**Exhibit 10.12**

 

 

 

LIEN SUBORDINATION AND INTERCREDITOR AGREEMENT

 

dated as of

 

October 6, 2005,

 

among

 

DEUTSCHE BANK TRUST COMPANY AMERICAS,

 

as Revolving Facility Agent,

 

CREDIT SUISSE,

 

as Term Loan Agent,

 

NEWTON ACQUISITION, INC.,

 

NEWTON ACQUISITION MERGER SUB, INC. (to be merged withand into The Neiman Marcus Group, Inc.)

 

and

 

The subsidiaries of The Neiman Marcus Group, Inc. named herein

 

 

[CS&M #5865-334]

 

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LIEN SUBORDINATION AND INTERCREDITOR AGREEMENT datedas of October 6, 2005, among DEUTSCHE BANK TRUST COMPANY AMERICAS, asagent for the Revolving Facility Secured Parties referred to herein; CREDITSUISSE, as agent for the Term Loan Secured Parties and the Existing NotesSecured Parties referred to herein; NEWTON ACQUISITION, INC.; NEWTON ACQUISITIONMERGER SUB, INC. (to be merged with and into The Neiman MarcusGroup, Inc.); and the subsidiaries of The Neiman Marcus Group, Inc.named herein.

 

Referenceis made to (a) the Revolving Facility Credit Agreement (such term and eachother capitalized term used and not otherwise defined herein having the meaningassigned to it in Article I), under which the Revolving Facility Lendershave extended and agreed to extend credit to the Company, (b) the TermLoan Credit Agreement, under which the Term Loan Lenders have extended creditto the Company and (c) the Existing Notes Indenture governing the ExistingNotes.

 

Inconsideration of the mutual agreements herein contained and other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the Revolving Facility Agent (for itself and on behalf of theRevolving Facility Secured Parties), the Term Loan Agent (for itself and onbehalf of the Term Loan Secured Parties and the Existing Notes SecuredParties), Holdings, the Company, NM Nevada Trust, a Massachusetts businesstrust, and the subsidiaries of the Company identified on Schedule I heretoagree as follows:

 

ARTICLE I

 

**Definitions**

 

SECTION 1.01. ***Construction; CertainDefined Terms***.  The definitions of terms herein shall applyequally to the singular and plural forms of the terms defined.  Wheneverthe context may require, any pronoun shall include the corresponding masculine,feminine and neuter forms.  The words “include”, “includes” and “including”shall be deemed to be followed by the phrase “without limitation”.  Theword “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (i) any definition of or referenceto any agreement, instrument or other document herein shall be construed asreferring to such agreement, instrument or other document as from time to timeamended, supplemented or otherwise modified, (ii) any reference herein toany person shall be construed to include such person’s successors and permittedassigns, but shall not be deemed to include the subsidiaries of such personunless express reference is made to such subsidiaries, (iii) the words “herein”,“hereof” and “hereunder”, and words of similar import, shall be construed torefer to this Agreement in its entirety and not to any particular provisionhereof, (iv) all references herein to Articles and Sections shall beconstrued to refer to Articles and Sections of this Agreement and(v) unless otherwise expressly qualified herein, the words “asset” and “property”shall be construed to have the same meaning and effect and to refer to any and

 

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alltangible and intangible assets and properties, including cash, securities,accounts and contract rights.

 

SECTION 1.02. As used in this Agreement, the following terms have the meanings specifiedbelow:

 

***“Bankruptcy Code”*** means Title 11of the United States Code.

 

***“Collateral”*** means theRevolving Facility Collateral and the Term Loan Collateral.

 

***“Company”*** means TheNeiman Marcus Group, Inc., a Delaware corporation, as the survivingcorporation of the merger with Newton Acquisition Merger Sub, Inc.

 

“***Excluded Assets***” hasthe meaning set forth (a) in the Term Loan Security Agreement, in the caseof Term Loan First Lien Collateral, and (b) in the Revolving FacilitySecurity Agreement, in the case of Revolving Facility First Lien Collateral.

 

***“Existing Noteholders”*** means theSecurityholders under and as defined in the Existing Notes Indenture.

 

***“Existing Notes”*** means the 2008Notes and the 2028 Debentures.

 

***“Existing Notes DesignatedCollateral”*******has the meaning set forth inthe Term Loan Security Agreement.

 

***“Existing Notes Event of Default”*** means any “Eventof Default”, as defined in the Existing Notes Indenture.

 

***“Existing Notes Indenture”*** means theIndenture dated as of May 27, 1998, between the Company and the ExistingNotes Trustee, pursuant to which the Existing Notes were issued.

 

***“Existing Notes Obligations”*** has themeaning set forth in the Term Loan Security Agreement.

 

***“Existing Notes Secured Parties”*** has themeaning set forth in the Term Loan Security Agreement.

 

***“Existing Notes Trustee”*** means The Bankof New York, in its capacity as trustee under the Existing Notes Indenture, andits successors in such capacity.

 

***“Grantor”*** meansHoldings, the Company and each subsidiary of the Company that shall havecreated any Lien on any of its assets or properties to secure any of theObligations.

 

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***“Holdings”*** means NewtonAcquisition, Inc., a Delaware corporation.

 

***“Junior Documents”*** means(a) in respect of the Term Loan First Lien Collateral, the RevolvingFacility Documents, and (b) in respect of the Revolving Facility FirstLien Collateral, the Term Loan/Notes Documents.

 

***“Junior Liens”*** means(a) in respect of the Revolving Facility First Lien Collateral, the TermLoan Liens on such Collateral, and (b) in respect of the Term Loan FirstLien Collateral, the Revolving Facility Liens on such Collateral.

 

***“Junior Obligations”*** means(a) with respect to the Term Loan Obligations and the Existing NotesObligations (to the extent such Obligations are secured by the Term Loan FirstLien Collateral), the Revolving Facility Obligations, and (b) with respectto Revolving Facility Obligations (to the extent such Obligations are securedby the Revolving Facility First Lien Collateral), the Term Loan Obligations andthe Existing Notes Obligations.

 

***“Junior Obligations Collateral”*** means, withrespect to any Senior Obligations, the Collateral securing the related JuniorObligations.

 

***“Junior Obligations Event of Default”*** means(a) with respect to the Term Loan First Lien Collateral, any RevolvingFacility Event of Default, and (b) with respect to the Revolving FacilityFirst Lien Collateral, any Term Loan Event of Default or Existing Notes Eventof Default.

 

***“Junior Obligations Secured Parties”*** means(a) with respect to the Term Loan First Lien Collateral, the RevolvingFacility Secured Parties, and (b) with respect to the Revolving FacilityFirst Lien Collateral, the Term Loan Secured Parties and the Existing NotesSecured Parties.

 

***“Junior Obligations SecurityDocuments”*** means (a) with respect to the RevolvingFacility First Lien Collateral, the Term Loan Security Documents, and(b) with respect to the Term Loan First Lien Collateral, the RevolvingFacility Security Documents.

 

***“Junior Representative”*** means(a) with respect to the Term Loan First Lien Collateral, the RevolvingFacility Agent, and (b) with respect to the Revolving Facility First LienCollateral, the Term Loan Agent.

 

***“Lien”*** means anypledge, security interest, mortgage or other lien or encumbrance created tosecure any indebtedness or other obligation.

 

***“Mortgages”*****means the Term Loan Mortgages and the Revolving Facility Mortgages.

 

***“Obligations”*** means the TermLoan Obligations, the Existing Notes Obligations and the Revolving FacilityObligations.

 

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***“Refinance”*** means, inrespect of any indebtedness, to refinance, extend, renew, defease, amend,modify, supplement, restructure, replace, refund or repay, or to issue otherindebtedness, in exchange or replacement for, such indebtedness in whole or inpart; *provided* that theRefinancing indebtedness is secured by Liens in respect of the same assets andproperties that secured the Refinanced indebtedness prior to such Refinancing. “***Refinanced***” and “***Refinancing***” shallhave correlative meanings.

 

***“Representative”*** means(a) in the case of any Revolving Facility Obligations, the RevolvingFacility Agent, and (b) in the case of any Term Loan Obligations andExisting Notes Obligations, the Term Loan Agent.

