Document:

Exhibit 10.12

 

 

 

LIEN SUBORDINATION AND INTERCREDITOR AGREEMENT

 

dated as of

 

October 6, 2005,

 

among

 

DEUTSCHE BANK TRUST COMPANY AMERICAS,

 

as Revolving Facility Agent,

 

CREDIT SUISSE,

 

as Term Loan Agent,

 

NEWTON ACQUISITION, INC.,

 

NEWTON ACQUISITION MERGER SUB, INC. (to be merged with

and into The Neiman Marcus Group, Inc.)

 

and

 

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

 

 

[CS&M #5865-334]

 

 

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

 

Reference
is made to (a) the Revolving Facility Credit Agreement (such term and each
other capitalized term used and not otherwise defined herein having the meaning
assigned to it in Article I), under which the Revolving Facility Lenders
have extended and agreed to extend credit to the Company, (b) the Term
Loan Credit Agreement, under which the Term Loan Lenders have extended credit
to the Company and (c) the Existing Notes Indenture governing the Existing
Notes.

 

In
consideration of the mutual agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Revolving Facility Agent (for itself and on behalf of the
Revolving Facility Secured Parties), the Term Loan Agent (for itself and on
behalf of the Term Loan Secured Parties and the Existing Notes Secured
Parties), Holdings, the Company, NM Nevada Trust, a Massachusetts business
trust, and the subsidiaries of the Company identified on Schedule I hereto
agree as follows:

 

ARTICLE I

 

Definitions

 

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

 

 

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

 

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

 

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

 

“Collateral” means the
Revolving Facility Collateral and the Term Loan Collateral.

 

“Company” means The
Neiman Marcus Group, Inc., a Delaware corporation, as the surviving
corporation of the merger with Newton Acquisition Merger Sub, Inc.

 

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

 

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

 

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

 

“Existing Notes Designated
Collateral”  has the meaning set forth in
the Term Loan Security Agreement.

 

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

 

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

 

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

 

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

 

“Existing Notes Trustee” means The Bank
of New York, in its capacity as trustee under the Existing Notes Indenture, and
its successors in such capacity.

 

“Grantor” means
Holdings, the Company and each subsidiary of the Company that shall have
created any Lien on any of its assets or properties to secure any of the
Obligations.

 

2

 

“Holdings” means Newton
Acquisition, Inc., a Delaware corporation.

 

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

 

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

 

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

 

“Junior Obligations Collateral” means, with
respect to any Senior Obligations, the Collateral securing the related Junior
Obligations.

 

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

 

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

 

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

 

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

 

“Lien” means any
pledge, security interest, mortgage or other lien or encumbrance created to
secure any indebtedness or other obligation.

 

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

 

“Obligations” means the Term
Loan Obligations, the Existing Notes Obligations and the Revolving Facility
Obligations.

 

3

 

“Refinance” means, in
respect of any indebtedness, to refinance, extend, renew, defease, amend,
modify, supplement, restructure, replace, refund or repay, or to issue other
indebtedness, in exchange or replacement for, such indebtedness in whole or in
part; provided that the
Refinancing indebtedness is secured by Liens in respect of the same assets and
properties that secured the Refinanced indebtedness prior to such Refinancing. “Refinanced” and “Refinancing” shall
have correlative meanings.

 

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

 

“Revolving Facility Agent” means Deutsche
Bank Trust Company Americas, in its capacity as administrative agent and
collateral agent under the Revolving Facility Credit Agreement.

 

“Revolving Facility Collateral” means all
assets and properties subject to Liens created by the Revolving Facility
Security Documents to secure the Revolving Facility Obligations.

 

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

 

“Revolving Facility Documents” means the
Revolving Facility Credit Agreement and the Revolving Facility Security
Documents.

 

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

 

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

 

4

 

policies
related to Inventory of any Grantor and business interruption insurance; provided, however,
under no circumstances shall Excluded Assets be Revolving Facility First Lien
Obligations.  All capitalized terms used in this definition and not
defined elsewhere in this Agreement have the meanings assigned to them in the
UCC.

 

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

 

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

 

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

 

“Revolving Facility Mortgages”
means any mortgage, deed of trust or other agreement which conveys or
evidences a Lien in favor of the Revolving Facility Agent, for the benefit of
the Revolving Facility Agent and the Revolving Facility Secured Parties, on
real property of a Grantor, including any amendment, modification or supplement
thereto.

 

“Revolving Facility Obligations” means all “Secured
Obligations” as such term is defined in the Revolving Facility Credit
Agreement.

 

“Revolving Facility Required Parties” means the “Required
Secured Parties” as such term is defined in the Revolving Facility Security
Agreement.

 

“Revolving Facility Secured Parties” means, at any
time, the Revolving Facility Agent, each Revolving Facility Lender and each
other holder of, or obligee in respect of, any Revolving Facility Obligations
outstanding at such time.

 

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

 

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

 

5

 

“Secured Parties” means the Term
Loan Secured Parties, the Existing Notes Secured Parties the Revolving Facility
Secured Parties.

 

“Security Documents” means the Term
Loan Security Documents and the Revolving Facility Security Documents.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

“Term Loan Agent” means Credit
Suisse, in its capacity as collateral agent for the Term Loan Secured Parties
and the Existing Notes Secured Parties.

 

“Term Loan Collateral” means all
assets and properties subject to Liens created by the Term Loan Security
Documents to secure the Term Loan Obligations and the Existing Notes
Obligations.

