes and(iv) in the case of sub-clause (y) above only, is not incurredin contemplation of such acquisition or merger;

 

(17)         Indebtednessarising from the honoring by a bank or other financial institution of a check,draft or similar instrument drawn against insufficient funds in the ordinarycourse of business; *provided* thatsuch Indebtedness is extinguished within two Business Days of its incurrence;

 

(18)         Indebtedness ofthe Company or any Restricted Subsidiary supported by a letter of credit issuedpursuant to the Senior Credit Facilities, in a principal amount not in excessof the stated amount of such letter of credit;

 

(19)         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 (19) and thenoutstanding, does not exceed $75.0 million (it being understood that anyIndebtedness, Disqualified Stock and Preferred Stock incurred pursuant to thisclause (19) shall cease to be deemed incurred or outstanding for purposesof this clause (19) but shall be deemed incurred pursuant to Section 1011(a) fromand after the first date on which the Company or such Restricted Subsidiarycould have incurred such Indebtedness, Disqualified Stock or Preferred Stockpursuant to Section 1011(a) without reliance on thisclause (19));

 

(20)         Indebtednessincurred by a Foreign Subsidiary which, when aggregated with the principalamount of all other Indebtedness incurred pursuant to this clause (20) andthen outstanding, does not exceed 5.0% of Foreign Subsidiary Total Assets (itbeing understood that any Indebtedness, Disqualified Stock and Preferred Stockincurred pursuant to this clause (20) shall cease to be deemed incurred oroutstanding for purposes of this clause (20) but shall be deemed incurredpursuant to Section 1011(a) from and after the first date on whichthe Company or such Restricted Subsidiary could have incurred suchIndebtedness, Disqualified Stock or Preferred Stock pursuant toSection 1011(a) without reliance on this clause (20));

 

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(21)         Indebtedness consisting of Indebtedness issued by theCompany or any Restricted Subsidiary to current or former officers, managers,directors and employees thereof, their respective estates, spouses or formerspouses, in each case to finance the purchase or redemption of Equity Interestsof the Company or any direct or indirect parent company of the Company to theextent described in clause (4) of Section 1010(b) of thisIndenture;

 

(22)         Indebtedness, Disqualified Stock and Preferred Stock of theCompany or any Restricted Subsidiary not otherwise permitted hereunder in anaggregate principal amount or liquidation preference, which, when aggregatedwith the principal amount and liquidation preference of all other Indebtedness,Disqualified Stock and Preferred Stock incurred pursuant to thisclause (22) and then outstanding, does not at any one time outstandingexceed the sum of

 

(i)            $175.0 million(it being understood that any Indebtedness, Disqualified Stock and PreferredStock incurred pursuant to this clause (22)(i) shall cease to bedeemed incurred or outstanding for purposes of thisclause (22)(i) but shall be deemed incurred pursuant toSection 1011(a) from and after the first date on which the Company orsuch Restricted Subsidiary could have incurred such Indebtedness, DisqualifiedStock or Preferred Stock pursuant to Section 1011(a) without relianceon this clause (22)(i)); *plus*

 

(ii)           200%of the net cash proceeds received by the Company since after the Issue Datefrom the issue or sale of Equity Interests of the Company or cash contributedto the capital of the Company (in each case, other than proceeds ofDisqualified Stock or sales of Equity Interests to the Company or any of itsSubsidiaries) as determined in accordance with clauses (C)(2) and (C)(3) ofSection 1010(a) of this Indenture to the extent such net cashproceeds or cash have not been applied pursuant to such clauses to makeRestricted Payments or to make other investments, payments or exchangespursuant to Section 1010(b) of this Indenture or to make PermittedInvestments (other than Permitted Investments specified in clauses (a) and(c) of the definition thereof); and

 

(23)         Attributable Debt incurred by the Company or any RestrictedSubsidiary pursuant to Sale and Lease-Back Transactions of property (real orpersonal), equipment or other fixed or capital assets owned by the Company orany Restricted Subsidiary as of the Issue Date or acquired by the Company orany Restricted Subsidiary after the Issue Date in exchange for, or with the proceedsof the sale of, such assets owned by the Company or any Restricted Subsidiaryas of the Issue Date, *provided*that the aggregate amount of Attributable Debt incurred under thisclause (23) does not exceed $100.0 million.

 

(c)           Forpurposes of determining compliance with this Section 1011, in the eventthat an item of Indebtedness, Disqualified Stock or Preferred Stock meets thecriteria of more than one of the categories of Permitted Debt described inclauses

 

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(1) through(23) of Section 1011(b) or is entitled to be incurred pursuantto Section 1011(a), the Company, in its sole discretion, shall classify orreclassify, or later divide, classify or reclassify, such item of Indebtedness,Disqualified Stock or Preferred Stock (or any portion thereof) and shall onlybe required to include the amount and type of such Indebtedness, DisqualifiedStock or Preferred Stock in one or more of the above clauses; *provided* that all Indebtedness outstandingunder the Senior Credit Facilities on the Issue Date shall be deemed to havebeen incurred on such date in reliance on the exception in clauses (1) and(2) of this Section 1011(b).

 

(d)           Theaccrual of interest, the accretion of accreted value and the payment ofinterest in the form of additional Indebtedness, Disqualified Stock orPreferred Stock shall not be deemed to be an incurrence of Indebtedness,Disqualified Stock or Preferred Stock for purposes of this Section 1011.

 

(e)           Forpurposes of determining compliance with any U.S. dollar-denominated restrictionon the incurrence of Indebtedness, the U.S. dollar-equivalent principal amountof Indebtedness denominated in a foreign currency shall be calculated based onthe relevant currency exchange rate in effect on the date such Indebtedness wasincurred, in the case of term debt, or first committed, in the case ofrevolving credit debt; *provided*that if such Indebtedness is incurred to extend, replace, refund, refinance,renew or defease other Indebtedness denominated in a foreign currency, and suchextension, replacement, refunding, refinancing, renewal or defeasance wouldcause the applicable U.S. dollar-denominated restriction to be exceeded ifcalculated at the relevant currency exchange rate in effect on the date of suchextension, replacement, refunding, refinancing, renewal or defeasance, suchU.S. dollar-denominated restriction shall be deemed not to have been exceededso long as the principal amount of such refinancing Indebtedness does notexceed the principal amount of such Indebtedness being extended, replaced,refunded, refinanced, renewed or defeased.

 

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

 

SECTION 1012.  Liens.  TheCompany shall not, and shall not permit any of the Subsidiary Guarantors to,directly or indirectly, create, incur, assume or suffer to exist any Lien(except Permitted Liens) that secures obligations under any Senior SubordinatedIndebtedness or Subordinated Indebtedness on any asset or property of theCompany or any Subsidiary Guarantor now owned or hereafter acquired, or anyincome or profits therefrom, or assign or convey any right to receive incometherefrom, unless:

 

(1)           in the case of Liens securing Subordinated Indebtedness,the Notes or the applicable Subsidiary Guarantee of a Subsidiary Guarantor, asthe case may

 

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be, are secured by a Lien on such property or assetsthat is senior in priority to such Liens; and

 

(2)           in all other cases, the Notes or the applicable SubsidiaryGuarantee of a Subsidiary Guarantor, as the case may be, are equally andratably secured;

 

*provided* that any Lien which isgranted to secure the Notes under this Section 1012 shall be discharged atthe same time as the discharge of the Lien (other than through the exercise ofremedies with respect thereto) that gave rise to the obligation to so securethe Notes.

 

SECTION 1013.  Limitations onTransactions with Affiliates.  (a)  The Company shall not,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 Company (each of theforegoing, an “*Affiliate Transaction*”)involving aggregate payments or consideration in excess of $10.0 million,unless

 

(1)           such Affiliate Transaction is on terms that are notmaterially less favorable to the Company or the relevant Restricted Subsidiarythan those that would have been obtained in a comparable transaction by theCompany or such Restricted Subsidiary with an unrelated Person and

 

(2)           the Company delivers to the Trustee with respect to anyAffiliate Transaction or series of related Affiliate Transactions involvingaggregate payments or consideration in excess of $30.0 million, a BoardResolution adopted by the majority of the members of the Board of Directors ofthe Company approving such Affiliate Transaction and set forth in an Officers’Certificate certifying that such Affiliate Transaction complies with clause(1) above.

 

(b)           Theforegoing provisions shall not apply to the following:

 

(1)           Transactions between or among the Company or any of theRestricted Subsidiaries;

 

(2)           Restricted Payments permitted by Section 1010 of thisIndenture and the definition of “Permitted Investments”;

 

(3)           the payment of management, consulting, monitoring andadvisory fees and related expenses to the Sponsors and any termination or otherfee payable to the Sponsors upon a change of control or initial public equityoffering of the Company or any direct or indirect parent company thereofpursuant to the Management Services Agreement as in effect on the Issue Date;

 

(4)           the payment of reasonable and customary fees paid to, andindemnities provided on behalf of, officers, directors, managers, employees or

 

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consultants of the Company, any of its direct orindirect parent companies or any Restricted Subsidiary;

 

(5)           payments by the Company or any Restricted Subsidiary toany of the Sponsors and the Co-Investors for any financial advisory, financing,underwriting or placement services or in respect of other investment bankingactivities, including in connection with acquisitions or divestitures, whichpayments are approved by a majority of the members of the Board of Directors ofthe Company in good faith;

 

(6)           transactions in which the Company or any RestrictedSubsidiary, as the case may be, delivers to the Trustee a letter from anIndependent Financial Advisor stating that such transaction is fair to theCompany or such Restricted Subsidiary from a financial point of view or meetsthe requirements of clause (1) of Section 1013(a);

 

(7)           payments or loans (or cancellations of loans) to employeesor consultants of the Company, any of its direct or indirect parent companiesor any Restricted Subsidiary and employment agreements, stock option plans andother compensatory arrangements with such employees or consultants that are, ineach case, approved by the Company in good faith;

 

(8)           any agreement, instrument or arrangement as in effect asof the Issue Date, or any amendment thereto (so long as any such amendment isnot disadvantageous to the Holders in any material respect as compared to theapplicable agreement as in effect on the Issue Date as reasonably determined ingood faith by the Company);

 

(9)           the existence of, or the performance by the Company or anyof the Restricted Subsidiaries of its obligations under the terms of, anystockholders agreement or its equivalent (including any registration rightsagreement or purchase agreement related thereto) to which it is a party as ofthe Issue Date and any similar agreements which it may enter into thereafter; *provided, however*, that the existence of,or the performance by the Company or any Restricted Subsidiary of obligationsunder any future amendment to any such existing agreement or under any similaragreement entered into after the Issue Date shall only be permitted by thisclause (9) to the extent that the terms of any such existing agreementtogether with all amendments thereto, taken as a whole, or new agreement arenot otherwise more disadvantageous to the Holders in any material respect thanthe terms of the original agreement in effect on the Issue Date as reasonablydetermined in good faith by the Company;

 

(10)         the Transactions, the Credit Card Sale and the payment ofall fees and expenses related to the Transactions and the Credit Card Sale, ineach case as disclosed in the Offering Circular;

 

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(11)         transactions with customers, clients, suppliers, orpurchasers or sellers of goods or services, in each case in the ordinary courseof business and otherwise in compliance with the terms of this Indenture thatare fair to the Company and the Restricted Subsidiaries, in the reasonabledetermination of the Board of Directors or the senior management of theCompany, or are on terms at least as favorable as might reasonably have beenobtained at such time from an unaffiliated party;

 

(12)         the issuance of Equity Interests (other than DisqualifiedStock) of the Company to any Permitted Holder or to any director, manager,officer, employee or consultant of the Company or any direct or indirect parentcompany thereof;

 

(13)         sales of accounts receivable, or participations therein, inconnection with any Receivables Facility; and

 

(14)         investments by the Sponsors and the Co-Investors insecurities of the Company or any of its Restricted Subsidiaries so long as(i) the investment is being offered generally to other investors on thesame or more favorable terms and (ii) the investment constitutes less than5.0% of the proposed or outstanding issue amount of such class of securities.

 

SECTION 1014.  Limitations on Dividendand Other Payment Restrictions Affecting Restricted Subsidiaries.  TheCompany shall not, and shall not permit any Restricted Subsidiary that is not aSubsidiary Guarantor to, directly or indirectly, create or otherwise cause orsuffer to exist or become effective any consensual encumbrance or consensualrestriction on the ability of any such Restricted Subsidiary to:

 

(a)           (1) pay dividends or make any other distributions tothe Company or any Restricted Subsidiary on its Capital Stock or with respectto any other interest or participation in, or measured by, its profits or

 

(2)           payany Indebtedness owed to the Company or any Restricted Subsidiary;

 

(b)           make loans or advances to the Company or any RestrictedSubsidiary; or

 

(c)           sell, lease or transfer any of its properties or assets tothe Company or any Restricted Subsidiary,

 

except(in each case) for such encumbrances or restrictions existing under or byreason of:

 

(1)           contractual encumbrances or restrictions in effect on theIssue Date, including pursuant to the Senior Credit Facilities and the relateddocumentation (including security documents and intercreditor agreements) andHedging Obligations, the Existing 2008 Notes and the Existing 2028 Debentures;

 

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(2)           the Indentures and the New Notes and the SubsidiaryGuarantees;

 

(3)           purchase money obligations for property acquired in theordinary course of business and Capital Lease Obligations that imposerestrictions of the nature discussed in clause (c) above on the propertyso acquired;

 

(4)           applicable law or any applicable rule, regulation ororder;

 

(5)           any agreement or other instrument of a Person acquired bythe Company or any Restricted Subsidiary in existence at the time of suchacquisition (but not created in connection therewith or in contemplationthereof), which encumbrance or restriction is not applicable to any Person, orthe properties or assets of any Person, other than the Person, or the propertyor assets of the Person, so acquired;

 

(6)           contracts for the sale of assets, including customaryrestrictions with respect to a Subsidiary pursuant to an agreement that hasbeen entered into for the sale or disposition of all or substantially all ofthe Capital Stock or assets of such Subsidiary;

 

(7)           Secured Indebtedness otherwise permitted to be incurredpursuant to Sections 1011 and 1012 of this Indenture that limit the rightof the debtor to dispose of the assets securing such Indebtedness;

 

(8)           restrictions on cash or other deposits or net worthimposed by customers under contracts entered into in the ordinary course ofbusiness;

 

(9)           other Indebtedness, Disqualified Stock or Preferred Stockof Restricted Subsidiaries permitted to be incurred after the Issue Datepursuant to the provisions of Section 1011 of this Indenture;

 

(10)         customary provisions in joint venture agreements and othersimilar agreements;

 

(11)         customary provisions contained in leases and otheragreements entered into in the ordinary course of business;

 

(12)         restrictions created in connection with any ReceivablesFacility; *provided* that in thecase of Receivables Facilities established after the Issue Date, suchrestrictions are necessary or advisable, in the good faith determination of theCompany, to effect such Receivables Facility;

 

(13)         restrictions or conditions contained in any trading,netting, operating, construction, service, supply, purchase or other agreementto which the Company or any of its Restricted Subsidiaries is a party enteredinto in the ordinary course of business; *provided*that such agreement prohibits the encumbrance of solely the property or assetsof the Company or such Restricted Subsidiary that are the subject of suchagreement, the payment rights arising

 

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thereunder or the proceeds thereof and does notextend to any other asset or property of the Company or such RestrictedSubsidiary or the assets or property of any other Restricted Subsidiary; and

 

(14)         any encumbrances or restrictions of the type referred to inclauses (a), (b) and (c) above imposed by any amendments,modifications, restatements, renewals, increases, supplements, refundings,replacements or refinancings of the contracts, instruments or obligationsreferred to in clauses (1) through (13) above; *provided* that such amendments, modifications, restatements,renewals, increases, supplements, refundings, replacements or refinancings are,in the good faith judgment of the Company, not materially more restrictive withrespect to such encumbrance and other restrictions than those prior to suchamendment, modification, restatement, renewal, increase, supplement, refunding,replacement or refinancing; *provided,further*, that with respect to contracts, instruments or obligationsexisting on the Issue 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 Issue Date.

 

SECTION 1015.  Limitation on Guaranteesof Indebtedness by Restricted Subsidiaries.  The Company shall notpermit any of its Wholly-Owned Subsidiaries that are Restricted Subsidiaries(and non-Wholly-Owned Subsidiaries if such non-Wholly-Owned Subsidiariesguarantee other capital markets debt securities), other than a SubsidiaryGuarantor or a Foreign Subsidiary, to guarantee the payment of any Indebtednessof the Company or any other Subsidiary Guarantor unless:

 

(1)           such Restricted Subsidiary within 30 days executes anddelivers a supplemental indenture to this Indenture providing for a SubsidiaryGuarantee by such Restricted Subsidiary, except that with respect to aguarantee of Indebtedness of the Company or any Subsidiary Guarantor:

 

(a)           ifthe Notes or such Subsidiary Guarantor’s Subsidiary Guarantee are subordinatedin right of payment to such Indebtedness, the Subsidiary Guarantee under thesupplemental indenture shall be subordinated to such Restricted Subsidiary’sguarantee with respect to such Indebtedness substantially to the same extent asthe Notes are subordinated to such Indebtedness; and

 

(b)           ifsuch Indebtedness is by its express terms subordinated in right of payment tothe Notes or such Subsidiary Guarantor’s Subsidiary Guarantee, any suchguarantee by such Restricted Subsidiary with respect to such Indebtedness shallbe subordinated in right of payment to such Subsidiary Guarantee substantiallyto the same extent as such Indebtedness is subordinated to the Notes;

 

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(2)           such Restricted Subsidiary waives and shall not in anymanner whatsoever claim or take the benefit or advantage of, any rights ofreimbursement, indemnity or subrogation or any other rights against the Companyor any other Restricted Subsidiary as a result of any payment by suchRestricted Subsidiary under its Subsidiary Guarantee; and

 

(3)           such Restricted Subsidiary shall deliver to the Trustee anOpinion of Counsel to the effect that:

 

(a)           suchSubsidiary Guarantee has been duly executed and authorized; and

 

(b)           suchSubsidiary Guarantee constitutes a valid, binding and enforceable obligation ofsuch Restricted Subsidiary, except insofar as enforcement thereof may belimited by bankruptcy, insolvency or similar laws (including all laws relatingto fraudulent transfers) and except insofar as enforcement thereof is subjectto general principles of equity;

 

*provided* that this Section 1015shall not be applicable to any guarantee of any Restricted Subsidiary thatexisted at the time such Person became a Restricted Subsidiary and was notincurred in connection with, or in contemplation of, such Person becoming a RestrictedSubsidiary.

 

SECTION 1016.  Limitation on OtherSenior Subordinated Indebtedness.  The Company shall not, and shallnot permit any Subsidiary Guarantor to, directly or indirectly, incur anyIndebtedness (including Acquired Debt) that is contractually subordinated orjunior in right of payment to any Senior Indebtedness of the Company or anySubsidiary Guarantor, as the case may be, unless such Indebtedness is either:

 

(1)           *pari passu*in right of payment with the Notes or the Subsidiary Guarantees, as the casemay be; or

 

(2)           expressly subordinated in right of payment to the Notes orthe Subsidiary Guarantees, as the case may be.

 

Pursuantto this Indenture (1) no unsecured Indebtedness shall be consideredsubordinated or junior to Secured Indebtedness merely because it is unsecuredand (2) no Senior Indebtedness shall be considered subordinated or juniorto any other Senior Indebtedness merely because it has a junior priority withrespect to the same collateral.