 

***“Revolving Facility Agent”*** means DeutscheBank Trust Company Americas, in its capacity as administrative agent andcollateral agent under the Revolving Facility Credit Agreement.

 

***“Revolving Facility Collateral”*** means allassets and properties subject to Liens created by the Revolving FacilitySecurity Documents to secure the Revolving Facility Obligations.

 

***“Revolving Facility Credit Agreement”*** means theCredit Agreement dated as of October 6, 2005, among Holdings, the Company,the subsidiaries of the Company from time to time party thereto, the RevolvingFacility Lenders and the Revolving Facility Agent, as amended, extended,renewed, restated, supplemented or otherwise modified from time to time, withthe same or different lenders and agents.

 

***“Revolving Facility Documents”*** means theRevolving Facility Credit Agreement and the Revolving Facility SecurityDocuments.

 

***“Revolving Facility Event of Default”*** means any “Eventof Default”, as defined in the Revolving Facility Credit Agreement.

 

***“Revolving Facility First LienCollateral”*** means any and all of the following assets andproperties now owned or at any time hereafter acquired by any Grantor:(a) all Accounts arising from the sale or other disposition of Inventory;(b) all Inventory; (c) to the extent evidencing, governing, securingor otherwise related to the items referred to in the preceding clauses(a) and (b), all (i) General Intangibles, (ii) Chattel Paper,(iii) Instruments and (iv) Documents; (d) all PaymentIntangibles (including corporate tax refunds), other than any PaymentIntangibles that represent tax refunds in respect of or otherwise relate toreal property, Fixtures or Equipment; (e) all payments received from theGrantors’ credit card clearinghouses and processors or otherwise in respect ofall credit card charges for sales of Inventory by the Company and itssubsidiaries; (f) all collection accounts, deposit accounts and commodityaccounts and any cash or other assets in any such accounts (excluding any netcash proceeds from the sale or other disposition of any Term Loan First LienCollateral held in trust by the Term Loan Agent pending application inaccordance with the Term Loan Credit Agreement); (g) all books and recordsrelated to the foregoing; and (h) all Products and Proceeds of any and allof the foregoing in whatever form received, including proceeds of insurance

 

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policiesrelated to Inventory of any Grantor and business interruption insurance; *provided*, *however*,under no circumstances shall Excluded Assets be Revolving Facility First LienObligations.  All capitalized terms used in this definition and notdefined elsewhere in this Agreement have the meanings assigned to them in theUCC.

 

***“Revolving Facility First LienCollateral Transition Date”*** means the earlier of(a) the date on which all the Revolving Facility Obligations shall havebeen paid in full (other than unripened or contingent indemnity obligationsunder the relevant Revolving Facility Documents for which no demand has beenmade) and the Revolving Facility Credit Agreement shall have been terminatedand (b) the date on which the Revolving Facility First Lien Collateralshall have been released from the Liens created under the Revolving FacilityDocuments.

 

***“Revolving Facility Lenders”*** means theLenders under and as defined in the Revolving Facility Credit Agreement.

 

***“Revolving Facility Liens”*** means theLiens on the Revolving Facility Collateral created under Revolving FacilitySecurity Documents to secure the Revolving Facility Obligations.

 

***“Revolving Facility Mortgages”*****means any mortgage, deed of trust or other agreement which conveys orevidences a Lien in favor of the Revolving Facility Agent, for the benefit ofthe Revolving Facility Agent and the Revolving Facility Secured Parties, onreal property of a Grantor, including any amendment, modification or supplementthereto.

 

***“Revolving Facility Obligations”*** means all “SecuredObligations” as such term is defined in the Revolving Facility CreditAgreement.

 

***“Revolving Facility Required Parties”*** means the “RequiredSecured Parties” as such term is defined in the Revolving Facility SecurityAgreement.

 

***“Revolving Facility Secured Parties”*** means, at anytime, the Revolving Facility Agent, each Revolving Facility Lender and eachother holder of, or obligee in respect of, any Revolving Facility Obligationsoutstanding at such time.

 

***“Revolving Facility SecurityAgreement”*** means the Pledge and Security Agreement dated as ofOctober 6, 2005, among Holdings, the Company, the subsidiaries of theCompany from time to time party thereto and the Revolving Facility Agent, asamended, extended, renewed, restated, supplemented or otherwise modified fromtime to time.

 

***“Revolving Facility SecurityDocuments”*** means the Revolving Facility Security Agreement,the Revolving Facility Mortgages, and any other documents now existing orentered into after the date hereof that create Liens on any assets or propertiesof Holdings, the Company or any of its subsidiaries to secure any RevolvingFacility Obligations.

 

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***“Secured Parties”*** means the TermLoan Secured Parties, the Existing Notes Secured Parties the Revolving FacilitySecured Parties.

 

***“Security Documents”*** means the TermLoan Security Documents and the Revolving Facility Security Documents.

 

***“Senior Liens”*** means(a) in respect of the Revolving Facility First Lien Collateral, theRevolving Facility Liens on such Collateral, and (b) in respect of theTerm Loan First Lien Collateral, the Term Loan Liens on such Collateral (in thecase of the Existing Notes Obligations, solely to the extent such Collateralconstitutes Existing Notes Designated Collateral).

 

***“Senior Obligations”*** means(a) with respect to the Revolving Facility Obligations (to the extent suchObligations are secured by the Term Loan First Lien Collateral), the Term LoanObligations and the Existing Notes Obligations, and (b) with respect to TermLoan Obligations and the Existing Notes Obligations (to the extent suchObligations are secured by the Revolving Facility First Lien Collateral), theRevolving Facility Obligations.

 

***“Senior Obligations Collateral”*** means(a) with respect to the Term Loan Obligations and the Existing NotesObligations, the Revolving Facility First Lien Collateral, and (b) withrespect to the Revolving Facility Obligations, the Term Loan First LienCollateral.

 

***“Senior Obligations Required Parties”*** means(a) with respect to the Revolving Facility First Lien Collateral, theRevolving Facility Required Parties, and (b) with respect to the Term LoanFirst Lien Collateral, the Term Loan Required Parties.

 

***“Senior Obligations Secured Parties”*** means(a) with respect to the Term Loan First Lien Collateral, the Term LoanSecured Parties and the Existing Notes Secured Parties, and (b) withrespect to the Revolving Facility First Lien Collateral, the Revolving FacilitySecured Parties.

 

***“Senior Obligations SecurityDocuments”*** means (a) with respect to the RevolvingFacility First Lien Collateral, the Revolving Facility Security Documents, and(b) with respect to the Term Loan First Lien Collateral, the Term LoanSecurity Documents.

 

***“Senior Representative”*** means(a) with respect to the Term Loan First Lien Collateral, the Term LoanAgent, and (b) with respect to the Revolving Facility First LienCollateral, the Revolving Facility Agent.

 

***“subsidiary”*** means, withrespect to any person (herein referred to as the “parent”), any corporation,partnership, association or other business entity (a) of which securitiesor other ownership interests representing more than 50% of the equity or morethan 50% of the ordinary voting power or more than 50% of the generalpartnership interests are, at the time any determination is being made, owned,controlled or held, or (b) that is, at the time any determination is made,otherwise controlled, by the parent or

 

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oneor more subsidiaries of the parent or by the parent and one or moresubsidiaries of the parent.

 

***“Term Loan Agent”*** means CreditSuisse, in its capacity as collateral agent for the Term Loan Secured Partiesand the Existing Notes Secured Parties.

 

***“Term Loan Collateral”*** means allassets and properties subject to Liens created by the Term Loan SecurityDocuments to secure the Term Loan Obligations and the Existing NotesObligations.

 

***“Term Loan Credit Agreement”*** means theCredit Agreement dated as of October 6, 2005, among Holdings, the Company,the subsidiaries of the Company from time to time party thereto, the Term LoanLenders and the Term Loan Agent, as amended, extended, renewed, restated,supplemented or otherwise modified from time to time, with the same ordifferent lenders and agents.

