Document:

Exhibit
4.2

 

EXECUTION COPY

 

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

 

 

SENIOR SUBORDINATED INDENTURE

 

Dated as of October 6, 2005

 

 

$500,000,000

103/8% Senior Subordinated Notes Due 2015

 

 

Reconciliation
and tie between Trust Indenture Act

of 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.

 

*                                         This
reconciliation and tie shall not, for any purpose, be deemed to be a part of
this Indenture.

 

 

Table of Contents*

 

	
   

  	
  ARTICLE ONE

  

  DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 101.
   Rules of Construction and
  Incorporation by Reference of Trust Indenture Act

  	
   

  
	
  SECTION 102.
   Definitions

  	
   

  
	
  SECTION 103.  Compliance
  Certificates and Opinions

  	
   

  
	
  SECTION 104.  Form of
  Documents Delivered to Trustee

  	
   

  
	
  SECTION 105.  Acts of
  Holders

  	
   

  
	
  SECTION 106.  Notices,
  Etc., to Trustee, Company, any Guarantor and Agent

  	
   

  
	
  SECTION 107.  Notice to Holders; Waiver

  	
   

  
	
  SECTION 108.  Effect of Headings and Table of Contents

  	
   

  
	
  SECTION 109.  Successors and Assigns

  	
   

  
	
  SECTION 110.  Separability Clause

  	
   

  
	
  SECTION 111.  Benefits of Indenture

  	
   

  
	
  SECTION 112.  Governing Law

  	
   

  
	
  SECTION 113.  Legal Holidays

  	
   

  
	
  SECTION 114.  No Personal Liability of Directors,
  Officers, Employees and Stockholders

  	
   

  
	
  SECTION 115.  Trust Indenture Act Controls

  	
   

  
	
  SECTION 116.  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE TWO

  

  NOTE FORMS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 201.  Form and Dating

  	
   

  
	
  SECTION 202.  Execution, Authentication, Delivery and
  Dating

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE THREE

  

  THE NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 301.  Title and Terms

  	
   

  
	
  SECTION 302.  Denominations

  	
   

  
	
  SECTION 303.  Temporary Notes

  	
   

  
	
  SECTION 304.  Note Registrar; Paying Agent; Registration
  of Transfer and Exchange

  	
   

  
	
  SECTION 305.  Mutilated, Destroyed, Lost and Stolen Notes

  	
   

  

 

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

 

i

 

	
  SECTION 306.  Payment of Interest; Interest Rights
  Preserved

  	
   

  
	
  SECTION 307.  Persons Deemed Owners

  	
   

  
	
  SECTION 308.  Cancellation

  	
   

  
	
  SECTION 309.  Computation of Interest

  	
   

  
	
  SECTION 310.  Transfer and Exchange

  	
   

  
	
  SECTION 311.  CUSIP Numbers

  	
   

  
	
  SECTION 312.  Issuance of Additional Notes

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE FOUR

  

  SATISFACTION AND DISCHARGE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 401.  Satisfaction and Discharge of Indenture

  	
   

  
	
  SECTION 402.  Application of Trust Money

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE FIVE

  

  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 501.  Events of Default

  	
   

  
	
  SECTION 502.  Acceleration of Maturity; Rescission and
  Annulment

  	
   

  
	
  SECTION 503.  Collection of Indebtedness and Suits for
  Enforcement by Trustee

  	
   

  
	
  SECTION 504.  Trustee May File Proofs of Claim

  	
   

  
	
  SECTION 505.  Trustee May Enforce Claims Without
  Possession of Notes

  	
   

  
	
  SECTION 506.  Application of Money Collected

  	
   

  
	
  SECTION 507.  Limitation on Suits

  	
   

  
	
  SECTION 508.  Unconditional Right of Holders to Receive
  Principal, Premium and Interest

  	
   

  
	
  SECTION 509.  Restoration of Rights and Remedies

  	
   

  
	
  SECTION 510.  Rights and Remedies Cumulative

  	
   

  
	
  SECTION 511.  Delay or Omission Not Waiver

  	
   

  
	
  SECTION 512.  Control by Holders

  	
   

  
	
  SECTION 513.  Waiver of Defaults

  	
   

  
	
  SECTION 514.  Waiver of Stay or Extension Laws

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE SIX

  

  THE TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 601.  Duties of the Trustee

  	
   

  
	
  SECTION 602.  Notice of Defaults

  	
   

  
	
  SECTION 603.  Certain Rights of Trustee

  	
   

  
	
  SECTION 604.  Trustee Not Responsible for Recitals or
  Issuance of Notes

  	
   

  
	
  SECTION 605.  May Hold Notes

  	
   

  
	
  SECTION 606.  Money Held in Trust

  	
   

  
	
  SECTION 607.  Compensation and Reimbursement

  	
   

  
	
  SECTION 608.  Corporate Trustee Required; Eligibility

  	
   

  

 

ii

 

	
  SECTION 609.  Resignation and Removal; Appointment of
  Successor

  	
   

  
	
  SECTION 610.  Acceptance of Appointment by Successor

  	
   

  
	
  SECTION 611.  Merger, Conversion, Consolidation or
  Succession to Business

  	
   

  
	
  SECTION 612.  Appointment of Authenticating Agent

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE SEVEN

  

  HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 701.  Holder Lists

  	
   

  
	
  SECTION 702.  Disclosure of Names and Addresses of Holders

  	
   

  
	
  SECTION 703.  Reports by Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE EIGHT

  

  MERGER, CONSOLIDATION OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 801.  Company May Consolidate, Etc., Only on
  Certain Terms

  	
   

  
	
  SECTION 802. Subsidiary Guarantors
  May Consolidate, Etc., Only on Certain Terms

  	
   

  
	
  SECTION 803.  Holdings May Consolidate, Etc., Only on
  Certain Terms

  	
   

  
	
  SECTION 804.  Successor Substituted

  	
   

  
	
  SECTION 805.  The Merger Permitted

  	
   

  
	
  SECTION 806.  Assets of Subsidiary Apply to Company and
  Holdings

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE NINE

  

  AMENDMENT, SUPPLEMENT AND WAIVER

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 901.  Amendments or Supplements Without Consent of
  Holders

  	
   

  
	
  SECTION 902.  Amendments or Supplements With Consent of
  Holders

  	
   

  
	
  SECTION 903.  Execution of Amendments, Supplements or
  Waivers

  	
   

  
	
  SECTION 904.  Effect of Amendments, Supplements or Waivers

  	
   

  
	
  SECTION 905.  Compliance with Trust Indenture Act

  	
   

  
	
  SECTION 906.  Reference in Notes to Supplemental Indentures

  	
   

  
	
  SECTION 907.  Notice of Supplemental Indentures

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE TEN

  

  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1001.  Payment of Principal, Premium, if any, and
  Interest

  	
   

  
	
  SECTION 1002.  Maintenance of Office or Agency

  	
   

  
	
  SECTION 1003.  Paying Agent to Hold Money in Trust

  	
   

  
	
  SECTION 1004.  Corporate Existence

  	
   

  
	
  SECTION 1005.  Payment of Taxes and Other Claims

  	
   

  
	
  SECTION 1006.  Reserved

  	
   

  
	
  SECTION 1007.  Reserved

  	
   

  

 

iii

 

	
  SECTION 1008.  Statement by Officers as to Default

  	
   

  
	
  SECTION 1009.  Reports and Other Information

  	
   

  
	
  SECTION 1010.  Limitation on Restricted Payments

  	
   

  
	
  SECTION 1011.  Limitation on Incurrence of Indebtedness and
  Issuance of Disqualified Stock and Preferred Stock

  	
   

  
	
  SECTION 1012.  Liens

  	
   

  
	
  SECTION 1013.  Limitations on Transactions with Affiliates

  	
   

  
	
  SECTION 1014.  Limitations on Dividend and Other Payment
  Restrictions Affecting Restricted Subsidiaries

  	
   

  
	
  SECTION 1015.  Limitation on Guarantees of Indebtedness by
  Restricted Subsidiaries

  	
   

  
	
  SECTION 1016.  Limitation on Other Senior Subordinated
  Indebtedness

  	
   

  
	
  SECTION 1017.  Change of Control

  	
   

  
	
  SECTION 1018.  Asset Sales

  	
   

  
	
  SECTION 1019.  Additional Interest Notice

  	
   

  
	
  SECTION 1020.  Obligations of the Company and the
  Restricted Subsidiaries Relating to Kate Spade

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE ELEVEN

  

  REDEMPTION OF NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1101.  Right of Redemption

  	
   

  
	
  SECTION 1102.  Applicability of Article

  	
   

  
	
  SECTION 1103.  Election to Redeem; Notice to Trustee

  	
   

  
	
  SECTION 1104.  Selection by Trustee of Notes to Be Redeemed

  	
   

  
	
  SECTION 1105.  Notice of Redemption

  	
   

  
	
  SECTION 1106.  Effect of Notice of Redemption

  	
   

  
	
  SECTION 1107.  Deposit of Redemption Price

  	
   

  
	
  SECTION 1108.  Notes Payable on Redemption Date

  	
   

  
	
  SECTION 1109.  Notes Redeemed in Part

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE TWELVE

  

  GUARANTEES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1201.  Guarantees

  	
   

  
	
  SECTION 1202.  Severability

  	
   

  
	
  SECTION 1203.  Subordination of Guarantees

  	
   

  
	
  SECTION 1204.  Limitation of Guarantors’ Liability

  	
   

  
	
  SECTION 1205.  Contribution

  	
   

  
	
  SECTION 1206.  Subrogation

  	
   

  
	
  SECTION 1207.  Reinstatement

  	
   

  
	
  SECTION 1208.  Release of a Guarantor

  	
   

  
	
  SECTION 1209.  Benefits Acknowledged

  	
   

  

 

iv

 

	
   

  	
  ARTICLE THIRTEEN

  

  LEGAL DEFEASANCE AND COVENANT DEFEASANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1301.  Company’s Option to Effect Legal Defeasance
  or Covenant Defeasance

  	
   

  
	
  SECTION 1302.  Legal Defeasance and Discharge

  	
   

  
	
  SECTION 1303.  Covenant Defeasance

  	
   

  
	
  SECTION 1304.  Conditions to Legal Defeasance or Covenant
  Defeasance

  	
   

  
	
  SECTION 1305.  Deposited Money and Government Securities to
  Be Held in Trust; Other Miscellaneous Provisions

  	
   

  
	
  SECTION 1306.  Reinstatement

  	
   

  
	
  SECTION 1307.  Repayment to Company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE FOURTEEN

  

  SUBORDINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1401.  Agreement To Subordinate

  	
   

  
	
  SECTION 1402.  Liquidation, Dissolution, Bankruptcy

  	
   

  
	
  SECTION 1403.  Default on Designated Senior Indebtedness of
  the Company

  	
   

  
	
  SECTION 1404.  Acceleration of Payment of Securities

  	
   

  
	
  SECTION 1405.  When Distribution Must Be Paid Over

  	
   

  
	
  SECTION 1406.  Subrogation

  	
   

  
	
  SECTION 1407.  Relative Rights

  	
   

  
	
  SECTION 1408.  Subordination May Not Be Impaired by
  Company

  	
   

  
	
  SECTION 1409.  Rights of Trustee and Paying Agent

  	
   

  
	
  SECTION 1410.  Distribution or Notice to Representative

  	
   

  
	
  SECTION 1411.  Article Fourteen Not To Prevent Events
  of Default or Limit Right To Accelerate

  	
   

  
	
  SECTION 1412.  Trust Moneys Not Subordinated

  	
   

  
	
  SECTION 1413.  Trustee Entitled To Rely

  	
   

  
	
  SECTION 1414.  Trustee To Effectuate Subordination

  	
   

  
	
  SECTION 1415.  Trustee Not Fiduciary for Holders of
  Senior Indebtedness of the Company

  	
   

  
	
  SECTION 1416.  Reliance by Holders of Senior Indebtedness
  of the Company on Subordination Provisions

  	
   

  

 

	
   

  	
  APPENDIX &
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Rule 144A
  / Regulation S Appendix

  	
   

  
	
   

  	
  EXHIBIT 1 to Rule 144A /
  Regulation S Appendix – Form of Initial Note

  	
   

  
	
   

  	
  EXHIBIT 2 to Rule 144A /
  Regulation S Appendix – Form of Transferee Letter of Representation

  	
   

  
	
   

  	
  EXHIBIT 3 to Rule 144A /
  Regulation S Appendix – Form of Non-U.S. Beneficial Ownership
  Certification by Euroclear or Clearstream Luxembourg

  	
   

  

 

v

 

	
   

  	
  EXHIBIT A

  	
  – Form of Exchange Security or Private
  Exchange Security

  	
   

  
	
   

  	
  EXHIBIT B

  	
  – Form of Supplemental Indenture

  	
   

  

 

vi

 

SENIOR
SUBORDINATED INDENTURE 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 MARCUS
GROUP, 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.’s direct and indirect
Domestic Subsidiaries (as defined below), each named in Schedule I hereto
(each, a “Subsidiary Guarantor” and collectively,
the “Subsidiary Guarantors”), and WELLS FARGO
BANK, NATIONAL ASSOCIATION, as Trustee (the “Trustee”).

 

RECITALS

 

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

 

Holdings and
the Subsidiary Guarantors have each duly authorized their Guarantee of the
Initial Notes and, if and when issued, the Exchange Notes, and to provide
therefor Holdings and the Subsidiary Guarantors have each duly authorized the
execution and delivery of this Indenture.

 

All things
necessary have been done to make the Notes, when executed by the Company and
authenticated and delivered hereunder and duly issued by the Company, the valid
and legally binding obligations of the Company and to make this Indenture a
valid and legally binding agreement of the Company, in accordance with their
and its terms.

 

All things
necessary have been done to make the Guarantees, upon execution and delivery of
this Indenture, the valid obligations of each Guarantor and to make this
Indenture a valid and legally binding agreement of each Guarantor, in
accordance with their and its terms.

 

NOW,
THEREFORE, THIS INDENTURE WITNESSETH:

 

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

 

 

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS

OF GENERAL APPLICATION

 

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

 

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

 

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

 

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

 

(4)  all
references to Articles, Sections, Exhibits and Appendices shall be construed to
refer to Articles and Sections of, and Exhibits 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 originally issued shall refer to the
Issue Date; and

 

(8)  all
references, in any context, to any interest or other amount payable on or with
respect to the Notes shall be deemed to include any Additional Interest (as
herein defined) pursuant to the Registration Rights Agreement.

 

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

 

(1)           “Commission”
means the SEC;

 

(2)           “indenture
securities” means the Notes and the Guarantees;

 

(3)           “indenture
security holder” means a Holder;

 

(4)           “indenture
to be qualified” means this Indenture;

 

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

 

2

 

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

 

All other TIA
terms used in this Indenture that are defined by the TIA, defined by TIA
reference to another statute or defined by SEC rule have the meanings
assigned to them by such definitions.

 

SECTION 102.  Definitions.

 

“Acquired Indebtedness” means, with
respect to any specified Person,

 

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

 

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

 

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

 

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

 

“Additional Interest Notice”
has the meaning specified in Section 1019 of this Indenture.

 

“Additional Notes” means any Notes issued
by the Company pursuant to Section 312.

 

“Adjusted Net Assets” has the meaning
specified in Section 1205 of this Indenture.

 

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

 

“Affiliate Transaction” has the meaning
specified in Section 1013 of this Indenture.

 

3

 

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

 

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

 

(2)           the
excess, if any, of:

 

(a)           the
present value at such Redemption Date of (i) the redemption price of the
Note at October 15, 2010 (such redemption price being set forth in the
table appearing in Section 1101(b)), plus
(ii) all required interest payments due on the Note through October 15,
2010 (excluding accrued but unpaid interest to the Redemption Date), computed
using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over

 

(b)           the
principal amount of the Note.

 

“Asset Sale” means

 

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

 

(2)           the
issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a
single transaction or a series of related transactions,

 

in each case,
other than:

 

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

 

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

 

(c)           the
making of any Permitted Investment or the making of any Restricted Payment that
is not prohibited by Section 1010 of this Indenture;

 

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

 

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

 

4

 

(f)            to
the extent allowable under Section 1031 of the Internal Revenue Code of
1986, any exchange of like property (excluding any boot thereon) for use in a
Similar Business;

 

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

 

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

 

(i)            foreclosures
on assets;

 

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

 

(k)           the
unwinding of any Hedging Obligations.

 

“Asset Sale Offer” has the meaning
specified in Section 1018 of this Indenture.

 

“Attributable Debt” in
respect of a Sale and Lease-Back Transaction means, as at the time of
determination, the present value (discounted at the interest rate borne by the
Notes, compounded annually) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Sale and
Lease-Back Transaction (including any period for which such lease has been
extended); provided, however,
that if such Sale and Lease-Back Transaction results in a Capitalized Lease
Obligation, the amount of Indebtedness represented thereby shall be determined
in accordance with the definition of “Capitalized Lease Obligation”.

 

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

 

“Blockage Notice” has the meaning
specified in Section 1403 of this Indenture.

 

“Board of Directors” means:

 

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

 

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

 

5

 

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

 

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

 

“Business Day” means each
day that is not a Legal Holiday.

 

“Capital Stock” means

 

(1)           in
the case of a corporation, corporate stock,

 

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

 

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

 

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

 

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

 

“Cash Equivalents” means

 

(1)           United
States of America dollars,

 

(2)           (a)           Canadian
dollars,

 

(b)           Japanese
yen,

 

(c)           pounds
sterling,

 

(d)           euro
or

 

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

 

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

 

6

 

(4)           certificates
of deposit, time deposits and eurodollar time deposits with maturities of one
year or less from the date of acquisition, bankers’ acceptances with maturities
not exceeding one year and overnight bank deposits, in each case with any
commercial bank having capital and surplus in excess of $250.0 million,

 

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

 

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

 

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

 

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

 

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

 

Notwithstanding
the foregoing, Cash Equivalents shall include amounts denominated in currencies
other than those set forth in clauses (1) and (2) above; provided that such amounts are converted
into one or more of the currencies set forth in clauses (1) and (2) above
as promptly as practicable and in any event within ten Business Days following
the receipt of such amounts.

 

“Change of Control” means
the occurrence of any of the following:

 

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

 

(2)           the
Company becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of
the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by
any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act, or any successor provision), including any group acting for
the purpose of acquiring, holding or disposing of securities (within the
meaning of Rule 13d-5(b)(1) under the Exchange Act, or any successor provision),
other than the Permitted Holders, in a single transaction or in a series of
related transactions, by way of merger, consolidation or other business
combination or purchase of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act, or any successor

 

7

 

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

 

“Change of Control Offer” has the meaning
specified in Section 1017 of this Indenture.

 

“Change of Control Payment” has the
meaning specified in Section 1017 of this Indenture.

 

“Change of Control Payment Date” has the
meaning specified in Section 1017 of this Indenture.

 

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

 

“Common Stock” means, with respect to any Person, any and all
shares, interest, participations and other equivalents (however designated,
whether voting or non-voting) of such Person’s common equity interests, whether
now outstanding or issued after the date of this Indenture, 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 have
become such pursuant to the applicable provisions of this Indenture, and
thereafter, “Company” shall mean such successor Person; provided that when used in the context of
determining the fair market value of an asset or liability under this
Indenture, “Company” shall, unless otherwise expressly stated, be deemed to
mean the Board of Directors of the Company when the fair market value of such
asset or liability is equal to or in excess of $100.0 million.

 

“Company Request” or “Company Order” means a written request or order signed in
the name of the Company by two Officers or one Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company, and delivered to the
Trustee.

 

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

 

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

 

8

 

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

 

(a)           consolidated
interest expense of such Person and its Restricted Subsidiaries for such
period, to the extent such expense was deducted in computing Consolidated Net
Income (including (a) amortization of original issue discount resulting
from the issuance of Indebtedness at less than par, (b) all commissions,
discounts and other fees and charges owed with respect to letters of credit or
bankers’ acceptances, (c) noncash interest payments (but excluding any
noncash interest expense attributable to the movement in the mark-to-market
valuation of Hedging Obligations or other derivative instruments pursuant to
GAAP), (d)  the interest component of Capitalized Lease Obligations and (e) net
payments, if any, pursuant to interest rate Hedging Obligations with respect to
Indebtedness, and excluding (i) any expense resulting from the discounting
of the Existing 2028 Debentures as a result of the application of purchase
accounting in connection with the Transactions, (ii) Additional Interest, (iii) amortization
of deferred financing fees, debt issuance costs, commissions, fees and
expenses, (iv) any expensing 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 paid in connection with the redemption of the Existing
2008 Notes), plus

 

(b)           consolidated
capitalized interest of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued, less

 

(c)           interest
income for such period.

 

For purposes
of this definition, interest on a Capitalized Lease Obligation shall be deemed
to accrue at an interest rate reasonably determined by such Person to be the
rate of interest implicit in such Capitalized Lease Obligation in accordance
with GAAP.

 

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

 

“Consolidated Net Income”
means, with respect to any Person for any period, the aggregate of the Net
Income of such Person and its Restricted Subsidiaries for

 

9

 

such period, on a consolidated basis, and
otherwise determined in accordance with GAAP; provided
that, without duplication,

 

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

 

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

 

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

 

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

 

(5)           the
Net Income for such period of any Person that is not a Subsidiary, or is an
Unrestricted Subsidiary, or that is accounted for by the equity method of
accounting, shall be excluded; provided that
Consolidated Net Income of the Company shall be increased by the amount of
dividends or distributions or other payments that are actually paid in cash (or
to the extent converted into cash) to the referent Person or a Restricted
Subsidiary thereof in respect of such period (subject in the case of dividends,
distributions or other payments made to a Restricted Subsidiary to the
limitations contained in clause (6) below),

 

(6)           solely
for the purpose of determining the amount available for Restricted Payments
under clause (C)(1) of Section 1010(a) of this Indenture,
the Net Income for such period of any Restricted Subsidiary (other than any
Subsidiary Guarantor) shall be excluded if the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of its Net
Income is not at the date of determination wholly permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule, or governmental regulation applicable
to that Restricted Subsidiary or its stockholders, unless such restriction with
respect to the payment of dividends or similar distributions has been legally
waived; provided that Consolidated Net Income of
the Company shall be increased by the amount of dividends or other
distributions or other payments actually paid in cash (or to the extent
converted into cash) to the Company or a Restricted Subsidiary thereof in
respect of such period, to the extent not already included therein,

 

10

 

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

 

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

 

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

 

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

 

Notwithstanding
the foregoing, for the purpose of Section 1010(a) of this Indenture
only (other than clause (C)(4) thereof), there shall be excluded from
Consolidated Net Income any income arising from any sale or other disposition
of Restricted Investments made by the Company and the Restricted Subsidiaries,
any repurchases and redemptions of Restricted Investments from the Company and
the Restricted Subsidiaries, any repayments of loans and advances that
constitute Restricted Investments by the Company or any Restricted Subsidiary,
any sale of the stock of an Unrestricted Subsidiary or any distribution or
dividend from an Unrestricted Subsidiary, in each case only to the extent such
amounts increase the amount of Restricted Payments permitted under Section 1010(a) of
this Indenture pursuant to clause (C)(4) thereof; provided, however, that any income arising from any sale or
other disposition of Equity Interests in Kate Spade or any Extraordinary
Distribution shall be excluded from Consolidated Net Income for the purpose of Section 1010
of this Indenture only.

 

“Consolidated Total Indebtedness”
means, as at any date of determination, an amount equal to the sum of (1) the
aggregate amount of all outstanding Indebtedness of the Company and the
Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for
borrowed money, Obligations in respect of Capitalized Lease Obligations,
Attributable Debt in respect of Sale and Lease-Back Transactions and debt obligations
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or bankers’ acceptances (and excluding (x) any undrawn letters of
credit issued in the ordinary course of business and (y) all obligations
relating to Receivables Facilities) and (2) the aggregate amount of all
outstanding Disqualified Stock of the Company and all Disqualified Stock and
Preferred Stock of the Restricted Subsidiaries (excluding items eliminated in
consolidation), with the amount of such Disqualified Stock and Preferred Stock
equal to the greater of their respective voluntary or involuntary liquidation
preferences and Maximum Fixed Repurchase Prices, in each case determined on a
consolidated basis in accordance with GAAP.

 

11

 

For purposes
hereof, the “Maximum Fixed Repurchase Price”
of any Disqualified Stock or Preferred Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock or Preferred Stock as if such Disqualified Stock or
Preferred Stock were purchased on any date on which Consolidated Total
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Stock or Preferred Stock, such fair market value shall be
determined reasonably and in good faith by the Company.

 

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

 

(1)           to
purchase any such primary obligation or any property constituting direct or
indirect security therefor,

 

(2)           to
advance or supply funds

 

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

 

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

 

(3)           to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation against loss in respect thereof.

 

“Corporate Trust Office” means the
principal corporate trust office of the Trustee, at which at any particular
time its corporate trust business shall be administered, which office at the
date 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 for
payment or for registration of transfer or exchange, such term shall mean the office
or agency of the Trustee at which, at any particular time, its corporate agency
business shall be conducted.

 

“Covenant Defeasance” has the meaning
specified in Section 1303 of this Indenture.

 

“Credit Card Sale” means
the sale from The Neiman Marcus Group, Inc. to HSBC Bank Nevada, N.A., of
The Neiman Marcus Group, Inc.’s private label credit card accounts and
related receivables and other assets, pursuant to a Purchase, Sale and
Servicing Transfer Agreement, dated as of June 8, 2005, among HSBC Bank
Nevada, N.A., HSBC Finance Corporation, The Neiman Marcus Group, Inc. and
Bergdorf Goodman, Inc. (it being understood that such sale was consummated
on July 7, 2005).

 

12

 

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

 

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

 

“Depository” means The Depository Trust
Company, its nominees and their respective successors.

 

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

 

“Designated Preferred Stock”
means Preferred Stock of the Company or any parent company thereof (in each
case other than Disqualified Stock) that is issued for cash (other than to a
Restricted Subsidiary) and is so designated as Designated Preferred Stock
pursuant to an Officers’ Certificate executed by an executive vice president
and the principal financial officer of the Company or the applicable parent
company thereof, as the case may be, on the issuance date thereof, the cash
proceeds of which are excluded from the calculation set forth in clause (C) of
Section 1010(a) of this Indenture.

 

“Designated Senior Indebtedness” means:

 

(1)           any
Indebtedness outstanding under the Senior Credit Facilities;

 

(2)           any
Indebtedness outstanding under the Senior Indenture; and

 

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

 

“Disqualified Stock” means, with respect
to any Person, any Capital Stock of such Person which, by its terms, or by the
terms of any security into which it is convertible or for which it is putable
or exchangeable, or upon the happening of any event, matures or is mandatorily
redeemable (other than solely for Capital Stock that is not Disqualified Stock),
other than as a result of a change of control or asset sale, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, other than as a result of a change of control or asset sale, in
whole or in part, in each case prior to the date that is 91 days after the
earlier of the maturity date of the Notes and the date the Notes are no longer
Outstanding; provided that if such Capital
Stock is issued to any plan for the benefit of employees of the Company or its
Subsidiaries or by any such plan to such employees, such Capital Stock shall
not

 

13

 

constitute Disqualified Stock solely because
it may be required to be repurchased by the Company or its Subsidiaries in
order to satisfy applicable statutory or regulatory obligations.

 

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

 

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

 

(1)           increased
by (without duplication):

 

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

 

(b)           consolidated
Fixed Charges of such Person for such period to the extent the same was
deducted in calculating Consolidated Net Income, plus

 

(c)           Consolidated
Depreciation and Amortization Expense of such Person for such period to the
extent such depreciation and amortization were deducted in computing
Consolidated Net Income, plus

 

(d)           any
expenses or charges related to any Equity Offering, Permitted Investment,
acquisition, disposition, recapitalization or the incurrence of Indebtedness
permitted to be incurred by this Indenture including a refinancing thereof
(whether or not successful) and any amendment or modification to the terms of
any such transactions, including such fees, expenses or charges related to the
Transactions and the Credit Card Sale (including any one-time costs associated
with entering into any program agreements or servicing agreements directly
related to the Credit Card Sale, but not any payments required or contemplated
by such agreements, other than payments in respect of transition services
provided thereunder prior to the first anniversary of the Credit Card Sale), in
each case, deducted in computing Consolidated Net Income, plus

 

(e)           the
amount of any restructuring charge or reserve deducted in such period in
computing Consolidated Net Income, including any one-time costs incurred in
connection with (x) acquisitions after the Issue Date or (y) the
closing of any stores or distribution centers after the Issue Date, plus

 

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

 

14

 

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

 

(h)           the
amount of management, monitoring, consulting and advisory fees and related
expenses paid (or any accruals related to such fees or related expenses) during
such period to the Sponsors to the extent permitted under Section 1013 of
this Indenture, plus

 

(i)            the
amount of net cost savings projected by the Company in good faith to be
realized as a result of specified actions taken during such period (calculated
on a pro forma basis as though such cost
savings had been realized on the first day of such period), net of the amount
of actual benefits realized during such period from such actions; provided that (x) such cost savings are reasonably
identifiable and factually supportable, (y) such actions are taken within
36 months after the Issue Date and (z) the aggregate amount of cost
savings added pursuant to this clause (i) shall not exceed
$50.0 million for any four consecutive quarter period (which adjustments
may be incremental to pro forma
adjustments made pursuant to the second paragraph of the definition of “Fixed
Charge Coverage Ratio”), plus

 

(j)            any
costs or expenses incurred by the Company or a Restricted Subsidiary pursuant
to any management equity plan or stock option plan or any other management or
employee benefit plan or agreement or any stock subscription or stockholders
agreement, to the extent that such costs or expenses are funded with cash
proceeds contributed to the capital of the Company or net cash proceeds of
issuance of Equity Interests of the Company (other than Disqualified Stock that
is Preferred Stock) in each case, solely to the extent that such cash proceeds
are excluded from the calculation set forth in clause (C) of Section 1010(a) of
this Indenture;

 

(2)           decreased
by (without duplication) noncash gains increasing Consolidated Net Income of
such Person for such period, excluding any gains that represent the reversal of
any accrual of, or cash reserve for, anticipated cash charges in any prior
period (other than such cash charges that have been added back to Consolidated
Net Income in calculating EBITDA in accordance with this definition); and

 

(3)           increased
or decreased, as applicable, by (without duplication):

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

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

 

(c)           an
issuance to any Subsidiary of the Company.

 

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

 

“Event of Default” has the meaning
specified in Section 501 of this Indenture.

 

“Excess Proceeds” has the meaning
specified in Section 1018 of this Indenture.

 

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

 

“Exchange Notes” has the meaning
specified in the first recital of this Indenture.  Unless the context otherwise requires, all
references to the Exchange Notes shall include 103/8%
Senior Subordinated Exchange Notes Due 2015 issued in exchange for any
Additional Notes.

 

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

 

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

 

“Excluded Contribution” means net cash
proceeds, marketable securities or Qualified Proceeds received by the Company
from

 

16

 

(a)           contributions
to its common equity capital, and

 

(b)           the
sale (other than to a Subsidiary of the Company or to any management equity
plan or stock option plan or any other management or employee benefit plan or
agreement of the Company) of Capital Stock (other than Disqualified Stock and
Designated Preferred Stock) of the Company,

 

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

 

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

 

“Existing Indenture” means the Indenture
dated 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 Existing
2008 Notes and the Existing 2028 Debentures have been issued, as the
same may be amended from time to time.

 

“Existing 2008 Notes” means the
$125,000,000 aggregate principal amount of 6.65% senior notes due 2008 issued
by 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 2028
issued by The Neiman Marcus Group, Inc. pursuant to the Existing
Indenture.

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

(a)           Consolidated
Interest Expense of such Person for such period,

 

(b)           all
cash dividend payments (excluding items eliminated in consolidation) on any
series of Preferred Stock during such period, and

 

18

 

(c)           all
cash dividend payments (excluding items eliminated in consolidation) on any
series of Disqualified Stock made during such period.

 

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

 

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

 

“Funding Guarantor” has the meaning
specified in Section 1205 of this Indenture.

 

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

 

“Government Securities” means securities
that are

 

(a)           direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or

 

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

 

which, in
either case, are not callable or redeemable at the option of the issuers
thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian with
respect to any such Government Securities or a specific payment of principal of
or interest on any such Government Securities held by such custodian for the
account of the holder of such depository receipt; provided
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Securities or
the specific payment of principal of or interest on the Government Securities
evidenced by such depository receipt.

 

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

 

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

 

“Guarantor” means any of the Subsidiary
Guarantors and Holdings.

 

19

 

“Hedging Obligations” means, with respect
to any Person, the obligations of such Person under currency exchange, interest
rate or commodity swap agreements, currency exchange, interest rate or
commodity cap agreements and currency exchange, interest rate or commodity
collar agreements and other agreements or arrangements, in each case designed
to protect such Person against fluctuations in currency exchange, interest
rates or commodity prices.

 

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

 

“Holdings” means Newton
Acquisition, Inc. and its successors.

 

“incur” has the meaning specified in Section 1011
of this Indenture.

 

“incurrence” has the meaning specified in
Section 1011 of this Indenture.

 

“Indebtedness” means,
with respect to any Person,

 

(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, debentures or similar instruments or letters of credit or
bankers’ acceptances (or, without double counting, reimbursement agreements in
respect thereof),

 

(3)           representing
the balance deferred and unpaid of the purchase price of any property
(including Capitalized Lease Obligations), except any such balance that
constitutes a trade payable or similar obligation to a trade creditor, in each
case accrued in the ordinary course of business, or

 

(4)           representing
any Hedging Obligations,

 

if and to the extent that any of the
foregoing Indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet (excluding the footnotes
thereto) of such Person prepared in accordance with GAAP,

 

(b)           to
the extent not otherwise included, any obligation by such Person to be liable
for, or to pay, as obligor, guarantor or otherwise, on the obligations of the
type referred to in clause (a) of another Person (whether or not such
items would appear upon the balance sheet of such obligor or guarantor), other
than by endorsement of negotiable instruments for collection in the ordinary
course of business,

 

(c)           to
the extent not otherwise included, the obligations of the type referred to in
clause (a) of another Person secured by a Lien on any asset owned

 

20

 

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

 

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

 

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

 

“Indenture” means this instrument as
originally executed and as it may from time to time be supplemented or amended
by one or more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof, including, for all purposes of this Indenture and
any such supplemental indenture, the provisions of the Trust Indenture Act that
are deemed to be part of and govern this instrument and any such supplemental
indenture, respectively.

 

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

 

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

 

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

 

“Interest Payment Date” means the Stated
Maturity of an installment of interest on the Notes.

