**Exhibit 4.3**

 

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 INDENTURE

 

Dated as of October 6, 2005

 

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$700,000,000

 

9%/93⁄4% Senior Notes Due 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               |   |

 

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*              Thistable of contents shall not, for any purpose, be deemed to be a part of thisIndenture.

 

i

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| SECTION 305.  Mutilated, Destroyed, Lost and Stolen Notes                               |   |
|----------------------------------------------------------------------------------------------|--------|
| 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 Default                                                         |   |
| 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                                            |   |

 

ii

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| SECTION 608.  Corporate Trustee Required; Eligibility                                      |   |
|-------------------------------------------------------------------------------------------------|--------|
| 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                                                                    |   |

 

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| SECTION 1007.  Reserved                                                                                         |   |
|----------------------------------------------------------------------------------------------------------------------|--------|
| 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 Sale and Lease-Back Transactions                                                   |   |
| SECTION 1017.  Change of Control                                                                                |   |
| SECTION 1018.  Asset Sales                                                                                      |   |
| SECTION 1019.  Additional Interest Notice                                                                       |   |
| SECTION 1020.  No Amendment to Subordination Provision                                                          |   |
| SECTION 1021.  Designation of “Designated Senior Indebtedness”                                        |   |
|                                                                                                                 |   |
| **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.  Reserved                                                                                         |   |
| 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                                                                                                                        |   |
|                                                                                                                                                            |   |
| 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 Luxembuorg |   |
| EXHIBIT A  — Form of Exchange Security or Private Exchange Security                                                                              |   |
| EXHIBIT B  — Form of Supplemental Indenture                                                                                                      |   |

 

v

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SENIORINDENTURE dated as of October 6, 2005 (this “*Indenture*”), among NEWTON ACQUISITION MERGER SUB, INC.,a Delaware corporation that shall be merged with and into THE NEIMAN MARCUSGROUP, INC., a Delaware corporation, with The Neiman Marcus Group, Inc.continuing as the surviving corporation (the “*Company*”),NEWTON ACQUISITION INC., a Delaware corporation (“*Holdings*”), and certain of The Neiman Marcus Group, Inc.’sdirect and indirect Domestic Subsidiaries (as defined below), each named inSchedule I hereto (each, a “*SubsidiaryGuarantor*” and collectively, the “*SubsidiaryGuarantors*”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee(the “*Trustee*”).

 

**RECITALS**

 

TheCompany has duly authorized the creation of an issue of (i) 9%/93⁄4% SeniorNotes Due 2015 issued on the date hereof (the “*InitialNotes*”) and (ii) if and when issued as required by the Exchangeand Registration Rights Agreement dated the date hereof, among the Company,Holdings, the Subsidiary Guarantors and the Purchasers (as defined therein)(the “*Registration Rights Agreement*”),9%/93⁄4% Senior Exchange Notes Due 2015 issued in an Exchange Offer in exchangefor any Initial Notes and any increase in the aggregate amount of the InitialNotes as a result of a PIK Payment (as defined below) (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 Marcus Group, Inc.continuing as the surviving corporation and assuming all of the obligations ofNewton Acquisition Merger Sub, Inc. under this Indenture.

 

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 and deliveryof this Indenture, the valid obligations of each Guarantor and to make thisIndenture a valid and legally binding agreement of each Guarantor, inaccordance with their and its terms.

 

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**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:

 

2

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**ARTICLE ONE**

 

**DEFINITIONSAND OTHER PROVISIONSOF GENERAL APPLICATION**

 

SECTION 101. Rules of Construction and Incorporation by Reference of Trust IndentureAct.  For all purposes of this Indenture, except as otherwiseexpressly provided or unless 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 otherwords of similar import refer to this Indenture as a whole and not to anyparticular Article, Section or other subdivision;

 

(4)  all references to Articles, Sections, Exhibits andAppendices shall be construed to refer to Articles and Sections of, andExhibits and 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.

 

This Indenture is subject to the mandatoryprovisions of the TIA (as herein defined) which are incorporated by referencein and made a part of this Indenture.  The following TIA terms have thefollowing meanings:

 

(1)           “Commission” meansthe SEC;

 

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

 

(3)           “indenture securityholder” means a Holder;

 

(4)           “indenture to bequalified” means this Indenture;

 

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

 

3

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(6)           “obligor” on theindenture securities means the Company, each Guarantor and any other obligor onthe 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 of anyother Person existing at the time such other Person is merged with or into orbecame a Restricted Subsidiary of such specified Person, including Indebtednessincurred in connection with, or in contemplation of, such other Person mergingwith or into, or becoming a Restricted Subsidiary of such specified Person, and

 

(2)           Indebtedness securedby 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.

 

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

 

4

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

 

(2)           the excess, if any,of:

 

(a)           the present value atsuch Redemption Date of (i) the redemption price of the Note at October 15,2010 (such redemption price being set forth in the table appearing inSection 1101(b), *plus*(ii) all required interest payments (calculated based on the interest ratepayable for Cash Interest on the Notes) due on the Note through October 15,2010 (excluding accrued but unpaid interest to the Redemption Date), computedusing a discount rate equal to the Treasury Rate as of such Redemption Date *plus* 50 basis points; over

 

(b)           the principal amountof 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 or saleof Equity Interests of any Restricted Subsidiary, whether in a single transactionor a series of related transactions,

 

ineach case, other than:

 

(a)           a disposition ofcash, Cash Equivalents or Investment Grade Securities or obsolete or worn outequipment, vehicles or other similar assets in the ordinary course of businessor any disposition of inventory or goods held for sale in the ordinary courseof business;

 

(b)           the disposition ofall 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 of anyPermitted Investment or the making of any Restricted Payment that is notprohibited by Section 1010 of this Indenture;

 

(d)           any disposition ofassets or issuance or sale of Equity Interests of any Restricted Subsidiary inany transaction or series of transactions with an aggregate fair market valueof less than $25.0 million;

 

(e)           any disposition ofproperty or assets or issuance of securities by a Restricted Subsidiary to theCompany or by the Company or a Restricted Subsidiary to a RestrictedSubsidiary;

 

5

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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 or saleof Equity Interests in, or Indebtedness or other securities of, an UnrestrictedSubsidiary (other than any sale of Equity Interests in, or Indebtedness orother securities of, Kate Spade held by the Company or any RestrictedSubsidiary);

 

(i)            foreclosures onassets;

 

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

 

(k)           the unwinding of anyHedging 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 for Cash Interest,compounded annually) of the total obligations of the lessee for rental paymentsduring the remaining term of the lease included in such Sale and Lease-BackTransaction (including any period for which such lease has been extended); *provided, however*, that if such Sale andLease-Back Transaction 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.

 

“*Board of Directors*” means:

 

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

 

(2)           with respect to apartnership, the board of directors of the general partner of the partnership;and

 

(3)           with respect to anyother Person, the board or committee of such Person serving a similar function.

 

6

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“*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.

 

“CapitalStock” means

 

(1)           in the case of acorporation, corporate stock,

 

(2)           in the case of anassociation or business entity, any and all shares, interests, participations,rights or other equivalents (however designated) of corporate stock,

 

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

 

(4)           any other interestor participation that confers on a Person the right to receive a share of theprofits and losses of, or distributions of assets of, the issuing Person.

 

“*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 States ofAmerica dollars,

 

(2)           (a)           Canadiandollars,

 

(b)          Japanese yen,

 

(c)          pounds sterling,

 

(d)          euro or

 

(e)          in the case of anyForeign Subsidiary that is a Restricted Subsidiary, such local currencies heldby it from time to time in the ordinary course of business,

 

(3)           securities issued ordirectly and fully and unconditionally guaranteed or insured by the governmentof the United States of America or any agency or instrumentality thereof thesecurities of which are unconditionally guaranteed as a full faith and creditobligation of such government with maturities of 24 months or less fromthe 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)           commercial paperrated at least P-1 by Moody’s or at least A-1 by S&P and in each casematuring within 12 months after the date of issuance thereof,

 

(7)           investment fundsinvesting at least 95% of their assets in securities of the types described inclauses (1) through (6) above,

 

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

 

“*Cash Interest*” shall have the meaning setforth in Section 301 of this Indenture.

 

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

 

(1)           the sale, lease ortransfer, in one or a series of related transactions, of all or substantiallyall of the assets of the Company and its Subsidiaries, taken as a whole, to anyPerson other than a Permitted Holder; or

 

(2)           the Company becomesaware of (by way of a report or any other filing pursuant to Section 13(d) ofthe Exchange Act, proxy, vote, written notice or otherwise) the acquisition byany Person or group (within the meaning of Section 13(d)(3) orSection 14(d)(2) of the Exchange Act, or any successor provision),including any group acting for the purpose of acquiring, holding or disposingof securities (within the meaning of Rule 13d-5(b)(1) under theExchange Act, or any successor provision), other than the Permitted Holders, ina

 

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singletransaction or in a series of related transactions, by way of merger,consolidation or other business combination or purchase of beneficial ownership(within the meaning of Rule 13d-3 under the Exchange Act, or any successorprovision) of 50% or more of the total voting power of the Voting Stock of theCompany or any 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 to meanthe Board of Directors of the Company when the fair market value of such assetor 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 income forsuch 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 areavailable immediately preceding the date on which such event for which suchcalculation is being made shall occur to (y) the aggregate amount ofEBITDA of such Person for the period of the most recently ended four fullconsecutive fiscal quarters for which internal financial statements are availableimmediately preceding the date on which such event for which such calculationis being made shall occur, in each case with such*pro forma* adjustments to Consolidated Total Indebtednessand EBITDA as are appropriate and consistent with the*pro forma* adjustment provisions set forth in the definitionof Fixed Charge 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 net after-taxextraordinary, non-recurring or unusual gains or losses (less all fees andexpenses relating thereto) or expenses (including relating to severance,relocation, one-time compensation charges and the Transactions) shall beexcluded,

 

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

 

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

 

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

 

(5)           the Net Income forsuch period of any Person that is not a Subsidiary, or is an UnrestrictedSubsidiary, or that is accounted for by the equity method of accounting, shallbe excluded; *provided* 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 extent convertedinto cash) to the Company or a Restricted Subsidiary thereof in respect of suchperiod, 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 net after-taxincome (loss) from the early extinguishment of Indebtedness or HedgingObligations 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 to clause (C)(4) thereof;*provided, however*, that anyincome arising from any sale or other disposition of Equity Interests in KateSpade or any Extraordinary Distribution shall be excluded from Consolidated NetIncome for the purpose of Section 1010 of this Indenture only.

 

“*Consolidated Secured Debt Ratio*” as of anydate of determination means the ratio of (a) Consolidated TotalIndebtedness of the Company and the Restricted Subsidiaries that is secured byLiens as of the end of the most recent fiscal quarter for which internalfinancial statements are available immediately preceding the date on which suchevent for which such calculation is being made shall occur to (b) theaggregate amount of EBITDA of the Company and the Restricted Subsidiaries forthe period of the most recently ended consecutive four full fiscal quarters forwhich internal financial statements are available immediately preceding thedate on which such event for which such calculation is being made shall occur,in each case with such*pro forma*adjustments to Consolidated Total Indebtedness and EBITDA as are appropriateand consistent with the*pro forma*adjustment provisions set forth in the definition of Fixed Charge CoverageRatio.

 

“*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 theRestricted Subsidiaries on a consolidated basis consisting of

 

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Indebtednessfor borrowed money, Obligations in respect of Capitalized Lease Obligations,Attributable Debt in respect of Sale and Lease-Back Transactions and debtobligations evidenced by bonds, notes, debentures or similar instruments orletters of credit or bankers’ acceptances (and excluding (x) any undrawnletters of credit issued in the ordinary course of business and (y) allobligations relating to Receivables Facilities) and (2) the aggregateamount of all outstanding Disqualified Stock of the Company and allDisqualified Stock and Preferred Stock of the Restricted Subsidiaries(excluding items eliminated in consolidation), with the amount of suchDisqualified Stock and Preferred Stock equal to the greater of their respectivevoluntary or involuntary liquidation preferences and Maximum Fixed RepurchasePrices, in each case determined on a consolidated basis in accordance withGAAP.

 

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 any suchprimary obligation or any property constituting direct or indirect securitytherefor,

 

(2)           to advance or supplyfunds

 

(A)          for the purchase orpayment of any such primary obligation or

 

(B)           to maintain workingcapital or equity capital of the primary obligor or otherwise to maintain thenet 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 presentation of the Notes forpayment or for registration of transfer or exchange, such term shall mean theoffice or

 

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agencyof the Trustee at which, at any particular time, its corporate agency businessshall 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).

 

“*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 CashEquivalents received in connection with a subsequent sale of such DesignatedNoncash 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 in clause (C) ofSection 1010(a) 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

 

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Subsidiariesor by any such plan to such employees, such Capital Stock shall not constituteDisqualified Stock solely because it may be required to be repurchased by 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 for taxesbased on income or profits,*plus*franchise or similar taxes, of such Person for such period deducted incomputing Consolidated Net Income,*plus*

 

(b)           consolidated FixedCharges of such Person for such period to the extent the same was deducted incalculating 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 of anyrestructuring 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 write offs,write downs or other noncash charges reducing Consolidated Net Income for suchperiod, excluding any such charge that represents an accrual or reserve for acash expenditure for a future period,*plus*

 

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(g)           the amount of anyminority 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 of netcost savings projected by the Company in good faith to be realized as a resultof 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 isPreferred Stock) in each case, solely to the extent that such cash proceeds areexcluded from 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 or lossresulting in such period from Hedging Obligations and the application ofStatement of Financial Accounting Standards #133;

 

(b)           any net gain or lossresulting in such period from currency translation gains or losses related tocurrency remeasurements of Indebtedness; and

 

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(c)           the amount of gainor loss resulting in such period from a sale of receivables and related assetsto 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)           public offeringswith respect to the Company’s or any direct or indirect parent company’s CommonStock registered on Form S-4 or Form S-8;

 

(b)           any such public orprivate sale that constitutes an Excluded Contribution; and

 

(c)           an issuance to anySubsidiary of the Company.

 

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

 

“*Event of Default*” has the meaningspecified in 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 9%/93⁄4% SeniorExchange Notes Due 2015 issued in exchange for any PIK Notes, any increase inthe aggregate principal amount of the Notes as a result of a PIK Payment andany 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.

 

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

 

(a)           contributions to itscommon equity capital, and

 

(b)           the sale (other thanto a Subsidiary of the Company or to any management equity plan or stock optionplan or any other management or employee benefit plan or agreement of theCompany) 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) of Section 1010(a) ofthis 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 Marcus Group, Inc.and The Bank of New York, as trustee, pursuant to which the Existing2008 Notes and the Existing 2028 Debentures have been issued, as thesame 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 thaninventory, accounts receivable and other assets sold in the ordinary course ofbusiness as part of the normal retirement or replacement of assets or(b) representing a liquidating distribution or payment in connection withthe liquidation or winding 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

 

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whichthe calculation of the Fixed Charge Coverage Ratio is made (the “CalculationDate”), then the Fixed Charge Coverage Ratio shall be calculated giving*pro forma* effect to such incurrence,assumption, guarantee, redemption, retirement or extinguishing of Indebtedness,or such issuance or redemption of Disqualified Stock or Preferred Stock, as 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, thenbased upon 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,

 

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(b)           all cash dividendpayments (excluding items eliminated in consolidation) on any series ofPreferred Stock during such period, and

 

(c)           all cash dividendpayments (excluding items eliminated in consolidation) on any series ofDisqualified 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)           direct obligationsof the United States of America for the timely payment of which its full faithand credit is pledged or

 

(b)           obligations of aPerson 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.

 

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“*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.

 

“*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 Newton Acquisition, 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)           any indebtedness(including principal and premium) of such Person, whether or not contingent

 

(1)           in respect of borrowed money,

 

(2)           evidenced by bonds, notes, debenturesor similar instruments or letters of credit or bankers’ acceptances (or,without double counting, reimbursement agreements in respect thereof),

 

(3)           representing the balance deferred andunpaid of the purchase price of any property (including Capitalized LeaseObligations), except any such balance that constitutes a trade payable orsimilar obligation to a trade creditor, in each case accrued in the ordinarycourse of business, or

 

(4)           representing any 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 extent nototherwise included, any obligation by such Person to be liable for, or to pay,as obligor, guarantor or otherwise, on the obligations of the type referred toin clause (a) of another Person (whether or not such items wouldappear upon the balance sheet of such obligor or guarantor), other than by

 

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endorsementof negotiable instruments for collection in the ordinary course of business,

 

(c)           to the extent nototherwise included, the obligations of the type referred to in clause (a) ofanother Person secured by a Lien on any asset owned by such Person, whether ornot such obligations are assumed by such Person and whether or not suchobligations would appear upon the balance sheet of such Person; *provided* that the amount of suchIndebtedness shall be the lesser of the fair market value of such asset at thedate of determination and the amount of Indebtedness so secured, and

 

(d)           Attributable Debt inrespect 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.

 

“*Interest Period*” means each periodcommencing on and including an Interest Payment Date (or, if there has not yetbeen an Interest Payment Date, October 6, 2005) and ending on andincluding the day immediately preceding the next succeeding Interest PaymentDate.

 

“*Investment Grade Securities*” means:

 

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(1)           securities issued ordirectly and fully guaranteed or insured by the government of the United Statesof America or any agency or instrumentality thereof (other than CashEquivalents),

 

(2)           debt securities ordebt instruments with a rating of BBB- or higher by S&P or Baa3 or higherby Moody’s or the equivalent of such rating by such rating organization, or, ifno rating of S&P or Moody’s then exists, the equivalent of such rating byany other nationally recognized securities rating agency, but excluding anydebt securities or instruments constituting loans or advances among the Companyand its Subsidiaries,

 

(3)           investments in anyfund that invests exclusively in investments of the type described in clauses(1) and (2), which fund may also hold immaterial amounts of cash pendinginvestment 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 thisIndenture,

 

(1)           “Investments” shallinclude the portion (proportionate to the Company’s equity interest in suchSubsidiary) of the fair market value of the net assets of a Subsidiary of theCompany 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

 

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(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.

 

“*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 Marcus Group, 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.

 

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“*Net Income*” means, with respect to anyPerson, the net income (loss) of such Person, determined in accordance withGAAP and before 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 interest on Indebtedness required (other than byclause (1) of Section 1018(b) of this Indenture) to be paidas a result of such transaction and any deduction of appropriate amounts to beprovided by the Company as a reserve in accordance with GAAP against anyliabilities associated with the asset disposed of in such transaction andretained by the Company after such sale or other disposition thereof, includingpension and other post-employment benefit liabilities and liabilities relatedto environmental matters or against any indemnification obligations associatedwith such transaction.

 

“*New Indentures*” means the Senior SubordinatedIndenture and this Indenture.

 

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

 

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

 

“*Note Register*” and “*Note Registrar*” have the respectivemeanings specified 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, any PIK Notes andany Additional Notes (including, in each case, any increase in the principalamount thereof as a result of a PIK Payment) shall be treated as a single classfor all purposes of this Indenture, including waivers, amendments, redemptionsand offers to purchase, and unless the context otherwise requires, all referencesto the Notes shall include the Initial Notes, any PIK Notes, any AdditionalNotes and the Exchange Notes issued in exchange for the Initial Notes, any PIKNotes, and any Additional Notes (including, in each case, any increase in theprincipal amount thereof as a result of a PIK Payment).  All references to“principal amount” of the Notes include any increase in principal amount of theoutstanding Notes as a result of a PIK Payment.

 

“*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

 

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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, theTreasurer or 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.

 

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

 

(1)           Notes theretoforecancelled by the Trustee or delivered to the Trustee for cancellation;

 

(2)           Notes, or portionsthereof, for whose payment or redemption money in the necessary amount has beentheretofore deposited with the Trustee or any Paying Agent (other than theCompany) in trust or set aside and segregated in trust by the Company (if theCompany 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, except to theextent provided in Sections 1302 and 1303, with respect to which theCompany has effected Legal Defeasance or Covenant Defeasance as provided in Article Thirteen;and

 

(4)           Notes which havebeen paid pursuant to Section 305 or in exchange for or in lieu of whichother Notes have been authenticated and delivered pursuant to this Indenture,other than any such Notes in respect of which there shall have been presentedto the Trustee proof satisfactory to it that such Notes are held by a ProtectedPurchaser in whose hands the Notes are valid obligations of the Company;

 

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*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 be disregardedand deemed not to be Outstanding, except that, in determining whether theTrustee shall be protected in making such calculation or in relying upon anysuch request, demand, authorization, direction, notice, consent or waiver, onlyNotes which a Responsible Officer of the Trustee actually knows to be so ownedshall 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.

 

“*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) or Section 14(d)(2) ofthe Exchange Act, or any successor provision) of which any of the foregoing aremembers; *provided* that, in thecase of such group and without giving effect to the existence of such group orany other group, the Sponsors, the Co-Investors and members of management,collectively, have beneficial ownership of more than 50% of the total votingpower of the Voting Stock of the Company or any of its direct or indirectparent companies. Any Person or group whose acquisition of beneficial ownershipconstitutes a Change of Control in respect of which a Change of Control Offeris made in accordance with the requirements of this Indenture shall thereafter,together with its Affiliates, constitute an additional Permitted Holder.