 

***“Term Loan Event of Default”*** means any “Eventof Default”, as defined in the Term Loan Credit Agreement.

 

***“Term Loan First Lien Collateral”*** means any andall of the following assets and properties now owned or at any time hereafteracquired by any Grantor (in the case of the Existing Notes Obligations, solelyto the extent such assets or property constitute Existing Notes DesignatedCollateral): (a) all Accounts (but not including Accounts arising from thesale or other disposition of Inventory); (b) all real property, Fixturesand Equipment; (c) all Intellectual Property; (d) all EquityInterests in the Company and its subsidiaries; (e) all GeneralIntangibles, Chattel Paper, Instruments and Documents (other than GeneralIntangibles, Chattel Paper, Instruments and Documents that are RevolvingFacility First Lien Collateral); (f) all Payment Intangibles thatrepresent tax refunds in respect of or otherwise relate to real property,Fixtures or Equipment; (g) all intercompany indebtedness of Holdings andits subsidiaries; (h) all permits and licenses related to any of theforegoing (including any permits or licenses related to the ownership oroperation of real property, Fixtures or Equipment of any Grantor); (i) allproceeds of insurance policies (other than any such proceeds that are RevolvingFacility First Lien Collateral); (j) all books and records related to theforegoing and not constituting Revolving Facility First Lien Collateral;(k) all Products and Proceeds of any and all of the foregoing; and(l) all other Collateral not constituting Revolving Facility First LienCollateral; *provided*, *however*, under no circumstances shallExcluded Assets be Term Loan First Lien Collateral.  All capitalized termsused in this definition and not defined elsewhere in this Agreement have themeanings assigned to them in the UCC.

 

***“Term Loan First Lien CollateralTransition Date”*** means the earlier of (a) the date on which allthe Term Loan Obligations shall have been paid in full (other than unripened orcontingent indemnity obligations under the relevant Term Loan/Notes Documentsfor which no demand has been made) and the Term Loan Credit Agreement shallhave been terminated and (b) the date on which the Term Loan First LienCollateral shall have been released from the Liens created under the TermLoan/Notes Documents.

 

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***“Term Loan Lenders”*** means theLenders under and as defined in the Term Loan Credit Agreement.

 

***“Term Loan Liens”*** means theLiens on the Term Loan Collateral created under the Term Loan SecurityDocuments to secure the Term Loan Obligations and the Existing NotesObligations.

 

***“Term Loan Mortgages”*** means anymortgage, deed of trust or other agreement which conveys or evidences a Lien infavor of the Term Loan Agent, for the benefit of the Term Loan Agent, Term LoanSecured Parties and the Existing Notes Secured Parties, on real property of aGrantor, including any amendment, modification or supplement thereto.

 

***“Term Loan Obligations”*** has themeaning set forth in the Term Loan Security Agreement.

 

***“Term Loan Pari Passu Indebtedness”*** meansindebtedness of the Company or its subsidiaries that is equally and ratablysecured on a pari passu basis with the Term Loan Obligations, the ExistingNotes Obligations and Refinancings thereof and is permitted to be so incurredin accordance with the Revolving Facility Credit Agreement and the Term LoanCredit Agreement.

 

***“Term Loan Required Parties”*** means the “RequiredSecured Parties” as such term is defined in the Term Loan Security Agreement.

 

***“Term Loan Secured Parties”*** has themeaning set forth in the Term Loan Security Agreement*.*

 

***“Term Loan Security Agreement”*** means thePledge and Security and Intercreditor Agreement dated as of October 6,2005, among Holdings, the Company, the subsidiaries of the Company from time totime party thereto and the Term Loan Agent, as amended, extended, renewed,restated, supplemented or otherwise modified from time to time.

 

***“Term Loan Security Documents”*** means the TermLoan Security Agreement, the Term Loan Mortgages, and any other documents nowexisting or entered into after the date hereof that creates Liens on any assetsor properties of Holdings, the Company or any of its subsidiaries to secure anyTerm Loan Obligations and Existing Notes Obligations.

 

***“Term Loan/Notes Documents”*** means theExisting Notes Indenture, the Term Loan Credit Agreement and the Term LoanSecurity Documents.

 

***“2008 Notes”*** means theCompany’s 6.65% Senior Notes due 2008 in an initial aggregate principal amountof $125,000,000.

 

***“2028 Debentures”*** means theCompany’s 7.125% Debentures due 2028 in an initial aggregate principal amountof $125,000,000.

 

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*“**UCC**”* means theUniform Commercial Code as from time to time in effect in the State of NewYork.

 

ARTICLE II

 

**Subordination of Junior Liens; Certain Agreements**

 

SECTION 2.01. ***Subordination of JuniorLiens.***  (a)  All Junior Liens in respect of anyCollateral are expressly subordinated and made junior in right, priority,operation and effect to any and all Senior Liens in respect of such Collateral,notwithstanding anything contained in this Agreement, the Term Loan/NotesDocuments, the Revolving Facility Documents or any other agreement orinstrument to the contrary, and irrespective of the time, order or method ofcreation, attachment or perfection of such Junior Liens and such Senior Liensor any defect or deficiency or alleged defect or deficiency in any of theforegoing.

 

(b) It is acknowledged that (i) the aggregate amount of the Senior Obligationsmay, subject to the limitations set forth in the Existing Notes Indenture, theTerm Loan Credit Agreement and the Revolving Facility Credit Agreement, be increased,(ii) a portion of the Senior Obligations consists or may consist ofindebtedness that is revolving in nature, and the amount thereof that may beoutstanding at any time or from time to time may be increased or reduced andsubsequently reborrowed, and (iii) the Senior Obligations may beincreased, extended, renewed or otherwise amended or modified from time totime, all without affecting the subordination of the Junior Liens hereunder orthe provisions of this Agreement defining the relative rights of the RevolvingFacility Secured Parties, the Term Loan Secured Parties and the Existing NotesSecured Parties.  The lien priorities provided for herein shall not bealtered or otherwise affected by any amendment, modification, supplement,extension, increase, replacement, renewal, restatement or refinancing of eitherthe Junior Obligations or the Senior Obligations, by the release of anyCollateral or guarantees securing any Senior Obligations or by any action thatany Representative or Secured Party may take or fail to take in respect of anyCollateral.

 

SECTION 2.02. ***No Action With Respectto Junior Obligations Collateral Subject to Senior Liens.**** *No Junior Representative or otherJunior Obligations Secured Party shall commence or instruct any Junior Representativeto commence any judicial or nonjudicial foreclosure proceedings with respectto, seek to have a trustee, receiver, liquidator or similar official appointedfor or over, attempt any action to take possession of, exercise any right,remedy or power with respect to, or otherwise take any action to enforce itsinterest in or realize upon, or take any other action available to it inrespect of, any Junior Obligations Collateral under any Junior ObligationsSecurity Document, applicable law or otherwise, at any time when such JuniorObligations Collateral shall be subject to any Senior Lien and any SeniorObligations secured by such Senior Lien shall remain outstanding or anycommitment to extend credit that would constitute Senior Obligations secured bysuch Senior Lien shall remain in effect, it being agreed that only the SeniorRepresentative, acting in accordance with the applicable Senior ObligationsSecurity Documents, shall be entitled to take any such actions or

 

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exerciseany such remedies.  Notwithstanding the foregoing, any JuniorRepresentative may, subject to Section 2.05, take all such actions as itshall deem necessary to perfect or continue the perfection of its Junior Liens.