 

SECTION 1017.  Change of Control. (a)  If a Change of Control occurs, the Company shall make an offerto purchase all of the Notes pursuant to the offer described below (the “*Change of Control Offer*”) at a price incash (the “*Change of Control Payment*”)equal to 101% of the aggregate principal amount thereof plus accrued and unpaidinterest, and Additional Interest, if any, to the date of purchase, subject tothe right of Holders of record on the relevant record date to receive interestdue on the relevant interest payment date. Within 30 days following any Changeof Control, the

 

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Companyshall send notice of such Change of Control Offer by first class mail, with acopy to the Trustee, to each Holder to the address of such Holder appearing inthe security register with a copy to the Trustee, with the followinginformation:

 

(1)           a Change of Control Offer is being made pursuant to thisSection 1017 and all Notes properly tendered pursuant to such Change ofControl Offer shall be accepted for payment;

 

(2)           the purchase price and the purchase date, which shall beno earlier than 30 days nor later than 60 days from the date such notice ismailed (the “*Change of Control Payment Date*”);

 

(3)           any Note not properly tendered shall remain outstanding andcontinue to accrue interest;

 

(4)           unless the Company defaults in the payment of the Changeof Control Payment, all Notes accepted for payment pursuant to the Change ofControl Offer shall cease to accrue interest on the Change of Control PaymentDate;

 

(5)           Holders electing to have any Notes purchased pursuant to aChange of Control Offer shall be required to surrender the Notes, with the formentitled “Option of Holder to Elect Purchase” on the reverse of the Notescompleted, to the paying agent specified in the notice at the address specifiedin the notice prior to the close of business on the third Business Daypreceding the Change of Control Payment Date;

 

(6)           Holders shall be entitled to withdraw their tendered Notesand their election to require the Company to purchase such Notes; *provided* that the paying agent receives,not later than the close of business on the last day of the offer period, atelegram, telex, facsimile transmission or letter setting forth the name of theHolder, the principal amount of Notes tendered for purchase, and a statementthat such Holder is withdrawing its tendered Notes and its election to havesuch Notes purchased; and

 

(7)           Holders whose Notes are being purchased only in part shallbe issued new Notes equal in principal amount to the unpurchased portion of theNotes surrendered, which unpurchased portion must be equal to $2,000 or anintegral multiple of $1,000 in excess of $2,000; *provided* that no Note of less than $2,000 shall be redeemedin part.

 

(b)           Whilethe Notes are in global form and the Company makes an offer to purchase all ofthe Notes pursuant to the Change of Control Offer, a Holder may exercise itsoption to elect for the purchase of the Notes through the facilities of DTC,subject to its rules and regulations.

 

(c)           TheCompany shall comply with the requirements of Rule 14e-1 under theExchange Act and any other securities laws and regulations thereunder to the

 

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extentsuch laws or regulations are applicable in connection with the repurchase ofthe Notes pursuant to a Change of Control Offer. To the extent that theprovisions of any securities laws or regulations conflict with the provisionsof this Indenture, the Company shall comply with the applicable securities lawsand regulations and shall not be deemed to have breached its obligationsdescribed in this Indenture by virtue thereof.

 

(d)           Onthe Change of Control Payment Date, the Company shall, to the extent permittedby law,

 

(1)           accept for payment all Notes or portions thereof properlytendered pursuant to the Change of Control Offer,

 

(2)           deposit with the Paying Agent an amount equal to theaggregate Change of Control Payment in respect of all Notes or portions thereofso tendered and

 

(3)           deliver, or cause to be delivered, to the Trustee forcancellation the Notes so accepted together with an Officers’ Certificatestating that such Notes or portions thereof have been tendered to and purchasedby the Company.

 

(e)           ThePaying Agent shall promptly mail to each Holder the Change of Control Paymentfor such Notes, and the Trustee shall promptly authenticate and mail to eachHolder a new Note equal in principal amount to any unpurchased portion of theNotes surrendered, if any; *provided*that no Notes of $2,000 or less shall be redeemed in part and each such newNote shall be in a principal amount of $2,000 or an integral multiple of $1,000in excess of $2,000. The Company shall publicly announce the results of theChange of Control Offer on or as soon as practicable after the Change ofControl Payment Date.

 

(f)            TheCompany shall not be required to make a Change of Control Offer following aChange of Control if a third party makes the Change of Control Offer in themanner, at the time and otherwise in compliance with the requirements set forthin this Indenture applicable to a Change of Control Offer made by the Companyand purchases all Notes validly tendered and not withdrawn under such Change ofControl Offer. A Change of Control Offer may be made in advance of a Change ofControl, conditional upon such Change of Control, if a definitive agreement isin place for the Change of Control at the time of making of the Change ofControl Offer.

 

SECTION 1018.  Asset Sales. (a)  The Company shall not, and shall not permit any RestrictedSubsidiary to, cause, make or suffer to exist an Asset Sale, unless:

 

(1)           the Company or such Restricted Subsidiary, as the case maybe, receives consideration at the time of such Asset Sale at least equal to thefair market value (as determined in good faith by the Company) of the assetssold or otherwise disposed of; and

 

(2)           except in the case of a Permitted Asset Swap, at least 75%of the consideration therefor received by the Company or such RestrictedSubsidiary, as

 

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the case may be, is in the form of cash or CashEquivalents; *provided* that theamount of

 

(A)          any liabilities (as shown on the Company’s or suchRestricted Subsidiary’s most recent balance sheet or in the notes thereto) ofthe Company or such Restricted Subsidiary, other than liabilities that are bytheir terms subordinated to the Notes, that are assumed by the transferee ofany such assets (or a third party on behalf of the transferee) and for whichthe Company or such Restricted Subsidiary has been validly released by allcreditors in writing,

 

(B)           any securities, notes or other obligations or assetsreceived by the Company or such Restricted Subsidiary from such transferee thatare converted by the Company or such Restricted Subsidiary into cash (to theextent of the cash received) within 180 days following the closing of suchAsset Sale and

 

(C)           any Designated Noncash Consideration received by theCompany or such Restricted Subsidiary in such Asset Sale having an aggregatefair market value, taken together with all other Designated NoncashConsideration received pursuant to this clause (C) that is at that timeoutstanding, not to exceed the greater of (x) $125.0 million and (y) 1.75%of Total Assets at the time of the receipt of such Designated NoncashConsideration, with the fair market value of each item of Designated NoncashConsideration being measured at the time received and without giving effect tosubsequent changes in value,

 

shallbe deemed to be cash for purposes of this provision and for no other purpose.

 

(b)           Within450 days after any of the Company’s or any Restricted Subsidiary’s receipt ofthe Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiarymay, at its option, apply the Net Proceeds from such Asset Sale:

 

(1)           to permanently reduce

 

(x)            Obligationsunder any Senior Indebtedness, the Notes or any other Senior SubordinatedIndebtedness, in each case, of the Company or any Subsidiary Guarantor and, inthe case of Obligations under revolving credit facilities or other similarIndebtedness, to correspondingly permanently reduce commitments with respectthereto (other than Obligations owed to the Company or a RestrictedSubsidiary); *provided* that if theCompany or any Restricted Subsidiary shall so reduce Obligations under anySenior Subordinated Indebtedness, the Company or such Subsidiary Guarantorshall, equally and ratably, reduce Obligations under the Notes by, at itsoption, (A) redeeming Notes if the Notes

 

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arethen redeemable as provided by the terms of the Notes, (B) making an offer(in accordance with the procedures set forth in this Section 1018) to allHolders to purchase their Notes at 100% of the principal amount thereof, *plus* the amount of accrued and unpaidinterest and Additional Interest, if any, on the principal amount of Notes tobe repurchased or (C) purchasing Notes through open market purchases (tothe extent such purchases are at a price equal to or higher than 100% of theprincipal amount thereof) in a manner that complies with this Indenture andapplicable securities law; or

 

(y)           Indebtednessof a Restricted Subsidiary that is not a Subsidiary Guarantor, other thanIndebtedness owed to the Company or another Restricted Subsidiary; or

 

(2)           to an investment in (A) any one or more businesses; *provided* that such investment in anybusiness is in the form of the acquisition of Capital Stock and results in theCompany or any Restricted Subsidiary owning an amount of the Capital Stock ofsuch business such that it constitutes a Restricted Subsidiary,(B) properties, (C) capital expenditures and (D) acquisitions ofother assets, that in each of (A), (B), (C) and (D), are used or useful ina Similar Business or replace the businesses, properties and assets that arethe subject of such Asset Sale.

 

(c)           AnyNet Proceeds from the Asset Sale that are not invested or applied in accordancewith the preceding paragraph within 450 days from the date of the receipt ofsuch Net Proceeds shall be deemed to constitute “*Excess Proceeds*”; *provided*that if during such 450-day period the Company or a Restricted Subsidiaryenters into a definitive binding agreement committing it to apply such NetProceeds in accordance with the requirements of clause (2) ofSection 1018(b) after such 450th day, such 450-day period shall beextended with respect to the amount of Net Proceeds so committed until such NetProceeds are required to be applied in accordance with such agreement (but suchextension shall in no event be for a period longer than 180 days) (or, ifearlier, the date of termination of such agreement). When the aggregate amountof Excess Proceeds exceeds $45.0 million, the Company shall make an offer toall Holders and, if required by the terms of any Senior SubordinatedIndebtedness, to the holders of such Senior Subordinated Indebtedness (otherthan with respect to Hedging Obligations) (an “*AssetSale Offer*”), to purchase the maximum aggregate principal amount ofNotes and such Senior Subordinated Indebtedness that is an integral multiple of$1,000 that may be purchased out of the Excess Proceeds at an offer price incash in an amount equal to 100% of the principal amount thereof, plus accruedand unpaid interest and Additional Interest, if any, to the date fixed for theclosing of such offer, in accordance with the procedures set forth in thisIndenture. The Company shall commence an Asset Sale Offer with respect toExcess Proceeds within ten Business Days after the date that Excess Proceeds exceed$45.0 million by mailing the notice required pursuant to the terms of thisIndenture, with a copy to the Trustee. The Company may satisfy the foregoingobligations with respect to any Net Proceeds from an Asset Sale by making anAsset Sale

 

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Offerwith respect to such Net Proceeds prior to the expiration of the relevant 450days or with respect to Excess Proceeds of $45.0 million or less.  To theextent that the aggregate amount of Notes and such Senior SubordinatedIndebtedness tendered pursuant to an Asset Sale Offer is less than the ExcessProceeds, the Company may use any remaining Excess Proceeds for generalcorporate purposes, subject to the other covenants contained in this Indenture.If the aggregate principal amount of Notes or the Senior SubordinatedIndebtedness surrendered by such holders thereof exceeds the amount of ExcessProceeds, the Trustee shall select or cause to be selected the Notes and suchSenior Subordinated Indebtedness to be purchased on a *pro rata* basis based on the accreted valueor principal amount of the Notes or such Senior Subordinated Indebtednesstendered. Upon completion of any such Asset Sale Offer, the amount of ExcessProceeds related to such Asset Sale Offer shall be reset at zero.

 

(d)           Pendingthe final application of any Net Proceeds pursuant to this Section 1018,the Company or the applicable Restricted Subsidiary may apply such Net Proceedstemporarily to reduce Indebtedness outstanding under a revolving credit facilityor otherwise invest such Net Proceeds in any manner not prohibited by thisIndenture.

 

(e)           TheCompany shall comply with the requirements of Rule 14e-1 under theExchange Act and any other securities laws and regulations thereunder to theextent such laws or regulations are applicable in connection with therepurchase of Notes pursuant to an Asset Sale Offer. To the extent that theprovisions of any securities laws or regulations conflict with the provisionsof this Indenture, the Company shall comply with the applicable securities lawsand regulations and shall not be deemed to have breached its obligationsdescribed in this Indenture by virtue thereof.

 

(f)            Ifthe Company is repurchasing less than all of the Notes at any time, the Trusteeshall select the Notes to be repurchased (a) if the Notes are listed onany national securities exchange, in compliance with the requirements of theprincipal national securities exchange on which such Notes are listed or(b) if such Notes are not so listed, on a *prorata* basis to the extent practicable; *provided* that no Notes of $2,000 or less shall berepurchased in part.

 

(g)           Noticesof repurchase shall be mailed by first class mail, postage prepaid, at least 30days but not more than 60 days before the date of repurchase to each Holder atsuch Holder’s registered address, except that notices of repurchase may bemailed more than 60 days prior to a date of repurchase if the notice is issuedin connection with a defeasance of the Notes or a satisfaction and discharge ofthis Indenture. If any Note is to be repurchased in part only, any notice ofrepurchase that relates to such Note shall state the portion of the principalamount thereof to be repurchased.

 

(h)           Anew Note in principal amount equal to the unrepurchased portion of any Noterepurchased in part shall be issued in the name of the Holder thereof uponcancellation of the original Note. Notes called for repurchase become due andpayable on the date fixed for repurchase. On and after the date of repurchase, unlessthe

 

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Companydefaults in the repurchase payment, interest shall cease to accrue on the Noteor portions thereof called for repurchase.

 

SECTION 1019.  Additional InterestNotice.  In the event that the Company is required to pay AdditionalInterest to Holders pursuant to the Registration Rights Agreement, the Companyshall provide written notice (an “*AdditionalInterest Notice*”) to the Trustee of its obligation to pay AdditionalInterest no later than fifteen days prior to the proposed payment date for theAdditional Interest, and the Additional Interest Notice shall set forth theamount of Additional Interest to be paid by the Company on such paymentdate.  The Trustee shall not at any time be under any duty orresponsibility to any Holder to determine the Additional Interest, or withrespect to the nature, extent, or calculation of the amount of AdditionalInterest owed, or with respect to the method employed in such calculation ofthe Additional Interest.

 

SECTION 1020.  Obligations of theCompany and the Restricted Subsidiaries Relating to Kate Spade.  Inthe event that Kate Spade sells, conveys, transfers or otherwise disposes allor substantially all of its properties or assets in one or more relatedtransactions, the Company shall, subject to its fiduciary duties to the holdersof minority Equity Interests in Kate Spade and subject to any other obligationsin the organizational documents of Kate Spade or other agreements with KateSpade or holders of its Equity Interests (in each case, as in effect on theIssue Date), exercise its rights and powers as a controlling holder of EquityInterests in Kate Spade to cause Kate Spade to distribute to the Company its *pro rata* share of the net proceeds of suchsale, conveyance, transfer or other disposition, the Company shall apply suchproceeds in accordance with Section 1018 of this Indenture and suchproceeds shall constitute “Net Proceeds” thereunder.  In addition, theCompany shall, and shall cause its Restricted Subsidiaries to, apply the amountof any other Extraordinary Distribution in accordance with Section 1018 ofthis Indenture and such amount will constitute “Net Proceeds” thereunder. Furthermore, the Company, in its capacity as a holder of Equity Interests inKate Spade, shall not, and shall cause its Restricted Subsidiaries not to,waive any of its rights to receive dividends, distributions or other paymentsfrom Kate Spade or consent to an amendment of Kate Spade’s organizationaldocuments or other agreements that would restrict Kate Spade’s ability to makeany such distributions.

 

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**ARTICLE ELEVEN**

 

**REDEMPTIONOF NOTES**

 

SECTION 1101.  Right of Redemption. (a)  At any time prior to October 15, 2010, the Company may redeemall or a part of the Notes, upon not less than 30 nor more than 60 days’prior notice, at a redemption price equal to 100% of the principal amount ofNotes redeemed plus the Applicable Premium as of, and accrued and unpaidinterest and Additional Interest, if any, to the Redemption Date, subject tothe rights of Holders on the relevant Record Date to receive interest due onthe relevant Interest Payment Date.

 

(b)           Fromand after October 15, 2010, the Company may redeem the Notes, in whole orin part, upon not less than 30 nor more than 60 days’ prior notice at theredemption prices (expressed as percentages of principal amount) set forthbelow, plus accrued and unpaid interest, and Additional Interest, if any,thereon to the applicable Redemption Date, subject to the right of Holders onthe relevant record date to receive interest due on the relevant InterestPayment Date, if redeemed during the twelve-month period beginning onOctober 15 of each of the years indicated below:

 
| **Year**            | ** ** | **Percentage** | ** ** |
|---------------------|------------|----------------|------------|
| 2010                |       | 105.188        | %          |
| 2011                |       | 103.458        | %          |
| 2012                |       | 101.729        | %          |
| 2013 and thereafter |       | 100.000        | %          |

 

(c)           Priorto October 15, 2008, the Company may, at its option, redeem up to 35% ofthe aggregate principal amount of Notes issued under this Indenture at aredemption price equal to 110.375% of the aggregate principal amount thereof,plus accrued and unpaid interest and Additional Interest, if any, thereon tothe applicable Redemption Date, subject to the right of Holders on the relevantrecord date to receive interest due on the relevant interest payment date, withthe net cash proceeds of one or more Equity Offerings of the Company or anydirect or indirect parent of the Company to the extent such net cash proceedsare contributed to the Company; *provided*thatat least 50% of the sum of the aggregate principal amount of Notes originallyissued under this Indenture and any Additional Notes issued under thisIndenture after the Issue Date remains Outstanding immediately after theoccurrence of each such redemption; *providedfurther*that each such redemption occurs within 90 days of thedate of closing of each such Equity Offering.

 

SECTION 1102.  Applicability ofArticle.  Redemption of Notes at the election of the Company orotherwise, as permitted or required by any provision of this Indenture or theNotes, shall be made in accordance with such provision and this Article.

 

SECTION 1103.  Election to Redeem;Notice to Trustee.  The election of the Company to redeem any Notespursuant to Section 1101 above shall be evidenced by a BoardResolution.  If the Company elects to redeem Notes pursuant toSection 1101

 

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aboveit shall furnish to the Trustee, at least five Business Days before notice ofredemption is required to be mailed or caused to be mailed to Holders pursuantto Section 1105 hereof, an Officers’ Certificate setting forth(i) the paragraph or subparagraph of such Note and/or Section of thisIndenture pursuant to which the redemption shall occur, (ii) theRedemption Date, (iii) the principal amount of the Notes to be redeemedand (iv) the Redemption Price.

 

SECTION 1104.  Selection by Trustee ofNotes to Be Redeemed.  (a)  If the Company is redeeming less thanall of the Notes at any time, the Trustee shall select the Notes to be redeemed(a) if the Notes are listed on any national securities exchange, incompliance with the requirements of the principal national securities exchangeon which such Notes are listed or (b) if such Notes are not so listed, ona *pro rata* basis to the extentpracticable; *provided* that noNotes of $2,000 or less shall be redeemed in part.

 

(b)           Ifany Note is to be redeemed in part only, any notice of redemption that relatesto such Note shall state the portion of the principal amount thereof to beredeemed.

 

(c)           Anew Note in principal amount equal to the unredeemed portion of any Noteredeemed in part shall be issued in the name of the Holder thereof uponcancellation of the original Note.  Notes called for redemption become dueand payable on the date fixed for redemption.  On and after the RedemptionDate, unless the Company defaults in the redemption payment, interest shallcease to accrue on the Note or portions thereof called for redemption.

 

SECTION 1105.  Notice of Redemption. Notices of redemption shall be mailed by first class mail, postage prepaid, atleast 30 days but not more than 60 days before the Redemption Date toeach Holder at such Holder’s registered address, except that notices ofredemption may be mailed more than 60 days prior to a Redemption Date ifthe notice is issued in connection with a defeasance of the Notes or asatisfaction and discharge of this Indenture.

 

Allnotices of redemption shall state:

 

(1)           the Redemption Date,

 

(2)           the Redemption Price and the amount of accrued interest tothe Redemption Date payable as provided in Section 1107, if any,

 

(3)           if less than all Outstanding Notes are to be redeemed, theidentification (and, in the case of a partial redemption, the principalamounts) of the particular Notes to be redeemed,

 

(4)           in case any Note is to be redeemed in part only, thenotice which relates to such Note shall state that on and after the RedemptionDate, upon surrender of such Note, the Holder shall receive, without charge, anew Note or Notes of authorized denominations for the principal amount thereofremaining unredeemed,

 

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(5)           that on the Redemption Date the Redemption Price (andaccrued interest, if any, to the Redemption Date payable as provided inSection 1107) shall become due and payable upon each such Note, or theportion thereof, to be redeemed, and that interest thereon shall cease toaccrue on and after said date,

 

(6)           the place or places where such Notes are to be surrenderedfor payment of the Redemption Price and accrued interest, if any,

 

(7)           the name and address of the Paying Agent,

 

(8)           that Notes called for redemption must be surrendered tothe Paying Agent to collect the Redemption Price,

 

(9)           that, unless the Company defaults in making suchredemption payment, interest on Notes called for redemption ceases to accrue onand after the Redemption Date;

 

(10)         the “CUSIP” number, ISIN or “Common Code” number andthat no representation is made as to the accuracy or correctness of the “CUSIP”number, ISIN or “Common Code” number, if any, listed in such notice orprinted on the Notes, and

 

(11)         the paragraph of the Notes or Section of the Indenturepursuant to which the Notes are to be redeemed.