 

“Investment Grade Securities” means:

 

(1)           securities
issued or directly and fully guaranteed or insured by the government of the
United States of America or any agency or instrumentality thereof (other than
Cash Equivalents),

 

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

 

21

 

(3)           investments
in any fund that invests exclusively in investments of the type described in
clauses (1) and (2), which fund may also hold immaterial amounts of cash
pending investment or distribution and

 

(4)           corresponding
instruments in countries other than the United States of America customarily
utilized for high quality investments.

 

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

 

(1)           “Investments”
shall include the portion (proportionate to the Company’s equity interest in
such Subsidiary) of the fair market value of the net assets of a Subsidiary of
the Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided that upon a redesignation of
such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to
continue to have a permanent “Investment” in an Unrestricted Subsidiary 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 fair market value of the net assets of such Subsidiary at the time of such
redesignation; and

 

(2)           any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Company.

 

“Issue Date” means October 6, 2005.

 

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

 

“Legal Defeasance” has the meaning
specified in Section 1302 of this Indenture.

 

22

 

“Legal Holiday” means a Saturday, a
Sunday or a day on which banking institutions are not required to be open in
the State of New York.

 

“Lien” means, with respect to any asset,
any mortgage, lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law, including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent 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 of transmittal to be
prepared by the Company and sent to all Holders for use by such Holders in
connection with the Exchange Offer.

 

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

 

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

 

“Merger” means the merger of Newton
Acquisition Merger Sub, Inc. with and into The Neiman Marcus Group, Inc.
pursuant to the Merger Agreement.

 

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

 

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

 

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

 

“Net Proceeds” means the
aggregate cash proceeds received by the Company or any Restricted Subsidiary in
respect of any Asset Sale, including any cash received upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset Sale,
net of the direct costs relating to such Asset Sale and the sale or disposition
of such Designated Noncash Consideration, including legal, accounting and
investment banking fees, and brokerage and sales commissions, any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts required to be applied to the repayment
of principal, premium, if any, and 

 

23

 

interest on Indebtedness required (other than
by clause (1) of Section 1018(b) of this Indenture) to be
paid as a result of such transaction and any deduction of appropriate amounts
to be provided by the Company as a reserve in accordance with GAAP against any
liabilities associated with the asset disposed of in such transaction and
retained by the Company after such sale or other disposition thereof, including
pension and other post-employment benefit liabilities and liabilities related
to environmental matters or against any indemnification obligations associated
with such transaction.

 

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

 

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

 

“Non-U.S.
Person” means a Person who is not a U.S. Person.

 

“Note Register” and “Note
Registrar” have the respective meanings specified in Section 304.

 

“Notes” has the meaning stated in the
first recital of this Indenture and more particularly means any Notes
authenticated and delivered under this Indenture.  The Initial Notes and the Additional Notes
shall be treated as a single class for all purposes of this Indenture, and
unless the context otherwise requires, all references to the Notes shall
include the Initial Notes, any Additional Notes and the Exchange Notes issued
in exchange for the Initial Notes and any Additional Notes.

 

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

 

“Offering Circular” means the Offering
Circular 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,
any Executive Vice President, Senior Vice President or Vice President, the
Treasurer or the Secretary of the Company.

 

“Officers’ Certificate”
means a certificate signed on behalf of the Company by two Officers of the
Company, one of whom must be the principal executive officer, the principal financial
officer, the treasurer or the principal accounting officer of the Company, that
meets the requirements set forth in this Indenture.

 

“Opinion
of Counsel” means a written opinion from legal
counsel. The counsel may be an employee of or counsel to the Company.

 

24

 

“Outstanding”, when used with respect to
Notes, means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture, except:

 

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

 

(2)           Notes,
or portions thereof, for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of
such Notes; provided that, if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;

 

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

 

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

 

provided, however, that in determining whether
the Holders of the requisite principal amount of Outstanding Notes have given
any request, demand, authorization, direction, consent, notice or waiver
hereunder, and for the purpose of making the calculations required by TIA Section 313,
Notes owned by the Company or any other obligor upon the Notes or any Affiliate
of the Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which a Responsible Officer of
the Trustee actually knows to be so owned shall be so disregarded.

 

“pay the Notes” has the meaning specified
in Section 1403 of this Indenture.

 

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

 

“Payment Blockage Period” has the meaning
specified in Section 1403 of this Indenture.

 

“Payment Default” has the meaning
specified in Section 1403 of this Indenture.

 

25

 

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

 

“Permitted Holders” means each of the
Sponsors, the Co-Investors and members of management of the Company (or its
direct parent) who are holders of Equity Interests of the Company (or any of
its 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) of
the Exchange Act, or any successor provision) of which any of the foregoing are
members; provided that, in the case of such group
and without giving effect to the existence of such group or any other group,
the Sponsors, the Co-Investors and members of management, collectively, have
beneficial ownership of more than 50% of the total voting power of the Voting
Stock of the Company or any of its direct or indirect parent companies. Any
Person or group whose acquisition of beneficial ownership constitutes a Change
of Control in respect of which a Change of Control Offer is made in accordance
with the requirements of this Indenture shall thereafter, together with its
Affiliates, constitute an additional Permitted Holder.

 

“Permitted Investments” means:

 

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

 

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

 

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

 

(1)           such
Person becomes a Restricted Subsidiary of the Company or

 

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

 

(ii)           any
Investment held by such Person;

 

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

 

26

 

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

 

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

 

(g)           any
Investment acquired by the Company or any Restricted Subsidiary

 

(1)           in
exchange for any other Investment or accounts receivable held by the Company or
any such Restricted Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the Person in which
such other Investment is made or which is the obligor with respect to such
accounts receivable or

 

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

 

(h)           Hedging
Obligations permitted under clause (12) of Section 1011(b) of
this Indenture;

 

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

 

(j)            Investments
the payment for which consists of Equity Interests of the Company, or any of
its direct or indirect parent companies (exclusive of Disqualified Stock); provided that such Equity Interests shall not increase the
amount available for Restricted Payments under clause (C) of Section 1010(a) of
this Indenture;

 

(k)           guarantees
of Indebtedness permitted under Section 1011 of this Indenture and
performance guarantees in the ordinary course of business;

 

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

 

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

 

27

 

(n)           Investments
in a Similar Business having an aggregate fair market value, taken together
with all other Investments made pursuant to this clause (n) that are at
that time outstanding (without giving effect to the sale of an Unrestricted
Subsidiary to the extent the proceeds of such sale do not consist of cash or
marketable securities), not to exceed the greater of
(x) $100.0 million and (y) 1.5% of Total Assets at the time of
such Investment (with the fair market value of each Investment being measured
at the time made and without giving effect to subsequent changes in value);

 

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

 

(p)           additional
Investments having an aggregate fair market value, taken together with all
other Investments made pursuant to this clause (p) that are at that time
outstanding (without giving effect to the sale of an Unrestricted Subsidiary to
the extent the proceeds of such sale do not consist of cash or marketable
securities), not to exceed $150.0 million (with the fair market value of
each Investment being measured at the time made and without giving effect to
subsequent changes in value).

 

“Permitted Junior Securities” means:

 

(1)           Equity
Interests in the Company, any Subsidiary Guarantor or any direct or indirect
parent of the Company; or

 

(2)           unsecured
debt securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to substantially the
same extent as, or to a greater extent than, the Notes and the related
Guarantees are subordinated to Senior Indebtedness under this Indenture;

 

provided
that the term “Permitted Junior Securities” shall not include any securities
distributed pursuant to a plan of reorganization if the Indebtedness under the
Senior Credit Facilities is, or any of the Senior Notes, the Existing 2008 Notes
and the Existing 2028 Debentures are, treated as part of the same class as the
Notes for purposes of such plan of reorganization.

 

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

 

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

 

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

 

28

 

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

 

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

 

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

 

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

 

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

 

(7)           Liens
existing on the Issue Date;

 

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

 

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

 

29

 

(10)         Liens
securing Indebtedness or other obligations of a Restricted Subsidiary owing to
the Company or another Restricted Subsidiary permitted to be incurred in
accordance with Section 1011 of this Indenture;

 

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

 

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

 

(13)         Liens
arising from financing statement filings under the Uniform Commercial Code or
similar state laws regarding operating leases entered into by the Company and
its Restricted Subsidiaries in the ordinary course of business;

 

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

 

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

 

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

 

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

 

(18)         Liens
securing Indebtedness 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 securing
Indebtedness permitted to be incurred pursuant to clause (19) thereof are
solely on acquired property or the assets of the acquired entity, as the case
may be and (B) Liens securing Indebtedness permitted to be incurred
pursuant to clause (20) thereof extend only to the assets of Foreign
Subsidiaries;

 

30

 

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

 

(20)         Liens
securing judgments for the payment of money not constituting an Event of
Default under clause (5) of Section 501 of this Indenture, so
long as such Liens are adequately bonded and any appropriate legal proceedings
that may have been duly initiated for the review of such judgment have not been
finally terminated or the period within which such proceedings may be initiated
has not expired;

 

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

 

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

 

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

 

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

 

(25)         Liens
deemed to exist in connection with Investments in repurchase agreements
permitted under Section 1011 of this Indenture; provided
that such Liens do not extend to any assets other than those assets that are
the subject of such repurchase agreement; and

 

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

 

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

 

31

 

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

 

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

 

“Protected Purchaser” has the meaning
specified in Section 305 of this Indenture.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Refinancing Indebtedness” has the
meaning specified in Section 1011 of this Indenture.

 

“Refunding Capital Stock” has the meaning
specified in Section 1010 of this Indenture.

 

32

 

“Registration Rights Agreement” means the
Registration Rights Agreement dated as of the Issue Date, among the Company,
Holdings, the Subsidiary Guarantors and the Initial Purchasers and, with
respect to any Additional Notes, one or more registration rights agreements
among the Company, Holdings, the Subsidiary Guarantors and the other parties
thereto, as such agreement(s) may be amended, modified or supplemented from
time to time, relating to rights given by the Company to the purchasers of
Additional Notes to register such Additional Notes under the Securities Act.

 

“Regular Record Date” has the meaning
specified 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 the Company or a
Restricted Subsidiary in exchange for assets transferred by the Company or a
Restricted Subsidiary shall not be deemed to be Related Business Assets if they
consist of securities of a Person, unless upon receipt of the securities of
such Person, such Person would become a Restricted Subsidiary.

 

“Representative” means, with respect to a
person, any trustee, agent or representative (if any) for an issue of Senior
Indebtedness of such Person.

 

“Responsible Officer”, when used with
respect to the Trustee, means any vice president, any assistant treasurer, any
trust officer or assistant trust officer, or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above-designated
officers, and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject and who shall have direct responsibility
for the administration of this Indenture.

 

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

 

“Restricted Payments” has the meaning
specified in Section 1010 of this Indenture.

 

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

 

“Retired Capital Stock” has the meaning
specified in Section 1010 of this Indenture.

 

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

 

33

 

lenders thereunder and Deutsche Bank Trust
Company Americas, as Administrative Agent, including any guarantees, collateral
documents, instruments and agreements executed in connection therewith, and any
amendments, supplements, modifications, extensions, replacements, renewals,
restatements, refundings or refinancings thereof and any indentures or credit
facilities or commercial paper facilities with banks or other institutional
lenders or investors that extend, replace, refund, refinance, renew or defease
any part of the loans, notes, other credit facilities or commitments
thereunder, including any such replacement, refunding or refinancing facility
or indenture that increases the amount borrowable thereunder or alters the
maturity thereof (provided that such increase in
borrowings is permitted under Section 1011 of this Indenture).

 

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

 

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

 

“SEC” means the Securities and Exchange
Commission.

 

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

 

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

 

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

 

“Senior Indebtedness” means with respect
to any Person:

 

(1)                                  all
Indebtedness of such Person, whether outstanding on the Issue Date or
thereafter incurred; and

 

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

 

unless, in the
case of clauses (1) and (2), the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness or other Obligations are subordinate in right of payment to or pari passu in right of payment with the Notes or the
Guarantee of such Person, as the case may be; provided
that Senior Indebtedness shall not include:

 

34

 

(1)                                  any
obligation of such Person to the Company or any Subsidiary or to any joint
venture in which the Company or any Restricted Subsidiary has an interest;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Significant Subsidiary” means any
Restricted 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 on
the date hereof.

 

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

 

35

 

“Special Record Date” for the payment of
any Defaulted Interest means a date fixed by the Trustee pursuant to Section 306.

 

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

 

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

 

“Subordinated Indebtedness” means:

 

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

 

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

 

“Subsidiary” means, with
respect to any Person,

 

(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 the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time of determination owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof and

 

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

 

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

 

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

 

“Subsidiary Guarantee”
means the guarantee by any Subsidiary Guarantor of the Company’s Obligations
under this Indenture and the Notes.

 

“Subsidiary Guarantor”
means each Restricted Subsidiary of the Company that executes this Indenture as
a guarantor on the Issue Date and each other

 

36

 

Restricted Subsidiary of the Company that
thereafter guarantees the Notes pursuant to the terms of this Indenture.

 

“Successor Company” has the meaning
specified in Section 801 of this Indenture.

 

“Successor Person” has the meaning
specified in Section 802 of this Indenture.

 

“Term Loan Facility”
means the credit facility provided under the Senior Secured Term Loan
Agreement, to be entered into as of the Issue Date, among the Company,
Holdings, the lenders party thereto in their capacity as lenders and Credit
Suisse, as Administrative Agent, including any guarantees, collateral
documents, instruments and agreements executed in connection therewith, and any
amendments, supplements, modifications, extensions, replacements, renewals,
restatements, refundings or refinancings thereof and any indentures or credit
facilities or commercial paper facilities with banks or other institutional
lenders or investors that extend, replace, refund, refinance, renew or defease
any part of the loans, notes, other credit facilities or commitments
thereunder, including any such replacement, refunding or refinancing facility
or indenture that increases the amount borrowable thereunder or alters the
maturity thereof (provided that such increase in
borrowings is permitted under Section 1011 of this Indenture).

 

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

 

“Transactions” means the Merger,
including the payment of the merger consideration in connection therewith, the
investment by the Sponsors, members of management and the Co-Investors, the
issuance of the New Notes and the execution of, and borrowings on the Issue
Date under, the Senior Credit Facilities as in effect on the Issue Date, the
pledge and security arrangements in connection with the foregoing, the
refinancing of certain Indebtedness in connection with the foregoing (including
the redemption of the Existing 2008 Notes) and the related transactions
described in the Offering Circular, in particular as described under the section thereof
entitled “The Transactions”.

 

“Treasury Rate” means, as of any Redemption
Date, the yield to maturity as of such Redemption Date of United States
Treasury securities with a constant maturity (as compiled and published in the
most recent Federal Reserve Statistical Release H.15 (519) that has become
publicly available at least two Business Days prior to the Redemption Date (or,
if such Statistical Release is no longer published, any publicly available
source of similar market data)) most nearly equal to the period from the Redemption
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 United States
Treasury securities adjusted to a constant maturity of one year shall be used.

 

37

 

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

 

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

 

“Uniform Commercial Code” means the New
York Uniform Commercial Code as in effect from time to time.

 

“Unrestricted Subsidiary” means:

 

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

 

(2)                                  any
Subsidiary of an Unrestricted Subsidiary.

 

The Company
may designate any Subsidiary of the Company (including any existing Subsidiary
and any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity
Interests or Indebtedness of, or owns or holds any Lien on, any property of,
the Company or any Subsidiary of the Company (other than any Subsidiary of the
Subsidiary to be so designated); provided that

 

(a)                                  any
Unrestricted Subsidiary must be an entity of which shares of the capital stock
or other equity interests (including partnership interests) entitled to cast at
least a majority of the votes that may be cast by all shares or equity
interests having ordinary voting power for the election of directors or other
governing body are owned, directly or indirectly, by the Company,

 

(b)                                 such
designation complies with Section 1010 of this Indenture and

 

(c)                                  each
of

 

(1)                                  the
Subsidiary to be so designated and

 

(2)                                  its
Subsidiaries

 

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

 

The Company
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such
designation no Default shall have occurred and be continuing and either

 

38

 

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

 

(2)                                  the
Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries
would be greater than such ratio for the Company and its Restricted
Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation.

 

Any such
designation by the Company shall be notified by the Company to the Trustee by
promptly filing with the Trustee a copy of any applicable Board Resolution
giving effect to such designation and an Officers’ Certificate certifying that
such designation complied with the foregoing provisions.

 

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

 

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

 

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

 

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

 

(1)                                  the
sum of the products of the number of years from the date of determination to
the date of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Disqualified Stock or
Preferred Stock multiplied by the amount of such payment, by

 

(2)                                  the
sum of all such payments.

 

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

 

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

 

39

 

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

 

Every
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 1008(a) of
this Indenture or Section 314(a)(4) of the TIA) shall include:

 

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

 

(2)                                  a brief statement as
to the nature and scope of the examination or investigation upon which the
statements or opinions contained in such certificate or opinion are based;

 

(3)                                  a statement that, in
the opinion of each such individual, he or she has made such examination or
investigation as is necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and

 

(4)                                  a statement as to
whether, in the opinion of each such individual, such condition or covenant has
been complied with.

 

SECTION 104.  Form of Documents Delivered to
Trustee.  In any case where several
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 certified by, or
covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.

 

Any
certificate or opinion of an officer of the Company may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous. Any
such certificate or opinion may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.

 

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

 

40

 

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

 

The fact and
date of the execution by any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution or by a certificate of a
notary public or other officer authorized by law to take acknowledgments of
deeds, certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. 
Where such execution is by a signer acting in a capacity other than his
or her individual capacity, such certificate or affidavit shall also constitute
sufficient proof of authority.  The fact
and date of the execution of any such instrument or writing, or the authority
of the Person executing the same, may also be proved in any other manner that
the Trustee deems sufficient.

 

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

 

If the Company
shall solicit from the Holders any request, demand, authorization, direction,
notice, consent, waiver or other Act, the Company may, at its option, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
Act, but the Company shall have no obligation to do so.  Notwithstanding TIA Section 316(c), such
record date shall be a date not earlier than the date 30 days prior to the
first solicitation of Holders generally in connection therewith and not later
than the date such solicitation is completed. 
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for the purposes of determining
whether Holders of the requisite proportion of Outstanding Notes have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for that purpose the
Outstanding Notes shall be computed as of such record date; provided that no such authorization,
agreement or consent by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than eleven months after the record date.  Any request, demand, authorization,
direction, notice, consent, waiver or other Act of the Holder of any Note shall
bind every future Holder of the same Note and the Holder of every Note issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done,

 

41

 

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

 

Without
limiting the foregoing, a Holder entitled to take any action hereunder with
regard to any particular Note may do so with regard to all or any part of the
principal amount of such Note or by one or more duly appointed agents, each of
which may do so pursuant to such appointment with regard to all or any part of
such principal amount.  Any notice given
or action taken by a Holder or its agents with regard to different parts of such
principal amount pursuant to this paragraph shall have the same effect as if
given or taken by separate Holders of each such different part.

 

Without
limiting the generality of the foregoing, a Holder, 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 action provided in this Indenture
to be made, given or taken by Holders, and the Depository that is the Holder of
a Global Note may provide its proxy or proxies to the beneficial owners of
interests in any such Global Note through such depositary’s standing
instructions and customary practices.

 

The Company
may fix a record date for the purpose of determining the Persons who are
beneficial owners of interests in any Global Note held by the Depository
entitled under the procedures of such depositary to make, give or take, by a
proxy or proxies duly appointed in writing, any request, demand, authorization,
direction, notice, consent, waiver or other action 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 Act of Holders or
other document provided or permitted by this Indenture to be made upon, given
or furnished to, or filed with,

 

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

 

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

 

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

 

42

 

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

 

In case by
reason of the suspension of or irregularities in regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any
event to Holders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice for every purpose hereunder.

 

Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.

 

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

 

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

 

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

 

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

 

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

 

43

 

required to be part of this
Indenture and shall, to the extent 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 a
Business Day, then (notwithstanding any other provision of this Indenture or of
the Notes) payment of principal (or premium, if any) or interest need not be
made on such date, but may be made on the next succeeding Business Day with the
same 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 from
and after such Interest Payment Date, Redemption Date, Stated Maturity or
Maturity, 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
or any Subsidiary Guarantor (other than in the case of stockholders of any
Subsidiary Guarantor, the Company or another Subsidiary Guarantor or in the
case of stockholders of the Company, Holdings) or any of their parent companies
shall have any liability for any obligations of the Company, Holdings or the
Subsidiary Guarantors under the Notes, the Guarantees and this Indenture or for
any claim based on, in respect of, or by reason of such obligations or their
creation to the extent permitted by applicable law.  Each Holder by accepting a Note and the
related Guarantee waives and releases all such liability to the extent
permitted by applicable law.  The waiver
and release are part of the consideration for issuance of the Notes and the
Guarantees.

 

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

 

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

 

44

 

ARTICLE TWO

NOTE FORMS

 

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

 

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

 

Notes bearing
the manual or facsimile signature of an individual who was at any time a proper
officer of the Company shall bind the Company, notwithstanding that such
individual ceased to hold such office prior to the authentication and delivery
of such Notes or did not hold such office at the date of such Notes.

 

At any time
and from time to time after the execution and delivery of this Indenture, the
Company may deliver Notes executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Notes, and the Trustee in accordance with such Company Order
shall authenticate and deliver such Notes.

 

On the Issue
Date, the Company shall deliver the Initial Notes in the aggregate principal
amount of $500,000,000 executed by the Company to the Trustee for
authentication, together with a Company Order directing the Trustee to
authenticate the Notes and certifying that all conditions precedent to the
issuance of Notes contained herein have been fully complied with, and the
Trustee in accordance with such Company Order shall authenticate and deliver
such Initial Notes.  At any time and from
time to time after the Issue Date, the Company may deliver Additional Notes
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Additional Notes,
directing the Trustee to authenticate the Additional Notes and certifying that
the issuance of such Additional Notes is in compliance with Article Ten
hereof and that all other conditions precedent to the issuance of Notes
contained herein have been fully complied with, and the Trustee in

 

45

 

accordance with such Company Order shall authenticate and deliver such
Additional Notes.

 

Upon receipt
of a Company Order, the Trustee shall authenticate for original issue Exchange
Notes in an aggregate principal amount not to exceed $500,000,000 plus the
aggregate principal amount of any Additional Notes issued; provided that such Exchange Notes shall be
issuable only upon the valid surrender for cancellation of Initial Notes and
any Additional Notes of a like aggregate principal amount in accordance with an
Exchange Offer pursuant to the Registration Rights Agreement and a Company
Order for the authentication and delivery of such Exchange Notes and certifying
that all conditions precedent to the issuance of such Exchange Notes are
complied with.

 

In each case,
the Trustee shall receive a Company Order and an Opinion of Counsel of the
Company that it may reasonably require in connection with such authentication
of Notes.  Such Company Order shall
specify the amount of Notes to be authenticated and the date on which the
original issue of Notes is to be authenticated.

 

Each Note
shall be dated the date of its authentication.

 

No Note shall
be entitled to any benefit under this Indenture or be valid or obligatory for
any purpose unless there appears on such Note a certificate of authentication
substantially in the form provided for in Exhibit 1 to the Appendix, duly
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder and is
entitled to the benefits of this Indenture.

 

In case the
Company or any Guarantor, pursuant to Article Eight of this Indenture,
shall be consolidated or merged with or into any other Person or shall convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company or such
Guarantor shall have been merged, or the Person which shall have received a
conveyance, transfer, lease or other disposition as aforesaid, shall have
executed a supplemental indenture hereto with the Trustee pursuant to Article Eight
of this Indenture, any of the Notes authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Notes executed in the name of the successor Person with such changes in
phraseology and form as may be appropriate, but otherwise in substance of like
tenor as the Notes surrendered for such exchange and of like principal amount;
and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Notes as specified in such request for the purpose of
such exchange.  If Notes shall at any
time be authenticated and delivered in any new name of a successor Person
pursuant to this Section in exchange or substitution for or upon
registration of transfer of any Notes, such successor 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 Notes authenticated and delivered in such new
name.

 

46

 

ARTICLE THREE

THE NOTES

 

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

 

The Notes
shall be known and designated as the “103/8% Senior
Subordinated Notes Due 2015” of the Company. 
The Stated Maturity of the Notes shall be October 15, 2015, and the
Notes shall bear interest at the rate of 103/8% per annum
from October 6, 2005, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, payable on April 15,
2006 and semi-annually thereafter on April 15 and October 15 in each
year and at said Stated Maturity, until the principal thereof 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 the April 1 and October 1
immediately preceding such Interest Payment Date (each, a “Regular
Record Date”).

 

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

 

Holders shall
have the right to require the Company to purchase their Notes, in whole or 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 as provided in Section 1018.

 

The Notes
shall be redeemable as provided in Article Eleven of this Indenture and
Paragraph 5 of the Notes.

 

The due and
punctual payment of principal of, premium, if any, and interest on the Notes
payable by the Company is irrevocably unconditionally guaranteed, to the extent
set forth herein, by each of the Guarantors.

 

47

 

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

 

SECTION 303.  Temporary Notes.  Pending the preparation of definitive Notes,
the Company may execute, and upon receipt of a Company Order the Trustee shall
authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Notes in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Notes may
determine, as conclusively evidenced by their execution of such Notes.

 

If temporary
Notes are issued, the Company shall cause definitive Notes to be prepared
without unreasonable delay.  Subject to
the provisions set forth in the Rule 144A/Regulation S Appendix, after the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company designated for such purpose pursuant to Section 1002,
without charge to the Holder.  Upon
surrender for cancellation of any one or more temporary Notes, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations.  Until so exchanged, the
temporary Notes shall in all respects be entitled to the same benefits under
this Indenture as definitive Notes.

 

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 Trustee a
register (the register maintained in such office and in any other office or agency
designated pursuant to Section 1002 being herein sometimes referred to as
the “Note Register”) in which,
subject to such reasonable regulations as it may prescribe, the Company shall
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 being converted into written form within a reasonable
time.  At all reasonable times, the Note
Register shall be open to inspection by the Trustee.  The Trustee is hereby initially appointed as
note registrar (the “Note Registrar”)
for the purpose of registering Notes and transfers of Notes as herein
provided.  The Trustee is hereby
initially appointed to act as the Paying Agent and to act as Custodian with
respect to the Global Notes.

 

Upon surrender
for registration of transfer of any Note at the office or agency of the Company
designated pursuant to Section 1002, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Notes of any authorized denomination
or denominations of a like aggregate principal amount.

 

At the option
of the Holder, Notes may be exchanged for other Notes of any authorized
denomination and of a like aggregate principal amount, upon surrender of the
Notes to be exchanged at such office or agency. 
Whenever any Notes are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate

 

48

 

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

 

All Notes
issued upon any registration of transfer or exchange of Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Notes surrendered upon such
registration of transfer or exchange.

 

Every Note presented
or surrendered for registration of transfer or for exchange shall (if so
required by the Company or the Note Registrar) be duly endorsed, or be
accompanied by written instruments of transfer, in form satisfactory to the
Company and the Note Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.

 

No service
charge shall be made for any registration of transfer or exchange or redemption
of Notes, but the Company may require payment of a sum sufficient to cover any
taxes, fees or other governmental charge that may be imposed in connection with
any registration of transfer or exchange of Notes, other than exchanges
pursuant to Sections 202, 303, 906, 1017, 1018, or 1108 not involving any
transfer.

 

SECTION 305.  Mutilated, Destroyed, Lost and Stolen
Notes.  If (1) any mutilated
Note is surrendered to the Trustee, or (2) the Company and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Note, and there is delivered to the Company and the Trustee such security 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 may suffer if a Note is
replaced, then, in the absence of notice to the Company or the Trustee that
such Note has been acquired by a Protected Purchaser (as defined in Section 8-303
of the Uniform Commercial Code) (a “Protected
Purchaser”), the Company shall execute and upon Company Order the
Trustee shall authenticate and deliver, in exchange for any such mutilated Note
or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor
and principal amount, bearing a number not contemporaneously outstanding.

 

In case any
such mutilated, destroyed, lost or stolen Note has become or is about to become
due and payable, the Company in its discretion may, instead of issuing a new
Note, pay such Note.

 

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

 

49

 

Every new Note
issued pursuant to this Section in lieu of any mutilated, destroyed, lost
or stolen Note shall constitute an original additional contractual obligation
of the Company and each Guarantor, whether or not the mutilated, destroyed,
lost or stolen Note shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Notes duly issued hereunder.

 

The provisions
of this Section are exclusive and shall preclude (to the extent lawful)
all other rights and remedies with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Notes.

 

SECTION 306.  Payment of Interest; Interest Rights
Preserved.  

(a)  Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest at the office or agency
of the Company maintained for such purpose pursuant to Section 1002; provided that, subject to Section 301
hereof, each installment of interest may at the Company’s option be paid by (1) mailing
a check for such interest, payable to or upon the written order of the Person
entitled thereto pursuant to Section 307, to the address of such Person as
it appears in the Note Register or (2) transfer to an account located in
the United States maintained by the payee.

 

(b)                                 Any
interest on any Note which is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date shall forthwith cease to be payable
to the Holder on the Regular Record Date by virtue of having been such Holder,
and such defaulted interest and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Notes (such defaulted interest and
interest thereon herein collectively called “Defaulted
Interest”) may be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:

 

(1)                                  The Company may elect
to make payment of any Defaulted Interest to the Persons in whose names the
Notes (or their respective Predecessor Notes) are registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest,
which shall be fixed in the following manner. 
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Note and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided.  Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not more
than 15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment.  The
Trustee shall promptly notify the Company of such Special Record Date, and in
the name and at the expense of the Company, shall cause notice of the proposed

 

50

 

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

 

(2)                                  The Company may make
payment of any Defaulted Interest in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed practicable by the Trustee.

 

(c)                                  Subject
to the foregoing provisions of this Section, each Note delivered under this
Indenture upon registration of transfer of or in exchange for or in lieu of any
other Note 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 for
registration of transfer, the Company, any Guarantor, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name such Note is
registered as the owner of such Note for the purpose of receiving payment of
principal of (and premium, if any) and (subject to Sections 304 and 306)
interest on such Note and for all other purposes whatsoever, whether or not
such Note be overdue, and none of the Company, the Trustee or any agent of the
Company 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 other than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by it.  The Company
may at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company may have acquired in
any manner whatsoever, and may deliver to the Trustee (or to any other Person
for delivery to the Trustee) for cancellation any Notes previously
authenticated hereunder which the Company has not issued and sold, and all
Notes so delivered shall be promptly cancelled by the Trustee.  If the Company shall so acquire any of the
Notes, however, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are surrendered to the Trustee for cancellation.  No Notes shall be authenticated in lieu of or
in exchange for any Notes cancelled as provided in this Section, except as
expressly permitted by this Indenture. 
All cancelled Notes held by the Trustee shall be disposed of by the
Trustee in accordance with its customary procedures (subject to the record
retention requirements of the Exchange Act). 
Certification of the destruction of all cancelled Notes shall be
delivered to the Company by the Trustee.

 

51

 

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

 

SECTION 310.  Transfer and Exchange.  The Notes shall be issued in registered form
and shall be transferable only upon the surrender of a Note for registration of
transfer.  When a Note is presented to
the Note Registrar or a co-registrar with a request to register a transfer, the
Note Registrar shall register the transfer as requested if the requirements of
this Indenture and 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 request to exchange them for an equal
principal amount of Notes of other denominations, the Note Registrar shall make
the exchange as requested if the same requirements are met.

 

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

 

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

 

52

 

ARTICLE FOUR

SATISFACTION AND DISCHARGE

 

SECTION 401.  Satisfaction and Discharge of Indenture.  This Indenture shall upon Company 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 to surviving rights of
registration of transfer or exchange of Notes expressly provided for herein or
pursuant hereto) and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
when:

 

(1)                                  either,

 

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

 

(B)  all such Notes not theretofore
delivered to the Trustee for cancellation,

 

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

 

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

 

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

 

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

 

53

 

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

 

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

 

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

 

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

 

Notwithstanding
the satisfaction and discharge of this Indenture, if money or Government
Securities shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the
obligations of the Trustee under Section 402 and the last paragraph of Section 1003
shall survive such satisfaction and discharge. 
In addition, nothing in this Section 401 shall be deemed to
discharge the obligations of the Company to the Trustee under Section 607
and the obligations of the Company to any Authenticating Agent under Section 612
that, by their terms, survive the satisfaction and discharge of this Indenture.

 

SECTION 402.  Application of Trust Money.  Subject to the provisions of the last
paragraph of Section 1003, all money or Government Securities deposited
with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium and
Additional Interest, if any) and interest for whose payment such money or
Government Securities has been deposited with the Trustee, but such money or
Government Securities need not be segregated from other funds except to the
extent required by law.

 

If the Trustee
or Paying Agent is unable to apply any money or Government Securities in
accordance with Section 401 by reason of any legal proceeding or by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company’s and any
Guarantor’s obligations under this Indenture and the Notes shall be revived and
reinstated as though

 

54

 

no deposit had occurred pursuant to Section 401 until such time as
the Trustee or Paying Agent is permitted to apply all such money or Government
Securities in accordance with Section 401;
provided that if the Company has made any payment of principal of,
premium, if any, or interest on any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money or Government Securities held
by the Trustee or Paying Agent.

 

55

 

ARTICLE FIVE

REMEDIES

 

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

 

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

 

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

 

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

 

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

 

(A)  such default either

 

(i)                                     results from the
failure to pay any principal of such Indebtedness at its stated final maturity
(after giving effect to any applicable grace periods) or

 

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

 

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

 

56

 

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

 

(5)                                  failure by the
Company or any Significant Subsidiary (or any group of Subsidiaries that
together would constitute a Significant Subsidiary) to pay final judgments
aggregating in excess of $50.0 million, which final judgments remain
unpaid, undischarged and unstayed for a period of more than 60 days after
such judgment becomes final, and in the event such judgment is covered by
insurance, an enforcement proceeding has been commenced by any creditor upon
such judgment or decree which is not promptly stayed;

 

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

 

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

 

(i)                                     commences a
voluntary case;

 

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

 

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

 

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

 

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

 

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

 

(ii)                                  appoints a custodian
of the Company or any Significant Subsidiary or for any substantial part of its
property; or

 

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

 

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

 

provided,
that for the purposes of this clause (6), a Significant Subsidiary shall
include any group of Subsidiaries that together would constitute a Significant
Subsidiary; or

 

(7)                                  the Guarantee of any
Significant Subsidiary (or any group of Subsidiaries that together would
constitute a Significant Subsidiary) shall for any

 

57

 

reason cease to be in full force and effect or be declared null and
void or any responsible officer of any Subsidiary Guarantor that is a
Significant Subsidiary (or the responsible officers of any group of
Subsidiaries that together would constitute a Significant Subsidiary), as the
case may be, denies that it has any further liability under its Guarantee or
gives notice to such effect, other than by reason of the termination of this
Indenture or the release of any such Subsidiary Guarantee in accordance with
this Indenture.