 

SECTION 2.03. ***No Duties of SeniorRepresentative.***  Each Junior Obligations Secured Partyacknowledges and agrees that neither the Senior Representative nor any otherSenior Obligations Secured Party shall have any duties or other obligations tosuch Junior Obligations Secured Party with respect to any Senior ObligationsCollateral, other than to transfer to the Junior Representative any proceeds ofany such Collateral that constitutes Junior Obligations Collateral remaining inits possession following any sale, transfer or other disposition of suchCollateral, the payment and satisfaction in full of the Senior Obligationssecured thereby and the termination of any commitment to extend credit thatwould constitute Senior Obligations secured thereby, or, if the SeniorRepresentative shall be in possession of all or any part of such Collateralafter such payment and satisfaction in full and termination, such Collateral orany part thereof remaining, in each case without representation or warranty onthe part of the Senior Representative or any Senior Obligations SecuredParty.  In furtherance of the foregoing, each Junior Obligations SecuredParty acknowledges and agrees that until the Senior Obligations secured by anyCollateral shall have been paid and satisfied in full and any commitment toextend credit that would constitute Senior Obligations secured thereby shallhave been terminated, the Senior Representative shall be entitled, for thebenefit of the holders of such Senior Obligations, to sell, transfer or otherwisedispose of or deal with such Collateral as provided herein and in the SeniorObligations Security Documents without regard to any Junior Lien or any rightsto which the holders of the Junior Obligations would otherwise be entitled as aresult of such Junior Lien.  Without limiting the foregoing, each JuniorObligations Secured Party agrees that neither the Senior Representative nor anyother Senior Obligations Secured Party shall have any duty or obligation firstto marshall or realize upon any type of Collateral (or any other collateralsecuring the Senior Obligations), or to sell, dispose of or otherwise liquidateall or any portion of the Collateral (or any other collateral securing theSenior Obligations), in any manner that would maximize the return to the JuniorObligations Secured Parties, notwithstanding that the order and timing of anysuch realization, sale, disposition or liquidation may affect the amount ofproceeds actually received by the Junior Obligations Secured Parties from suchrealization, sale, disposition or liquidation. Each of the Junior ObligationsSecured Parties waives any claim such Junior Obligations Secured Party may nowor hereafter have against the Senior Representative or any other SeniorObligations Secured Party (or their representatives) arising out of(i) any actions which the Senior Representative or the Senior ObligationsSecured Parties take or omit to take (including, actions with respect to thecreation, perfection or continuation of Liens on any Collateral, actions withrespect to the foreclosure upon, sale, release or depreciation of, or failureto realize upon, any of the Collateral and actions with respect to thecollection of any claim for all or any part of the Senior Obligations from anyaccount debtor, guarantor or any other party) in accordance with the SeniorObligations Security Documents or any other agreement related thereto or to thecollection of the Senior Obligations or the valuation, use, protection orrelease of any security for the Senior Obligations, (ii) any election bythe Senior Representative or any Senior Obligations Secured Parties, in anyproceeding instituted under the

 

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BankruptcyCode, of the application of Section 1111(b) of the Bankruptcy Codeand/or (iii) any borrowing of, or grant of a security interest oradministrative expense priority under Section 364 of the Bankruptcy Codeto, Holdings or any of its subsidiaries as debtor-in-possession.

 

SECTION 2.04. ***No Interference;Application of Proceeds; Payment Over; Reinstatement.*** (a)  Each Junior Obligations Secured Party agrees that (i) it willnot take or cause to be taken any action the purpose or effect of which is, orcould be, to make any Junior Lien *pari**passu* with, or to give such JuniorObligations Secured Party any preference or priority relative to, any SeniorLien with respect to the Collateral subject to such Junior Lien or any partthereof, (ii) it will not challenge or question in any proceeding thevalidity or enforceability of any Senior Obligations or Senior ObligationsSecurity Document, or the validity, attachment, perfection or priority of anySenior Lien, or the validity or enforceability of the priorities, rights orduties established by, or other provisions of, this Agreement, (iii) itwill not take any action the purpose or intent of which is to interfere, hinderor delay, in any manner, whether by judicial proceedings or otherwise, anysale, transfer or other disposition of any Senior Obligations Collateral subjectto any Junior Lien by any Senior Obligations Secured Party or any SeniorRepresentative acting on their behalf, (iv) it shall have no right to(A) direct any Senior Representative or any holder of Senior Obligationsto exercise any right, remedy or power with respect to the Collateral subjectto any Junior Lien or (B) consent to the exercise by any SeniorRepresentative or any other Senior Obligations Secured Party of any right,remedy or power with respect to the Collateral subject to any Junior Lien,(v) it will not institute any suit or assert in any suit, bankruptcy,insolvency or other proceeding any claim against any Senior Representative orother Senior Obligations Secured Party seeking damages from or other relief byway of specific performance, instructions or otherwise with respect to, andneither any Senior Representative nor any other Senior Obligations SecuredParty shall be liable for, any action taken or omitted to be taken by suchSenior Representative or other Senior Obligations Secured Party with respect toany Collateral securing any Senior Obligations that is subject to any JuniorLien, (vi) it will not seek, and hereby waives any right, to have anySenior Obligations Collateral subject to any Junior Lien or any part thereofmarshaled upon any foreclosure or other disposition of such Collateral and(vii) it will not attempt, directly or indirectly, whether by judicialproceedings or otherwise, to challenge the enforceability of any provision ofthis Agreement.

 

(b) Prior to the Revolving Facility First Lien Collateral Transition Date, whetheror not any proceeding under the Bankruptcy Code or any other Federal, state orforeign bankruptcy, insolvency, receivership or similar law by or againstHoldings or any of its subsidiaries has been commenced, all Revolving FacilityFirst Lien Collateral or proceeds thereof received in connection with the saleor other disposition of, or collection on, such Collateral upon the exercise ofremedies by the Revolving Facility Agent or Revolving Facility Secured Parties,shall be applied by the Revolving Facility Agent to the Revolving FacilityObligations in such order as specified in the relevant Revolving FacilityDocuments. After the Revolving Facility First Lien Collateral Transition Date,the Revolving Facility Agent shall deliver to the Term Loan Agent any RevolvingFacility First Lien Collateral and proceeds of such Collateral held by it inthe same form

 

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asreceived, with any necessary endorsements or as a court of competentjurisdiction may otherwise direct, to be applied by the Term Loan Agent in suchorder as specified in the Term Loan Security Agreement and/or the otherrelevant Term Loan/Notes Documents.  The Revolving Facility Agent shall providethe Term Loan Agent and the Company with notice of a pending Revolving FacilityFirst Lien Collateral Transition Date within 5 Business Days of the RevolvingFacility Agent becoming aware of the pendency of such date in order that theTerm Loan Agent may make the necessary preparations for the transfer of anyCollateral.

 

(c) Prior to the Term Loan First Lien Collateral Transition Date, whether or notany proceeding under the Bankruptcy Code or any other Federal, state or foreignbankruptcy, insolvency, receivership or similar law by or against Holdings orany of its subsidiaries has been commenced, all Term Loan First Lien Collateralor proceeds thereof received in connection with the sale or other dispositionof, or collection on, such Collateral upon the exercise of remedies by the TermLoan Agent or the Term Loan Secured Parties, shall be applied by the Term LoanAgent to the Term Loan Obligations and the Existing Notes Obligations in suchorder as specified in the Term Loan Security Agreement and/or the otherrelevant Term Loan/Notes Documents.  After the Term Loan First LienCollateral Transition Date, the Term Loan Agent shall deliver to the RevolvingFacility Agent any Term Loan First Lien Collateral and proceeds of suchCollateral held by it in the same form as received, with any necessaryendorsements or as a court of competent jurisdiction may otherwise direct, tobe applied by the Revolving Facility Agent in such order as specified in therelevant Revolving Facility Documents.  The Term Loan Agent shall providethe Revolving Facility Agent and the Company with notice of a pending Term LoanFirst Lien Collateral Transition Date within 5 Business Days of the Term LoanAgent becoming aware of the pendency of such date in order that the RevolvingFacility Agent may make the necessary preparations for the transfer of anyCollateral, including cooperating with the Grantors to grant any Liens in anyExisting Notes Designated Collateral required to be granted pursuant to theRevolving Facility Documents and the Existing Notes Indenture.