 

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

 

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

 

“Term Loan First Lien Collateral” means any and
all of the following assets and properties now owned or at any time hereafter
acquired by any Grantor (in the case of the Existing Notes Obligations, solely
to the extent such assets or property constitute Existing Notes Designated
Collateral): (a) all Accounts (but not including Accounts arising from the
sale or other disposition of Inventory); (b) all real property, Fixtures
and Equipment; (c) all Intellectual Property; (d) all Equity
Interests in the Company and its subsidiaries; (e) all General
Intangibles, Chattel Paper, Instruments and Documents (other than General
Intangibles, Chattel Paper, Instruments and Documents that are Revolving
Facility First Lien Collateral); (f) all Payment Intangibles that
represent tax refunds in respect of or otherwise relate to real property,
Fixtures or Equipment; (g) all intercompany indebtedness of Holdings and
its subsidiaries; (h) all permits and licenses related to any of the
foregoing (including any permits or licenses related to the ownership or
operation of real property, Fixtures or Equipment of any Grantor); (i) all
proceeds of insurance policies (other than any such proceeds that are Revolving
Facility First Lien Collateral); (j) all books and records related to the
foregoing and not constituting Revolving Facility First Lien Collateral;
(k) all Products and Proceeds of any and all of the foregoing; and
(l) all other Collateral not constituting Revolving Facility First Lien
Collateral; provided, however, under no circumstances shall
Excluded Assets be Term Loan First Lien Collateral.  All capitalized terms
used in this definition and not defined elsewhere in this Agreement have the
meanings assigned to them in the UCC.

 

“Term Loan First Lien Collateral
Transition Date” means the earlier of (a) the date on which all
the Term Loan Obligations shall have been paid in full (other than unripened or
contingent indemnity obligations under the relevant Term Loan/Notes Documents
for which no demand has been made) and the Term Loan Credit Agreement shall
have been terminated and (b) the date on which the Term Loan First Lien
Collateral shall have been released from the Liens created under the Term
Loan/Notes Documents.

 

7

 

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

 

“Term Loan Liens” means the
Liens on the Term Loan Collateral created under the Term Loan Security
Documents to secure the Term Loan Obligations and the Existing Notes
Obligations.

 

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

 

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

 

“Term Loan Pari Passu Indebtedness” means
indebtedness of the Company or its subsidiaries that is equally and ratably
secured on a pari passu basis with the Term Loan Obligations, the Existing
Notes Obligations and Refinancings thereof and is permitted to be so incurred
in accordance with the Revolving Facility Credit Agreement and the Term Loan
Credit Agreement.

 

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

 

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

 

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

 

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

 

“Term Loan/Notes Documents” means the
Existing Notes Indenture, the Term Loan Credit Agreement and the Term Loan
Security Documents.

 

“2008 Notes” means the
Company’s 6.65% Senior Notes due 2008 in an initial aggregate principal amount
of $125,000,000.

 

“2028 Debentures” means the
Company’s 7.125% Debentures due 2028 in an initial aggregate principal amount
of $125,000,000.

 

8

 

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

 

ARTICLE II

 

Subordination of Junior Liens; Certain Agreements

 

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

 

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

 

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

 

9

 

exercise
any such remedies.  Notwithstanding the foregoing, any Junior
Representative may, subject to Section 2.05, take all such actions as it
shall deem necessary to perfect or continue the perfection of its Junior Liens.

 

SECTION 2.03. 
No Duties of Senior
Representative.  Each Junior Obligations Secured Party
acknowledges and agrees that neither the Senior Representative nor any other
Senior Obligations Secured Party shall have any duties or other obligations to
such Junior Obligations Secured Party with respect to any Senior Obligations
Collateral, other than to transfer to the Junior Representative any proceeds of
any such Collateral that constitutes Junior Obligations Collateral remaining in
its possession following any sale, transfer or other disposition of such
Collateral, the payment and satisfaction in full of the Senior Obligations
secured thereby and the termination of any commitment to extend credit that
would constitute Senior Obligations secured thereby, or, if the Senior
Representative shall be in possession of all or any part of such Collateral
after such payment and satisfaction in full and termination, such Collateral or
any part thereof remaining, in each case without representation or warranty on
the part of the Senior Representative or any Senior Obligations Secured
Party.  In furtherance of the foregoing, each Junior Obligations Secured
Party acknowledges and agrees that until the Senior Obligations secured by any
Collateral shall have been paid and satisfied in full and any commitment to
extend credit that would constitute Senior Obligations secured thereby shall
have been terminated, the Senior Representative shall be entitled, for the
benefit of the holders of such Senior Obligations, to sell, transfer or otherwise
dispose of or deal with such Collateral as provided herein and in the Senior
Obligations Security Documents without regard to any Junior Lien or any rights
to which the holders of the Junior Obligations would otherwise be entitled as a
result of such Junior Lien.  Without limiting the foregoing, each Junior
Obligations Secured Party agrees that neither the Senior Representative nor any
other Senior Obligations Secured Party shall have any duty or obligation first
to marshall or realize upon any type of Collateral (or any other collateral
securing the Senior Obligations), or to sell, dispose of or otherwise liquidate
all or any portion of the Collateral (or any other collateral securing the
Senior Obligations), in any manner that would maximize the return to the Junior
Obligations Secured Parties, notwithstanding that the order and timing of any
such realization, sale, disposition or liquidation may affect the amount of
proceeds actually received by the Junior Obligations Secured Parties from such
realization, sale, disposition or liquidation. Each of the Junior Obligations
Secured Parties waives any claim such Junior Obligations Secured Party may now
or hereafter have against the Senior Representative or any other Senior
Obligations Secured Party (or their representatives) arising out of
(i) any actions which the Senior Representative or the Senior Obligations
Secured Parties take or omit to take (including, actions with respect to the
creation, perfection or continuation of Liens on any Collateral, actions with
respect to the foreclosure upon, sale, release or depreciation of, or failure
to realize upon, any of the Collateral and actions with respect to the
collection of any claim for all or any part of the Senior Obligations from any
account debtor, guarantor or any other party) in accordance with the Senior
Obligations Security Documents or any other agreement related thereto or to the
collection of the Senior Obligations or the valuation, use, protection or
release of any security for the Senior Obligations, (ii) any election by
the Senior Representative or any Senior Obligations Secured Parties, in any
proceeding instituted under the