 

Atthe Company’s request, the Trustee shall give the notice of redemption in theCompany’s name and at its expense; *provided*that the Company shall have delivered to the Trustee, at least five BusinessDays before notice of redemption is required to be mailed or caused to bemailed to Holders pursuant to this Section 1105 (unless a shorter noticeshall be agreed to by the Trustee), an Officers’ Certificate requesting that theTrustee give such notice and setting forth the information to be stated in suchnotice as provided in Section 1103.

 

SECTION 1106.  Effect of Notice ofRedemption.  Once notice of redemption is mailed in accordance withSection 1105 hereof, Notes called for redemption become irrevocably dueand payable on the Redemption Date at the Redemption Price.  The notice,if mailed in a manner herein provided, shall be conclusively presumed to havebeen given, whether or not the Holder receives such notice.  In any case,failure to give such notice by mail or any defect in the notice to the Holderof any Note designated for redemption in whole or in part shall not affect thevalidity of the proceedings for the redemption of any other Note.  Subjectto Section 1107 hereof, on and after the Redemption Date, interest ceasesto accrue on Notes or portions of Notes called for redemption.

 

SECTION 1107.  Deposit of RedemptionPrice.  Prior to 10:00 a.m. (Eastern Time) on any RedemptionDate, the Company shall deposit with the Trustee or with a Paying Agent (or, ifthe Company is acting as its own Paying Agent, segregate and hold in trust asprovided in Section 1003) an amount of money sufficient to pay the

 

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RedemptionPrice of, and accrued interest and Additional Interest, if any, on, all theNotes that are to be redeemed on that date.  The Trustee or the PayingAgent shall promptly return to the Company any money deposited with the Trusteeor the Paying Agent by the Company in excess of the amounts necessary to paythe redemption price of, and accrued and unpaid interest and AdditionalInterest, if any, on, all Notes to be redeemed or purchased.

 

SECTION 1108.  Notes Payable onRedemption Date.  (a)  Notice of redemption having been given asaforesaid, the Notes so to be redeemed shall, on the Redemption Date, becomedue and payable at the Redemption Price therein specified (together withaccrued interest and Additional Interest, if any, to the Redemption Date), andfrom and after such date (unless the Company shall default in the payment ofthe Redemption Price and accrued interest) such Notes shall cease to bearinterest.  Upon surrender of any such Note for redemption in accordancewith said notice, such Note shall be paid by the Company at the RedemptionPrice, together with accrued interest and Additional Interest, if any, to theRedemption Date and such Notes shall be canceled by the Trustee; *provided, however*, that installments ofinterest whose Stated Maturity is on or prior to the Redemption Date shall bepayable to the Holders of such Notes, or one or more Predecessor Notes,registered as such at the close of business on the relevant Record Datesaccording to their terms and the provisions of Section 306.

 

(b)           Ifany Note called for redemption shall not be so paid upon surrender thereof forredemption, the principal (and premium, if any) shall, until paid, bearinterest from the Redemption Date at the rate borne by the Notes.

 

SECTION 1109.  Notes Redeemed in Part. Any Note which is to be redeemed only in part (pursuant to the provisionsof this Article) shall be surrendered at the office or agency of the Companymaintained for such purpose pursuant to Section 1002 (with, if the Companyor the Trustee so requires, due endorsement by, or a written instrument oftransfer in form satisfactory to the Company and the Trustee duly executed by,the Holder thereof or such Holder’s attorney duly authorized in writing), andthe Company shall execute, and the Trustee shall authenticate and deliver tothe Holder of such Note without service charge, a new Note or Notes, of anyauthorized denomination as requested by such Holder, in aggregate principalamount equal to and in exchange for the unredeemed portion of the principal ofthe Note so surrendered; *provided*that each new Note will be in a principal amount of $2,000 or an integralmultiple of $1,000.

 

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**ARTICLE TWELVE**

 

**GUARANTEES**

 

SECTION 1201.  Guarantees. (a)  From and after the consummation of the Merger, each Guarantor herebyjointly and severally, irrevocably and unconditionally irrevocably guarantees,as primary obligor and not merely as surety, the Notes and obligations of theCompany hereunder and thereunder, and guarantees to each Holder of a Noteauthenticated and delivered by the Trustee, and to the Trustee for itself andon behalf of such Holder, that: (1) the principal of (and premium, if any)and interest on, or Additional Interest in respect of, the Notes shall be paidin full when due, whether at Stated Maturity, by acceleration or otherwise(including the amount that would become due but for the operation of theautomatic stay under Section 362(a) of the Bankruptcy Law), togetherwith interest on the overdue principal, if any, and interest on any overdueinterest, to the extent lawful, and all other obligations of the Company to theHolders or the Trustee hereunder or thereunder shall be paid in full orperformed, all in accordance with the terms hereof and thereof; and (2) incase of any extension of time of payment or renewal of any Notes or of any suchother obligations, the same shall be paid in full when due or performed inaccordance with the terms of the extension or renewal, whether at StatedMaturity, by acceleration or otherwise, subject, however, in the case ofclauses (1) and (2) above, to the limitation set forth inSection 1204 hereof.

 

(b)           EachGuarantor hereby agrees that its obligations hereunder shall be unconditional,irrespective of the validity, regularity or enforceability of the Notes or thisIndenture, the absence of any action to enforce the same, any waiver or consentby any Holder with respect to any provisions hereof or thereof, any release ofany other Guarantor, the recovery of any judgment against the Company, anyaction to enforce the same or any other circumstance which might otherwiseconstitute a legal or equitable discharge or defense of a Guarantor.

 

(c)           EachGuarantor hereby waives (to the extent permitted by law) the benefits of diligence,presentment, demand for payment, filing of claims with a court in the event ofinsolvency or bankruptcy of the Company, any right to require a proceedingfirst against the Company or any other Person, protest, notice and all demandswhatsoever and covenants that the Guarantee of such Guarantor shall not bedischarged as to any Note except by complete performance of the obligationscontained in such Note, this Indenture and such Guarantee.  Each Guarantoracknowledges that the Guarantee is a guarantee of payment, performance andcompliance when due and not of collection.  Each of the Guarantors herebyagrees that, in the event of a default in payment of principal (or premium, ifany) or interest on such Note, whether at its Stated Maturity, by acceleration,purchase or otherwise, legal proceedings may be instituted by the Trustee onbehalf of, or by, the Holder of such Note, subject to the terms and conditionsset forth in this Indenture, directly against each of the Guarantors to enforcesuch Guarantor’s Guarantee without first proceeding against the Company or anyother Guarantor.  Each Guarantor agrees that if, after the occurrence andduring the continuance of an Event of Default, the Trustee or any of theHolders are prevented by applicable law from exercising their respective rightsto accelerate the Maturity of the

 

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Notes,to collect interest on the Notes, or to enforce or exercise any other right orremedy with respect to the Notes, such Guarantor shall pay to the Trustee forthe account of the Holder, upon demand therefor, the amount that wouldotherwise have been due and payable had such rights and remedies been permittedto be exercised by the Trustee or any of the Holders.

 

(d)           Ifany Holder or the Trustee is required by any court or otherwise to return tothe Company or any Guarantor, or any custodian, trustee, liquidator or othersimilar official acting in relation to either the Company or any Guarantor, anyamount paid by any of them to the Trustee or such Holder, the Guarantee of eachof the Guarantors, to the extent theretofore discharged, shall be reinstated infull force and effect.  Each Guarantor further agrees that, as betweeneach Guarantor, on the one hand, and the Holders and the Trustee on the otherhand, (1) subject to this Article Twelve, the Maturity of theobligations guaranteed hereby may be accelerated as provided inArticle Five hereof for the purposes of the Guarantee of such Guarantornotwithstanding any stay, injunction or other prohibition preventing suchacceleration in respect of the obligations guaranteed hereby, and (2) inthe event of any acceleration of such obligation as provided inArticle Five hereof, such obligations (whether or not due and payable)shall forthwith become due and payable by each Guarantor for the purpose of theGuarantee of such Guarantor.  The Guarantors shall have the right to seekcontribution from any non-paying Guarantor so long as the exercise of suchright does not impair the rights of the Holders under the Guarantees.

 

(e)           EachGuarantee shall remain in full force and effect and continue to be effectiveshould any petition be filed by or against the Company for liquidation,reorganization, should the Company become insolvent or make an assignment forthe benefit of creditors or should a receiver or trustee be appointed for allor any significant part of the Company’s assets, and shall, to the fullestextent permitted by law, continue to be effective or be reinstated, as the casemay be, if at any time payment and performance of the Notes are, pursuant toapplicable law, rescinded or reduced in amount, or must otherwise be restoredor returned by any obligee on the Notes, whether as a “voidable preference”, “fraudulenttransfer” or otherwise, all as though such payment or performance had not beenmade.  In the event that any payment or any part thereof, is rescinded,reduced, restored or returned, the Notes shall, to the fullest extent permittedby law, be reinstated and deemed reduced only by such amount paid and not sorescinded, reduced, restored or returned.

 

SECTION 1202.  Severability. In case any provision of any Guarantee shall be invalid, illegal orunenforceable, the validity, legality, and enforceability of the remainingprovisions shall not in any way be affected or impaired thereby to the extentpermitted by applicable law.

 

SECTION 1203.  Subordination ofGuarantees.  The Guarantee issued by any Guarantor shall be unsecuredsenior subordinated obligations of such Guarantor, ranking pari passu with allother existing and future Senior Subordinated Indebtedness of such Guarantor,if any.  The Indebtedness evidenced by such Guarantee shall be

 

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subordinatedon the same basis to Senior Indebtedness of such Guarantor as the Notes aresubordinated to Senior Indebtedness under Article Fourteen.

 

SECTION 1204.  Limitation of Guarantors’Liability.  Each Guarantor, and by its acceptance of Notes, eachHolder hereby confirms that it is the intention of all such parties that theGuarantee of such Guarantor not constitute a fraudulent transfer or conveyancefor purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, theUniform Fraudulent Transfer Act or any similar federal or state law to theextent applicable to any Guarantee or the provisions of its local law relatingto fraudulent transfer or conveyance.  To effectuate the foregoingintention, the Trustee, the Holders and each Subsidiary Guarantor herebyirrevocably agree that the obligations of such Subsidiary Guarantor under itsSubsidiary Guarantee shall be limited to the maximum amount as will, aftergiving effect to such maximum amount and all other contingent and fixedliabilities of such Subsidiary Guarantor that are relevant under such laws andafter giving effect to any collections from, rights to receive contributionfrom or payments made by or on behalf of any other Guarantor in respect of theobligations of such other Guarantor under this Article Eleven, result inthe obligations of such Subsidiary Guarantor under its Subsidiary Guarantee notconstituting a fraudulent conveyance or fraudulent transfer under applicablelaw.

 

SECTION 1205.  Contribution. Each Guarantor that makes a payment under its Guarantee shall be entitled uponpayment in full of all guaranteed obligations under this Indenture to acontribution from each other Guarantor in an amount equal to such otherGuarantor’s *pro rata* portion ofsuch payment based on the respective net assets of all the Guarantors at thetime of such payment determined in accordance with GAAP (and for purposes ofthis Section 1205, Holdings’ net assets shall be those of all itsconsolidated Subsidiaries (other than the Subsidiary Guarantors)).

 

SECTION 1206.  Subrogation.  EachGuarantor shall be subrogated to all rights of Holders against the Company inrespect of any amounts paid by any Guarantor pursuant to the provisions ofSection 1201; *provided, however,*that, if a Default or Event of Default has occurred and is continuing, noGuarantor shall be entitled to enforce or receive any payments arising out of,or based upon, such right of subrogation until all amounts then due and payableby the Company under this Indenture or the Notes shall have been paid in full.

 

SECTION 1207.  Reinstatement. Each Guarantor hereby agrees (and each Person who becomes a Guarantor shallagree) that the Guarantee provided for in Section 1201 shall continue tobe effective or be reinstated, as the case may be, if at any time, payment, orany part thereof, of any obligations or interest thereon is rescinded or mustotherwise be restored by a Holder to the Company upon the bankruptcy orinsolvency of the Company or any Guarantor.

 

SECTION 1208.  Release of a Guarantor. The Subsidiary Guarantee of a Subsidiary Guarantor shall automatically andunconditionally be released and discharged, and no further action by suchGuarantor, the Company or the Trustee is required for the release of suchGuarantor’s Guarantee, upon:

 

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(1)           (A)  the sale, disposition orother transfer (including through merger or consolidation) of all of theCapital Stock (or any sale, disposition or other transfer of Capital Stockfollowing which such Subsidiary Guarantor is no longer a RestrictedSubsidiary), or all or substantially all the assets, of such SubsidiaryGuarantor (other than a sale, disposition or other transfer to a RestrictedSubsidiary) if such sale, disposition or other transfer is made in compliancewith the applicable provisions of this Indenture;

 

(B)  the designation bythe Company of such Subsidiary Guarantor as an Unrestricted Subsidiary inaccordance Section 1010 of this Indenture and the definition of “UnrestrictedSubsidiary”;

 

(C)  the release ordischarge of such Subsidiary Guarantor from its guarantee of Indebtedness underthe Senior Credit Facilities or the guarantee that resulted in the obligationof such Subsidiary Guarantor to guarantee the Notes, in each case, if suchSubsidiary Guarantor would not then otherwise be required to guarantee theNotes pursuant to Section 1015 of this Indenture (treating any guaranteesof such Subsidiary Guarantor that remain outstanding as incurred at least30 days prior to such release), except, in each case, a release ordischarge by, or as a result of, payment under such Guarantee or payment infull of the Indebtedness under the Senior Credit Facilities; or

 

(D)  exercise by theCompany of its Legal Defeasance of the Notes under Section 1302 of thisIndenture or its Covenant Defeasance of the Notes under Section 1303 ofthis Indenture or if the Company’s obligations under this Indenture aredischarged in accordance with Section 401 of this Indenture; and

 

(2)           in the case of clause (1) (a) above, therelease of such Subsidiary Guarantor from its guarantee, if any, of and allpledges and security, if any, granted in connection with, the Senior CreditFacilities, the Senior Notes and any other Indebtedness of the Company or anyRestricted Subsidiary.

 

SECTION 1209.  Benefits Acknowledged. Each Guarantor acknowledges that it shall receive direct and indirect benefitsfrom the financing arrangements contemplated by this Indenture and from itsguarantee and waivers pursuant to its Guarantees under thisArticle Twelve.

 

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**ARTICLE THIRTEEN**

 

**LEGALDEFEASANCE AND COVENANT DEFEASANCE**

 

SECTION 1301.  Company’s Option toEffect Legal Defeasance or Covenant Defeasance.  The Company may, atits option and at any time, elect to have either Section 1302 orSection 1303 be applied to all Outstanding Notes upon compliance with theconditions set forth below in this Article Thirteen.

 

SECTION 1302.  Legal Defeasance andDischarge.  Upon the Company’s exercise under Section 1301 of theoption applicable to this Section 1302, each of the Company and theGuarantors shall be deemed to have been discharged from its respectiveobligations with respect to all Outstanding Notes on the date the conditionsset forth in Section 1304 are satisfied (hereinafter, “*Legal Defeasance*”).  For thispurpose, such Legal Defeasance means that each of the Company and theGuarantors shall be deemed to have paid and discharged the entire indebtednessrepresented by the Outstanding Notes, which shall thereafter be deemed to be “Outstanding”only for the purposes of Section 1305 and the other Sections of thisIndenture referred to in (1) and (2) below, and to have satisfied allits other obligations under such Notes and this Indenture insofar as such Notesand their related Guarantees are concerned (and the Trustee, at the expense ofthe Company, shall execute proper instruments acknowledging the same), exceptfor the following which shall survive until otherwise terminated or dischargedhereunder:

 

(1)           the rights of Holders of Outstanding Notes to receivepayments in respect of the principal of (and premium, if any, on) and intereston such Notes when such payments are due, solely out of the trust createdpursuant to this Indenture (as described in Section 1304),

 

(2)           the Company’s obligations with respect to such Notes underSections 303, 304, 305, 1002 and 1003,

 

(3)           the rights, powers, trusts, duties and immunities of theTrustee hereunder, and the obligations of each of the Company and theGuarantors in connection therewith and

 

(4)           this Article Thirteen.

 

Subjectto compliance with this Article Thirteen, the Company may exercise itsoption under this Section 1302 notwithstanding the prior exercise of itsoption under Section 1303 with respect to the Notes.

 

SECTION 1303.  Covenant Defeasance.** **Upon the Company’s exerciseunder Section 1301 of the option applicable to this Section 1303,each of the Company and the Guarantors shall be released from its respectiveobligations under any covenant contained in Sections 801, 802, 803 and inSections 1005, 1006, 1007 and 1009 through and including 1018 and 1020with respect to the Outstanding Notes on and after the date the conditions setforth below are satisfied (hereinafter, “*CovenantDefeasance*”), and the

 

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Notesshall thereafter be deemed not to be “Outstanding” for the purposes of anydirection, waiver, consent or declaration or Act of Holders (and theconsequences of any thereof) in connection with such covenants, but shallcontinue to be deemed “Outstanding” for all other purposes hereunder.  Forthis purpose, such Covenant Defeasance means that, with respect to theOutstanding Notes, the Company or any Guarantor, as applicable, may omit tocomply with and shall have no liability in respect of any term, condition orlimitation set forth in any such covenant, whether directly or indirectly, byreason of any reference elsewhere herein to any such covenant or by reason ofany reference in any such covenant to any other provision herein or in anyother document and such omission to comply shall not constitute a Default or anEvent of Default under Sections 501(3), 501(4), 501(5) and501(7) and, with respect to only any Significant Subsidiary and not theCompany, Section 501(6), but, except as specified above, the remainder ofthis Indenture and such Notes shall be unaffected thereby.