 

“*Permitted Investments*” means:

 

(a)           any Investment inthe Company or any Restricted Subsidiary;

 

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

 

(c)           (i) any Investment by theCompany or any Restricted Subsidiary of the Company in a Person that is engagedin a Similar Business if as a result of such Investment

 

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(1)           such Person becomes a RestrictedSubsidiary of the Company or

 

(2)           such Person, in one transaction or aseries of related transactions, is merged, consolidated or amalgamated with orinto, or transfers or conveys substantially all of its assets to, or isliquidated into, the Company or a Restricted Subsidiary of the Company and

 

(ii)           any Investment held by such Person;

 

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

 

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

 

(f)            loans and advancesto, 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)           inexchange for any other Investment or accounts receivable held by the Company orany such Restricted Subsidiary in connection with or as a result of abankruptcy, workout, reorganization or recapitalization of the Person in whichsuch other Investment is made or which is the obligor with respect to suchaccounts receivable or

 

(2)           asa result of a foreclosure by the Company or any Restricted Subsidiary withrespect to any secured Investment or other transfer of title with respect toany secured Investment in default;

 

(h)           Hedging Obligationspermitted under clause (12) of Section 1011(b) of thisIndenture;

 

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

 

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DisqualifiedStock); *provided* that such EquityInterests shall not 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 transaction tothe 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;

 

(n)           Investments in aSimilar Business having an aggregate fair market value, taken together with allother Investments made pursuant to this clause (n) 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 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)           Investments relatingto 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 giving effectto subsequent changes in value).

 

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

 

(1)           Liens to secureIndebtedness incurred under clauses (1) or (2) ofSection 1011(b) of this Indenture, the Existing 2008 Notes andthe Existing 2028 Debentures (and, in each case, any related Obligations);

 

(2)           pledges or depositsby such Person under workmen’s compensation laws, unemployment insurance lawsor similar legislation, or good faith deposits to secure bids, tenders,contracts (other than for the payment of Indebtedness) or leases to which suchPerson is a party, or deposits to secure public or statutory obligations ofsuch Person or deposits of cash or U.S.

 

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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 for taxes,assessments or other governmental charges or claims not yet overdue for aperiod 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 favor ofissuers of performance and surety bonds or bid bonds or with respect to otherregulatory requirements or letters of credit issued pursuant to the request ofand for the account of such Person in the ordinary course of its business;

 

(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,which were 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 existing onthe Issue Date;

 

(8)           Liens on property orshares of stock of a Person at the time such Person becomes a Subsidiary; *provided* that such Liens are not createdor incurred in connection with, or in contemplation of, such other Personbecoming such a Subsidiary; *provided,further*, that such Liens may not extend to any other property ownedby the Company or any Restricted Subsidiary;

 

(9)           Liens on property atthe time the Company or a Restricted Subsidiary acquired the property,including any acquisition by means of a merger or consolidation with or intothe Company or any Restricted Subsidiary; *provided*that such Liens are not created or incurred in connection with, or incontemplation of, such acquisition; *provided,further*, that the Liens may not extend to any other property ownedby 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 on specificitems of inventory or other goods and proceeds of any Person securing suchPerson’s obligations in respect of bankers’ acceptances issued or created forthe account of such Person to facilitate the purchase, shipment or storage ofsuch inventory or other goods;

 

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

 

(13)         Liens arising fromfinancing statement filings under the Uniform Commercial Code or similar statelaws regarding operating leases entered into by the Company and its RestrictedSubsidiaries in the ordinary course of business;

 

(14)         Liens in favor of theCompany or any Subsidiary Guarantor;

 

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

 

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

 

(17)         Liens to secure anyrefinancing, 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 clauses (18) and(27); *provided* that (x) suchnew Lien shall be limited to all or part of the same property that secured theoriginal Lien (plus improvements on such property), and (y) theIndebtedness secured by such Lien at such time is not increased to any amountgreater than the sum of (A) the outstanding principal amount or, if greater,committed amount of the Indebtedness described under clauses (1), (7), (8),(9) and the following clauses (18) and (27) at the time the originalLien became a Permitted Lien under this Indenture, and (B) an amountnecessary to pay any fees and expenses, including premiums, related to suchrefinancing, 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 incurred pursuantto clause (20) thereof extend only to the assets of Foreign Subsidiaries;

 

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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) under Section 501 of this Indenture, so long as suchLiens are adequately bonded and any appropriate legal proceedings that may havebeen duly initiated for the review of such judgment have not been finallyterminated or the period within which such proceedings may be initiated has notexpired;

 

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

 

(22)         Liens (i) of acollection bank arising under Section 4-210 of the Uniform Commercial Codeon items in the course of collection, (ii) attaching to commodity tradingaccounts or other commodity brokerage accounts incurred in the ordinary courseof business and (iii) in favor of banking institutions arising as a matterof law encumbering deposits (including the right of set-off) and which arewithin the general parameters customary in the banking industry;

 

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

 

(25)         Liens deemed to existin 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;

 

(26)         other Liens securingobligations incurred in the ordinary course of business which obligations donot exceed $50.0 million at any one time outstanding;

 

(27)         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 Obligations; and

 

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(28)         Liens incurred tosecure Obligations in respect of any Indebtedness permitted to be incurredpursuant to Section 1011 of this Indenture; *provided* that, at the time of incurrence and after giving*pro forma* effect thereto, theConsolidated Secured Debt Ratio would be no greater than 4.0:1.0.

 

“*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.

 

“*PIK Interest*” has the meaning specified inSection 301 of this Indenture.

 

“*PIK Notes”*  has the meaning specifiedin Section 206 of this Indenture.

 

“*PIK Payment”*  has the meaningspecified in Section 206 of this Indenture.

 

“*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, theIndebtedness of which is non-recourse (except for standard representations,warranties, covenants and indemnities made in connection with such facilities)to the Company and its Restricted Subsidiaries pursuant to which the Company orany of its Restricted Subsidiaries sells its accounts receivable to either(a) a Person that is not a Restricted Subsidiary or (b) a ReceivablesSubsidiary that in turn sells its accounts receivable to a Person that is not aRestricted Subsidiary.

 

“*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.

 

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“*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.

 

“*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 particularcorporate trust matter, any other officer to whom such matter is referredbecause of his knowledge of and familiarity with the particular subject and whoshall have direct responsibility for the administration of this Indenture.

 

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

 

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“*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 ForeignSubsidiary) that is not then an Unrestricted Subsidiary; *provided* that upon the occurrence of anUnrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, suchSubsidiary 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 lenders thereunder andDeutsche Bank Trust Company Americas, as Administrative Agent, including anyguarantees, collateral documents, instruments and agreements executed inconnection therewith, and any amendments, supplements, modifications,extensions, replacements, renewals, restatements, refundings or refinancingsthereof and any indentures or credit facilities or commercial paper facilitieswith banks or other institutional lenders or investors that extend, replace,refund, refinance, renew or defease any part of the loans, notes, other creditfacilities or commitments thereunder, including any such replacement, refundingor refinancing facility or indenture that increases the amount borrowablethereunder or alters the maturity thereof (*provided*that such increase in borrowings is permitted under Section 1011 of thisIndenture).

 

“*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:

 

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(1)           all Indebtedness ofsuch Person, whether outstanding on the Issue Date or thereafter 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 tothe Notes or the Guarantee of such Person, as the case may be; *provided* that Senior Indebtedness shallnot include:

 

(1)           any obligation ofsuch Person to the Company or any Subsidiary or to any joint venture in whichthe Company or any Restricted Subsidiary has an interest;

 

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

 

(3)           any accounts payableor other liability to trade creditors in the ordinary course of business(including guarantees thereof as instruments evidencing such liabilities);

 

(4)           any Indebtedness orother Obligation of such Person that is subordinate or junior in any respect toany other Indebtedness or other Obligation of such Person; or

 

(5)           that portion of anyIndebtedness that at the time of Incurrence is Incurred in violation of thisIndenture.

 

“*Senior Subordinated Indenture*” means theSenior Subordinated Indenture dated as of the Issue Date, among the Company, asissuer, certain of its Subsidiaries and Holdings, as guarantors and Wells FargoBank, National Association, as trustee, pursuant to which the SeniorSubordinated Notes are issued.

 

“*Senior Subordinated Notes*” means the$500,000,000 aggregate principal amount of 103/8% Senior Subordinated Notes due 2015 issued by the Company under theSenior Subordinated Indenture on the Issue Date.

 

“*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.

 

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“*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.

 

“*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 to theCompany, any Indebtedness of the Company that is by its terms subordinated inright of payment to the Notes, and

 

(b)           with respect to anyGuarantor, any Indebtedness of such Guarantor that is by its terms subordinatedin right of payment to the Guarantee of such Guarantor.

 

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

 

(1)           any corporation,association, or other business entity (other than a partnership, joint venture,limited liability company or similar entity) of which more than 50% of thetotal voting power of shares of Capital Stock entitled (without regard to theoccurrence of any contingency) to vote in the election of directors, managersor trustees thereof is at the time of determination owned or controlled,directly or indirectly, by such Person or one or more of the other Subsidiariesof that Person or a combination thereof and

 

(2)           any partnership,joint venture, limited liability company or similar entity of which

 

(x)            morethan 50% of the capital accounts, distribution rights, total equity and votinginterests or general or limited partnership interests, as applicable, are ownedor controlled, directly or indirectly, by such Person or one or more of theother Subsidiaries of that Person or a combination thereof whether in the formof membership, general, special or limited partnership or otherwise, and

 

(y)           suchPerson or any Restricted Subsidiary of such Person is a controlling generalpartner or otherwise controls such entity.

 

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“*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 Restricted Subsidiary of the Companythat thereafter guarantees the Notes pursuant to the terms 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

 

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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 to October 15,2010, is less than one year, the weekly average yield on actually traded UnitedStates Treasury securities adjusted to a constant maturity of one year shall beused.

 

“*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 Subsidiary ofthe Company that at the time of determination is an Unrestricted Subsidiary (asdesignated by the Company, as provided below) and

 

(2)           any Subsidiary of anUnrestricted 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)           any UnrestrictedSubsidiary must be an entity of which shares of the capital stock or otherequity interests (including partnership interests) entitled to cast at least amajority of the votes that may be cast by all shares or equity interests havingordinary voting power for the election of directors or other governing body areowned, directly or indirectly, by the Company,

 

(b)           such designationcomplies with Section 1010 of this Indenture and

 

(c)           each of

 

(1)           the Subsidiary to be so designatedand

 

(2)           its Subsidiaries

 

hasnot at the time of designation, and does not thereafter, create, incur, issue,assume, guarantee or otherwise become directly or indirectly liable withrespect to

 

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anyIndebtedness pursuant to which the lender has recourse to any of the assets ofthe 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

 

(1)           the Company couldincur at least $1.00 of additional Indebtedness pursuant to the Fixed ChargeCoverage Ratio test described in Section 1011(a) of this Indenture or

 

(2)           the Fixed ChargeCoverage Ratio for the Company and its Restricted Subsidiaries would be greaterthan such ratio for the Company and its Restricted Subsidiaries immediatelyprior to such designation, in each case on a*pro forma* basis taking into account such designation.

 

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 all suchpayments.

 

“*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.

 

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SECTION 103. Compliance Certificates and Opinions.  Upon any application orrequest by the Company to the Trustee to take or refrain from taking any actionunder this Indenture, the Company shall furnish to the Trustee an Officers’Certificate stating that all conditions precedent, if any, provided for in thisIndenture (including any covenant compliance with which constitutes a conditionprecedent) relating to the proposed action have been complied with and, otherthan in connection with the authentication of the Initial Notes, an Opinion ofCounsel stating that in the opinion of such counsel all such conditionsprecedent, if any, have been complied with, except that in the case of any suchapplication or request as to which the furnishing of such documents isspecifically required by any provision of this Indenture relating to suchparticular application or request, no additional certificate or opinion need befurnished.

 

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 Documents Delivered to Trustee.  In any case whereseveral matters are required to be certified by, or covered by an opinion of,any specified Person, it is not necessary that all such matters be certifiedby, or covered by the opinion of, only one such Person, or that they be socertified or covered by only one document, but one such Person may certify orgive an opinion with respect to some matters and one or more other such Personsas to other matters, and any such Person may certify or give an opinion as tosuch matters in one or several documents.

 

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

 

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respectto such factual matters is in the possession of the Company, unless suchcounsel knows, or in the exercise of reasonable care should know, that thecertificate or opinion or representations with respect to such matters areerroneous.

 

Whereany Person is required to make, give or execute two or more applications,requests, consents, certificates, statements, opinions or other instrumentsunder this Indenture, they may, but need not, be consolidated and form oneinstrument.

 

SECTION 105. Acts of Holders.  Any request, demand, authorization, direction,notice, consent, waiver or other action provided by this Indenture to be givenor taken by Holders may be embodied in and evidenced by one or more instrumentsof substantially similar tenor signed by such Holders in person or by agentsduly appointed in writing; and, except as herein otherwise expressly provided,such action shall become effective when such instrument or instruments aredelivered to the Trustee and, where it is hereby expressly required, to theCompany.  Such instrument or instruments (and the action embodied thereinand evidenced thereby) are herein sometimes referred to as the “Act” of theHolders signing such instrument or instruments.  Proof of execution of anysuch instrument or of a writing appointing any such agent shall be sufficientfor any purpose of this Indenture and (subject to Section 601) conclusivein favor of the Trustee and the Company, if made in the manner provided in thisSection.

 

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

 

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OutstandingNotes shall be computed as of such record date; *provided* that no such authorization, agreement or consent bythe Holders on such record date shall be deemed effective unless it shallbecome effective pursuant to the provisions of this Indenture not later thaneleven months after the record date.  Any request, demand, authorization,direction, notice, consent, waiver or other Act of the Holder of any Note shallbind every future Holder of the same Note and the Holder of every Note issuedupon the registration of transfer thereof or in exchange therefor or in lieuthereof in respect of anything done, omitted or suffered to be done by theTrustee, the Company or any Guarantor in reliance thereon, whether or notnotation 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., to Trustee, Company, any Guarantor and Agent. Any request, demand, authorization, direction, notice, consent, waiver or Actof Holders or other document provided or permitted by this Indenture to be madeupon, given or furnished 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

 

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postage prepaid, or delivered by recognizedovernight courier, to the Company or such Guarantor addressed to it at TheNeiman Marcus Group, Inc., 1618 Main Street, Dallas, TX 75201,Attention: General Counsel, or at any other address previously furnished inwriting to the Trustee by the Company or such Guarantor.

 

SECTION 107. Notice to Holders; Waiver.  Where this Indenture provides fornotice of any event to Holders by the Company or the Trustee, such notice 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 and Table of Contents.  The Article and Section headingsherein, the Table of Contents and the reconciliation and tie between the TIAand this Indenture are for convenience of reference only, are not intended tobe considered 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 thisIndenture and the Notes shall bind its successors.  All agreements of theTrustee in this Indenture shall bind its successors.  All agreements ofeach Guarantor in this Indenture shall bind its successors, except as otherwiseprovided in Section 1208 hereof.

 

SECTION 110. Separability Clause.  In case any provision in this Indenture or inthe Notes shall be invalid, illegal or unenforceable, the validity, legalityand enforceability of the remaining provisions shall not in any way be affectedor impaired thereby.

 

SECTION 111. Benefits of Indenture.  Nothing in this Indenture or in the Notes,express or implied, shall give to any Person, other than the parties hereto,any

 

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PayingAgent, any Note Registrar and their successors hereunder and the Holders anybenefit or any legal or equitable right, remedy or claim under this Indenture.

 

SECTION 112. Governing Law.  This Indenture, the Notes and any Guarantee shallbe governed by and construed in accordance with the laws of the State ofNew York.  This Indenture is subject to the provisions of the TrustIndenture Act that are required to be part of this Indenture and shall, to theextent applicable, be governed by such provisions.

 

SECTION 113. Legal Holidays.  In any case where any Interest Payment Date,Redemption Date or Stated Maturity or Maturity of any Note shall not be aBusiness Day, then (notwithstanding any other provision of this Indenture or ofthe Notes) payment of principal (or premium, if any) or interest need not bemade on such date, but may be made on the next succeeding Business Day with thesame force and effect as if made on the Interest Payment Date, Redemption Date,or at the Stated Maturity or Maturity; *provided*that no interest shall accrue for purposes of such payment for the period fromand after such Interest Payment Date, Redemption Date, Stated Maturity orMaturity, as the case may be.

 

SECTION 114. No Personal Liability of Directors, Officers, Employees and Stockholders. No director, officer, employee, incorporator or stockholder of the Company orany Subsidiary Guarantor (other than in the case of stockholders of anySubsidiary Guarantor, the Company or another Subsidiary Guarantor or in thecase of stockholders of the Company, Holdings) or any of their parent companiesshall have any liability for any obligations of the Company, Holdings or theSubsidiary Guarantors under the Notes, the Guarantees and this Indenture or forany claim based on, in respect of, or by reason of such obligations or theircreation to the extent permitted by applicable law.  Each Holder byaccepting a Note and the related Guarantee waives and releases all suchliability to the extent permitted by applicable law.  The waiver andrelease are part of the consideration for issuance of the Notes and theGuarantees.

 

SECTION 115. Trust Indenture Act Controls.  Upon qualification of this Indentureunder the TIA, if any provision of this Indenture limits, qualifies orconflicts with another provision which is required to be included in thisIndenture by the TIA, the provision required by the TIA shall control.  Ifany provision of this Indenture modifies or excludes any provision of the TIAthat may be so modified or excluded, the latter provision shall be deemed toapply to this Indenture as so modified or excluded, as the case may be.

 

SECTION 116. Counterparts.  This Indenture may be executed in any number ofcounterparts, each of which shall be original; but such counterparts shalltogether constitute but one and the same instrument.  One signed copy isenough to prove this Indenture.

 

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**ARTICLE TWO**

 

**NOTE FORMS**

 

SECTION 201. Form and Dating.  Provisions relating to the Initial Notes,any PIK Notes, the Private Exchange Notes and the Exchange Notes are set forthin the Rule 144A / Regulation S Appendix attached hereto (the “*Appendix*”) which is hereby incorporatedin, and expressly made part of, this Indenture.  The Initial Notes and theTrustee’s certificate of authentication shall be substantially in the form of Exhibit 1to the Appendix which is hereby incorporated in, and expressly made a part of,this Indenture.  The Exchange Notes, the Private Exchange Notes, any PIKNotes issued with respect to Private Exchange Notes and the Trustee’scertificate of authentication shall be substantially in the form of Exhibit A,which is hereby incorporated in and expressly made a part of thisIndenture.  The Notes may have notations, legends or endorsements requiredby law, stock exchange rule, agreements to which the Company is subject, ifany, or usage (*provided* that anysuch notation, legend or endorsement is in a form reasonably acceptable to theCompany).  Each Note shall be dated the date of its authentication. The terms of the Note set forth in the Appendix and Exhibit A arepart of the terms of this Indenture.

 

SECTION 202. Execution, Authentication, Delivery and Dating.  The Notes shall beexecuted on behalf of the Company by any Officer.  The signature of anOfficer on the Notes may be manual or facsimile signature of the present or anyfuture such authorized officer and may be imprinted or otherwise reproduced onthe 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 $700,000,000 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

 

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theissuance of Notes contained herein have been fully complied with, and theTrustee in accordance with such Company Order shall authenticate and deliversuch Additional Notes.  In addition, in connection with the payment of PIKInterest, the Company is entitled to, without the consent of the Holders, increasethe outstanding principal amount of the Notes or issue additional Notes (the “*PIK Notes*”) under this Indenture on thesame terms and conditions as the Notes offered hereby (in each case, the “*PIK Payment*”).

 

Uponreceipt of a Company Order, the Trustee shall authenticate for original issueExchange Notes in an aggregate principal amount not to exceed $700,000,000 plusany increase in the aggregate principal amount of the Notes as a result of aPIK Payment plus the aggregate principal amount of any PIK Notes or anyAdditional Notes issued; *provided*that such Exchange Notes shall be issuable only upon the valid surrender forcancellation of Initial Notes, any PIK Notes and any Additional Notes of a likeaggregate principal amount in accordance with an Exchange Offer pursuant to theRegistration Rights Agreement and a Company Order for the authentication anddelivery of such Exchange Notes and certifying that all conditions precedent tothe issuance of such Exchange Notes are complied with.  In each case, theTrustee shall receive a Company Order and an Opinion of Counsel of the Companythat it may reasonably require in connection with such authentication ofNotes.  Such Company Order shall specify the amount of Notes to beauthenticated and the date on which the original issue of Notes is to beauthenticated.

 

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 deliveredhereunder and 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 to Article Eightof this Indenture, any of the Notes authenticated or delivered prior to suchconsolidation, merger, conveyance, transfer, lease or other disposition may,from time to time, at the request of the successor Person, be exchanged forother Notes executed in the name of the successor Person with such changes inphraseology and form as may be appropriate, but otherwise in substance of liketenor as the Notes surrendered for such exchange and of like principal amount;and the Trustee, upon Company Request of the successor Person, shall authenticateand deliver Notes as specified in such request for the purpose of suchexchange.  If Notes shall at any time be authenticated and

 

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deliveredin any new name of a successor Person pursuant to this Section in exchangeor substitution for or upon registration of transfer of any Notes, suchsuccessor Person, at the option of the Holders but without expense to them,shall provide for the exchange of all Notes at the time outstanding for Notesauthenticated 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 maybe authenticated and issued under this Indenture is not limited; *provided, however* that any AdditionalNotes issued under this Indenture rank *paripassu* with the Initial Notes, are issued in accordance with Sections202 and 1011 hereof, form a single class with the Initial Notes and shall havethe same terms as to status, redemption or otherwise as the InitialNotes.  Any Additional Notes shall be issued pursuant to a supplementalindenture to this Indenture.