 

10

 

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

 

SECTION 2.04. 
No Interference;
Application of Proceeds; Payment Over; Reinstatement. 
(a)  Each Junior Obligations Secured Party agrees that (i) it will
not take or cause to be taken any action the purpose or effect of which is, or
could be, to make any Junior Lien pari
passu with, or to give such Junior
Obligations Secured Party any preference or priority relative to, any Senior
Lien with respect to the Collateral subject to such Junior Lien or any part
thereof, (ii) it will not challenge or question in any proceeding the
validity or enforceability of any Senior Obligations or Senior Obligations
Security Document, or the validity, attachment, perfection or priority of any
Senior Lien, or the validity or enforceability of the priorities, rights or
duties established by, or other provisions of, this Agreement, (iii) it
will not take any action the purpose or intent of which is to interfere, hinder
or delay, in any manner, whether by judicial proceedings or otherwise, any
sale, transfer or other disposition of any Senior Obligations Collateral subject
to any Junior Lien by any Senior Obligations Secured Party or any Senior
Representative acting on their behalf, (iv) it shall have no right to
(A) direct any Senior Representative or any holder of Senior Obligations
to exercise any right, remedy or power with respect to the Collateral subject
to any Junior Lien or (B) consent to the exercise by any Senior
Representative or any other Senior Obligations Secured Party of any right,
remedy or power with respect to the Collateral subject to any Junior Lien,
(v) it will not institute any suit or assert in any suit, bankruptcy,
insolvency or other proceeding any claim against any Senior Representative or
other Senior Obligations Secured Party seeking damages from or other relief by
way of specific performance, instructions or otherwise with respect to, and
neither any Senior Representative nor any other Senior Obligations Secured
Party shall be liable for, any action taken or omitted to be taken by such
Senior Representative or other Senior Obligations Secured Party with respect to
any Collateral securing any Senior Obligations that is subject to any Junior
Lien, (vi) it will not seek, and hereby waives any right, to have any
Senior Obligations Collateral subject to any Junior Lien or any part thereof
marshaled upon any foreclosure or other disposition of such Collateral and
(vii) it will not attempt, directly or indirectly, whether by judicial
proceedings or otherwise, to challenge the enforceability of any provision of
this Agreement.

 

(b) 
Prior to the Revolving Facility First Lien Collateral Transition Date, whether
or not any proceeding under the Bankruptcy Code or any other Federal, state or
foreign bankruptcy, insolvency, receivership or similar law by or against
Holdings or any of its subsidiaries has been commenced, all Revolving Facility
First Lien Collateral or proceeds thereof received in connection with the sale
or other disposition of, or collection on, such Collateral upon the exercise of
remedies by the Revolving Facility Agent or Revolving Facility Secured Parties,
shall be applied by the Revolving Facility Agent to the Revolving Facility
Obligations in such order as specified in the relevant Revolving Facility
Documents. After the Revolving Facility First Lien Collateral Transition Date,
the Revolving Facility Agent shall deliver to the Term Loan Agent any Revolving
Facility First Lien Collateral and proceeds of such Collateral held by it in
the same form

 

11

 

as
received, with any necessary endorsements or as a court of competent
jurisdiction may otherwise direct, to be applied by the Term Loan Agent in such
order as specified in the Term Loan Security Agreement and/or the other
relevant Term Loan/Notes Documents.  The Revolving Facility Agent shall provide
the Term Loan Agent and the Company with notice of a pending Revolving Facility
First Lien Collateral Transition Date within 5 Business Days of the Revolving
Facility Agent becoming aware of the pendency of such date in order that the
Term Loan Agent may make the necessary preparations for the transfer of any
Collateral.