 

(d) The Junior Representative and each other Junior Obligations Secured Partyhereby agrees that if it shall obtain possession of any Senior ObligationsCollateral or shall realize any proceeds or payment in respect of any suchCollateral, pursuant to any Junior Obligations Security Document or by theexercise of any rights available to it under applicable law or in anybankruptcy, insolvency or similar proceeding or through any other exercise ofremedies, at any time when any Senior Obligations secured or intended to besecured by such Collateral shall remain outstanding or any commitment to extendcredit that would constitute Senior Obligations secured or intended to besecured by such Senior Lien shall remain in effect, then it shall hold suchCollateral, proceeds or payment in trust for the Senior Obligations SecuredParties and transfer such Collateral, proceeds or payment, as the case may be,to the Senior Representative.  Each Junior Obligations Secured Party agreesthat if, at any time, all or part of any payment with respect to any SeniorObligations previously made shall be rescinded for any reason whatsoever, suchJunior Obligations Secured Party shall promptly pay over to the SeniorRepresentative any payment received by it in respect of any Collateral subjectto any Senior Lien securing such Senior Obligations and shall promptly turn anyCollateral

 

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subjectto any such Senior Lien then held by it over to the Senior Representative, andthe provisions set forth in this Agreement shall be reinstated as if suchpayment had not been made, until the payment and satisfaction in full of theSenior Obligations.

 

SECTION 2.05. ***Automatic Release ofJunior Liens.***  The Junior Representative and each otherJunior Obligations Secured Party agrees that any Junior Lien on any SeniorObligations Collateral shall terminate and be released automatically andwithout further action if the applicable Senior Liens on such Senior ObligationsCollateral are released and such release (a) is in connection with thesale, transfer or other disposition of such Senior Obligations Collateralsubject to such Junior Lien, so long as such sale, transfer or otherdisposition is then permitted by the Junior Documents, (b) occurs inconnection with the foreclosure upon or other exercise of rights and remedieswith respect to such Senior Obligations Collateral or (c) shall have beenapproved by the Senior Obligations Required Parties, so long as no Junior ObligationsEvent of Default shall have occurred and be continuing at such time.  TheJunior Representative agrees to execute and deliver all such releases and otherinstruments as shall reasonably be requested by the Senior Representative orthe Company to evidence and confirm any release of Junior ObligationsCollateral provided for in this Section.

 

SECTION 2.06. ***Certain Agreements WithRespect to Bankruptcy or Insolvency Proceedings.***  (a) This Agreement shall continue in full force and effect notwithstanding thecommencement of any proceeding under the Bankruptcy Code or any other Federal,state or foreign bankruptcy, insolvency, receivership or similar law by oragainst Holdings or any of its subsidiaries.

 

(b) If Holdings or any of its subsidiaries shall become subject to a case under theU.S. Bankruptcy Code and shall, as debtor(s)-in-possession, move for approvalof financing (“***DIPFinancing***”) to be provided by one or more lenders (the “***DIP Lenders***”) underSection 364 of the U.S. Bankruptcy Code or the use of cash collateral withthe consent of the DIP Lenders under Section 363 of the U.S. BankruptcyCode, each Term Loan Secured Party and Existing Notes Secured Party agrees thatit will raise no objection to any such financing or to the Liens securing thesame (“***DIP FinancingLiens***”) or to any use of cash collateral that constitutesRevolving Facility First Lien Collateral, unless the Revolving Facility SecuredParties, or a representative authorized by the Revolving Facility SecuredParties, shall then oppose or object to such DIP Financing or such DIPFinancing Liens or use of cash collateral (and, to the extent that such DIPFinancing Liens are senior to, or rank *pari passu*with, the Revolving Facility Liens, the Term Loan Agent will, for itself and onbehalf of the other Term Loan Secured Parties and Existing Notes SecuredParties, subordinate the Term Loan Liens to the Revolving Facility Liens andthe DIP Financing Liens), so long as the Term Loan Secured Parties and ExistingNotes Secured Parties retain Liens on all the Term Loan First Lien Collateral,including proceeds thereof arising after the commencement of such proceeding,with the same priority relative to the priority of the Liens of the RevolvingSecured Parties as existed prior to the commencement of the case under the U.S.Bankruptcy Code.

 

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SECTION 2.07. ***Reinstatement.*** In the event that any of the Senior Obligations shall be paid in full and suchpayment or any part thereof shall subsequently, for whatever reason (includingan order or judgment for disgorgement of a preference under Title 11 of theUnited Stated Code, or any similar law, or the settlement of any claim inrespect thereof), be required to be returned or repaid, the terms andconditions of this Article II shall be fully applicable thereto until allsuch Senior Obligations shall again have been paid in full in cash.

 

SECTION 2.08. ***Entry Upon Premises bythe Revolving Facility Agent.**** *(a)  If the Revolving Facility Agent takes any enforcementaction with respect to the Revolving Facility First Lien Collateral, the TermLoan Secured Parties and the Existing Notes Secured Parties (i) shallcooperate with the Revolving Facility Agent in its efforts to enforce itssecurity interest in the Revolving Facility First Lien Collateral and to finishany work-in-process and assemble the Revolving Facility First Lien Collateral,(ii) shall not hinder or restrict in any respect the Revolving FacilityAgent from enforcing its security interest in the Revolving Facility First LienCollateral or from finishing any work-in-process or assembling the RevolvingFacility First Lien Collateral, and (iii) shall permit the RevolvingFacility Agent, its employees, agents, advisers and representatives, at thesole cost and expense of the Revolving Facility Secured Parties, to enter uponand use the Term Loan First Lien Collateral (including (x) equipment,processors, computers and other machinery related to the storage or processingof records, documents or files and (y) intellectual property), for aperiod not to exceed 180 days after the taking of such enforcement action,for purposes of (A) assembling and storing the Revolving Facility FirstLien Collateral and completing the processing of and turning into finishedgoods any Revolving Facility First Lien Collateral consisting ofwork-in-process, (B) selling any or all of the Revolving Facility FirstLien Collateral located on such Term Loan First Lien Collateral, whether inbulk, in lots or to customers in the ordinary course of business or otherwise,(C) removing any or all of the Revolving Facility First Lien Collaterallocated on such Term Loan First Lien Collateral, and/or (D) takingreasonable actions to protect, secure, and otherwise enforce the rights of theRevolving Facility Secured Parties in and to the Revolving Facility First LienCollateral; *provided*, *however*, that nothing contained in thisAgreement shall restrict the rights of the Term Loan Agent from selling,assigning or otherwise transferring any Term Loan First Lien Collateral priorto the expiration of such 180 day period if the purchaser, assignee ortransferee thereof agrees to be bound by the provisions of this Section. If any stay or other order prohibiting the exercise of remedies with respect tothe Revolving Facility First Lien Collateral has been entered by a court ofcompetent jurisdiction, such 180 day period shall be tolled during thependency of any such stay or other order.

 

(b) During the period of actual occupation, use and/or control by the RevolvingFacility Secured Parties or their agents or representatives of any Term LoanFirst Lien Collateral, the Revolving Facility Secured Parties shall beobligated to repair at their expense any physical damage to such Term Loan FirstLien Collateral resulting from such occupancy, use or control, and to leavesuch Term Loan First Lien Collateral in substantially the same condition as itwas at the commencement of such occupancy, use or control, ordinary wear andtear excepted.  Notwithstanding the foregoing, in no event shall theRevolving Facility Secured Parties have any liability to the Term Loan

 

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SecuredParties or the Existing Notes Secured Parties pursuant to this Section asa result of any condition (including any environmental condition, claim orliability) on or with respect to the Term Loan First Lien Collateral existingprior to the date of the exercise by the Revolving Facility Secured Parties oftheir rights under this Section and the Revolving Facility Secured Partiesshall have no duty or liability to maintain the Term Loan First Lien Collateralin a condition or manner better than that in which it was maintained prior tothe use thereof by the Revolving Facility Secured Parties, or for anydiminution in the value of the Term Loan First Lien Collateral that resultsfrom ordinary wear and tear resulting from the use of the Term Loan First LienCollateral by the Revolving Facility Secured Parties in the manner and for thetime periods specified under this Section 2.08.  Without limiting therights granted in this paragraph, the Revolving Facility Secured Parties shallcooperate with the Term Loan Secured Parties in connection with any effortsmade by the Term Loan Secured Parties to sell the Term Loan First LienCollateral.