 

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

 

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

 

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

 

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

 

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

 

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

 

(A)  all overdue interest on all
Outstanding Notes,

 

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

 

58

 

(C)  to the extent that payment of such
interest is lawful, interest on overdue interest at the rate borne by the
Notes, and

 

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

 

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

 

No such
rescission shall affect any subsequent default or impair any right consequent
thereon.

 

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

 

(1)                                  the Indebtedness or
guarantee that is the basis for such Event of Default has been discharged, or

 

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

 

(3)                                  the default that 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) occurs and 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 due hereunder
pursuant to this Article 5 and unpaid, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.  The
Trustee may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company, any Guarantor or any other obligor upon
the Notes and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company, any Guarantor or any
other obligor upon the Notes, wherever situated.

 

If an Event of
Default occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders under this
Indenture and the Guarantees by the judicial proceedings discussed above as the
Trustee shall deem necessary to protect and enforce any such rights, including
seeking recourse against any Guarantor.

 

59

 

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

 

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

 

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

 

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

 

Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Holder in any such proceeding.

 

SECTION 505.  Trustee May Enforce Claims Without
Possession of Notes.  All rights of
action and claims under this Indenture or the Notes may be prosecuted and
enforced by the Trustee without the possession of any of the Notes or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name and as trustee of an
express trust, and any recovery of judgment shall, after provision for the payment
of the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders in
respect of which such judgment has been recovered.

 

SECTION 506.  Application of Money Collected.  Subject to Article Fourteen hereof and Section 1203,
any money or property collected by the Trustee pursuant to this Article shall
be applied in the following order, at the date or dates fixed

 

60

 

by the Trustee and, in case of
the distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Notes and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:

 

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

 

SECOND:  To holders of Senior Indebtedness of the
Company and, if such money or property has been collected from a Guarantor, to
holders of Senior Indebtedness of such Guarantor, in each case to the extent
required by Article Fourteen hereof and Section 1203 hereof, as applicable;

 

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

 

FOURTH:  The balance, if any, to the Company or the
applicable Guarantor or as a court of competent jurisdiction may direct in
writing; provided that all sums due and owing to
the Holders and the Trustee have been paid in full as required by this
Indenture.

 

The Trustee
may fix a record date and payment date for any payment to Holders of Notes pursuant
to this Section 506.

 

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

 

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

 

(2)                                  Holders of at least
30% in principal amount of the Outstanding Notes have requested the Trustee to
pursue the remedy;

 

(3)                                  such Holders have
offered the Trustee reasonable security or indemnity reasonably satisfactory to
it against any loss, liability or expense;

 

(4)                                  the Trustee has not
complied with such request within 60 days after the receipt thereof and
the offer of security or indemnity; and

 

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

 

it being
understood and intended that no one or more Holders shall have any right in any
manner whatever by virtue of, or by availing of, any provision of this
Indenture or the

 

61

 

Guarantees to
affect, disturb or prejudice the rights of any other Holders, or to obtain or
to seek to obtain priority or preference over any other Holders or to enforce
any right under this Indenture or the Guarantees, except in the manner herein
provided and for the equal and ratable benefit of all the Holders (it being
further understood that the Trustee does not have an affirmative duty to
ascertain whether or not such actions or forbearances 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
Note shall have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article Eleven) and
in such Note of the principal of (and premium, if any) and (subject to Section 306)
interest on such Note on the respective Stated Maturities expressed 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 such respective dates,
and such rights shall not be impaired without the consent of such Holder.

 

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

 

SECTION 510.  Rights and Remedies Cumulative.  Except as otherwise provided with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes in the
last paragraph of Section 305, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or
otherwise.  The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.

 

SECTION 511.  Delay or Omission Not Waiver.  No delay or omission of the Trustee or of any
Holder of any Note to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein.  Every right and remedy given by this Article or
by law to the Trustee or to the Holders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the Holders, as the
case may be.

 

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

 

62

 

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

 

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

 

(2)                                  subject to Section 315
of the Trust Indenture Act, the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction, and

 

(3)                                  the Trustee need not
take any action which might involve it in personal liability or be unduly
prejudicial to the Holders not consenting.

 

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

 

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

 

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

 

63

 

ARTICLE SIX

THE TRUSTEE

 

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

 

(1)                                  the Trustee
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and

 

(2)                                  in the absence of bad
faith or willful misconduct on its part, the Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture; but in the case of any such certificates
or opinions specifically required by any provision hereof to be provided to it,
the Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture, but not to verify the
contents thereof.

 

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

 

(c)                                  No
provision of this Indenture shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to act, or
its own willful misconduct, except that

 

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

 

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

 

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

 

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

 

64

 

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

 

(d)                                 Whether
or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Trustee shall be subject to the provisions of this Section.

 

SECTION 602.  Notice of Defaults.  If a Default or Event of Default occurs and
is continuing and if it is known to the Trustee, the Trustee shall transmit, in
the manner and to the extent provided in TIA Section 313(c), notice of
such Default or Event of Default within 90 days after it occurs unless such
Default or Event of Default shall have been cured or waived.  Except in the 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 be protected in withholding such notice if it
determines that the withholding of such notice is in the interest of the
Holders.  In addition, the Trustee shall
have no obligation to accelerate the Notes if in the best judgment of the
Trustee acceleration is not in the best interest of the Holders of such Notes.

 

SECTION 603.  Certain Rights of Trustee.  Subject to the provisions of TIA
Sections 315(a) through 315(d):

 

(1)                                  the Trustee may
conclusively rely and shall be fully protected in acting or refraining from
acting 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 original
or facsimile form) believed by it to be genuine and to have been signed or
presented by the proper party or parties;

 

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

 

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

 

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

 

(5)                                  the Trustee shall be
under no obligation to exercise any of the rights or powers vested in it by
this Indenture at the request or direction of any of

 

65

 

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

 

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

 

(7)                                  the Trustee may
execute any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents or attorneys and the Trustee shall not
be responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;

 

(8)                                  the Trustee shall not
be liable for any action taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Indenture; provided, however,
that the Trustee’s conduct does not constitute wilful misconduct 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 be
enforceable by, the Trustee in each of its capacities hereunder, and each
agent, custodian and other Person employed to act hereunder; and

 

(10)                            in no event shall the
Trustee be responsible or liable for special, indirect, or consequential loss
or damage of any kind whatsoever (including, but not limited to, loss of
profit) irrespective of whether the Trustee has been advised of the likelihood
of such loss or damage and regardless of the form of action.

 

SECTION 604.  Trustee Not Responsible for Recitals or
Issuance of Notes.  The recitals
contained herein and in the Notes, except for the Trustee’s certificates of
authentication, shall be taken as the statements of the Company, and the
Trustee assumes no responsibility for their correctness.  The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Notes, except that the
Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Notes and perform its obligations hereunder and
that the statements made by it in a Statement of Eligibility on Form T-1
supplied to the Company are true and accurate, subject to the qualifications
set forth therein.  The Trustee shall not
be accountable for the use or application by the Company of Notes or the
proceeds thereof.

 

66

 

SECTION 605.  May Hold Notes.  The Trustee, any Paying Agent, any Note
Registrar or any other agent of the Company or of the Trustee, in its
individual 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 the
Company with the same rights it would have if it were not the Trustee, Paying
Agent, Note Registrar or such other agent; provided,
however, that, if it acquires any conflicting interest, it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue or resign.

 

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

 

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

 

(1)                                  to pay to the Trustee
from time to time such compensation as shall be agreed in writing between 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 to the
compensation of a trustee of an express trust);

 

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

 

(3)                                  to indemnify the
Trustee and any predecessor Trustee for, and to hold it harmless against, any
and all loss, liability, claim, damage or expense, including taxes (other than
the taxes based on the income of the Trustee) incurred without negligence or
willful misconduct on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim regardless of whether the claim is asserted
by the Company, a Guarantor, a Holder or any other Person or liability in
connection with the exercise or performance of any of its powers or duties
hereunder.

 

The
obligations of the Company under this Section to compensate the Trustee,
to pay or reimburse the Trustee for expenses, disbursements and advances and to
indemnify and hold harmless the Trustee shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture and resignation or removal of the Trustee.  As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the Notes
upon all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of (and premium, if any) or interest
on particular Notes.

 

67

 

When the
Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 501(8), the expenses (including the
reasonable charges and expenses of its counsel) of and the compensation for
such services are intended to constitute expenses of administration under any
applicable Bankruptcy Law.

 

The provisions
of this Section shall survive the termination of this Indenture and
resignation or removal of the Trustee.

 

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

 

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

 

(b)                                 The
Trustee may resign at any time by giving written notice thereof to the
Company.  Upon receiving such notice of
resignation, the Company shall promptly appoint a successor 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 the successor
Trustee.  If the instrument of acceptance
by a successor Trustee required by Section 610 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition, at the expense of the Company,
any court of competent jurisdiction for the appointment of a successor Trustee.

 

(c)                                  The
Trustee may be removed at any time by Act of the Holders of not less than a
majority in principal amount of the Outstanding Notes, delivered to the Trustee
and to the Company.  If the instrument of
acceptance by a successor Trustee required by Section 610 shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition, at the expense of the Company,
any court of competent jurisdiction for the appointment of a successor Trustee.

 

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

 

68

 

(e)                                  If
the Trustee shall resign, be removed or become incapable of acting, or if a
vacancy shall occur in the office of Trustee for any cause, the Company, by a
Board Resolution, shall promptly appoint a successor Trustee.  If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
shall be appointed by Act of the Holders of a majority in principal amount of the
Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company.  If no
successor Trustee shall have been so appointed by the Company or the Holders
and accepted appointment in the manner hereinafter provided, any Holder who has
been a bona fide Holder of a Note for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.

 

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

 

SECTION 610.  Acceptance of Appointment by Successor.  (a)  Every successor Trustee appointed
hereunder shall execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Company or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.  Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.

 

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

 

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

 

69

 

the Notes so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Notes.  In case at that time any of the
Notes shall not have been authenticated, any successor Trustee may authenticate
such Notes either in the name of any predecessor hereunder or in the name of
the successor Trustee.  In all such cases
such certificates shall have the full force and effect which this Indenture
provides for the certificate of authentication of the Trustee shall have; provided, however, that the right to adopt
the certificate of authentication of any predecessor Trustee or to authenticate
Notes in the name of any predecessor Trustee shall apply only to its successor
or successors by merger, conversion or consolidation.

 

SECTION 612.  Appointment of Authenticating Agent.  At any time when any of the Notes remain
Outstanding, the Trustee may appoint an Authenticating Agent or Agents with
respect to the Notes which shall be authorized to act on behalf of the Trustee to
authenticate Notes and the Trustee shall give written notice of such
appointment to all Holders of Notes with respect to which such Authenticating
Agent shall serve, in the manner provided for in Section 107.  Notes so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder.  Any such appointment shall be evidenced by an
instrument in writing signed by a Responsible Officer of the Trustee, and a
copy of such instrument shall be promptly furnished to the Company.  Wherever reference is made in this Indenture
to the authentication and delivery of Notes by the Trustee or the Trustee’s
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent.  Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or state authority.  If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. 
If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect specified in this Section.

 

Any
corporation into which an Authenticating Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any corporation succeeding to all or substantially all the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent; provided
that such corporation shall be otherwise eligible under this Section, without
the execution or filing of any paper or any further act on the part of the
Trustee or the Authenticating Agent.

 

70

 

An
Authenticating Agent may resign at any time by giving written notice thereof to
the Trustee and to the Company.  The
Trustee may at any time terminate the agency of an Authenticating Agent by
giving written notice thereof to such Authenticating Agent and to the
Company.  Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the provisions
of this Section, the Trustee may appoint a successor Authenticating Agent which
shall be acceptable to the Company and shall give written notice of such
appointment to all Holders of Notes, in the manner provided for in Section 107.  Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. 
No successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section.

 

The Company
agrees to pay to each Authenticating Agent from time to time such compensation
for its services under this Section as shall be agreed in writing between
the Company and such Authenticating Agent.

 

If an
appointment is made pursuant to this Section, the Notes may have endorsed
thereon, in addition to the Trustee’s certificate of authentication, an
alternate certificate of authentication in the following form:

 

71

 

This is one of
the Notes designated therein referred to in the within-mentioned Indenture.

 

	
   

  	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION

  
	
   

  	
   

  	
  as Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  as
  Authenticating Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  as Authorized Officer

  

 

72

 

ARTICLE SEVEN

HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY

 

SECTION 701.  Holder Lists.  The Trustee shall preserve in as current a form as is reasonably practicable the most
recent list available to it of the names and addresses 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 the Trustee at least two Business Days before each
Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Notes and the Company shall otherwise comply with
Trust Indenture Act Section 312(a).

 

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

 

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

 

73

 

ARTICLE EIGHT

MERGER, CONSOLIDATION OR SALE

OF 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 its properties or
assets, in one or more related transactions, to any Person unless:

 

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

 

(2)           the
Successor Company, if other than the Company, expressly assumes all the
obligations of the Company under this Indenture and the Notes pursuant to
supplemental indentures or other documents or instruments in form reasonably
satisfactory to the Trustee;

 

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

 

(4)           immediately
after giving pro forma effect to
such transaction, as if such transaction had occurred at the beginning of the
applicable four-quarter period,

 

(A)  the Successor Company would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in Section 1011(a) of this
Indenture or

 

(B)  the Fixed Charge Coverage Ratio for
the Successor Company and the Restricted Subsidiaries on a consolidated basis
would be greater than such ratio for the Company and the Restricted
Subsidiaries immediately prior to such transaction;

 

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

 

(6)           the
Company shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation,

 

74

 

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

 

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

 

(1)           any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company and

 

(2)           the
Company may merge with an Affiliate of the Company incorporated solely for the
purpose of reincorporating the Company in another State of the United States so
long as the amount of Indebtedness of the Company and the Restricted
Subsidiaries is not increased thereby.

 

SECTION 802.  Subsidiary Guarantors May Consolidate,
Etc., Only on Certain Terms.  Subject
to Section 1208, each Subsidiary Guarantor shall not, and the Company
shall not permit any Subsidiary Guarantor to, consolidate or merge with or into
or wind up into (whether or not such Subsidiary Guarantor is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets in one or more related
transactions to, any Person unless

 

(A)          (1) such
Subsidiary Guarantor is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than such Subsidiary
Guarantor) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States of America, any state thereof, the District
of Columbia, or any territory thereof (such Subsidiary Guarantor or such
Person, as the case may be, being herein called the “Successor
Person”);

 

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

 

(3)           immediately after such
transaction, no Default exists; and

 

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

 

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

 

75

 

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

 

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

 

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

 

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

 

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

 

(4)           the
Company shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer
and such supplemental indentures, if any, comply with this Indenture.

 

Notwithstanding
the foregoing, Holdings may merge into or transfer all or part of its properties
and assets to a Subsidiary Guarantor or the Company, and Holdings may merge
with an Affiliate of the Company incorporated solely for the purpose of
reincorporating Holdings in another state of the United States of America so
long as the amount of Indebtedness of Holdings, the Company and the Restricted
Subsidiaries is not increased thereby.

 

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

 

76

 

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
the Guarantees, as the case may be; provided
that the predecessor Company, Holdings or any Subsidiary Guarantor shall not be
relieved from the obligation to pay the principal of and interest and Additional Interest, 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
Subsidiary Guarantor, as the case may be,
that meets the requirements of Sections 801, 802 and 803 hereof, as
applicable.

 

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

 

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

 

77

 

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, the Company, any Guarantor (with
respect to a Guarantee or this Indenture to which it is a party), and the
Trustee, at any time and from time to time, may amend or supplement this
Indenture, any Guarantee or the Notes, in form satisfactory to the Trustee, for
any of the following purposes:

 

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

 

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

 

(3)           to
comply with Article Eight hereof and to provide for the assumption of the
Company’s or such Guarantor’s obligations to Holders in connection therewith;

 

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

 

(5)           to
add covenants for the benefit of the Holders or to surrender any right or power
conferred in this Indenture upon the Company, Holdings or any Subsidiary
Guarantor;

 

(6)           to
comply with requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the Trust Indenture Act;

 

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

 

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

 

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

 

(10)         to
conform the text of this Indenture, Guarantees or the Notes to any provision of
the “Description of the Notes” section of the Offering Circular to the
extent that such provision in the “Description of the Notes” was intended to be
a verbatim recitation of a provision of this Indenture, the Guarantees or the
Notes; or

 

78

 

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

 

Upon the
request of the Company accompanied by a Board Resolution authorizing the
execution of any such amended or supplemental indenture, and upon receipt by
the Trustee of the documents described in Section 603 hereof, the Trustee
shall join with the Company and the Guarantors in the execution of any amended
or supplemental indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental indenture that affects its own rights, duties or
immunities under this Indenture or otherwise. 
Notwithstanding the foregoing, no Opinion of Counsel shall be required
in connection with the addition of a Guarantor under this Indenture upon execution
and delivery by such Guarantor and the Trustee of a supplemental indenture to
this Indenture, the form of which is attached as Exhibit B hereto,
and delivery of an Officer’s Certificate.

 

SECTION 902.  Amendments or Supplements With Consent of
Holders.  With the written consent of
the Holders of not less than a majority in principal amount of the Outstanding
Notes, delivered to the Company and the Trustee, the Company, any Guarantor
(with respect to any Guarantee or this Indenture to which it is a party) and
the Trustee may (a) amend or supplement this Indenture, any Guarantee or
the Notes (including consents obtained in connection with a purchase of, or
tender offer or Exchange Offer for, the Notes) and (b) waive any existing
Default or Event of Default or compliance with any provision of this Indenture
or the Notes (including consents obtained in connection with a purchase of, or
tender offer or Exchange Offer, for Notes). 
Notwithstanding the foregoing sentence, no such amendment, supplement or
waiver shall, without the consent of each Holder of the Outstanding Notes
affected thereby:

 

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

 

(2)           reduce
the principal of or change the Maturity of any such Note or alter or waive the
provisions with respect to the redemption of the Notes (other than Sections
1017 and 1018),

 

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

 

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

 

79

 

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

 

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

 

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

 

(7)           make
any change in Article Fourteen hereof or Section 1203 of this
Indenture or in the ranking of this Indenture and the Notes that would
adversely affect the Holders,

 

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

 

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

 

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

 

The consent of
the Holders is not necessary under this Indenture to approve the particular
form of any proposed amendment. It is sufficient if such consent approves the
substance of the proposed amendment.

 

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

 

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

 

80

 

a part of this Indenture for all purposes; and every Holder of Notes
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.

 

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

 

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

 

SECTION 907.  Notice of Supplemental Indentures.  Promptly after the execution by the Company,
any Guarantor and the Trustee of any supplemental indenture pursuant to the
provisions of Section 902, the Company shall give notice thereof to the
Holders, in the manner provided for in Section 107, setting forth in
general terms the substance of such supplemental indenture.

 

81

 

ARTICLE TEN

COVENANTS

 

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

 

The Company
shall pay interest on overdue principal at the rate equal to the then
applicable interest rate on the Notes, and it shall pay interest on overdue
installments of interest at the same rate, in any case to the extent lawful.

 

SECTION 1002.  Maintenance of Office or Agency.  The Company shall maintain, an office or
agency where Notes may be presented or surrendered for payment, where Notes may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served.  The Corporate Trust Office of
the Trustee shall be such office or agency of the Company, unless the Company
shall designate and maintain 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 in the location of any such
office or agency.  If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.

 

The Company
may also from time to time designate one or more other offices or agencies
where the Notes may be presented or surrendered for any or all such purposes
and may from time to time rescind any such designation.  The Company shall give prompt written notice
to the Trustee of any such designation or rescission and any change in the
location of any such other office or agency.

 

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

 

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

 

82

 

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

 

The Company
shall cause each Paying Agent (other than the Trustee) to execute and deliver
to the Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such Paying Agent
shall:

 

(1)           hold
all sums held by it for the payment of the principal of (and premium, if any)
or interest on Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as
herein provided;

 

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

 

(3)           at
any time during the continuance of any such Default, upon the written request
of the Trustee, forthwith pay to the Trustee all sums so held in trust by such
Paying Agent.

 

The Company
may at any time, for the purpose of obtaining the satisfaction and discharge of
this Indenture or for any other purpose, pay, or by Company Order direct any
Paying Agent to pay, to the Trustee all sums held in trust by the Company or
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Company or such Paying Agent; and,
upon such payment by any Paying Agent to the Trustee, such Paying Agent shall
be released from all further liability with respect to such sums.

 

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

 

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

 

83

 

determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries as a whole.

 

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

 

SECTION 1006.  Reserved. 

 

SECTION 1007.  Reserved. 

 

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

 

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

 

84

 

notice or other action within five Business Days of its occurrence
(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 for
non-accelerated filers:

 

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

 

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

 

In addition,
whether or not required by the SEC, the Company shall file a copy of all
of the information and reports referred to in clauses (1) and (2) above
with the SEC for public availability within the time periods specified in the
SEC’s rules and regulations (unless the SEC shall not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company has agreed that,
for so long as any Notes remain outstanding, it shall furnish to Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act.

 

(b)           Delivery
of such reports, information and documents to the Trustee is for informational
purposes only and the Trustee’s receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, 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 as Holdings is a Guarantor under this Indenture or if at
any time any other direct or indirect parent company of the Company is a
guarantor of the Notes, the reports, information and other documents required
to be filed and furnished to the Holders pursuant to this Section 1009
may, at the option of the Company, be filed by and be those of Holdings or such
other parent, as applicable, rather than the Company; provided that the same is accompanied by
consolidating information that explains in reasonable detail the differences
between the information relating to Holdings or such other parent, on the one
hand, and the information relating to the Company and its Restricted
Subsidiaries on a standalone basis, on the other hand.

 

85

 

(d)           Notwithstanding
the foregoing, the requirements of this Section 1009 shall be deemed
satisfied prior to the commencement of the Exchange Offer or the effectiveness
of the Shelf Registration Statement by the filing with the SEC of the Exchange
Offer Registration Statement or Shelf Registration Statement within the time
periods specified in the Registration Rights Agreement, and any amendments
thereto, with such financial information that satisfies Regulation S-X of
the Securities Act.

 

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

 

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

 

(A)  dividends or distributions by the
Company payable in Equity Interests (other than Disqualified Stock) of the
Company or

 

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

 

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

 

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

 

(x)            Indebtedness
permitted under clauses (9) and (10) of Section 1011(b) of
this Indenture or

 

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

 

(4)           make
any Restricted Investment;

 

86

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

87

 

Company or any
of the Company’s Subsidiaries after the Issue Date to the extent such amounts
have been applied to Restricted Payments made in accordance with
clause (4) of Section 1010(b) and

 

(B)           Designated
Preferred Stock

 

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

 

(y)           debt
securities of the Company that have been converted into or exchanged for such
Equity Interests of the Company;

 

provided that this clause (2) shall
not include the proceeds from (a) Refunding Capital Stock (as defined
below), (b) Equity Interests of the Company or debt securities of the
Company that have been converted into or exchanged for Equity Interests of the
Company sold to a Restricted Subsidiary or the Company, as the case may be,
(c) Disqualified Stock or debt securities that have been converted into or
exchanged for Disqualified Stock or (d) Excluded Contributions, plus

 

(3)           100%
of the aggregate amount of 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 the Company after the Issue Date (less the amount of such net cash proceeds to the extent such
amount has been relied upon to permit the incurrence of Indebtedness or
issuance of Disqualified Stock or Preferred Stock pursuant to
clause (22)(ii) of Section 1011(b) of this Indenture)
(other than by a Restricted Subsidiary and other than by any Excluded
Contributions), plus

 

(4)           to
the extent not already included in Consolidated Net Income, 100% of the
aggregate amount received in cash and the fair market value, as determined in
good faith by the Company, of marketable securities or other property received
after the Issue Date by means of

 

(A)  the
sale or other disposition (other than to the Company or a Restricted
Subsidiary) of Restricted Investments made by the Company or any Restricted
Subsidiary and repurchases and redemptions of such Restricted Investments from
the Company or any Restricted Subsidiary and repayments of loans or advances
that constitute Restricted Investments by the Company or any Restricted
Subsidiary or

 

88

 

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

 

(5)           in
the case of the redesignation of an Unrestricted Subsidiary (other than Kate
Spade) as a Restricted Subsidiary after the Issue Date, the fair market value
of the Investment in such Unrestricted Subsidiary, as determined by the Company
in good faith or if, in the case of an Unrestricted Subsidiary, such fair
market value may exceed $125.0 million, in writing by an Independent
Financial Advisor, at the time of the redesignation of such Unrestricted
Subsidiary as a Restricted Subsidiary, other than an Unrestricted Subsidiary to
the extent the Investment in such Unrestricted Subsidiary was made by the
Company or a Restricted Subsidiary pursuant to clauses (9) or (13) of
Section 1010(b) or to the extent such Investment constituted a Permitted
Investment.

 

(b)           The
foregoing provisions shall not prohibit:

 

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

 

(2)           (A) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
(“Retired Capital Stock”) or
Subordinated Indebtedness of the Company or any Equity Interests of any direct
or indirect parent company of the Company, in exchange for, or out of the
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary) of, Equity Interests of the Company (in each case, other than any
Disqualified Stock) (“Refunding Capital
Stock”) and (B) if immediately prior to the retirement of
Retired Capital Stock, the declaration and payment of dividends thereon was
permitted under clause (6) of this Section 1010(b), the
declaration and payment of dividends on the Refunding Capital Stock (other than
Refunding Capital Stock the proceeds of which were used to redeem, repurchase,
retire or otherwise acquire any Equity Interests of any direct or indirect
parent company of the Company) in an aggregate amount per year no greater than
the aggregate amount of dividends per annum that was declarable and payable on
such Retired Capital Stock immediately prior to such retirement;

 

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

 

89

 

Guarantor made by exchange for, or out of the proceeds of the
substantially concurrent sale of, new Indebtedness of such Person that is
incurred in compliance with Section 1011 of this Indenture so long as

 

(A)          the
principal amount of such new Indebtedness does not exceed the principal amount
(or accreted value, if applicable) of the Subordinated Indebtedness being so
defeased, redeemed, repurchased, acquired or retired for value, plus the amount of any reasonable premium
required to be paid under the terms of the instrument governing the
Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or
retired and any reasonable fees and expenses incurred in connection with the
issuance of such new Indebtedness,

 

(B)           such
Indebtedness is subordinated to the Notes at least to the same extent as such
Subordinated Indebtedness so defeased, redeemed, repurchased, acquired or
retired,

 

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

 

(D)          such
Indebtedness has a Weighted Average Life to Maturity equal to or greater than
the remaining Weighted Average Life to Maturity of the Subordinated
Indebtedness being so defeased, redeemed, repurchased, acquired or retired;

 

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

 

(A)          the
cash proceeds from the sale of Equity Interests (other than Disqualified Stock)
of the Company and, to the extent contributed to the Company, Equity Interests
of any of the Company’s direct or indirect parent companies, in each case to
members of management, directors, managers or consultants of the Company, any
of its Subsidiaries or any of its direct or indirect parent companies that
occurs after the Issue Date, to the extent the cash proceeds from the sale of
such Equity Interests have

 

90

 

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

 

(B)           the
cash proceeds of key man life insurance policies received by the Company and
the Restricted Subsidiaries after the Issue Date, less

 

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

 

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

 

(5)           the
declaration and payment of dividends to holders of any class or series of
Disqualified Stock of the Company or any Restricted Subsidiary issued in
accordance with Section 1011 of this Indenture to the extent such
dividends are included in the definition of Fixed Charges;

 

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

 

(B)           the
declaration and 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 holders of any class or series of Designated Preferred Stock
(other than Disqualified Stock) of such parent company issued after the Issue
Date; provided that the amount of
dividends paid pursuant to this clause (B) shall not exceed the
aggregate amount of cash actually contributed to the Company from the sale of
such Designated Preferred Stock; or

 

(C)           the
declaration and payment of dividends on Refunding Capital Stock that is
Preferred Stock in excess of the dividends declarable and payable thereon
pursuant to clause (2) of this Section 1010(b);

 

provided, however, in the case of each of (A),
(B) and (C) of this clause (6), that for the most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date of issuance of such Designated Preferred Stock
or the declaration of such dividends on Refunding Capital Stock that is
Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, the Company and the
Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge
Coverage Ratio of at least 2.00 to 1.00;

 

91

 

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

 

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

 

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

 

(10)         the
declaration and payment of dividends by the Company to, or the making of loans
to, its direct parent company in amounts required for the Company’s direct or
indirect parent companies to pay

 

(A)          franchise
taxes and other fees, taxes and expenses required to maintain their corporate
existence,

 

(B)           Federal,
state and local income taxes, to the extent such income taxes are attributable
to the income of the Company and the Restricted Subsidiaries and, to the extent
of the amount actually received from its Unrestricted Subsidiaries, in amounts
required to pay such taxes to the extent attributable to the income of such
Unrestricted Subsidiaries,

 

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

 

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

 

(E)           reasonable
fees and expenses incurred in connection with any unsuccessful debt or equity
offering by such direct or indirect parent company of the Company;

 

(11)         any
Restricted Payments used to fund the Transactions and the fees and expenses
related thereto, including those owed to Affiliates, in each case to the extent
permitted by Section 1013 of this Indenture;

 

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

 

92

 

described under Section 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 extent permitted by this Indenture) shall have made a Change of
Control Offer or Asset Sale Offer, as the case may be, with respect to the
Notes and shall have repurchased all Notes validly tendered and not withdrawn
in connection with such Change of Control Offer or Asset Sale Offer;

 

(13)         Investments
in Unrestricted Subsidiaries, having an aggregate fair market value, taken
together with all other Investments made pursuant to this clause (13) that
are at the time outstanding, without giving effect to the sale of an
Unrestricted Subsidiary to the extent the proceeds of such sale do not consist
of cash or marketable securities, not to exceed the greater of (x) $75.0 million
and (y) 1.0% of Total Assets at the time of such Investment (with the fair
market value of each Investment being measured at the time such Investment is
made and without giving effect to subsequent changes in value);

 

(14)         distributions
or payments of Receivables Fees;

 

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

 

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

 

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

 

(c)           As
of the time of issuance of the Notes, all of the Company’s Subsidiaries shall
be Restricted Subsidiaries other than Neiman Marcus Funding Corporation,
Gurwitch Products, L.L.C., Kate Spade and their respective Subsidiaries. The
Company shall not permit any Unrestricted Subsidiary to become a Restricted
Subsidiary except pursuant to the penultimate paragraph of the definition of
“Unrestricted Subsidiary”. For purposes of designating any Restricted
Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the
Company and the Restricted Subsidiaries (except to the extent repaid) in the
Subsidiary so designated shall be deemed to be Restricted Payments in an amount
determined as set forth in the last sentence of the definition of
“Investments”. Such designation shall be permitted only if a Restricted Payment
in such amount would be permitted at such time, whether pursuant to
Section 1010(a) or under clauses (9), (13) or (16) of
Section 1010(b), or pursuant to the definition of “Permitted Investments”,
and if such Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. Unrestricted Subsidiaries shall not be subject to any of the
restrictive covenants set forth in this Indenture.

 

93

 

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

 

SECTION 1011.  Limitation on Incurrence of Indebtedness
and Issuance of Disqualified Stock and Preferred Stock.  (a)  The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise (collectively, “incur” and collectively, an “incurrence”)
with respect to any Indebtedness (including Acquired Indebtedness), and the
Company shall not issue any shares of Disqualified Stock and shall not permit
any Restricted Subsidiary to issue any shares of Disqualified Stock or
Preferred Stock; provided that the Company may
incur Indebtedness (including Acquired Indebtedness) or issue shares of
Disqualified Stock, and any Restricted Subsidiary may incur Indebtedness
(including Acquired Indebtedness), issue shares of Disqualified Stock or issue
shares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidated
basis for the Company’s and its Restricted Subsidiaries’ most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock or Preferred Stock is issued would have
been at least 2.00 to 1.00, determined on a pro forma basis
(including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or
the Disqualified Stock or Preferred Stock had been issued, as the case may be,
and the application of the proceeds therefrom had occurred at the beginning of
such four-quarter period; and provided, further, that the amount of Indebtedness
(including Acquired Indebtedness), Disqualified Stock and Preferred Stock that
may be incurred or issued, as applicable, pursuant to the foregoing by
Restricted Subsidiaries that are not Subsidiary Guarantors shall not exceed
$100.0 million at any one time outstanding.