 

(c) 
Prior to the Term Loan First Lien Collateral Transition Date, whether or not
any proceeding under the Bankruptcy Code or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law by or against Holdings or
any of its subsidiaries has been commenced, all Term Loan First Lien Collateral
or proceeds thereof received in connection with the sale or other disposition
of, or collection on, such Collateral upon the exercise of remedies by the Term
Loan Agent or the Term Loan Secured Parties, shall be applied by the Term Loan
Agent to the Term Loan Obligations and the Existing Notes Obligations in such
order as specified in the Term Loan Security Agreement and/or the other
relevant Term Loan/Notes Documents.  After the Term Loan First Lien
Collateral Transition Date, the Term Loan Agent shall deliver to the Revolving
Facility Agent any Term Loan First Lien Collateral and proceeds of such
Collateral held by it in the same form as received, with any necessary
endorsements or as a court of competent jurisdiction may otherwise direct, to
be applied by the Revolving Facility Agent in such order as specified in the
relevant Revolving Facility Documents.  The Term Loan Agent shall provide
the Revolving Facility Agent and the Company with notice of a pending Term Loan
First Lien Collateral Transition Date within 5 Business Days of the Term Loan
Agent becoming aware of the pendency of such date in order that the Revolving
Facility Agent may make the necessary preparations for the transfer of any
Collateral, including cooperating with the Grantors to grant any Liens in any
Existing Notes Designated Collateral required to be granted pursuant to the
Revolving Facility Documents and the Existing Notes Indenture.

 

(d) 
The Junior Representative and each other Junior Obligations Secured Party
hereby agrees that if it shall obtain possession of any Senior Obligations
Collateral or shall realize any proceeds or payment in respect of any such
Collateral, pursuant to any Junior Obligations Security Document or by the
exercise of any rights available to it under applicable law or in any
bankruptcy, insolvency or similar proceeding or through any other exercise of
remedies, at any time when any Senior Obligations secured or intended to be
secured by such Collateral shall remain outstanding or any commitment to extend
credit that would constitute Senior Obligations secured or intended to be
secured by such Senior Lien shall remain in effect, then it shall hold such
Collateral, proceeds or payment in trust for the Senior Obligations Secured
Parties and transfer such Collateral, proceeds or payment, as the case may be,
to the Senior Representative.  Each Junior Obligations Secured Party agrees
that if, at any time, all or part of any payment with respect to any Senior
Obligations previously made shall be rescinded for any reason whatsoever, such
Junior Obligations Secured Party shall promptly pay over to the Senior
Representative any payment received by it in respect of any Collateral subject
to any Senior Lien securing such Senior Obligations and shall promptly turn any
Collateral

 

12

 

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

 

SECTION 2.05. 
Automatic Release of
Junior Liens.  The Junior Representative and each other
Junior Obligations Secured Party agrees that any Junior Lien on any Senior
Obligations Collateral shall terminate and be released automatically and
without further action if the applicable Senior Liens on such Senior Obligations
Collateral are released and such release (a) is in connection with the
sale, transfer or other disposition of such Senior Obligations Collateral
subject to such Junior Lien, so long as such sale, transfer or other
disposition is then permitted by the Junior Documents, (b) occurs in
connection with the foreclosure upon or other exercise of rights and remedies
with respect to such Senior Obligations Collateral or (c) shall have been
approved by the Senior Obligations Required Parties, so long as no Junior Obligations
Event of Default shall have occurred and be continuing at such time.  The
Junior Representative agrees to execute and deliver all such releases and other
instruments as shall reasonably be requested by the Senior Representative or
the Company to evidence and confirm any release of Junior Obligations
Collateral provided for in this Section.

 

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

 

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

 

13

 

SECTION 2.07. 
Reinstatement. 
In the event that any of the Senior Obligations shall be paid in full and such
payment or any part thereof shall subsequently, for whatever reason (including
an order or judgment for disgorgement of a preference under Title 11 of the
United Stated Code, or any similar law, or the settlement of any claim in
respect thereof), be required to be returned or repaid, the terms and
conditions of this Article II shall be fully applicable thereto until all
such Senior Obligations shall again have been paid in full in cash.

 

SECTION 2.08. 
Entry Upon Premises by
the Revolving Facility Agent. 
(a)  If the Revolving Facility Agent takes any enforcement
action with respect to the Revolving Facility First Lien Collateral, the Term
Loan Secured Parties and the Existing Notes Secured Parties (i) shall
cooperate with the Revolving Facility Agent in its efforts to enforce its
security interest in the Revolving Facility First Lien Collateral and to finish
any work-in-process and assemble the Revolving Facility First Lien Collateral,
(ii) shall not hinder or restrict in any respect the Revolving Facility
Agent from enforcing its security interest in the Revolving Facility First Lien
Collateral or from finishing any work-in-process or assembling the Revolving
Facility First Lien Collateral, and (iii) shall permit the Revolving
Facility Agent, its employees, agents, advisers and representatives, at the
sole cost and expense of the Revolving Facility Secured Parties, to enter upon
and use the Term Loan First Lien Collateral (including (x) equipment,
processors, computers and other machinery related to the storage or processing
of records, documents or files and (y) intellectual property), for a
period not to exceed 180 days after the taking of such enforcement action,
for purposes of (A) assembling and storing the Revolving Facility First
Lien Collateral and completing the processing of and turning into finished
goods any Revolving Facility First Lien Collateral consisting of
work-in-process, (B) selling any or all of the Revolving Facility First
Lien Collateral located on such Term Loan First Lien Collateral, whether in
bulk, in lots or to customers in the ordinary course of business or otherwise,
(C) removing any or all of the Revolving Facility First Lien Collateral
located on such Term Loan First Lien Collateral, and/or (D) taking
reasonable actions to protect, secure, and otherwise enforce the rights of the
Revolving Facility Secured Parties in and to the Revolving Facility First Lien
Collateral; provided, however, that nothing contained in this
Agreement shall restrict the rights of the Term Loan Agent from selling,
assigning or otherwise transferring any Term Loan First Lien Collateral prior
to the expiration of such 180 day period if the purchaser, assignee or
transferee thereof agrees to be bound by the provisions of this Section. 
If any stay or other order prohibiting the exercise of remedies with respect to
the Revolving Facility First Lien Collateral has been entered by a court of
competent jurisdiction, such 180 day period shall be tolled during the
pendency of any such stay or other order.