 

TheNotes shall be known and designated as the “9%/93⁄4% Senior Notes Due 2015” ofthe Company.  The Stated Maturity of the Notes shall be October 15,2015, and the Notes shall bear interest at the rate set forth below fromOctober 6, 2005, or from the most recent Interest Payment Date to whichinterest has been paid or duly provided for, payable on January 15, 2006and quarterly thereafter on January 15, April 15, July 15 andOctober 15 in each year and at said Stated Maturity, until the principalthereof is paid or duly provided for and to the Person in whose name the Note(or any predecessor Note) is registered at the close of business on theJanuary 1, April 1, July 1 and October 1 immediatelypreceding such Interest Payment Date (each, a “*RegularRecord Date*”).

 

TheCompany shall pay interest with respect to the Interest Period that commenceson the Issue Date entirely in cash.  For any Interest Period thereafterthrough the Interest Period ending October 14, 2010, the Company may, atits option, elect to pay interest on the Notes:

 

(a)           entirely incash (“*Cash Interest*”) or

 

(b)           entirely byincreasing the principal amount of the Outstanding Notes or by issuing PIKNotes (“*PIK Interest*”).

 

TheCompany must elect the form of interest payment with respect to each InterestPeriod by delivering a notice to the Trustee prior to the beginning of suchInterest Period. The Trustee shall promptly deliver a corresponding notice tothe Holders. In the absence of such an election, interest on the Notes shall bepayable entirely in cash.  From and after the Interest Period commencingOctober 15, 2010, the Company shall make all interest payments on theNotes entirely in cash.

 

CashInterest on the Notes shall accrue at the rate of 9% per annum and be payablein cash. PIK Interest on the Notes shall accrue at the rate of 93⁄4% per annumand be payable (x) with respect to Notes represented by one or more globalnotes registered in the name of, or held by, the Depository or its nominee onthe relevant record date, by increasing the principal amount of the outstandingglobal Notes by an amount equal to the amount of PIK

 

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Interestfor the applicable Interest Period (rounded up to the nearest $1,000) and (y) withrespect to Notes represented by certificated notes, by issuing PIK Notes incertificated form in an aggregate principal amount equal to the amount of PIKInterest for the applicable Interest Period (rounded up to the nearest wholedollar) and the Trustee shall, upon receipt of a Company Order, authenticateand deliver such PIK Notes in certificated form for original issuance to theHolders on the relevant record date, as shown by the records of the NoteRegister. Following an increase in the principal amount of the outstandingglobal Notes as a result of a PIK Payment, the global Notes shall bear intereston such increased principal amount from and after the date of such PIK Payment.Any PIK Notes issued in certificated form shall be dated as of the applicableInterest Payment Date and shall bear interest from and after such date. AllNotes issued pursuant to a PIK Payment shall mature on October 15, 2015and shall be governed by, and subject to the terms, provisions and conditionsof, this Indenture and shall have the same rights and benefits as the Notesissued on the Issue Date. Any certificated PIK Notes shall be issued with thedescription “PIK” on the face of such PIK Note.

 

Theprincipal of (and premium, if any), Cash Interest and Additional Interestpayable in cash, if any, on the Notes shall be payable at the office or agencyof the Company maintained for such purpose in the City of Dallas, State ofTexas or, at the option of the Company, payment of Cash Interest may be made bycheck mailed to the Holders of the Notes at their respective addresses setforth in the Note Register of Holders; *provided*that all payments of principal, premium, if any, and Cash Interest andAdditional Interest payable in cash, if any, with respect to Notes representedby one or more permanent global notes registered in the name of or held by theDepository or its nominee shall be made by wire transfer of immediatelyavailable funds to the accounts specified by the Holder or Holders thereof.

 

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 to Section 1017. The Notes shall be subject to repurchase pursuant to an Offer to Purchase asprovided 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.

 

SECTION 302. Denominations.  The Notes shall be issuable only in registered formwithout coupons and only in denominations of $2,000 and any integral multipleof $1,000 in excess thereof, subject to the issuance of certificated PIK Notesas indicated above.

 

SECTION 303. Temporary Notes.  Pending the preparation of definitive Notes, theCompany may execute, and upon receipt of a Company Order the Trustee shallauthenticate and deliver, temporary Notes which are printed, lithographed,typewritten, mimeographed or otherwise produced, in any authorizeddenomination, substantially of the tenor of the definitive Notes in lieu ofwhich they are issued and with such appropriate insertions, omissions,substitutions and other variations as the officers

 

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executingsuch Notes may determine, as conclusively evidenced by their execution of suchNotes.

 

Iftemporary Notes are issued, the Company shall cause definitive Notes to beprepared without unreasonable delay.  After the preparation of definitiveNotes, the temporary Notes shall be exchangeable for definitive Notes uponsurrender of the temporary Notes at the office or agency of the Companydesignated for such purpose pursuant to Section 1002, without charge tothe Holder.  Upon surrender for cancellation of any one or more temporaryNotes, the Company shall execute and the Trustee shall authenticate and deliverin exchange therefor a like principal amount of definitive Notes of authorizeddenominations.  Until so exchanged, the temporary Notes shall in allrespects be entitled to the same benefits under this Indenture as definitiveNotes.

 

SECTION 304. Note Registrar; Paying Agent; Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trusteea register (the register maintained in such office and in any other office oragency designated pursuant to Section 1002 being herein sometimes referredto as the “*Note Register*”) inwhich, subject to such reasonable regulations as it may prescribe, the Companyshall provide for the registration of Notes and of transfers of Notes. The Note Register shall be in written form or any other form capable of beingconverted into written form within a reasonable time.  At all reasonabletimes, the Note Register shall be open to inspection by the Trustee.  TheTrustee is hereby initially appointed as note registrar (the “*Note Registrar*”) for the purpose ofregistering Notes and transfers of Notes as herein provided.  The Trusteeis hereby initially appointed to act as the Paying Agent and to act asCustodian with respect to the Global Notes.

 

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 and deliver, the Notes which the Holder making theexchange is entitled to receive; *provided*that no exchange of Notes for Exchange Notes shall occur until an ExchangeOffer Registration Statement shall have been declared effective by the SEC, theTrustee shall have received an Officers’ Certificate confirming that theExchange Offer Registration Statement has been declared effective by the SECand the Initial Notes to be exchanged for the Exchange Notes shall be cancelledby 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.

 

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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) anymutilated Note is surrendered to the Trustee, or (2) the Company and theTrustee receive evidence to their satisfaction of the destruction, loss ortheft of any Note, and there is delivered to the Company and the Trustee suchsecurity or indemnity as may be required to protect the Company, the Trustee,any agent and any authenticating agent from any loss that any of them maysuffer if a Note is replaced, then, in the absence of notice to the Company orthe Trustee that such Note has been acquired by a Protected Purchaser (asdefined in Section 8-303 of the Uniform Commercial Code) (a “*Protected Purchaser*”), the Company shallexecute and upon Company Order the Trustee shall authenticate and deliver, inexchange for any such mutilated Note or in lieu of any such destroyed, lost orstolen Note, a new Note of like tenor and principal amount, bearing a numbernot 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.

 

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)  Intereston any Note which is payable, and is punctually paid or duly provided for, onany

 

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InterestPayment Date shall be paid to the Person in whose name such Note (or one ormore Predecessor Notes) is registered at the close of business on the RegularRecord Date for such interest at the office or agency of the Company maintainedfor such purpose pursuant to Section 1002; *provided, however*, that, subject to Section 301 hereof,each installment of Cash 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 onany Note which is payable, but is not punctually paid or duly provided for, onany Interest Payment Date shall forthwith cease to be payable to the Holder onthe Regular Record Date by virtue of having been such Holder, and suchdefaulted interest and (to the extent lawful) interest on such defaultedinterest at the rate borne by the Notes (such defaulted interest and interestthereon herein collectively called “*DefaultedInterest*”) may be paid by the Company, at its election in each case,as provided in clause (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 notless than 10 days after the receipt by the Trustee of the notice of theproposed payment.  The Trustee shall promptly notify the Company of suchSpecial Record Date, and in the name and at the expense of the Company, shallcause notice of the proposed 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

 

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the proposed payment pursuant to this clause, suchmanner of payment shall be deemed practicable by the Trustee.

 

(c)           Subject to theforegoing provisions of this Section, each Note delivered under this Indentureupon registration of transfer of or in exchange for or in lieu of any otherNote shall carry the rights to interest accrued and unpaid, and to accrue,which were carried by such other Note.

 

SECTION 307. Persons Deemed Owners.  Prior to the due presentment of a Note forregistration of transfer, the Company, any Guarantor, the Trustee and any agentof the Company or the Trustee may treat the Person in whose name such Note isregistered as the owner of such Note for the purpose of receiving payment ofprincipal of (and premium, if any) and (subject to Sections 304 and 306)interest on such Note and for all other purposes whatsoever, whether or notsuch Note be overdue, and none of the Company, the Trustee or any agent of theCompany or the Trustee shall be affected by notice to the contrary.

 

SECTION 308. Cancellation.  All Notes surrendered for payment, redemption,registration of transfer or exchange shall, if surrendered to any Person otherthan the Trustee, be delivered to the Trustee and shall be promptly cancelledby it.  The Company may at any time deliver to the Trustee forcancellation any Notes previously authenticated and delivered hereunder whichthe Company may have acquired in any manner whatsoever, and may deliver to theTrustee (or to any other Person for delivery to the Trustee) for cancellationany Notes previously authenticated hereunder which the Company has not issuedand sold, and all Notes so delivered shall be promptly cancelled by theTrustee.  If the Company shall so acquire any of the Notes, however, suchacquisition shall not operate as a redemption or satisfaction of the indebtednessrepresented by such Notes unless and until the same are surrendered to theTrustee for cancellation.  No Notes shall be authenticated in lieu of orin exchange for any Notes cancelled as provided in this Section, except asexpressly permitted by this Indenture.  All cancelled Notes held by theTrustee shall be disposed of by the Trustee in accordance with its customaryprocedures (subject to the record retention requirements of the ExchangeAct).  Certification of the destruction of all cancelled Notes shall bedelivered to the Company by the Trustee.

 

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

 

SECTION 310. Transfer and Exchange.  The Notes shall be issued in registeredform and shall be transferable only upon the surrender of a Note forregistration of transfer.  When a Note is presented to the Note Registraror a co-registrar with a request to register a transfer, the Note Registrarshall register the transfer as requested if the requirements of this Indentureand Section 8-401(a) of the Uniform Commercial Code are met. When Notes are presented to the Note Registrar or a co-registrar with a requestto exchange them for an equal principal amount of Notes of other denominations,the Note Registrar shall make the exchange as requested if the samerequirements are met.

 

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SECTION 311. CUSIP Numbers.  The Company in issuing the Notes may use “CUSIP”numbers, ISINs and “Common Code” numbers (in each case, if then generallyin use) in addition to serial numbers, and, if so, the Trustee shall use such “CUSIP”numbers, ISINs and “Common Code” numbers in addition to serial numbers innotices of redemption, repurchase or other notices to Holders as a convenienceto Holders; *provided* that anysuch notice may state that no representation is made as to the correctness ofsuch “CUSIP” numbers, ISINs and “Common Code” numbers either as printed onthe Notes or as contained in any notice of a redemption or repurchase and thatreliance may be placed only on the serial or other identification numbersprinted on the Notes, and any such redemption or repurchase shall not beaffected by any defect in or omission of such numbers.  The Company shallpromptly notify the Trustee in writing of any change in the “CUSIP” numbers, ISINsand “Common Code” numbers applicable to the Notes.

 

SECTION 312. Issuance of Additional Notes.  The Company may, subject to Section 1011of this Indenture, issue additional Notes having identical terms and conditionsto the Initial Notes issued on the Issue Date, other than with respect to thedate of issuance 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 of Section 1273of the Code. The Initial Notes issued on the Issue Date and any AdditionalNotes subsequently issued, along with any PIK Notes and any increase in theprincipal amount of Outstanding Notes as a result of a PIK Payment, shall betreated as a single class for all purposes under this Indenture.  ExchangeNotes issued in exchange for Initial Notes issued on the Issue Date andExchange Notes issued for any Additional Notes subsequently issued, along withany PIK Notes and any increase in the principal amount of Outstanding Notes asa result of a PIK Payment, shall be treated as a single class for all purposesunder this Indenture.

 

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**ARTICLE FOUR**

 

**SATISFACTIONAND DISCHARGE**

 

SECTION 401. Satisfaction and Discharge of Indenture.  This Indenture shall uponCompany Request and at the Company’s expense cease to be of further effect(except as set forth in the last paragraph of this Section and as tosurviving rights of registration of transfer or exchange of Notes expresslyprovided for herein or pursuant hereto) and the Trustee, at the expense of theCompany, shall execute proper instruments acknowledging satisfaction anddischarge of this Indenture when:

 

(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 dueand payable by reason of the making of a notice of redemption pursuant to Section 1105or otherwise, or

 

(ii)     shall becomedue and payable at their Stated Maturity within one year, or

 

(iii)    are to becalled for redemption within one year under arrangements satisfactory to theTrustee for the giving of notice of redemption by the Trustee in the name, andat the expense, 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 with theTrustee as trust funds in trust solely for the benefit of the Holders, cash inU.S. dollars, non-callable Government Securities, or a combination thereof, insuch amounts as shall be sufficient without consideration of any reinvestmentof interest to pay and discharge the entire indebtedness on such Notes nottheretofore delivered to the Trustee for cancellation for principal, premium,if any, and accrued interest to the date of maturity or redemption, as the casemay 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 Subordinated Indenture, theExisting Indenture, the Senior Subordinated Notes, the Existing 2028 Debenturesor any other material agreement or instrument (other than this Indenture) towhich the Company, Holdings or any Subsidiary Guarantor is a party or by whichthe 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 Trust Money.  Subject to the provisions of the lastparagraph of Section 1003, all money or Government Securities depositedwith the Trustee pursuant to Section 401 shall be held in trust andapplied by it, in accordance with the provisions of the Notes and thisIndenture, to the payment, either directly or through any Paying Agent(including the Company acting as its own Paying Agent) as the Trustee maydetermine, to the Persons entitled thereto, of the principal (and premium andAdditional Interest, if any) and interest for whose payment such money orGovernment Securities has been deposited with the Trustee, but such money orGovernment Securities need not be segregated from other funds except to theextent 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

 

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orby reason of any order or judgment of any court or governmental authorityenjoining, restraining or otherwise prohibiting such application, the Company’sand any Guarantor’s obligations under this Indenture and the Notes shall berevived and reinstated as though no deposit had occurred pursuant to Section 401until such time as the Trustee or Paying Agent is permitted to apply all suchmoney or Government Securities in accordance with Section 401;*provided* that if the Company has made anypayment of principal of, premium, if any, or interest on any Notes because ofthe reinstatement of its obligations, the Company shall be subrogated to therights of the Holders of such Notes to receive such payment from the money or GovernmentSecurities held by the Trustee or Paying Agent.

 

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**ARTICLE FIVE**

 

**REMEDIES**

 

SECTION 501. Events of Default.  “*Event ofDefault*”, wherever used herein, means any one of the followingevents (whatever the reason for such Event of Default and whether it shall bevoluntary or involuntary or be effected by operation of law or pursuant to anyjudgment, decree or order of any court or any order, rule or regulation ofany 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;

 

(2)           default for30 days or more in the payment when due of interest on or with respect tothe Notes issued under this Indenture;

 

(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 grace periods), or the maturityof which has been so accelerated, aggregate $50.0 million or more at anyone time outstanding;

 

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(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 anycomparable action 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 reason cease to be in fullforce and effect or be declared null and void or any responsible officer of anySubsidiary Guarantor that is a Significant Subsidiary (or the responsibleofficers of any group of Subsidiaries that together would

 

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constitute a Significant Subsidiary), as the casemay 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 Defaultspecified in Section 501(6)) occurs and is continuing under thisIndenture, the Trustee or the Holders of at least 30% in principal amount ofthe Outstanding Notes issued under this Indenture may declare the principal,premium, if any, interest and any other monetary Obligations on all theOutstanding Notes issued under this Indenture to be due and payable immediatelyby a notice in writing to the Company (and to the Trustee if given by theHolders).

 

(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 timeafter a declaration of acceleration has been made and before a judgment ordecree for payment of the money due has been obtained by the Trustee ashereinafter provided in this Article, the Holders of a majority in aggregateprincipal amount of the Outstanding Notes, by written notice to the Company andthe Trustee, 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,

 

(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.

 

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

 

(d)           Notwithstandingthe preceding 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)           if the defaultthat is the basis for such Event of Default has been cured.

 

SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. If an Event of Default specified in Section 501(1) or (2) occursand is continuing, the Trustee, in its own name as trustee of an express trust,may institute a judicial proceeding for the collection of the sums duehereunder pursuant to this Article 5 and unpaid, and, in addition thereto,such further 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.

 

SECTION 504. Trustee May File Proofs of Claim.  In case of the pendency ofany receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement,adjustment, composition or other judicial proceeding relative to the Company orany other obligor including any Guarantor, upon the Notes or the property ofthe Company or of such other obligor or their creditors, the Trustee(irrespective of whether the principal of the Notes shall then be due andpayable as therein expressed or by declaration or otherwise and irrespective ofwhether the Trustee shall have made any demand on the Company for the paymentof overdue principal, premium, if any, or interest) shall be entitled andempowered, by intervention in such proceeding or otherwise,

 

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(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 Enforce Claims Without Possession of Notes.  Allrights of action and claims under this Indenture or the Notes may be prosecutedand enforced by the Trustee without the possession of any of the Notes or theproduction thereof in any proceeding relating thereto, and any such proceedinginstituted by the Trustee shall be brought in its own name and as trustee of anexpress trust, and any recovery of judgment shall, after provision for thepayment of the reasonable compensation, expenses, disbursements and advances ofthe Trustee, its agents and counsel, be for the ratable benefit of the Holdersin respect of which such judgment has been recovered.

 

SECTION 506. Application of Money Collected.  Any money or property collected bythe Trustee pursuant to this Article shall be applied in the followingorder, at the date or dates fixed by the Trustee and, in case of thedistribution of such money on account of principal (or premium, if any) orinterest, upon presentation of the Notes and the notation thereon of thepayment if only partially paid and upon surrender thereof if fully paid:

 

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

 

SECOND:  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

 

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THIRD:  The balance, if any, to the Company or as acourt of competent jurisdiction may direct in writing; *provided* that all sums due and owing tothe Holders and the Trustee have been paid in full as required by thisIndenture.

 

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 anyNotes shall have any right to institute any proceeding, judicial or otherwise,with respect to this Indenture, or for the appointment of a receiver ortrustee, or for any other remedy 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 Guarantees to affect, disturb or prejudice the rights of anyother Holders, or to obtain or to seek to obtain priority or preference overany other Holders or to enforce any right under this Indenture or theGuarantees, except in the manner herein provided and for the equal and ratablebenefit of all the Holders (it being further understood that the Trustee doesnot have an affirmative duty to ascertain whether or not such actions orforbearances are unduly prejudicial to such Holders).

 

SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Noteshall have the right, which is absolute and unconditional, to receive payment,as provided herein (including, if applicable, Article Eleven) and in suchNote of the principal of (and premium, if any) and (subject toSection 306) interest on such Note on the respective Stated Maturitiesexpressed in such Note (or, in the case of redemption, on the Redemption Date)and to institute suit for the enforcement of any such payment on or after suchrespective dates, and such rights shall not be impaired without the consent ofsuch Holder.

 

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SECTION 509. Restoration of Rights and Remedies.  If the Trustee or any Holderhas instituted any proceeding to enforce any right or remedy under thisIndenture or the Guarantees and such proceeding has been discontinued orabandoned for any reason, or has been determined adversely to the Trustee or tosuch Holder, then and in every such case, subject to any determination in suchproceeding, the Company, any Guarantor, any other obligor of the Notes, theTrustee and the Holders shall be restored severally and respectively to theirformer positions hereunder and thereafter all rights and remedies of theTrustee and the Holders shall continue as though no such proceeding had beeninstituted.

 

SECTION 510. Rights and Remedies Cumulative.  Except as otherwise provided withrespect to the replacement or payment of mutilated, destroyed, lost or stolenNotes in the last paragraph of Section 305, no right or remedy hereinconferred upon or reserved to the Trustee or to the Holders is intended to beexclusive of any other right or remedy, and every right and remedy shall, tothe extent permitted by law, be cumulative and in addition to every other rightand remedy given 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 Not Waiver.  No delay or omission of the Trusteeor of any Holder of any Note to exercise any right or remedy accruing upon anyEvent of Default shall impair any such right or remedy or constitute a waiverof any such Event of Default or an acquiescence therein.  Every right andremedy given by this Article or by law to the Trustee or to the Holdersmay be exercised from time to time, and as often as may be deemed expedient, bythe Trustee or by the Holders, as the case may be.

 

SECTION 512. Control by Holders.  The Holders of not less than a majority inprincipal amount of the Outstanding Notes shall have the right to direct thetime, method and place of conducting any proceeding for any remedy available tothe Trustee, 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 to Section 315of the Trust Indenture Act, the Trustee may take any other action deemed properby the Trustee which is not inconsistent with such direction, 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 Default.  Subject to Sections 508 and 902, the Holders ofnot less than a majority in principal amount of the Outstanding Notes may onbehalf of the Holders of all such Notes waive any Default hereunder and itsconsequences, except a continuing Default or Event of Default (1) inrespect of the

 

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paymentof interest 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 or Extension Laws.  Each of the Company, theGuarantors and any other obligor on the Notes covenants (to the extent that itmay lawfully do so) that it shall not at any time insist upon, or plead, or inany manner whatsoever claim or take the benefit or advantage of, any stay orextension law wherever enacted, now or at any time hereafter in force thatwould prohibit or forgive the Company or a Guarantor from paying any portion ofthe principal of, and premium, 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 ofan Event of Default,

 

(1)           the Trusteeundertakes to perform such duties and only such duties as are specifically set forthin this Indenture, and no implied covenants or obligations shall be read intothis 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) shallnot be construed to limit the effect of paragraph (a) of this 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 iscontinuing and if it is known to the Trustee, the Trustee shall transmit, inthe manner and to the extent provided in TIA Section 313(c), notice ofsuch Default or Event of Default within 90 days after it occurs unless suchDefault or Event of Default shall have been cured or waived.  Except inthe case of a Default or Event of Default in the payment of the principal of(or premium, if any, on) or interest on any Note, the Trustee shall beprotected in withholding such notice if it determines that the withholding ofsuch notice is in the interest of the Holders.  In addition, the Trusteeshall have no obligation to accelerate the Notes if in the best judgment of theTrustee acceleration is not in the best interest of the Holders of such Notes.