 

SECTION 2.09. ***Amendments to SecurityDocuments.***  (a)  Without the prior written consent ofthe Senior Representative, no Junior Obligations Security Document may beamended, supplemented or otherwise modified or entered into to the extent suchamendment, supplement or modification, or the terms of any new JuniorObligations Security Document, would be prohibited by or inconsistent with anyof the terms of this Agreement.

 

(b) In the event that the Senior Representative enters into any amendment, waiveror consent in respect of any of the Senior Obligations Security Documents forthe purpose of adding to, or deleting from, or waiving or consenting to anydepartures from any provisions of, any Senior Obligations Security Document orchanging in any manner the rights of the Senior Representative, the SeniorObligations Secured Parties, the Company or any other Grantor thereunder(including the release of any Liens on Senior Obligations Collateral permitted bySection 2.05), then such amendment, waiver or consent shall applyautomatically to any comparable provision of the comparable Junior ObligationsSecurity Document without the consent of the Junior Representative or anyJunior Obligations Secured Party and without any action by the JuniorRepresentative, the Company or any other Grantor; *provided*, *however*,that written notice of such amendment, waiver or consent shall have been givento the Junior Representative.

 

SECTION 2.10. ***Refinancings.*** The Revolving Facility Obligations, Term Loan Obligations and the ExistingNotes Obligations may be Refinanced, in whole or in part, in each case, withoutnotice to, or the consent (except to the extent a consent is required to permitthe Refinancing transaction under any Revolving Facility Document or any TermLoan/Notes Document) of the Revolving Facility Agent, the Revolving FacilitySecured Parties, the Term Loan Agent, the Term Loan Secured Parties or theExisting Notes Secured Parties, as the case may be, all without affecting thelien priorities provided for herein or the other provisions hereof, *provided*, *however*,that the holders of such Refinancing indebtedness (or an authorized agent ortrustee on their behalf) bind themselves in writing to the terms of this Agreementpursuant to such documents or agreements (including amendments or supplementsto this Agreement) as the Revolving Facility Agent or the Term Loan Agent, asthe case may be, shall reasonably request and

 

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inform and substance reasonably acceptable to the Revolving Facility Agent or theTerm Loan Agent, as the case may be, and any such Refinancing transaction shallbe in accordance with the provisions of both the Revolving Facility Documentsand the Term Loan/Notes Documents.

 

SECTION 2.11. ***Insurance.*** Unless and until the Revolving Facility Agent shall have delivered writtennotice to the Term Loan Agent that the Revolving Facility Obligations have beenpaid in full, as between the Revolving Facility Agent, on the one hand, and theTerm Loan Agent, on the other hand, only the Revolving Facility Agent will havethe right to adjust or settle any insurance policy or claim covering orconstituting Revolving Facility First Lien Collateral in the event of any lossthereunder and to approve any award granted in any condemnation or similarproceeding affecting the Revolving Facility First Lien Collateral.  Unlessand until the Term Loan Agent shall have delivered written notice to theRevolving Facility Agent that the Term Loan Obligations have been paid in full,as between the Revolving Facility Agent, on the one hand, and the Term LoanAgent, on the other hand, only the Term Loan Agent will have the right toadjust or settle any insurance policy covering or constituting Term Loan FirstLien Collateral in the event of any loss thereunder and to approve any awardgranted in any condemnation or similar proceeding solely affecting the TermLoan First Lien Collateral.  To the extent that an insured loss covers orapplies to assets or property, some of which constitute Revolving FacilityFirst Lien Collateral and some of which constitute Term Loan First LienCollateral, then the Revolving Facility Agent and the Term Loan Agent will workjointly and in good faith to collect, adjust or settle under the relevantinsurance policy.

 

ARTICLE III

 

**Sub-Agency for Perfection of Certain SecurityInterests; Rights Under Permits and Licenses**

 

SECTION 3.01. ***General.*** The Senior Representative agrees that if it shall at any time hold a SeniorLien on any Junior Obligations Collateral that can be perfected by thepossession or control of such Collateral or of any account in which suchCollateral is held, and if such Collateral or any such account is in fact inthe possession or under the control of the Senior Representative, the SeniorRepresentative will serve as sub-agent for the Junior Representative for thesole purpose of perfecting the Junior Lien of the Junior Representative and theother Junior Obligations Secured Parties on such Collateral.  It is agreedthat the obligations of the Senior Representative and the rights of the JuniorRepresentative and the other Junior Obligations Secured Parties in connectionwith any such sub-agency arrangement will be in all respects subject to theprovisions of Article II.  The Senior Representative will be deemedto make no representation as to the adequacy of the steps taken by it toperfect the Junior Lien on any such Collateral and shall have no responsibilityto the Junior Representative or any other Junior Obligations Secured Party forsuch perfection, it being understood that the sole purpose of thisArticle is to enable the Junior Obligations Secured Parties to obtain aperfected Junior Lien in such Collateral to the extent, if any, that suchperfection results from the possession or control of such Collateral or anysuch account by the Senior Representative.  Subject to

 

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Section 2.07,at such time as the Senior Obligations secured by the Senior Lien of the SeniorRepresentative and the other Senior Obligations Secured Parties shall have beenpaid and satisfied in full and any commitment to extend credit that wouldconstitute such Senior Obligations shall have been terminated, the SeniorRepresentative shall take all such actions in its power as shall reasonably berequested by the Junior Representative to transfer possession or control ofsuch Collateral or any such account to the Junior Representative.

 

SECTION 3.02. ***Depositary Accounts.**** *Holdings and its subsidiaries, inaccordance with the Revolving Facility Credit Agreement, shall maintain blockedaccount arrangements relating to depositary accounts (the “***Depositary Accounts***”)with certain depositary banks (the “***Depositary Banks***”) in which all collectionsfrom any Inventory and related Accounts are deposited.  The RevolvingFacility Agent will act as sub-agent for the Term Loan Agent for the purpose ofperfecting the Liens of the Term Loan Secured Parties in all such Depositary Accountsand the cash and other assets therein as provided in Section 3.01 (butwill have no duty, responsibility or obligation to the Term Loan SecuredParties except as set forth in the last sentence of this Section).  Afterthe occurrence of the Revolving Facility First Lien Collateral Transition Date,the Revolving Facility Agent shall (a) at the request of the Term LoanAgent, transfer all cash and other assets in such Depositary Accountsmaintained with it to the Term Loan Agent and (b) at the request of theTerm Loan Agent, cooperate with the Company and the Term Loan Agent (at theexpense of the Company) in permitting control of any other Depositary Accountsto be transferred to the Term Loan Agent (or for other arrangements withrespect to each such Depositary Account satisfactory to the Term Loan Agent tobe made).

 

SECTION 3.03. ***Rights under Permits andLicenses.***  The Term Loan Agent agrees that if the RevolvingFacility Agent shall require rights available under any permit or licensecontrolled by the Term Loan Agent in order to realize on any Revolving FacilityFirst Lien Collateral, the Term Loan Agent shall take all such actions as shallbe available to it, consistent with applicable law and reasonably requested bythe Revolving Facility Agent, to make such rights available to the RevolvingFacility Agent.

 

ARTICLE IV

 

**Existence and Amounts of Liens and Obligations**

 

Whenevera Representative shall be required, in connection with the exercise of itsrights or the performance of its obligations hereunder, to determine theexistence or amount of any Senior Obligations or Junior Obligations, or theexistence of any Lien securing any such obligations, or the Collateral subjectto any such Lien, it may request that such information be furnished to it in writingby the other Representative and shall be entitled to make such determination onthe basis of the information so furnished; provided, however, that if aRepresentative shall fail or refuse reasonably promptly to provide therequested information, the requesting Representative shall be entitled to makeany such determination by such commercially reasonable method as it may, in theexercise its good faith judgment, determine, including by reliance upon acertificate of

 

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theCompany.  Each Representative may rely conclusively, and shall be fullyprotected in so relying, on any determination made by it in accordance with theprovisions of the preceding sentence (or as otherwise directed by a court ofcompetent jurisdiction) and shall have no liability to Holdings, the Company orany of its subsidiaries, any Secured Party or any other person as a result ofsuch determination.