 

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

 

14

 

Secured
Parties or the Existing Notes Secured Parties pursuant to this Section as
a result of any condition (including any environmental condition, claim or
liability) on or with respect to the Term Loan First Lien Collateral existing
prior to the date of the exercise by the Revolving Facility Secured Parties of
their rights under this Section and the Revolving Facility Secured Parties
shall have no duty or liability to maintain the Term Loan First Lien Collateral
in a condition or manner better than that in which it was maintained prior to
the use thereof by the Revolving Facility Secured Parties, or for any
diminution in the value of the Term Loan First Lien Collateral that results
from ordinary wear and tear resulting from the use of the Term Loan First Lien
Collateral by the Revolving Facility Secured Parties in the manner and for the
time periods specified under this Section 2.08.  Without limiting the
rights granted in this paragraph, the Revolving Facility Secured Parties shall
cooperate with the Term Loan Secured Parties in connection with any efforts
made by the Term Loan Secured Parties to sell the Term Loan First Lien
Collateral.

 

SECTION 2.09. 
Amendments to Security
Documents.  (a)  Without the prior written consent of
the Senior Representative, no Junior Obligations Security Document may be
amended, supplemented or otherwise modified or entered into to the extent such
amendment, supplement or modification, or the terms of any new Junior
Obligations Security Document, would be prohibited by or inconsistent with any
of the terms of this Agreement.

 

(b) 
In the event that the Senior Representative enters into any amendment, waiver
or consent in respect of any of the Senior Obligations Security Documents for
the purpose of adding to, or deleting from, or waiving or consenting to any
departures from any provisions of, any Senior Obligations Security Document or
changing in any manner the rights of the Senior Representative, the Senior
Obligations Secured Parties, the Company or any other Grantor thereunder
(including the release of any Liens on Senior Obligations Collateral permitted by
Section 2.05), then such amendment, waiver or consent shall apply
automatically to any comparable provision of the comparable Junior Obligations
Security Document without the consent of the Junior Representative or any
Junior Obligations Secured Party and without any action by the Junior
Representative, the Company or any other Grantor; provided, however,
that written notice of such amendment, waiver or consent shall have been given
to the Junior Representative.

 

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

 

15

 

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

 

SECTION 2.11. 
Insurance. 
Unless and until the Revolving Facility Agent shall have delivered written
notice to the Term Loan Agent that the Revolving Facility Obligations have been
paid in full, as between the Revolving Facility Agent, on the one hand, and the
Term Loan Agent, on the other hand, only the Revolving Facility Agent will have
the right to adjust or settle any insurance policy or claim covering or
constituting Revolving Facility First Lien Collateral in the event of any loss
thereunder and to approve any award granted in any condemnation or similar
proceeding affecting the Revolving Facility First Lien Collateral.  Unless
and until the Term Loan Agent shall have delivered written notice to the
Revolving Facility Agent that the Term Loan Obligations have been paid in full,
as between the Revolving Facility Agent, on the one hand, and the Term Loan
Agent, on the other hand, only the Term Loan Agent will have the right to
adjust or settle any insurance policy covering or constituting Term Loan First
Lien Collateral in the event of any loss thereunder and to approve any award
granted in any condemnation or similar proceeding solely affecting the Term
Loan First Lien Collateral.  To the extent that an insured loss covers or
applies to assets or property, some of which constitute Revolving Facility
First Lien Collateral and some of which constitute Term Loan First Lien
Collateral, then the Revolving Facility Agent and the Term Loan Agent will work
jointly and in good faith to collect, adjust or settle under the relevant
insurance policy.

 

ARTICLE III

 

Sub-Agency for Perfection of Certain Security
Interests; Rights Under Permits and Licenses

 

SECTION 3.01. 
General. 
The Senior Representative agrees that if it shall at any time hold a Senior
Lien on any Junior Obligations Collateral that can be perfected by the
possession or control of such Collateral or of any account in which such
Collateral is held, and if such Collateral or any such account is in fact in
the possession or under the control of the Senior Representative, the Senior
Representative will serve as sub-agent for the Junior Representative for the
sole purpose of perfecting the Junior Lien of the Junior Representative and the
other Junior Obligations Secured Parties on such Collateral.  It is agreed
that the obligations of the Senior Representative and the rights of the Junior
Representative and the other Junior Obligations Secured Parties in connection
with any such sub-agency arrangement will be in all respects subject to the
provisions of Article II.  The Senior Representative will be deemed
to make no representation as to the adequacy of the steps taken by it to
perfect the Junior Lien on any such Collateral and shall have no responsibility
to the Junior Representative or any other Junior Obligations Secured Party for
such perfection, it being understood that the sole purpose of this
Article is to enable the Junior Obligations Secured Parties to obtain a
perfected Junior Lien in such Collateral to the extent, if any, that such
perfection results from the possession or control of such Collateral or any
such account by the Senior Representative.  Subject to

 

16

 

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

 