 

94

 

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

 

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

 

(2)           Indebtedness
incurred pursuant to the Term Loan Facility by the Company or any Restricted
Subsidiary; provided that after giving effect to any
such incurrence, the aggregate principal amount of all Indebtedness incurred
under this clause (2) and then outstanding does not exceed
$1,975.0 million less up to
$250.0 million in the aggregate of all principal payments with respect to
such Indebtedness made pursuant to clause (1)(x) of
Section 1018(b) of this Indenture;

 

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

 

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

 

(5)           Existing
Indebtedness (other than Indebtedness described in clauses (1), (2),
(3) and (4) of this Section 1011(b)), including the Existing
2008 Notes and the Existing 2028 Debentures;

 

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

 

95

 

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

 

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

 

(8)           Indebtedness
arising from agreements of the Company or a Restricted Subsidiary providing for
indemnification, adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or a Subsidiary, other than guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or Subsidiary for
the purpose of financing such acquisition; provided that

 

(A)          such
Indebtedness is not reflected on the balance sheet of the Company or any
Restricted Subsidiary (contingent obligations referred to in a footnote to
financial statements and not otherwise reflected on the balance sheet shall not
be deemed to be reflected on such balance sheet for purposes of this
clause (8)(A)) and

 

(B)           the
maximum assumable liability in respect of all such Indebtedness shall at no
time exceed the gross proceeds including noncash proceeds (the fair market
value of such noncash proceeds being measured at the time received and without
giving effect to any subsequent changes in value) actually received by the
Company and the Restricted Subsidiaries in connection with such disposition;

 

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

 

(10)         Indebtedness
of a Restricted Subsidiary to the Company or another Restricted Subsidiary; provided that if a Subsidiary Guarantor incurs such

 

96

 

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

 

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

 

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

 

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

 

(14)         (x) any
guarantee by the Company or a Restricted Subsidiary of Indebtedness or other
Obligations of any Restricted Subsidiary, so long as the incurrence of such
Indebtedness by such Restricted Subsidiary is permitted under the terms of this
Indenture or (y) any guarantee by a Restricted Subsidiary of Indebtedness
of the Company permitted to be incurred under the terms of this Indenture; provided that such guarantee is incurred in accordance with
Section 1015 of this Indenture;

 

(15)         the
incurrence by the Company or any Restricted Subsidiary of Indebtedness,
Disqualified Stock or Preferred Stock that serves to extend, replace, refund,
refinance, renew or defease any Indebtedness, Disqualified Stock or Preferred
Stock incurred as permitted under 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 Preferred Stock including additional Indebtedness, Disqualified Stock
or Preferred Stock incurred to pay premiums and fees in connection therewith
(the “Refinancing Indebtedness”) prior to its
respective maturity; provided, however,
that such Refinancing Indebtedness:

 

97

 

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

 

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

 

(C)           shall
not include

 

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

 

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

 

(z)            Indebtedness,
Disqualified Stock or Preferred Stock of the Company or a Restricted Subsidiary
that refinances Indebtedness, Disqualified Stock or Preferred Stock of an
Unrestricted Subsidiary;

 

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

 

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

 

(A)          after
giving effect to such acquisition or merger, either

 

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

 

98

 

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

 

(B)           such
Indebtedness, Disqualified Stock or Preferred Stock (i) is not Secured
Indebtedness and is Senior Subordinated Indebtedness or Subordinated
Indebtedness with subordination terms no more favorable to the holders thereof
than the subordination terms set forth in this Indenture as in effect on the
Issue Date, (ii) is not incurred while a Default exists and no Default
shall result therefrom, (iii) does not mature (and is not mandatorily
redeemable in the case of Disqualified Stock or Preferred Stock) and does not
require any payment of principal prior to the final maturity of the Notes and
(iv) in the case of sub-clause (y) above only, is not incurred in
contemplation of such acquisition or merger;

 

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

 

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

 

(19)         Indebtedness,
Disqualified Stock or Preferred Stock of a Restricted Subsidiary incurred to
finance or assumed in connection with an acquisition which, when aggregated
with the principal amount of all other Indebtedness, Disqualified Stock and
Preferred Stock incurred pursuant to this clause (19) and then
outstanding, does not exceed $75.0 million (it being understood that any
Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this
clause (19) shall cease to be deemed incurred or outstanding for purposes
of this clause (19) but shall be deemed incurred pursuant to
Section 1011(a) from and after the first date on which the Company or
such Restricted Subsidiary could have incurred such Indebtedness, Disqualified
Stock or Preferred Stock pursuant to Section 1011(a) without reliance
on this clause (19));

 

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

 

99

 

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

 

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

 

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

 

(ii)           200%
of the net cash proceeds received by the Company since after the Issue Date
from the issue or sale of Equity Interests of the Company or cash contributed
to the capital of the Company (in each case, other than proceeds of
Disqualified Stock or sales of Equity Interests to the Company or any of its
Subsidiaries) as determined in accordance with clauses (C)(2) and
(C)(3) of Section 1010(a) of this Indenture to the extent such
net cash proceeds or cash have not been applied pursuant to such clauses to
make Restricted Payments or to make other investments, payments or exchanges
pursuant to Section 1010(b) of this Indenture or to make Permitted
Investments (other than Permitted Investments specified in clauses (a) and
(c) of the definition thereof); and

 

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

 

(c)           For
purposes of determining compliance with this Section 1011, in the event
that an item of Indebtedness, Disqualified Stock or Preferred Stock meets the
criteria of more than one of the categories of Permitted Debt described in
clauses

 

100

 

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

 

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

 

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

 

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

 

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

 

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

 

101

 

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

 

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

 

provided
that any Lien which is granted to secure the Notes under this Section 1012
shall be discharged at the same time as the discharge of the Lien (other than
through the exercise of remedies with respect thereto) that gave rise to the
obligation to so secure the Notes.

 

SECTION 1013.  Limitations on Transactions with
Affiliates.  (a)  The
Company shall not, and shall not permit any Restricted Subsidiary to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate of the Company
(each of the foregoing, an “Affiliate
Transaction”) involving aggregate payments or consideration in
excess of $10.0 million, unless

 

(1)           such
Affiliate Transaction is on terms that are not materially less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and

 

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

 

(b)           The
foregoing provisions shall not apply to the following:

 

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

 

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

 

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

 

(4)           the
payment of reasonable and customary fees paid to, and indemnities provided on
behalf of, officers, directors, managers, employees or

 

102

 

consultants of the Company, any of its direct or indirect parent
companies or any Restricted Subsidiary;

 

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

 

(6)           transactions
in which the Company or any Restricted Subsidiary, as the case may be, delivers
to the Trustee a letter from an Independent Financial Advisor stating that such
transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view or meets the requirements of clause (1) of
Section 1013(a);

 

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

 

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

 

(9)           the
existence of, or the performance by the Company or any of the Restricted
Subsidiaries of its obligations under the terms of, any stockholders agreement
or its equivalent (including any registration rights agreement or purchase
agreement related thereto) to which it is a party as of the 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 obligations under any future amendment to any such
existing agreement or under any similar agreement entered into after the Issue
Date shall only be permitted by this clause (9) to the extent that the
terms of any such existing agreement together with all amendments thereto,
taken as a whole, or new agreement are not otherwise more disadvantageous to
the Holders in any material respect than the terms of the original agreement in
effect on the Issue Date as reasonably determined in good faith by the Company;

 

(10)         the
Transactions, the Credit Card Sale and the payment of all fees and expenses
related to the Transactions and the Credit Card Sale, in each case as disclosed
in the Offering Circular;

 

103

 

(11)         transactions
with customers, clients, suppliers, or purchasers or sellers of goods or
services, in each case in the ordinary course of business and otherwise in
compliance with the terms of this Indenture that are fair to the Company and
the Restricted Subsidiaries, in the reasonable determination 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 at such time from an
unaffiliated party;

 

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

 

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

 

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

 

SECTION 1014.  Limitations on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries.  The Company shall not, and shall not permit
any Restricted Subsidiary that is not a Subsidiary Guarantor to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or consensual restriction on the ability of any such
Restricted Subsidiary to:

 

(a)           (1) pay
dividends or make any other distributions to the Company or any Restricted
Subsidiary on its Capital Stock or with respect to any other interest or participation
in, or measured by, its profits or

 

(2)           pay
any Indebtedness owed to the Company or any Restricted Subsidiary;

 

(b)           make
loans or advances to the Company or any Restricted Subsidiary; or

 

(c)           sell,
lease or transfer any of its properties or assets to the Company or any
Restricted Subsidiary,

 

except (in
each case) for such encumbrances or restrictions existing under or by reason
of:

 

(1)           contractual
encumbrances or restrictions in effect on the Issue Date, including pursuant to
the Senior Credit Facilities and the related documentation (including security
documents and intercreditor agreements) and Hedging Obligations, the Existing
2008 Notes and the Existing 2028 Debentures;

 

104

 

(2)           the
Indentures and the New Notes and the Subsidiary Guarantees;

 

(3)           purchase
money obligations for property acquired in the ordinary course of business and
Capital Lease Obligations that impose restrictions of the nature discussed in
clause (c) above on the property so acquired;

 

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

 

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

 

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

 

(7)           Secured
Indebtedness otherwise permitted to be incurred pursuant to Sections 1011
and 1012 of this Indenture that limit the right of the debtor to dispose of the
assets securing such Indebtedness;

 

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

 

(9)           other
Indebtedness, Disqualified Stock or Preferred Stock of Restricted Subsidiaries
permitted to be incurred after the Issue Date pursuant to the provisions of
Section 1011 of this Indenture;

 

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

 

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

 

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

 

(13)         restrictions
or conditions contained in any trading, netting, operating, construction,
service, supply, purchase or other agreement to which the Company or any of its
Restricted Subsidiaries is a party entered into in the ordinary course of
business; provided that such agreement prohibits
the encumbrance of solely the property or assets of the Company or such
Restricted Subsidiary that are the subject of such agreement, the payment
rights arising

 

105

 

thereunder or the proceeds thereof and does not extend to any other
asset or property of the Company or such Restricted Subsidiary or the assets or
property of any other Restricted Subsidiary; and

 

(14)         any
encumbrances or restrictions of the type referred to in clauses (a), (b) and
(c) above imposed by any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings of
the contracts, instruments or obligations referred to in clauses
(1) through (13) above; provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment of the
Company, not materially more restrictive with respect to such encumbrance and
other restrictions than those prior to such amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing; provided, further, that with
respect to contracts, instruments or obligations existing on the Issue Date,
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are not materially more restrictive
with respect to such encumbrances and other restrictions than those contained
in such contracts, instruments or obligations as in effect on the Issue Date.

 

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

 

(1)           such
Restricted Subsidiary within 30 days executes and delivers a supplemental
indenture to this Indenture providing for a Subsidiary Guarantee by such
Restricted Subsidiary, except that with respect to a guarantee of Indebtedness
of the Company or any Subsidiary Guarantor:

 

(a)           if
the Notes or such Subsidiary Guarantor’s Subsidiary Guarantee are subordinated
in right of payment to such Indebtedness, the Subsidiary Guarantee under the
supplemental indenture shall be subordinated to such Restricted Subsidiary’s
guarantee with respect to such Indebtedness substantially to the same extent as
the Notes are subordinated to such Indebtedness; and

 

(b)           if
such Indebtedness is by its express terms subordinated in right of payment to
the Notes or such Subsidiary Guarantor’s Subsidiary Guarantee, any such
guarantee by such Restricted Subsidiary with respect to such Indebtedness shall
be subordinated in right of payment to such Subsidiary Guarantee substantially
to the same extent as such Indebtedness is subordinated to the Notes;

 

106

 

(2)           such
Restricted Subsidiary waives and shall not in any manner whatsoever claim or
take the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee; and

 

(3)           such
Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the
effect that:

 

(a)           such
Subsidiary Guarantee has been duly executed and authorized; and

 

(b)           such
Subsidiary Guarantee constitutes a valid, binding and enforceable obligation of
such Restricted Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including all laws relating
to fraudulent transfers) and except insofar as enforcement thereof is subject
to general principles of equity;

 

provided
that this Section 1015 shall not be applicable to any guarantee of any
Restricted Subsidiary that existed at the time such Person became a Restricted
Subsidiary and was not incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary.

 

SECTION 1016.  Limitation on Other Senior Subordinated
Indebtedness.  The Company shall not,
and shall not permit any Subsidiary Guarantor to, directly or indirectly, incur
any Indebtedness (including Acquired Debt) that is contractually subordinated
or junior in right of payment to any Senior Indebtedness of the Company or any
Subsidiary Guarantor, as the case may be, unless such Indebtedness is either:

 

(1)           pari passu in right of payment with the Notes or the
Subsidiary Guarantees, as the case may be; or

 

(2)           expressly
subordinated in right of payment to the Notes or the Subsidiary Guarantees, as
the case may be.

 

Pursuant to
this Indenture (1) no unsecured Indebtedness shall be considered
subordinated or junior to Secured Indebtedness merely because it is unsecured
and (2) no Senior Indebtedness shall be considered subordinated or junior
to any other Senior Indebtedness merely because it has a junior priority with
respect to the same collateral.

 

SECTION 1017.  Change of Control.  (a)  If a Change of Control occurs,
the Company shall make an offer to purchase all of the Notes pursuant to the
offer described below (the “Change of
Control Offer”) at a price in cash (the “Change of Control Payment”) equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest, and Additional
Interest, if any, to the date of purchase, subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date. Within 30 days following any Change of Control, the

 

107

 

Company shall send notice of such Change of Control Offer by first
class mail, with a copy to the Trustee, to each Holder to the address of such
Holder appearing in the security register with a copy to the Trustee, with the
following information:

 

(1)           a
Change of Control Offer is being made pursuant to this Section 1017 and
all Notes properly tendered pursuant to such Change of Control Offer shall be
accepted for payment;

 

(2)           the
purchase price and the purchase date, which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”);

 

(3)           any
Note not properly tendered shall remain outstanding and continue to accrue
interest;

 

(4)           unless
the Company defaults in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest on the Change of Control Payment Date;

 

(5)           Holders
electing to have any Notes purchased pursuant to a Change of Control Offer
shall be required to surrender the Notes, with the form entitled “Option of
Holder to Elect Purchase” on the reverse of the Notes completed, to the paying
agent specified in the notice at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Payment Date;

 

(6)           Holders
shall be entitled to withdraw their tendered Notes and 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, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes tendered
for purchase, and a statement that such Holder is withdrawing its tendered
Notes and its election to have such Notes purchased; and

 

(7)           Holders
whose Notes are being purchased only in part shall be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $2,000 or an integral multiple of $1,000
in excess of $2,000; provided that
no Note of less than $2,000 shall be redeemed in part.

 

(b)           While
the Notes are in global form and the Company makes an offer to purchase all of
the Notes pursuant to the Change of Control Offer, a Holder may exercise its
option to elect for the purchase of the Notes through the facilities of DTC,
subject to its rules and regulations.

 

(c)           The
Company shall comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the

 

108

 

extent such laws or regulations are applicable in connection with the
repurchase of the Notes pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in this Indenture by virtue thereof.

 

(d)           On
the Change of Control Payment Date, the Company shall, to the extent permitted
by law,

 

(1)           accept
for payment all Notes or portions thereof properly tendered pursuant to the
Change of Control Offer,

 

(2)           deposit
with the Paying Agent an amount equal to the aggregate Change of Control
Payment in respect of all Notes or portions thereof so tendered and

 

(3)           deliver,
or cause to be delivered, to the Trustee for cancellation the Notes so accepted
together with an Officers’ Certificate stating that such Notes or portions
thereof have been tendered to and purchased by the Company.

 

(e)                                  The
Paying Agent shall promptly mail to each Holder the Change of Control Payment
for such Notes, and the Trustee shall promptly authenticate and mail to each
Holder a new Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided that
no Notes of $2,000 or less shall be redeemed in part and each such new Note
shall be in a principal amount of $2,000 or an integral multiple of $1,000 in
excess of $2,000. The Company shall publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.

 

(f)            The
Company shall not be required to make a Change of Control Offer following a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the time and otherwise in compliance with the requirements set forth
in this Indenture applicable to a Change of Control Offer made by the Company
and purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer. A Change of Control Offer may be made in advance of a Change of
Control, conditional upon such Change of Control, if a definitive agreement is
in place for the Change of Control at the time of making of the Change of
Control Offer.

 

SECTION 1018.  Asset Sales.  (a)  The Company shall not, and
shall not permit any Restricted Subsidiary to, cause, make or suffer to exist
an Asset Sale, unless:

 

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

 

109

 

the case may be, is in the form of cash or Cash Equivalents; provided that the amount of

 

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

 

(B)           any
securities, notes or other obligations or assets received by the Company or
such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received) within 180 days following the closing of such Asset Sale and

 

(C)           any
Designated Noncash Consideration received by the Company or such Restricted
Subsidiary in such Asset Sale having an aggregate fair market value, taken
together with all other Designated Noncash Consideration received pursuant to
this clause (C) that is at that time outstanding, not to exceed the
greater of (x) $125.0 million and (y) 1.75% of Total Assets at the time of the
receipt of such Designated Noncash Consideration, with the fair market value of
each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value,

 

shall be
deemed to be cash for purposes of this provision and for no other purpose.

 

(b)           Within
450 days after any of the Company’s or any Restricted Subsidiary’s receipt of
the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary
may, at its option, apply the Net Proceeds from such Asset Sale:

 

(1)           to
permanently reduce

 

(x)            Obligations
under any Senior Indebtedness, the Notes or any other Senior Subordinated
Indebtedness, in each case, of the Company or any Subsidiary Guarantor and, in
the case of Obligations under revolving credit facilities or other similar
Indebtedness, to correspondingly permanently reduce commitments with respect
thereto (other than Obligations owed to the Company or a Restricted
Subsidiary); provided that if the Company or
any Restricted Subsidiary shall so reduce Obligations under any Senior
Subordinated Indebtedness, the Company or such Subsidiary Guarantor shall,
equally and ratably, reduce Obligations under the Notes by, at its option,
(A) redeeming Notes if the Notes

 

110

 

are then redeemable as provided by the terms of the Notes,
(B) making an offer (in accordance with the procedures set forth in this
Section 1018) to all Holders to purchase their Notes at 100% of the
principal amount thereof, plus the amount
of accrued and unpaid interest and Additional Interest, if any, on the
principal amount of Notes to be repurchased or (C) purchasing Notes
through open market purchases (to the extent such purchases are at a price
equal to or higher than 100% of the principal amount thereof) in a manner that
complies with this Indenture and applicable securities law; or

 

(y)           Indebtedness
of a Restricted Subsidiary that is not a Subsidiary Guarantor, other than
Indebtedness owed to the Company or another Restricted Subsidiary; or

 

(2)           to
an investment in (A) any one or more businesses; provided
that such investment in any business is in the form of the acquisition of
Capital Stock and results in the Company or any Restricted Subsidiary owning an
amount of the Capital Stock of such business such that it constitutes a
Restricted Subsidiary, (B) properties, (C) capital expenditures and
(D) acquisitions of other assets, that in each of (A), (B), (C) and
(D), are used or useful in a Similar Business or replace the businesses,
properties and assets that are the subject of such Asset Sale.

 

(c)           Any
Net Proceeds from the Asset Sale that are not invested or applied in accordance
with the preceding paragraph within 450 days from the date of the receipt of
such Net Proceeds shall be deemed to constitute “Excess
Proceeds”; provided that
if during such 450-day period the Company or a Restricted Subsidiary enters
into a definitive binding agreement committing it to apply such Net Proceeds in
accordance with the requirements of clause (2) of
Section 1018(b) after such 450th day, such 450-day period shall be extended
with respect to the amount of Net Proceeds so committed until such Net Proceeds
are required to be applied in accordance with such agreement (but such
extension shall in no event be for a period longer than 180 days) (or, if
earlier, the date of termination of such agreement). When the aggregate amount
of Excess Proceeds exceeds $45.0 million, the Company shall make an offer to
all Holders and, if required by the terms of any Senior Subordinated
Indebtedness, to the holders of such Senior Subordinated Indebtedness (other
than with respect to Hedging Obligations) (an “Asset Sale
Offer”), to purchase the maximum aggregate principal amount of Notes
and such Senior Subordinated Indebtedness that is an integral multiple of
$1,000 that may be purchased out of the Excess Proceeds at an offer price in
cash in an amount equal to 100% of the principal amount thereof, plus accrued
and unpaid interest and Additional Interest, if any, to the date fixed for the
closing of such offer, in accordance with the procedures set forth in this
Indenture. The Company shall commence an Asset Sale Offer with respect to
Excess Proceeds within ten Business Days after the date that Excess Proceeds
exceed $45.0 million by mailing the notice required pursuant to the terms of
this Indenture, with a copy to the Trustee. The Company may satisfy the
foregoing obligations with respect to any Net Proceeds from an Asset Sale by
making an Asset Sale

 

111

 

Offer with respect to such Net Proceeds prior to the expiration of the
relevant 450 days or with respect to Excess Proceeds of $45.0 million or
less.  To the extent that the aggregate
amount of Notes and such Senior Subordinated Indebtedness tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes, subject to the other
covenants contained in this Indenture. If the aggregate principal amount of
Notes or the Senior Subordinated Indebtedness surrendered by such holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select or
cause to be selected the Notes and such Senior Subordinated Indebtedness to be
purchased on a pro rata basis based on the
accreted value or principal amount of the Notes or such Senior Subordinated
Indebtedness tendered. Upon completion of any such Asset Sale Offer, the amount
of Excess Proceeds related to such Asset Sale Offer shall be reset at zero.

 

(d)           Pending
the final application of any Net Proceeds pursuant to this Section 1018,
the Company or the applicable Restricted Subsidiary may apply such Net Proceeds
temporarily to reduce Indebtedness outstanding under a revolving credit
facility or otherwise invest such Net Proceeds in any manner not prohibited by
this Indenture.

 

(e)           The
Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this Indenture, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations
described in this Indenture by virtue thereof.

 

(f)            If
the Company is repurchasing less than all of the Notes at any time, the Trustee
shall select the Notes to be repurchased (a) if the Notes are listed on
any national securities exchange, in compliance with the requirements of the
principal national securities exchange on which such Notes are listed or
(b) if such 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)           Notices
of repurchase shall be mailed by first class mail, postage prepaid, at least 30
days but not more than 60 days before the date of repurchase to each Holder at
such Holder’s registered address, except that notices of repurchase may be
mailed more than 60 days prior to a date of repurchase if the notice is issued
in connection with a defeasance of the Notes or a satisfaction and discharge of
this Indenture. If any Note is to be repurchased in part only, any notice of
repurchase that relates to such Note shall state the portion of the principal
amount thereof to be repurchased.

 

(h)           A
new Note in principal amount equal to the unrepurchased portion of any Note
repurchased in part shall be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for repurchase become due and
payable on the date fixed for repurchase. On and after the date of repurchase,
unless the

 

112

 

Company defaults in the repurchase payment, interest shall cease to
accrue on the Note or portions thereof called for repurchase.

 

SECTION 1019.  Additional Interest Notice.  In the event that the Company is required to
pay Additional Interest to Holders pursuant to the Registration Rights
Agreement, the Company shall provide written notice (an “Additional Interest Notice”) to the
Trustee of its obligation to pay Additional Interest no later than fifteen days
prior to the proposed payment date for the Additional Interest, and the
Additional Interest Notice shall set forth the amount of Additional Interest to
be paid by the Company on such payment date. 
The Trustee shall not at any time be under any duty or responsibility to
any Holder to determine the Additional Interest, or with respect to the nature,
extent, or calculation of the amount of Additional Interest owed, or with
respect to the method employed in such calculation of the Additional Interest.

 

SECTION 1020.  Obligations of the Company and the
Restricted Subsidiaries Relating to Kate Spade.  In the event that Kate Spade sells, conveys,
transfers or otherwise disposes all or substantially all of its properties or
assets in one or more related transactions, the Company shall, subject to its
fiduciary duties to the holders of minority Equity Interests in Kate Spade and
subject to any other obligations in the organizational documents of Kate Spade
or other agreements with Kate Spade or holders of its Equity Interests (in each
case, as in effect on the Issue Date), exercise its rights and powers as a
controlling holder of Equity Interests in Kate Spade to cause Kate Spade to
distribute to the Company its pro rata
share of the net proceeds of such sale, conveyance, transfer or other
disposition, the Company shall apply such proceeds in accordance with
Section 1018 of 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 1018 of
this Indenture and such amount will constitute “Net Proceeds” thereunder.  Furthermore, the Company, in its capacity as
a holder of Equity Interests in Kate Spade, shall not, and shall cause its
Restricted Subsidiaries not to, waive any of its rights to receive dividends,
distributions or other payments from Kate Spade or consent to an amendment of
Kate Spade’s organizational documents or other agreements that would restrict
Kate Spade’s ability to make any such distributions.

 

113

 

ARTICLE ELEVEN

REDEMPTION OF NOTES

 

SECTION 1101.  Right of Redemption.  (a)  At any time prior to
October 15, 2010, the Company may redeem all or a part of the Notes, upon
not less than 30 nor more than 60 days’ prior notice, at a redemption
price equal to 100% of the principal amount of Notes redeemed plus the
Applicable Premium as of, and accrued and unpaid interest and Additional
Interest, if any, to the Redemption Date, subject to the rights of Holders on
the relevant Record Date to receive interest due on the relevant Interest
Payment Date.

 

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

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2010

  	
   

  	
  105.188

  	
  %

  
	
  2011

  	
   

  	
  103.458

  	
  %

  
	
  2012

  	
   

  	
  101.729

  	
  %

  
	
  2013 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

(c)                                  Prior
to October 15, 2008, the Company may, at its option, redeem up to 35% of
the aggregate principal amount of Notes issued under this Indenture at a
redemption price equal to 110.375% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Additional Interest, if any, thereon to
the applicable Redemption Date, subject to the right of Holders on the relevant
record date to receive interest due on the relevant interest payment date, with
the net cash proceeds of one or more Equity Offerings of the Company or any
direct or indirect parent of the Company to the extent such net cash proceeds
are contributed to the Company; provided that
at least 50% of the sum of the aggregate principal amount of Notes originally
issued under this Indenture and any Additional Notes issued under this
Indenture after the Issue Date remains Outstanding immediately after the
occurrence of each such redemption; provided
further that each such redemption occurs within 90 days of the
date of closing of each such Equity Offering.

 

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

 

SECTION 1103.  Election to Redeem; Notice to Trustee.  The election of the Company to redeem any
Notes pursuant to Section 1101 above shall be evidenced by a Board
Resolution.  If the Company elects to
redeem Notes pursuant to Section 1101

 

114

 

above it shall furnish to the Trustee, at least five Business Days
before notice of redemption is required to be mailed or caused to be mailed to
Holders pursuant to Section 1105 hereof, an Officers’ Certificate setting
forth (i) the paragraph or subparagraph of such Note and/or
Section of this Indenture pursuant to which the redemption shall occur,
(ii) the Redemption Date, (iii) the principal amount of the Notes to
be redeemed and (iv) the Redemption Price.

 

SECTION 1104.  Selection by Trustee of Notes to Be
Redeemed.  (a)  If the Company
is redeeming less than all of the Notes at any time, the Trustee shall select
the Notes to be redeemed (a) if the Notes are listed on any national
securities exchange, in compliance with the requirements of the principal
national securities exchange on which such Notes are listed or (b) if such
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 redeemed in part.

 

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

 

(c)                                  A
new Note in principal amount equal to the unredeemed portion of any Note
redeemed in part shall be issued in the name of the Holder thereof upon
cancellation of the original Note.  Notes
called for redemption become due and payable on the date fixed for
redemption.  On and after the Redemption
Date, unless the Company defaults in the redemption payment, interest shall
cease to accrue on the Note or portions thereof called for redemption.

 

SECTION 1105.  Notice of Redemption.  Notices of redemption shall be mailed by
first class mail, postage prepaid, at least 30 days but not more than
60 days before the Redemption Date to each Holder at such Holder’s
registered address, except that notices of redemption may be mailed more than
60 days prior to a Redemption Date if the notice is issued in connection
with a defeasance of the Notes or a satisfaction and discharge of this
Indenture.

 

All notices of
redemption shall state:

 

(1)                                  the Redemption Date,

 

(2)                                  the Redemption Price
and the amount of accrued interest to the Redemption Date payable 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 particular Notes to be
redeemed,

 

(4)                                  in case any Note is
to be redeemed in part only, the notice which relates to such Note shall state
that on and after the Redemption Date, upon surrender of such Note, the Holder
shall receive, without charge, a new Note or Notes of authorized denominations
for the principal amount thereof remaining unredeemed,

 

115

 

(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 due and
payable upon each such Note, or the portion thereof, to be redeemed, and that
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 the Redemption Price and
accrued interest, if any,

 

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

 

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

 

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

 

(10)                            the “CUSIP” number, ISIN or
“Common Code” number and that no representation is made as to the accuracy or
correctness of the “CUSIP” number, ISIN or “Common Code” number, if any, listed
in such notice or printed on the Notes, and

 

(11)                            the paragraph of the Notes
or Section of the Indenture pursuant to which the Notes are to be
redeemed.

 

At the
Company’s request, the Trustee shall give the notice of redemption in the
Company’s name and at its expense; provided
that the Company shall have delivered to the Trustee, at least five Business
Days before notice of redemption is required to be mailed or caused to be
mailed to Holders pursuant to this Section 1105 (unless a shorter notice
shall be agreed to by the Trustee), an Officers’ Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in Section 1103.

 

SECTION 1106.  Effect of Notice of Redemption.  Once
notice of redemption is mailed in accordance with Section 1105 hereof,
Notes called for redemption become irrevocably due and payable on the
Redemption Date at the Redemption Price. 
The notice, if mailed in a manner herein provided, shall be conclusively
presumed to have been given, whether or not the Holder receives such
notice.  In any case, failure to give
such notice by mail or any defect in the notice to the Holder of any Note designated
for redemption in whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note.  Subject to Section 1107 hereof, on and
after the Redemption Date, interest ceases to accrue on Notes or portions of
Notes called for redemption.

 

SECTION 1107.  Deposit of Redemption Price.  Prior to 10:00 a.m. (Eastern Time) on
any Redemption Date, the Company shall deposit with the Trustee or with 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 of money
sufficient to pay the

 

116

 

Redemption Price of, and accrued interest and Additional Interest, if
any, on, all the Notes that are to be redeemed on that date.  The Trustee or the Paying Agent shall
promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued and unpaid interest and Additional Interest,
if any, on, all Notes to be redeemed or purchased.

 

SECTION 1108.  Notes Payable on Redemption Date.  (a)  Notice of redemption having been
given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified (together with
accrued interest and Additional Interest, if any, to the Redemption Date), and
from and after such date (unless the Company shall default in the payment of
the Redemption Price and accrued interest) such Notes shall cease to bear
interest.  Upon surrender of any such
Note for redemption in accordance with said notice, such Note shall be paid by
the Company at the Redemption Price, together with accrued interest and
Additional Interest, if any, to the Redemption Date and such Notes shall be
canceled by the Trustee; provided, however,
that installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Notes, or one or more
Predecessor Notes, registered as such at the close of business on the relevant
Record 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 thereof for
redemption, the principal (and premium, if any) shall, until paid, bear
interest from the Redemption Date at the rate borne by the Notes.

 

SECTION 1109.  Notes Redeemed in Part.  Any Note which is to be redeemed only in part
(pursuant to the provisions of this Article) shall be surrendered at the office
or agency of the Company maintained for such purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder’s
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Note without
service charge, a new Note or Notes, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Note so
surrendered; provided that each
new Note will be in a principal amount of $2,000 or an integral multiple of
$1,000.

 

117

 

ARTICLE TWELVE

GUARANTEES

 

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

 

(b)                                 Each
Guarantor hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder with respect to any provisions hereof or thereof, any release of
any other Guarantor, the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor.

 

(c)                                  Each
Guarantor hereby waives (to the extent permitted by law) the benefits of diligence,
presentment, demand for payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding
first against the Company or any other Person, protest, notice and all demands
whatsoever and covenants that the Guarantee of such Guarantor shall not be
discharged as to any Note except by complete performance of the obligations
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 the
Guarantors hereby agrees that, in the event of a default in payment of
principal (or premium, if any) or interest on such Note, whether at its Stated
Maturity, by acceleration, purchase or otherwise, legal proceedings may be
instituted by the Trustee on behalf of, or by, the Holder of such Note, subject
to the terms and conditions set forth in this Indenture, directly against each
of the Guarantors to enforce such Guarantor’s Guarantee without first
proceeding against the Company or any other Guarantor.  Each Guarantor agrees that if, after the
occurrence and during the continuance of an Event of Default, the Trustee or
any of the Holders are prevented by applicable law from exercising their
respective rights to accelerate the Maturity of the

 

118

 

Notes, to collect interest on the Notes, or to enforce or exercise any
other right or remedy with respect to the Notes, such Guarantor shall 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 and remedies
been permitted to be exercised by the Trustee or any of the Holders.

 

(d)                                 If
any Holder or the Trustee is required by any court or otherwise to return to
the Company or any Guarantor, or any custodian, trustee, liquidator or other
similar official acting in relation to either the Company or any Guarantor, any
amount paid by any of them to the Trustee or such Holder, the Guarantee of each
of the Guarantors, to the extent theretofore discharged, shall be reinstated in
full force and effect.  Each Guarantor
further agrees that, as between each Guarantor, on the one hand, and the
Holders and the Trustee on the other hand, (1) subject to this
Article Twelve, the Maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Five hereof for the purposes of the
Guarantee of such Guarantor notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (2) in the event of any acceleration of such
obligation as provided in Article Five hereof, such obligations (whether
or not due and payable) shall forthwith become due and payable by each
Guarantor for the purpose of the Guarantee of such Guarantor.  The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantees.

 

(e)                                  Each
Guarantee shall remain in full force and effect and continue to be effective
should any petition be filed by or against the Company for liquidation,
reorganization, should the Company become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed 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 be reinstated, as the case
may be, if at any time payment and performance of the Notes are, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored
or returned by any obligee on the Notes, whether as a “voidable preference”,
“fraudulent transfer” or otherwise, all as though such payment or performance
had not been made.  In the event that any
payment or any part thereof, is rescinded, reduced, restored or returned, the
Notes shall, to the fullest extent permitted by law, be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored or
returned.

 

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

 

SECTION 1203.  Subordination of Guarantees.  The Guarantee issued by any Guarantor shall
be unsecured senior subordinated obligations of such Guarantor, ranking pari
passu with all other existing and future Senior Subordinated Indebtedness of
such Guarantor, if any.  The Indebtedness
evidenced by such Guarantee shall be

 

119

 

subordinated on the same basis to Senior Indebtedness of such Guarantor
as the Notes are subordinated to Senior Indebtedness under
Article Fourteen.

 

SECTION 1204.  Limitation of Guarantors’ Liability.  Each Guarantor, and by its acceptance of
Notes, each Holder hereby confirms that it is the intention of all such parties
that the Guarantee of such Guarantor not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or
state law to the
extent applicable to any Guarantee or the provisions of its local law
relating to fraudulent transfer or conveyance. 
To effectuate the foregoing intention, the Trustee, the Holders and each
Subsidiary Guarantor hereby irrevocably agree that the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the
maximum amount as will, after giving
effect to such maximum amount and all other contingent and fixed liabilities of
such Subsidiary Guarantor that
are relevant under such laws and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under
this Article Eleven, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under applicable law.

 

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

 

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

 

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

 

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

 

120

 

(1)                                  (A) 
the sale, disposition or other transfer (including through merger or
consolidation) of all of the Capital Stock (or any sale, disposition or other
transfer of Capital Stock following which such Subsidiary Guarantor is no longer
a Restricted Subsidiary), or all or substantially all the assets, of such
Subsidiary Guarantor (other than a sale, disposition or other transfer to a
Restricted Subsidiary) if such sale, disposition or other transfer is made in
compliance with the applicable provisions of this Indenture;

 

(B)  the designation by the Company of
such Subsidiary Guarantor as an Unrestricted Subsidiary in accordance
Section 1010 of this Indenture and the definition of “Unrestricted
Subsidiary”;

 

(C)  the release or discharge of such
Subsidiary Guarantor from its guarantee of Indebtedness under the Senior Credit
Facilities or the guarantee that resulted in the obligation of such Subsidiary
Guarantor to guarantee the Notes, in each case, if such Subsidiary Guarantor
would not then otherwise be required to guarantee the Notes pursuant to
Section 1015 of this Indenture (treating any guarantees of such Subsidiary
Guarantor that remain outstanding as incurred at least 30 days prior to
such release), except, in each case, a release or discharge by, or as a result
of, payment under such Guarantee or payment in full of the Indebtedness under
the Senior Credit Facilities; or

 

(D)  exercise by the Company of its
Legal Defeasance of the Notes under Section 1302 of this Indenture or its
Covenant Defeasance of the Notes under Section 1303 of this Indenture or
if the Company’s obligations under this Indenture are discharged in accordance
with Section 401 of this Indenture; and

 

(2)                                  in the case of
clause (1) (a) above, the release of such Subsidiary Guarantor
from its guarantee, if any, of and all pledges and security, if any, granted in
connection with, the Senior Credit Facilities, the Senior Notes and any other
Indebtedness of the Company or any Restricted Subsidiary.