 

SECTION 1304.  Conditions to LegalDefeasance or Covenant Defeasance.  The following shall be theconditions to application of either Section 1302 or Section 1303 tothe Outstanding Notes:

 

(1)           the Company shall irrevocably have deposited or caused tobe deposited with the Trustee (or another trustee satisfying the requirementsof Section 608 who shall agree to comply with the provisions of this Article Thirteenapplicable to it) as trust funds in trust for the purpose of making thefollowing payments, specifically pledged as security for, and dedicated solelyto the benefit of the Holders of such Notes; (A) cash in U.S. dollars, or(B) non-callable Government Securities, or (C) a combination thereof,in such amounts as shall be sufficient, in the opinion of a nationallyrecognized firm of independent public accountants expressed in a writtencertification thereof delivered to the Trustee, to pay and discharge, and whichshall be applied by the Trustee (or other qualifying trustee) to pay anddischarge, the principal of (and premium, if any) and interest on theOutstanding Notes on the Stated Maturity (or Redemption Date, if applicable) ofsuch principal (and premium, if any) or, interest due on the Notes; *provided* that the Trustee shall have beenirrevocably instructed to apply such cash or the proceeds of such GovernmentSecurities to said payments with respect to the Notes; and *provided further* that upon theeffectiveness of this Section 1304, the cash or Government Securitiesdeposited shall not be subject to the rights of the holders of SeniorIndebtedness pursuant to the provisions of Article Fourteen of thisIndenture, so long as the provisions of Article Fourteen were not violatedat the time the cash or Government Securities were so deposited.  Beforesuch a deposit, the Company may give to the Trustee, in accordance withSection 1103 hereof, a notice of its election to redeem all of theOutstanding Notes at a future date in accordance with Article Elevenhereof, which notice shall be irrevocable.  Such irrevocable redemptionnotice, if given, shall be given effect in applying the foregoing;

 

(2)           in the case of Legal Defeasance, the Company shall havedelivered to the Trustee an Opinion of Counsel in the United States reasonablyacceptable to the Trustee confirming that, subject to customary assumptions andexclusions,

 

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(A)  the Company hasreceived from, or there has been published by, the United States InternalRevenue Service a ruling, or

 

(B)  since the issuanceof the Notes, there has been a change in the applicable U.S. Federal income taxlaw,

 

ineither case to the effect that, and based thereon such Opinion of Counsel inthe United States shall confirm that, subject to customary assumptions andexclusions, the Holders shall not recognize income, gain or loss for U.S.Federal income tax purposes as a result of such Legal Defeasance and shall besubject to U.S. Federal income tax on the same amounts, in the same manner andat the same times as would have been the case if such Legal Defeasance had notoccurred;

 

(3)           in the case of Covenant Defeasance, the Company shall havedelivered to the Trustee an Opinion of Counsel in the United States reasonablyacceptable to the Trustee confirming that, subject to customary assumptions andexclusions, the Holders shall not recognize income, gain or loss for U.S.Federal income tax purposes as a result of such Covenant Defeasance and shallbe subject to such tax on the same amounts, in the same manner and at the sametimes as would have been the case if such Covenant Defeasance had not occurred;

 

(4)           no Default (other than that resulting from borrowing fundsto be applied to make such deposit and the granting of Liens in connectiontherewith) shall have occurred and be continuing on the date of such deposit;

 

(5)           such Legal Defeasance or Covenant Defeasance shall notresult in a breach or violation of, or constitute a default under any of theSenior Credit Facilities, the Senior Indenture, the Existing Indenture, theSenior Notes, the Existing 2028 Debentures or any other material agreement orinstrument (other than this Indenture) to which, the Company, Holdings or anySubsidiary Guarantor is a party or by which the Company, Holdings or anySubsidiary Guarantor is bound;

 

(6)           the Company shall have delivered to the Trustee an Opinionof Counsel in the United States of America to the effect that, as of the dateof such opinion and subject to customary assumptions and exclusions followingthe deposit, the trust funds shall not be subject to the effect of anyapplicable bankruptcy, insolvency, reorganization or similar laws affectingcreditors’ rights generally under any applicable U.S. Federal or state law, andthat the Trustee has a perfected security interest in such trust funds for theratable benefit of the Holders;

 

(7)           the Company shall have delivered to the Trustee anOfficers’ Certificate stating that the deposit was not made by the Company withthe intent of defeating, hindering, delaying or defrauding any creditors of theCompany or any Guarantor or others; and

 

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(8)           the Company shall have delivered to the Trustee anOfficers’ Certificate and an Opinion of Counsel in the United States of America(which Opinion of Counsel may be subject to customary assumptions andexclusions) each stating that all conditions precedent provided for or relatingto the Legal Defeasance or the Covenant Defeasance, as the case may be, havebeen complied with.

 

SECTION 1305.  Deposited Money andGovernment Securities to Be Held in Trust; Other Miscellaneous Provisions. All cash and Government Securities (including the proceeds thereof) depositedwith the Trustee (or other qualifying trustee, collectively for purposes ofthis Section 1305, the “*QualifyingTrustee*”) pursuant to Section 1304 in respect of theOutstanding Notes shall be held in trust and applied by the Qualifying Trustee,in accordance with the provisions of such Notes and this Indenture, to thepayment, either directly or through any Paying Agent (including the Company ora Subsidiary acting as its own Paying Agent) as the Qualifying Trustee maydetermine, to the Holders of such Notes of all sums due and to become duethereon in respect of principal (and premium, if any) and interest, but suchmoney or Government Securities need not be segregated from other funds exceptto the extent required by law.  Money and Government Securities so held intrust are not subject to Article Fourteen or Section 1204 hereof; *provided* that the subordination provisionsof Article Fourteen and Section 1204 were not violated at the timethe such amounts were deposited in trust.

 

TheCompany shall pay and indemnify the Qualifying Trustee against any tax, fee orother charge imposed on or assessed against the Government Securities depositedpursuant to Section 1304 or the principal and interest received in respectthereof other than any such tax, fee or other charge which by law is for theaccount of the Holders of the Outstanding Notes.

 

Anythingin this Article Thirteen to the contrary notwithstanding, the QualifyingTrustee shall deliver or pay to the Company from time to time upon CompanyRequest any money or Government Securities held by it as provided inSection 1304 which, in the opinion of a nationally recognized firm ofindependent public accountants expressed in a written certification thereofdelivered to the Qualifying Trustee, are in excess of the amount thereof whichwould then be required to be deposited to effect an equivalent Legal Defeasanceor Covenant Defeasance, as applicable, in accordance with this Article.

 

SECTION 1306.  Reinstatement. If the Trustee or any Paying Agent is unable to apply any money or GovernmentSecurities in accordance with Section 1305 by reason of any order orjudgment of any court or governmental authority enjoining, restraining orotherwise prohibiting such application, then the Company’s and each Guarantor’sobligations under this Indenture and the Outstanding Notes shall be revived andreinstated as though no deposit had occurred pursuant to Section 1302 or1303, as the case may be, until such time as the Trustee or Paying Agent ispermitted to apply all such money or Government Securities in accordance withSection 1305; *provided, however,*that if the Company makes any payment of principal of (or premium, if any) orinterest on any Note following the reinstatement of its obligations, theCompany shall be

 

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subrogatedto the rights of the Holders of such Notes to receive such payment from themoney or Government Securities held by the Trustee or Paying Agent.

 

SECTION 1307.  Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by theCompany, in trust for the payment of the principal of, premium and AdditionalInterest, if any, or interest on any Note and remaining unclaimed for two yearsafter such principal, and premium and Additional Interest, if any, or interesthas become due and payable shall be paid to the Company on its request or (ifthen held by the Company) shall be discharged from such trust; and the Holderof such Note shall thereafter look only to the Company for payment thereof, andall liability of the Trustee or such Paying Agent with respect to such trustmoney, and all liability of the Company as trustee thereof, shall thereuponcease.

 

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**ARTICLE FOURTEEN**

 

**SUBORDINATION**

 

SECTION 1401.  Agreement ToSubordinate.  The Company agrees, and each Holder by accepting a Noteagrees, that the Indebtedness evidenced by the Notes is subordinated in rightof payment, to the extent and in the manner provided in thisArticle Fourteen, to the prior payment of all Senior Indebtedness of theCompany and that the subordination is for the benefit of and enforceable by theholders of such Senior Indebtedness.  The Notes shall in all respects rank*pari passu* in right of paymentwith all existing and future Senior Subordinated Indebtedness of the Company,and will be senior in right of payment to all existing and future SubordinatedIndebtedness of the Company; and only Indebtedness of the Company that is SeniorIndebtedness shall rank senior to the Notes in accordance with the provisionsset forth herein.  All provisions of this Article Fourteen shall besubject to Section 1412 hereof.

 

SECTION 1402.  Liquidation,Dissolution, Bankruptcy.  Upon any payment or distribution of theassets of the Company upon a total or partial liquidation or dissolution orreorganization of or similar proceeding relating to the Company or itsproperty:

 

(1)           the holders of Senior Indebtedness of the Company shall beentitled to receive payment in full in cash of such Senior Indebtedness beforethe Holders are entitled to receive any payment;

 

(2)           until the Senior Indebtedness of the Company is paid infull in cash, any payment or distribution to which Holders would be entitledbut for the subordination provisions of this Indenture shall be made to holdersof such Senior Indebtedness as their interests may appear, except that Holdersmay receive Permitted Junior Securities; and

 

(3)           if a distribution is made to Holders that, due to the subordinationprovisions, should not have been made to them, such Holders are required tohold it in trust for the holders of Senior Indebtedness of the Company and payit over to them as their interests may appear.

 

SECTION 1403.  Default on DesignatedSenior Indebtedness of the Company.  The Company shall not pay theprincipal of, premium, if any, or interest on the Notes or make any depositpursuant to Article Four or Article Thirteen and may not purchase,redeem or otherwise retire any Notes (collectively, “*pay the Notes*”) (except in the form of Permitted JuniorSecurities) if either of the following (a “*PaymentDefault*”) occurs: (a) any Obligation on Designated SeniorIndebtedness of the Company is not paid in full in cash when due (after givingeffect to any applicable grace period); or (b) any other default onDesignated Senior Indebtedness of the Company occurs and the maturity of suchDesignated Senior Indebtedness is accelerated in accordance with its termsunless, in either case, the Payment Default has been cured or waived and anysuch acceleration has been rescinded or such Designated Senior Indebtedness hasbeen paid in

 

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fullin cash; *provided, however*, thatthe Company shall be entitled to pay the Notes without regard to the foregoingif the Company and the Trustee receive written notice approving such paymentfrom the Representatives of all Designated Senior Indebtedness with respect towhich the Payment Default has occurred and is continuing.

 

Duringthe continuance of any default (other than a Payment Default) with respect toany Designated Senior Indebtedness of the Company pursuant to which thematurity thereof may be accelerated immediately without further notice (exceptsuch notice as may be required to effect such acceleration) or the expirationof any applicable grace periods, the Company shall not pay the Notes (except inthe form of Permitted Junior Securities) for a period (a “*Payment Blockage Period*”) commencing uponthe receipt by the Trustee of (with a copy to the Company) written notice (a “*Blockage Notice*”) of such default from theRepresentative of such Designated Senior Indebtedness specifying an election toeffect a Payment Blockage Period and ending 179 days thereafter.  ThePayment Blockage Period shall end earlier if such Payment Blockage Period isterminated (1) by written notice to the Trustee and the Company from thePerson or Persons who gave such Blockage Notice; (2) because the defaultgiving rise to such Blockage Notice is cured, waived or otherwise no longercontinuing; or (3) because such Designated Senior Indebtedness has beendischarged or repaid in full in cash.

 

Notwithstandingthe provisions described in the immediately preceding two sentences (butsubject to the provisions contained in the first sentence of thisSection 1403), unless the holders of such Designated Senior Indebtednessor the Representative of such Designated Senior Indebtedness shall haveaccelerated the maturity of such Designated Senior Indebtedness, the Companyshall be entitled to resume payments on the Notes after termination of suchPayment Blockage Period.  The Notes shall not be subject to more than onePayment Blockage Period in any consecutive 360-day period, irrespective of thenumber of defaults with respect to Designated Senior Indebtedness of theCompany during such period; *provided*that if any Blockage Notice within such 360-day period is delivered to theTrustee by or on behalf of any holders of Designated Senior Indebtedness of theCompany (other than holders of Indebtedness under the Senior CreditFacilities), a Representative of holders of Indebtedness under each of theSenior Credit Facilities shall be entitled to give another Blockage Noticewithin such period; *provided further*,*however*, that in no event shallthe total number of days during which any Payment Blockage Period or Periods isin effect exceed 179 days in the aggregate during any 365-consecutive-dayperiod, and there must be at least 186 days during any consecutive 365-dayperiod during which no Payment Blockage Period is in effect.  For purposesof this Section 1403, no Default or Event of Default that existed or wascontinuing on the date of the commencement of any Payment Blockage Period withrespect to the Designated Senior Indebtedness of the Company initiating suchPayment Blockage Period shall be, or be made, the basis of the commencement ofa subsequent Payment Blockage Period by the Representative of such DesignatedSenior Indebtedness, whether or not within a period of 365 consecutivedays.  So long as there shall remain outstanding Senior Indebtedness underthe Senior Credit facilities, a Blockage Notice with respect to the CreditFacilities may only be given by the administrative agents thereunder unless otherwiseagreed to in writing by the respective requisite lenders named therein.

 

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SECTION 1404.  Acceleration of Paymentof Securities.  If payment of the Notes is accelerated because of anEvent of Default, the Company or the Trustee shall promptly notify the holdersof the Designated Senior Indebtedness of the Company (or their Representatives)of the acceleration; *provided*that any failure to give such notice shall have no effect whatsoever on theprovisions of this Article Fourteen.  If any Designated SeniorIndebtedness of the Company is outstanding, the Company may not pay the Notesuntil five Business Days after the Representatives of all the issuers of suchDesignated Senior Indebtedness receive notice of such acceleration and,thereafter, may pay the Notes only if this Indenture otherwise permits paymentat that time.

 

SECTION 1405.  When Distribution MustBe Paid Over.  If a distribution is made to Holders that because ofthis Article Fourteen should not have been made to them, the Holders whoreceive the distribution shall hold it in trust for holders of SeniorIndebtedness of the Company and pay it over to them as their interests mayappear.

 

SECTION 1406.  Subrogation. After all Senior Indebtedness of the Company is paid in full and until theNotes are paid in full, Holders shall be subrogated to the rights of holders ofsuch Senior Indebtedness to receive distributions applicable to such SeniorIndebtedness.  A distribution made under this Article Fourteen toholders of such Senior Indebtedness which otherwise would have been made toHolders is not, as between the Company and Holders, a payment by the Company onsuch Senior Indebtedness.

 

SECTION 1407.  Relative Rights. This Article Fourteen defines the relative rights of Holders and holdersof Senior Indebtedness of the Company.  Nothing in this Indenture shall:

 

(1)           impair, as between the Company and Holders, the obligationof the Company, which is absolute and unconditional, to pay principal of andinterest on the Notes in accordance with their terms; or

 

(2)           prevent the Trustee or any Holder from exercising itsavailable remedies upon a Default, subject to the rights of holders of SeniorIndebtedness of the Company to receive distributions otherwise payable toHolders.

 

SECTION 1408.  SubordinationMay Not Be Impaired by Company.  No right of any holder of SeniorIndebtedness of the Company to enforce the subordination of the Indebtednessevidenced by the Notes shall be impaired by any act or failure to act by theCompany or by its failure to comply with this Indenture.

 

SECTION 1409.  Rights of Trustee andPaying Agent.  (a)  Notwithstanding Section 1403, theTrustee or Paying Agent shall continue to make payments on the Notes and shallnot be charged with knowledge of the existence of facts that under thisArticle Fourteen would prohibit the making of any such payments unless,not less than two Business Days prior to the date of such payment, a trustofficer of the Trustee receives notice satisfactory to it that such paymentsare prohibited by this Article Fourteen.  The Company, the NoteRegistrar or co-registrar, the Paying Agent, a

 

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Representativeor a holder of Senior Indebtedness of the Company shall be entitled to give thenotice; *provided, however*, that,if an issue of Senior Indebtedness of the Company has a Representative, onlythe Representative shall be entitled to give the notice.

 

(b)           TheTrustee in its individual or any other capacity shall be entitled to holdSenior Indebtedness of the Company with the same rights it would have if itwere not Trustee.  The Note Registrar and co-registrar and the PayingAgent shall be entitled to do the same with like rights.  The Trusteeshall be entitled to all the rights set forth in this Article Fourteenwith respect to any Senior Indebtedness of the Company which may at any time beheld by it, to the same extent as any other holder of such Senior Indebtedness;and nothing in Article Six shall deprive the Trustee of any of its rightsas such holder.  Nothing in this Article Fourteen shall apply toclaims of, or payments to, the Trustee under or pursuant to Section 607.

 

SECTION 1410.  Distribution or Noticeto Representative.  Whenever any Person is to make a distribution orgive a notice to holders of Senior Indebtedness of the Company, such Personshall be entitled to make such distribution or give such notice to theirRepresentative (if any).

 

SECTION 1411.  Article FourteenNot To Prevent Events of Default or Limit Right To Accelerate.  Thefailure to make a payment pursuant to the Notes by reason of any provision inthis Article Fourteen shall not be construed as preventing the occurrenceof a Default.  Nothing in this Article Fourteen shall have any effecton the right of the Holders or the Trustee to accelerate the maturity of theNotes.

 

SECTION 1412.  Trust Moneys NotSubordinated.  Notwithstanding anything contained herein to thecontrary, payments from money or the proceeds of U.S. GovernmentSecurities held in trust under Article Four or Article Thirteen bythe Trustee for the payment of principal of and interest on the Notes shall notbe subordinated to the prior payment of any Senior Indebtedness of the Companyor subject to the restrictions set forth in this Article Fourteen, andnone of the Holders shall be obligated to pay over any such amount to theCompany or any holder of Senior Indebtedness of the Company or any othercreditor of the Company; *provided*that the subordination provisions of this Article Fourteen andSection 1204 of this Indenture were not violated at the time theapplicable amounts were deposited in trust pursuant to Article Four orArticle Thirteen of this Indenture, as the case may be.

 

SECTION 1413.  Trustee Entitled ToRely.  Upon any payment or distribution pursuant to thisArticle Fourteen, the Trustee and the Holders shall be entitled to rely(a) upon any order or decree of a court of competent jurisdiction in whichany proceedings of the nature referred to in Section 1402 are pending,(b) upon a certificate of the liquidating trustee or agent or other Personmaking such payment or distribution to the Trustee or to the Holders or(c) upon the Representatives of Senior Indebtedness of the Company for thepurpose of ascertaining the Persons entitled to participate in such payment ordistribution, the holders of such Senior Indebtedness and other Indebtedness ofthe Company, the amount thereof or payable thereon, the amount or amounts paidor

 

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distributedthereon and all other facts pertinent thereto or to thisArticle Fourteen.  In the event that the Trustee determines, in goodfaith, that evidence is required with respect to the right of any Person as aholder of Senior Indebtedness of the Company to participate in any payment ordistribution pursuant to this Article Fourteen, the Trustee shall beentitled to request such Person to furnish evidence to the reasonablesatisfaction of the Trustee as to the amount of such Senior Indebtedness heldby such Person, the extent to which such Person is entitled to participate insuch payment or distribution and other facts pertinent to the rights of suchPerson under this Article Fourteen, and, if such evidence is not furnished,the Trustee shall be entitled to defer any payment to such Person pendingjudicial determination as to the right of such Person to receive suchpayment.  The provisions of Sections 601 and 603 shall be applicable toall actions or omissions of actions by the Trustee pursuant to thisArticle Fourteen.

 

SECTION 1414.  Trustee To EffectuateSubordination.  Each Holder by accepting a Note authorizes and directsthe Trustee on his behalf to take such action as may be necessary orappropriate to acknowledge or effectuate the subordination between the Holdersand the holders of Senior Indebtedness of the Company as provided in thisArticle Fourteen and appoints the Trustee as attorney-in-fact for any andall such purposes.

 

SECTION 1415.  Trustee Not Fiduciaryfor Holders of Senior Indebtedness of the Company.  The Trusteeshall not be deemed to owe any fiduciary duty to the holders of SeniorIndebtedness of the Company and shall not be liable to any such holders if itshall mistakenly pay over or distribute to Holders or the Company or any otherPerson, money or assets to which any holders of Senior Indebtedness of theCompany shall be entitled by virtue of this Article Fourteen or otherwise.

 

SECTION 1416.  Reliance by Holders ofSenior Indebtedness of the Company on Subordination Provisions.  EachHolder by accepting a Note acknowledges and agrees that the foregoingsubordination provisions are, and are intended to be, an inducement and aconsideration to each holder of any Senior Indebtedness of the Company, whethersuch Senior Indebtedness was created or acquired before or after the issuanceof the Notes, to acquire and continue to hold, or to continue to hold, suchSenior Indebtedness and such holder of such Senior Indebtedness shall be deemedconclusively to have relied on such subordination provisions in acquiring andcontinuing to hold, or in continuing to hold, such Senior Indebtedness.