SECTION 3.02. 
Depositary Accounts.  Holdings and its subsidiaries, in
accordance with the Revolving Facility Credit Agreement, shall maintain blocked
account arrangements relating to depositary accounts (the “Depositary Accounts”)
with certain depositary banks (the “Depositary Banks”) in which all collections
from any Inventory and related Accounts are deposited.  The Revolving
Facility Agent will act as sub-agent for the Term Loan Agent for the purpose of
perfecting the Liens of the Term Loan Secured Parties in all such Depositary Accounts
and the cash and other assets therein as provided in Section 3.01 (but
will have no duty, responsibility or obligation to the Term Loan Secured
Parties except as set forth in the last sentence of this Section).  After
the occurrence of the Revolving Facility First Lien Collateral Transition Date,
the Revolving Facility Agent shall (a) at the request of the Term Loan
Agent, transfer all cash and other assets in such Depositary Accounts
maintained with it to the Term Loan Agent and (b) at the request of the
Term Loan Agent, cooperate with the Company and the Term Loan Agent (at the
expense of the Company) in permitting control of any other Depositary Accounts
to be transferred to the Term Loan Agent (or for other arrangements with
respect to each such Depositary Account satisfactory to the Term Loan Agent to
be made).

 

SECTION 3.03. 
Rights under Permits and
Licenses.  The Term Loan Agent agrees that if the Revolving
Facility Agent shall require rights available under any permit or license
controlled by the Term Loan Agent in order to realize on any Revolving Facility
First Lien Collateral, the Term Loan Agent shall take all such actions as shall
be available to it, consistent with applicable law and reasonably requested by
the Revolving Facility Agent, to make such rights available to the Revolving
Facility Agent.

 

ARTICLE IV

 

Existence and Amounts of Liens and Obligations

 

Whenever
a Representative shall be required, in connection with the exercise of its
rights or the performance of its obligations hereunder, to determine the
existence or amount of any Senior Obligations or Junior Obligations, or the
existence of any Lien securing any such obligations, or the Collateral subject
to any such Lien, it may request that such information be furnished to it in writing
by the other Representative and shall be entitled to make such determination on
the basis of the information so furnished; provided, however, that if a
Representative shall fail or refuse reasonably promptly to provide the
requested information, the requesting Representative shall be entitled to make
any such determination by such commercially reasonable method as it may, in the
exercise its good faith judgment, determine, including by reliance upon a
certificate of

 

17

 

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

 

ARTICLE V

 

Consent of Grantors

 

Each
Grantor hereby consents to the provisions of this Agreement and the
intercreditor arrangements provided for herein and agrees that (a) no
Representative or other Secured Party shall have any liability to any Grantor
as a result of the performance of its obligations hereunder and (b) the
obligations of the Grantors under the Security Documents will in no way be
diminished or otherwise affected by such provisions or arrangements.

 

ARTICLE VI

 

Representations and Warranties

 

SECTION 6.01. 
Representations and
Warranties of Each Representative.  Each Representative
represents and warrants to the other parties hereto as follows:

 

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

 

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

 

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

 

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

 

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

 

18

 

ARTICLE VII

 

Miscellaneous

 

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

 

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

 

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

 

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

 

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

 

Any
party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto (and for this
purpose a notice to the Company shall be deemed to be a notice to each
Grantor).  All notices and other communications given to any party hereto
in accordance with the provisions of this Agreement shall be deemed to have
been given on the date of receipt if delivered by hand or overnight courier
service or sent by telecopy or on the date five Business Days after dispatch by
certified or registered mail if mailed, in each case delivered, sent or mailed
(properly addressed) to such party as provided in this Section 7.01 or in
accordance with the latest unrevoked direction from such party given in
accordance with this Section 7.01.  As agreed to in writing among the
Company and the Representatives from time to time, notices and other
communications may also be delivered by e-mail to the e-mail address of a
representative of the applicable person provided from time to time by such
person.

 

SECTION 7.02. 
Waivers; Amendment. 
(a)  No failure or delay on the part of any party hereto in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The rights and remedies of the parties hereto are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any provision of this Agreement or consent
to any departure by any party therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which

 

19

 

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

 

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

 

SECTION 7.03. 
Parties in Interest. 
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, as well as the other
Secured Parties, all of whom are intended to be bound by, and to be third party
beneficiaries of, this Agreement.

 

SECTION 7.04. 
Certain Provisions. 
The Company and each of the Representatives agrees that the Term Loan Credit
Agreement, the Revolving Facility Credit Agreement and the Security Documents
shall contain the applicable provisions set forth on Annex I hereto (or
provisions substantially similar thereto).  The Company and each of the
Representatives further agrees that each Mortgage covering any Collateral shall
contain such language as the Revolving Facility Agent and the Term Loan Agent
may request to reflect the Lien priorities covering such Collateral provided
for herein.

 

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

 

20

 

SECTION 7.06. 
Counterparts. 
This Agreement may be executed in counterparts, each of which shall constitute
an original but all of which when taken together shall constitute a single
contract.  Delivery of an executed signature page to this Agreement
by facsimile transmission shall be as effective as delivery of a manually
signed counterpart of this Agreement.

 

SECTION 7.07. 
Severability. 
Any provision of this Agreement held to be invalid, illegal or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity, illegality or unenforceability without affecting the
validity, legality and enforceability of the remaining provisions hereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.  The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

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

 

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

 

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

 

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

 

21

 

SECTION 7.09. 
WAIVER OF JURY TRIAL. 
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT.  EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.