 

SECTION 603. Certain Rights of Trustee.  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 Responsible for Recitals or Issuance of Notes.  Therecitals contained herein and in the Notes, except for the Trustee’scertificates of authentication, shall be taken as the statements of theCompany, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of thisIndenture or of the Notes, except that the Trustee represents that it is dulyauthorized to execute and deliver this Indenture, authenticate the Notes andperform its obligations hereunder and that the statements made by it in aStatement of Eligibility on Form T-1 supplied to the Company are true andaccurate, subject to the qualifications set forth therein.  The Trusteeshall not be accountable for the use or application by the Company of Notes orthe proceeds thereof.

 

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SECTION 605. May Hold Notes.  The Trustee, any Paying Agent, any NoteRegistrar or any other agent of the Company or of the Trustee, in itsindividual or any other capacity, may become the owner or pledgee of Notes and,subject to TIA Sections 310(b) and 311, may otherwise deal with theCompany with the same rights it would have if it were not the Trustee, PayingAgent, Note Registrar or such other agent; *provided,however*, that, if it acquires any conflicting interest, it musteliminate such conflict within 90 days, apply to the SEC for permission tocontinue or resign.

 

SECTION 606. Money Held in Trust.  Money held by the Trustee in trust hereunderneed not be segregated from other funds except to the extent required bylaw.  The Trustee shall be under no liability for interest on any moneyreceived by it hereunder except as otherwise agreed in writing with theCompany.

 

SECTION 607. Compensation and Reimbursement.  The Company and theGuarantors, 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 be determinedto 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 Trustee Required; Eligibility.  There shall be at alltimes a Trustee hereunder 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)  Noresignation or removal of the Trustee and no appointment of a successor Trusteepursuant to this Article shall become effective until the acceptance ofappointment by the successor Trustee in accordance with the applicablerequirements of Section 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 of Directors,a copy of which shall be delivered to the resigning Trustee and a copy to thesuccessor Trustee.  If the instrument of acceptance by a successor Trusteerequired by Section 610 shall not have been delivered to the Trusteewithin 30 days after the giving of such notice of resignation, the resigningTrustee may petition, at the expense of the Company, any court of competentjurisdiction 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 TIA Section 310(b)(1) anyindenture or indentures under which other securities or certificates ofinterest or participation in other securities of the Company are outstanding ifthe requirements for such exclusion set forth in TIA Section 310(b)(1) aremet.

 

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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 BoardResolution, shall promptly appoint a successor Trustee.  If, within oneyear after such resignation, removal or incapability, or the occurrence of suchvacancy, a successor Trustee shall be appointed by Act of the Holders of amajority in principal amount of the Outstanding Notes delivered to the Companyand the retiring Trustee, the successor Trustee so appointed shall, forthwithupon its acceptance of such appointment, become the successor Trustee andsupersede the successor Trustee appointed by the Company.  If no successorTrustee shall have been so appointed by the Company or the Holders and acceptedappointment in the manner hereinafter provided, any Holder who has been a bonafide Holder of a Note for at least six months may, on behalf of himself and allothers similarly 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 Appointment by Successor.  (a)  Every successorTrustee appointed hereunder shall execute, acknowledge and deliver to theCompany and to the retiring Trustee an instrument accepting such appointment,and thereupon the resignation or removal of the retiring Trustee shall becomeeffective and such successor Trustee, without any further act, deed orconveyance, shall become vested with all the rights, powers, trusts and dutiesof the retiring Trustee; but, on request of the Company or the successorTrustee, such retiring Trustee shall, upon payment of its charges, execute anddeliver an instrument transferring to such successor Trustee all the rights,powers and trusts of the retiring Trustee and shall duly assign, transfer anddeliver to such successor Trustee all property and money held by such retiringTrustee hereunder.  Upon request of any such successor Trustee, theCompany shall execute any and all instruments for more fully and certainlyvesting in and confirming to such successor Trustee all such rights, powers andtrusts.

 

(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.  Anycorporation into which the Trustee may be merged or converted or with which itmay be consolidated, or any corporation resulting from any merger, conversionor consolidation to which the Trustee shall be a party, or any corporationsucceeding to all or substantially all of the corporate trust business of theTrustee, shall be the successor of the Trustee hereunder; *provided* that such corporation shall beotherwise qualified and eligible under this Article, without the execution orfiling of any paper or any further act on the part of any of the partieshereto.  In case any Notes shall have been authenticated, but notdelivered, by the Trustee then in office, any successor by merger, conversionor consolidation to such authenticating Trustee may adopt such authenticationand 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 suchNotes either in the name of any predecessor hereunder or in the name of thesuccessor Trustee.  In all such cases such certificates shall have thefull force and 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 orconsolidation.

 

SECTION 612. Appointment of Authenticating Agent.  At any time when any of theNotes remain Outstanding, the Trustee may appoint an Authenticating Agent orAgents with respect to the Notes which shall be authorized to act on behalf ofthe Trustee to authenticate Notes and the Trustee shall give written notice ofsuch appointment to all Holders of Notes with respect to which suchAuthenticating Agent shall serve, in the manner provided for in Section 107. Notes so authenticated shall be entitled to the benefits of this Indenture andshall be valid and obligatory for all purposes as if authenticated by theTrustee hereunder.  Any such appointment shall be evidenced by aninstrument in writing signed by a Responsible Officer of the Trustee, and acopy of such instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and deliveryof Notes by the Trustee or the Trustee’s certificate of authentication, such referenceshall be deemed to include authentication and delivery on behalf of the Trusteeby an Authenticating Agent and a certificate of authentication executed onbehalf of the Trustee by an Authenticating Agent.  Each AuthenticatingAgent shall be acceptable to the Company and shall at all times be acorporation organized and doing business under the laws of the United States ofAmerica, any state thereof or the District of Columbia, authorized under suchlaws to act as Authenticating Agent, having a combined capital and surplus ofnot less than $50,000,000 and subject to supervision or examination by Federalor state authority.  If such corporation publishes reports of condition atleast annually, 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 theprovisions of this Section, the Trustee may appoint a successor AuthenticatingAgent which shall be acceptable to the Company and shall give written notice ofsuch appointment to all Holders of Notes, in the manner provided for in Section 107. Any successor Authenticating Agent upon acceptance of its appointment hereundershall become vested with all the rights, powers and duties of its predecessorhereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under theprovisions 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:

 

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 asis reasonably practicable the most recent list available to it of the names andaddresses of all Holders and 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 and Addresses of Holders.  Every Holder, byreceiving and holding Notes, agrees with the Company and the Trustee that noneof the Company or the Trustee or any agent of either of them shall be heldaccountable by reason of the disclosure of any such information as to the namesand addresses of the Holders in accordance with TIA Section 312,regardless of the source from which such information was derived, and that theTrustee shall not be held accountable by reason of mailing any materialpursuant to a request made under TIA Section 312(b).

 

SECTION 703. Reports by Trustee.  Within 60 days after May 15 of each yearcommencing with the first May 15 after the Issue Date, and for so long asNotes remain outstanding, the Trustee shall mail to the Holders (with a copy tothe Company at the address specified in Section 106), in the manner and tothe extent provided 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. Company May Consolidate, Etc., Only on Certain Terms. (a)  The Company may not consolidate or merge with or into or wind up into(whether or not the Company is the surviving entity), or sell, assign,transfer, lease, convey or otherwise dispose of all or substantially all of itsproperties or assets, in one or more related transactions, to any Personunless:

 

(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 in Section 1011(a) ofthis 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, merger or transfer and suchsupplemental indentures, if any, comply with this Indenture.

 

(b)                                 Notwithstanding clauses(a)(3) and (a)(4) above,

 

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(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 Guarantors May Consolidate, Etc., Only on CertainTerms.  Subject to Section 1208, each Subsidiary Guarantor shallnot, and the Company shall not permit any Subsidiary Guarantor to, consolidateor merge with or into or wind up into (whether or not such Subsidiary Guarantoris the surviving corporation), or sell, assign, transfer, lease, convey orotherwise dispose of all or substantially all of its properties or assets inone or more related transactions to, any Person unless

 

(A)                              (1) such SubsidiaryGuarantor is the surviving corporation or the Person formed by or surviving anysuch consolidation or merger (if other than such Subsidiary Guarantor) or towhich such sale, assignment, transfer, lease, conveyance or other dispositionshall have been made is a corporation organized or existing under the laws ofthe United States of America, any state thereof, the District of Columbia, orany territory thereof (such Subsidiary Guarantor or such Person, as the casemay be, being herein called the “*SuccessorPerson*”);

 

(2)                                  the Successor Person, ifother than such Subsidiary Guarantor, expressly assumes all the obligations ofsuch Subsidiary Guarantor under this Indenture and such Subsidiary Guarantor’sSubsidiary Guarantee, pursuant to supplemental indentures or other documents orinstruments in form reasonably satisfactory to the Trustee;

 

(3)                                  immediately after suchtransaction, no Default exists; and

 

(4)                                  the Company shall havedelivered to the Trustee an Officers’ Certificate and an Opinion of Counsel,each stating that such consolidation, merger or transfer and such supplementalindentures, if any, comply with this Indenture; or

 

(B)                                the transactionis made in compliance with Section 1018 of this Indenture.

 

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. Holdings May Consolidate, Etc., Only on Certain Terms. Holdings shall not consolidate or merge with or into or wind up into (whetheror not Holdings is the surviving corporation), or sell, assign, transfer,lease, convey or otherwise

 

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disposeof all or substantially all of its properties or assets in one or more relatedtransactions 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 (withrespect to any Subsidiary Guarantor only), upon any consolidation or merger, orany sale, assignment, conveyance, transfer, lease or disposition of all orsubstantially all of the assets of the Company, Holdings or any SubsidiaryGuarantor in accordance with Sections 801, 802 and 803 hereof, thesuccessor Person formed by such consolidation or into which the Company,Holdings or such Subsidiary Guarantor, as the case may be, is merged or thesuccessor Person to which such sale, assignment, conveyance, transfer, lease ordisposition is made, shall succeed to, and be substituted for, and may exerciseevery right and power of, the Company, Holdings or such Subsidiary Guarantor,as the case may be, under this Indenture or the Guarantees, as the case may be,with the same effect as if such successor Person had been named as the Company,Holdings or such Subsidiary Guarantor, as the case may be, herein or theGuarantees, as the case may be; *provided*that the predecessor Company, Holdings or any Subsidiary Guarantor shall not berelieved from the obligation to pay the principal of and interest and AdditionalInterest, if any, on the Notes except in the case of a sale, assignment,transfer, conveyance or other disposition of all of the assets of the Company,Holdings or such

 

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SubsidiaryGuarantor, as the case may be, that meets the requirements ofSections 801, 802 and 803 hereof, as applicable.

 

SECTION 805. The Merger Permitted.  Notwithstanding the foregoing, the Mergershall be permitted without compliance with this Article Eight.

 

SECTION 806. Assets of Subsidiary Apply to Company and Holdings.  For purposesof this Article Eight, the sale, lease, conveyance, assignment, transferor other disposition of all or substantially all of the properties and assetsof one or more Subsidiaries of the Company or Holdings, as applicable, whichproperties and assets, if held by the Company or Holdings, as applicable,instead of such Subsidiaries, would constitute all or substantially all of theproperties and assets of the Company and its Subsidiaries on a consolidatedbasis or Holdings and its Subsidiaries on a consolidated basis, as applicable,shall be deemed to be the transfer of all or substantially all of theproperties and assets of the Company or Holdings, as applicable.

 

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**ARTICLE NINE**

 

**AMENDMENT,SUPPLEMENT AND WAIVER**

 

SECTION 901. Amendments or Supplements Without Consent of Holders. Notwithstanding Section 902 hereof, without the consent of any Holder, theCompany, any Guarantor (with respect to a Guarantee or this Indenture to whichit is a party), and the Trustee, at any time and from time to time, may amendor supplement this Indenture, any Guarantee or the Notes, in form satisfactoryto the Trustee, for any of the following 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 with Article Eighthereof and to provide for the assumption of the Company’s or such Guarantor’sobligations 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

 

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a verbatim recitation of a provision of thisIndenture, the Guarantees or the Notes; or

 

(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.

 

Upon the request of theCompany accompanied by a Board Resolution authorizing the execution of any suchamended or supplemental indenture, and upon receipt by the Trustee of thedocuments described in Section 603 hereof, the Trustee shall join with theCompany and the Guarantors in the execution of any amended or supplementalindenture authorized or permitted by the terms of this Indenture and to makeany further appropriate agreements and stipulations that may be thereincontained, but the Trustee shall not be obligated to enter into such amended orsupplemental indenture that affects its own rights, duties or immunities underthis Indenture or otherwise.  Notwithstanding the foregoing, no Opinion ofCounsel shall be required in connection with the addition of a Guarantor underthis Indenture upon execution and delivery by such Guarantor and the Trustee ofa supplemental indenture to this Indenture, the form of which is attached as Exhibit Bhereto, and delivery of an Officer’s Certificate.

 

SECTION 902. Amendments or Supplements With Consent of Holders.  With thewritten consent of the Holders of not less than a majority in principal amountof the Outstanding Notes, delivered to the Company and the Trustee, theCompany, any Guarantor (with respect to any Guarantee or this Indenture towhich it is a party) and the Trustee may (a) amend or supplement thisIndenture, any Guarantee or the Notes (including consents obtained inconnection with a purchase of, or tender offer or Exchange Offer for, theNotes) and (b) waive any existing Default or Event of Default orcompliance with any provision of this Indenture or the Notes (includingconsents obtained in connection with a purchase of, or tender offer or ExchangeOffer, for Notes).  Notwithstanding the foregoing sentence, no suchamendment, supplement or waiver shall, without the consent of each Holder ofthe 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,

 

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(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 provisioncontained in this Indenture or any Guarantee that cannot be amended or modifiedwithout 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 the 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 wouldconstitute a 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 shallsign any amendment, supplement or waiver authorized pursuant to this Article Nineif the amendment 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.

 

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SECTION 904. Effect of Amendments, Supplements or Waivers.  Upon the executionof any supplemental indenture under this Article, this Indenture shall bemodified in accordance therewith, and such amendment, supplement or waivershall form a part of this Indenture for all purposes; and every Holder of Notestheretofore or thereafter authenticated and delivered hereunder shall be boundthereby.

 

SECTION 905. Compliance with Trust Indenture Act.  Every amendment or supplementto this Indenture or the Notes shall be set forth in an amended or supplementalindenture that complies with the Trust Indenture Act as then in effect.

 

SECTION 906. Reference in Notes to Supplemental Indentures.  Notes authenticatedand delivered after the execution of any supplemental indenture pursuant tothis Article may, and shall if required by the Trustee, bear a notation inform approved by the Trustee as to any matter provided for in such supplementalindenture.  If the Company shall so determine, new Notes so modified as toconform, in the opinion of the Trustee and the Company, to any suchsupplemental indenture may be prepared and executed by the Company andauthenticated and delivered by the Trustee in exchange for Outstanding Notes.

 

SECTION 907. Notice of Supplemental Indentures.  Promptly after the execution bythe Company, any Guarantor and the Trustee of any supplemental indenturepursuant to the provisions of Section 902, the Company shall give noticethereof to the Holders, in the manner provided for in Section 107, settingforth in general 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 Companyshall pay or cause to be paid the principal of, premium, if any, AdditionalInterest, if any, and interest on the Notes on the dates and in the mannerprovided in the Notes.  Principal, premium, if any, Additional Interestpaid in cash, if any, and Cash Interest shall be considered paid on the datedue if the Paying Agent, if other than the Company or a Subsidiary, holds as ofnoon Eastern Time on the due date money deposited by the Company in immediatelyavailable funds and designated for and sufficient to pay all principal,premium, if any, Cash Interest and Additional Interest to be paid in cash, ifany, 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 or Agency.  The Company shall maintain, anoffice or agency where Notes may be presented or surrendered for payment, whereNotes may be surrendered for registration of transfer or exchange and wherenotices and demands to or upon the Company in respect of the Notes and this Indenturemay be served.  The Corporate Trust Office of the Trustee shall be suchoffice or agency of the Company, unless the Company shall designate andmaintain some other office or agency for one or more of such purposes. The Company shall give prompt written notice to the Trustee of any change inthe location of any such office or agency.  If at any time the Companyshall fail to maintain any such required office or agency or shall fail tofurnish the Trustee with the address thereof, such presentations, surrenders,notices and demands may be made or served at the Corporate Trust Office of theTrustee, and the Company hereby appoints the Trustee as its agent to receiveall 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 Hold Money in Trust.  If the Company shall at anytime act as its own Paying Agent, it shall, on or before each due date of theprincipal of (or premium, if any) or interest on any of the Notes, segregateand hold in trust for the benefit of the Persons entitled thereto a sumsufficient to pay the principal of (or premium, if any) or interest so becomingdue until such sums shall be paid to such Persons or otherwise disposed of asherein provided and shall promptly notify the Trustee of its action or failureso to act.

 

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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 interest onany 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 Companyshall do or cause to be done all things necessary to preserve and keep in fullforce and effect the corporate existence and that of each Restricted Subsidiaryand the corporate rights (charter and statutory) and franchises of the Companyand each

 

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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 determine that the preservationthereof is no longer desirable in the conduct of the business of the Companyand its Subsidiaries as a whole.

 

SECTION 1005. Payment of Taxes and Other Claims.  The Company shall pay ordischarge or cause to be paid or discharged, before the same shall becomedelinquent, (1) all taxes, assessments and governmental charges levied orimposed upon the Company or any Subsidiary or upon the income, profits orproperty of the Company or any Subsidiary and (2) all lawful claims forlabor, materials and supplies, which, if unpaid, might by law become a lienupon the property of the Company or any Subsidiary; *provided, however*, that the Company shall not be required topay or discharge or cause to be paid or discharged any such tax, assessment,charge or claim whose amount, applicability or validity is being contested ingood faith by appropriate proceedings and for which appropriate reserves, ifnecessary (in the good faith judgment of management of the Company) are beingmaintained in accordance with GAAP.

 

SECTION 1006. Reserved.

 

SECTION 1007. Reserved.

 

SECTION 1008. Statement by Officers as to Default.  (a)  The Company shalldeliver to the Trustee within 120 days after the end of each fiscal year, anOfficers’ Certificate stating that a review of the activities of the Companyand its Restricted Subsidiaries during the preceding fiscal year has been madeunder the supervision of the signing Officers with a view to determiningwhether it has kept, observed, performed and fulfilled, and has caused each ofits Restricted Subsidiaries to keep, observe, perform and fulfill itsobligations under this Indenture and further stating, as to each such Officersigning such certificate, that, to the best of his or her knowledge, theCompany during such preceding fiscal year has kept, observed, performed andfulfilled, and has caused each of its Restricted Subsidiaries to keep, observe,perform and fulfill each and every such covenant contained in this Indentureand no Default occurred during such year and at the date of such certificatethere is no Default which has occurred and is continuing or, if such signers doknow of such Default that is continuing, the certificate shall describe itsstatus, with particularity and what action each is taking or proposes to takewith respect thereto and that, to the best of his or her knowledge, no eventhas occurred and remains by reason of which payments on the account of theprincipal of or interest, if any, on the Notes is prohibited or if such eventhas occurred, a description of the event.  The Officers’ Certificate shallalso notify the Trustee should the Company elect to change the manner in whichit fixes its fiscal year-end.  For purposes of this Section 1008(a),such compliance shall be determined without regard to any period of grace orrequirement of notice under this Indenture.

 

(b)                                 (1)  When anyDefault has occurred and is continuing under this Indenture, or (2) if thetrustee for or the holder of any other evidence of Indebtedness of the Companyor any Restricted Subsidiary gives any notice or takes any other action withrespect to a claimed Default (other than with respect to Indebtedness in theprincipal

 

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amountof less than $50,000,000), the Company shall deliver to the Trustee byregistered or certified mail or facsimile transmission an Officers’ Certificatespecifying such event, notice or other action within five Business Days of itsoccurrence (with respect to clause (1)) or such notice or other action(with respect to clause (2)).

 

SECTION 1009. Reports and Other Information.  Whether or not required by the SEC,so long as any Notes are outstanding, the Company shall furnish to the Holders,within the time periods specified in the SEC’s rules and regulations fornon-accelerated filers:

 

(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 in clauses (1) and(2) above with the SEC for public availability within the time periodsspecified in the SEC’s rules and regulations (unless the SEC shall notaccept such a filing) and make such information available to securitiesanalysts and prospective investors upon request. In addition, the Company hasagreed that, for so long as any Notes remain outstanding, it shall furnish toHolders and to securities analysts and prospective investors, upon theirrequest, the information required to be delivered pursuant to Rule 144A(d)(4) underthe Securities Act.

 

(b)                                 Delivery of such reports,information and documents to the Trustee is for informational purposes only andthe Trustee’s receipt of such shall not constitute constructive notice of anyinformation contained therein or determinable from information containedtherein, including the Company’s compliance with any of its covenants hereunder(as to which the Trustee is entitled to rely exclusively on Officers’Certificates).