 

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INWITNESS WHEREOF, the parties hereto have caused this Indenture to be dulyexecuted 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 |

 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| The  undersigned hereby acknowledges and agrees that, upon the effectiveness of  the merger of Newton Acquisition Merger Sub, Inc. with and into the  Neiman Marcus Group, Inc. with the Neiman Marcus Group, Inc.  continuing as the surviving corporation, it shall succeed by operation of law  to all of the rights and obligations of Newton Acquisition Merger  Sub, Inc., set forth herein and that all references to the “Company”  shall thereupon be deemed to be references to the undersigned. |

 
|                               |
|------------------------------------|
| THE NEIMAN MARCUS GROUP, INC. |
|                               |
|                               |
| By:                                | /s/  Nelson A. Bangs |   |
|                               | Name: | Nelson  A. Bangs |
|                               | Title: | Senior  Vice President and |
|                               |   | General  Counsel |
|                                    |  |  |  |

 

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|   | NEWTON  ACQUISITION, INC.            |
|--------|-------------------------------------------|
|   |                                      |   |
|   |                                      |   |
|   | By:                                       | /s/  Nelson A. Bangs |
|   |                                      | Name: | Nelson  A. Bangs |
|   |                                      | Title: | Senior  Vice President and |
|   |                                      | General  Counsel |
|   |                                      |   |
|   |                                      |   |
|   | Neiman  Marcus Special Events, Inc., |
|   | NM  Financial Services, Inc.,        |
|   | NM  Kitchens, Inc.,                  |
|   | BergdorfGoodman.com,  LLC,                |
|   | Bergdorf  Goodman, Inc.,             |
|   | Bergdorf  Graphics, Inc.,            |
|   | Neiman  Marcus Holdings, Inc.,       |
|   | NEMA  Beverage Corporation,               |
|   | NEMA  Beverage Holding Corporation,       |
|   | NEMA  Beverage Parent Corporation,        |
|   | Worth  Avenue Leasing Company,            |
|   | NMGP,  LLC,                               |
|   | NM  Nevada Trust,                         |
|   |                                      |   |
|   |                                      |   |
|   | By:                                       | /s/  Nelson A. Bangs |
|   |                                      | Name: | Nelson  A. Bangs |
|   |                                      | Title: | Vice  President |
|   |                                      |   |
|   |                                      |   |
|   | WELLS  FARGO BANK, NATIONAL  ASSOCIATION, |
|   | as  Trustee                               |
|   |                                      |   |
|   |                                      |   |
|   | By:                                       | /s/  Joseph P. O’Donnell |
|   |                                      | Name: | Joseph  P. O’Donnell |
|   |                                      | Title: | Vice  President |

 

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**SCHEDULE I**

 

Subsidiary Guarantors

 
| 1.     |   | Neiman  Marcus Special Events, Inc., a Delaware corporation |
|--------|--------|------------------------------------------------------------------|
|   |   |                                                             |
| 2.     |   | NM  Financial Services, Inc., a Delaware corporation        |
|   |   |                                                             |
| 3.     |   | NM  Kitchens, Inc., a Delaware corporation                  |
|   |   |                                                             |
| 4.     |   | BergdorfGoodman.com,  LLC, a Delaware limited liability company  |
|   |   |                                                             |
| 5.     |   | Bergdorf  Goodman, Inc., a New York corporation             |
|   |   |                                                             |
| 6.     |   | Bergdorf  Graphics, Inc., a New York corporation            |
|   |   |                                                             |
| 7.     |   | Neiman  Marcus Holdings, Inc., a California corporation     |
|   |   |                                                             |
| 8.     |   | NEMA  Beverage Corporation, a Texas corporation                  |
|   |   |                                                             |
| 9.     |   | NEMA  Beverage Holding Corporation, a Texas corporation          |
|   |   |                                                             |
| 10.    |   | NEMA  Beverage Parent Corporation, a Texas corporation           |
|   |   |                                                             |
| 11.    |   | Worth  Avenue Leasing Company, a Florida corporation             |
|   |   |                                                             |
| 12.    |   | NMGP,  LLC, a Virginia limited liability company                 |
|   |   |                                                             |
| 13.    |   | NM  Nevada Trust, a Massachusetts business trust                 |

 

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**Rule 144A / Regulation S Appendix**

 

PROVISIONS RELATING TO INITIAL NOTES,PRIVATE EXCHANGE NOTESAND EXCHANGE NOTES

 

1.             Definitions

 

1.1           Definitions.

 

Forthe purposes of this Appendix the following terms shall have the meaningsindicated below:

 

“ApplicableProcedures” means, with respect to any transfer or transaction involving aTemporary Regulation S Global Note or beneficial interest therein, therules and procedures of the Depository for such a Temporary Regulation SGlobal Note, to the extent applicable to such transaction and as in effect fromtime to time.

 

“CertificatedNote” means a certificated Initial Note or Exchange Note or Private ExchangeNote (other than a Global Note) bearing, if required, the appropriaterestricted notes legend set forth in Section 2.3(e) of this Appendix.

 

“Depository”means The Depository Trust Company, its nominees and their respectivesuccessors.

 

“DistributionCompliance Period”, with respect to any Notes, means the period of 40consecutive days beginning on and including the later of (i) the day onwhich such Notes are first offered to Persons other than distributors (asdefined in Regulation S under the Securities Act) in reliance on Regulation Sand (ii) the issue date with respect to such Notes.

 

“ExchangeNotes” means (1) the 103/8% SeniorSubordinated Notes Due 2015 issued pursuant to the Indenture in connection witha Registered Exchange Offer pursuant to a Registration Rights Agreement and(2) Additional Notes, if any, issued pursuant to a registration statementfiled with the SEC under the Securities Act.

 

“InitialNotes” means (1) $500,000,000 aggregate principal amount of 103/8% Senior Subordinated Notes Due 2015 issued onthe Issue Date and (2) Additional Notes, if any, issued in a transactionexempt from the registration requirements of the Securities Act.

 

“InitialPurchasers” means (1) with respect to the Initial Notes issued on theIssue Date,****Credit Suisse FirstBoston LLC, Deutsche Bank Securities Inc., Banc of America Securities LLC, andGoldman Sachs & Co., and (2) with respect to each issuanceof Additional Notes, the Persons purchasing such Additional Notes under therelated Purchase Agreement**.**

 

“Notes”means the Initial Notes, any Additional Notes, the Exchange Notes and thePrivate Exchange Notes, treated as a single class.

 

----

 

“NotesCustodian” means the custodian with respect to a Global Note (as appointed bythe Depository), or any successor Person thereto and shall initially be theTrustee.

 

“PrivateExchange” means the offer by the Company, pursuant to a Registration RightsAgreement, to the Initial Purchasers to issue and deliver to each InitialPurchaser, in exchange for the Initial Notes held by the Initial Purchaser aspart of its initial distribution, a like aggregate principal amount of PrivateExchange Notes.

 

“PrivateExchange Notes” means any 103/8% SeniorSubordinated Notes Due 2015 issued in connection with a Private Exchange.

 

“PurchaseAgreement” means (1) with respect to the Initial Notes issued on the IssueDate, the Purchase Agreement dated September 28, 2005, among the Company,Holdings, the Subsidiary Guarantors and the Initial Purchasers, and(2) with respect to each issuance of Additional Notes, the purchaseagreement or underwriting agreement among the Company, Holdings, the SubsidiaryGuarantors and the Persons purchasing such Additional Notes.

 

“QIB”means a “qualified institutional buyer” as defined in Rule 144A.

 

“RegisteredExchange Offer” means the offer by the Company, pursuant to a RegistrationRights Agreement, to certain Holders of Initial Notes, to issue and deliver tosuch Holders, in exchange for the Initial Notes, a like aggregate principalamount of Exchange Notes registered under the Securities Act.

 

“RegistrationRights Agreement” means (1) with respect to the Initial Notes issued onthe Issue Date, the Exchange and Registration Rights Agreement datedOctober 6, 2005, among the Company, Holdings, the Subsidiary Guarantorsand the Initial Purchasers and (2) with respect to each issuance ofAdditional Notes issued in a transaction exempt from the registrationrequirements of the Securities Act, the registration rights agreement, if any,among the Company and the Persons purchasing such Additional Notes under therelated Purchase Agreement**.**

 

“Representative”means Credit Suisse First Boston LLC as representative of the InitialPurchasers.

 

“Rule 144ANotes” means all Notes offered and sold to QIBs in reliance on Rule 144A.

 

“SecuritiesAct” means the Securities Act of 1933, as amended.

 

“ShelfRegistration Statement” means the registration statement issued by the Companyin connection with the offer and sale of Initial Notes or Private ExchangeNotes pursuant to a Registration Rights Agreement.

 

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“TransferRestricted Notes” means Notes that bear or are required to bear the legendrelating to restrictions on transfer relating to the Securities Act set forthin Section 2.3(e) hereto.

 

1.2           Other Definitions.

 
| **Term**                                        | ** ** | **Defined in  Section:** |
|-------------------------------------------------|------------|-------------------------------|
| “Agent  Members”                      |       | 2.1(b)                        |
| “Global  Notes”                       |       | 2.1(a)                        |
| “Permanent  Regulation S Global Note” |       | 2.1(a)                        |
| “Regulation  S”                       |       | 2.1(a)                        |
| “Regulation  S Global Note”           |       | 2.1(a)                        |
| “Rule 144A”                      |       | 2.1(a)                        |
| “Rule 144A  Global Note”         |       | 2.1(a)                        |
| “Temporary  Regulation S Global Note” |       | 2.1(a)                        |

 

1.3           Capitalized terms used inthis Appendix but not defined have the meanings ascribed to such terms in theIndenture to which this Appendix is attached.

 

2.             The Notes.

 

2.1           (a)  Form andDating.  The Initial Notes shall be offered and sold by the Companypursuant to a Purchase Agreement.  The Initial Notes shall be resoldinitially only to (i) QIBs in reliance on Rule 144A under theSecurities Act (“Rule 144A”) and (ii) Persons other than U.S. Persons(as defined in Regulation S) in reliance on Regulation S under theSecurities Act (“Regulation S”).  Initial Notes may thereafter betransferred to, among others, QIBs and purchasers in reliance onRegulation S, subject to the restrictions on transfer set forthherein.  Initial Notes initially resold pursuant to Rule 144A shall beissued initially in the form of one or more permanent global Notes indefinitive, fully registered form (collectively, the “Rule 144A GlobalNote”); and Initial Notes initially resold pursuant to Regulation S shall beissued initially in the form of one or more temporary global notes in fullyregistered form (collectively, the “Temporary Regulation S Global Note”), ineach case without interest coupons and with the global notes legend and theapplicable restricted notes legend set forth in Exhibit 1 hereto, whichshall be deposited on behalf of the purchasers of the Initial Notes representedthereby with the Notes Custodian and registered in the name of the Depositoryor a nominee of the Depository, duly executed by the Company and authenticatedby the Trustee as provided in this Indenture.  Except as set forth in thisSection 2.1(a), beneficial ownership interests in the Temporary RegulationS Global Note shall be held only through the Euroclear System (“Euroclear”) andClearstream Banking, S.A. (“Clearstream”) (as indirect participants in theDepository) and shall not be exchangeable for interests in the Rule 144AGlobal Note, a permanent Regulation S global note in fully registered form(the “Permanent Regulation S Global Note”, and together with the TemporaryRegulation S Global Note, the “Regulation S Global Note”) or any other Noteprior to the expiration of the Distribution Compliance Period and then, afterthe

 

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expirationof the Distribution Compliance Period, may be exchanged for interests in aRule 144A Global Note or the Permanent Regulation S Global Note onlyupon certification in the form attached hereto as Exhibit 3 or otherwisein a form reasonably satisfactory to the Trustee that beneficial ownershipinterests in such Temporary Regulation S Global Note are owned either bynon-U.S. persons or U.S. persons who purchased such interests in a transactionthat is exempt from the registration requirements under the Securities Act.

 

Priorto the expiration of the Distribution Compliance Period, Beneficial interestsin Temporary Regulation S Global Notes may be exchanged for interests inRule 144A Global Notes if (1) such exchange occurs in connection witha transfer of Notes in compliance with Rule 144A and (2) the transferorof the beneficial interest in the Temporary Regulation S Global Note asapplicable, first delivers to the Trustee a written certificate (in a formsubstantially similar to that attached hereto as Exhibit 2) to the effectthat the beneficial interest in the Temporary Regulation S Global Note asapplicable, is being transferred (a) to a Person who the transferorreasonably believes to be a QIB that is purchasing for its own account or theaccount of a QIB in a transaction meeting the requirements of Rule 144A,and (b) in accordance with all applicable securities laws of the States ofthe United States and other jurisdictions.

 

Beneficialinterests in a Rule 144A Global Note may be transferred to a Person whotakes delivery in the form of an interest in a Regulation S Global Note,whether before or after the expiration of the Distribution Compliance Period,only if the transferor first delivers to the Trustee a written certificate (ina form substantially similar to that attached hereto as Exhibit 2) to theeffect that such transfer is being made in accordance with Rule 903 or 904of Regulation S or Rule 144 (if applicable).

 

TheRule 144A Global Note, the Temporary Regulation S Global Note and thePermanent Regulation S Global Note are collectively referred to herein as “GlobalNotes”.  The aggregate principal amount of the Global Notes may from timeto time be increased or decreased by adjustments made on the records of theTrustee and the Depository or its nominee as hereinafter provided.

 

(b)           Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Note deposited withor on behalf of the Depository.

 

TheCompany shall execute and the Trustee shall, in accordance with thisSection 2.1(b), authenticate and deliver initially one or more GlobalNotes that (a) shall be registered in the name of the Depository or thenominee of the Depository and (b) shall be delivered by the Trustee to theDepository or pursuant to the Depository’s instructions or held by the Trusteeas custodian for the Depository.

 

Membersof, or participants in, the Depository (“Agent Members”) shall have no rightsunder this Indenture with respect to any Global Note held on their behalf bythe Depository or by the Trustee as the custodian of the Depository or undersuch Global Note, and the Company, the Trustee and any agent of the Company orthe Trustee shall be entitled to treat the Depository as the absolute owner ofsuch Global Note for all

 

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purposeswhatsoever.  Notwithstanding the foregoing, nothing herein shall preventthe Company, the Trustee or any agent of the Company or the Trustee from givingeffect to any written certification, proxy or other authorization furnished bythe Depository or impair, as between the Depository and its Agent Members, theoperation of customary practices of such Depository governing the exercise ofthe rights of a holder of a beneficial interest in any Global Note.

 

(c)           Certificated Notes.  Exceptas provided in this Section 2.1 or Section 2.3 or 2.4, owners ofbeneficial interests in Global Notes shall not be entitled to receive physicaldelivery of Certificated Notes.

 

2.2           Authentication.  TheTrustee shall upon receipt of a Company Order specified in Section 202 ofthe Indenture authenticate and deliver:  (1) on the Issue Date, anaggregate principal amount of $500,000,000 103/8% Senior Subordinated Notes Due 2015, (2) any Additional Notes foran original issue in an aggregate principal amount specified in the writtenorder of the Company pursuant to Section 202 of the Indenture****and (3) Exchange Notes or PrivateExchange Notes for issue only in a Registered Exchange Offer or a PrivateExchange, respectively, pursuant to a Registration Rights Agreement, for a likeprincipal amount of Initial Notes, in each case upon a written order of theCompany signed by two Officers or by an Officer and either an AssistantTreasurer or an Assistant Secretary of the Company.  Such Company Ordershall specify the amount of the Notes to be authenticated and the date on whichthe original issue of Notes is to be authenticated and, in the case of anyissuance of Additional Notes pursuant to Section 312 of the Indenture,shall certify that such issuance is in compliance with Section 1011 of theIndenture.

 

2.3           Transfer and Exchange.

 

(a)           Transfer and Exchange ofCertificated Notes.  When Certificated Notes are presented to theNote Registrar with a request:

 

(x)            to register the transfer of such Certificated Notes;or

 

(y)           to exchange such Certificated Notes for an equalprincipal amount of Certificated Notes of other authorized denominations,

 

theNote Registrar shall register the transfer or make the exchange as requested ifits reasonable requirements for such transaction are met; *provided, however*, that the CertificatedNotes surrendered for transfer or exchange:

 

(i)            shall be dulyendorsed or accompanied by a written instrument of transfer in form reasonablysatisfactory to the Company and the Note Registrar, duly executed by the Holderthereof or its attorney duly authorized in writing; and

 

(ii)           if suchCertificated Notes are required to bear a restricted notes legend, they arebeing transferred or exchanged pursuant to an effective registration statementunder the Securities Act, pursuant to Section 2.3(b) or

 

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pursuantto clause (A), (B) or (C) below, and are accompanied by the followingadditional information and documents, as applicable:

 

(A)          if such Certificated Notesare being delivered to the Note Registrar by a Holder for registration in thename of such Holder, without transfer, a certification from such Holder to thateffect; or

 

(B)           if such Certificated Notesare being transferred to the Company, a certification to that effect; or

 

(C)           if such Certificated Notesare being transferred (x) pursuant to an exemption from registration inaccordance with Rule 144A, Regulation S or Rule 144 under theSecurities Act; or (y) in reliance upon another exemption from therequirements of the Securities Act: (i) a certification to that effect (inthe form set forth on the reverse of the Note) and (ii) if the Company sorequests, an Opinion of Counsel or other evidence reasonably satisfactory to itas to the compliance with the restrictions set forth in the legend set forth inSection 2.3(e)(i).

 

(b)           Restrictions on Transfer ofa Certificated Note for a Beneficial Interest in a Global Note.  ACertificated Note may not be exchanged for a beneficial interest in aRule 144A Global Note or a Permanent Regulation S Global Note exceptupon satisfaction of the requirements set forth below.  Upon receipt bythe Trustee of a Certificated Note, duly endorsed or accompanied by appropriateinstruments of transfer, in form satisfactory to the Trustee, together with:

 

(i)            certification, in a form substantially similar tothat attached hereto as Exhibit 2, that such Certificated Note is either(A) being transferred to a QIB in accordance with Rule 144A or(B) being transferred after expiration of the Distribution CompliancePeriod by a Person who initially purchased such Note in reliance on RegulationS to a buyer who elects to hold its interest in such Note in the form of abeneficial interest in the Permanent Regulation S Global Note; and

 

(ii)           written instructions directing the Trustee to make,or to direct the Notes Custodian to make, an adjustment on its books andrecords with respect to such Rule 144A Global Note (in the case of atransfer pursuant to clause (b)(i)(A)) or Permanent Regulation S GlobalNote (in the case of a transfer pursuant to clause (b)(i)(B)) to reflect anincrease in the aggregate principal amount of the Notes represented by theRule 144A Global Note or Permanent Regulation S Global Note, asapplicable, such instructions to contain information regarding the Depositoryaccount to be credited with such increase,

 

thenthe Trustee shall cancel such Certificated Note and cause, or direct the NotesCustodian to cause, in accordance with the standing instructions and proceduresexisting between the Depository and the Notes Custodian, the aggregateprincipal amount of

 

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Notesrepresented by the Rule 144A Global Note or Permanent Regulation SGlobal Note, as applicable, to be increased by the aggregate principal amountof the Certificated Note to be exchanged and shall credit or cause to becredited to the account of the Person specified in such instructions abeneficial interest in the Rule 144A Global Note or Permanent Regulation SGlobal Note, as applicable, equal to the principal amount of the CertificatedNote so canceled.  If no Rule 144A Global Notes or PermanentRegulation S Global Notes, as applicable, are then outstanding, the Companyshall issue and the Trustee shall authenticate, upon receipt of a CompanyOrder, a new Rule 144A Global Note or Permanent Regulation S Global Note,as applicable, in the appropriate principal amount.

 

(c)           Transfer and Exchange ofGlobal Notes.

 

(i)            The transfer and exchange of Global Notes orbeneficial interests therein shall be effected through the Depository, inaccordance with this Indenture (including applicable restrictions on transferset forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Note shall deliver to theNote Registrar a written order given in accordance with the Depository’sprocedures containing information regarding the participant account of theDepository to be credited with a beneficial interest in the Global Note. The Note Registrar shall, in accordance with such instructions instruct theDepository to credit to the account of the Person specified in suchinstructions a beneficial interest in the Global Note and to debit the accountof the Person making the transfer the beneficial interest in the Global Notebeing transferred.

 

(ii)           If the proposed transfer is a transfer of abeneficial interest in one Global Note to a beneficial interest in anotherGlobal Note, the Note Registrar shall reflect on its books and records the dateand an increase in the principal amount of the Global Note to which suchinterest is being transferred in an amount equal to the principal amount of theinterest to be so transferred, and the Note Registrar shall reflect on itsbooks and records the date and a corresponding decrease in the principal amountof the Global Note from which such interest is being transferred.

 

(iii)          Notwithstanding any other provisions of thisAppendix (other than the provisions set forth in Section 2.4), a GlobalNote may not be transferred as a whole except by the Depository to a nominee ofthe Depository or by a nominee of the Depository to the Depository or anothernominee of the Depository or by the Depository or any such nominee to asuccessor Depository or a nominee of such successor Depository.