 

SECTION 1209.  Benefits Acknowledged.  Each Guarantor acknowledges that it shall
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and from its guarantee and waivers pursuant to
its Guarantees under this Article Twelve.

 

121

 

ARTICLE THIRTEEN

LEGAL DEFEASANCE 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 either
Section 1302 or Section 1303 be applied to all Outstanding Notes upon
compliance with the conditions set forth below in this Article Thirteen.

 

SECTION 1302.  Legal Defeasance and Discharge.  Upon the Company’s exercise under
Section 1301 of the option applicable to this Section 1302, each of
the Company and the Guarantors shall be deemed to have been discharged from its
respective obligations with respect to all Outstanding Notes on the date the
conditions set forth in Section 1304 are satisfied (hereinafter, “Legal Defeasance”).  For this purpose, such Legal Defeasance means
that each of the Company and the Guarantors shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Notes, which
shall thereafter be deemed to be “Outstanding” only for the purposes of
Section 1305 and the other Sections of this Indenture referred to in
(1) and (2) below, and to have satisfied all its other obligations
under such Notes and this Indenture insofar as such Notes and their related
Guarantees are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder:

 

(1)                                  the rights of Holders
of Outstanding Notes to receive payments in respect of the principal of (and
premium, if any, on) and interest on such Notes when such payments 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, and the obligations of
each of the Company and the Guarantors in connection therewith and

 

(4)                                  this
Article Thirteen.

 

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

 

SECTION 1303.  Covenant Defeasance.   Upon
the Company’s exercise under Section 1301 of the option applicable to this
Section 1303, each of the Company and the Guarantors shall be released
from its respective obligations under any covenant contained in
Sections 801, 802, 803 and in Sections 1005, 1006, 1007 and 1009
through and including 1018 and 1020 with respect to the Outstanding Notes on
and after the date the conditions set forth below are satisfied (hereinafter, “Covenant Defeasance”), and the

 

122

 

Notes shall thereafter be deemed not to be “Outstanding” for the
purposes of any direction, waiver, consent or declaration or Act of Holders
(and the consequences of any thereof) in connection with such covenants, but
shall continue to be deemed “Outstanding” for all other purposes
hereunder.  For this purpose, such
Covenant Defeasance means that, with respect to the Outstanding Notes, the
Company or any Guarantor, as applicable, may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Sections 501(3), 501(4), 501(5) and 501(7) and, with respect to
only any Significant Subsidiary and not the Company, Section 501(6), but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby.

 

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

 

(1)                                  the Company shall
irrevocably have deposited or caused to be deposited with the Trustee (or
another trustee satisfying the requirements of Section 608 who shall agree
to comply with the provisions of this Article Thirteen applicable to it)
as trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to the benefit of
the Holders of such Notes; (A) cash in U.S. dollars, or (B) non-callable
Government Securities, or (C) a combination thereof, in such amounts as
shall be sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying trustee) to pay and discharge, the principal
of (and premium, if any) and interest on the Outstanding Notes on the Stated
Maturity (or Redemption Date, if applicable) of such principal (and premium, if
any) or, interest due on the Notes; provided that
the Trustee shall have been irrevocably instructed to apply such cash or the
proceeds of such Government Securities to said payments with respect to the
Notes; and provided further that upon the
effectiveness of this Section 1304, the cash or Government Securities
deposited shall not be subject to the rights of the holders of Senior
Indebtedness pursuant to the provisions of Article Fourteen of this
Indenture, so long as the provisions of Article Fourteen were not violated
at the time the cash or Government Securities were so deposited.  Before such a deposit, the Company may give
to the Trustee, in accordance with Section 1103 hereof, a notice of its
election to redeem all of the Outstanding Notes at a future date in accordance
with Article Eleven hereof, which notice shall be irrevocable.  Such irrevocable redemption notice, if given,
shall be given effect in applying the foregoing;

 

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

 

123

 

(A)  the Company has received from, or
there has been published by, the United States Internal Revenue Service a
ruling, or

 

(B)  since the issuance of the Notes,
there has been a change in the applicable U.S. Federal income tax law,

 

in either case to the effect that, and based
thereon such Opinion of Counsel in the United States shall confirm that,
subject to customary assumptions and exclusions, the Holders shall not
recognize income, gain or loss for U.S. Federal income tax purposes as a result
of such Legal Defeasance and shall 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 such Legal Defeasance had not occurred;

 

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

 

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

 

(5)                                  such Legal Defeasance
or Covenant Defeasance shall not result in a breach or violation of, or constitute
a default under any of the Senior Credit Facilities, the Senior Indenture, the
Existing Indenture, the Senior Notes, the Existing 2028 Debentures or any other
material agreement or instrument (other than this Indenture) to which, the
Company, Holdings or any Subsidiary Guarantor is a party or by which the
Company, Holdings or any Subsidiary Guarantor is bound;

 

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

 

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

 

124

 

(8)                                  the Company shall
have delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel in the United States of America (which Opinion of Counsel may be
subject to customary assumptions and exclusions) each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance, as the case may be, have been complied with.

 

SECTION 1305.  Deposited Money and Government Securities
to Be Held in Trust; Other Miscellaneous Provisions.  All cash and Government Securities (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 1305, the “Qualifying Trustee”) pursuant to
Section 1304 in respect of the Outstanding Notes shall be held in trust
and applied by the Qualifying Trustee, in accordance with the provisions of
such Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company or a Subsidiary acting as its own Paying
Agent) as the Qualifying Trustee may determine, to the Holders of such Notes of
all sums due and to become due thereon in respect of principal (and premium, if
any) and interest, but such money or Government Securities need not be
segregated from other funds except to the extent required by law.  Money and Government Securities so held in
trust are not subject to Article Fourteen or Section 1204 hereof; provided that the subordination provisions
of Article Fourteen and Section 1204 were not violated at the time
the such amounts were deposited in trust.

 

The Company
shall pay and indemnify the Qualifying Trustee against any tax, fee or other
charge imposed on or assessed against the Government Securities deposited
pursuant to Section 1304 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the Outstanding Notes.

 

Anything in
this Article Thirteen to the contrary notwithstanding, the Qualifying
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or Government Securities held by it as provided in
Section 1304 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Qualifying Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent Legal Defeasance
or Covenant Defeasance, as applicable, in accordance with this Article.

 

SECTION 1306.  Reinstatement.  If the Trustee or any Paying Agent is unable
to apply any money or Government Securities in accordance with
Section 1305 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company’s and each Guarantor’s obligations under this
Indenture and the Outstanding Notes shall be revived and reinstated as though
no deposit had occurred pursuant to Section 1302 or 1303, as the case may
be, until such time as the Trustee or Paying Agent is permitted to apply all
such money or Government Securities in accordance with Section 1305; provided, however, that if the Company
makes any payment of principal of (or premium, if any) or interest on any Note
following the reinstatement of its obligations, the Company shall be

 

125

 

subrogated to the rights of the Holders of such Notes to receive such
payment from the money or Government Securities held by the Trustee or Paying
Agent.

 

SECTION 1307.  Repayment to Company.  Any
money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of, premium and Additional
Interest, if any, or interest on any Note and remaining unclaimed for two years
after such principal, and premium and Additional Interest, if any, or interest
has become due and payable shall be paid to the Company on its request or (if
then held by the Company) shall be discharged from such trust; and the Holder
of such Note shall thereafter look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.

 

126

 

ARTICLE FOURTEEN

SUBORDINATION

 

SECTION 1401.  Agreement To Subordinate.  The Company agrees, and each Holder by
accepting a Note agrees, that the Indebtedness evidenced by the Notes is
subordinated in right of payment, to the extent and in the manner provided in
this Article Fourteen, to the prior payment of all Senior Indebtedness of
the Company and that the subordination is for the benefit of and enforceable by
the holders of such Senior Indebtedness. 
The Notes shall in all respects rank pari
passu in right of payment with all existing and future Senior
Subordinated Indebtedness of the Company, and will be senior in right of
payment to all existing and future Subordinated Indebtedness of the Company;
and only Indebtedness of the Company that is Senior Indebtedness shall rank
senior to the Notes in accordance with the provisions set forth herein.  All provisions of this Article Fourteen
shall be subject to Section 1412 hereof.

 

SECTION 1402.  Liquidation, Dissolution, Bankruptcy.  Upon any payment or distribution of the
assets of the Company upon a total or partial liquidation or dissolution or
reorganization of or similar proceeding relating to the Company or its
property:

 

(1)                                  the holders of Senior Indebtedness of the
Company shall be entitled to receive payment in full in cash of such Senior
Indebtedness before the Holders are entitled to receive any payment;

 

(2)                                  until the Senior Indebtedness of the Company
is paid in full in cash, any payment or distribution to which Holders would be
entitled but for the subordination provisions of this Indenture shall be made
to holders of such Senior Indebtedness as their interests may appear, except
that Holders may receive Permitted Junior Securities; and

 

(3)                                  if a distribution is made to Holders that,
due to the subordination provisions, should not have been made to them, such
Holders are required to hold it in trust for the holders of Senior Indebtedness
of the Company and pay it over to them as their interests may appear.

 

SECTION 1403.  Default on Designated Senior Indebtedness
of the Company.  The Company shall
not pay the principal of, premium, if any, or interest on the Notes or make any
deposit pursuant to Article Four or Article Thirteen and may not
purchase, redeem or otherwise retire any Notes (collectively, “pay the Notes”) (except in the form of
Permitted Junior Securities) if either of the following (a “Payment Default”) occurs: (a) any
Obligation on Designated Senior Indebtedness of the Company is not paid in full
in cash when due (after giving effect to any applicable grace period); or
(b) any other default on Designated Senior Indebtedness of the Company
occurs and the maturity of such Designated Senior Indebtedness is accelerated
in accordance with its terms unless, in either case, the Payment Default has
been cured or waived and any such acceleration has been rescinded or such
Designated Senior Indebtedness has been paid in

 

127

 

full in cash; provided, however,
that the Company shall be entitled to pay the Notes without regard to the
foregoing if the Company and the Trustee receive written notice approving such
payment from the Representatives of all Designated Senior Indebtedness with
respect to which the Payment Default has occurred and is continuing.

 

During the
continuance of any default (other than a Payment Default) with respect to any
Designated Senior Indebtedness of the Company pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company shall not pay the Notes (except in the
form of Permitted Junior Securities) for a period (a “Payment
Blockage Period”) commencing upon the receipt by the Trustee of
(with a copy to the Company) written notice (a “Blockage
Notice”) of such default from the Representative of such Designated
Senior Indebtedness specifying an election to effect a Payment Blockage Period
and ending 179 days thereafter.  The
Payment Blockage Period shall end earlier if such Payment Blockage Period is
terminated (1) by written notice to the Trustee and the Company from the
Person or Persons who gave such Blockage Notice; (2) because the default
giving rise to such Blockage Notice is cured, waived or otherwise no longer
continuing; or (3) because such Designated Senior Indebtedness has been
discharged or repaid in full in cash.

 

Notwithstanding
the provisions described in the immediately preceding two sentences (but
subject to the provisions contained in the first sentence of this
Section 1403), unless the holders of such Designated Senior Indebtedness
or the Representative of such Designated Senior Indebtedness shall have
accelerated the maturity of such Designated Senior Indebtedness, the Company
shall be entitled to resume payments on the Notes after termination of such
Payment Blockage Period.  The Notes shall
not be subject to more than one Payment Blockage Period in any consecutive
360-day period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness of the Company during such period; provided that if any Blockage Notice within such 360-day
period is delivered to the Trustee by or on behalf of any holders of Designated
Senior Indebtedness of the Company (other than holders of Indebtedness under
the Senior Credit Facilities), a Representative of holders of Indebtedness
under each of the Senior Credit Facilities shall be entitled to give another
Blockage Notice within such period; provided further,
however, that in no event shall the
total number of days during which any Payment Blockage Period or Periods is in
effect exceed 179 days in the aggregate during any 365-consecutive-day
period, and there must be at least 186 days during any consecutive 365-day period
during which no Payment Blockage Period is in effect.  For purposes of this Section 1403, no
Default or Event of Default that existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated Senior
Indebtedness of the Company initiating such Payment Blockage Period shall be,
or be made, the basis of the commencement of a subsequent Payment Blockage
Period by the Representative of such Designated Senior Indebtedness, whether or
not within a period of 365 consecutive days.  So long as there shall remain outstanding
Senior Indebtedness under the Senior Credit facilities, a Blockage Notice with
respect to the Credit Facilities may only be given by the administrative agents
thereunder unless otherwise agreed to in writing by the respective requisite
lenders named therein.

 

128

 

SECTION 1404.  Acceleration of Payment of Securities.  If payment of the Notes is accelerated
because of an Event of Default, the Company or the Trustee shall promptly
notify the holders of the Designated Senior Indebtedness of the Company (or
their Representatives) of the acceleration; provided that any failure to give such notice shall have no
effect whatsoever on the provisions of this Article Fourteen.  If any Designated Senior Indebtedness of the
Company is outstanding, the Company may not pay the Notes until five Business
Days after the Representatives of all the issuers of such Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Notes only if this Indenture otherwise permits payment at that time.

 

SECTION 1405.  When Distribution Must Be Paid Over.  If a distribution is made to Holders that
because of this Article Fourteen should not have been made to them, the
Holders who receive the distribution shall hold it in trust for holders of
Senior Indebtedness of the Company and pay it over to them as their interests
may appear.

 

SECTION 1406.  Subrogation.  After all Senior Indebtedness of the Company
is paid in full and until the Notes are paid in full, Holders shall be
subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to such Senior Indebtedness.  A distribution made under this
Article Fourteen to holders of such Senior Indebtedness which otherwise
would have been made to Holders is not, as between the Company and Holders, a
payment by the Company on such Senior Indebtedness.

 

SECTION 1407.  Relative Rights.  This Article Fourteen defines the
relative rights of Holders and holders of Senior Indebtedness of the
Company.  Nothing in this Indenture
shall:

 

(1)                                  impair, as between
the Company and Holders, the obligation of the Company, which is absolute and
unconditional, to pay principal of and interest on the Notes in accordance with
their terms; or

 

(2)                                  prevent the Trustee
or any Holder from exercising its available remedies upon a Default, subject to
the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to
Holders.

 

SECTION 1408.  Subordination May Not Be Impaired by
Company.  No right of any holder of
Senior Indebtedness of the Company to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or by its failure to comply with this Indenture.

 

SECTION 1409.  Rights of Trustee and Paying Agent.  (a)  Notwithstanding Section 1403,
the Trustee or Paying Agent shall continue to make payments on the Notes and
shall not be charged with knowledge of the existence of facts that under this
Article Fourteen would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a trust
officer of the Trustee receives notice satisfactory to it that such payments
are prohibited by this Article Fourteen. 
The Company, the Note Registrar or co-registrar, the Paying Agent, a

 

129

 

Representative or a holder of Senior Indebtedness of the Company shall
be entitled to give the notice; provided, however,
that, if an issue of Senior Indebtedness of the Company has a Representative,
only the Representative shall be entitled to give the notice.

 

(b)                                 The
Trustee in its individual or any other capacity shall be entitled to hold
Senior Indebtedness of the Company
with the same rights it would have if it were not Trustee.  The Note Registrar and co-registrar and the
Paying Agent shall be entitled to do the same with like rights.  The Trustee shall be entitled to all the
rights set forth in this Article Fourteen with respect to any Senior
Indebtedness of the Company
which may at any time be held by it, to the same extent as any other holder of
such Senior Indebtedness; and nothing in Article Six shall deprive the
Trustee of any of its rights as such holder. 
Nothing in this Article Fourteen shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 607.

 

SECTION 1410.  Distribution or Notice to Representative.  Whenever any Person is to make a distribution
or give a notice to holders of Senior Indebtedness of the Company, such Person
shall be entitled to make such distribution or give such notice to their
Representative (if any).

 

SECTION 1411.  Article Fourteen Not To Prevent
Events of Default or Limit Right To Accelerate.  The failure to make a payment pursuant to the
Notes by reason of any provision in this Article Fourteen shall not be
construed as preventing the occurrence of a Default.  Nothing in this Article Fourteen shall
have any effect on the right of the Holders or the Trustee to accelerate the
maturity of the Notes.

 

SECTION 1412.  Trust Moneys Not Subordinated.  Notwithstanding anything contained herein to
the contrary, payments from money or the proceeds of U.S. Government Securities
held in trust under Article Four or Article Thirteen by the Trustee
for the payment of principal of and interest on the Notes shall not be
subordinated to the prior payment of any Senior Indebtedness of the Company or
subject to the restrictions set forth in this Article Fourteen, and none
of the Holders shall be obligated to pay over any such amount to the Company or
any holder of Senior Indebtedness of the Company or any other creditor of the
Company; provided that the
subordination provisions of this Article Fourteen and Section 1204 of
this Indenture were not violated at the time the applicable amounts were
deposited in trust pursuant to Article Four or Article Thirteen of
this Indenture, as the case may be.

 

SECTION 1413.  Trustee Entitled To Rely.  Upon any payment or distribution pursuant to
this Article Fourteen, the Trustee and the Holders shall be entitled to
rely (a) upon any order or decree of a court of competent jurisdiction in
which any proceedings of the nature referred to in Section 1402 are
pending, (b) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Holders or (c) upon the Representatives of Senior Indebtedness of the
Company for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of such Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or

 

130

 

distributed thereon and all other facts pertinent thereto or to this
Article Fourteen.  In the event that
the Trustee determines, in good faith, that evidence is required with respect
to the right of any Person as a holder of Senior Indebtedness of the Company to
participate in any payment or distribution pursuant to this
Article Fourteen, the Trustee shall be entitled to request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of such Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article Fourteen,
and, if such evidence is not furnished, the Trustee shall be entitled to defer
any payment to such Person pending judicial determination as to the right of
such Person to receive such payment.  The
provisions of Sections 601 and 603 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article Fourteen.

 

SECTION 1414.  Trustee To Effectuate Subordination.  Each Holder by accepting a Note authorizes
and directs the Trustee on his behalf to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination between the
Holders and the holders of Senior Indebtedness of the Company as provided in
this Article Fourteen and appoints the Trustee as attorney-in-fact for any
and all such purposes.

 

SECTION 1415.  Trustee Not Fiduciary for Holders of
Senior Indebtedness of the Company. 
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness of the Company and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Holders or the Company
or any other Person, money or assets to which any holders of Senior
Indebtedness of the Company shall be entitled by virtue of this
Article Fourteen or otherwise.

 

SECTION 1416.  Reliance by Holders of Senior Indebtedness
of the Company on Subordination Provisions. 
Each Holder by accepting a Note acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness of the Company,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness and such holder of such Senior Indebtedness shall be
deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness.

 

131

 

IN WITNESS
WHEREOF, the parties hereto have caused this Indenture to be duly executed 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

  	
   

  
									

 

132

 

	
   

  	
  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

  	
   

  

 

133

 

SCHEDULE I

 

Subsidiary
Guarantors

 

1.                                       Neiman
Marcus Special Events, Inc., a Delaware corporation

 

2.                                       NM
Financial Services, Inc., a Delaware corporation

 

3.                                       NM
Kitchens, Inc., a Delaware corporation

 

4.                                       BergdorfGoodman.com,
LLC, a Delaware limited liability company

 

5.                                       Bergdorf
Goodman, Inc., a New York corporation

 

6.                                       Bergdorf
Graphics, Inc., a New York corporation

 

7.                                       Neiman
Marcus Holdings, Inc., a California corporation

 

8.                                       NEMA
Beverage Corporation, a Texas corporation

 

9.                                       NEMA
Beverage Holding Corporation, a Texas corporation

 

10.                                 NEMA
Beverage Parent Corporation, a Texas corporation

 

11.                                 Worth
Avenue Leasing Company, a Florida corporation

 

12.                                 NMGP,
LLC, a Virginia limited liability company

 

13.                                 NM
Nevada Trust, a Massachusetts business trust

 

 

Rule 144A / Regulation S Appendix

 

PROVISIONS RELATING TO INITIAL NOTES,

PRIVATE EXCHANGE NOTES

AND EXCHANGE NOTES

 

1.             Definitions

 

1.1           Definitions.

 

For the
purposes of this Appendix the following terms shall have the meanings indicated
below:

 

“Applicable
Procedures” means, with respect to any transfer or transaction involving a
Temporary Regulation S Global Note or beneficial interest therein, the
rules and procedures of the Depository for such a Temporary Regulation S
Global Note, to the extent applicable to such transaction and as in effect from
time to time.

 

“Certificated
Note” means a certificated Initial Note or Exchange Note or Private Exchange
Note (other than a Global Note) bearing, if required, the appropriate
restricted notes legend set forth in Section 2.3(e) of this Appendix.

 

“Depository”
means The Depository Trust Company, its nominees and their respective
successors.

 

“Distribution
Compliance Period”, with respect to any Notes, means the period of 40
consecutive days beginning on and including the later of (i) the day on
which such Notes are first offered to Persons other than distributors (as
defined in Regulation S under the Securities Act) in reliance on Regulation S
and (ii) the issue date with respect to such Notes.

 

“Exchange
Notes” means (1) the 103/8%
Senior Subordinated Notes Due 2015 issued pursuant to the Indenture in connection
with a Registered Exchange Offer
pursuant to a Registration
Rights Agreement and
(2) Additional Notes, if any, issued pursuant to a registration statement
filed with the SEC under the Securities Act.

 

“Initial
Notes” means (1) $500,000,000
aggregate principal amount of 103/8% Senior Subordinated
Notes Due 2015 issued on the Issue Date and (2) Additional Notes, if any, issued in a transaction exempt
from the registration requirements of the Securities Act.

 

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

 

“Notes” means
the Initial Notes, any Additional Notes, the Exchange Notes and the Private
Exchange Notes, treated as a single class.

 

 

“Notes
Custodian” means the custodian with respect to a Global Note (as appointed by
the Depository), or any successor Person thereto and shall initially be the
Trustee.

 

“Private
Exchange” means the offer by the Company, pursuant to a Registration Rights Agreement, to the Initial Purchasers to issue and deliver to each Initial Purchaser, in exchange
for the Initial Notes held by the Initial Purchaser as part of its initial
distribution, a like aggregate principal amount of Private Exchange Notes.

 

“Private
Exchange Notes” means any 103/8% Senior Subordinated
Notes Due 2015 issued in connection with a Private Exchange.

 

“Purchase
Agreement” means (1) with respect
to the Initial Notes issued on the Issue Date, 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
agreement or underwriting agreement among the Company, Holdings, the Subsidiary
Guarantors and the Persons purchasing such Additional Notes.

 

“QIB” means a
“qualified institutional buyer” as defined in Rule 144A.

 

“Registered
Exchange Offer” means the offer by the Company, pursuant to a Registration Rights Agreement, to
certain Holders of Initial Notes, to issue and deliver to such Holders, in
exchange for the Initial Notes, a like aggregate principal amount of Exchange
Notes registered under the Securities Act.

 

“Registration
Rights Agreement” means (1) with
respect to the Initial Notes issued on the Issue Date, the Exchange and
Registration Rights Agreement dated October 6, 2005, among the Company,
Holdings, the Subsidiary Guarantors and the Initial Purchasers and (2) with respect to each issuance of
Additional Notes issued in a transaction exempt from the registration
requirements of the Securities Act, the registration rights agreement, if any,
among the Company and the Persons purchasing such Additional Notes under the
related Purchase Agreement.

 

“Representative”
means Credit Suisse First Boston LLC as representative of the Initial
Purchasers.

 

“Rule 144A
Notes” means all Notes offered and sold to QIBs in reliance on Rule 144A.

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

“Shelf
Registration Statement” means the registration statement issued by the Company
in connection with the offer and sale of Initial Notes or Private Exchange
Notes pursuant to a Registration
Rights Agreement.

 

2

 

“Transfer
Restricted Notes” means Notes that bear or are required to bear the legend
relating to restrictions on transfer relating to the Securities Act set forth
in 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 in this Appendix but not defined have the meanings ascribed to such
terms in the Indenture to which this Appendix is attached.

 

2.                                       The
Notes.

 

2.1                                 (a)  Form and
Dating.  The Initial Notes shall be
offered and sold by the Company pursuant to a Purchase Agreement.  The Initial Notes shall be resold initially
only to (i) QIBs in reliance on Rule 144A under the Securities Act
(“Rule 144A”) and (ii) Persons other than U.S. Persons (as defined in
Regulation S) in reliance on Regulation S under the Securities Act
(“Regulation S”).  Initial Notes may
thereafter be transferred to, among others, QIBs and purchasers in reliance on
Regulation S, subject to the restrictions on transfer set forth
herein.  Initial Notes initially resold
pursuant to Rule 144A shall be issued initially in the form of one or more
permanent global Notes in definitive, fully registered form (collectively, the
“Rule 144A Global Note”); and Initial Notes initially resold pursuant to
Regulation S shall be issued initially in the form of one or more temporary
global notes in fully registered form (collectively, the “Temporary Regulation
S Global Note”), in each case without interest coupons and with the global
notes legend and the applicable restricted notes legend set forth in
Exhibit 1 hereto, which shall be deposited on behalf of the purchasers of
the Initial Notes represented thereby with the Notes Custodian and registered
in the name of the Depository or a nominee of the Depository, duly executed by
the Company and authenticated by the Trustee as provided in this
Indenture.  Except as set forth in this
Section 2.1(a), beneficial ownership interests in the Temporary Regulation
S Global Note shall be held only through the Euroclear System (“Euroclear”) and
Clearstream Banking, S.A. (“Clearstream”) (as indirect participants in the
Depository) and shall not be exchangeable for interests in the Rule 144A
Global Note, a permanent Regulation S global note in fully registered form
(the “Permanent Regulation S Global Note”, and together with the Temporary
Regulation S Global Note, the “Regulation S Global Note”) or any other Note
prior to the expiration of the Distribution Compliance Period and then, after
the

 

3

 

expiration of the Distribution Compliance Period, may be exchanged for
interests in a Rule 144A Global Note or the Permanent Regulation S
Global Note only upon certification in the form attached hereto as
Exhibit 3 or otherwise in a form reasonably satisfactory to the Trustee
that beneficial ownership interests in such Temporary Regulation S Global Note
are owned either by non-U.S. persons or U.S. persons who purchased such
interests in a transaction that is exempt from the registration requirements
under the Securities Act.

 

Prior to the
expiration of the Distribution Compliance Period, Beneficial interests in
Temporary Regulation S Global Notes may be exchanged for interests in
Rule 144A Global Notes if (1) such exchange occurs in connection with
a transfer of Notes in compliance with Rule 144A and (2) the
transferor of the beneficial interest in the Temporary Regulation S Global
Note as applicable, first delivers to the Trustee a written certificate (in a
form substantially similar to that attached hereto as Exhibit 2) to the
effect that the beneficial interest in the Temporary Regulation S Global Note
as applicable, is being transferred (a) to a Person who the transferor
reasonably believes to be a QIB that is purchasing for its own account or the
account of a QIB in a transaction meeting the requirements of Rule 144A,
and (b) in accordance with all applicable securities laws of the States of
the United States and other jurisdictions.

 

Beneficial
interests in a Rule 144A Global Note may be transferred to a Person who
takes 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 (in
a form substantially similar to that attached hereto as Exhibit 2) to the
effect that such transfer is being made in accordance with Rule 903 or 904
of Regulation S or Rule 144 (if applicable).

 

The
Rule 144A Global Note, the Temporary Regulation S Global Note and the
Permanent Regulation S Global Note are collectively referred to herein as
“Global Notes”.  The aggregate principal
amount of the Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depository or its
nominee as hereinafter provided.

 

(b)                                 Book-Entry
Provisions.  This
Section 2.1(b) shall apply only to a Global Note deposited with or on
behalf of the Depository.

 

The Company
shall execute and the Trustee shall, in accordance with this
Section 2.1(b), authenticate and deliver initially one or more Global
Notes that (a) shall be registered in the name of the Depository or the
nominee of the Depository and (b) shall be delivered by the Trustee to the
Depository or pursuant to the Depository’s instructions or held by the Trustee
as custodian for the Depository.

 

Members of, or
participants in, the Depository (“Agent Members”) shall have no rights under
this Indenture with respect to any Global Note held on their behalf by the
Depository or by the Trustee as the custodian of the Depository or under such
Global Note, and the Company, the Trustee and any agent of the Company or the
Trustee shall be entitled to treat the Depository as the absolute owner of such
Global Note for all

 

4

 

purposes whatsoever. 
Notwithstanding the foregoing, nothing herein shall prevent the Company,
the Trustee or any agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished by the
Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the exercise of
the rights of a holder of a beneficial interest in any Global Note.

 

(c)                                  Certificated
Notes.  Except as provided in this
Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in
Global Notes shall not be entitled to receive physical delivery of Certificated
Notes.

 

2.2                                 Authentication.  The Trustee shall upon receipt of a Company
Order specified in Section 202 of the Indenture authenticate and
deliver:  (1) on the Issue Date, an
aggregate principal amount of $500,000,000 103/8% Senior
Subordinated Notes Due 2015,
(2) any Additional Notes for an original issue in an aggregate principal
amount specified in the written order of the Company pursuant to
Section 202 of the Indenture and
(3) Exchange Notes or
Private Exchange Notes for issue only in a Registered Exchange Offer or a
Private Exchange, respectively, pursuant to a Registration Rights Agreement,
for a like principal amount of Initial Notes, in each case upon a written order
of the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company.  Such Company Order shall specify the amount
of the Notes to be authenticated and the date on which the original issue of
Notes is to be authenticated and, in
the case of any issuance of Additional Notes pursuant to Section 312 of
the Indenture, shall certify that such issuance is in compliance with
Section 1011 of the Indenture.

 

2.3                                 Transfer
and Exchange.

 

(a)                                  Transfer
and Exchange of Certificated Notes. 
When Certificated Notes are presented to the Note Registrar with a
request:

 

(x)                                   to
register the transfer of such Certificated Notes; or

 

(y)                                 to
exchange such Certificated Notes for an equal principal amount of Certificated
Notes of other authorized denominations,

 

the Note Registrar
shall register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided, however,
that the Certificated Notes surrendered for transfer or exchange:

 

(i)                                     shall
be duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Company and the Note Registrar, duly executed by
the Holder thereof or its attorney duly authorized in writing; and

 

(ii)                                  if
such Certificated Notes are required to bear a restricted notes legend, they
are being transferred or exchanged pursuant to an effective registration
statement under the Securities Act, pursuant to Section 2.3(b) or

 

5

 

pursuant to clause (A), (B) or (C) below, and are accompanied
by the following additional information and documents, as applicable:

 

(A)                              if
such Certificated Notes are being delivered to the Note Registrar by a Holder
for registration in the name of such Holder, without transfer, a certification
from such Holder to that effect; or

 

(B)                                if
such Certificated Notes are being transferred to the Company, a certification
to that effect; or

 

(C)                                if
such Certificated Notes are being transferred (x) pursuant to an exemption
from registration in accordance with Rule 144A, Regulation S or
Rule 144 under the Securities Act; or (y) in reliance upon another
exemption from the requirements of the Securities Act: (i) a certification
to that effect (in the form set forth on the reverse of the Note) and
(ii) if the Company so requests, an Opinion of Counsel or other evidence
reasonably satisfactory to it as to the compliance with the restrictions set
forth in the legend set forth in Section 2.3(e)(i).

 

(b)                                 Restrictions
on Transfer of a Certificated Note for a Beneficial Interest in a Global Note.  A Certificated Note may not be exchanged for
a beneficial interest in a Rule 144A Global Note or a Permanent
Regulation S Global Note except upon satisfaction of the requirements set
forth below.  Upon receipt by the Trustee
of a Certificated Note, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:

 

(i)                                     certification,
in a form substantially similar to that attached hereto as Exhibit 2, that
such Certificated Note is either (A) being transferred to a QIB in
accordance with Rule 144A or (B) being transferred after expiration
of the Distribution Compliance Period by a Person who initially purchased such
Note in reliance on Regulation S to a buyer who elects to hold its interest in
such Note in the form of a beneficial interest in the Permanent Regulation S
Global Note; and

 

(ii)                                  written
instructions directing the Trustee to make, or to direct the Notes Custodian to
make, an adjustment on its books and records with respect to such
Rule 144A Global Note (in the case of a transfer pursuant 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 an increase in the aggregate
principal amount of the Notes represented by the Rule 144A Global Note or
Permanent Regulation S Global Note, as applicable, such instructions to
contain information regarding the Depository account to be credited with such
increase,

 

then the
Trustee shall cancel such Certificated Note and cause, or direct the Notes
Custodian to cause, in accordance with the standing instructions and procedures
existing between the Depository and the Notes Custodian, the aggregate
principal amount of

 

6

 

Notes represented by the Rule 144A Global Note or Permanent
Regulation S Global Note, as applicable, to be increased by the aggregate
principal amount of the Certificated Note to be exchanged and shall credit or
cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Rule 144A Global Note or
Permanent Regulation S Global Note, as applicable, equal to the principal
amount of the Certificated Note so canceled. 
If no Rule 144A Global Notes or Permanent Regulation S Global
Notes, as applicable, are then outstanding, the Company shall issue and the
Trustee shall authenticate, upon receipt of a Company Order, a new
Rule 144A Global Note or Permanent Regulation S Global Note, as
applicable, in the appropriate principal amount.

 

(c)                                  Transfer
and Exchange of Global Notes.

 

(i)                                     The
transfer and exchange of Global Notes or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depository therefor.  A
transferor of a beneficial interest in a Global Note shall deliver to the Note
Registrar a written order given in accordance with the Depository’s procedures
containing information regarding the participant account of the Depository to
be credited with a beneficial interest in the Global Note.  The Note Registrar shall, in accordance with
such instructions instruct the Depository to credit to the account of the
Person specified in such instructions a beneficial interest in the Global Note
and to debit the account of the Person making the transfer the beneficial
interest in the Global Note being transferred.

 

(ii)                                  If
the proposed transfer is a transfer of a beneficial interest in one Global Note
to a beneficial interest in another Global Note, the Note Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the Global Note to which such interest is being transferred in an amount
equal to the principal amount of the interest to be so transferred, and the
Note Registrar shall reflect on its books and records the date and a
corresponding decrease in the principal amount of the Global Note from which
such interest is being transferred.

 

(iii)                               Notwithstanding
any other provisions of this Appendix (other than the provisions set forth in
Section 2.4), a Global Note may not be transferred as a whole except by
the Depository to a nominee of the Depository or by a nominee of the Depository
to the Depository or another nominee of the Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such successor
Depository.