 

(c)                                  In addition, for so long asHoldings is a Guarantor under this Indenture or if at any time any other director indirect parent company of the Company is a guarantor of the Notes, thereports, information and other documents required to be filed and furnished tothe Holders pursuant to this Section 1009 may, at the option of theCompany, be filed by and be those of Holdings or such other parent, asapplicable, rather than the Company; *provided*that the same is accompanied by consolidating information that explains inreasonable detail the differences between the information relating to Holdingsor such other parent, on the one hand, and the information relating to theCompany and its Restricted Subsidiaries on a standalone basis, on the otherhand.

 

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(d)                                 Notwithstanding theforegoing, the requirements of this Section 1009 shall be deemed satisfiedprior to the commencement of the Exchange Offer or the effectiveness of theShelf Registration Statement by the filing with the SEC of the Exchange OfferRegistration Statement or Shelf Registration Statement within the time periodsspecified in the Registration Rights Agreement, and any amendments thereto,with such financial information that satisfies Regulation S-X of theSecurities Act.

 

SECTION 1010. Limitation on Restricted Payments.  (a)  The Companyshall not, and shall not permit any Restricted Subsidiary to, directly orindirectly:

 

(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)                                   Indebtedness permitted underclauses (9) and (10) of Section 1011(b) of this Indentureor

 

(y)                                 the purchase, repurchase orother acquisition of Subordinated Indebtedness purchased in anticipation ofsatisfying a sinking fund obligation, principal installment or final maturity,in each case due within one year of the date of purchase, repurchase oracquisition; or

 

(4)                                  make anyRestricted Investment;

 

(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:

 

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

 

(B)  immediately aftergiving effect to such transaction on a*proforma* basis, the Company could incur $1.00 of additionalIndebtedness under the provisions of Section 1011(a) of thisIndenture; and

 

(C)  such RestrictedPayment, together with the aggregate amount of all other Restricted Paymentsmade by the Company and the Restricted Subsidiaries after the Issue Datepursuant to this Section 1010(a) or clauses (1), (2) (withrespect to the payment of dividends on Refunding Capital Stock pursuant toclause (B) thereof only), (6)(C), (8) and (12) of Section 1010(b) (andexcluding, for the avoidance of doubt, all other Restricted Payments madepursuant to Section 1010(b)), is less than the sum, without duplication,of

 

(1)                                  50% of the Consolidated NetIncome of the Company for the period (taken as one accounting period) fromAugust 1, 2005 to the end of the Company’s most recently ended fiscalquarter for which internal financial statements are available at the time ofsuch Restricted Payment, or, in the case such Consolidated Net Income for suchperiod is a deficit, minus 100% of such deficit, *provided* that if, at the time of a proposed RestrictedPayment under this Section 1010(a), the Consolidated Leverage Ratio of theCompany is less than 4.50 to 1.00, for purposes of calculating availability ofamounts hereunder for such Restricted Payment only, the reference to 50% inthis clause (1) above shall be deemed to be 75%,*plus*

 

(2)                                  100% of the aggregate netcash proceeds and the fair market value, as determined in good faith by theCompany, of marketable securities or other property received by the Companyafter the Issue Date (less the amount of such net cash proceeds to the extentsuch amount has been relied upon to permit the incurrence of Indebtedness, orissuance of Disqualified Stock or Preferred Stock pursuant toclause (22)(ii) of Section 1011(b) of this Indenture) fromthe issue or sale of

 

(x)                                   Equity Interests of theCompany, including /Retired Capital Stock (as defined below), but excludingcash proceeds and the fair market value, as determined in good faith by theCompany, of marketable securities or other property received from the sale of

 

(A)                              Equity Interests to anyfuture, present or former employees, directors, managers or consultants of theCompany, any direct or indirect parent company of the Company or any of theCompany’s Subsidiaries after the Issue Date to the extent such amounts havebeen applied to Restricted Payments made in accordance with clause (4) ofSection 1010(b) and

 

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(B)                                Designated Preferred Stock

 

andto 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 securities of theCompany that have been converted into or exchanged for such Equity Interests ofthe Company;

 

*provided* that this clause (2) shallnot include the proceeds from (a) Refunding Capital Stock (as definedbelow), (b) Equity Interests of the Company or debt securities of theCompany that have been converted into or exchanged for Equity Interests of theCompany sold to a Restricted Subsidiary or the Company, as the case may be,(c) Disqualified Stock or debt securities that have been converted into orexchanged for Disqualified Stock or (d) Excluded Contributions,*plus*

 

(3)                                  100% of the aggregate amountof cash and the fair market value, as determined in good faith by the Company,of marketable securities or other property contributed to the capital of theCompany 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) of Section 1011(b) ofthis Indenture) (other than by a Restricted Subsidiary and other than by anyExcluded Contributions),*plus*

 

(4)                                  to the extent not alreadyincluded in Consolidated Net Income, 100% of the aggregate amount received incash and the fair market value, as determined in good faith by the Company, ofmarketable securities or other property received after the Issue Date by meansof

 

(A)  the sale or otherdisposition (other than to the Company or a Restricted Subsidiary) ofRestricted Investments made by the Company or any Restricted Subsidiary andrepurchases and redemptions of such Restricted Investments from the Company orany Restricted Subsidiary and repayments of loans or advances that constituteRestricted Investments by the Company or any Restricted Subsidiary or

 

(B)  the sale (otherthan to the Company or a Restricted Subsidiary) of the Capital Stock of anUnrestricted Subsidiary (other than Kate Spade) or a distribution from anUnrestricted Subsidiary (other than an Extraordinary Distribution) (other thanin

 

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each case of such sale or distribution to the extentthe Investment in such Unrestricted Subsidiary was made by the Company or aRestricted Subsidiary pursuant to clauses (9) or (13) of Section 1010(b) orto the extent such Investment constituted a Permitted Investment) or a dividendfrom an Unrestricted Subsidiary (other than an Extraordinary Distribution),*plus*

 

(5)                                  in the case of theredesignation 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 foregoing provisionsshall 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), the declarationand payment of dividends on the Refunding Capital Stock (other than RefundingCapital Stock the proceeds of which were used to redeem, repurchase, retire orotherwise acquire any Equity Interests of any direct or indirect parent companyof the Company) in an aggregate amount per year no greater than the aggregateamount of dividends per annum that was declarable and payable on such RetiredCapital Stock immediately prior to such retirement;

 

(3)                                  the defeasance,redemption, repurchase or other acquisition or retirement of SubordinatedIndebtedness of the Company or a Subsidiary Guarantor made by exchange for, orout of the proceeds of the substantially concurrent sale of, new Indebtednessof such Person that is incurred in compliance with Section 1011 of thisIndenture so long as

 

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(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 amountof any reasonable premium required to be paid under the terms of the instrumentgoverning the Subordinated Indebtedness being so defeased, redeemed,repurchased, acquired or retired and any reasonable fees and expenses incurredin connection with the issuance 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 not otherwise been applied to the payment ofRestricted Payments by virtue of clause (C) of Section 1010(a), *plus*

 

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(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*, thatcancellation of Indebtedness owing to the Company from members of management,directors, managers or consultants of the Company, any of its direct orindirect parent companies or any Restricted Subsidiary in connection with arepurchase of Equity Interests of the Company or any of its direct or indirectparent companies shall not be deemed to constitute a Restricted Payment forpurposes of this Section 1010(b) or any other provision of thisIndenture;

 

(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 to clause (2) ofthis 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;

 

(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;

 

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(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 described underSection 1017 and Section 1018 of this Indenture; *provided* that, prior to such repurchase,redemption or other acquisition, the Company (or a third party to the extentpermitted by this Indenture) shall have made a Change of Control Offer or AssetSale Offer, as the case may be, with respect to the Notes

 

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and shall have repurchased all Notes validlytendered and not withdrawn in connection with such Change of Control Offer orAsset 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 consistof cash 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 time of issuanceof 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”. Suchdesignation shall be permitted only if a Restricted Payment in such amountwould be permitted at such time, whether pursuant to Section 1010(a) orunder clauses (9), (13) or (16) of Section 1010(b), or pursuant tothe definition of “Permitted Investments”, and if such Subsidiary otherwisemeets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiariesshall not be subject to any of the restrictive covenants set forth in thisIndenture.

 

(d)                                 Notwithstanding anything tothe contrary herein, the Company shall not, and shall not permit any RestrictedSubsidiary to, directly or indirectly, make any (x) Restricted Payment coveredin clauses (1) through (3) of the definition of Restricted Payments to theholders of Equity Interests of the Company or any of its direct

 

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orindirect parent companies (which shall include the Sponsors, the Co-Investorsand their respective Affiliates) (other than to the Company and its RestrictedSubsidiaries, future, present or former employees, directors, managers, orconsultants of the Company, any of its Subsidiaries or any of its direct orindirect parent companies with respect to Equity Interests held by them in suchcapacities and other than a Restricted Payment made pursuant to clause (10) ofSection 1010(b)) or (y) Investment in any Sponsor, any Co-Investor, anyPermitted Holders who are members of a group (within the meaning of Section13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision)with the Sponsors or any Co-Investors or any Person or group who becomes aPermitted Holder following a Change of Control as provided for in thedefinition of “Permitted Holders” or their respective Affiliates (other than inthe Company and its Subsidiaries and members of management of the Company (orits direct parent)), in each case during any period beginning on the date whenthe Company makes an election to pay PIK Interest with respect to any InterestPeriod and ending on the first date after such Interest Period on which theCompany makes a payment of Cash Interest with respect to a subsequent InterestPeriod.

 

SECTION1011.  Limitation on Incurrence of Indebtedness and Issuance ofDisqualified Stock and Preferred Stock.  (a)  The Company shallnot, and shall not permit any Restricted Subsidiary to, directly or indirectly,create, incur, issue, assume, guarantee or otherwise become directly orindirectly liable, contingently or otherwise (collectively, “*incur*” and collectively, an “*incurrence*”) with respect to anyIndebtedness (including Acquired Indebtedness), and the Company shall not issueany shares of Disqualified Stock and shall not permit any Restricted Subsidiaryto issue any shares of Disqualified Stock or Preferred Stock; *provided* that the Company may incurIndebtedness (including Acquired Indebtedness) or issue shares of DisqualifiedStock, and any Restricted Subsidiary may incur Indebtedness (including AcquiredIndebtedness), issue shares of Disqualified Stock or issue shares of PreferredStock, if the Fixed Charge Coverage Ratio on a consolidated basis for theCompany’s and its Restricted Subsidiaries’ most recently ended four full fiscalquarters for which internal financial statements are available immediatelypreceding the date on which such additional Indebtedness is incurred or suchDisqualified Stock or Preferred Stock is issued would have been at least 2.00to 1.00, determined on a*pro forma*basis (including a*pro forma*application of the net proceeds therefrom), as if the additional Indebtednesshad been incurred, or the Disqualified Stock or Preferred Stock had beenissued, as the case may be, and the application of the proceeds therefrom hadoccurred at the beginning of such four-quarter period; and *provided, further*, that the amount ofIndebtedness (including Acquired Indebtedness), Disqualified Stock andPreferred Stock that may be incurred or issued, as applicable, pursuant to theforegoing by Restricted Subsidiaries that are not Subsidiary Guarantors shallnot exceed $100.0 million at any one time outstanding**.**

 

(b)                                 The foregoing limitationsshall 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

 

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effectto any such incurrence, the aggregate principal amount of all Indebtednessincurred under this clause (1) and then outstanding does not exceed thegreater 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 does notexceed $1,975.0 million less up to $250.0 million in the aggregate ofall principal payments with respect to such Indebtedness made pursuant toclause (1)(x) of Section 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 Subordinated Notes issued on the Issue Date (including any guaranteethereof) and the exchange notes and related exchange guarantees to be issued inexchange for the Senior Subordinated Notes pursuant to the Registration RightsAgreement (other than any Additional Notes (as defined in the Senior SubordinatedIndenture));

 

(5)                                  ExistingIndebtedness (other than Indebtedness described in clauses (1), (2), (3) and(4) of this Section 1011(b)), including the Existing 2008 Notes andthe 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, such assets owned by the Company or any Restricted Subsidiary as ofthe Issue Date), repairs, additions or improvement of property (real orpersonal), equipment or other fixed or capital assets that are used or usefulin a Similar Business, whether through the direct purchase of assets or theCapital Stock of any Person owning such assets; *provided* that the aggregate

 

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amountof Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant tothis clause (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)                              such Indebtedness is notreflected on the balance sheet of the Company or any Restricted Subsidiary(contingent obligations referred to in a footnote to financial statements andnot otherwise reflected on the balance sheet shall not be deemed to bereflected on such balance sheet for purposes of this clause (8)(A)) and

 

(B)                                the maximum assumableliability in respect of all such Indebtedness shall at no time exceed the grossproceeds including noncash proceeds (the fair market value of such noncashproceeds being measured at the time received and without giving effect to anysubsequent 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 Indebtedness to a Restricted Subsidiary that is not a SubsidiaryGuarantor such Indebtedness is subordinated in right of payment to theSubsidiary Guarantee of such Subsidiary Guarantor; *provided, further*, that any subsequent issuance or transferof Capital Stock or any other event that results in any such Restricted

 

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Subsidiaryceasing to be a Restricted Subsidiary or any subsequent transfer of any suchIndebtedness (except to the Company or another Restricted Subsidiary) shall bedeemed, in each case, to be an incurrence of such 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:

 

(A)                              has a Weighted Average Lifeto Maturity at the time such Refinancing Indebtedness is incurred which is notless than the remaining Weighted Average Life to Maturity of the Indebtedness,Disqualified Stock or Preferred Stock being extended, replaced, refunded,refinanced, renewed or defeased,

 

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(B)                                to the extent suchRefinancing Indebtedness extends, replaces, refunds, refinances, renews ordefeases (i) Indebtedness subordinated to the Notes or any SubsidiaryGuarantee, such Refinancing Indebtedness is subordinated to the Notes or suchSubsidiary Guarantee at least to the same extent as the Indebtedness beingextended, replaced, refunded, refinanced, renewed or defeased or(ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtednessmust be Disqualified Stock or Preferred Stock, respectively and

 

(C)                                shall not include

 

(x)                                   Indebtedness, DisqualifiedStock or Preferred Stock of a Subsidiary that is not a Subsidiary Guarantorthat refinances Indebtedness, Disqualified Stock or Preferred Stock of theCompany,

 

(y)                                 Indebtedness, DisqualifiedStock or Preferred Stock of a Subsidiary that is not a Subsidiary Guarantorthat refinances Indebtedness, Disqualified Stock or Preferred Stock of aSubsidiary Guarantor or

 

(z)                                   Indebtedness, DisqualifiedStock or Preferred Stock of the Company or a Restricted Subsidiary thatrefinances 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 orrefinancing of any Senior Indebtedness outstanding under the Existing 2028Debentures;

 

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

 

(A)                              after giving effect to suchacquisition or merger, either

 

(i)                                     the Company would bepermitted to incur at least $1.00 of additional Indebtedness pursuant to theFixed Charge Coverage Ratio test set forth in Section 1011(a); or

 

(ii)                                  the Fixed Charge CoverageRatio of the Company and the Restricted Subsidiaries on a consolidated basis isgreater than immediately prior to such acquisition or merger; or

 

(B)                                such Indebtedness,Disqualified Stock or Preferred Stock (i) is not Secured Indebtedness andis Subordinated Indebtedness with

 

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subordinationterms no more favorable to the holders thereof than the subordination terms setforth in the Senior Subordinated Indenture as in effect on the Issue Date,(ii) is not incurred while a Default exists and no Default shall resulttherefrom, (iii) does not mature (and is not mandatorily redeemable in thecase of Disqualified Stock or Preferred Stock) and does not require any paymentof principal prior to the final maturity of the Notes and (iv) in the caseof sub-clause (y) above only, is not incurred in contemplation of suchacquisition 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 toSection 1011(a) from and after the first date on which the Company or suchRestricted Subsidiary could have incurred such Indebtedness, Disqualified Stockor Preferred Stock pursuant 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 which theCompany or such Restricted Subsidiary could have incurred such Indebtedness,Disqualified Stock or Preferred Stock pursuant to Section 1011(a) withoutreliance on this clause (20));

 

(21)                            Indebtednessconsisting of Indebtedness issued by the Company or any Restricted Subsidiaryto current or former officers, managers, directors and employees thereof, theirrespective estates, spouses or former spouses, in each case to finance thepurchase or redemption of Equity Interests of the Company or any direct orindirect parent company of the Company to the extent described inclause (4) of Section 1010(b) of this Indenture;

 

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(22)                            Indebtedness,Disqualified Stock and Preferred Stock of the Company or any RestrictedSubsidiary not otherwise permitted hereunder in an aggregate principal amountor liquidation preference, which, when aggregated with the principal amount andliquidation preference of all other Indebtedness, Disqualified Stock andPreferred Stock incurred pursuant to this clause (22) and thenoutstanding, does not at any one time outstanding exceed the sum of

 

(i)                                     $175.0 million (itbeing understood that any Indebtedness, Disqualified Stock and Preferred Stockincurred pursuant to this clause (22)(i) shall cease to be deemedincurred or outstanding for purposes of this clause (22)(i) but shallbe deemed incurred pursuant to Section 1011(a) from and after the firstdate on which the Company or such Restricted Subsidiary could have incurredsuch Indebtedness, Disqualified Stock or Preferred Stock pursuant to Section 1011(a)without reliance on this clause (22)(i));*plus*

 

(ii)                                  200% of the net cashproceeds received by the Company since after the Issue Date from the issue orsale of Equity Interests of the Company or cash contributed to the capital ofthe Company (in each case, other than proceeds of Disqualified Stock or salesof Equity Interests to the Company or any of its Subsidiaries) as determined inaccordance with clauses (C)(2) and (C)(3) of Section 1010(a) of thisIndenture to the extent such net cash proceeds or cash have not been appliedpursuant to such clauses to make Restricted Payments or to make otherinvestments, payments or exchanges pursuant to Section 1010(b) of thisIndenture or to make Permitted Investments (other than Permitted Investments specifiedin clauses (a) and (c) of the definition thereof); and

 

(23)                            AttributableDebt incurred by the Company or any Restricted Subsidiary pursuant to Sale andLease-Back Transactions of property (real or personal), equipment or otherfixed or capital assets owned by the Company or any Restricted Subsidiary as ofthe Issue Date or acquired by the Company or any Restricted Subsidiary afterthe Issue Date in exchange for, or with the proceeds of the sale of, suchassets owned by the Company or any Restricted Subsidiary as of the Issue Date, *provided* that the aggregate amount ofAttributable Debt incurred under this clause (23) does not exceed$100.0 million.

 

(c)                                  For purposes of determiningcompliance with this Section 1011, in the event that an item of Indebtedness,Disqualified Stock or Preferred Stock meets the criteria of more than one ofthe categories of Permitted Debt described in clauses (1) through(23) of Section 1011(b) or is entitled to be incurred pursuant toSection 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

 

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IssueDate shall be deemed to have been incurred on such date in reliance on theexception in clauses (1) and (2) of this Section 1011(b).

 

(d)                                 The accrual of interest, theaccretion of accreted value and the payment of interest in the form ofadditional Indebtedness, Disqualified Stock or Preferred Stock shall not bedeemed to be an incurrence of Indebtedness, Disqualified Stock or PreferredStock for purposes of this Section 1011.

 

(e)                                  For purposes of determiningcompliance with any U.S. dollar-denominated restriction on the incurrence ofIndebtedness, the U.S. dollar-equivalent principal amount of Indebtednessdenominated in a foreign currency shall be calculated based on the relevantcurrency exchange rate in effect on the date such Indebtedness was incurred, inthe case of term debt, or first committed, in the case of revolving creditdebt; *provided* that if suchIndebtedness is incurred to extend, replace, refund, refinance, renew ordefease 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)                                    The principal amount of anyIndebtedness incurred to extend, replace, refund, refinance, renew or defeaseother Indebtedness, if incurred in a different currency from the Indebtednessbeing extended, replaced, refunded, refinanced, renewed or defeased, shall becalculated based on the currency exchange rate applicable to the currencies inwhich such respective Indebtedness is denominated that is in effect on the dateof such extension, replacement, refunding, refinancing, renewal or defeasance.

 

SECTION1012.  Liens.  The Company shall not, and shall not permit anyof the Subsidiary Guarantors to, directly or indirectly, create, incur, assumeor suffer to exist any Lien (except Permitted Liens) that secures obligationsunder any Indebtedness on any asset or property of the Company or anySubsidiary Guarantor now owned or hereafter acquired, or any income or profitstherefrom, or assign or convey any right to receive income therefrom, unless:

 

(1)                                  in the case ofLiens securing Subordinated Indebtedness, the Notes or the applicableSubsidiary Guarantee of a Subsidiary Guarantor, as the case may be, are securedby a Lien on such property or assets that is senior in priority to such Liens;and

 

(2)                                  in all othercases, the Notes or the applicable Subsidiary Guarantee of a SubsidiaryGuarantor, as the case may be, are equally and ratably secured;

 

*provided* that any Lien which isgranted to secure the Notes under this Section 1012 shall be discharged at thesame time as the discharge of the Lien (other than through the

 

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exerciseof remedies with respect thereto) that gave rise to the obligation to so securethe Notes.