 

(iv)          In the event that Global Note is exchanged forCertificated Notes to Section 2.4 of this Appendix, prior to theconsummation of a Registered Exchange Offer or the effectiveness of a ShelfRegistration Statement with respect to such Notes, such Notes may be exchangedonly

 

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inaccordance with such procedures as are substantially consistent with theprovisions of this Section 2.3 (including the certification requirementsset forth on the reverse of the Initial Notes (as set forth in Exhibit 2,hereto) intended to ensure that such transfers comply with Rule 144A,Regulation S or another applicable exemption under the Securities Act, as thecase may be) and such other procedures as may from time to time be adopted bythe Company.

 

(d)           Restrictions on Transfer ofTemporary Regulation S Global Notes.  During theDistribution Compliance Period, beneficial ownership interests in TemporaryRegulation S Global Notes may only be sold, pledged or transferred in accordancewith the Applicable Procedures and only (i) to the Company, (ii) inan offshore transaction in accordance with Regulation S (other than atransaction resulting in an exchange for an interest in a Permanent RegulationS Global Note), (iii) pursuant to an effective registration statementunder the Securities Act, in each case in accordance with any applicablesecurities laws of any State of the United States.

 

(e)           Legend.

 

(i)            Except as permitted by the followingparagraphs (ii), (iii) and (iv), each Note certificate evidencing theGlobal Notes (and all Notes issued in exchange therefor or in substitutionthereof), in the case of Notes offered otherwise than in reliance onRegulation S shall bear a legend in substantially the following form:

 

THISNOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROMREGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIESACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED INTHE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTEMAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OFTHE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

 

THEHOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THISNOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY(I) TO THE COMPANY, (II) IN THE UNITED STATES TO A PERSON WHOM THESELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED INRULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THEREQUIREMENTS OF RULE 144A,

 

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(III) OUTSIDETHE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904UNDER THE SECURITIES ACT, (IV) PURSUANT TO EXEMPTION FROM REGISTRATIONUNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR(V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIESACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANYAPPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THEHOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OFTHIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

 

Eachcertificate evidencing a Note offered in reliance on Regulation S shall, inaddition to the foregoing, bear a legend in substantially the following form:

 

THISNOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLYEXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE“SECURITIES ACT”), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO,OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO ANAVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACTAND ALL APPLICABLE STATE SECURITIES LAWS.  TERMS USED ABOVE HAVE THEMEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.

 

EachCertificated Note shall also bear the following additional legend:

 

INCONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE NOTE REGISTRAR ANDTRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENTMAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THEFOREGOING RESTRICTIONS.

 

(ii)           Upon any sale or transfer of a Transfer RestrictedNote (including any Transfer Restricted Note represented by a Global Note)pursuant to Rule 144 under the Securities Act, the Note Registrar shallpermit the transferee thereof to exchange such Transfer Restricted Note for acertificated Note that does not bear the legend set forth above and rescind anyrestriction on the transfer of such Transfer Restricted Note, if the transferorthereof certifies in writing to the Note Registrar that such

 

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saleor transfer was made in reliance on Rule 144 (such certification to be inthe form set forth on the reverse of the Note).

 

(iii)          After a transfer of any Initial Notes or PrivateExchange Notes pursuant to and during the period of the effectiveness of aShelf Registration Statement with respect to such Initial Notes or PrivateExchange Notes, as the case may be, all requirements pertaining to legends onsuch Initial Note or such Private Exchange Note shall cease to apply, the requirementsrequiring any such Initial Note or such Private Exchange Note issued to certainHolders be issued in global form shall cease to apply, and a certificatedInitial Note or Private Exchange Note or an Initial Note or Private ExchangeNote in global form, in each case without restrictive transfer legends, shallbe available to the transferee of the Holder of such Initial Notes or PrivateExchange Notes upon exchange of such transferring Holder’s certificated InitialNote or Private Exchange Note or directions to transfer such Holder’s interestin the Global Note, as applicable.

 

(iv)          Upon the consummation of a Registered Exchange Offerwith respect to the Initial Notes, all requirements pertaining to such InitialNotes that Initial Notes issued to certain Holders be issued in global formshall still apply with respect to Holders of such Initial Notes that do notexchange their Initial Notes, and Exchange Notes in certificated or globalform, in each case without the restricted notes legend set forth in Exhibit 1hereto shall be available to Holders that exchange such Initial Notes in suchRegistered Exchange Offer.

 

(v)           Upon the consummation of a Private Exchange withrespect to the Initial Notes, all requirements pertaining to such Initial Notesthat Initial Notes issued to certain Holders be issued in global form shallstill apply with respect to Holders of such Initial Notes that do not exchangetheir Initial Notes, and Private Exchange Notes in global form with the globalnotes legend and the applicable restricted notes legend set forth inExhibit 1 hereto shall be available to Holders that exchange such InitialNotes in such Private Exchange.

 

(f)            Cancellation or Adjustmentof Global Note.  At such time as all beneficial interests in aGlobal Note have been exchanged for Certificated Notes, redeemed, purchased orcanceled, such Global Note shall be returned to the Depository for cancellationor retained and canceled by the Trustee.  At any time prior to suchcancellation, if any beneficial interest in a Global Note is exchanged forcertificated Notes, redeemed, purchased or canceled, the principal amount ofNotes represented by such Global Note shall be reduced and an adjustment shallbe made on the books and records of the Trustee (if it is then the NotesCustodian for such Global Note) with respect to such Global Note, by theTrustee or the Notes Custodian, to reflect such reduction.

 

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(g)           No Obligation of theTrustee.

 

(i)            The Trustee shall have no responsibility orobligation to any beneficial owner of a Global Note, a member of, or aparticipant in the Depository or other Person with respect to the accuracy ofthe records of the Depository or its nominee or of any participant or memberthereof, with respect to any ownership interest in the Notes or with respect tothe delivery to any participant, member, beneficial owner or other Person(other than the Depository) of any notice (including any notice of redemption)or the payment of any amount, under or with respect to such Notes.  Allnotices and communications to be given to the Holders and all payments to bemade to Holders under the Notes shall be given or made only to or upon the orderof the registered Holders (which shall be the Depository or its nominee in thecase of a Global Note).  The rights of beneficial owners in any GlobalNote shall be exercised only through the Depository subject to the applicablerules and procedures of the Depository.  The Trustee may rely andshall be fully protected in relying upon information furnished by theDepository with respect to its members, participants and any beneficial owners.

 

(ii)           The Trustee shall have no obligation or duty tomonitor, determine or inquire as to compliance with any restrictions ontransfer imposed under this Indenture or under applicable law with respect toany transfer of any interest in any Note (including any transfers between oramong Depository participants, members or beneficial owners in any Global Note)other than to require delivery of such certificates and other documentation orevidence as are expressly required by, and to do so if and when expresslyrequired by, the terms of this Indenture, and to examine the same to determinesubstantial compliance as to form with the express requirements hereof.

 

2.4           Certificated Notes.

 

(a)           A Global Note deposited withthe Depository or with the Trustee as Notes Custodian for the Depositorypursuant to Section 2.1 shall be transferred to the beneficial ownersthereof in the form of Certificated Notes in an aggregate principal amountequal to the principal amount of such Global Note, in exchange for such GlobalNote, only if such transfer complies with Section 2.3 hereof and (i) theDepository notifies the Company that it is unwilling or unable to continue asdepository for such Global Note and the Depository fails to appoint a successordepository or if at any time such depository ceases to be a “clearing agency”registered under the Exchange Act, in either case, and a successor depositoryis not appointed by the Company within 90 days of such notice, or(ii) a Default has occurred and is continuing or (iii) the Company,in its sole discretion, notifies the Trustee in writing that it elects to causethe issuance of Certificated Notes under this Indenture (although TemporaryRegulation S Global Notes at the Company’s election pursuant to this clause maynot be exchanged for Certificated

 

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Notesprior to (a) the expiration of the Distribution Compliance Period and(b) the receipt of any certificates required under the provisions ofRegulation S).

 

(b)           Any Global Note that istransferable to the beneficial owners thereof pursuant to this Section 2.4shall be surrendered by the Depository to the Trustee located at its principalcorporate trust office to be so transferred, in whole or from time to time inpart, without charge, and the Trustee shall authenticate and deliver, upon suchtransfer of each portion of such Global Note, an equal aggregate principalamount of Certificated Notes of authorized denominations.  Any portion ofa Global Note transferred pursuant to this Section 2.4 shall be executed,authenticated and delivered only in denominations of $2,000 principal amountand any integral multiple of $1,000 in excess thereof and registered in suchnames as the Depository shall direct.  Any Certificated Note delivered inexchange for an interest in the Transfer Restricted Note shall, except asotherwise provided by Section 2.3(e) hereof, bear the applicablerestricted notes legend and certificated notes legend set forth inExhibit 1 hereto.

 

(c)            Subject to the provisionsof Section 2.4(b) hereof, the registered Holder of a Global Noteshall be entitled to grant proxies and otherwise authorize any Person,including Agent Members and Persons that may hold interests through AgentMembers, to take any action which a Holder is entitled to take under thisIndenture or the Notes.

 

(d)           In the event of theoccurrence of one of the events specified in Section 2.4(a) hereof,the Company shall promptly make available to the Trustee a reasonable supply ofCertificated Notes in definitive, fully registered form without interest coupons. In the event that such Certificated Notes are not issued, the Company expresslyacknowledges, with respect to the right of any Holder to pursue a remedypursuant to this Indenture, including pursuant to Section 507, the rightof any beneficial owner of Notes to pursue such remedy with respect to theportion of the Global Note that represents such beneficial owner’s Notes as ifsuch Certificated Notes had been issued.

 

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**EXHIBIT 1to Rule 144A / Regulation S Appendix**

 

[FORM OF FACE OF INITIAL NOTE]

[Global Notes Legend]

 

UNLESSTHIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORYTRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THECOMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANYCERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCHOTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANYPAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTEDBY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USEHEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THEREGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERSOF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TONOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE ANDTRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE INACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THEREVERSE HEREOF.

 

[[FORREGULATION S GLOBAL NOTE ONLY] UNTIL 40 DAYS AFTER THE LATER OF COMMENCEMENT ORCOMPLETION OF THE OFFERING, AN OFFER OR SALE OF SECURITIES WITHIN THE UNITEDSTATES BY A DEALER (AS DEFINED IN THE SECURITIES ACT) MAY VIOLATE THEREGISTRATION REQUIREMENTS OF THE SECURITIES ACT IF SUCH OFFER OR SALE IS MADEOTHERWISE THAN IN ACCORDANCE WITH RULE 144A THEREUNDER.]

 

[Restricted Notes Legend for Notes offered otherwisethan in Reliance on Regulation S]

 

THISNOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROMREGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIESACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED INTHE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTEMAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OFTHE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

 

THEHOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THISNOTE MAY BE OFFERED, RESOLD, PLEDGED OR

 

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OTHERWISETRANSFERRED, ONLY (I) TO THE COMPANY, (II) WITHIN THE UNITED STATESTO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONALBUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTIONMEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITEDSTATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THESECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THESECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR(V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIESACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANYAPPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THEHOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OFTHIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

 

[Restricted Notes Legend for Notes Offered in Reliance on Regulation S]

 

THISNOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLYEXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933,AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED IN THEUNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPTPURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THESECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS.  TERMS USED ABOVEHAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.

 

[Temporary Regulation S Global Note Legend]

 

EXCEPTAS SET FORTH BELOW, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARYREGULATION S GLOBAL NOTE WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THEPERMANENT REGULATION S GLOBAL NOTE OR ANY OTHER NOTE REPRESENTING ANINTEREST IN THE NOTES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGENDCONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION OF THE “40-DAYDISTRIBUTION COMPLIANCE PERIOD” (WITHIN THE MEANING OF RULE 903(b)(2) OFREGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION INFORM REASONABLY SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTSARE OWNED EITHER BY NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCHINTERESTS IN A TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THESECURITIES ACT.  DURING SUCH 40-DAY DISTRIBUTION COMPLIANCE PERIOD,BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTEMAY ONLY BE SOLD, PLEDGED OR TRANSFERRED (I) TO THE COMPANY, (II) OUTSIDETHE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 OFREGULATION S

 

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UNDERTHE SECURITIES ACT, OR (III) PURSUANT TO AN EFFECTIVE REGISTRATIONSTATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (III) INACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITEDSTATES.  HOLDERS OF INTERESTS IN THIS TEMPORARY REGULATION S GLOBALNOTE WILL NOTIFY ANY PURCHASER OF THIS NOTE OF THE RESALE RESTRICTIONS REFERREDTO ABOVE, IF THEN APPLICABLE.

 

AFTERTHE EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD BENEFICIAL INTERESTS INTHIS TEMPORARY REGULATION S GLOBAL NOTE MAY BE EXCHANGED FORINTERESTS IN A RULE 144A GLOBAL NOTE ONLY IF (1) SUCH EXCHANGE OCCURSIN CONNECTION WITH A TRANSFER OF THE NOTES IN COMPLIANCE WITH RULE 144AAND (2) THE TRANSFEROR OF THE REGULATION S GLOBAL NOTE FIRST DELIVERS TOTHE TRUSTEE A WRITTEN CERTIFICATE (IN THE FORM ATTACHED TO THISCERTIFICATE) TO THE EFFECT THAT THE REGULATION S GLOBAL NOTE IS BEINGTRANSFERRED (A) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES TO BE AQUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, (B) TO APERSON WHO IS PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIEDINSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, AND(C) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THEUNITED STATES AND OTHER JURISDICTIONS.

 

BENEFICIALINTERESTS IN A RULE 144A GLOBAL NOTE MAY BE TRANSFERRED TO A PERSON WHOTAKES DELIVERY IN THE FORM OF AN INTEREST IN THE REGULATION S GLOBAL NOTE,WHETHER BEFORE OR AFTER THE EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCEPERIOD, ONLY IF THE TRANSFEROR FIRST DELIVERS TO THE TRUSTEE A WRITTENCERTIFICATE (IN THE FORM ATTACHED TO THIS CERTIFICATE) TO THE EFFECT THATSUCH TRANSFER IS BEING MADE IN ACCORDANCE WITH RULE 903 OR 904 OFREGULATION S OR RULE 144 (IF AVAILABLE).

 

[Certificated Notes Legend]

 

INCONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE NOTE REGISTRAR ANDTRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENTMAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THEFOREGOING RESTRICTIONS.

 

3

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| No. |   | $ |
|-----|--------|---|

 

103/8% Senior Subordinated NotesDue 2015

 

TheNeiman Marcus Group, Inc., a Delaware corporation, promises to pay to                        ,or registered assigns, the principal sumof                          Dollarson October 15, 2015.

 

InterestPayment Dates:  April 15 and October 15.

 

RecordDates:  April 1 and October 1.

 

Additionalprovisions of this Note are set forth on the other side of this Note.

 
| Dated:                                                                 |                                   |
|------------------------------------------------------------------------|----------------------------------------|
|                                                                   |                                   |
|                                                                   |                                   |
|                                                                   | **THE NEIMAN MARCUS GROUP, INC.** |
|                                                                   | By                                     |   |
|                                                                   |                                   |   |
|                                                                   |                                   |   |
|                                                                   |                                   | Name: |
|                                                                   |                                   | Title: |
|                                                                   |                                   |   |
|                                                                   |                                   |   |
| TRUSTEE’S CERTIFICATE OF                                          |                                   |
| AUTHENTICATION                                                         |                                   |
|                                                                   |                                   |
| **WELLS FARGO BANK, NATIONAL  ASSOCIATION**, as Trustee                |                                   |
| certifies that this is one of the Notes  referred to in the Indenture. |                                   |
|                                                                   |                                   |
| By                                                                     |                                   |   |
|                                                                   | Authorized Signatory                   |   |

 

4

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[FORM OF REVERSE SIDE OF INITIAL NOTE]

 

103/8% Senior Subordinated NoteDue 2015

 

Capitalizedterms used herein but not defined herein shall have the meanings given to suchterms in the Indenture.

 

1.             Principal and Interest;Subordination.

 

TheNeiman Marcus Group, Inc. (the “Company”) shall pay the principal of thisNote on October 15, 2015.

 

TheCompany promises to pay interest and Additional Interest, if any, on theprincipal amount of this Note on each Interest Payment Date, as set forthbelow, at the rate of 103/8% per annum (subject toadjustment as provided below).

 

Interest,and Additional Interest, if any, shall be payable semi-annually (to the Holdersof the Notes at the close of business on April 1 or October 1immediately preceding the Interest Payment Date) on each Interest Payment Date,commencing April 15, 2006.

 

TheHolder of this Note is entitled to the benefits of the Exchange andRegistration Rights Agreement, dated October 6, 2005, among the Company,Holdings, the Subsidiary Guarantors and the Initial Purchasers named therein(the “Registration Rights Agreement”), including with respect to AdditionalInterest.

 

Intereston this Note shall accrue from the most recent date to which interest has beenpaid or, if no interest has been paid, from October 6, 2005; *provided*that, if there is no existingDefault in the payment of interest and if this Note is authenticated between aRegular Record Date referred to on the face hereof and the next succeedingInterest Payment Date, interest shall accrue from such next succeeding InterestPayment Date.  Interest shall be computed on the basis of a 360-day yearof twelve 30-day months.

 

TheCompany shall pay interest and Additional Interest if any, on overdue principaland premium, if any, and interest on overdue installments of interest, to theextent lawful, at a rate per annum equal to the rate of interest applicable tothe Notes.

 

Theindebtedness evidenced by the Notes is, to the extent and in the mannerprovided in the Indenture, subordinate and subject in right of payment to theprior payment in full of all Senior Indebtedness, and this Note is issuedsubject to such provisions.  Each Holder of this Note, by accepting thesame, (a) agrees to and shall be bound by such provisions,(b) authorizes and directs the Trustee on its behalf to take such actionas may be necessary or appropriate to effectuate the subordination as providedin the Indenture and (c) appoints the Trustee its attorney in-fact forsuch purpose.

 

5

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2.             Method of Payment.

 

TheCompany shall pay interest (except defaulted interest) on the principal amountof the Notes on each April 15 and October 15 to the Persons who areHolders (as reflected in the Note Register at the close of business onApril 1 and October 1 immediately preceding the Interest PaymentDate), in each case, even if the Note is transferred or exchanged after suchRegular Record Date, except as provided in Section 306(b) withrespect to Defaulted Interest; *provided*that, with respect to the payment of principal, the Company shall make paymentto the Holder that surrenders this Note to any Paying Agent on or afterOctober 15, 2015.

 

TheCompany shall pay principal (premium, if any) and interest in money of theUnited States that at the time of payment is legal tender for payment of publicand private debts.  However, the Company may pay principal (premium, ifany) and interest by its check payable in such money.  The Company may payinterest on the Notes either (a) by mailing a check for such interest to aHolder’s registered address (as reflected in the Note Register) or (b) bywire transfer to an account located in the United States maintained by thepayee.  If a payment date is a date other than a Business Day at a placeof payment, payment may be made at that place on the next succeeding day thatis a Business Day and no interest shall accrue for the intervening period.

 

3.             Paying Agent and NoteRegistrar.

 

Initially,Wells Fargo Bank, National Association (the “Trustee”) shall act as PayingAgent and Note Registrar.  The Company may change any Paying Agent or NoteRegistrar upon written notice thereto and without notice to the Holders. The Company, any Subsidiary or any Affiliate of any of them may act as PayingAgent, Note Registrar or co-registrar.

 

4.             Indenture.

 

TheCompany issued the Notes under a Senior Subordinated Indenture dated as ofOctober 6, 2005 (the “Indenture”), among the Company, Holdings, theSubsidiary Guarantors and the Trustee.  The terms of the Notes includethose stated in the Indenture and those made part of the Indenture by referenceto the Trust Indenture Act.  The Notes are subject to all such terms, andHolders are referred to the Indenture and the Trust Indenture Act for astatement of all such terms.  To the extent permitted by applicable law,in the event of any inconsistency between the terms of this Note and the termsof the Indenture, the terms of the Indenture shall control.

 

TheNotes are unsecured senior subordinated obligations of the Company.  TheIndenture does not limit the aggregate principal amount of the Notes. Subject to the conditions set forth in the Indenture, the Company may issueAdditional Notes.