 

(iv)                              In
the event that Global Note is exchanged for Certificated Notes to
Section 2.4 of this Appendix, prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration Statement with
respect to such Notes, such Notes may be exchanged only

 

7

 

in accordance with such procedures as are substantially consistent with
the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Notes (as set forth in
Exhibit 2, hereto) intended to ensure that such transfers comply with
Rule 144A, Regulation S or another applicable exemption under the
Securities Act, as the case may be) and such other procedures as may from time
to time be adopted by the Company.

 

(d)                                 Restrictions
on Transfer of Temporary Regulation S Global Notes.  During the Distribution Compliance Period,
beneficial ownership interests in Temporary Regulation S Global Notes may only
be sold, pledged or transferred in accordance 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 a Permanent Regulation S Global Note),
(iii) pursuant to an effective registration statement under the Securities
Act, in each case in accordance with any applicable securities laws of any
State of the United States.

 

(e)                                  Legend.

 

(i)                                     Except
as permitted by the following paragraphs (ii), (iii) and (iv), each
Note certificate evidencing the Global Notes (and all Notes issued in exchange
therefor or in substitution thereof), in the case of Notes offered otherwise
than in reliance on Regulation S shall bear a legend in substantially the
following form:

 

THIS NOTE (OR
ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM.  EACH PURCHASER OF THIS NOTE
IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER.

 

THE HOLDER OF
THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO
THE COMPANY, (II) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A,

 

8

 

(III) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904
UNDER THE SECURITIES ACT, (IV) PURSUANT TO EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR
(V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

 

Each
certificate evidencing a Note offered in reliance on Regulation S shall, in
addition to the foregoing, bear a legend in substantially the following form:

 

THIS NOTE (OR
ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT 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 AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL
APPLICABLE STATE SECURITIES LAWS.  TERMS
USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES
ACT.

 

Each
Certificated Note shall also bear the following additional legend:

 

IN CONNECTION
WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE NOTE REGISTRAR AND TRANSFER
AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.

 

(ii)                                  Upon
any sale or transfer of a Transfer Restricted Note (including any Transfer
Restricted Note represented by a Global Note) pursuant to Rule 144 under
the Securities Act, the Note Registrar shall permit the transferee thereof to
exchange such Transfer Restricted Note for a certificated Note that does not
bear the legend set forth above and rescind any restriction on the transfer of
such Transfer Restricted Note, if the transferor thereof certifies in writing
to the Note Registrar that such

 

9

 

sale or transfer was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Note).

 

(iii)                               After
a transfer of any Initial Notes or Private Exchange Notes pursuant to and
during the period of the effectiveness of a Shelf Registration Statement with
respect to such Initial Notes or Private Exchange Notes, as the case may be,
all requirements pertaining to legends on such Initial Note or such Private
Exchange Note shall cease to apply, the requirements requiring any such Initial
Note or such Private Exchange Note issued to certain Holders be issued in
global form shall cease to apply, and a certificated Initial Note or Private
Exchange Note or an Initial Note or Private Exchange Note in global form, in
each case without restrictive transfer legends, shall be available to the
transferee of the Holder of such Initial Notes or Private Exchange Notes upon
exchange of such transferring Holder’s certificated Initial Note or Private
Exchange Note or directions to transfer such Holder’s interest in the Global
Note, as applicable.

 

(iv)                              Upon
the consummation of a Registered Exchange Offer with respect to the Initial
Notes, all requirements pertaining to such Initial Notes that Initial Notes
issued to certain Holders be issued in global form shall still apply with
respect to Holders of such Initial Notes that do not exchange their Initial
Notes, and Exchange Notes in certificated or global form, in each case without
the restricted notes legend set forth in Exhibit 1 hereto shall be
available to Holders that exchange such Initial Notes in such Registered
Exchange Offer.

 

(v)                                 Upon
the consummation of a Private Exchange with respect to the Initial Notes, all
requirements pertaining to such Initial Notes that Initial Notes issued to
certain Holders be issued in global form shall still apply with respect to
Holders of such Initial Notes that do not exchange their Initial Notes, and
Private Exchange Notes in global form with the global notes legend and the
applicable restricted notes legend set forth in Exhibit 1 hereto shall be
available to Holders that exchange such Initial Notes in such Private Exchange.

 

(f)                                    Cancellation
or Adjustment of Global Note.  At
such time as all beneficial interests in a Global Note have been exchanged for
Certificated Notes, redeemed, purchased or canceled, such Global Note shall be
returned to the Depository for cancellation or retained and canceled by the
Trustee.  At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged for
certificated Notes, redeemed, purchased or canceled, the principal amount of
Notes represented by such Global Note shall be reduced and an adjustment shall
be made on the books and records of the Trustee (if it is then the Notes
Custodian for such Global Note) with respect to such Global Note, by the
Trustee or the Notes Custodian, to reflect such reduction.

 

10

 

(g)                                 No
Obligation of the Trustee.

 

(i)                                     The
Trustee shall have no responsibility or obligation to any beneficial owner of a
Global Note, a member of, or a participant in the Depository or other Person
with respect to the accuracy of the records of the Depository or its nominee or
of any participant or member thereof, with respect to any ownership interest in
the Notes or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount, under or
with respect to such Notes.  All notices
and communications to be given to the Holders and all payments to be made to
Holders under the Notes shall be given or made only to or upon the order of the
registered Holders (which shall be the Depository or its nominee in the case of
a Global Note).  The rights of beneficial
owners in any Global Note shall be exercised only through the Depository
subject to the applicable rules and procedures of the Depository.  The Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its members, participants and any beneficial owners.

 

(ii)                                  The
Trustee shall have no obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under this Indenture or
under applicable law with respect to any transfer of any interest in any Note
(including any transfers between or among Depository participants, members or
beneficial owners in any Global Note) other than to require delivery of such
certificates and other documentation or evidence as are expressly required by, and
to do so if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.

 

2.4                                 Certificated
Notes.

 

(a)                                  A
Global Note deposited with the Depository or with the Trustee as Notes
Custodian for the Depository pursuant to Section 2.1 shall be transferred
to the beneficial owners thereof in the form of Certificated Notes in an
aggregate principal amount equal to the principal amount of such Global Note, in
exchange for such Global Note, only if such transfer complies with
Section 2.3 hereof and (i) the Depository notifies the Company that
it is unwilling or unable to continue as depository for such Global Note and
the Depository fails to appoint a successor depository or if at any time such
depository ceases to be a “clearing agency” registered under the Exchange Act,
in either case, and a successor depository is not appointed by the Company
within 90 days of such notice, or (ii) a Default has occurred and is
continuing or (iii) the Company, in its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Certificated Notes
under this Indenture (although Temporary Regulation S Global Notes at the
Company’s election pursuant to this clause may not be exchanged for
Certificated

 

11

 

Notes prior to (a) the expiration of the Distribution Compliance
Period and (b) the receipt of any certificates required under the
provisions of Regulation S).

 

(b)                                 Any
Global Note that is transferable to the beneficial owners thereof pursuant to
this Section 2.4 shall be surrendered by the Depository to the Trustee
located at its principal corporate trust office to be so transferred, in whole
or from time to time in part, without charge, and the Trustee shall
authenticate and deliver, upon such transfer of each portion of such Global
Note, an equal aggregate principal amount of Certificated Notes of authorized
denominations.  Any portion of a Global
Note transferred pursuant to this Section 2.4 shall be executed,
authenticated and delivered only in denominations of $2,000 principal amount
and any integral multiple of $1,000 in excess thereof and registered in such
names as the Depository shall direct. 
Any Certificated Note delivered in exchange for an interest in the
Transfer Restricted Note shall, except as otherwise provided by
Section 2.3(e) hereof, bear the applicable restricted notes legend
and certificated notes legend set forth in Exhibit 1 hereto.

 

(c)                                  Subject
to the provisions of Section 2.4(b) hereof, the registered Holder of
a Global Note shall be entitled to grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Notes.

 

(d)                                 In
the event of the occurrence of one of the events specified in
Section 2.4(a) hereof, the Company shall promptly make available to
the Trustee a reasonable supply of Certificated Notes in definitive, fully
registered form without interest coupons. 
In the event that such Certificated Notes are not issued, the Company
expressly acknowledges, with respect to the right of any Holder to pursue a
remedy pursuant to this Indenture, including pursuant to Section 507, the
right of any beneficial owner of Notes to pursue such remedy with respect to
the portion of the Global Note that represents such beneficial owner’s Notes as
if such Certificated Notes had been issued.

 

12

 

EXHIBIT 1

to Rule 144A / Regulation S Appendix

 

[FORM OF FACE OF INITIAL NOTE]

[Global Notes Legend]

 

UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF
THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE
REVERSE HEREOF.

 

[[FOR
REGULATION S GLOBAL NOTE ONLY] UNTIL 40 DAYS AFTER THE LATER OF COMMENCEMENT OR
COMPLETION OF THE OFFERING, AN OFFER OR SALE OF SECURITIES WITHIN THE UNITED
STATES BY A DEALER (AS DEFINED IN THE SECURITIES ACT) MAY VIOLATE THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IF SUCH OFFER OR SALE IS MADE
OTHERWISE THAN IN ACCORDANCE WITH RULE 144A THEREUNDER.]

 

[Restricted Notes Legend for Notes offered otherwise

than in Reliance on Regulation S]

 

THIS NOTE (OR
ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM.  EACH PURCHASER OF THIS NOTE
IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER.

 

THE HOLDER OF
THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE
MAY BE OFFERED, RESOLD, PLEDGED OR

 

 

OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY, (II) WITHIN THE
UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904
UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR
(V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

 

[Restricted Notes Legend for Notes Offered in Reliance on Regulation S]

 

THIS NOTE (OR
ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM
REGISTRATION UNDER THE UNITED STATES 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 AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND ALL APPLICABLE STATE SECURITIES LAWS. 
TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER
THE SECURITIES ACT.

 

[Temporary Regulation S Global Note Legend]

 

EXCEPT AS SET
FORTH BELOW, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S
GLOBAL NOTE WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THE PERMANENT
REGULATION S GLOBAL NOTE OR ANY OTHER NOTE REPRESENTING AN INTEREST IN THE
NOTES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGEND CONTAINING RESTRICTIONS
ON TRANSFER, UNTIL THE EXPIRATION OF THE “40-DAY DISTRIBUTION COMPLIANCE
PERIOD” (WITHIN THE MEANING OF RULE 903(b)(2) OF REGULATION S UNDER
THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION IN FORM REASONABLY
SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTS ARE OWNED EITHER BY
NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCH INTERESTS IN A TRANSACTION
THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT.  DURING SUCH 40-DAY DISTRIBUTION COMPLIANCE
PERIOD, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S
GLOBAL NOTE MAY ONLY BE SOLD, PLEDGED OR TRANSFERRED (I) TO THE
COMPANY, (II) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH
RULE 904 OF REGULATION S

 

2

 

UNDER THE SECURITIES ACT, OR (III) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(III) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES.  HOLDERS OF INTERESTS IN
THIS TEMPORARY REGULATION S GLOBAL NOTE WILL NOTIFY ANY PURCHASER OF THIS
NOTE OF THE RESALE RESTRICTIONS REFERRED TO ABOVE, IF THEN APPLICABLE.

 

AFTER THE
EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD BENEFICIAL INTERESTS IN THIS
TEMPORARY REGULATION S GLOBAL NOTE MAY BE EXCHANGED FOR INTERESTS IN
A RULE 144A GLOBAL NOTE ONLY IF (1) SUCH EXCHANGE OCCURS IN
CONNECTION WITH A TRANSFER OF THE NOTES IN COMPLIANCE WITH RULE 144A AND
(2) THE TRANSFEROR OF THE REGULATION S GLOBAL NOTE FIRST DELIVERS TO THE
TRUSTEE A WRITTEN CERTIFICATE (IN THE FORM ATTACHED TO THIS CERTIFICATE)
TO THE EFFECT THAT THE REGULATION S GLOBAL NOTE IS BEING TRANSFERRED
(A) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES TO BE A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, (B) TO A PERSON WHO
IS PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, AND (C) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES AND OTHER JURISDICTIONS.

 

BENEFICIAL
INTERESTS IN A RULE 144A GLOBAL NOTE MAY BE TRANSFERRED TO A PERSON WHO
TAKES DELIVERY IN THE FORM OF AN INTEREST IN THE REGULATION S GLOBAL NOTE,
WHETHER BEFORE OR AFTER THE EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE
PERIOD, ONLY IF THE TRANSFEROR FIRST DELIVERS TO THE TRUSTEE A WRITTEN
CERTIFICATE (IN THE FORM ATTACHED TO THIS CERTIFICATE) TO THE EFFECT THAT
SUCH TRANSFER IS BEING MADE IN ACCORDANCE WITH RULE 903 OR 904 OF
REGULATION S OR RULE 144 (IF AVAILABLE).

 

[Certificated Notes Legend]

 

IN CONNECTION
WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE NOTE REGISTRAR AND TRANSFER
AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.

 

3

 

	
  No.

  	
   

  	
   

  	
   

  	
  $

  	
   

  

 

103/8% Senior Subordinated Notes Due 2015

 

The Neiman
Marcus Group, Inc., a Delaware corporation, promises to pay to ____________,
or registered assigns, the principal sum of ____________ Dollars on
October 15, 2015.

 

Interest
Payment Dates:  April 15 and
October  15.

 

Record
Dates:  April 1 and October 1.

 

Additional
provisions of this Note are set forth on the other side of this Note.

 

	
  Dated:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE NEIMAN MARCUS GROUP, INC.

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  TRUSTEE’S CERTIFICATE OF

  	
   

  
	
  AUTHENTICATION

  	
   

  
	
   

  	
   

  
	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION, as Trustee

  	
   

  
	
  certifies
  that this is one of the Notes

  referred to in the Indenture.

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
    Authorized Signatory

  	
   

  

 

4

 

[FORM OF REVERSE SIDE OF INITIAL NOTE]

 

103/8% Senior Subordinated Note Due 2015

 

Capitalized
terms used herein but not defined herein shall have the meanings given to such
terms in the Indenture.

 

1.                                       Principal
and Interest; Subordination.

 

The Neiman
Marcus Group, Inc. (the “Company”) shall pay the principal of this Note on
October 15, 2015.

 

The Company
promises to pay interest and Additional Interest, if any, on the principal
amount of this Note on each Interest Payment Date, as set forth below, at the
rate of 103/8% per annum (subject to adjustment as
provided below).

 

Interest, and
Additional Interest, if any, shall be payable semi-annually (to the Holders of
the Notes at the close of business on April 1 or October 1
immediately preceding the Interest Payment Date) on each Interest Payment Date,
commencing April 15, 2006.

 

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

 

Interest on
this Note shall accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from October 6, 2005; provided that, if there is no existing
Default in the payment of interest and if this Note is authenticated between a
Regular Record Date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest
Payment Date.  Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.

 

The Company
shall pay interest and Additional Interest if any, on overdue principal and
premium, if any, and interest on overdue installments of interest, to the
extent lawful, at a rate per annum equal to the rate of interest applicable to
the Notes.

 

The
indebtedness evidenced by the Notes is, to the extent and in the manner
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Note is issued
subject to such provisions.  Each Holder
of this Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on its behalf to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
its attorney in-fact for such purpose.

 

5

 

2.                                       Method
of Payment.

 

The Company
shall pay interest (except defaulted interest) on the principal amount of the
Notes on each April 15 and October 15 to the Persons who are Holders
(as reflected in the Note Register at the close of business on April 1 and
October 1 immediately preceding the Interest Payment Date), in each case,
even if the Note is transferred or exchanged after such Regular Record Date,
except as provided in Section 306(b) with respect to Defaulted
Interest; provided that, with
respect to the payment of principal, the Company shall make payment to the
Holder that surrenders this Note to any Paying Agent on or after
October 15, 2015.

 

The Company
shall pay principal (premium, if any) and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts.  However, the Company may
pay principal (premium, if any) and interest by its check payable in such
money.  The Company may pay interest on
the Notes either (a) by mailing a check for such interest to a Holder’s
registered address (as reflected in the Note Register) or (b) by wire
transfer to an account located in the United States maintained by the
payee.  If a payment date is a date other
than a Business Day at a place of payment, payment may be made at that place on
the next succeeding day that is a Business Day and no interest shall accrue for
the intervening period.

 

3.                                       Paying
Agent and Note Registrar.

 

Initially,
Wells Fargo Bank, National Association (the “Trustee”) shall act as Paying
Agent and Note Registrar.  The Company
may change any Paying Agent or Note Registrar upon written notice thereto and
without notice to the Holders.  The
Company, any Subsidiary or any Affiliate of any of them may act as Paying
Agent, Note Registrar or co-registrar.

 

4.                                       Indenture.

 

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

 

The Notes are
unsecured senior subordinated obligations of the Company.  The Indenture does not limit the aggregate
principal amount of the Notes.  Subject
to the conditions set forth in the Indenture, the Company may issue Additional
Notes.

 

5.                                       Redemption.

 

At any time
prior to October 15, 2010, the Company may redeem all or a part of the
Notes, upon not less than 30 nor more than 60 days’ prior notice at a

 

6

 

redemption price equal to 100% of the principal amount of Notes
redeemed plus the Applicable Premium as of, and accrued and unpaid interest and
Additional Interest, if any, to the Redemption Date, subject to the rights of
Holders on the relevant record date to receive interest due on the relevant
Interest Payment Date.

 

On and after
October 15, 2010, the Company may redeem the Notes, in whole or in part,
upon not less than 30 nor more than 60 days’ prior notice to each Holder
at the Redemption Prices (expressed as percentages of principal amount) set
forth below, plus accrued and unpaid interest thereon and Additional Interest,
if any, to the applicable Redemption Date, subject to the right of Holders on
the relevant record date to receive interest due on the relevant Interest
Payment Date, if redeemed during the twelve-month period beginning on
October 15 of each of the years indicated below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2010

  	
   

  	
  105.188

  	
  %

  
	
  2011

  	
   

  	
  103.458

  	
  %

  
	
  2012

  	
   

  	
  101.729

  	
  %

  
	
  2013 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

In addition,
until October 15, 2008, the Company may, at its option, redeem up to 35%
of the aggregate principal amount of Notes issued under the Indenture at a
redemption price equal to 110.375% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon and Additional Interest, if any, to
the applicable Redemption Date, subject to the right of Holders on the relevant
record date to receive interest due on the relevant Interest Payment Date, with
the net cash proceeds of one or more Equity Offerings of the Company or any
direct or indirect parent of the Company to the extent such net cash proceeds
are contributed to the Company; provided that
at least 50% of the sum of the aggregate principal amount of Notes originally
issued under the Indenture remains Outstanding immediately after the occurrence
of each such redemption; provided, further, that
each such redemption occurs within 90 days of the date of closing of each
such Equity Offering.

 

6.                                       Repurchase
upon a Change of Control and Asset Sales.

 

Upon the
occurrence of (a) a Change of Control, the Holders shall have the right to
require that the Company purchase such Holder’s outstanding Notes, in whole 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 date of
purchase and (b) Asset Sales, the Company may be obligated to make offers
to purchase Notes and Senior Subordinated Indebtedness of the Company with a
portion of the Net Proceeds of such Asset Sales at a redemption price of 100%
of the principal amount thereof plus accrued and unpaid interest and Additional
Interest, if any, to the date of purchase.

 

7

 

7.                                       Denominations;
Transfer; Exchange.

 

The Notes are
in registered form without coupons in denominations of $2,000 principal amount
and integral multiples of $1,000.  A
Holder may transfer or exchange Notes in accordance with the Indenture.  The Note Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture.  The Note Registrar need not register the
transfer or exchange of a Note or portion of a Note selected for redemption
(except, in the case of a Note to be redeemed in part, the portion of the Note
not to be redeemed) or any Note or portion of a Note for a period of 15 days
before a selection of Notes to be redeemed or 15 days before an interest
payment date.

 

8.                                       Persons
Deemed Owners.

 

A registered
Holder may be treated as the owner of a Note for all purposes.

 

9.                                       Unclaimed
Money.

 

Subject to any
laws relating to abandoned property, if money for the payment of principal
(premium, if any) or interest remains unclaimed for two years, the Trustee and
the Paying Agent shall pay the money back to the Company at its request or (if
then held by the Company) shall be discharged from such trust.  After that, Holders entitled to the money
must look to the Company for payment and all liability of the Trustee and such
Paying Agent with respect to such money, and all liability of the Company as
trustee thereof, shall cease.

 

10.                                 Discharge
and Defeasance Prior to Redemption or Maturity.

 

Subject to
satisfaction of conditions set forth in the Indenture, the Company at any time
may terminate some or all of its obligations under the Notes and the Indenture
if the Company irrevocably deposits with the Trustee cash or Government
Securities or a combination thereof sufficient for the payment of the then
outstanding principal of and interest on the Notes to Redemption or Stated
Maturity, as the case may be.

 

11.                                 Amendment;
Supplement; Waiver.

 

Subject to
certain exceptions, the Indenture or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in aggregate principal
amount of the Outstanding Notes, including consents obtained in connection with
a purchase of, or tender offer or exchange offer for, the Notes, and any
existing Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Notes. 
Without notice to or the consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Notes to, among other things, cure any

 

8

 

ambiguity, omission, mistake, defect or inconsistency and make any
change that does not adversely affect the legal rights of any Holder.

 

12.                                 Restrictive
Covenants.

 

The Indenture
contains certain covenants, including covenants with respect to the following
matters: (i) Restricted Payments; (ii) incurrence of Indebtedness and
issuance of Disqualified Stock and Preferred Stock; (iii) Liens;
(iv) transactions with Affiliates; (v) dividend and other payment
restrictions affecting Restricted Subsidiaries; (vi) guarantees of
Indebtedness by Restricted Subsidiaries; (vii) incurrence of other Senior
Subordinated Indebtedness; (viii) merger, consolidation or sale of all or
substantially all assets; (ix) purchase of Notes upon a Change in Control;
and (x) disposition of proceeds of Asset Sales.  Within 120 days (or the successor time period
then in effect under the rules and regulations of the Exchange Act) after
the end of each fiscal year, the Company must report to the Trustee on
compliance with such limitations.

 

13.                                 Successor
Persons.

 

When a
successor Person or other entity assumes all the obligations of its predecessor
under the Notes and the Indenture, the predecessor Person shall be released
from those obligations, subject to certain exceptions.

 

14.                                 Remedies
for Events of Default.

 

If an Event of
Default, as defined in the Indenture, occurs and is continuing, the Trustee or
the Holders of at least 30% in principal amount of the Outstanding Notes may
declare all Outstanding Notes to be immediately due and payable; provided, however, that, so long as any Indebtedness
permitted to be incurred under the Indenture as part of the Senior Credit
Facilities or the Senior Notes shall be outstanding, no such acceleration shall
be effective until the earlier of (1) acceleration of any such
Indebtedness under the Senior Credit Facilities and the Senior Notes, or
(2) five Business Days after the giving of written notice of such
acceleration to the Company, the administrative agent under the Senior Credit Facilities
and the trustee under the Senior Indenture. 
If an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company or any Significant Subsidiary occurs and
is continuing, the Notes automatically become immediately due and payable.  Subject to the provisions of the Indenture
relating to the duties 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 under the Indenture at the request or direction of any of the Holders
unless such Holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense.  Subject to certain restrictions, the Holders
of a majority in principal amount of the Outstanding Notes are given the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred
on the Trustee.  The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder of a Note or that would involve the Trustee in personal liability.

 

9

 

15.                                 Guarantees.

 

The Company’s
obligations under the Notes are fully, irrevocably and unconditionally
guaranteed on an unsecured senior subordinated basis, to the extent set forth
in the Indenture, by Holdings and each of the Subsidiary Guarantors.

 

16.                                 Trustee
Dealings with Company.

 

The Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for, and otherwise deal with, the Company and its Affiliates as if it
were not the Trustee.

 

17.                                 Authentication.

 

This Note
shall not be valid until the Trustee signs the certificate of authentication on
the other side of this Note.

 

18.                                 Abbreviations.

 

Customary
abbreviations 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), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).

 

19.                                 CUSIP
Numbers.

 

Pursuant to a
recommendation promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on the Notes and
has directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Holders.  No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.

 

20.                                 Holders’
Compliance with the Registration Rights Agreement.

 

Each Holder of
a Note, by acceptance hereof, acknowledges and agrees to the provisions of the
Registration Rights Agreement, including the obligations of the Holders with
respect to a registration and the indemnification of the Company to the extent
provided therein.

 

21.                                 Governing
Law.

 

THIS
SECURITY AND THE INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

 

10

 

The Company
shall furnish to any Holder upon written request and without charge a copy of
the Indenture.  Requests may be made to
The Neiman Marcus Group, Inc., 1618 Main Street, Dallas, Texas 75201,
Attention: General Counsel.

 

11

 

EXHIBIT 2

to Rule 144A / Regulation S Appendix

 

ASSIGNMENT/TRANSFER FORM

 

To assign and
transfer this Note, fill in the form below:

 

I or we assign
and transfer this Note to

 

(Print or type
assignee’s name, address and zip code)

 

(Insert
assignee’s soc. sec. or tax I.D. No.)

 

and
irrevocably appoint _______________ agent to transfer this Note on the books of
the Company.  The agent may substitute
another to act for him.

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  
	
   

  

 

Sign exactly
as your name appears on the other side of this Note.

 

In connection
with any transfer of any of the Notes evidenced by this certificate occurring
prior to the expiration of the period referred to in Rule 144(k) under the
Securities Act after the later of the date of original issuance of such
Notes and the last date, if any, on which such Notes were owned by the Company
or any Affiliate of the Company, the undersigned confirms that such Notes are
being transferred in accordance with its terms:

 

CHECK ONE BOX
BELOW

 

to the Company; or

 

	
  (1)

  	
   

  	
  pursuant to an effective registration
  statement under the Securities Act of 1933, as amended; or

  
	
   

  	
   

  	
   

  
	
  (2)

  	
   

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

  
	
   

  	
   

  	
   

  
	
  (3)

  	
   

  	
  outside the United States in an offshore
  transaction within the meaning of Regulation S under the Securities Act in
  compliance with Rule 904 under the Securities Act of 1933, as amended;
  or

  

 

 

	
  (4)

  	
   

  	
  pursuant to the exemption from registration
  provided by Rule 144 under the Securities Act of 1933, as amended.

  

 

Unless one of
the boxes is checked, the Trustee shall refuse to register any of the Notes
evidenced by this certificate in the name of any person other than the
registered 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 to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933, as amended, such as the exemption provided by Rule 144 under such
Act.

 

	
   

  	
   

  
	
  Signature

  
	
   

  
	
  Signature Guarantee:

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
  Signature must be guaranteed

  	
   

  	
  Signature

  
				

 

Signatures
must be guaranteed by an “eligible guarantor institution” meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

 

2

 

TO BE COMPLETED BY PURCHASER IF
(2) ABOVE IS CHECKED.

 

The
undersigned represents and warrants that it is purchasing this Note for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional
buyer” within the meaning of Rule 144A under the Securities Act of 1933,
as amended, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is relying
upon the undersigned’s foregoing representations in order to claim the
exemption from registration provided by Rule 144A.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice: To be executed by

  an executive officer

  

 

3

 

[TO BE ATTACHED TO GLOBAL NOTES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

The following increases or decreases in this Global Note have been
made:

 

	
  Date of

  Exchange

  	
   

  	
  Amount of decrease in

  Principal amount of this

  Global Note

  	
   

  	
  Amount of increase in

  Principal amount of this

  Global Note

  	
   

  	
  Principal amount of this

  Global Note following such

  decrease or increase)

  	
   

  	
  Signature of authorized

  officer of Trustee or Notes

  Custodian

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

4

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to
elect to have this Note purchased by the Company pursuant to Section 1017 or 1018 of the
Indenture, check the box:

 

  If you want to elect to have only part of
this Note purchased by the Company pursuant to Section 1017 or 1018 of the Indenture, state
the amount in principal amount:  $

 

	
  Dated:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
   

  	
  (Sign exactly as your name appears

  on the other side of this Note.)

  
	
   

  	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  
	
   

  	
  (Signature must be guaranteed)

  
						

 

Signatures
must be guaranteed by an “eligible guarantor institution” meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

 

5

 

EXHIBIT 3

to Rule 144A / Regulation S Appendix

 

FORM OF NON-U.S. BENEFICIAL OWNERSHIP

CERTIFICATION BY EUORCLEAR OR CLEARSTREAM LUXEMBOURG

 

[Date]

 

Wells Fargo Bank, N.A.

 

Re:                               103/8%
Senior Subordinated Notes due 2015 (the “Notes”) of The Neiman Marcus
Group, Inc. (the “Company”) 

 

Reference is hereby made to the Senior Subordinated
Indenture, dated as of October 6, 2005 (as amended and supplemented from
time to time, the “Indenture”), among the Company, the Guarantors named therein and Wells Fargo Bank, N.A.,
as Trustee.  Capitalized terms used but
not defined herein shall have the meanings given them in the Indenture.

 

This is to certify with respect to $__________
principal amount of the Notes that, except as set forth below, we have received
in writing, by tested telex or by electronic transmission, from member
organizations appearing in our records as persons being entitled to a portion
of such principal amount (our “Member Organizations”) certifications with
respect 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 beneficially owned by such U.S. person(s) in transactions that did not
require registration under the Securities Act of 1933, as amended (the
“Act”).  As used in this paragraph the
term “U.S. person” has the meaning given to it by Regulation S under the Act.

 

We further certify:

 

(i) that we are not making available herewith for
exchange (or, if relevant, exercise of any rights or collection of any
interest) any portion of the Regulation S Temporary Global Note excepted in
such certifications; and

 

(ii) that as of the date hereof we have not
received any notification from any of our Member Organizations to the effect
that the statements made by such Member Organizations with respect to any
portion of the part submitted herewith for exchange (or, if relevant, exercise
of any rights or collection of any interest) are no longer true and cannot be
relied upon as the date hereof.

 

We understand that this certification is required in
connection with certain securities laws of the United States.  In connection therewith, if administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you or the Company to produce this certification
to any interested party in such proceedings.

 

 

	
  Dated:

  	
  _____________

  	
  , 20___

  	
   

  
	
   

  	
   

  
	
   

  	
  Yours faithfully,

  
	
   

  	
  [Euroclear or Clearstream Luxembourg]

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  

 

2

 

EXHIBIT A

 

[FORM OF FACE OF EXCHANGE NOTE

OR PRIVATE EXCHANGE NOTE] */**/

 

 

*/ [If the Note is to be issued in global form add the Global Notes
Legend from Exhibit 1 to Appendix A and the attachment from such
Exhibit 1 captioned “[TO BE ATTACHED 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 an Initial Purchaser holding an unsold portion of its initial
allotment, add the Restricted Notes Legend from Exhibit 1 to Appendix A
and replace the Assignment Form included in this Exhibit A with the
Assignment Form included in such Exhibit 1.]

 

 

	
  No.

  	
   

  	
   

  	
  $

  	
   

  

 

103/8% Senior Subordinated Notes Due 2015

 

The Neiman
Marcus Group, Inc., a Delaware corporation, promises to pay to ___________,
or registered assigns, the principal sum of ___________ Dollars on
October 15, 2015.

 

Interest
Payment Dates:  April 15 and
October 15.

 

Record
Dates:  April 1 and October 1.

 

Additional
provisions 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

 

[FORM OF REVERSE SIDE OF EXCHANGE NOTE

OR PRIVATE EXCHANGE NOTE]

 

103/8% Senior Subordinated Note Due 2015

 

Capitalized
terms used herein but not defined herein shall have the meanings given to such
terms in the Indenture.

 

1.                                       Principal
and Interest; Subordination.

 

The Neiman
Marcus Group, Inc. (the “Company”) shall pay the principal of this Note on
October 15, 2015.

 

The Company
promises to pay interest and Additional Interest, if any, on the principal
amount of this Note on each Interest Payment Date, as set forth below, at the
rate of 103/8% per annum (subject to adjustment as
provided below).

 

Interest, and
Additional Interest, if any, shall be payable semi-annually (to the Holders of
the Notes (or any predecessor Notes) at the close of business on April 1
or October 1 immediately preceding the Interest Payment Date) on each
Interest Payment Date, commencing April 15, 2006.

 

[The Holder of
this Note is entitled to the benefits of the Exchange and Registration Rights
Agreement, dated October 6, 2005, among the Company, Holdings, the
Subsidiary Guarantors and the Initial Purchasers named therein (the
“Registration Rights Agreement”) including with respect to Additional
Interest.](1)

 

Interest,
including Additional Interest if any, on this Note shall accrue from the most
recent date to which interest has been paid on this Note or the Note
surrendered in exchange herefor or, if no interest has been paid, from
October 6, 2005; provided that,
if there is no existing Default in the payment of interest and if this Note is
authenticated between a Regular Record Date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date. 
Interest shall be computed on the basis of a 360-day year of twelve
30-day months.

 

The Company
shall pay interest and Additional Interest if any, on overdue principal and
premium, if any, and interest on overdue installments of interest, to the
extent lawful, at a rate per annum equal to the rate of interest applicable to
the Notes.

 

(1)  Insert if at the date
of issuance of the Exchange Note ar Private Exchange Note (as the case may be)
any Registration Default has occurred with respect to the related Initial Note,
during the interest period in which such date of issuance occurs.

 

3

 

The
indebtedness evidenced by the Notes is, to the extent and in the manner
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Note is issued
subject to such provisions.  Each Holder
of this Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on its behalf to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
its attorney in-fact for such purpose

 

2.                                       Method
of Payment.

 

The Company
shall pay interest (except defaulted interest) on the principal amount of the
Notes on each April 15 and October 15 to the Persons who are Holders
(as reflected in the Note Register at the close of business on April 1 and
October 1 immediately preceding the Interest Payment Date), in each case,
even if the Note is transferred or exchanged after such Regular Record Date,
except as provided in Section 306(b) with respect to defaulted
interest; provided that, with
respect to the payment of principal, the Company shall make payment to the Holder
that surrenders this Note to any Paying Agent on or after
October 15, 2015.

 

The Company
shall pay principal (premium, if any) and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts.  However, the Company may
pay principal (premium, if any) and interest by its check payable in such
money.  The Company may pay interest on
the Notes either (a) by mailing a check for such interest to a Holder’s
registered address (as reflected in the Note Register) or (b) by wire
transfer to an account located in the United States maintained by the
payee.  If a payment date is a date other
than a Business Day at a place of payment, payment may be made at that place on
the next succeeding day that is a Business Day and no interest shall accrue for
the intervening period.