 

SECTION1013.  Limitations on Transactions with Affiliates. (a)  The Company shall not, and shall not permit any RestrictedSubsidiary to, make any payment to, or sell, lease, transfer or otherwisedispose of any of its properties or assets to, or purchase any property orassets from, or enter into or make or amend any transaction, contract,agreement, understanding, loan, advance or guarantee with, or for the benefitof, any Affiliate of the Company (each of the foregoing, an “*Affiliate Transaction*”) involvingaggregate payments or consideration in excess of $10.0 million, unless

 

(1)                                  such AffiliateTransaction is on terms that are not materially less favorable to the Companyor the relevant Restricted Subsidiary than those that would have been obtainedin a comparable transaction by the Company or such Restricted Subsidiary withan unrelated Person and

 

(2)                                  the Companydelivers to the Trustee with respect to any Affiliate Transaction or series ofrelated Affiliate Transactions involving aggregate payments or consideration inexcess of $30.0 million, a Board Resolution adopted by the majority of themembers of the Board of Directors of the Company approving such AffiliateTransaction and set forth in an Officers’ Certificate certifying that suchAffiliate Transaction complies with clause (1) above.

 

(b)                                 The foregoing provisions shallnot apply to the following:

 

(1)                                  Transactionsbetween or among the Company or any of the Restricted Subsidiaries;

 

(2)                                  RestrictedPayments permitted by Section 1010 of this Indenture and the definition of“Permitted Investments”;

 

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

 

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

 

(5)                                  payments by theCompany or any Restricted Subsidiary to any of the Sponsors and the CoInvestors for any financial advisory, financing, underwriting or placementservices or in respect of other investment banking activities, including inconnection with acquisitions or divestitures, which payments are approved by amajority of the members of the Board of Directors of the Company in good faith;

 

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(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;

 

(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 the Company,or are on terms at least as favorable as might reasonably have been obtained atsuch 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,

 

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employee or consultant of the Company or any director indirect parent company 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) theinvestment is being offered generally to other investors on the same or morefavorable terms and (ii) the investment constitutes less than 5.0% of theproposed or outstanding issue amount of such class of securities.

 

SECTION 1014. Limitations on Dividend and Other Payment Restrictions Affecting RestrictedSubsidiaries.  The Company shall not, and shall not permit anyRestricted Subsidiary that is not a Subsidiary Guarantor to, directly orindirectly, create or otherwise cause or suffer to exist or become effectiveany consensual encumbrance or consensual restriction on the ability of any suchRestricted Subsidiary to:

 

(a)           (1)                                  pay dividendsor make any other distributions to the Company or any Restricted Subsidiary onits Capital Stock or with respect to any other interest or participation in, ormeasured 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;

 

(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;

 

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(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 other similaragreements;

 

(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 thereunder or the proceeds thereof anddoes not extend to any other asset or property of the Company or suchRestricted Subsidiary or the assets or property of any other RestrictedSubsidiary; 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, replacementsor refinancings of the contracts, instruments or obligations referred to inclauses (1) through (13) above;

 

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*provided* that suchamendments, modifications, restatements, renewals, increases, supplements,refundings, replacements or refinancings are, in the good faith judgment of theCompany, not materially more restrictive with respect to such encumbrance andother restrictions than those prior to such amendment, modification,restatement, renewal, increase, supplement, refunding, replacement orrefinancing; *provided, further*,that with respect to contracts, instruments or obligations existing on theIssue Date, any amendments, modifications, restatements, renewals, increases,supplements, refundings, replacements or refinancings are not materially morerestrictive with respect to such encumbrances and other restrictions than thosecontained in such contracts, instruments or obligations as in effect on theIssue Date.

 

SECTION 1015. Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. The Company shall not permit any of its Wholly-Owned Subsidiaries that areRestricted Subsidiaries (and non-Wholly-Owned Subsidiaries if suchnon-Wholly-Owned Subsidiaries guarantee other capital markets debt securities),other than a Subsidiary Guarantor or a Foreign Subsidiary, to guarantee thepayment of any Indebtedness of the Company or any other Subsidiary Guarantorunless:

 

(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 that is byits express terms subordinated in right of payment to the Notes or suchSubsidiary Guarantor’s Subsidiary Guarantee, any such guarantee by suchRestricted Subsidiary with respect to such Indebtedness shall be subordinatedin right of payment to such Subsidiary Guarantee substantially to the sameextent as such Indebtedness is subordinated to the Notes;

 

(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;

 

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*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 aRestricted Subsidiary.

 

SECTION 1016. Limitation on Sale and Lease-Back Transactions.  The Company shallnot, and shall not permit any Restricted Subsidiary to, enter into any Sale andLease-Back Transaction with respect to any property unless:

 

(1)           the Company or such Restricted Subsidiary would beentitled to (A) incur Indebtedness in an amount equal to the AttributableDebt with respect to such Sale and Lease-Back Transaction pursuant to Section 1011of this Indenture and (B) create a Lien on such property securing suchAttributable Debt without equally and ratably securing the Notes pursuant to Section 1012of this Indenture;

 

(2)           the consideration received by the Company or anyRestricted Subsidiary in connection with such Sale and Lease-Back Transactionis at least equal to the fair market value (as determined in good faith by theCompany) of such property; and

 

(3)           the Company applies the proceeds of such transaction incompliance with Section 1018 of this Indenture.

 

SECTION 1017. Change of Control.  (a) If a Change of Control occurs, theCompany shall make an offer to purchase all of the Notes pursuant to the offerdescribed below (the “*Change of ControlOffer*”) at a price in cash (the “*Changeof Control Payment*”) equal to 101% of the aggregate principal amountthereof plus accrued and unpaid interest, and Additional Interest, if any, tothe date of purchase, subject to the right of Holders of record on the relevantrecord date to receive interest due on the relevant interest payment date.Within 30 days following any Change of Control, the Company shall send noticeof such Change of Control Offer by first class mail, with a copy to theTrustee, to each Holder to the address of such Holder appearing in the securityregister with a copy to the Trustee, with the following information:

 

(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 outstandingand continue 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 of

 

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Control Offer shall cease to accrue interest on theChange of Control Payment Date;

 

(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 Notes 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 theextent such laws or regulations are applicable in connection with therepurchase of the Notes pursuant to a Change of Control Offer. To the extentthat the provisions of any securities laws or regulations conflict with theprovisions of this Indenture, the Company shall comply with the applicablesecurities laws and regulations and shall not be deemed to have breached itsobligations described 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

 

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(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 of ControlPayment 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 permitany Restricted Subsidiary 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 the case may be, is in the form of cash or Cash Equivalents; *provided* that the amount of

 

(A)          anyliabilities (as shown on the Company’s or such Restricted Subsidiary’s mostrecent balance sheet or in the notes thereto) of the Company or such RestrictedSubsidiary, other than liabilities that are by their terms subordinated to theNotes, that are assumed by the transferee of any such assets (or a third partyon behalf of the transferee) and for which the Company or such RestrictedSubsidiary has been validly released by all creditors in writing,

 

(B)           anysecurities, notes or other obligations or assets received by the Company orsuch Restricted Subsidiary from such transferee that are converted by theCompany or such Restricted Subsidiary into cash (to

 

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theextent of the cash received) within 180 days following the closing of suchAsset Sale and

 

(C)           anyDesignated Noncash Consideration received by the Company or such RestrictedSubsidiary in such Asset Sale having an aggregate fair market value, takentogether with all other Designated Noncash Consideration received pursuant tothis clause (C) that is at that time outstanding, not to exceed thegreater of (x) $125.0 million and (y) 1.75% of Total Assets at thetime of the receipt of such Designated Noncash Consideration, with the fairmarket value of each item of Designated Noncash Consideration being measured atthe time received and without giving effect to subsequent changes in value, 

 

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 of the Company or any Subsidiary Guarantor and,in the 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 anyIndebtedness that is not Secured Indebtedness, the Company or such SubsidiaryGuarantor shall, equally and ratably, reduce Obligations under the Notes by, atits option, (A) redeeming Notes if the Notes are then redeemable asprovided by the terms of the Notes, (B) making an offer (in accordancewith the procedures set forth in this Section 1018) to all Holders topurchase 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

 

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(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 of other assets, thatin each of (A), (B), (C) and (D), are used or useful in a Similar Businessor replace the businesses, properties and assets that are the subject of suchAsset 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 Indebtedness, to theholders of such Senior Indebtedness (other than with respect to HedgingObligations) (an “*Asset Sale Offer*”),to purchase the maximum aggregate principal amount of Notes and such SeniorIndebtedness that is an integral multiple of $1,000 that may be purchased outof the Excess Proceeds at an offer price in cash in an amount equal to 100% ofthe principal amount thereof, *plus*accrued and unpaid interest and Additional Interest, if any, to the date fixedfor the closing of such offer, in accordance with the procedures set forth inthis Indenture. The Company shall commence an Asset Sale Offer with respect toExcess Proceeds within ten Business Days after the date that Excess Proceedsexceed $45.0 million by mailing the notice required pursuant to the terms ofthis Indenture, with a copy to the Trustee. The Company may satisfy theforegoing obligations with respect to any Net Proceeds from an Asset Sale bymaking an Asset Sale Offer with respect to such Net Proceeds prior to theexpiration of the relevant 450 days or with respect to Excess Proceeds of $45.0million or less.  To the extent that the aggregate amount of Notes andsuch Senior Indebtedness tendered pursuant to an Asset Sale Offer is less thanthe Excess Proceeds, the Company may use any remaining Excess Proceeds forgeneral corporate purposes, subject to the other covenants contained in thisIndenture. If the aggregate principal amount of Notes or the SeniorIndebtedness surrendered by such holders thereof exceeds the amount of ExcessProceeds, the Trustee shall select or cause to be selected the Notes and suchSenior Indebtedness to be purchased on a *prorata* basis based on the accreted value or principal amount of theNotes or such Senior Indebtedness tendered. Upon completion of any such AssetSale Offer, the amount of Excess Proceeds related to such Asset Sale Offershall 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

 

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Proceedstemporarily to reduce Indebtedness outstanding under a revolving creditfacility or otherwise invest such Net Proceeds in any manner not prohibited bythis Indenture.

 

(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) ifsuch Notes are not so listed, on a *pro rata*basis to the extent practicable; *provided*that no Notes of $2,000 or less shall be repurchased 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,unless the Company defaults in the repurchase payment, interest shall cease toaccrue on the Note or portions thereof called for repurchase.

 

SECTION 1019. Additional Interest Notice.  In the event that the Company isrequired to pay Additional Interest to Holders pursuant to the RegistrationRights Agreement, the Company shall provide written notice (an “*Additional Interest Notice*”) to theTrustee of its obligation to pay Additional Interest no later than fifteen daysprior to the proposed payment date for the Additional Interest, and theAdditional Interest Notice shall set forth the amount of Additional Interest tobe paid by the Company on such payment date.  The Trustee shall not at anytime be under any duty or responsibility to any Holder to determine theAdditional Interest, or with respect to the nature, extent, or calculation ofthe amount of Additional Interest owed, or with respect to the method employedin such calculation of the Additional Interest.

 

(a)           Obligationsof the Company and the Restricted Subsidiaries Relating to Kate Spade. In the event that Kate Spade sells, conveys, transfers or

 

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otherwisedisposes all or substantially all of its properties or assets in one or morerelated transactions, the Company shall, subject to its fiduciary duties to theholders of minority Equity Interests in Kate Spade and subject to any otherobligations in the organizational documents of Kate Spade or other agreementswith Kate Spade or holders of its Equity Interests (in each case, as in effecton the Issue Date), exercise its rights and powers as a controlling holder ofEquity Interests in Kate Spade to cause Kate Spade to distribute to the Companyits pro rata share of the net proceeds of such sale, conveyance, transfer orother disposition, the Company shall apply such proceeds in accordance with Section 1018of this Indenture and such proceeds shall constitute “Net Proceeds” thereunder. In addition, the Company shall, and shall cause its Restricted Subsidiaries to,apply the amount of any other Extraordinary Distribution in accordance with Section 1018of this 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.

 

SECTION 1020. No Amendment to Subordination Provision.  Without the consent ofthe Holders of a majority in Outstanding aggregate principal amount of theNotes, the Company shall not amend, modify or alter the Senior SubordinatedIndenture in any way to:

 

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

 

(2)           increase the principal of, advance the final maturity dateof or shorten the Weighted Average Life to Maturity of any Senior SubordinatedNotes;

 

(3)           alter the redemption provisions or the price or terms atwhich the Company is required to offer to purchase any Senior SubordinatedNotes; or

 

(4)           amend the provisions of the Senior Subordinated Indenturethat relate to subordination.

 

SECTION 1021. Designation of “Designated Senior Indebtedness”.  The Companyhereby designates the Notes to be “Designated Senior Indebtedness” under theSenior Subordinated Indenture.

 

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**ARTICLE ELEVEN**

 

**REDEMPTIONOF NOTES**

 

SECTION 1101. Right of Redemption.  (a)  At any time prior toOctober 15, 2010, the Company may redeem all or a part of the Notes, uponnot less than 30 nor more than 60 days’ prior notice, at a 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.

 

(b)          From and after October 15, 2010, the Company may redeem the Notes, inwhole or in part, upon not less than 30 nor more than 60 days’ priornotice at the redemption prices (expressed as percentages of principal amount)set forth below, plus accrued and unpaid interest, and Additional Interest, ifany, thereon to the applicable Redemption Date, subject to the right of Holderson the relevant record date to receive interest due on the relevant Interest PaymentDate, if redeemed during the twelve-month period beginning on October 15of each of the years indicated below:

 
| **Year**            | ** ** | **Percentage** | ** ** |
|---------------------|------------|----------------|------------|
| 2010                |       | 104.500        | %          |
| 2011                |       | 103.000        | %          |
| 2012                |       | 101.500        | %          |
| 2013 and thereafter |       | 100.000        | %          |

 

(c)          Prior to October 15, 2008, the Company may, at its option, redeem up to35% of the aggregate principal amount of Notes issued under this Indenture at aredemption price equal to 109.000% 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; *provided,further,*that each such redemption occurs within 90 days of thedate of closing of each such Equity Offering.

 

SECTION 1102. Applicability of Article.  Redemption of Notes at the election ofthe Company or otherwise, as permitted or required by any provision of thisIndenture or the Notes, shall be made in accordance with such provision andthis Article.

 

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SECTION 1103. Election to Redeem; Notice to Trustee.  The election of the Companyto redeem any Notes pursuant to Section 1101 above shall be evidenced by aBoard Resolution.  If the Company elects to redeem Notes pursuant to Section 1101hereof, it shall furnish to the Trustee, at least five Business Days beforenotice of redemption is required to be mailed or caused to be mailed to Holderspursuant to Section 1105 hereof, an Officers’ Certificate setting forth (i) theparagraph or subparagraph of such Note and/or Section of this Indenturepursuant to which the redemption shall occur, (ii) the Redemption Date, (iii) theprincipal amount of the Notes to be redeemed and (iv) the RedemptionPrice.

 

SECTION 1104. Selection by Trustee of Notes to Be Redeemed.  (a)  If theCompany is redeeming less than all of the Notes at any time, the Trustee shallselect the Notes to be redeemed (a) if the Notes are listed on anynational 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 be redeemedin part.

 

(b)          If any Note is to be redeemed in part only, any notice of redemption thatrelates to such Note shall state the portion of the principal amount thereof tobe redeemed.

 

(c)          A new 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 byfirst class mail, postage prepaid, at least 30 days but not more than60 days before the Redemption Date to each Holder at such Holder’sregistered address, except that notices of redemption may be mailed more than60 days prior to a Redemption Date if the notice is issued in connectionwith a defeasance of the Notes or a satisfaction and discharge of thisIndenture.

 

Allnotices of redemption shall state:

 

(1)          the Redemption Date,

 

(2)          the Redemption Price and the amount of accrued interest to the Redemption Datepayable as provided in Section 1107, if any,

 

(3)          if less than all Outstanding Notes are to be redeemed, the identification (and,in the case of a partial redemption, the principal amounts) of the particularNotes to be redeemed,

 

(4)          in case any Note is to be redeemed in part only, the notice which relates tosuch Note shall state that on and after the Redemption Date, upon

 

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surrender of such Note, the Holder shall receive,without charge, a new Note or Notes of authorized denominations for theprincipal amount thereof remaining unredeemed,

 

(5)          that on the Redemption Date the Redemption Price (and accrued interest, if any,to the Redemption Date payable as provided in Section 1107) shall become dueand payable upon each such Note, or the portion thereof, to be redeemed, andthat interest thereon shall cease to accrue on and after said date,

 

(6)          the place or places where such Notes are to be surrendered for payment of theRedemption Price and accrued interest, if any,

 

(7)          the name and address of the Paying Agent,

 

(8)          that Notes called for redemption must be surrendered to the Paying Agent tocollect the Redemption Price,

 

(9)          that, unless the Company defaults in making such redemption payment, intereston Notes called for redemption ceases to accrue on and after the RedemptionDate;

 

(10)        the “CUSIP” number, ISIN or “Common Code” number and that norepresentation is made as to the accuracy or correctness of the “CUSIP” number, ISINor “Common Code” number, if any, listed in such notice or printed on the Notes,and

 

(11)        the paragraph of the Notes or Section of the Indenture pursuant to whichthe 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 be mailedto Holders pursuant to this Section 1105 (unless a shorter notice shall beagreed to by the Trustee), an Officers’ Certificate requesting that the Trusteegive such notice and setting forth the information to be stated in such noticeas provided in Section 1103.

 

SECTION 1106. Effect of Notice of Redemption.  Once notice of redemption ismailed in accordance with Section 1105 hereof, Notes called for redemptionbecome irrevocably due and payable on the Redemption Date at the RedemptionPrice.  The notice, if mailed in a manner herein provided, shall beconclusively presumed to have been given, whether or not the Holder receivessuch notice.  In any case, failure to give such notice by mail or anydefect in the notice to the Holder of any Note designated for redemption inwhole or in part shall not affect the validity of the proceedings for theredemption of any other Note.  Subject to Section 1107 hereof, on andafter the Redemption Date, interest ceases to accrue on Notes or portions ofNotes called for redemption.

 

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SECTION 1107. Deposit of Redemption Price.  Prior to 10:00 a.m. (EasternTime) on any Redemption Date, the Company shall deposit with the Trustee orwith a Paying Agent (or, if the Company is acting as its own Paying Agent,segregate and hold in trust as provided in Section 1003) an amount ofmoney sufficient to pay the Redemption Price of, and accrued interest andAdditional Interest, if any, on, all the Notes that are to be redeemed on thatdate.  The Trustee or the Paying Agent shall promptly return to theCompany any money deposited with the Trustee or the Paying Agent by the Companyin excess of the amounts necessary to pay the redemption price of, and accruedand unpaid interest and Additional Interest, if any, on, all Notes to beredeemed or purchased.

 

SECTION 1108. Notes Payable on Redemption Date.  (a)  Notice of redemptionhaving been given as aforesaid, the Notes so to be redeemed shall, on theRedemption Date, become due and payable at the Redemption Price thereinspecified (together with accrued interest and Additional Interest, if any, tothe Redemption Date), and from and after such date (unless the Company shalldefault in the payment of the Redemption Price and accrued interest) such Notesshall cease to bear interest.  Upon surrender of any such Note forredemption in accordance with said notice, such Note shall be paid by theCompany at the Redemption Price, together with accrued interest and AdditionalInterest, if any, to the Redemption Date and such Notes shall be canceled bythe Trustee; *provided, however*,that installments of interest whose Stated Maturity is on or prior to theRedemption Date shall be payable to the Holders of such Notes, or one or morePredecessor Notes, registered as such at the close of business on the relevantRecord Dates according to their terms and the provisions of Section 306.

 

(b)          If any Note called for redemption shall not be so paid upon surrender thereoffor redemption, 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 inpart (pursuant to the provisions of this Article) shall be surrendered at theoffice or agency of the Company maintained for such purpose pursuant toSection 1002 (with, if the Company or the Trustee so requires, dueendorsement by, or a written instrument of transfer in form satisfactory to theCompany and the Trustee duly executed by, the Holder thereof or such Holder’sattorney duly authorized in writing), and the Company shall execute, and theTrustee shall authenticate and deliver to the Holder of such Note withoutservice charge, a new Note or Notes, of any authorized denomination asrequested by such Holder, in aggregate principal amount equal to and inexchange for the unredeemed portion of the principal of the Note sosurrendered; *provided* that noNote of $2,000 or less will be redeemed in part.

 

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**ARTICLE TWELVE**

 

**GUARANTEES**

 

SECTION 1201. Guarantees.  From and after the consummation of the Merger, eachGuarantor hereby jointly and severally, irrevocably and unconditionallyirrevocably guarantees, as primary obligor and not merely as surety, the Notesand obligations of the Company hereunder and thereunder, and guarantees to eachHolder of a Note authenticated and delivered by the Trustee, and to the Trusteefor itself and on behalf of such Holder, that: (1) the principal of (andpremium, if any) and interest on, or Additional Interest in respect of, theNotes shall be paid in full when due, whether at Stated Maturity, byacceleration or otherwise (including the amount that would become due but forthe operation of the automatic stay under Section 362(a) of theBankruptcy Law), together with interest on the overdue principal, if any, andinterest on any overdue interest, to the extent lawful, and all otherobligations of the Company to the Holders or the Trustee hereunder orthereunder shall be paid in full or performed, all in accordance with the termshereof and thereof; and (2) in case of any extension of time of payment orrenewal of any Notes or of any such other obligations, the same shall be paidin full when due or performed in accordance with the terms of the extension orrenewal, whether at Stated Maturity, by acceleration or otherwise, subject,however, in the case of clauses (1) and (2) above, to the limitationset forth in Section 1204 hereof.

 

(a)          Each Guarantor hereby agrees that its obligations hereunder shall beunconditional, irrespective of the validity, regularity or enforceability ofthe Notes or this Indenture, the absence of any action to enforce the same, anywaiver or consent by any Holder with respect to any provisions hereof orthereof, any release of any other Guarantor, the recovery of any judgmentagainst the Company, any action to enforce the same or any other circumstancewhich might otherwise constitute a legal or equitable discharge or defense of aGuarantor.