 

ARTICLE V

 

**Consent of Grantors**

 

EachGrantor hereby consents to the provisions of this Agreement and theintercreditor arrangements provided for herein and agrees that (a) noRepresentative or other Secured Party shall have any liability to any Grantoras a result of the performance of its obligations hereunder and (b) theobligations of the Grantors under the Security Documents will in no way bediminished or otherwise affected by such provisions or arrangements.

 

ARTICLE VI

 

**Representations and Warranties**

 

SECTION 6.01. ***Representations andWarranties of Each Representative.***  Each Representativerepresents and warrants to the other parties hereto as follows:

 

(a) Such party is duly organized, validly existing and in good standing under thelaws of the jurisdiction of its organization and has all requisite power andauthority to enter into and perform its obligations under this Agreement.

 

(b) This Agreement has been duly executed and delivered by such party andconstitutes a legal, valid and binding obligation of such party, enforceable inaccordance with its terms.

 

(c) The execution, delivery and performance by such party of this Agreement(i) do not require any consent or approval of, registration or filing withor any other action by any governmental authority and (ii) will notviolate any applicable law or regulation or the charter, by-laws or otherorganizational documents of such party or any order of any governmentalauthority or any indenture, agreement or other instrument binding upon suchparty.

 

(d) In the case of the Term Loan Agent, it represents and warrants to the otherparties hereto that it is authorized under the Term Loan Credit Agreement andthe Term Loan Security Agreement to enter into this Agreement.

 

(e) In the case of the Revolving Facility Agent, it represents and warrants to theother parties hereto that it is authorized under the Revolving Facility CreditAgreement to enter into this Agreement.

 

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ARTICLE VII

 

**Miscellaneous**

 

SECTION 7.01. ***Notices.*** All notices and other communications provided for herein shall be in writingand shall be delivered by hand or overnight courier service, mailed bycertified or registered mail or sent by telecopy, as follows:

 

(a) if to the Revolving Facility Agent, to it at Deutsche Bank Trust CompanyAmericas, 60 Wall Street, New York, New York 10005, Attention of MargueriteSutton (Telecopy No. (212) 797-5690);

 

(b) if to the Term Loan Agent, to it at Credit Suisse, Eleven Madison Avenue, NewYork, New York 10010, Attention of Agency Group (Telecopy No. (212)325-8304);

 

(c) if to Holdings or the Company, to it at The Neiman Marcus Group, Inc., OneMarcus Square, 1618 Main Street, Dallas, Texas 75201, Attention of GeneralCounsel (Telecopy No. (214) 743-7611); and

 

(d) if to any other Grantor, to it in care of the Company as provided inclause (c) above.

 

Anyparty hereto may change its address or telecopy number for notices and othercommunications hereunder by notice to the other parties hereto (and for thispurpose a notice to the Company shall be deemed to be a notice to eachGrantor).  All notices and other communications given to any party heretoin accordance with the provisions of this Agreement shall be deemed to havebeen given on the date of receipt if delivered by hand or overnight courierservice or sent by telecopy or on the date five Business Days after dispatch bycertified or registered mail if mailed, in each case delivered, sent or mailed(properly addressed) to such party as provided in this Section 7.01 or inaccordance with the latest unrevoked direction from such party given inaccordance with this Section 7.01.  As agreed to in writing among theCompany and the Representatives from time to time, notices and othercommunications may also be delivered by e-mail to the e-mail address of arepresentative of the applicable person provided from time to time by suchperson.

 

SECTION 7.02. ***Waivers; Amendment.*** (a)  No failure or delay on the part of any party hereto inexercising any right or power hereunder shall operate as a waiver thereof, norshall any single or partial exercise of any such right or power, or anyabandonment or discontinuance of steps to enforce such a right or power,preclude any other or further exercise thereof or the exercise of any otherright or power.  The rights and remedies of the parties hereto arecumulative and are not exclusive of any rights or remedies that they wouldotherwise have.  No waiver of any provision of this Agreement or consentto any departure by any party therefrom shall in any event be effective unlessthe same shall be permitted by paragraph (b) of this Section, andthen such waiver or consent shall be effective only in the specific instance andfor the purpose for which

 

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given. No notice or demand on any party hereto in any case shall entitle such party toany other or further notice or demand in similar or other circumstances.

 

(b) Neither this Agreement nor any provision hereof may be waived, amended ormodified except pursuant to an agreement or agreements in writing entered intoby each Representative, Holdings and the Company; *provided, however,* this Agreement may be amended from timeto time as necessary at the request of the Company, at the Company’s expense,and without the consent of Term Loan Agent, the Revolving Facility Agent or anyother Secured Party (i) to add other parties holding Term Loan Pari PassuIndebtedness (or any authorized agent or trustee thereof), (ii) toestablish that the Liens on any Term Loan First Lien Collateral securing suchTerm Loan Pari Passu Indebtedness shall be senior and superior in right,priority, operation and effect to any and all Liens on the Term Loan First LienCollateral securing any Revolving Facility Obligations, (iii) to establishthat the Liens on any Revolving Facility First Lien Collateral securing suchTerm Loan Pari Passu Indebtedness shall be subordinated and junior in right,priority, operation and effect to any and all Liens on the Revolving FacilityFirst Lien Collateral securing any Revolving Facility Obligations, and(iv) to provide to the holders of such Term Loan Pari Passu Indebtedness(or any authorized agent or trustee thereof) the comparable rights and benefitsas are provided to the holders of the Term Loan Obligations and the ExistingNotes Obligations under this Agreement.  Any such additional party, theRevolving Facility Agent and the Term Loan Agent shall be entitled to rely on thedetermination of officers of the Company that such modifications do not violateany Term Loan/Notes Document or Revolving Facility Document if suchdetermination is set forth in an Officers’ Certificate (as such term is definedin the Term Loan Credit Agreement) delivered to such party, the RevolvingFacility Agent and the Term Loan Agent; *provided,however,*that no such determination will affect whether or notCompany has complied with its undertakings under the Term Loan/Notes Documentsor the Revolving Facility Documents.

 

SECTION 7.03. ***Parties in Interest.*** This Agreement shall be binding upon and inure to the benefit of the partieshereto and their respective successors and assigns, as well as the otherSecured Parties, all of whom are intended to be bound by, and to be third partybeneficiaries of, this Agreement.

 

SECTION 7.04. ***Certain Provisions***. The Company and each of the Representatives agrees that the Term Loan CreditAgreement, the Revolving Facility Credit Agreement and the Security Documentsshall contain the applicable provisions set forth on Annex I hereto (orprovisions substantially similar thereto).  The Company and each of theRepresentatives further agrees that each Mortgage covering any Collateral shallcontain such language as the Revolving Facility Agent and the Term Loan Agentmay request to reflect the Lien priorities covering such Collateral providedfor herein.

 

SECTION 7.05. ***Survival of Agreement.*** All covenants, agreements, representations and warranties made by any party inthis Agreement shall be considered to have been relied upon by the otherparties hereto and shall survive the execution and delivery of this Agreement.

 

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SECTION 7.06. ***Counterparts.*** This Agreement may be executed in counterparts, each of which shall constitutean original but all of which when taken together shall constitute a singlecontract.  Delivery of an executed signature page to this Agreementby facsimile transmission shall be as effective as delivery of a manuallysigned counterpart of this Agreement.

 

SECTION 7.07. ***Severability.*** Any provision of this Agreement held to be invalid, illegal or unenforceable inany jurisdiction shall, as to such jurisdiction, be ineffective to the extentof such invalidity, illegality or unenforceability without affecting thevalidity, legality and enforceability of the remaining provisions hereof; andthe invalidity of a particular provision in a particular jurisdiction shall notinvalidate such provision in any other jurisdiction.  The parties shallendeavor in good-faith negotiations to replace the invalid, illegal orunenforceable provisions with valid provisions the economic effect of whichcomes as close as possible to that of the invalid, illegal or unenforceableprovisions.

 

SECTION 7.08. ***Governing Law;Jurisdiction; Consent to Service of Process.***  (a) This Agreement shall be construed in accordance with and governed by the law ofthe State of New York, without giving effect to the conflict of laws provisionsthereof.