 

3.                                       Paying
Agent and Note Registrar.

 

Initially,
Wells Fargo Bank, National Association (the “Trustee”) shall act as Paying
Agent and Note Registrar.  The Company
may change any Paying Agent or Note Registrar upon written notice thereto and
without notice to the Holders.  The
Company, any Subsidiary or any Affiliate of any of them may act as Paying
Agent, Note Registrar or co-registrar.

 

4.                                       Indenture.

 

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

 

4

 

The Notes are
unsecured senior subordinated obligations of the Company.  The Indenture does not limit the aggregate
principal amount of the Notes.  Subject
to the conditions set forth in the Indenture, the Company may issue Additional
Notes.

 

5.                                       Redemption.

 

At any time
prior to October 15, 2010, the Company may redeem all or a part of the
Notes, upon not less than 30 nor more than 60 days’ prior notice at a
redemption price equal to 100% of the principal amount of Notes redeemed plus
the Applicable Premium as of, and accrued and unpaid interest and Additional
Interest, if any, to the Redemption Date, subject to the rights of Holders on
the relevant record date to receive interest due on the relevant Interest
Payment Date.

 

On and after
October 15, 2010, the Company may redeem the Notes, in whole or in part,
upon not less than 30 nor more than 60 days’ prior notice to each Holder
at the Redemption Prices (expressed as percentages of principal amount) set
forth below, plus accrued and unpaid interest thereon and Additional Interest,
if any, to the applicable Redemption Date, subject to the right of Holders on
the relevant record date to receive interest due on the relevant Interest
Payment Date, if redeemed during the twelve-month period beginning on
October 15 of each of the years indicated below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2010

  	
   

  	
  105.188

  	
  %

  
	
  2011

  	
   

  	
  103.458

  	
  %

  
	
  2012

  	
   

  	
  101.729

  	
  %

  
	
  2013 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

In addition,
until October 15, 2008, the Company may, at its option, redeem up to 35%
of the aggregate principal amount of Notes issued under the Indenture at a
redemption price equal to  110.375% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon and Additional Interest, if
any, to the applicable Redemption Date, subject to the right of Holders on the
relevant record date to receive interest due on the relevant Interest Payment
Date, with the net cash proceeds of one or more Equity Offerings of the Company
or any direct or indirect parent of the Company to the extent such net cash
proceeds are contributed to the Company; provided
that at least 50% of the sum of the aggregate principal amount of
Notes originally issued under the Indenture remains Outstanding immediately
after the occurrence of each such redemption; provided,
further, that each such redemption occurs
within 90 days of the date of closing of each such Equity Offering.

 

6.                                       Repurchase
upon a Change of Control and Asset Sales.

 

Upon the
occurrence of (a) a Change of Control, the Holders shall have the right to
require that the Company purchase such Holder’s outstanding Notes, in whole 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 date of
purchase and (b) Asset Sales,

 

5

 

the Company may be obligated to make offers to purchase Notes and
Senior Subordinated Indebtedness of the Company with a portion of the Net
Proceeds of such Asset Sales at a redemption price of 100% of the principal
amount thereof plus accrued and unpaid interest and Additional Interest, if
any, to the date of purchase.

 

7.                                       Denominations;
Transfer; Exchange.

 

The Notes are
in registered form without coupons in denominations of $2,000 principal amount
and integral multiples of $1,000.  A
Holder may transfer or exchange Notes in accordance with the Indenture.  The Note Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture.  The Note Registrar need not register the
transfer or exchange of a Note or portion of a Note selected for redemption
(except, in the case of a Note to be redeemed in part, the portion of the Note
not to be redeemed) or any Note or portion of a Note for a period of 15 days
before a selection of Notes to be redeemed or 15 days before an interest
payment date.

 

8.                                       Persons
Deemed Owners.

 

A registered
Holder may be treated as the owner of a Note for all purposes.

 

9.                                       Unclaimed
Money.

 

Subject to any
laws relating to abandoned property, if money for the payment of principal
(premium, if any) or interest remains unclaimed for two years, the Trustee and
the Paying Agent shall pay the money back to the Company at its request or (if
then held by the Company) shall be discharged from such trust.  After that, Holders entitled to the money
must look to the Company for payment and all liability of the Trustee and such
Paying Agent with respect to such money and all liability of the Company as
trustee thereof shall cease.

 

10.                                 Discharge
and Defeasance Prior to Redemption or Maturity.

 

Subject to
satisfaction of conditions set forth in the Indenture, the Company at any time
may terminate some or all of its obligations under the Notes and the Indenture,
if the Company irrevocably deposits with the Trustee cash or Government
Securities or a combination thereof sufficient for the payment of the then
outstanding principal of and interest on the Notes to Redemption or Stated
Maturity, as the case may be.

 

11.                                 Amendment;
Supplement; Waiver.

 

Subject to
certain exceptions, the Indenture or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in aggregate principal
amount of the Outstanding Notes, including consents obtained in connection with
a purchase of, or tender offer or exchange offer for, the Notes, and any
existing

 

6

 

Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Notes. 
Without notice to or the consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Notes to, among other things, cure any
ambiguity, omission, mistake, defect or inconsistency and make any change that
does not adversely affect the legal rights of any Holder.

 

12.                                 Restrictive
Covenants.

 

The Indenture
contains certain covenants, including covenants with respect to the following
matters: (i) Restricted Payments; (ii) incurrence of Indebtedness and
issuance of Disqualified Stock and Preferred Stock; (iii) Liens;
(iv) transactions with Affiliates; (v) dividend and other payment
restrictions affecting Restricted Subsidiaries; (vi) guarantees of
Indebtedness by Restricted Subsidiaries; (vii) incurrence of other Senior
Subordinated Indebtedness; (viii) merger, consolidation or sale of all or
substantially all assets; (ix) purchase of Notes upon a Change in Control;
and (x) disposition of proceeds of Asset Sales.  Within 120 days (or the successor time period
then in effect under the rules and regulations of the Exchange Act) after
the end of each fiscal year, the Company must report to the Trustee on
compliance with such limitations.

 

13.                                 Successor
Persons.

 

When a
successor Person or other entity assumes all the obligations of its predecessor
under the Notes and the Indenture, the predecessor Person shall be released
from those obligations, subject to certain exceptions.

 

14.                                 Remedies
for Events of Default.

 

If an Event of
Default, as defined in the Indenture, occurs and is continuing, the Trustee or
the Holders of at least 30% in principal amount of the Outstanding Notes may
declare all Outstanding Notes to be immediately due and payable; provided, however, that, so long as any Indebtedness
permitted to be incurred under the Indenture as part of the Senior Credit
Facilities or the Senior Notes shall be outstanding, no such acceleration shall
be effective until the earlier of (1) acceleration of any such
Indebtedness under the Senior Credit Facilities and the Senior Notes, or
(2) five Business Days after the giving of written notice of such
acceleration to the Company, the administrative agent under the Senior Credit
Facilities and the trustee under the Senior Indenture.  If an Event of Default arising from certain
events of bankruptcy or insolvency with respect to the Company or any
Significant Subsidiary occurs and is continuing, the Notes automatically become
immediately due and payable.  Subject to
the provisions of the Indenture relating to the duties 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 under the Indenture at the request
or direction of any of the Holders unless such Holders have offered to the
Trustee reasonable indemnity or security against any loss, liability or
expense.  Subject to certain
restrictions, the Holders of a majority in principal amount of the Outstanding
Notes are given the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or of exercising any

 

7

 

trust or power conferred on the Trustee.  The Trustee, however, may refuse to follow
any direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other Holder of a Note or
that would involve the Trustee in personal liability.

 

15.                                 Guarantees.

 

The Company’s
obligations under the Notes are fully, irrevocably and unconditionally
guaranteed on an unsecured senior subordinated basis, to the extent set forth
in the Indenture, by Holdings and each of the Subsidiary Guarantors.

 

16.                                 Trustee
Dealings with Company.

 

The Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for, and otherwise deal with, the Company and its Affiliates as if it
were not the Trustee.

 

17.                                 Authentication.

 

This Note
shall not be valid until the Trustee signs the certificate of authentication on
the other side of this Note.

 

18.                                 Abbreviations.

 

Customary
abbreviations 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), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).

 

19.                                 CUSIP
Numbers.

 

Pursuant to a
recommendation promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on the Notes and
has directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Holders.  No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.

 

20.                                 Holders’
Compliance with the Registration Rights Agreement.

 

Each Holder of
a Note, by acceptance hereof, acknowledges and agrees to the provisions of the
Registration Rights Agreement, including the obligations of the Holders with
respect to a registration and the indemnification of the Company to the extent
provided therein.

 

8

 

21.                                 Governing
Law.

 

THIS SECURITY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

The Company
shall furnish to any Holder upon written request and without charge a copy of
the Indenture.  Requests may be made to
The Neiman Marcus Group, Inc., 1618 Main Street, Dallas, Texas 75201,
Attention: General Counsel.

 

9

 

ASSIGNMENT/TRANSFER FORM

 

To assign and
transfer this Note, fill in the form below:

 

I or we assign
and transfer this Note to

 

(Print or type
assignee’s name, address and zip code)

 

(Insert
assignee’s soc. sec. or tax I.D. No.)

 

and
irrevocably appoint _________________  agent to transfer this Note on the
books of the Company.  The agent may
substitute another to act for him.

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  
	
   

  

 

Sign exactly as your name appears on the other side of this Note.

 

 

OPTION OF HOLDER TO ELECT
PURCHASE

 

If you want to
elect to have this Note purchased by the Company pursuant to Section 1017 or 1018 of the
Indenture, check the box:

 

  If you want to elect to have only part of
this Note purchased by the Company pursuant to Section 1017 or 1018 of the Indenture, state
the amount in principal amount:  $

 

	
  Dated:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
   

  	
  (Sign exactly as your name appears

  on the other side of this Note.)

  
	
   

  	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  
	
   

  	
  (Signature must be guaranteed)

  
						

 

Signatures must be guaranteed by an “eligible guarantor institution”
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.

 

 

EXHIBIT B

 

FORM OF SUPPLEMENTAL
INDENTURE

TO BE DELIVERED BY SUBSEQUENT GUARANTORS

 

SUPPLEMENTAL
INDENTURE (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”), the Company, Newton Acquisition, Inc. (“Holdings”) the other
Subsidiary Guarantors (as defined in the Indenture referred to herein) and
Wells Fargo Bank, 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 senior
subordinated indenture (the “Indenture”), dated as of October 6, 2005
providing for the issuance of 103/8% Senior Subordinated
Notes Due 2015 (the “Notes”);

 

WHEREAS, the
Indenture provides that under certain circumstances the Guaranteeing Subsidiary
shall execute and deliver to the Trustee a supplemental indenture pursuant to
which the Guaranteeing Subsidiary shall unconditionally guarantee all of the
Company’s Obligations under the Notes and the Indenture on the terms and
conditions set forth herein (the “Guarantee”); and

 

WHEREAS,
pursuant to Section 901 of the Indenture, the Trustee is authorized to
execute and deliver this Supplemental Indenture.

 

NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and
the Trustee mutually covenant and agree for the equal and ratable benefit of
the Holders of the Notes as follows:

 

1.                                       CAPITALIZED
TERMS.  Capitalized terms used herein
without definition shall have the meanings assigned to them in the Indenture.

 

2.                                       AGREEMENT
TO GUARANTEE.  The Guaranteeing
Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and
subject to the conditions set forth in the Note Guarantee and in the Indenture
including but not limited to Article 12 thereof.

 

3.                                       NO
RECOURSE AGAINST OTHERS.  No past,
present or future director, officer, employee, incorporator, stockholder or
agent of the Guaranteeing Subsidiary, as such, shall have any liability for any
obligations of the Company or any Guaranteeing Subsidiary under the Notes, any
Note Guarantees, the Indenture or this Supplemental Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.  Each Holder of the Notes by accepting a Note
waives and releases all such liability. 
The waiver and release are part of the consideration for issuance of the
Notes.  Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of
the SEC that such a waiver is against public policy.

 

 

4.                                       GOVERNING
LAW.  THIS SUPPLEMENTAL INDENTURE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.

 

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

 

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

 

7.                                       THE
TRUSTEE.  The Trustee shall not be
responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Supplemental Indenture or for or in respect of the recitals
contained herein, all of which recitals are made solely by the Guaranteeing
Subsidiary and the Company.

 

2

 

IN WITNESS
WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed and attested, all as of the date first above written.

 

	
  Dated:

  	
   

  	
  , 20____

  	
   

  
	
   

  	
   

  
	
   

  	
  [GUARANTEEING SUBSIDIARY]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  

 

3Exhibit 4.5

 

EXECUTION COPY

 

$1,200,000,000

NEWTON ACQUISITION MERGER SUB,
INC.

 

$700,000,000 9%/93/4% Senior
Notes due 2015

$500,000,000 103/8% Senior Subordinated Notes due 2015

 

REGISTRATION RIGHTS AGREEMENT

 

October 6, 2005

 

	
  CREDIT SUISSE
  FIRST BOSTON LLC

  
	
  DEUTSCHE BANK
  SECURITIES INC.

  
	
  BANC OF AMERICA
  SECURITIES LLC

  
	
  GOLDMAN, SACHS &
  CO.,

  
	
    c/o Credit Suisse First Boston LLC,

  
	
  Eleven Madison Avenue,

  
	
  New York, N.Y. 10010-3629

  

 

Dear
Sirs:

 

Newton Acquisition Merger Sub, Inc., a Delaware corporation (the “Merger Sub”), proposes to issue and sell to Credit Suisse
First Boston LLC, Deutsche Bank Securities Inc., Banc of America Securities LLC
and Goldman, Sachs & Co. (collectively, the “Initial
Purchasers”), upon the terms set forth in a purchase agreement dated
September 28, 2005 (the “Purchase Agreement”),
$700,000,000 principal amount of its 9%/93⁄4% Senior Notes due 2015 (the “Senior Notes”), and $500,000,000 principal amount of its 103/8% Senior Subordinated Notes due 2015 (the “Senior Subordinated Notes” and, together with the Senior
Notes, the “Initial Securities”) to be
unconditionally guaranteed (the “Guarantees”) by
Newton Acquisition Inc. (“Holdings”) and,
immediately following the Merger (as defined in the Purchase Agreement), by
each of the subsidiary guarantors listed in Schedule I hereto
(collectively, and together with Holdings, the “Guarantors”
and, together with the Issuer (as defined below), the “Company”).
As used in this Agreement, the term “Issuer” means,
prior to the Merger, Merger Sub and, thereafter, The Neiman Marcus Group, Inc.,
a Delaware corporation. The Initial Securities will be issued pursuant to
separate Indentures, each dated as of October 6, 2005, (each, an “Indenture”) among the Issuer, the Guarantors and Wells Fargo
Bank, National Association, as trustee (the “Trustee”).
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement, the Company agrees with the Initial Purchasers, for the benefit of
the holders of the Initial Securities (including, without limitation, the
Initial Purchasers), the Exchange Securities (as defined below) and the Private
Exchange Securities (as defined below) (collectively the “Holders”)
and each Market Maker (as defined below) as follows:

 

1.  Registered Exchange Offer.  The
Company shall, at its own cost, use its reasonable best efforts to prepare and
file with the Securities and Exchange Commission (the “Commission”)
one or more registration statements (collectively, the “Exchange
Offer Registration Statement”) on an appropriate form under the
Securities Act of 1933, as amended (the “Securities Act”),
with respect to a proposed offer (the “Registered Exchange Offer”)
to the Holders of Transfer Restricted Securities (as defined in Section 7
hereof), who are not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer, to issue and deliver to such
Holders, in exchange for the Initial Securities, a like aggregate principal amount
of debt securities (the “Exchange Securities”)
of the Company issued under the applicable Indenture and identical in all
material respects to the applicable series of Initial Securities surrendered by
such Holder (except for the transfer restrictions relating to the Initial
Securities and the provisions relating to the matters described in Section 7
hereof) that would be registered under the Securities Act.  The Company shall use its reasonable best efforts
to (i) cause such Exchange Offer Registration Statement to be declared
effective under the Securities Act and (ii) keep the Exchange Offer
Registration Statement effective for not less than 20 business days (or
longer, if required by applicable law)

 

 

after the date notice of the Registered
Exchange Offer is mailed to the Holders (such period being called the “Exchange Offer Registration Period”).

 

If the Company effects the Registered Exchange Offer, the Company (i) will
be entitled to close the Registered Exchange Offer 20 business days after
the commencement thereof (provided that the Company has accepted all the
Initial Securities theretofore validly tendered in accordance with the terms of
the Registered Exchange Offer) and (ii) will use its reasonable best
efforts to consummate the Registered Exchange Offer not later than
360 days (or if the 360th day is not a business day, the
first business day thereafter) after the date of original issue of the Initial
Securities (the “Issue Date”) (such 360th day,
or the first business day thereafter, the “Consummation Deadline”).

 

The Company may, in its discretion, accept tenders of Initial
Securities for Exchange Securities after the date that the Company consummates
the Registered Exchange Offer with respect to Initial Securities tendered as of
the date of initial consummation and, for purposes of Section 7(a)(ii),
the Registered Exchange Offer shall be deemed to have been consummated
notwithstanding any such extension of the tender period.

 

Following the declaration of the effectiveness of the applicable Exchange
Offer Registration Statement, the Company shall promptly commence the
Registered Exchange Offer for the applicable series of the Initial Securities,
it being the objective of such Registered Exchange Offer to enable each Holder
of Transfer Restricted Securities electing to exchange the Initial Securities of
such series for Exchange Securities of the same series (assuming that such
Holder is not an affiliate of the Company within the meaning of the Securities
Act, acquires the Exchange Securities in the ordinary course of such Holder’s
business and has no arrangements or understanding with any person to
participate in the distribution of the Exchange Securities and is not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer) to trade such Exchange Securities from and after
their receipt without any limitations or restrictions under the Securities Act
and without material restrictions under the securities laws of the several
states of the United States.  The Company’s
obligations under each Registered Exchange Offer and each Private Exchange
shall be subject to the conditions that (i) such Registered Exchange Offer
or Private Exchange, as the case may be, does not violate applicable law or any
applicable interpretation of the staff of the SEC; (ii) no action or
proceeding shall have been instituted or threatened in any court or by any
governmental agency which might materially impair the ability of the Issuer to
proceed with such Registered Exchange Offer or Private Exchange, and no
material adverse development shall have occurred in any existing action or
proceeding with respect to the Company; and (iii) all governmental
approvals that the Company deems necessary for the consummation of such
Registered Exchange Offer or Private Exchange shall have been obtained.

 

The Company acknowledges that, pursuant to current interpretations by
the Commission’s staff of Section 5 of the Securities Act, in the absence
of an applicable exemption therefrom, (i) each Holder which is a broker or
dealer registered under the Exchange Act of 1934, as amended (the “Exchange Act”) (a “broker-dealer”) electing to exchange Initial
Securities, acquired for its own account as a result of market making
activities or other trading activities, for Exchange Securities (an “Exchanging Dealer”), is required to deliver a prospectus
containing the information set forth in (a) Annex A hereto on the cover, (b) Annex
B hereto in the “Exchange Offer Procedures” section and the “Purpose of
the Exchange Offer” section, and (c) Annex C hereto in the “Plan of Distribution”
section of such prospectus in connection with a sale of any such Exchange
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer and (ii) an Initial Purchaser that elects to sell Private Exchange
Securities (as defined below) acquired in exchange for Initial Securities
constituting any portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in connection with such
sale.  All references in this Agreement
to “prospectus” shall, except when context otherwise requires, include any
prospectus (or amendment or supplement thereto) filed with the Commission
pursuant to Section 4 of this Agreement.

 

The Company shall use its reasonable best efforts to keep each Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell

 

2

 

the Exchange Securities; provided, however,
that (i) in the case where such prospectus and any amendment or supplement
thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such
period shall be the lesser of 180 days (or such shorter period during which
such person is required by applicable law to deliver such prospectus) and the
date on which all Exchanging Dealers and the Initial Purchasers have sold all
Exchange Securities held by them (unless such period is extended pursuant to Section 3(j)
below) and (ii) the Company shall make such prospectus and any amendment
or supplement thereto, available to any broker-dealer or other person with
similar prospectus delivery requirements for use in connection with any resale
of any series of Exchange Securities for a period of not less than 90 days
after the effective date of the Exchange Offer Registration Statement relating
to such series (or such shorter period during which such persons are required
by applicable law to deliver such prospectus).

 

If, upon consummation of each Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the “Private Exchange”) for the Initial
Securities held by such Initial Purchaser, a like principal amount of debt
securities of the Company issued under the applicable Indenture and identical
in all material respects (including the existence of restrictions on transfer
under the Securities Act and the securities laws of the several states of the
United States, but excluding provisions relating to the matters described in Section 7
hereof) to the Initial Securities (the “Private Exchange
Securities”).  The Initial
Securities, the Exchange Securities and the Private Exchange Securities are herein
collectively called the “Securities”.

 

In connection with each Registered Exchange Offer, the Company shall:

 

(a)  mail to
each Holder a copy of the prospectus forming part of the applicable Exchange
Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;

 

(b)  keep the applicable
Registered Exchange Offer open for not less than 30 days (or longer, if
required by applicable law) after the date notice thereof is mailed to the
Holders;

 

(c)  utilize
the services of a depositary for the applicable Registered Exchange Offer with
an address in the Borough of Manhattan, The City of New York, which may be the
Trustee or an affiliate of the Trustee;

 

(d)  permit
Holders to withdraw tendered Securities at any time prior to the close of
business, New York time, on the last business day on which the applicable Registered
Exchange Offer shall remain open; and

 

(e)  otherwise
comply with all applicable laws.

 

As soon as practicable after the close of the applicable Registered
Exchange Offer or the applicable Private Exchange, as the case may be, the Company
shall:

 

(x)  accept for
exchange all the Initial Securities validly tendered and not withdrawn pursuant
to such Registered Exchange Offer and such Private Exchange;

 

(y)  deliver to
the Trustee for cancellation all the Initial Securities so accepted for
exchange; and

 

(z)  cause the
Trustee to authenticate and deliver promptly to each Holder of the Initial
Securities, Exchange Securities or Private Exchange Securities of each series,
as the case may be, equal in principal amount to the Initial Securities of such
series of such Holder so accepted for exchange.

 

Each Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the applicable Indenture and
that all the Securities issued pursuant to such Indenture

 

3

 

will vote and consent together on all matters
as one class and that none of the Securities will have the right to vote or
consent as a class separate from one another on any matter.

 

Interest on each Exchange Security and Private Exchange Security issued
pursuant to each Registered Exchange Offer and in each Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the Issue Date.

 

Each Holder participating in each Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of
the applicable Registered Exchange Offer that: (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business, (ii) such
Holder will have no arrangements or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Securities, (iii) such Holder is not an “affiliate,” as
defined in Rule 405 of the Securities Act, of the Company or if it is an “affiliate”,
such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv) if such
Holder is not a broker-dealer, that it is not engaged in, and does not intend
to engage in, the distribution of the Exchange Securities and (v) if such
Holder is a broker-dealer, that it will receive Exchange Securities for its own
account in exchange for Initial Securities that were acquired as a result of
market-making activities or other trading activities and that it will comply
with the applicable provisions of the Securities Act (including, but not
limited to delivery of a prospectus in connection with any resale of such
Exchange Securities).

 

Upon consummation of the Registered Exchange Offer in accordance with
this Section 2 with respect to each series of the Initial Securities, the
provisions of this Agreement shall continue to apply solely with respect to
Transfer Restricted Securities of such series that are Private Exchange
Securities, as to which Section 2 is applicable and Exchange Securities of
such series held by Participating Broker-Dealers, and the Company shall have no
further obligation to register any other Securities of such series pursuant
hereto.

 

2.  Shelf Registration.  If, (i) because of any change in law or
in applicable interpretations of the staff of the Commission, the Company is
not permitted to effect a Registered Exchange Offer, as contemplated by Section 1
hereof, (ii) for any other reason a Registered Exchange Offer is not
consummated within 360 days of the Issue Date, (iii) any Initial
Purchaser shall notify the Company following consummation of the applicable Registered
Exchange Offer that the Initial Securities (or the Private Exchange Securities)
held by it are not eligible to be exchanged for Exchange Securities in such
Registered Exchange Offer or (iv) any Holder (other than an Exchanging
Dealer) notifies the Company within 30 days after the consummation of the applicable
Registered Exchange Offer that it is prohibited by law or Commission policy
from participating in such Registered Exchange Offer or, in the case of any
Holder (other than an Exchanging Dealer) that participates in such Registered
Exchange Offer, such Holder may not resell the Exchange Securities acquired by
it in such Registered Exchange Offer to the public without delivering a
prospectus and so notifies the Company within 30 days after such Holder first
becomes aware of such restrictions, the Company shall take the following
actions:

 

(a)  The
Company shall, at its cost, promptly file with the Commission and thereafter
shall use its reasonable best efforts to, no later than 360 days after the
Issue Date (or if the 360th day is not a business day, the first
business day thereafter) (such 360th day, or the first business day
thereafter, as the case may be, being an “Effectiveness Deadline”),
cause to be declared effective under the Securities Act a registration
statement (the “Shelf Registration Statement” and,
together with the applicable Exchange Offer Registration Statement and any applicable
Market Making Registration Statement (as defined below), a “Registration Statement”) on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted
Securities of each series by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the applicable Shelf
Registration Statement and Rule 415 under the Securities Act (hereinafter,
the “Shelf Registration”); provided,
however, that no Holder (other than an Initial Purchaser) shall be entitled to
have the Securities held by it covered by such Shelf Registration Statement
unless such Holder agrees in writing to be bound by all the provisions of this
Agreement applicable to such Holder.

 

4

 

(b)  The
Company shall use its reasonable best efforts to keep each Shelf Registration
Statement continuously effective in order to permit the prospectus included
therein to be lawfully delivered by the Holders of the relevant Securities, for
a period of two years (or for such longer period if extended pursuant to Section 3(j)
below) from the Issue Date or such shorter period that will terminate when all
the Securities covered by such Shelf Registration Statement (i) have been
sold pursuant thereto or (ii) are no longer restricted securities (as
defined in Rule 144 under the Securities Act, or any successor rule thereof).  The Company shall be deemed not to have used
its reasonable best efforts to keep each Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that would
result in Holders of Securities covered thereby not being able to offer and
sell such Securities during that period, unless such action is required by
applicable law or is taken pursuant to Section 3(j) hereof.

 

(c)  Notwithstanding
any other provisions of this Agreement to the contrary, the Company shall cause
each Shelf Registration Statement and the related prospectus and any amendment
or supplement thereto, as of the effective date of such Shelf Registration
Statement, amendment or supplement, (i) to comply in all material respects
with the applicable requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

Notwithstanding any other
provisions of this Agreement to the contrary, at any time, the Company may
delay the filing of any Shelf Registration Statement or delay or suspend the
effectiveness thereof, for a reasonable period of time, but not in excess of 60
consecutive days with no more than three such delays in filing or delays or
suspension of effectiveness during any calendar year (each, a “Shelf Suspension Period”), if the Company determines
reasonably and in good faith that the filing of any such Shelf Registration
Statement or the continuing effectiveness thereof would require the disclosure
of non-public material information that, in the reasonable judgment of the
Board of Directors of the Company, would be detrimental to the Company if so
disclosed or would otherwise materially adversely affect a financing,
acquisition, disposition, merger or other material transaction or such action
is required by applicable law.

 

3.  Registration Procedures.  In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:

 

(a)  The
Company shall (i) furnish to each Initial Purchaser, prior to the filing
thereof with the Commission to the extent reasonably practicable, a copy of the
applicable Registration Statement and each amendment thereof and each
supplement, if any, to the prospectus included therein and, in the event that
an Initial Purchaser (with respect to any portion of an unsold allotment from
the original offering) is participating in such Registered Exchange Offer or such
Shelf Registration Statement, the Company shall use its reasonable best efforts
to reflect in each such document, when so filed with the Commission, such
comments as such Initial Purchaser reasonably may propose; (ii) include
the information set forth in Annex A hereto on the cover, in Annex B hereto in
the “Exchange Offer Procedures” section and the “Purpose of the Exchange
Offer” section and in Annex C hereto in the “Plan of Distribution” section of
the prospectus forming a part of the Exchange Offer Registration Statement and
include the information set forth in Annex D hereto in the Letter of
Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if
requested by an Initial Purchaser, include the information required by Items
507 or 508 of Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the applicable Exchange Offer Registration
Statement; (iv) include within the prospectus contained in the applicable Exchange
Offer Registration Statement a section entitled “Plan of Distribution,”
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the
Commission with respect to the potential “underwriter” status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act) of Exchange Securities received by such broker-dealer in the
Registered Exchange Offer (a “Participating
Broker-Dealer”), whether such positions or policies have been
publicly disseminated by the staff of the Commission or such positions or
policies, in the

 

5

 

reasonable
judgment of the Initial Purchasers based upon advice of counsel (which may be in-house
counsel), represent the prevailing views of the staff of the Commission; and (v) in
the case of a Shelf Registration Statement, include the names of the Holders,
who propose to sell Securities pursuant to such Shelf Registration Statement,
as selling security holders.

 

(b)  The
Company shall give written notice to the Initial Purchasers, the Holders of the
Securities and any Participating Broker-Dealer from whom the Company has
received prior written notice that it will be a Participating Broker-Dealer in
the applicable Registered Exchange Offer (which notice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use
of the prospectus until the requisite changes have been made):

 

(i)  when the applicable
Registration Statement or any amendment thereto has been filed with the
Commission and when the applicable Registration Statement or any post-effective
amendment thereto has become effective;

 

(ii)  of any
request by the Commission for amendments or supplements to the applicable Registration
Statement or the prospectus included therein or for additional information;

 

(iii)  of the
issuance by the Commission of any stop order suspending the effectiveness of
the applicable Registration Statement or the initiation of any proceedings for
that purpose;

 

(iv)  of the
receipt by the Company or its legal counsel of any notification with respect to
the suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and

 

(v)  of the
happening of any event that requires the Company to make changes in the applicable
Registration Statement or the prospectus in order that the applicable Registration
Statement or the prospectus do not contain an untrue statement of a material
fact nor omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the prospectus, in
light of the circumstances under which they were made) not misleading.

 

(c)  The Company
shall use its reasonable best efforts to obtain the withdrawal at the earliest
possible time of any order suspending the effectiveness of each Registration
Statement.

 

(d)  The
Company shall furnish to each Holder of Securities included within the coverage
of each Shelf Registration, without charge, if the Holder so requests in
writing, at least one copy of the applicable Shelf Registration Statement and
any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).

 

(e)  The
Company shall deliver to each Exchanging Dealer, upon its request, and each
Initial Purchaser, and to any other Holder who so requests, without charge, at
least one copy of the applicable Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if any Initial Purchaser or any such Holder requests, all exhibits thereto
(including those incorporated by reference).

 

(f)  The
Company shall, during each Shelf Registration Period, deliver to each Holder of
Securities included within the coverage of the applicable Shelf Registration,
without charge, as many copies of the prospectus (including each preliminary
prospectus) included in the applicable Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request. The
Company consents, subject to the provisions of this Agreement, to the use of
the prospectus or any amendment or supplement thereto by each of the selling
Holders of the Securities in connection with the offering and sale of the
Securities covered by the prospectus, or any amendment or supplement thereto,
included in the applicable Shelf Registration Statement.

 

6

 

(g)  The
Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any
Participating Broker-Dealer and such other persons required to deliver a
prospectus following each Registered Exchange Offer, without charge, as many
copies of the final prospectus included in the applicable Exchange Offer
Registration Statement and any amendment or supplement thereto as such persons
may reasonably request.  The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus or
any amendment or supplement thereto by any Initial Purchaser, if necessary, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the applicable Registered Exchange
Offer in connection with the offering and sale of the Exchange Securities
covered by the prospectus, or any amendment or supplement thereto, included in
such Exchange Offer Registration Statement.

 

(h)  Prior to
any public offering of the Securities, pursuant to any Registration Statement,
the Company shall register or qualify or cooperate with the Holders of the
Securities included therein and their respective counsel in connection with the
registration or qualification of the Securities for offer and sale under the
securities or “blue sky” laws of such states of the United States as any Holder
of the Securities reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by such Registration Statement;
provided, however, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so qualified
or (ii) take any action which would subject it to general service of
process or to taxation in any jurisdiction where it is not then so subject.

 

(i)  The
Company shall cooperate with the Holders of the Securities to facilitate the
timely preparation and delivery of certificates representing the Securities to
be sold pursuant to any Registration Statement free of any restrictive legends
and in such denominations and registered in such names as the Holders may
request a reasonable period of time prior to sales of the Securities pursuant
to such Registration Statement.

 

(j)  Upon the
occurrence of any event contemplated by paragraphs (ii) through (v) of
Section 3(b) above during the period for which the Company is
required to maintain an effective Registration Statement, the Company shall
promptly prepare and file a post-effective amendment to each Registration
Statement or a supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the Securities or
purchasers of Securities, the prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.  If the Company notifies the Initial
Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above
to suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then the Initial Purchasers, the Holders of the
Securities and any such Participating Broker-Dealers shall suspend use of such
prospectus, and the period of effectiveness of the applicable Shelf
Registration Statement provided for in Section 2(b) above and the applicable
Exchange Offer Registration Statement provided for in Section 1 above
shall each be extended by the number of days from and including the date of the
giving of such notice to and including the date when the Initial Purchasers,
the Holders of the Securities and any known Participating Broker-Dealer shall
have received such amended or supplemented prospectus pursuant to this Section 3(j).

 

(k)  Not later
than the effective date of the applicable Registration Statement, the Company
will provide a CUSIP number for the Initial Securities, the Exchange Securities
or the Private Exchange Securities, as the case may be, and provide the
applicable trustee with printed certificates for the Initial Securities, the
Exchange Securities or the Private Exchange Securities, as the case may be, in
a form eligible for deposit with The Depository Trust Company.

 

(l)  The
Company will comply with all rules and regulations of the Commission to
the extent and so long as they are applicable to each Registered Exchange Offer
or each Shelf Registration and will make generally available to its security
holders (or otherwise provide in accordance with Section 11(a) of the
Securities Act) an earnings statement satisfying the

 

7

 

provisions of Section 11(a) of
the Securities Act, no later than 45 days after the end of a 12-month period
(or 90 days, if such period is a fiscal year) beginning with the first month of
the Company’s first fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover such 12-month period.

 

(m)  The
Company shall cause the Indentures to be qualified under the Trust Indenture
Act of 1939, as amended (the “Trust Indenture Act”),
in a timely manner and containing such changes, if any, as shall be necessary
for such qualification.  In the event
that such qualification would require the appointment of a new trustee under either
Indenture, the Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the relevant Indenture.