 

(b)          Each Guarantor hereby waives (to the extent permitted by law) the benefits ofdiligence, presentment, demand for payment, filing of claims with a court inthe event of insolvency or bankruptcy of the Company, any right to require aproceeding first against the Company or any other Person, protest, notice andall demands whatsoever and covenants that the Guarantee of such Guarantor shallnot be discharged as to any Note except by complete performance of theobligations contained in such Note, this Indenture and such Guarantee. Each Guarantor acknowledges that the Guarantee is a guarantee of payment,performance and compliance when due and not of collection.  Each of theGuarantors hereby agrees that, in the event of a default in payment ofprincipal (or premium, if any) or interest on such Note, whether at its StatedMaturity, by acceleration, purchase or otherwise, legal proceedings may beinstituted by the Trustee on behalf of, or by, the Holder of such Note, subjectto the terms and conditions set forth in this Indenture, directly against eachof the Guarantors to enforce such Guarantor’s Guarantee without firstproceeding against the Company or any other Guarantor.  Each Guarantoragrees that if, after the occurrence and during the

 

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continuanceof an Event of Default, the Trustee or any of the Holders are prevented byapplicable law from exercising their respective rights to accelerate theMaturity of the Notes, to collect interest on the Notes, or to enforce orexercise any other right or remedy with respect to the Notes, such Guarantorshall pay to the Trustee for the account of the Holder, upon demand therefor,the amount that would otherwise have been due and payable had such rights andremedies been permitted to be exercised by the Trustee or any of the Holders.

 

(c)          If any 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 in Article Fivehereof for the purposes of the Guarantee of such Guarantor notwithstanding anystay, injunction or other prohibition preventing such acceleration in respectof the obligations guaranteed hereby, and (2) in the event of anyacceleration of such obligation as provided in Article Five hereof, suchobligations (whether or not due and payable) shall forthwith become due andpayable by each Guarantor for the purpose of the Guarantee of suchGuarantor.  The Guarantors shall have the right to seek contribution fromany non-paying Guarantor so long as the exercise of such right does not impairthe rights of the Holders under the Guarantees.

 

(d)          Each Guarantee shall remain in full force and effect and continue to beeffective should any petition be filed by or against the Company forliquidation, reorganization, should the Company become insolvent or make anassignment for the benefit of creditors or should a receiver or trustee beappointed for all or any significant part of the Company’s assets, and shall,to the fullest extent permitted by law, continue to be effective or bereinstated, as the case may be, if at any time payment and performance of theNotes are, pursuant to applicable law, rescinded or reduced in amount, or mustotherwise be restored or returned by any obligee on the Notes, whether as a “voidablepreference”, “fraudulent transfer” or otherwise, all as though such payment orperformance had not been made.  In the event that any payment or any partthereof, is rescinded, reduced, restored or returned, the Notes shall, to thefullest extent permitted by law, be reinstated and deemed reduced only by suchamount paid and not so rescinded, reduced, restored or returned.

 

SECTION 1202. Severability.  In case any provision of any Guarantee shall beinvalid, illegal or unenforceable, the validity, legality, and enforceabilityof the remaining provisions shall not in any way be affected or impairedthereby to the extent permitted by applicable law.

 

SECTION 1203. Reserved.

 

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SECTION 1204. Limitation of Guarantors’ Liability.  Each Guarantor, and by itsacceptance of Notes, each Holder hereby confirms that it is the intention ofall such parties that the Guarantee of such Guarantor not constitute afraudulent transfer or conveyance for purposes of the Bankruptcy Law, theUniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or anysimilar federal or state law to the extent applicable to any Guarantee or theprovisions of its local law relating to fraudulent transfer orconveyance.  To effectuate the foregoing intention, the Trustee, theHolders and each such Guarantor hereby irrevocably agree that the obligationsof such Guarantor under its Guarantee shall be limited to the maximum amount aswill, after giving effect to such maximum amount and all other contingent andfixed liabilities of such Guarantor that are relevant under such laws and aftergiving effect to any collections from, rights to receive contribution from orpayments 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 Guarantor under its Guarantee not constituting afraudulent conveyance or fraudulent transfer under applicable law.

 

SECTION 1205. Contribution.  Each Guarantor that makes a payment under itsGuarantee shall be entitled upon payment in full of all guaranteed obligationsunder this Indenture to a contribution from each other Guarantor in an amountequal to such other Guarantor’s *pro rata*portion of such payment based on the respective net assets of all theGuarantors at the time of such payment determined in accordance with GAAP (andfor purposes of this Section 1205, Holdings’ net assets shall be those ofall its consolidated Subsidiaries (other than the Subsidiary Guarantors)).

 

SECTION 1206. Subrogation.  Each Guarantor shall be subrogated to all rights ofHolders against the Company in respect of any amounts paid by any Guarantorpursuant to the provisions of Section 1201; *provided, however,* that, if a Default or Event of Defaulthas occurred and is continuing, no Guarantor shall be entitled to enforce orreceive any payments arising out of, or based upon, such right of subrogationuntil all amounts then due and payable by the Company under this Indenture orthe Notes shall have been paid in full.

 

SECTION 1207. Reinstatement.  Each Guarantor hereby agrees (and each Person whobecomes a Guarantor shall agree) that the Guarantee provided for in Section 1201shall continue to be effective or be reinstated, as the case may be, if at anytime, payment, or any part thereof, of any obligations or interest thereon isrescinded or must otherwise be restored by a Holder to the Company upon thebankruptcy or insolvency of the Company or any Guarantor.

 

SECTION 1208. Release of a Guarantor.  The Subsidiary Guarantee of a SubsidiaryGuarantor shall automatically and unconditionally be released and discharged,and no further action by such Guarantor, the Company or the Trustee is requiredfor the release of such Guarantor’s Guarantee, upon:

 

(1)          (A)  the sale, disposition or other transfer (including through merger orconsolidation) of all of the Capital Stock (or any sale, disposition or othertransfer of Capital Stock following which such

 

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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, the release of suchSubsidiary Guarantor from its guarantee, if any, of and all pledges and security,if any, granted in connection with, the Senior Credit Facilities, the SeniorSubordinated Notes and any other Indebtedness of the Company or any RestrictedSubsidiary.

 

SECTION 1209. Benefits Acknowledged.  Each Guarantor acknowledges that it shallreceive direct and indirect benefits from the financing arrangementscontemplated by this Indenture and from its guarantee and waivers pursuant toits Guarantees under this Article Twelve.

 

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**ARTICLE THIRTEEN**

 

**LEGALDEFEASANCE AND COVENANT DEFEASANCE**

 

SECTION 1301. Company’s Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at its option, and at any time, elect to have eitherSection 1302 or Section 1303 be applied to all Outstanding Notes uponcompliance with the conditions set forth below in this Article Thirteen.

 

SECTION 1302. Legal Defeasance and Discharge.  Upon the Company’s exercise underSection 1301 of the option applicable to this Section 1302, each ofthe Company and the Guarantors shall be deemed to have been discharged from itsrespective obligations with respect to all Outstanding Notes on the date theconditions set 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 receive payments in respect ofthe principal of (and premium, if any, on) and interest on such Notes when suchpayments are due, solely out of the trust created pursuant to this Indenture(as described in Section 1304),

 

(2)          the Company’s obligations with respect to such Notes under Sections 303, 304,305, 1002 and 1003,

 

(3)          the rights, powers, trusts, duties and immunities of the Trustee hereunder, andthe obligations of each of the Company and the Guarantors in connectiontherewith and

 

(4)          this Article Thirteen.

 

Subject to compliance with this Article Thirteen,the Company may exercise its option under this Section 1302notwithstanding the prior exercise of its option under Section 1303 withrespect to the Notes.

 

SECTION 1303. Covenant Defeasance.** **Uponthe Company’s exercise under Section 1301 of the option applicable to thisSection 1303, each of the Company and the Guarantors shall be releasedfrom its respective obligations under any covenant contained inSections 801, 802, 803 and in Sections 1005, 1006, 1007 and 1009through and including 1018 and 1020 with respect to the Outstanding Notes onand after the date

 

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theconditions set forth below are satisfied (hereinafter, “*Covenant Defeasance*”), and the Notes shallthereafter be deemed not to be “Outstanding” for the purposes of any direction,waiver, consent or declaration or Act of Holders (and the consequences of anythereof) in connection with such covenants, but shall continue to be deemed “Outstanding”for all other purposes hereunder.  For this purpose, such CovenantDefeasance means that, with respect to the Outstanding Notes, the Company orany Guarantor, as applicable, may omit to comply with and shall have noliability in respect of any term, condition or limitation set forth in any suchcovenant, whether directly or indirectly, by reason of any reference elsewhereherein to any such covenant or by reason of any reference in any such covenantto any other provision herein or in any other document and such omission tocomply shall not constitute a Default or an Event of Default underSections 501(3), 501(4), 501(5) and 501(7) and, with respect toonly any Significant Subsidiary and not the Company, Section 501(6), but,except as specified above, the remainder of this Indenture and such Notes shallbe unaffected thereby.

 

SECTION 1304. Conditions to Legal Defeasance or Covenant Defeasance.  Thefollowing shall be the conditions to application of either Section 1302 orSection 1303 to the Outstanding Notes:

 

(1)          the Company shall irrevocably have deposited or caused to be deposited with theTrustee (or another trustee satisfying the requirements of Section 608 whoshall 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-callableGovernment Securities, or (C) a combination thereof, in such amounts asshall be sufficient, in the opinion of a nationally recognized firm ofindependent public accountants expressed in a written certification thereofdelivered to the Trustee, to pay and discharge, and which shall be applied bythe Trustee (or other qualifying trustee) to pay and discharge, the principalof (and premium, if any) and interest on the Outstanding Notes on the StatedMaturity (or Redemption Date, if applicable) of such principal (and premium, ifany) or, interest due on the Notes; *provided*that the Trustee shall have been irrevocably instructed to apply such cash orthe proceeds of such Government Securities to said payments with respect to theNotes; before such a deposit, the Company may give to the Trustee, inaccordance with Section 1103 hereof, a notice of its election to redeemall of the Outstanding Notes at a future date in accordance withArticle Eleven hereof, which notice shall be irrevocable; such irrevocableredemption notice, if given, shall be given effect in applying the foregoing;

 

(2)          in the case of Legal Defeasance, the Company shall have delivered to theTrustee an Opinion of Counsel in the United States reasonably acceptable to theTrustee confirming that, subject to customary assumptions and exclusions,

 

(A)  the Company hasreceived from, or there has been published by, the United States InternalRevenue Service a ruling, or

 

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(B)  since the issuanceof the Notes, there has been a change in the applicable U.S. Federal income taxlaw, 

 

in either case to the effect that, and based thereonsuch Opinion of Counsel in the United States shall confirm that, subject tocustomary assumptions and exclusions, the Holders shall not recognize income,gain or loss for U.S. Federal income tax purposes as a result of such LegalDefeasance and shall be subject to U.S. Federal income tax on the same amounts,in the same manner and at the same times as would have been the case if suchLegal Defeasance had not occurred;

 

(3)          in the case of Covenant Defeasance, the Company shall have delivered to theTrustee an Opinion of Counsel in the United States reasonably acceptable to theTrustee confirming that, subject to customary assumptions and exclusions, theHolders shall not recognize income, gain or loss for U.S. Federal income taxpurposes as a result of such Covenant Defeasance and shall be subject to suchtax on the same amounts, in the same manner and at the same times as would havebeen the case if such Covenant Defeasance had not occurred;

 

(4)          no Default (other than that resulting from borrowing funds to be applied tomake such deposit and the granting of Liens in connection therewith) shall haveoccurred and be continuing on the date of such deposit;

 

(5)          such Legal Defeasance or Covenant Defeasance shall not result in a breach orviolation of, or constitute a default under any of the Senior CreditFacilities, the Senior Subordinated Indenture, the Existing Indenture, theSenior Subordinated 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, Holdingsor any Subsidiary Guarantor is bound;

 

(6)          the Company shall have delivered to the Trustee an Opinion of Counsel in theUnited States of America to the effect that, as of the date of such opinion andsubject to customary assumptions and exclusions following the deposit, thetrust funds shall not be subject to the effect of any applicable bankruptcy,insolvency, reorganization or similar laws affecting creditors’ rightsgenerally under any applicable U.S. Federal or state law, and that the Trusteehas a perfected security interest in such trust funds for the ratable benefitof the Holders;

 

(7)          the Company shall have delivered to the Trustee an Officers’ Certificatestating that the deposit was not made by the Company with the intent ofdefeating, hindering, delaying or defrauding any creditors of the Company orany Guarantor or others; and

 

(8)          the Company shall have delivered to the Trustee an Officers’ Certificate and anOpinion of Counsel in the United States of America (which

 

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Opinion of Counsel may be subject to customaryassumptions and exclusions) each stating that all conditions precedent providedfor or relating to the Legal Defeasance or the Covenant Defeasance, as the casemay be, have been complied with.

 

SECTION 1305. Deposited Money and Government Securities to Be Held in Trust; OtherMiscellaneous Provisions.  All cash and Government Securities(including the proceeds thereof) deposited with the Trustee (or otherqualifying trustee, collectively for purposes of this Section 1305, the “*Qualifying Trustee*”) pursuant toSection 1304 in respect of the Outstanding Notes shall be held in trustand applied by the Qualifying Trustee, in accordance with the provisions ofsuch Notes and this Indenture, to the payment, either directly or through anyPaying Agent (including the Company or a Subsidiary acting as its own PayingAgent) as the Qualifying Trustee may determine, to the Holders of such Notes ofall sums due and to become due thereon in respect of principal (and premium, ifany) and interest, but such money or Government Securities need not besegregated from other funds except to the extent required by law.

 

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 toapply any money or Government Securities in accordance with Section 1305by reason of any order or judgment of any court or governmental authorityenjoining, restraining or otherwise prohibiting such application, then theCompany’s and each Guarantor’s obligations under this Indenture and theOutstanding Notes shall be revived and reinstated as though no deposit hadoccurred pursuant to Section 1302 or 1303, as the case may be, until suchtime as the Trustee or Paying Agent is permitted to apply all such money orGovernment Securities in accordance with Section 1305; *provided, however,* that if the Companymakes any payment of principal of (or premium, if any) or interest on any Notefollowing the reinstatement of its obligations, the Company shall be 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 anyPaying Agent, or then held by the Company, in trust for the payment of

 

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theprincipal of, premium and Additional Interest, if any, or interest on any Noteand remaining unclaimed for two years after such principal, and premium andAdditional Interest, if any, or interest has become due and payable shall bepaid to the Company on its request or (if then held by the Company) shall bedischarged from such trust; and the Holder of such Note shall thereafter lookonly to the Company for payment thereof, and all liability of the Trustee orsuch Paying Agent with respect to such trust money, and all liability of theCompany as trustee thereof, shall thereupon cease.

 

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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., aDelaware corporation

 

4.             BergdorfGoodman.com, LLC, aDelaware 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, aTexas corporation

 

9.             NEMA Beverage HoldingCorporation, a Texas corporation

 

10.           NEMA Beverage ParentCorporation, a Texas corporation

 

11.           Worth Avenue LeasingCompany, a Florida corporation

 

12.           NMGP, LLC, a Virginialimited liability company

 

13.           NM Nevada Trust , aMassachusetts 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, the rules andprocedures of the Depository for such a Temporary Regulation S Global Note, tothe extent applicable to such transaction and as in effect from time 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 9%/93⁄4% Senior Notes Due 2015 issued pursuant to theIndenture in connection with a Registered Exchange Offer pursuant to aRegistration Rights Agreement and (2) Additional Notes, if any, issuedpursuant to a registration statement filed with the SEC under the SecuritiesAct.

 

“InitialNotes” means (1) $700,000,000 aggregate principal amount of 9%/93⁄4% Senior Notes Due 2015 issued on the Issue Date and (2) AdditionalNotes, if any, issued in a transaction exempt from the registrationrequirements 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 PIK Notes, any Additional Notes, the ExchangeNotes and the Private Exchange Notes (including, in each case, any increase inthe principal amount thereof as a result of a PIK Payment), treated as a singleclass.

 

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“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 9%/93⁄4% Senior Notes Due 2015 issued in connectionwith 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 purchase agreementor 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 dated October 6,2005, among the Company, Holdings, the Subsidiary Guarantors and the InitialPurchasers and (2) with respect to each issuance of Additional Notesissued in a transaction exempt from the registration requirements of theSecurities Act, the registration rights agreement, if any, among the Companyand the Persons purchasing such Additional Notes under the related PurchaseAgreement**.**

 

“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.

 

2

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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 shallbe issued 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 Note

 

3

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priorto the expiration of the Distribution Compliance Period and then, after theexpiration of the Distribution Compliance Period, may be exchanged forinterests in a Rule 144A Global Note or the Permanent Regulation SGlobal Note only upon certification in the form attached hereto asExhibit 3 or otherwise in a form reasonably satisfactory to the Trusteethat beneficial ownership interests in such Temporary Regulation S Global Noteare owned either by non-U.S. persons or U.S. persons who purchased suchinterests in a transaction that is exempt from the registration requirementsunder 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) thetransferor of the beneficial interest in the Temporary Regulation S GlobalNote 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 is beingtransferred (a) to a Person who the transferor reasonably believes to be aQIB that is purchasing for its own account or the account of a QIB in a transactionmeeting the requirements of Rule 144A, and (b) in accordance with allapplicable securities laws of the States of the United States and otherjurisdictions.

 

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.  ThisSection 2.1(b) shall apply only to a Global Note deposited with or onbehalf 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

 

4

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shallbe entitled to treat the Depository as the absolute owner of such Global Notefor all purposes whatsoever.  Notwithstanding the foregoing, nothingherein shall prevent the Company, the Trustee or any agent of the Company orthe Trustee from giving effect to any written certification, proxy or otherauthorization furnished by the Depository or impair, as between the Depositoryand its Agent Members, the operation of customary practices of such Depositorygoverning the exercise of the rights of a holder of a beneficial interest inany 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; PIK Interest.  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 $700,000,000 9%/93⁄4% Senior Notes Due 2015,(2) any Additional Notes for an original issue in an aggregate principalamount specified in the written order of the Company pursuant toSection 202 of the Indenture, (3) any PIK Notes issued in payment ofPIK Interest in an aggregate principal amount specified in the written order ofthe Company pursuant to Section 301 of the Indenture****and (4) 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 Company Order signed bytwo Officers or by an Officer and either an Assistant Treasurer or an AssistantSecretary of the Company.  Such Company Order shall specify the amount ofthe Notes to be authenticated and the date on which the original issue of Notesis to be authenticated and, in the case of any issuance of Additional Notespursuant to Section 312 of the Indenture, shall certify that such issuanceis in compliance with Section 1011 of the Indenture.  On any InterestPayment Date on which the Company pays PIK Interest with respect to a GlobalNote, the Trustee shall increase the principal amount of such Global Note by anamount equal to the interest payable, rounded up to the nearest $1,000, for therelevant Interest Period on the principal amount of such Global Note as of therelevant Record Date for such Interest Payment Date, to the credit of theHolders on such Record Date, pro rata in accordance with their interests, andan adjustment shall be made on the books and records of the Trustee (if it isthen the Notes Custodian for such Global Note) with respect to such GlobalNote, by the Trustee or the Notes Custodian, to reflect such increase.

 

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,

 

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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 pursuant toclause (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. A Certificated Note may not be exchanged for a beneficial interest in a Rule 144AGlobal Note or a Permanent Regulation S Global Note except uponsatisfaction of the requirements set forth below.  Upon receipt by theTrustee 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) beingtransferred to a QIB in accordance with Rule 144A or (B) beingtransferred after expiration of the Distribution Compliance Period by a Personwho initially purchased such Note in reliance on Regulation S to a buyer whoelects to hold its interest in such Note in the form of a beneficial interestin 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 a

 

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transferpursuant to clause (b)(i)(A)) or Permanent Regulation S Global Note(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 Notes represented by the Rule 144A Global Note orPermanent Regulation S Global Note, as applicable, to be increased by theaggregate principal amount of the Certificated Note to be exchanged and shallcredit or cause to be credited to the account of the Person specified in suchinstructions a beneficial interest in the Rule 144A Global Note orPermanent Regulation S Global Note, as applicable, equal to the principalamount of the Certificated Note so canceled.  If no Rule 144A GlobalNotes or Permanent Regulation S Global Notes, as applicable, are thenoutstanding, the Company shall issue and the Trustee shall authenticate, uponreceipt of a Company Order, a new Rule 144A Global Note or PermanentRegulation 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 such instructionsa beneficial interest in the Global Note and to debit the account of the Personmaking the transfer the beneficial interest in the Global Note beingtransferred.

 

(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.

 

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(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 in accordance 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, asthe case may be) and such other procedures as may from time to time be adoptedby the 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 inaccordance with the Applicable Procedures and only (i) to the Company,(ii) in an offshore transaction in accordance with Regulation S(other than a transaction resulting in an exchange for an interest in aPermanent Regulation S Global Note), (iii) pursuant to an effectiveregistration statement under the Securities Act, in each case in accordancewith any applicable securities 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 NOTE MAY BERELYING ON THE EXEMPTION FROM THE

 

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PROVISIONSOF SECTION 5 OF THE 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 THE REQUIREMENTSOF RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORETRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,(IV) PURSUANT TO EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACTPROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO ANEFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OFCASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIESLAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACHSUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OFTHE 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

 

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INFORMATIONAS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFERCOMPLIES WITH THE FOREGOING 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 sale or transferwas made in reliance on Rule 144 (such certification to be in the form setforth 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, therequirements requiring any such Initial Note or such Private Exchange Noteissued to certain Holders be issued in global form shall cease to apply, and acertificated Initial Note or Private Exchange Note or an Initial Note orPrivate Exchange Note in global form, in each case without restrictive transferlegends, shall be available to the transferee of the Holder of such InitialNotes or Private Exchange Notes upon exchange of such transferring Holder’scertificated Initial Note or Private Exchange Note or directions to transfersuch Holder’s interest in 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 inExhibit 1 hereto shall be available to Holders that exchange such InitialNotes in such Registered 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.