 

5.             Redemption.

 

Atany time prior to October 15, 2010, the Company may redeem all or a partof the Notes, upon not less than 30 nor more than 60 days’ prior notice at a

 

6

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redemptionprice equal to 100% of the principal amount of Notes redeemed plus theApplicable Premium as of, and accrued and unpaid interest and AdditionalInterest, if any, to the Redemption Date, subject to the rights of Holders onthe relevant record date to receive interest due on the relevant InterestPayment Date.

 

Onand after October 15, 2010, the Company may redeem the Notes, in whole or inpart, upon not less than 30 nor more than 60 days’ prior notice to eachHolder at the Redemption Prices (expressed as percentages of principal amount)set forth below, plus accrued and unpaid interest thereon and AdditionalInterest, if any, to the applicable Redemption Date, subject to the right ofHolders on the relevant record date to receive interest due on the relevantInterest Payment Date, if redeemed during the twelve-month period beginning onOctober 15 of each of the years indicated below:

 
| **Year**            | ** ** | **Percentage** | ** ** |
|---------------------|------------|----------------|------------|
| 2010                |       | 105.188        | %          |
| 2011                |       | 103.458        | %          |
| 2012                |       | 101.729        | %          |
| 2013 and thereafter |       | 100.000        | %          |

 

Inaddition, until October 15, 2008, the Company may, at its option, redeemup to 35% of the aggregate principal amount of Notes issued under the Indentureat a redemption price equal to 110.375% of the aggregate principal amountthereof, plus accrued and unpaid interest thereon and Additional Interest, ifany, to the applicable Redemption Date, subject to the right of Holders on therelevant record date to receive interest due on the relevant Interest PaymentDate, with the net cash proceeds of one or more Equity Offerings of the Companyor any direct or indirect parent of the Company to the extent such net cashproceeds are contributed to the Company; *provided*that at least 50% of the sum of the aggregate principal amount ofNotes originally issued under the Indenture remains Outstanding immediatelyafter the occurrence of each such redemption; *provided,further*,**that eachsuch redemption occurs within 90 days of the date of closing of each suchEquity Offering.

 

6.             Repurchase upon a Change ofControl and Asset Sales.

 

Uponthe occurrence of (a) a Change of Control, the Holders shall have theright to require that the Company purchase such Holder’s outstanding Notes, inwhole or in part, at a purchase price of 101% of the principal amount thereof,plus accrued and unpaid interest and Additional Interest, if any, to the dateof purchase and (b) Asset Sales, the Company may be obligated to makeoffers to purchase Notes and Senior Subordinated Indebtedness of the Companywith a portion of the Net Proceeds of such Asset Sales at a redemption price of100% of the principal amount thereof plus accrued and unpaid interest andAdditional Interest, if any, to the date of purchase.

 

7

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7.             Denominations; Transfer;Exchange.

 

TheNotes are in registered form without coupons in denominations of $2,000principal amount and integral multiples of $1,000.  A Holder may transferor exchange Notes in accordance with the Indenture.  The Note Registrarand the Trustee may require a Holder, among other things, to furnishappropriate endorsements and transfer documents and the Company may require aHolder to pay any taxes and fees required by law or permitted by theIndenture.  The Note Registrar need not register the transfer or exchangeof a Note or portion of a Note selected for redemption (except, in the case ofa Note to be redeemed in part, the portion of the Note not to be redeemed) orany Note or portion of a Note for a period of 15 days before a selection ofNotes to be redeemed or 15 days before an interest payment date.

 

8.             Persons Deemed Owners.

 

Aregistered Holder may be treated as the owner of a Note for all purposes.

 

9.             Unclaimed Money.

 

Subjectto any laws relating to abandoned property, if money for the payment ofprincipal (premium, if any) or interest remains unclaimed for two years, theTrustee and the Paying Agent shall pay the money back to the Company at itsrequest or (if then held by the Company) shall be discharged from suchtrust.  After that, Holders entitled to the money must look to the Companyfor payment and all liability of the Trustee and such Paying Agent with respectto such money, and all liability of the Company as trustee thereof, shallcease.

 

10.           Discharge and DefeasancePrior to Redemption or Maturity.

 

Subjectto satisfaction of conditions set forth in the Indenture, the Company at anytime may terminate some or all of its obligations under the Notes and theIndenture if the Company irrevocably deposits with the Trustee cash orGovernment Securities or a combination thereof sufficient for the payment ofthe then outstanding principal of and interest on the Notes to Redemption orStated Maturity, as the case may be.

 

11.           Amendment; Supplement;Waiver.

 

Subjectto certain exceptions, the Indenture or the Notes may be amended orsupplemented with the consent of the Holders of at least a majority inaggregate principal amount of the Outstanding Notes, including consentsobtained in connection with a purchase of, or tender offer or exchange offerfor, the Notes, and any existing Default or compliance with any provision ofthe Indenture or the Notes may be waived with the consent of the Holders of amajority in aggregate principal amount of the Outstanding Notes.  Withoutnotice to or the consent of any Holder, the parties thereto may amend orsupplement the Indenture or the Notes to, among other things, cure any

 

8

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ambiguity,omission, mistake, defect or inconsistency and make any change that does notadversely affect the legal rights of any Holder.

 

12.           Restrictive Covenants.

 

TheIndenture contains certain covenants, including covenants with respect to thefollowing matters: (i) Restricted Payments; (ii) incurrence ofIndebtedness and issuance of Disqualified Stock and Preferred Stock;(iii) Liens; (iv) transactions with Affiliates; (v) dividend andother payment restrictions affecting Restricted Subsidiaries; (vi) guaranteesof Indebtedness by Restricted Subsidiaries; (vii) incurrence of otherSenior Subordinated Indebtedness; (viii) merger, consolidation or sale ofall or substantially all assets; (ix) purchase of Notes upon a Change in Control;and (x) disposition of proceeds of Asset Sales.  Within 120 days (orthe successor time period then in effect under the rules and regulationsof the Exchange Act) after the end of each fiscal year, the Company must reportto the Trustee on compliance with such limitations.

 

13.           Successor Persons.

 

Whena successor Person or other entity assumes all the obligations of itspredecessor under the Notes and the Indenture, the predecessor Person shall bereleased from those obligations, subject to certain exceptions.

 

14.           Remedies for Events ofDefault.

 

Ifan Event of Default, as defined in the Indenture, occurs and is continuing, theTrustee or the Holders of at least 30% in principal amount of the OutstandingNotes may declare all Outstanding Notes to be immediately due and payable; *provided, however*, that, so long as anyIndebtedness permitted to be incurred under the Indenture as part of the SeniorCredit Facilities or the Senior Notes shall be outstanding, no suchacceleration shall be effective until the earlier of (1) acceleration ofany such Indebtedness under the Senior Credit Facilities and the Senior Notes,or (2) five Business Days after the giving of written notice of suchacceleration to the Company, the administrative agent under the Senior CreditFacilities and the trustee under the Senior Indenture.  If an Event ofDefault arising from certain events of bankruptcy or insolvency with respect tothe Company or any Significant Subsidiary occurs and is continuing, the Notesautomatically become immediately due and payable.  Subject to theprovisions of the Indenture relating to the duties of the Trustee, in case anEvent of Default occurs and is continuing, the Trustee shall be under noobligation to exercise any rights or powers under the Indenture at the requestor direction of any of the Holders unless such Holders have offered to theTrustee reasonable indemnity or security against any loss, liability orexpense.  Subject to certain restrictions, the Holders of a majority inprincipal amount of the Outstanding Notes are given the right to direct thetime, method and place of conducting any proceeding for any remedy available tothe Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts withlaw or the Indenture or that the Trustee determines is unduly prejudicial tothe rights of any other Holder of a Note or that would involve the Trustee inpersonal liability.

 

9

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15.           Guarantees.

 

TheCompany’s obligations under the Notes are fully, irrevocably andunconditionally guaranteed on an unsecured senior subordinated basis, to theextent set forth in the Indenture, by Holdings and each of the SubsidiaryGuarantors.

 

16.           Trustee Dealings withCompany.

 

TheTrustee under the Indenture, in its individual or any other capacity, maybecome the owner or pledgee of Notes and may make loans to, accept depositsfrom, perform services for, and otherwise deal with, the Company and itsAffiliates as if it were not the Trustee.

 

17.           Authentication.

 

ThisNote shall not be valid until the Trustee signs the certificate ofauthentication on the other side of this Note.

 

18.           Abbreviations.

 

Customaryabbreviations may be used in the name of a Holder or an assignee, suchas:  TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),JT TEN (= joint tenants with right of survivorship and not as tenants incommon), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).

 

19.           CUSIP Numbers.

 

Pursuantto a recommendation promulgated by the Committee on Uniform SecurityIdentification Procedures, the Company has caused CUSIP numbers to be printedon the Notes and has directed the Trustee to use CUSIP numbers in notices ofredemption as a convenience to Holders.  No representation is made as tothe accuracy of such numbers either as printed on the Notes or as contained inany notice of redemption and reliance may be placed only on the otheridentification numbers placed thereon.

 

20.           Holders’ Compliance with theRegistration Rights Agreement.

 

EachHolder of a Note, by acceptance hereof, acknowledges and agrees to theprovisions of the Registration Rights Agreement, including the obligations ofthe Holders with respect to a registration and the indemnification of theCompany to the extent provided therein.

 

21.           Governing Law.

 

**THIS SECURITY AND THE INDENTURE SHALL BE GOVERNED BY,AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.**

 

10

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TheCompany shall furnish to any Holder upon written request and without charge acopy of the Indenture.  Requests may be made to The Neiman MarcusGroup, Inc., 1618 Main Street, Dallas, Texas 75201, Attention: GeneralCounsel.

 

11

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**EXHIBIT 2to Rule 144A / Regulation S Appendix**

 

ASSIGNMENT/TRANSFER FORM

 

Toassign and transfer this Note, fill in the form below:

 

Ior we assign and transfer this Note to

 

(Printor type assignee’s name, address and zip code)

 

(Insertassignee’s soc. sec. or tax I.D. No.)

 

andirrevocably appoint                              agent to transfer this Note on the books of the Company.  The agent maysubstitute another to act for him.

 
|   |   |   |             |
|--------|--------|--------|------------------|
|   |   |   |             |
| Date:  |   |   | Your  Signature: |   |

 

 

 

Signexactly as your name appears on the other side of this Note.

 

Inconnection with any transfer of any of the Notes evidenced by this certificateoccurring prior to the expiration of the period referred to in Rule 144(k)under the Securities Act after the later of the date of original issuanceof such Notes and the last date, if any, on which such Notes were owned by theCompany or any Affiliate of the Company, the undersigned confirms that suchNotes are being transferred in accordance with its terms:

 

CHECKONE BOX BELOW

 

tothe Company; or

 
| (1)    |   | pursuant  to an effective registration statement under the Securities Act of 1933, as  amended; or                                                                                                                                                                                                                                                                                                                                             |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (2)    |   | inside  the United States to a “qualified institutional buyer” (as defined in  Rule 144A under the Securities Act of 1933) that purchases for its own  account or for the account of a qualified institutional buyer to whom notice  is given that such transfer is being made in reliance on Rule 144A, in  each case pursuant to and in compliance with Rule 144A under the  Securities Act of 1933, as amended; or |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (3)    |   | outside  the United States in an offshore transaction within the meaning of Regulation  S under the Securities Act in compliance with Rule 904 under the  Securities Act of 1933, as amended; or                                                                                                                                                                                                                                          |

 

1

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| (4) |   | pursuant  to the exemption from registration provided by Rule 144 under the  Securities Act of 1933, as amended. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------|

 

Unlessone of the boxes is checked, the Trustee shall refuse to register any of theNotes evidenced by this certificate in the name of any person other than theregistered holder thereof; *provided,however*, that if box (4) is checked, the Trustee shall beentitled to require, prior to registering any such transfer of the Notes, suchlegal opinions, certifications and other information as the Company hasreasonably requested to confirm that such transfer is being made pursuant to anexemption from, or in a transaction not subject to, the registrationrequirements of the Securities Act of 1933, as amended, such as the exemptionprovided by Rule 144 under such Act.

 

 
|                          |   |      |   |
|-------------------------------|--------|-----------|--------|
| Signature                     |   |      |   |
|                          |   |      |   |
| Signature  Guarantee:         |   |      |   |
|                          |   |      |   |
|                          |   |      |   |
|                          |   |      |
| Signature  must be guaranteed |   | Signature |   |

 

Signaturesmust be guaranteed by an “eligible guarantor institution” meeting therequirements of the Note Registrar, which requirements include membership orparticipation in the Security Transfer Agent Medallion Program (“STAMP”) orsuch other “signature guarantee program” as may be determined by the NoteRegistrar in addition to, or in substitution for, STAMP, all in accordance withthe Securities Exchange Act of 1934, as amended.

 

2

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TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

 

Theundersigned represents and warrants that it is purchasing this Note for its ownaccount or an account with respect to which it exercises sole investmentdiscretion and that it and any such account is a “qualified institutional buyer”within the meaning of Rule 144A under the Securities Act of 1933, asamended, and is aware that the sale to it is being made in reliance onRule 144A and acknowledges that it has received such information regardingthe Company as the undersigned has requested pursuant to Rule 144A or hasdetermined not to request such information and that it is aware that thetransferor is relying upon the undersigned’s foregoing representations in orderto claim the exemption from registration provided by Rule 144A.

 
| Dated: |   |   |                                             |   |
|--------|--------|--------|--------------------------------------------------|--------|
|   |   |   | Notice:  To be executed by  an executive officer |   |

 

3

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[TO BE ATTACHED TO GLOBAL NOTES]

 

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

 

The following increases or decreases in this Global Note have beenmade:

 
| **Date of  Exchange** | ** ** | **Amount of decrease in  Principal amount of this  Global Note** | ** ** | **Amount of increase in  Principal amount of this  Global Note** | ** ** | **Principal amount of this  Global Note following  such  decrease or increase)** | ** ** | **Signature of authorized  officer of Trustee or  Notes  Custodian** | ** ** |
|----------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|
|                       |       |                                                                                                |       |                                                                                                |       |                                                                                                                |       |                                                                                          |       |
|                       |       |                                                                                                |       |                                                                                                |       |                                                                                                                |       |                                                                                          |       |
|                       |       |                                                                                                |       |                                                                                                |       |                                                                                                                |       |                                                                                          |       |

 

4

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OPTION OF HOLDER TO ELECT PURCHASE

 

Ifyou want to elect to have this Note purchased by the Company pursuant toSection 1017 or****1018 of theIndenture, check the box:

 

 If you want to elect to have only part of this Note purchased by the Companypursuant to Section 1017 or 1018 of the Indenture, state the amount inprincipal amount:  $

 

 
| Dated: |   |   | Your  Signature: |                                                                  |
|--------|--------|--------|------------------|-----------------------------------------------------------------------|
|   |   |   |             | (Sign  exactly as your name appears  on the other side of this Note.) |

 
| Signature  Guarantee: |                            |
|-----------------------|---------------------------------|
|                  | (Signature  must be guaranteed) |

 

Signaturesmust be guaranteed by an “eligible guarantor institution” meeting therequirements of the Note Registrar, which requirements include membership orparticipation in the Security Transfer Agent Medallion Program (“STAMP”) orsuch other “signature guarantee program” as may be determined by the NoteRegistrar in addition to, or in substitution for, STAMP, all in accordance withthe Securities Exchange Act of 1934, as amended.

 

5

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**EXHIBIT 3to Rule 144A / Regulation S Appendix**

 

FORM OF NON-U.S. BENEFICIAL OWNERSHIPCERTIFICATION BY EUORCLEAR OR CLEARSTREAM LUXEMBOURG

 
|   |   |   |   | [Date] |
|--------|--------|--------|--------|--------|

 

WellsFargo Bank, N.A.

 

Re:                               103/8% Senior Subordinated Notes due 2015 (the “Notes”)of The Neiman Marcus Group, Inc. (the “Company”)

 

Referenceis hereby made to the Senior Subordinated Indenture, dated as ofOctober 6, 2005 (as amended and supplemented from time to time, the “Indenture”),among the Company, the Guarantors named therein and Wells Fargo Bank, N.A., asTrustee.  Capitalized terms used but not defined herein shall have themeanings given them in the Indenture.

 

Thisis to certify with respect to$                    principal amount of the Notes that, except as set forth below, we have receivedin writing, by tested telex or by electronic transmission, from memberorganizations appearing in our records as persons being entitled to a portionof such principal amount (our “Member Organizations”) certifications withrespect to such portion, that such portion is beneficially owned by(a) non-U.S. person(s) or (b) U.S. person(s) who purchased theportion beneficially owned by such U.S. person(s) in transactions that did notrequire registration under the Securities Act of 1933, as amended (the “Act”). As used in this paragraph the term “U.S. person” has the meaning given to it byRegulation S under the Act.

 

Wefurther certify:

 

(i) thatwe are not making available herewith for exchange (or, if relevant, exercise ofany rights or collection of any interest) any portion of the Regulation STemporary Global Note excepted in such certifications; and

 

(ii) thatas of the date hereof we have not received any notification from any of ourMember Organizations to the effect that the statements made by such Member Organizationswith respect to any portion of the part submitted herewith for exchange (or, ifrelevant, exercise of any rights or collection of any interest) are no longertrue and cannot be relied upon as the date hereof.

 

Weunderstand that this certification is required in connection with certainsecurities laws of the United States.  In connection therewith, ifadministrative or legal proceedings are commenced or threatened in connectionwith which this certification is or would be relevant, we irrevocably authorizeyou or the Company to produce this certification to any interested party insuch proceedings.

 

6

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Dated:                           , 20        

 
|   | Yours  faithfully,                     |
|--------|----------------------------------------|
|   | [Euroclear  or Clearstream Luxembourg] |
|   |                                   |   |
|   |                                   | By |   |

 

2

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**EXHIBIT A**

 

[FORM OF FACE OF EXCHANGE NOTEOR PRIVATE EXCHANGE NOTE] */**/

 

----

*/[If the Note is to be issued in global form add the Global Notes Legend fromExhibit 1 to Appendix A and the attachment from such Exhibit 1captioned “[TO BE ATTACHED TO GLOBAL NOTES] SCHEDULE OF INCREASES ORDECREASES IN GLOBAL NOTE.”

 

**/[If the Note is a Private Exchange Note issued in a Private Exchange to anInitial Purchaser holding an unsold portion of its initial allotment, add theRestricted Notes Legend from Exhibit 1 to Appendix A and replace theAssignment Form included in this Exhibit A with the AssignmentForm included in such Exhibit 1.]

 

3

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| No. |   | $ |
|-----|--------|---|

 

103/8% Senior Subordinated NotesDue 2015

 

TheNeiman Marcus Group, Inc., a Delaware corporation, promises to pay to                      ,or registered assigns, the principal sum of                      Dollars on October 15, 2015.

 

InterestPayment Dates:  April 15 and October 15.

 

RecordDates:  April 1 and October 1.

 

Additionalprovisions of this Note are set forth on the other side of this Note.

 

Dated:

 

 
| **THE NEIMAN MARCUS GROUP, INC.** |   |
|----------------------------------------|--------|
| By                                     |   |   |
|                                   |   |   |
|                                   | Name:  |   |
|                                   | Title: |   |
|                                   |   |

 
| TRUSTEE’S CERTIFICATE OF  AUTHENTICATION                                                                                   |                  |
|---------------------------------------------------------------------------------------------------------------------------------|-----------------------|
|                                                                                                                            |                  |
| **WELLS FARGO BANK, NATIONAL  ASSOCIATION**, as Trustee

certifies that this is one of the Notes  referred to in the Indenture. |                  |
|                                                                                                                            |                  |
| By                                                                                                                              |                  |   |
|                                                                                                                            | Authorized  Signatory |   |

 

2

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[FORM OF REVERSE SIDE OF EXCHANGE NOTEOR PRIVATE EXCHANGE NOTE]

 

103/8% Senior Subordinated NoteDue 2015

 

Capitalizedterms used herein but not defined herein shall have the meanings given to suchterms in the Indenture.