 

(n)  The
Company may require each Holder of Securities to be sold pursuant to any Shelf
Registration Statement to furnish to the Company such information regarding the
Holder and the distribution of the Securities as the Company may from time to
time reasonably require for inclusion in the Shelf Registration Statement
including requiring the Holder to properly complete and execute any selling
security holder notices and questionnaires, and any amendments or supplements
thereto, that it may reasonably deem necessary or appropriate, and the Company
may exclude from such registration the Securities of any Holder that
unreasonably fails to furnish such information within a reasonable time after
receiving such request.

 

(o)  The
Company shall enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other action, if
any, as Holders of 20% in principal amount of the Securities registered under
the Shelf Registration (such Holders being “Significant Holders”) shall
reasonably request in order to facilitate the disposition of the Securities
pursuant to any Shelf Registration.

 

(p)  In the case
of any underwritten offering pursuant to Shelf Registration, the Company shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the applicable Shelf
Registration Statement and any attorney, accountant or other agent retained by
the Holders of the Securities or any such underwriter all relevant financial
and other records, pertinent corporate documents and properties of the Company
and (ii) cause the Company’s officers, directors, employees, accountants
and auditors to supply all relevant information reasonably requested by the
Holders of the Securities or any such underwriter, attorney, accountant or
agent in connection with the applicable Shelf Registration Statement, in each
case, as shall be reasonably necessary to enable such persons, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial Purchasers
by you and on behalf of the other parties, by one counsel designated by and on
behalf of such other parties as described in Section 5 hereof.

 

(q)  In the
case of any underwritten offering pursuant to Shelf Registration, the Company,
if requested by any Significant Holders of Securities covered thereby, shall
cause (i) its counsel to deliver an opinion and updates thereof relating
to the Securities in customary form addressed to such Holders and the Managing Underwriters
(as defined below), if any, thereof and dated, in the case of the initial
opinion, the effective date of such Shelf Registration Statement (it being
agreed that the matters to be covered by such opinion shall include, without
limitation, the due incorporation and good standing of the Company and its
subsidiaries; the qualification of the Company and its subsidiaries to transact
business as foreign corporations; the due authorization, execution and delivery
of the relevant agreement of the type referred to in Section 3(o) hereof;
the due authorization, execution, authentication and issuance, and the validity
and enforceability, of the applicable Securities; the absence of material legal
or governmental proceedings involving the Company and its subsidiaries; the
absence of governmental approvals required to be obtained in connection with
the applicable Shelf Registration Statement, the offering and sale of the
applicable Securities, or any agreement of the type referred to in Section 3(o)
hereof; the compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indentures with the
requirements of the Securities Act and the Trust Indenture Act, respectively;
and, as of the date of the opinion and as of the effective date of the applicable
Shelf

 

8

 

Registration
Statement or most recent post-effective amendment thereto, as the case may be,
the absence from such Shelf Registration Statement and the prospectus included
therein, as then amended or supplemented, and from any documents incorporated
by reference therein of an untrue statement of a material fact or the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading (in the case of any such documents,
in the light of the circumstances existing at the time that such documents were
filed with the Commission under the Exchange Act); (ii) its officers to
execute and deliver all customary documents and certificates and updates
thereof requested by any underwriters of the applicable Securities and (iii) its
independent public accountants and the independent public accountants with
respect to any other entity for which financial information is provided in the
Shelf Registration Statement to provide to the selling Holders of the
applicable Securities and any underwriter therefor a comfort letter in
customary form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings, subject to receipt
of appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.

 

(r)  In the
case of the Registered Exchange Offer, if requested by any Initial Purchaser or
any known Participating Broker-Dealer, the Company shall cause (i) its
counsel to deliver to such Initial Purchaser or such Participating
Broker-Dealer a signed opinion in the form set forth in Section 6(c) of
the Purchase Agreement with such changes as are customary in connection with
the preparation of a Registration Statement and (ii) its independent
public accountants to deliver to such Initial Purchaser or such Participating
Broker-Dealer a comfort letter, in customary form, meeting the requirements as
to the substance thereof as set forth in Sections 6(a) and (g) of
the Purchase Agreement, with appropriate date changes.

 

(s)  If a
Registered Exchange Offer or a Private Exchange is to be consummated, upon
delivery of the Initial Securities by Holders to the Company (or to such other
Person as directed by the Company) in exchange for the Exchange Securities or
the Private Exchange Securities, as the case may be, the Company shall mark, or
cause to be marked, on the Initial Securities so exchanged that such Initial
Securities are being canceled in exchange for the Exchange Securities or the
Private Exchange Securities, as the case may be; in no event shall the Initial
Securities be marked as paid or otherwise satisfied.

 

(t)  The
Company will use its reasonable best efforts to (a) if the Initial
Securities have been rated prior to the initial sale of such Initial
Securities, confirm such ratings will apply to the Securities covered by a
Registration Statement, or (b) if the Initial Securities were not
previously rated, cause the Securities covered by a Registration Statement to
be rated with the appropriate rating agencies, if so requested by Holders of a
majority in aggregate principal amount of Securities covered by such
Registration Statement, or by the Managing Underwriters, if any.

 

(u)  In the
event that any broker-dealer registered under the Exchange Act shall underwrite
any Securities or participate as a member of an underwriting syndicate or
selling group or “assist in the distribution” (within the meaning of the
Conduct Rules (the “Rules”) of the
National Association of Securities Dealers, Inc. (“NASD”))
thereof, whether as a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof, or
otherwise, the Company will assist such broker-dealer in complying with the
requirements of such Rules, including, without limitation, by (i) if such
Rules, including Rule 2720, shall so require, engaging a “qualified
independent underwriter” (as defined in Rule 2720) to participate in the
preparation of the Registration Statement relating to such Securities, to
exercise usual standards of due diligence in respect thereto and, if any
portion of the offering contemplated by such Registration Statement is an
underwritten offering or is made through a placement or sales agent, to
recommend the yield of such Securities, (ii) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof and (iii) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules.

 

(v)  The
Company shall use its reasonable best efforts to take all other steps necessary
to effect the registration of the Securities covered by a Registration
Statement contemplated hereby.

 

9

 

4.  Market
Making. (a)  For so long as any of the Securities are
outstanding and CSFB (in such capacity, the “Market Maker”)
or any of its affiliates (as defined in the rules and regulations of the
Commission) owns any equity securities of the Company or any of its affiliates
and proposes to make a market in the Securities part of its business in the
ordinary course, the following provisions shall apply for the sole benefit of
the Market Maker:

 

(i) The Company
shall use its reasonable best efforts to (A) on the date that the applicable
Exchange Offer Registration Statement or, if required hereby, the applicable Shelf
Registration Statement is filed with the Commission, file a registration
statement (the “Market Making Registration Statement”)
(which may be the applicable Exchange Offer Registration Statement or the applicable
Shelf Registration Statement if permitted by the rules and regulations of
the Commission) and cause such Market Making Registration Statement to be
declared effective by the Commission on or prior to the consummation of the
Registered Exchange Offer or the effective date of the Shelf Registration
Statement, as applicable; (B) periodically amend such Market Making
Registration Statement so that the information contained therein complies with
the requirements of Section 10(a) under the Securities Act; (C) amend
the Market Making Registration Statement or amend or supplement the related
prospectus when necessary to reflect any material changes in the information
provided therein; and (D) amend the Market Making Registration Statement
when required to do so in order to comply with Section 10(a)(3) of
the Securities Act; provided, however, that (1) prior to filing the Market
Making Registration Statement, any amendment thereto or any amendment or
supplement to the related prospectus, the Company will to the extent reasonably
practicable furnish to the Market Maker copies of all such documents proposed
to be filed, which documents will be subject to the review of the Market Maker
and its counsel, (2) the Company will not file the Market Making
Registration Statement, any amendment thereto or any amendment or supplement to
the related prospectus to which the Market Maker and its counsel shall
reasonably object unless the Company is advised by counsel that such Market
Making Registration Statement, amendment or supplement is required to be filed
under applicable securities laws and (3) the Company will provide the
Market Maker and its counsel with copies of the Market Making Registration
Statement, the related prospectus and each amendment and supplement thereto
filed.

 

(ii) The Company
shall notify the Market Maker and, if requested by the Market Maker, confirm
such advice in writing, (A) when any Market Making Registration Statement,
any post effective amendment to the Market Making Registration Statement or any
amendment or supplement to the related prospectus has been filed, and, with
respect to any Market Making Registration Statement or any post effective
amendment, when the same has become effective; (B) of any request by the
Commission for any post effective amendment to the Market Making Registration
Statement, any supplement or amendment to the related prospectus or for
additional information; (C) of the issuance by the Commission of any stop
order suspending the effectiveness of the Market Making Registration Statement
or the initiation of any proceedings for that purpose; (D) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the initiation
or threatening of any proceedings for such purpose; and (E) of the
happening of any event that makes any statement made in the Market Making
Registration Statement, the related prospectus or any amendment or supplement
thereto untrue or that requires the making of any changes in the Market Making
Registration Statement, such prospectus or any amendment or supplement thereto,
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.

 

(iii) If any event
contemplated by Section 4(a)(ii)(B) through (E) occurs during
the period for which the Company is required to maintain an effective Market
Making Registration Statement, the Company shall use its reasonable best
efforts to promptly prepare and file with the Commission a post-effective
amendment to the Market Making Registration Statement or an amendment or
supplement to the related prospectus or file any other required document so
that the prospectus will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 

10

 

(iv) In the event of
the issuance of any stop order suspending the effectiveness of the Market Making
Registration Statement or of any order suspending the qualification of the
Securities for sale in any jurisdiction, the Company shall promptly use its
reasonable best efforts to obtain its withdrawal.

 

(v) The Company
shall furnish to the Market Maker, without charge, (i) at least one
conformed copy of the Market Making Registration Statement and any post
effective amendment thereto; and (ii) as many copies of the related
prospectus and any amendment or supplement thereto as the Market Maker may
reasonably request.

 

(vi) The Company
shall consent to the use of the prospectus contained in the Market Making
Registration Statement or any amendment or supplement thereto by the Market
Maker in connection with its market making activities.

 

(vii) Notwithstanding
the foregoing provisions of this Section 4, the Company may, if it
determines reasonably and in good faith that the continuing effectiveness of
the Market Making Registration Statement would require the disclosure of
non-public material information that, in the reasonable judgment of the Board
of Directors of the Company, would be detrimental to the Company if so
disclosed or would otherwise materially adversely affect a financing,
acquisition, disposition, merger or other material transaction or such action
is required by applicable law, notify the Market Maker in writing that the
Market Making Registration Statement is no longer effective or the prospectus
included therein is no longer usable for offers and sales of Securities;
provided that the use of the Market Making Registration Statement or the
prospectus contained therein shall not be suspended for more than 60 consecutive
days with no more than three such suspensions during any calendar year. The
Market Maker agrees that upon receipt of any notice from the Company pursuant
to this Section 4(a)(vii), it will discontinue use of the prospectus
contained in the Market Making Registration Statement until receipt of copies
of the supplemented or amended prospectus relating thereto or until advised in
writing by the Company that the use of the prospectus contained in the Market
Making Registration Statement may be resumed.

 

(b) In connection with the applicable Market Making Registration
Statement, the Company shall (i) make reasonably available for inspection
by a representative of, and counsel acting for, the Market Maker all relevant
financial and other records, pertinent corporate documents and properties of
the Company and its subsidiaries and (ii) use its reasonable best efforts
to have its officers, directors, employees, accountants and counsel supply all
relevant information reasonably requested by such representative or counsel or
the Market Maker.

 

(c)  Prior to the effective date of the applicable Market Making
Registration Statement, the Company shall use its reasonable best efforts to
register or qualify the Securities for offer and sale under the securities or
blue sky laws of such jurisdictions as the Market Maker reasonably requests in
writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Securities covered by such
Market Making Registration Statement; provided that the Company shall not be
required to (i) qualify as a foreign corporation or other entity or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to so qualify, (ii) file any general consent to subject itself to
service of process in any such jurisdictions or (iii) subject itself to
taxation in any such jurisdiction where it is not then so subject.

 

(d)  The Company represents and agrees that each Market Making
Registration Statement, any post effective amendments thereto, any amendments
or supplements to the related prospectus and any documents filed by them under
the Exchange Act will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the requirements of
the Securities Act and the Exchange Act and the rules and regulations of
the Commission thereunder and will not, as of the effective date of such Market
Making Registration Statement or post effective amendments and as of the filing
date of amendments or supplements to such prospectus or filings under the
Exchange Act, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that no representation or warranty is made as to
information contained in or omitted from the applicable Market

 

11

 

Making Registration Statement or the related
prospectus in reliance upon and in conformity with written information
furnished to the Company by the Market Maker specifically for inclusion
therein, which information the parties hereto agree will be limited to the
statements concerning the market making activities of the Market Maker to be
set forth on the cover page, in the “Plan of Distribution” and in the analogous
sections of the Canadian wrapper, if any, of the prospectus (the “Market Maker’s Information”).

 

(e)  At the time of effectiveness of the applicable Market Making
Registration Statement and concurrently with each time such Market Making
Registration Statement or the related prospectus shall be amended or such
prospectus shall be supplemented, the Company shall (if requested by the Market
Maker) furnish the Market Maker and its counsel with a certificate of its Chief
Executive Officer or any Vice President and a principal financial and
accounting officer to the effect that:

 

(i) such Market Making Registration Statement has
been declared effective; (ii) in the case of an amendment to such Market
Making Registration Statement, such amendment has become effective under the
Securities Act as of the date and time specified in such certificate, if
applicable; and in the case of an amendment or supplement to the prospectus,
such amendment or supplement to the prospectus was filed with the Commission
pursuant to the subparagraph of Rule 424(b) under the Securities Act
specified in such certificate on the date specified therein; (iii) to the
knowledge of such officers, no stop order suspending the effectiveness of the
Market Making Registration Statement has been issued and no proceeding for that
purpose is pending or threatened by the Commission; and (iv) such officers
have carefully examined the Market Making Registration Statement and the
prospectus (and, in the case of an amendment or supplement, such amendment or
supplement) and as of the date of such Market Making Registration Statement,
prospectus, amendment or supplement, as applicable, the Market Making
Registration Statement and the prospectus, as amended or supplemented, if
applicable, did not include any untrue statement of a material fact and did not
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.

 

(f)  At the time of effectiveness of the applicable Market Making
Registration Statement, the Company shall (if requested by the Market Maker)
furnish the Market Maker and its counsel with the written opinion of counsel
for the Company reasonably satisfactory to the Market Maker to the effect that:

 

(i)  such Market Making Registration Statement
has been declared effective; (ii) in the case of an amendment to such
Market Making Registration Statement, such amendment has become effective under
the Securities Act as of the date and time specified in such opinion, if
applicable; and in the case of an amendment or supplement to the prospectus,
such amendment or supplement to the prospectus was filed with the Commission
pursuant to the subparagraph of Rule 424(b) under the Securities Act
specified in such opinion on the date specified therein; (iii) to the
knowledge of such counsel, no stop order suspending the effectiveness of such
Market Making Registration Statement has been issued and no proceeding for that
purpose is pending or threatened by the Commission; and (iv) such counsel
has reviewed such Market Making Registration Statement and the prospectus (and,
in the case of an amendment or supplement, such amendment or supplement) and
has no reason to believe that (except for the financial statements and other
financial and statistical data contained therein as to which such counsel need
express no belief) as of the date of such Market Making Registration Statement,
prospectus, amendment or supplement, as applicable, such Market Making
Registration Statement and the prospectus, as amended or supplemented, if
applicable, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.

 

(g)  At the time of effectiveness of the applicable Market Making
Registration Statement, the Company shall (if requested by the Market Maker)
furnish the Market Maker and its counsel with a letter of Deloitte &
Touche LLP (or other independent public accountants for the Company of
nationally recognized standing) in form satisfactory to the Market Maker,
addressed to the Market Maker and dated the date of delivery of such letter, (i) confirming
that they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements relating
to the qualification of

 

12

 

accountants under Rule 2-01 of
Regulation S-X of the Commission and (ii) in all other respects,
substantially in the form of the letter delivered to the Initial Purchasers pursuant
to Sections 6(a) and 6(g) of the Purchase Agreement.

 

(h)  The Company, on the one hand, and the Market Maker, on the
other hand, hereby agree to indemnify each other, and, if applicable,
contribute to the other, in accordance with Section 6 of this Agreement.

 

(i)  The Company will comply with the provisions of this Section 4
at its own expense and will reimburse the Market Maker for its expenses
associated with this Section 4 (including reasonable fees of counsel for the
Market Maker).

 

(j)  The agreements contained in
this Section 4 and the representations, warranties and agreements
contained in this Agreement shall survive all offers and sales of the
Securities and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by or
on behalf of any indemnified party.

 

(k)  For purposes of this Section 4,
(i) any reference to the terms “amend”, “amendment” or “supplement” with
respect to the applicable Market Making Registration Statement or the
prospectus contained therein shall be deemed to refer to and include the filing
under the Exchange Act of any document deemed to be incorporated therein by
reference and (ii) any reference to the term “Securities” shall be deemed
to refer to and include any securities issued in exchange for or with respect
to such Securities.

 

5.  Registration Expenses.  The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 4 hereof (including the reasonable fees and expenses, if any, of
Cravath, Swaine & Moore LLP, counsel for the Initial Purchasers,
incurred in connection with the Registered Exchange Offer), whether or not the applicable
Exchange Offer Registration Statement or a Shelf Registration is filed or
becomes effective, and, in the event of a Shelf Registration, shall bear or
reimburse the Holders of the Securities covered thereby for the reasonable fees
and disbursements of one firm of counsel designated by the Holders of a
majority in principal amount of the Initial Securities covered thereby to act
as counsel for the Holders of the Initial Securities in connection therewith.

 

6.  Indemnification.  (a)  The Company agrees to indemnify and
hold harmless (x) each Holder of the Securities (including the Market Maker),
any Participating Broker-Dealer and each person, if any, who controls such
Holder (including the Market Maker) or such Participating Broker-Dealer within
the meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the “Indemnified Parties”)
from and against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof (including, but not limited to, any losses,
claims, damages, liabilities or actions relating to purchases and sales of the
Securities) to which each Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse, as incurred, the Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) the
Company shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration in reliance
upon and in conformity with written information pertaining to such Holder or
Market Maker, respectively, and furnished to the Company by or on behalf of
such Holder or Market Maker, respectively, specifically for inclusion therein
and (ii) with respect to any untrue statement or omission or alleged
untrue statement or omission made in any preliminary prospectus relating to a
Shelf Registration Statement, the

 

13

 

indemnity agreement contained in this subsection (a) shall
not inure to the benefit of any Holder or Participating Broker-Dealer from whom
the person asserting any such losses, claims, damages or liabilities purchased
the Securities concerned, to the extent that a prospectus relating to such
Securities was required to be delivered by such Holder or Participating
Broker-Dealer under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder or Participating
Broker-Dealer results from the fact that there was not sent or given to such
person, at or prior to the written confirmation of the sale of such Securities to
such person, a copy of the final prospectus if the Company had previously
furnished copies thereof to such Holder or Participating Broker-Dealer; and (y)
the Market Maker from and against any and all losses, claims, damages and
liabilities (including, without limitation, legal fees and other expenses
reasonably incurred in connection with any suit, action or proceeding or any
claim asserted, as such fees and expenses are incurred), that arise out of, or
are based upon, any breach of the Company of its representations, warranties
and agreements contained in Section 4 of this Agreement; provided further,
however, that this indemnity agreement will be in addition to any liability
which the Company may otherwise have to such Indemnified Party.  The Company shall also indemnify
underwriters, their officers and directors and each person who controls such
underwriters within the meaning of the Securities Act or the Exchange Act to
the same extent as provided above with respect to the indemnification of the
Holders of the Securities if requested by such Holders.

 

(b)  Each Holder of the Securities (including the Market
Maker), severally and not jointly, will indemnify and hold harmless the Company
and each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act from and against any losses, claims, damages
or liabilities or any actions in respect thereof, to which the Company or any
such controlling person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in a Registration Statement or
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration, or arise out of or are based upon
the omission or alleged omission to state therein a material fact necessary to
make the statements therein not misleading, but in each case only to the extent
that the untrue statement or omission or alleged untrue statement or omission
was made in reliance upon and in conformity with written information pertaining
to such Holder or Market Maker Information, respectively, and furnished to the
Company by or on behalf of such Holder or Market Maker, as the case may be, specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by the Company or any such controlling
person in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. 
This indemnity agreement will be in addition to any liability which such
Holder may otherwise have to the Company or any of its controlling persons.

 

(c)  Promptly after receipt by an indemnified party under
this Section 6 of notice of the commencement of any action or proceeding
(including a governmental investigation), such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure to notify the indemnifying party shall
not relieve the indemnifying party from any liability that it may have under
subsection (a) or (b) above except to the extent that it has
been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and provided further that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have to
an indemnified party otherwise than under subsection  (a) or (b) above.  In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this Section 6
for any legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof.  In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the contrary; (ii) the indemnifying party has failed
within a reasonable time to retain counsel reasonably

 

14

 

satisfactory to the indemnified party; (iii) the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or in addition to those available
to the indemnifying party; or (iv) the named parties in any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them.  It is understood and
agreed that the indemnifying party shall not, in connection with any proceeding
or related proceeding in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred.  Any
such separate firm for any Initial Purchaser, its affiliates, directors and
officers and any control persons of such Initial Purchaser shall be designated
in writing by CSFB and any such separate firm for the Company, and any control
persons of the Company shall be designated in writing by the Company.  Any such separate firm for the Market—Maker
shall be designated in writing by the Market—Maker.  No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement (i) includes
an unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action, and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.

 

(d)  If the indemnification provided for in this Section 6
is unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to in subsection (a) or (b) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party on the
other from the exchange of the Securities, pursuant to the Registered Exchange
Offer, or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations.  The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company on the one hand or such Holder or such other indemnified party or
the Market Maker Information, as the case may be, on the other, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.  The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d).  Notwithstanding any other provision of this Section 6(d),
the Holders of the Securities (including the Market Maker) shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holders (or the
Market Maker) have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, nor shall such Market
Maker be required to contribute any amount of its commission from the market
making transactions at issue.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.  For purposes of this paragraph (d), each
person, if any, who controls such indemnified party within the meaning of the
Securities Act or the Exchange Act shall have the same rights to contribution
as such indemnified party and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act shall have the
same rights to contribution as the Company.

 

(e)  The agreements contained in this Section 6 shall
survive the sale of the Securities pursuant to a Registration Statement and
shall remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any indemnified
party.

 

15

 

7.  Additional Interest Under
Certain Circumstances.  (a) 
Additional interest (the “Additional Interest”)
with respect to the Initial Securities of a given series shall be assessed as
follows if any of the following events occur in respect of such series (each
such event in clauses (i) through (iii) below a “Registration Default”):

 

(i)  any Shelf Registration
Statement (other than a Market Making Registration Statement) required by this
Agreement is not declared effective by the Commission on or prior to the applicable
Effectiveness Deadline;

 

(ii)  the Registered
Exchange Offer has not been consummated on or prior to the Consummation
Deadline; or

 

(iii)  any
Registration Statement (other than a Market Making Registration Statement)
required by this agreement has been declared effective and (A) such
Registration Statement thereafter ceases to be effective; or (B) such
Registration Statement or the related prospectus ceases to be usable in
connection with resales of Transfer Restricted Securities during the periods
specified herein because either (1) any event occurs as a result of which
the related prospectus forming part of such Registration Statement would
include any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or (2) it shall be necessary to
amend such Registration Statement or supplement the related prospectus, to
comply with the Securities Act or the Exchange Act or the respective rules thereunder.

 

Except
during any Shelf Suspension Period referred to in Section 2(c), Additional
Interest shall accrue on the Initial Securities of the relevant series over and
above the interest set forth in the title of the Securities of that series from
and including the date on which any such Registration Default shall occur, at a
rate of 0.25% per annum for the first 90-day period immediately following the
occurrence of such Registration Default, and such rate will increase by an
additional 0.25% per annum with respect to each subsequent 90-day period until
all Registration Defaults in respect of that series have been cured, up to a
maximum Additional Interest rate of 1.0% per annum.

 

(b)  A Registration Default referred to in Section 7(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events with respect
to the Company that would need to be described in such Shelf Registration Statement
or the related prospectus and (ii) in the case of clause (y), the Company
is proceeding promptly and in good faith to amend or supplement such Shelf
Registration Statement and related prospectus to describe such events.  Upon the cure of all Registration Defaults in
respect of a given series of Securities, additional interest shall cease to
accrue in respect of that series of Initial Securities.

 

(c)  Any amounts of Additional Interest due pursuant to Section 7(a) above
will be payable (a) with regard to the Senior Notes in the form elected by
the Company for payment or interest pursuant to the terms of the Indenture
governing the Senior Notes and (b) with regard to the Senior Subordinated Notes
in cash on the regular interest payment dates with respect to the Initial
Securities. The amount of Additional Interest will be determined by multiplying
the applicable Additional Interest rate by the principal amount of the Initial
Securities of the relevant series, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.

 

(d) ”Transfer Restricted
Securities” means each Security of a given series until (i) the
date on which such Transfer Restricted Security has been exchanged by a person
other than a broker-dealer for a freely transferable Exchange Security of the
same series in the Registered Exchange Offer with respect to such series, (ii) following
the exchange by a broker-dealer in the Registered Exchange Offer with respect
to such series of an Initial Security for an Exchange Security, the date on
which such Exchange Security is

 

16

 

sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement with respect to such
series, (iii) the date on which such Initial Security has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (iv) the date on which such Initial
Securities is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities
Act.

 

(e)  Notwithstanding any other provisions of this Section 7,
the Company shall not be obligated to pay Additional Interest provided in Section 7(a)(ii) during
a Shelf Suspension Period permitted by Section 2 hereof.

 

8.  Rules 144 and 144A.  The
Company shall use its reasonable best efforts to file the reports required to
be filed by it under the Securities Act and the Exchange Act in a timely manner
and, if at any time the Company is not required to file such reports, it will,
upon the request of any Holder of Initial Securities or the Market Maker, make
publicly available other information so long as necessary to permit sales of
their securities pursuant to Rules 144 and 144A.  The Company covenants that it will take such
further action as any Holder of Initial Securities or the Market Maker may
reasonably request, all to the extent required from time to time to enable such
Holder or the Market Maker to sell Initial Securities without registration
under the Securities Act within the limitation of the exemptions provided by Rules 144
and 144A (including the requirements of Rule 144A(d)(4)).  The Company will provide a copy of this
Agreement to prospective purchasers of Initial Securities identified to the
Company by the Initial Purchasers upon request. 
Upon the request of any Holder of Initial Securities or the Market Maker,
the Company shall deliver to such Holder or the Market Maker a written
statement as to whether it has complied with such requirements. Notwithstanding
the foregoing, nothing in this Section 8 shall be deemed to require the
Company to register any of its securities pursuant to the Exchange Act.

 

9.  Underwritten Registrations.  If
any of the Transfer Restricted Securities covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will administer the offering (“Managing Underwriters”) will be selected by the Holders of a
majority in aggregate principal amount of such Transfer Restricted Securities
to be included in such offering.

 

No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person’s Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.

 

10.  Miscellaneous.

 

(a)  Amendments and Waivers.  The
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
except by the Company and the written consent of the Holders of a majority in
principal amount of the Securities affected by such amendment, modification,
supplement, waiver or consents.  The
provisions of Section 4 may not be amended, modified or supplemented
without prior written consent of the Market Maker.

 

(b)  Notices.  All
notices and other communications provided for or permitted hereunder shall be
made in writing by hand delivery, first-class mail, facsimile transmission, or
air courier which guarantees overnight delivery:

 

	
  (1)

  	
  if
  to a Holder of the Securities, at the most current address given by such
  Holder to the Company.

  
	
   

  	
   

  
	
  (2)

  	
  if
  to the Initial Purchasers:

  
	
   

  	
   

  
	
   

  	
  Credit
  Suisse First Boston LLC

  
	
   

  	
  Eleven
  Madison Avenue

  
	
   

  	
  New
  York, NY 10010-3629

  

 

17

 

	
   

  	
  Fax
  No.: (212) 325-4296

  
	
   

  	
  Attention:
  Transactions Advisory Group

  
	
   

  	
   

  
	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Cravath,
  Swaine & Moore LLP

  
	
   

  	
  825 Eighth
  Avenue

  
	
   

  	
  Worldwide
  Plaza

  
	
   

  	
  New
  York, NY 10019-7475

  
	
   

  	
  Fax
  No.: (212) 474-3700

  
	
   

  	
  Attention: George A.
  Stephanakis

  
	
   

  	
   

  
	
  (3)

  	
  if to the Company, at its
  address as follows:

  
	
   

  	
   

  
	
   

  	
  The
  Neiman Marcus Group, Inc.

  
	
   

  	
  One
  Marcus Square

  
	
   

  	
  1618
  Main Street

  
	
   

  	
  Dallas,
  Texas 75201

  
	
   

  	
  Fax
  No.: (214) 743 7611

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  
	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Cleary
  Gottlieb Steen & Hamilton LLP

  
	
   

  	
  One
  Liberty Plaza

  
	
   

  	
  New
  York, NY 10006

  
	
   

  	
  Fax
  No.: (212) 225-3999

  
	
   

  	
  Attention:
  Robert P. Davis

  
	
   

  	
   

  
	
  (4)

  	
  if to CSFB as Market
  Marker:

  
	
   

  	
   

  
	
   

  	
  Credit
  Suisse First Boston LLC

  
	
   

  	
  Eleven
  Madison Avenue

  
	
   

  	
  New
  York, NY 10010-3629

  
	
   

  	
  Fax
  No.: (212) 325-4296

  
	
   

  	
  Attention: Transactions
  Advisory Group

  
	
   

  	
   

  
	
  with a copy to:

  	
   

  
	
   

  	
   

  
	
   

  	
  Cravath,
  Swaine & Moore LLP

  
	
   

  	
  825 Eighth
  Avenue

  
	
   

  	
  Worldwide
  Plaza

  
	
   

  	
  New
  York, NY 10019-7475

  
	
   

  	
  Fax
  No.: (212) 474-3700

  
	
   

  	
  Attention: George A.
  Stephanakis

  

 

All such notices and communications shall be deemed to have been duly
given:  at the time delivered by hand, if
personally delivered; three business days after being deposited in the mail,
postage prepaid, if mailed; when receipt is acknowledged by recipient’s
facsimile machine operator, if sent by facsimile transmission; and on the day
delivered, if sent by overnight air courier guaranteeing next day delivery.

 

(c)  No Inconsistent Agreements.  The
Company has not, as of the date hereof, entered into, nor shall it, on or after
the date hereof, enter into, any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.

 

(d)  Successors and Assigns.  This
Agreement shall be binding upon the Company and its successors and assigns.

 

18

 

(e)  Counterparts.  This
Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.

 

(f)  Headings.  The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

 

(g)  Governing Law.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

 

(h)  Severability.  If
any one or more of the provisions contained herein, or the application thereof
in any circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby.

 

(i)  Securities Held by the
Company.  Whenever the consent or approval of Holders of a
specified percentage of principal amount of Securities is required hereunder,
Securities held by the Company or its affiliates (other than subsequent Holders
of Securities if such subsequent Holders are deemed to be affiliates solely by
reason of their holdings of such Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.

 

(j)  Submission
to Jurisdiction; Waiver of Immunities.  Each of the parties hereto hereby submits to
the non-exclusive jurisdiction of the Federal and state courts in the Borough
of Manhattan in The City of New York in any suit or proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. To the
extent that any such party may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service of notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, it hereby irrevocably waives such immunity
in respect of this Agreement, to the fullest extent permitted by law.

 

19

 

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the several Initial Purchasers and the Issuer and the
Guarantors in accordance with its terms.

 

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  NEWTON ACQUISITION
  MERGER SUB, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Kewsong Lee

  
	
   

  	
   

  	
  Name:

  	
  Kewsong Lee

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  NEWTON ACQUISITION, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Nelson A. Bangs

  
	
   

  	
   

  	
  Name:

  	
  Nelson A. Bangs

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  	
  and General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  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

  

 

20

 

	
  The undersigned
  hereby acknowledges and agrees

  that, upon the effectiveness of the Merger (as

  defined in the Purchase Agreement) it will succeed

  by operation of law to all of the rights and obligations

  of the Company set forth herein and that all references

  herein and that all references hereinto the “Company”

  shall thereupon be deemed to be references to the

  undersigned.

  	
   

  
	
   

  	
   

  
	
  BY THE NEIMAN MARCUS GROUP, INC.

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  /s/ Nelson A. Bangs

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Nelson A. Bangs

  	
   

  
	
   

  	
  Title:

  	
  Assistant
  Secretary

  	
   

  
					

 

21

 

	
  The foregoing
  Registration Rights

  Agreement is hereby confirmed

  and accepted as of the date

  first above written.

  	
   

  
	
   

  	
   

  
	
  CREDIT SUISSE
  FIRST BOSTON LLC

  DEUTSCHE BANK SECURITIES INC.

  BANC OF AMERICA SECURITIES LLC

  GOLDMAN, SACHS & CO.

  	
   

  
	
   

  	
   

  
	
  BY CREDIT SUISSE FIRST BOSTON LLC

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  /s/ Edward Neuberg

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Edward Neuberg

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
					

 

22

 

ANNEX A

 

Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities.  The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an “underwriter” within the meaning of the
Securities Act.  This Prospectus, as it
may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities.  The Company has agreed that,
for a period of 180 days after the Expiration Date (as defined herein), it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale.  See “Plan of
Distribution.”

 

 

ANNEX B

 

Each broker-dealer that receives Exchange Securities for its own
account in exchange for Initial Securities, where such Initial Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities.  See “Plan of Distribution.”

 

 

ANNEX C

 

PLAN OF DISTRIBUTION

 

Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities.  This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Securities received in exchange for Initial Securities
where such Initial Securities were acquired as a result of market-making
activities or other trading activities. 
The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.  In addition, until                   , 200[•], all dealers
effecting transactions in the Exchange Securities may be required to deliver a
prospectus.(1)

 

The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers.  Exchange
Securities received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices.  Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. 
Any broker-dealer that resells Exchange Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed
to be an “underwriter” within the meaning of the Securities Act and any profit
on any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act.  The Letter of
Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an “underwriter” within the meaning of the Securities Act.

 

For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal.  The
Company has agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the Holders of the Securities) other
than commissions or concessions of any brokers or dealers and will indemnify
the Holders of the Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.

 

(1) 
In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.

 

 

ANNEX D

 

o                                    CHECK HERE IF YOU ARE A BROKER-DEALER AND
WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.

 

	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

 

If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Securities.  If the undersigned
is a broker-dealer that will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus in connection with any resale of such Exchange Securities; however,
by so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an “underwriter” within the meaning of the
Securities Act.

 

 

SCHEDULE I

 

List of Subsidiary Guarantors

 

	
  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

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