 

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(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.

 

(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 (otherthan the Depository) of any notice (including any notice of redemption) or thepayment of any amount, under or with respect to such Notes.  All noticesand communications to be given to the Holders and all payments to be made toHolders under the Notes shall be given or made only to or upon the order of theregistered Holders (which shall be the Depository or its nominee in the case ofa Global Note).  The rights of beneficial owners in any Global Note shallbe exercised only through the Depository subject to the applicable rules andprocedures of the Depository.  The Trustee may rely and shall be fullyprotected in relying upon information furnished by the Depository with respectto 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

 

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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) the Depository notifies the Company that it is unwilling or unable tocontinue as depository for such Global Note and the Depository fails to appointa successor depository or if at any time such depository ceases to be a “clearingagency” registered under the Exchange Act, in either case, and a successordepository is not appointed by the Company within 90 days of such notice,or (ii) a Default has occurred and is continuing or (iii) theCompany, in its sole discretion, notifies the Trustee in writing that it electsto cause the issuance of Certificated Notes under this Indenture (althoughTemporary Regulation S Global Notes at the Company’s election pursuant to thisclause may not be exchanged for Certificated Notes prior to (a) theexpiration of the Distribution Compliance Period and (b) the receipt ofany certificates required under the provisions of Regulation 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 provisions ofSection 2.4(b) hereof, the registered Holder of a Global Note shallbe entitled to grant proxies and otherwise authorize any Person, includingAgent Members and Persons that may hold interests through Agent Members, totake any action which a Holder is entitled to take under this Indenture or theNotes.

 

(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 interestcoupons.  In the event that such Certificated Notes are not issued, theCompany expressly acknowledges, with respect to the right of any Holder topursue a remedy pursuant to this Indenture, including pursuant to Section 507,the right of any beneficial owner of Notes to pursue such remedy with respectto the portion of the Global Note that represents such beneficial owner’s Notesas if such Certificated Notes had been issued.

 

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**EXHIBIT 1**

**to 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 THE COMPANYOR 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 NOTE MAY BERELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THESECURITIES 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 THE SECURITIESACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIESACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TOAN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OFCASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIESLAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACHSUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OFTHE 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 NOTE MAY ONLYBE SOLD, PLEDGED OR TRANSFERRED (I) TO THE COMPANY, (II) OUTSIDE THEUNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION 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 WRITTEN CERTIFICATE(IN THE FORM ATTACHED TO THIS CERTIFICATE) TO THE EFFECT THAT SUCHTRANSFER IS BEING MADE IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION SOR 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 AGENT MAY REASONABLYREQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

 

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| No. |   | $ |
|-----|--------|---|

 

9%/93⁄4% Senior Notes Due 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:  January 15, April 15, July 15 and October 15.

 

RecordDates:  January 1, April 1, July 1 and October 1.

 

Additionalprovisions of this Note are set forth on the other side of this Note.

 

Dated:

 

4

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|                                                                                                                            |                  | **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 |                                   |   |

 

5

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[FORM OF REVERSE SIDE OF INITIAL NOTE]

 

9%/93/4% Senior Note Due 2015

 

Capitalizedterms used herein but not defined herein shall have the meanings given to suchterms in the Indenture.

 

1.             Principal and Interest.

 

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 set forth below (subject to adjustment as provided below).

 

TheCompany shall pay interest with respect to the first Interest Period entirelyin cash. For any Interest Period thereafter through the Interest Period endingOctober 14, 2010, the Company may, at its option, elect to pay interest onthe Notes:

 

(a)           entirely in cash (“*Cash Interest*”) or

 

(b)           entirely by increasing theprincipal amount of the Outstanding Notes or by issuing PIK Notes (“*PIK Interest*”).

 

TheCompany must elect the form of interest payment with respect to each InterestPeriod by delivering a notice to the Trustee at or prior to the beginning ofsuch Interest Period. The Trustee shall promptly deliver a corresponding noticeto the Holders. In the absence of such an election, interest on the Notes shallbe payable entirely in cash. From and after the Interest Period commencingOctober 15, 2010, the Company shall make all interest payments on theNotes entirely in cash.

 

CashInterest on the Notes shall accrue at the rate of 9%  per annum and bepayable in cash. PIK Interest on the Notes shall accrue at the rate of 93/4% per annum.

 

Interest,and Additional Interest, if any, shall be payable quarterly (to the Holders ofthe Notes at the close of business on January 1, April 1, July 1or October 1 immediately preceding the Interest Payment Date) on eachInterest Payment Date, commencing January 15, 2006.

 

TheHolder of this Note is entitled to the benefits of the Exchange and RegistrationRights Agreement, dated October 6, 2005, among the Company, Holdings, theSubsidiary Guarantors and the Initial Purchasers named therein (the “RegistrationRights Agreement”), including with respect to Additional Interest.

 

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

 

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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.

 

2.             Method of Payment.

 

TheCompany shall pay interest (except defaulted interest) on the principal amountof the Notes on each January 15, April 15, July 15 andOctober 15 to the Persons who are Holders (as reflected in the NoteRegister at the close of business on January 1, April 1, July 1and October 1 immediately preceding the Interest Payment Date), in eachcase, even if the Note is transferred or exchanged after such Regular RecordDate, except as provided in Section 306(b) with respect to DefaultedInterest; *provided* that, withrespect to the payment of principal, the Company shall make payment to theHolder that surrenders this Note to any Paying Agent on or afterOctober 15, 2015.

 

PIKInterest shall be payable by increasing the principal amount of this globalNote by an amount equal to the amount of PIK Interest for the applicableInterest Period (rounded up to the nearest $1,000).  Following an increasein the principal amount of the outstanding global Notes as a result of a PIKPayment, this global Note shall bear interest on such increased principalamount from and after the date of such PIK Payment, and shall be governed by,and subject to the terms, provisions and conditions of, the Indenture and shallhave the same rights and benefits as the Notes issued on the Issue Date.

 

TheCompany shall pay principal (premium, if any) and Cash 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 Cash Interest by its check payable in such money.  The Companymay pay Cash Interest on the Notes either (a) by mailing a check for suchinterest to a Holder’s registered address (as reflected in the Note Register)or (b) by wire transfer to an account located in the United Statesmaintained by the payee.  If a payment date is a date other than aBusiness Day at a place of payment, payment may be made at that place on thenext succeeding day that is a Business Day and no interest shall accrue for theintervening 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.

 

7

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4.             Indenture.

 

TheCompany issued the Notes under a Senior Indenture dated as of October 6,2005 (the “Indenture”), among the Company, Holdings, the Subsidiary Guarantorsand the Trustee.  The terms of the Notes include those stated in theIndenture and those made part of the Indenture by reference to the TrustIndenture Act.  The Notes are subject to all such terms, and Holders arereferred to the Indenture and the Trust Indenture Act for a statement of allsuch terms.  To the extent permitted by applicable law, in the event ofany inconsistency between the terms of this Note and the terms of theIndenture, the terms of the Indenture shall control.

 

TheNotes are unsecured senior obligations of the Company.  The Indenture doesnot limit the aggregate principal amount of the Notes.  Subject to theconditions set forth in the Indenture, the Company may issue Additional 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                |       | 104.500        | %          |
| 2011                |       | 103.000        | %          |
| 2012                |       | 101.500        | %          |
| 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 109.000%% 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

 

8

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Indentureremains Outstanding immediately after the occurrence of each such redemption; *provided, further,*that each suchredemption 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 Indebtedness of the Company with a portionof the Net Proceeds of such Asset Sales at a redemption price of 100% of theprincipal amount thereof plus accrued and unpaid interest and AdditionalInterest, if any, to the date of purchase.

 

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.

 

9

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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 anyambiguity, omission, mistake, defect or inconsistency and make any change that doesnot adversely 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 and other paymentrestrictions affecting Restricted Subsidiaries; (vi) guarantees ofIndebtedness by Restricted Subsidiaries; (vii) changes to the terms of certainSubordinated Indebtedness; (viii) merger, consolidation or sale of all orsubstantially all assets; (ix) purchase of Notes upon a Change in Control;(x) sale and lease-back transactions; and (xi) disposition ofproceeds 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 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 andpayable.  If an Event of Default arising from certain events of bankruptcyor insolvency

 

10

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withrespect to the Company or any Significant Subsidiary occurs and is continuing,the Notes automatically become immediately due and payable.  Subject tothe provisions of the Indenture relating to the duties of the Trustee, in casean Event 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.

 

15.           Guarantees.

 

TheCompany’s obligations under the Notes are fully, irrevocably and unconditionallyguaranteed on an unsecured senior basis, to the extent set forth in theIndenture, by Holdings and each of the Subsidiary Guarantors.

 

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.           Abbreviations.

 

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.

 

11

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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 INDENTURE SHALL BE GOVERNED BY, ANDCONSTRUED IN ACCORDANCE 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 Marcus Group, Inc.,1618 Main Street, Dallas, Texas 75201, Attention: General Counsel.

 

12

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**EXHIBIT 2**

**to 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) underthe Securities Act after the later of the date of original issuance ofsuch 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 effectiveregistration statement under the Securities Act of 1933, as amended; or

 

(2)           inside the United States to a “qualifiedinstitutional buyer” (as defined in Rule 144A under the Securities Act of1933) that purchases for its own account or for the account of a qualifiedinstitutional buyer to whom notice is given that such transfer is being made inreliance on Rule 144A, in each case pursuant to and in compliance withRule 144A under the Securities Act of 1933, as amended; or

 

(3)           outside the United States in an offshore transactionwithin the meaning of Regulation S under the Securities Act in compliance withRule 904 under the Securities Act of 1933, as amended; or

 

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(4)           pursuant to the exemption from registration providedby 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 be entitled to require,prior to registering any such transfer of the Notes, such legal opinions,certifications and other information as the Company has reasonably requested toconfirm that such transfer is being made pursuant to an exemption from, or in atransaction not subject to, the registration requirements of the Securities Actof 1933, as amended, such as the exemption provided by Rule 144 under suchAct.

 

 
|      |   |
|-----------|--------|
| Signature |   |

 

SignatureGuarantee:

 

 

|                          |   |      |
|-------------------------------|--------|-----------|
| 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  or payment of  PIK Interest** | ** ** | **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** | ** ** |
|----------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|
|                                                                       |       |                                                                                            |       |                                                                                            |       |                                                                                                           |       |                                                                                      |       |
|                                                                       |       |                                                                                            |       |                                                                                            |       |                                                                                                           |       |                                                                                      |       |
|                                                                       |       |                                                                                            |       |                                                                                            |       |                                                                                                           |       |                                                                                      |       |

 

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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.

 

5

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**EXHIBIT 3**

**to Rule 144A / Regulation S Appendix**

 

FORM OF NON-U.S. BENEFICIAL OWNERSHIPCERTIFICATION BY EURO CLEAR OR CLEARSTREAM LUXEMBOURG

 

|   |   | [Date] |
|--------|--------|--------|

 

WellsFargo Bank, N.A.

 

Re:          9%/93/4%  Senior Notes due 2015 (the “Notes”) of The Neiman MarcusGroup, Inc. (the “Company”)

 

Referenceis hereby made to the Senior Indenture, dated as of October 6, 2005 (asamended and supplemented from time to time, the “Indenture”), among theCompany, 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 the portion beneficiallyowned by such U.S. person(s) in transactions that did not requireregistration under the Securities Act of 1933, as amended (the “Act”).  Asused 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 MemberOrganizations with respect to any portion of the part submitted herewith forexchange (or, if relevant, exercise of any rights or collection of anyinterest) are no longer true 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.

 

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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] */**/

 

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*/[If the Note is to be issued in global form add the Global Notes Legend from Exhibit 1to Appendix A and the attachment from such Exhibit 1 captioned “[TO BEATTACHED TO GLOBAL NOTES] SCHEDULE OF INCREASES OR DECREASES 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 Assignment Form includedin such Exhibit 1.]

 

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| No. |   | $ |
|-----|--------|---|

 

9%/93⁄4% Senior Notes Due 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:  January 15, April 15, July 15 andOctober 15.

 

RecordDates:  January 1, April 1, July 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 NOTE

OR PRIVATE EXCHANGE NOTE]

 

9%/93⁄4% Senior Note Due 2015

 

Capitalizedterms used herein but not defined herein shall have the meanings given to suchterms in the Indenture.

 

1.             Principal and Interest.

 

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 set forth below (subject to adjustment as provided below).

 

TheCompany shall pay interest with respect to the first Interest Period entirelyin cash. For any Interest Period thereafter through the Interest Period endingOctober 14, 2010, the Company may, at its option, elect to pay interest onthe Notes:

 

(a)           entirely in cash (“*Cash Interest*”) or

 

(b)           entirely by increasing theprincipal amount of the Outstanding Notes or by issuing PIK Notes (“*PIK Interest*”).

 

TheCompany must elect the form of interest payment with respect to each InterestPeriod by delivering a notice to the Trustee at or prior to the beginning ofsuch Interest Period. The Trustee shall promptly deliver a corresponding noticeto the Holders. In the absence of such an election, interest on the Notes shallbe payable entirely in cash. From and after the Interest Period commencingOctober 15, 2010, the Company shall make all interest payments on theNotes entirely in cash.

 

CashInterest on the Notes shall accrue at the rate of 9%  per annum and bepayable in cash. PIK Interest on the Notes shall accrue at the rate of 93⁄4% perannum.

 

Interest,and Additional Interest, if any, shall be payable quarterly (to the Holders ofthe Notes at the close of business on January 1, April 1, July 1or October 1 immediately preceding the Interest Payment Date) on eachInterest Payment Date, commencing January 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,

 

3

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theSubsidiary Guarantors and the Initial Purchasers named therein (the “RegistrationRights Agreement”), including with respect to Additional Interest.](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.

 

2.             Method of Payment.

 

TheCompany shall pay interest (except defaulted interest) on the principal amountof the Notes on each January 15, April 15, July 15 andOctober 15 to the Persons who are Holders (as reflected in the NoteRegister at the close of business on January 1, April 1, July 1and October 1 immediately preceding the Interest Payment Date), in eachcase, even if the Note is transferred or exchanged after such Regular RecordDate, except as provided in Section 306(b) with respect to defaultedinterest; *provided* that, withrespect to the payment of principal, the Company shall make payment to theHolder that surrenders this Note to any Paying Agent on or after October 15, 2015.

 

PIKInterest shall be payable by increasing the principal amount of this globalNote by an amount equal to the amount of PIK Interest for the applicableInterest Period (rounded up to the nearest $1,000).  Following an increasein the principal amount of the outstanding global Notes as a result of a PIKPayment, this global Note shall bear interest on such increased principalamount from and after the date of such PIK Payment, and shall be governed by,and subject to the terms, provisions and conditions of, the Indenture and shallhave the same rights and benefits as the Notes issued on the Issue Date.

 

TheCompany shall pay principal (premium, if any) and Cash 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 Cash Interest by its check payable in such money.  The Companymay pay Cash Interest on the Notes either (a) by mailing a check for suchinterest to a Holder’s registered address (as reflected in the Note Register)or (b) by wire transfer to an account

 

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(1) Insertif at the date of issuance of the Exchange Note or Private Exchange Note (asthe case may be) any Registration Default has occurred with respect to therelated Initial Notes during the interest period in which such date of issuanceoccurs.

 

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locatedin the United States maintained by the payee.  If a payment date is a dateother than a Business Day at a place of payment, payment may be made at thatplace on the next succeeding day that is a Business Day and no interest shallaccrue 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 Indenture dated as of October 6,2005 (the “Indenture”), among the Company, Holdings, the Subsidiary Guarantorsand the Trustee.  The terms of the Notes include those stated in theIndenture and those made part of the Indenture by reference to the TrustIndenture Act.  The Notes are subject to all such terms, and Holders arereferred to the Indenture and the Trust Indenture Act for a statement of all suchterms.  To the extent permitted by applicable law, in the event of anyinconsistency between the terms of this Note and the terms of the Indenture,the terms of the Indenture shall control.

 

TheNotes are unsecured senior obligations of the Company.  The Indenture doesnot limit the aggregate principal amount of the Notes.  Subject to theconditions set forth in the Indenture, the Company may issue Additional Notes.

 

5.             Redemption.

 

Atany time prior to October 15, 2010, the Company may redeem all or a part ofthe 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:

 

5

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| **Year**            | ** ** | **Percentage** | ** ** |
|---------------------|------------|----------------|------------|
| 2010                |       | 104.500        | %          |
| 2011                |       | 103.000        | %          |
| 2012                |       | 101.500        | %          |
| 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 109.000% 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 each such redemption occurs within 90 days of thedate 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, the Company may be obligated to make offersto purchase Notes and Senior Indebtedness of the Company with a portion of theNet Proceeds of such Asset Sales at a redemption price of 100% of the principalamount thereof plus accrued and unpaid interest and Additional Interest, ifany, to the date of purchase.

 

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.

 

6

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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 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 anyambiguity, omission, mistake, defect or inconsistency and make any change thatdoes not adversely 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 and other paymentrestrictions affecting Restricted Subsidiaries; (vi) guarantees ofIndebtedness by Restricted Subsidiaries; (vii) changes to the terms ofcertain Subordinated Indebtedness; (viii) merger, consolidation or sale ofall or substantially all assets; (ix) purchase of Notes upon a Change inControl; (x) sale and lease-back transactions and (xi) disposition ofproceeds 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.

 

7

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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 andpayable.  If an Event of Default arising from certain events of bankruptcyor insolvency with respect to the Company or any Significant Subsidiary occursand is continuing, the Notes automatically become immediately due andpayable.  Subject to the provisions of the Indenture relating to theduties of the Trustee, in case an Event of Default occurs and is continuing,the Trustee shall be under no obligation to exercise any rights or powers underthe Indenture at the request or direction of any of the Holders unless suchHolders have offered to the Trustee reasonable indemnity or security againstany loss, liability or expense.  Subject to certain restrictions, theHolders of a majority in principal amount of the Outstanding Notes are giventhe right to direct the time, method and place of conducting any proceeding forany remedy available to the Trustee or of exercising any trust or powerconferred on the Trustee.  The Trustee, however, may refuse to follow anydirection that conflicts with law or the Indenture or that the Trusteedetermines is unduly prejudicial to the rights of any other Holder of a Note orthat would involve the Trustee in personal liability.

 

15.           Guarantees.

 

TheCompany’s obligations under the Notes are fully, irrevocably andunconditionally guaranteed on an unsecured senior basis, to the extent setforth in the Indenture, by Holdings and each of the Subsidiary Guarantors.

 

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, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JTTEN (= joint tenants with right of survivorship and not as tenants in common),CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).

 

8

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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 INDENTURE SHALL BE GOVERNED BY, ANDCONSTRUED IN ACCORDANCE 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 Marcus Group, Inc.,1618 Main Street, Dallas, Texas 75201, Attention: General Counsel.

 

9

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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 Note Registrarin addition to, or in substitution for, STAMP, all in accordance with theSecurities 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 Marcus Group, Inc.(or its permitted successor), a Delaware corporation (the “Company”), theCompany, 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 seniorunsecured indenture (the “Indenture”), dated as of October 6, 2005providing for the issuance of 9%/93⁄4% Senior 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 TOGUARANTEE.  The Guaranteeing Subsidiary hereby agrees to provide anunconditional Guarantee on the terms and subject to the conditions set forth inthe Note Guarantee and in the Indenture including but not limited to Article 12thereof.

 

3.             NO RECOURSE AGAINSTOTHERS.  No past, present or future director, officer, employee,incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such,shall have any liability for any obligations of the Company or any GuaranteeingSubsidiary under the Notes, any Note Guarantees, the Indenture or thisSupplemental Indenture or for any claim based on, in respect of, or by reasonof, such obligations or their creation.  Each Holder of the Notes byaccepting a Note waives and releases all such liability.  The waiver andrelease are part of the consideration for issuance of the Notes.  Suchwaiver may not be effective to waive liabilities under the

 

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federalsecurities laws and it is the view of the SEC that such a waiver is againstpublic policy.

 

4.             GOVERNING LAW.  THISSUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITHTHE LAWS OF THE STATE OF NEW YORK.

 

5.             COUNTERPARTS.  Theparties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent thesame agreement.

 

6.             EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affectthe construction hereof.

 

7.             THE TRUSTEE.  TheTrustee shall not be responsible in any manner whatsoever for or in respect ofthe validity or sufficiency of this Supplemental Indenture or for or in respectof the 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:                                              |
|   |                                                |
|   | THE  NEIMAN MARCUS GROUP, INC.                      |
|   |                                                |
|   | By:                                                 |
|   |                                                |
|   | Name:                                               |
|   | Title:                                              |
|   |                                                |
|   | NEWTON  ACQUISITION, INC.                      |
|   |                                                |
|   | By:                                                 |
|   |                                                |
|   | Name:                                               |
|   | Title:                                              |
|   |                                                |
|   | [Existing  Guarantors]                              |
|   |                                                |
|   | By:                                                 |
|   |                                                |
|   | Name:                                               |
|   | Title:                                              |
|   |                                                |
|   | WELLS  FARGO BANK, NATIONAL ASSOCIATION, as Trustee |
|   |                                                |
|   | By:                                                 |
|   |                                                |
|   | Authorized  Signatory                               |

 

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