 

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

 

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

 

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

 

22

 

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

 

 

	
   

  	
  DEUTSCHE
  BANK TRUST COMPANY

  AMERICAS, as Revolving Facility Agent,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
  /s/
  Mark E. Funk

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Mark
  E. Funk

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Marguerita Sutton

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Marguerita
  Sutton

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CREDIT
  SUISSE, CAYMAN ISLANDS

  BRANCH, as Term Loan Agent,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Robert Hetu

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Robert
  Hetu

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Vanessa Gomez

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Vanessa
  Gomez

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NEWTON
  ACQUISITION, INC.,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Nelson A. Bangs

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Nelson
  A. Bangs

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Senior
  Vice President and General Counsel

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NEWTON
  ACQUISITION MERGER SUB,

  INC. (to be merged with and into The

  Neiman Marcus Group, Inc.),

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Kewsong Lee

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Kewsong
  Lee

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Senior
  Vice President

  

 

23

 

	
   

  	
  EACH
  OF THE SUBSIDIARIES LISTED

  ON SCHEDULE I HERETO,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Nelson A. Bangs

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Nelson
  A. Bangs

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NM
  NEVADA TRUST,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Nelson A. Bangs

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Nelson
  A. Bangs

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

24

 

SCHEDULE I

 

Subsidiary Parties

 

Bergdorf
Goodman, Inc.

BergdorfGoodman.com,
LLC

Bergdorf
Graphics, Inc.

Neiman
Marcus Holdings, Inc.

Neiman
Marcus Special Events, Inc.

NEMA
Beverage Corporation

NEMA
Beverage Holding Corporation

NEMA
Beverage Parent Corporation

NM
Financial Services, Inc.

NM
Kitchens, Inc.

NMGP,
LLC

Worth
Avenue Leasing Company

 

 

ANNEX I

 

Provision
for the Revolving Facility Credit Agreement and the Term Loan Credit Agreement

 

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

 

Provision
for Revolving Facility Security Documents and the Term Loan Security Documents

 

Reference is made to the Intercreditor
Agreement.  Notwithstanding any other provision contained herein, this
Agreement, the Liens created hereby and the rights, remedies, duties and
obligations provided for herein are subject in all respects to the provisions
of the Intercreditor Agreement and, to the extent provided therein, the
applicable Senior Obligations Security Documents (as defined in the
Intercreditor Agreement).  In the event of any conflict or inconsistency
between the provisions of this Agreement and the Intercreditor Agreement, the
provisions of the Intercreditor Agreement shall control.Exhibit 10.13

 

 

FORM OF FIRST PRIORITY

 

MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND
FINANCING STATEMENT

 

From

 

THE NEIMAN MARCUS GROUP, INC.

 

To

 

CREDIT SUISSE

 

 

Dated: October        , 2005

Premises: [City], [State]

                          
County

 

 

 

1

 

THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FINANCING STATEMENT dated as of
October         , 2005 (this “Mortgage”), by THE NEIMAN MARCUS GROUP, INC.,
a Delaware corporation, having an office at One Marcus Square,
1618 Main Street, Dallas, Texas 75201 (the “Mortgagor”), to CREDIT SUISSE, having an
office at Eleven Madison Avenue, New York, New York 10010 (the “Mortgagee”) as Collateral Agent for the
Secured Parties (as such terms are defined below).

 

WITNESSETH THAT:

 

Reference
is made to (i) the credit agreement dated as of even date hereof (as
amended, supplemented or otherwise modified from time to time, the “Term Loan Credit Agreement”), among NEWTON
ACQUISITION MERGER SUB. INC. (“Merger Sub”
and, prior to the Merger (as defined in the Term Loan Credit Agreement, the “Borrower”), a Delaware corporation to be
merged with and into THE NEIMAN MARCUS GROUP, INC., a Delaware corporation
(“Neiman Marcus” and, after the
Merger, the “Borrower”), NEWTON
ACQUISITION, INC., a Delaware corporation (“Holdings”), the subsidiaries of Neiman Marcus from time to
time party thereto, the lenders from time to time party thereto (the “Lenders”),
including, inter alia, Credit Suisse as administrative agent (the “Administrative Agent”) for the Lenders,
(ii) the credit agreement dated as of even date hereof (as amended,
supplemented or otherwise modified from time to time, the “Revolving Facility Credit Agreement”)
among Merger Sub, Neiman Marcus, Holdings, each subsidiary of Neiman Marcus
from time to time party thereto, the lenders from time to time party thereto,
and Deutsche Bank Trust Company Americas, as administrative agent,
(iii) the Indenture, dated as of May 27, 1998 (as amended,
supplemented or otherwise modified from time to time, the “Existing Notes Indenture”), between Neiman
Marcus and The Bank of New York, (iv) the Pledge and Security
Agreement dated as of even date hereof (as amended, supplemented or otherwise
modified from time to time, the “Security
Agreement”) among Holdings, the Borrower, the Subsidiary Parties
identified therein, the Mortgagee and the Administrative Agent, (v) that
certain mortgage dated as of even date hereof by Mortgagor, in favor of
Deutsche Bank Trust Company Americas, as mortgagee (the “Second Mortgage”) granting to the Second
Mortgagee a second priority lien and security interest in the Mortgaged
Property (as described below) in connection with the Revolving Facility Credit
Agreement and (vi) the Lien Subordination and Security Agreement, dated as
of even date hereof, among Deutsche Bank Trust Company Americas, Credit Suisse,
Merger Sub, Neiman Marcus, Holdings and the subsidiaries of Neiman Marcus from
time to time party thereto as attached hereto as Exhibit B. 
Capitalized terms used but not defined herein have the meanings given to them
in the Term Loan Credit Agreement and the Security Agreement.