 

1.             Principal and Interest; Subordination.

 

TheNeiman Marcus Group, Inc. (the “Company”) shall pay the principal of thisNote on October 15, 2015.

 

TheCompany promises to pay interest and Additional Interest, if any, on theprincipal amount of this Note on each Interest Payment Date, as set forthbelow, at the rate of 103/8% per annum (subject toadjustment as provided below).

 

Interest,and Additional Interest, if any, shall be payable semi-annually (to the Holdersof the Notes (or any predecessor Notes) at the close of business on April 1or October 1 immediately preceding the Interest Payment Date) on eachInterest Payment Date, commencing April 15, 2006.

 

[TheHolder of this Note is entitled to the benefits of the Exchange andRegistration Rights Agreement, dated October 6, 2005, among the Company,Holdings, the Subsidiary Guarantors and the Initial Purchasers named therein(the “Registration Rights Agreement”) including with respect to AdditionalInterest.](1)

 

Interest,including Additional Interest if any, on this Note shall accrue from the mostrecent date to which interest has been paid on this Note or the Notesurrendered in exchange herefor or, if no interest has been paid, fromOctober 6, 2005; *provided*that,if there is no existing Default in the payment of interest and if this Note isauthenticated between a Regular Record Date referred to on the face hereof andthe next succeeding Interest Payment Date, interest shall accrue from such nextsucceeding Interest Payment Date.  Interest shall be computed on the basisof a 360-day year of twelve 30-day months.

 

TheCompany shall pay interest and Additional Interest if any, on overdue principaland premium, if any, and interest on overdue installments of interest, to theextent lawful, at a rate per annum equal to the rate of interest applicable tothe Notes.

 

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(1) Insert if at the date of issuance of the Exchange Note ar Private Exchange Note(as the case may be) any Registration Default has occurred with respect to therelated Initial Note, during the interest period in which such date of issuanceoccurs.

 

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Theindebtedness evidenced by the Notes is, to the extent and in the mannerprovided in the Indenture, subordinate and subject in right of payment to theprior payment in full of all Senior Indebtedness, and this Note is issuedsubject to such provisions.  Each Holder of this Note, by accepting thesame, (a) agrees to and shall be bound by such provisions,(b) authorizes and directs the Trustee on its behalf to take such actionas may be necessary or appropriate to effectuate the subordination as providedin the Indenture and (c) appoints the Trustee its attorney in-fact forsuch purpose

 

2.             Method of Payment.

 

TheCompany shall pay interest (except defaulted interest) on the principal amountof the Notes on each April 15 and October 15 to the Persons who areHolders (as reflected in the Note Register at the close of business onApril 1 and October 1 immediately preceding the Interest PaymentDate), in each case, even if the Note is transferred or exchanged after suchRegular Record Date, except as provided in Section 306(b) withrespect to defaulted interest; *provided*that, with respect to the payment of principal, the Company shall make paymentto the Holder that surrenders this Note to any Paying Agent on or afterOctober 15, 2015.

 

TheCompany shall pay principal (premium, if any) and interest in money of theUnited States that at the time of payment is legal tender for payment of publicand private debts.  However, the Company may pay principal (premium, ifany) and interest by its check payable in such money.  The Company may payinterest on the Notes either (a) by mailing a check for such interest to aHolder’s registered address (as reflected in the Note Register) or (b) bywire transfer to an account located in the United States maintained by thepayee.  If a payment date is a date other than a Business Day at a placeof payment, payment may be made at that place on the next succeeding day thatis a Business Day and no interest shall accrue for the intervening period.

 

3.             Paying Agent and Note Registrar.

 

Initially,Wells Fargo Bank, National Association (the “Trustee”) shall act as PayingAgent and Note Registrar.  The Company may change any Paying Agent or NoteRegistrar upon written notice thereto and without notice to the Holders. The Company, any Subsidiary or any Affiliate of any of them may act as PayingAgent, Note Registrar or co-registrar.

 

4.             Indenture.

 

TheCompany issued the Notes under a Senior Subordinated Indenture dated as ofOctober 6, 2005 (the “Indenture”), among the Company, Holdings, theSubsidiary Guarantors and the Trustee.  The terms of the Notes includethose stated in the Indenture and those made part of the Indenture by referenceto the Trust Indenture Act.  The Notes are subject to all such terms, andHolders are referred to the Indenture and the Trust Indenture Act for astatement of all such terms.  To the extent permitted by applicable law,in the event of any inconsistency between the terms of this Note and the termsof the Indenture, the terms of the Indenture shall control.

 

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TheNotes are unsecured senior subordinated obligations of the Company.  TheIndenture does not limit the aggregate principal amount of the Notes. Subject to the conditions set forth in the Indenture, the Company may issueAdditional Notes.

 

5.             Redemption.

 

Atany time prior to October 15, 2010, the Company may redeem all or a partof the Notes, upon not less than 30 nor more than 60 days’ prior notice at aredemption price equal to 100% of the principal amount of Notes redeemed plusthe Applicable Premium as of, and accrued and unpaid interest and AdditionalInterest, if any, to the Redemption Date, subject to the rights of Holders onthe relevant record date to receive interest due on the relevant InterestPayment Date.

 

Onand after October 15, 2010, the Company may redeem the Notes, in whole orin part, upon not less than 30 nor more than 60 days’ prior notice to eachHolder at the Redemption Prices (expressed as percentages of principal amount)set forth below, plus accrued and unpaid interest thereon and AdditionalInterest, if any, to the applicable Redemption Date, subject to the right ofHolders on the relevant record date to receive interest due on the relevantInterest Payment Date, if redeemed during the twelve-month period beginning onOctober 15 of each of the years indicated below:

 
| **Year**            | ** ** | **Percentage** | ** ** |
|---------------------|------------|----------------|------------|
| 2010                |       | 105.188        | %          |
| 2011                |       | 103.458        | %          |
| 2012                |       | 101.729        | %          |
| 2013 and thereafter |       | 100.000        | %          |

 

Inaddition, until October 15, 2008, the Company may, at its option, redeemup to 35% of the aggregate principal amount of Notes issued under the Indentureat a redemption price equal to 110.375% of the aggregate principal amount thereof,plus accrued and unpaid interest thereon and Additional Interest, if any, tothe applicable Redemption Date, subject to the right of Holders on the relevantrecord date to receive interest due on the relevant Interest Payment Date, withthe net cash proceeds of one or more Equity Offerings of the Company or anydirect or indirect parent of the Company to the extent such net cash proceedsare contributed to the Company; *provided*thatat least 50% of the sum of the aggregate principal amount of Notes originallyissued under the Indenture remains Outstanding immediately after the occurrenceof each such redemption; *provided, further*,**that each such redemption occurs within90 days of the date of closing of each such Equity Offering.

 

6.             Repurchase upon a Change ofControl and Asset Sales.

 

Uponthe occurrence of (a) a Change of Control, the Holders shall have theright to require that the Company purchase such Holder’s outstanding Notes, inwhole or in part, at a purchase price of 101% of the principal amount thereof,plus accrued and unpaid interest and Additional Interest, if any, to the dateof purchase and (b) Asset Sales,

 

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theCompany may be obligated to make offers to purchase Notes and Senior SubordinatedIndebtedness of the Company with a portion of the Net Proceeds of such AssetSales at a redemption price of 100% of the principal amount thereof plusaccrued and unpaid interest and Additional Interest, if any, to the date ofpurchase.

 

7.             Denominations; Transfer;Exchange.

 

TheNotes are in registered form without coupons in denominations of $2,000principal amount and integral multiples of $1,000.  A Holder may transferor exchange Notes in accordance with the Indenture.  The Note Registrarand the Trustee may require a Holder, among other things, to furnishappropriate endorsements and transfer documents and the Company may require aHolder to pay any taxes and fees required by law or permitted by theIndenture.  The Note Registrar need not register the transfer or exchangeof a Note or portion of a Note selected for redemption (except, in the case ofa Note to be redeemed in part, the portion of the Note not to be redeemed) orany Note or portion of a Note for a period of 15 days before a selection ofNotes to be redeemed or 15 days before an interest payment date.

 

8.             Persons Deemed Owners.

 

Aregistered Holder may be treated as the owner of a Note for all purposes.

 

9.             Unclaimed Money.

 

Subjectto any laws relating to abandoned property, if money for the payment ofprincipal (premium, if any) or interest remains unclaimed for two years, theTrustee and the Paying Agent shall pay the money back to the Company at itsrequest or (if then held by the Company) shall be discharged from suchtrust.  After that, Holders entitled to the money must look to the Companyfor payment and all liability of the Trustee and such Paying Agent with respectto such money and all liability of the Company as trustee thereof shall cease.

 

10.           Discharge and Defeasance Prior toRedemption or Maturity.

 

Subjectto satisfaction of conditions set forth in the Indenture, the Company at anytime may terminate some or all of its obligations under the Notes and theIndenture, if the Company irrevocably deposits with the Trustee cash orGovernment Securities or a combination thereof sufficient for the payment ofthe then outstanding principal of and interest on the Notes to Redemption orStated Maturity, as the case may be.

 

11.           Amendment; Supplement; Waiver.

 

Subjectto certain exceptions, the Indenture or the Notes may be amended orsupplemented with the consent of the Holders of at least a majority inaggregate principal amount of the Outstanding Notes, including consentsobtained in connection with a purchase of, or tender offer or exchange offerfor, the Notes, and any existing

 

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Defaultor compliance with any provision of the Indenture or the Notes may be waivedwith the consent of the Holders of a majority in aggregate principal amount ofthe Outstanding Notes.  Without notice to or the consent of any Holder,the parties thereto may amend or supplement the Indenture or the Notes to,among other things, cure any ambiguity, omission, mistake, defect orinconsistency and make any change that does not adversely affect the legalrights of any Holder.

 

12.           Restrictive Covenants.

 

TheIndenture contains certain covenants, including covenants with respect to thefollowing matters: (i) Restricted Payments; (ii) incurrence ofIndebtedness and issuance of Disqualified Stock and Preferred Stock;(iii) Liens; (iv) transactions with Affiliates; (v) dividend andother payment restrictions affecting Restricted Subsidiaries;(vi) guarantees of Indebtedness by Restricted Subsidiaries;(vii) incurrence of other Senior Subordinated Indebtedness;(viii) merger, consolidation or sale of all or substantially all assets;(ix) purchase of Notes upon a Change in Control; and (x) dispositionof proceeds of Asset Sales.  Within 120 days (or the successor time periodthen in effect under the rules and regulations of the Exchange Act) afterthe end of each fiscal year, the Company must report to the Trustee oncompliance with such limitations.

 

13.           Successor Persons.

 

Whena successor Person or other entity assumes all the obligations of itspredecessor under the Notes and the Indenture, the predecessor Person shall bereleased from those obligations, subject to certain exceptions.

 

14.           Remedies for Events of Default.

 

Ifan Event of Default, as defined in the Indenture, occurs and is continuing, theTrustee or the Holders of at least 30% in principal amount of the OutstandingNotes may declare all Outstanding Notes to be immediately due and payable; *provided, however*, that, so long as anyIndebtedness permitted to be incurred under the Indenture as part of the SeniorCredit Facilities or the Senior Notes shall be outstanding, no suchacceleration shall be effective until the earlier of (1) acceleration ofany such Indebtedness under the Senior Credit Facilities and the Senior Notes,or (2) five Business Days after the giving of written notice of suchacceleration to the Company, the administrative agent under the Senior CreditFacilities and the trustee under the Senior Indenture.  If an Event ofDefault arising from certain events of bankruptcy or insolvency with respect tothe Company or any Significant Subsidiary occurs and is continuing, the Notesautomatically become immediately due and payable.  Subject to theprovisions of the Indenture relating to the duties of the Trustee, in case anEvent of Default occurs and is continuing, the Trustee shall be under noobligation to exercise any rights or powers under the Indenture at the requestor direction of any of the Holders unless such Holders have offered to the Trusteereasonable indemnity or security against any loss, liability or expense. Subject to certain restrictions, the Holders of a majority in principal amountof the Outstanding Notes are given the right to direct the time, method andplace of conducting any proceeding for any remedy available to the Trustee orof exercising any

 

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trustor power conferred on the Trustee.  The Trustee, however, may refuse tofollow any direction that conflicts with law or the Indenture or that theTrustee determines is unduly prejudicial to the rights of any other Holder of aNote or that would involve the Trustee in personal liability.

 

15.           Guarantees.

 

TheCompany’s obligations under the Notes are fully, irrevocably and unconditionallyguaranteed on an unsecured senior subordinated basis, to the extent set forthin the Indenture, by Holdings and each of the Subsidiary Guarantors.

 

16.           Trustee Dealings with Company.

 

TheTrustee under the Indenture, in its individual or any other capacity, maybecome the owner or pledgee of Notes and may make loans to, accept depositsfrom, perform services for, and otherwise deal with, the Company and itsAffiliates as if it were not the Trustee.

 

17.           Authentication.

 

ThisNote shall not be valid until the Trustee signs the certificate ofauthentication on the other side of this Note.

 

18.           Abbreviations.

 

Customaryabbreviations may be used in the name of a Holder or an assignee, suchas:  TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),JT TEN (= joint tenants with right of survivorship and not as tenants incommon), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).

 

19.           CUSIP Numbers.

 

Pursuantto a recommendation promulgated by the Committee on Uniform SecurityIdentification Procedures, the Company has caused CUSIP numbers to be printedon the Notes and has directed the Trustee to use CUSIP numbers in notices ofredemption as a convenience to Holders.  No representation is made as tothe accuracy of such numbers either as printed on the Notes or as contained inany notice of redemption and reliance may be placed only on the otheridentification numbers placed thereon.

 

20.           Holders’ Compliance with theRegistration Rights Agreement.

 

EachHolder of a Note, by acceptance hereof, acknowledges and agrees to theprovisions of the Registration Rights Agreement, including the obligations ofthe Holders with respect to a registration and the indemnification of theCompany to the extent provided therein.

 

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21.           Governing Law.

 

**THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED INACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.**

 

TheCompany shall furnish to any Holder upon written request and without charge acopy of the Indenture.  Requests may be made to The Neiman MarcusGroup, Inc., 1618 Main Street, Dallas, Texas 75201, Attention: GeneralCounsel.

 

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ASSIGNMENT/TRANSFER FORM

 

Toassign and transfer this Note, fill in the form below:

 

Ior we assign and transfer this Note to

 

(Printor type assignee’s name, address and zip code)

 

(Insertassignee’s soc. sec. or tax I.D. No.)

 

andirrevocably appoint                                   agent to transfer this Note on the books of the Company.  The agent maysubstitute another to act for him.

 
|   |   |   |             |   |
|--------|--------|--------|------------------|--------|
|   |   |   |             |   |
| Date:  |   |   | Your  Signature: |   |
|   |   |   |             |   |
|   |   |   |             |   |

 

Signexactly as your name appears on the other side of this Note.

 

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OPTION OF HOLDER TO ELECT PURCHASE

 

Ifyou want to elect to have this Note purchased by the Company pursuant toSection 1017 or****1018 of theIndenture, check the box:

 

Ifyou want to elect to have only part of this Note purchased by the Companypursuant to Section 1017 or 1018 of the Indenture, state the amount inprincipal amount:  $

 
| Dated:                |                            |   | Your  Signature: |                                                                 |
|-----------------------|---------------------------------|--------|------------------|----------------------------------------------------------------------|
|                  |                            |   |             | (Sign  exactly as your name appears on the other side of this Note.) |
|                  |                            |   |             |                                                                 |
| Signature  Guarantee: |                            |
|                  | (Signature  must be guaranteed) |

 

Signaturesmust be guaranteed by an “eligible guarantor institution” meeting therequirements of the Note Registrar, which requirements include membership orparticipation in the Security Transfer Agent Medallion Program (“STAMP”) orsuch other “signature guarantee program” as may be determined by the NoteRegistrar in addition to, or in substitution for, STAMP, all in accordance withthe Securities Exchange Act of 1934, as amended.

 

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**EXHIBIT B**

 

FORM OF SUPPLEMENTAL INDENTURETO BE DELIVERED BY SUBSEQUENT GUARANTORS

 

SUPPLEMENTALINDENTURE (this “Supplemental Indenture”), dated as of              ,200    , among                   (the “Guaranteeing Subsidiary”), a subsidiary of The Neiman MarcusGroup, Inc. (or its permitted successor), a Delaware corporation (the “Company”),the Company, Newton Acquisition, Inc. (“Holdings”) the other SubsidiaryGuarantors (as defined in the Indenture referred to herein) and Wells FargoBank, National Association, as trustee under the Indenture referred to below(the “Trustee”).

 

W I T N E S S E T H

 

WHEREAS,the Company has heretofore executed and delivered to the Trustee a seniorsubordinated indenture (the “Indenture”), dated as of October 6, 2005providing for the issuance of 103/8% Senior Subordinated Notes Due 2015 (the “Notes”);

 

WHEREAS,the Indenture provides that under certain circumstances the GuaranteeingSubsidiary shall execute and deliver to the Trustee a supplemental indenturepursuant to which the Guaranteeing Subsidiary shall unconditionally guaranteeall of the Company’s Obligations under the Notes and the Indenture on the termsand conditions set forth herein (the “Guarantee”); and

 

WHEREAS,pursuant to Section 901 of the Indenture, the Trustee is authorized toexecute and deliver this Supplemental Indenture.

 

NOW,THEREFORE, in consideration of the foregoing and for other good and valuableconsideration, the receipt of which is hereby acknowledged, the GuaranteeingSubsidiary and the Trustee mutually covenant and agree for the equal andratable benefit of the Holders of the Notes as follows:

 

1.             CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meaningsassigned to them in the Indenture.

 

2.             AGREEMENT TO GUARANTEE.  TheGuaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee onthe terms and subject to the conditions set forth in the Note Guarantee and inthe Indenture including but not limited to Article 12 thereof.

 

3.             NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator,stockholder or agent of the Guaranteeing Subsidiary, as such, shall have anyliability for any obligations of the Company or any Guaranteeing Subsidiaryunder the Notes, any Note Guarantees, the Indenture or this SupplementalIndenture or for any claim based on, in respect of, or by reason of, suchobligations or their creation.  Each Holder of the Notes by accepting aNote waives and releases all such liability.  The waiver and release arepart of the consideration for issuance of the Notes.  Such waiver may notbe effective to waive liabilities under the federal securities laws and it isthe view of the SEC that such a waiver is against public policy.

 

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4.             GOVERNING LAW.  THISSUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITHTHE LAWS OF THE STATE OF NEW YORK.

 

5.             COUNTERPARTS.  The parties maysign any number of copies of this Supplemental Indenture.  Each signedcopy shall be an original, but all of them together represent the sameagreement.

 

6.             EFFECT OF HEADINGS.  TheSection headings herein are for convenience only and shall not affect theconstruction hereof.

 

7.             THE TRUSTEE.  The Trusteeshall not be responsible in any manner whatsoever for or in respect of thevalidity or sufficiency of this Supplemental Indenture or for or in respect ofthe recitals contained herein, all of which recitals are made solely by theGuaranteeing Subsidiary and the Company.

 

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INWITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture tobe duly executed and attested, all as of the date first above written.

 
| Dated: |                                    ,  20 |   |                                                |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
|   |                                                                                                                                                                                                                    |   |                                                |
|   |                                                                                                                                                                                                                    |   |                                                |
|   |                                                                                                                                                                                                                    |   | [GUARANTEEING  SUBSIDIARY]                          |
|   |                                                                                                                                                                                                                    |   |                                                |
|   |                                                                                                                                                                                                                    |   | By:                                                 |   |
|   |                                                                                                                                                                                                                    |   |                                                | Name: |
|   |                                                                                                                                                                                                                    |   |                                                | Title: |
|   |                                                                                                                                                                                                                    |   |                                                |
|   |                                                                                                                                                                                                                    |   |                                                |
|   |                                                                                                                                                                                                                    |   | WELLS  FARGO BANK, NATIONAL ASSOCIATION, as Trustee |
|   |                                                                                                                                                                                                                    |   |                                                |
|   |                                                                                                                                                                                                                    |   | By:                                                 |   |
|   |                                                                                                                                                                                                                    |   |                                                | Authorized  Signatory |

 

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