 

(b) Each party hereto hereby irrevocably and unconditionally submits, for itselfand its property, to the nonexclusive jurisdiction of the Supreme Court of theState of New York sitting in New York County and of the United States DistrictCourt of the Southern District of New York, and any appellate court from anythereof, in any action or proceeding arising out of or relating to thisAgreement, or for recognition or enforcement of any judgment, and each of theparties hereto hereby irrevocably and unconditionally agrees that all claims inrespect of any such action or proceeding may be heard and determined in suchNew York State or, to the extent permitted by law, in such Federalcourt.  Each of the parties hereto agrees that a final judgment in anysuch action or proceeding shall be conclusive and may be enforced in otherjurisdictions by suit on the judgment or in any other manner provided bylaw.  Nothing in this Agreement shall affect any right that any partyhereto may otherwise have to bring any action or proceeding relating to thisAgreement in the courts of any jurisdiction.

 

(c) Each party hereto hereby irrevocably and unconditionally waives, to the fullestextent it may legally and effectively do so, any objection which it may now orhereafter have to the laying of venue of any suit, action or proceeding arisingout of or relating to this Agreement in any court referred to in paragraph(b) of this Section.  Each of the parties hereto hereby irrevocablywaives, to the fullest extent permitted by law, the defense of an inconvenientforum to the maintenance of such action or proceeding in any such court.

 

(d) Each party to this Agreement irrevocably consents to service of process in themanner provided for notices in Section 7.01.  Nothing in thisAgreement will affect the right of any party to this Agreement to serve processin any other manner permitted by law.

 

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SECTION 7.09. ***WAIVER OF JURY TRIAL***. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLELAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDINGDIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT.  EACHPARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OFANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTYWOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOINGWAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEENINDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERSAND CERTIFICATIONS IN THIS SECTION.

 

SECTION 7.10. ***Headings.*** Article and Section headings used herein are for convenience ofreference only, are not part of this Agreement and are not to affect the constructionof, or to be taken into consideration in interpreting, this Agreement.

 

SECTION 7.11. ***Conflicts.*** In the event of any conflict or inconsistency between the provisions of thisAgreement and the provisions of any of the other Security Documents, theprovisions of this Agreement shall control.

 

SECTION 7.12. ***Provisions Solely toDefine Relative Rights.***  The provisions of this Agreementare and are intended solely for the purpose of defining the relative rights ofthe Revolving Facility Secured Parties, on the one hand, and the Term LoanSecured Parties and the Existing Notes Secured Parties, on the otherhand.  None of Holdings, the Company, any other Grantor or any othercreditor thereof shall have any rights or obligations hereunder, except asexpressly provided in this Agreement, and none of Holdings, the Company, or anyother Grantor may rely on the terms hereof.  Nothing in this Agreement isintended to or shall impair the obligations of Holdings, the Company or anyother Grantor, which are absolute and unconditional, to pay the Obligations asand when the same shall become due and payable in accordance with their terms.

 

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INWITNESS WHEREOF, the parties hereto have caused this Agreement to be dulyexecuted by their respective authorized officers as of the day and year firstabove written.

 

 
|   | DEUTSCHE  BANK TRUST COMPANY  AMERICAS, as Revolving Facility Agent,                                    |
|--------|---------------------------------------------------------------------------------------------------------|
|   |                                                                                                    |   |
|   |                                                                                                    | By |
|   |                                                                                                    |   | /s/  Mark E. Funk |
|   |                                                                                                    |   | Name: | Mark  E. Funk |
|   |                                                                                                    |   | Title: | Managing  Director |
|   |                                                                                                    |   |   |
|   |                                                                                                    | By |   |
|   |                                                                                                    |   | /s/  Marguerita Sutton |
|   |                                                                                                    |   | Name: | Marguerita  Sutton |
|   |                                                                                                    |   | Title: | Director |
|   |                                                                                                    |   |   |
|   |                                                                                                    |   |   |
|   | CREDIT  SUISSE, CAYMAN ISLANDS  BRANCH, as Term Loan Agent,                                             |
|   |                                                                                                    |   |   |
|   |                                                                                                    | By |   |
|   |                                                                                                    |   | /s/  Robert Hetu |
|   |                                                                                                    |   | Name: | Robert  Hetu |
|   |                                                                                                    |   | Title: | Director |
|   |                                                                                                    |   |   |
|   |                                                                                                    | By |   |
|   |                                                                                                    |   | /s/  Vanessa Gomez |
|   |                                                                                                    |   | Name: | Vanessa  Gomez |
|   |                                                                                                    |   | Title: | Vice  President |
|   |                                                                                                    |   |   |
|   |                                                                                                    |   |   |
|   | NEWTON  ACQUISITION, INC.,                                                                         |
|   |                                                                                                    |   |   |
|   |                                                                                                    | By |   |
|   |                                                                                                    |   | /s/  Nelson A. Bangs |
|   |                                                                                                    |   | Name: | Nelson  A. Bangs |
|   |                                                                                                    |   | Title: | Senior  Vice President and General Counsel |
|   |                                                                                                    |   |   |
|   | NEWTON  ACQUISITION MERGER SUB,  INC. (to be merged with and into The  Neiman Marcus Group, Inc.), |
|   |                                                                                                    |   |   |
|   |                                                                                                    | By |   |
|   |                                                                                                    |   | /s/  Kewsong Lee |
|   |                                                                                                    |   | Name: | Kewsong  Lee |
|   |                                                                                                    |   | Title: | Senior  Vice President |

 

23

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|   | EACH  OF THE SUBSIDIARIES LISTED  ON SCHEDULE I HERETO, |
|--------|--------------------------------------------------------------|
|   |                                                         |
|   |                                                         | By |   |
|   |                                                         |   | /s/  Nelson A. Bangs |
|   |                                                         |   | Name: | Nelson  A. Bangs |
|   |                                                         |   | Title: | Vice  President |
|   |                                                         |   |   |
|   |                                                         |   |   |
|   | NM  NEVADA TRUST,                                            |
|   |                                                         |
|   |                                                         | By |   |
|   |                                                         |   | /s/  Nelson A. Bangs |
|   |                                                         |   | Name: | Nelson  A. Bangs |
|   |                                                         |   | Title: | Vice  President |

 

24

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SCHEDULE I

 

**Subsidiary Parties**

 

BergdorfGoodman, Inc.

BergdorfGoodman.com,LLC

BergdorfGraphics, Inc.

NeimanMarcus Holdings, Inc.

NeimanMarcus Special Events, Inc.

NEMABeverage Corporation

NEMABeverage Holding Corporation

NEMABeverage Parent Corporation

NMFinancial Services, Inc.

NMKitchens, Inc.

NMGP,LLC

WorthAvenue Leasing Company

 

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ANNEX I

 

Provisionfor the Revolving Facility Credit Agreement and the Term Loan Credit Agreement

 

**Reference is made to the IntercreditorAgreement.  Each Lender hereunder (a) consents to the subordinationof Liens provided for in the Intercreditor Agreement, (b) agrees that itwill be bound by and will take no actions contrary to the provisions of theIntercreditor Agreement and (c) authorizes and instructs the [RevolvingFacility Agent] [Term Loan Agent] to enter into the Intercreditor Agreement as[Revolving Facility Agent] [Term Loan Agent] and on behalf of suchLender.  The foregoing provisions are intended as an inducement to theLenders under the Credit Agreement to extend credit and such Lenders areintended third party beneficiaries of such provisions and the provisions of theIntercreditor Agreement.**

 

Provisionfor Revolving Facility Security Documents and the Term Loan Security Documents

 

**Reference is made to the IntercreditorAgreement.  Notwithstanding any other provision contained herein, thisAgreement, the Liens created hereby and the rights, remedies, duties andobligations provided for herein are subject in all respects to the provisionsof the Intercreditor Agreement and, to the extent provided therein, theapplicable Senior Obligations Security Documents (as defined in theIntercreditor Agreement).  In the event of any conflict or inconsistencybetween the provisions of this Agreement and the Intercreditor Agreement, theprovisions of the Intercreditor Agreement shall control.**

 

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