 

In
the Term Loan Credit Agreement, the Lenders have agreed to make term loans (the
“Loans”) to the Borrower pursuant
to, upon the terms, and subject to the conditions specified in, the Term Loan
Credit Agreement.

 

2

 

Mortgagor
will be the Borrower subsequent to the Merger and will derive substantial
benefit from the making of the Loans by the Lenders.  In order to induce
the Lenders to make Loans, the Mortgagor has agreed to grant this Mortgage to
secure, among other things, the due and punctual payment and performance of all
of the Obligations of the Borrower under the Security Agreement.

 

The
obligations of the Lenders to make Loans are conditioned upon, among other
things, the execution and delivery by the Mortgagor of this Mortgage in the
form hereof to secure the Obligations (as defined in the Security Agreement).

 

As
used in this Mortgage, the term “Secured
Parties” has the meaning set forth in the Security Agreement.

 

Pursuant
to the requirements of the Term Loan Credit Agreement, the Mortgagor is
granting this Mortgage to create a lien on and a security interest in the
Mortgaged Property (as hereinafter defined) to secure the performance and
payment by the Mortgagor of the Obligations.  The Term Loan Credit
Agreement also require the granting by the Mortgagor or the other Loan Parties,
as applicable, of mortgages, deeds of trust and/or deeds to secure debt (the “Other Mortgages”) that create liens on and
security interests in certain real and personal property other than the
Mortgaged Property to secure the performance of the Obligations.

 

Granting Clauses

 

NOW,
THEREFORE, IN CONSIDERATION OF the foregoing and in order to secure the
due and punctual payment and performance of the Obligations for the benefit of
the Secured Parties, Mortgagor hereby grants, conveys, mortgages, assigns and
pledges to the Mortgagee, a mortgage lien on and a security interest in,
Mortgagor’s interest in all the following described property (the “Mortgaged Property”) whether now owned or
held or hereafter acquired:

 

(1) the land more particularly described on Exhibit A hereto
(the “Land”), together with all
rights appurtenant thereto, including the easements over certain other
adjoining land granted by any easement agreements, covenant or restrictive
agreements and all air rights, mineral rights, water rights, oil and gas rights
and development rights, if any, relating thereto, and also together with all of
the other easements, rights, privileges, interests, hereditaments and
appurtenances thereunto belonging or in any way appertaining and all of the
estate, right, title, interest, claim or demand whatsoever of Mortgagor therein
and in the streets and ways adjacent thereto, either in law or in equity, in
possession or expectancy, now or hereafter acquired (the “Premises”);

 

(2) all buildings, improvements, structures, paving, parking
areas, walkways and landscaping now or hereafter erected or located upon the
Land, and all fixtures of every kind and type affixed to the Premises or
attached to or forming part of any structures, buildings or improvements and
replacements thereof now or hereafter erected or located upon the Land (the “Improvements”);

 

3

 

(3) all apparatus, movable appliances, building materials,
equipment, fittings, furnishings, furniture, machinery and other articles of
tangible personal property of every kind and nature, and replacements thereof,
now or at any time hereafter placed upon or used in any way in connection with
the use, enjoyment, occupancy or operation of the Improvements or the Premises,
including all of Mortgagor’s books and records relating thereto and including
all pumps, tanks, goods, machinery, tools, equipment, lifts (including fire
sprinklers and alarm systems, fire prevention or control systems, cleaning
rigs, air conditioning, heating, boilers, refrigerating, electronic monitoring,
water, loading, unloading, lighting, power, sanitation, waste removal,
entertainment, communications, computers, recreational, window or structural,
maintenance, truck or car repair and all other equipment of every kind),
restaurant, bar and all other indoor or outdoor furniture (including tables,
chairs, booths, serving stands, planters, desks, sofas, racks, shelves, lockers
and cabinets), bar equipment, glasses, cutlery, uniforms, linens, memorabilia
and other decorative items, furnishings, appliances, supplies, inventory, rugs,
carpets and other floor coverings, draperies, drapery rods and brackets,
awnings, venetian blinds, partitions, chandeliers and other lighting fixtures,
freezers, refrigerators, walk-in coolers, signs (indoor and outdoor), computer
systems, cash registers and inventory control systems, and all other apparatus,
equipment, furniture, furnishings, and articles used in connection with the use
or operation of the Improvements or the Premises, it being understood that the
enumeration of any specific articles of property shall in no way result in or
be held to exclude any items of property not specifically mentioned (the
property referred to in this subparagraph (3), the “Personal Property”);

 

(4) all general intangibles owned by Mortgagor and relating to
design, development, operation, management and use of the Premises or the
Improvements, all certificates of occupancy, zoning variances, building, use or
other permits, approvals, authorizations and consents obtained from and all
materials prepared for filing or filed with any governmental agency in
connection with the development, use, operation or management of the Premises
and Improvements, all construction, service, engineering, consulting, leasing,
architectural and other similar contracts concerning the design, construction,
management, operation, occupancy and/or use of the Premises and Improvements,
all architectural drawings, plans, specifications, soil tests, feasibility
studies, appraisals, environmental studies, engineering reports and similar
materials relating to any portion of or all of the Premises and Improvements,
and all payment and performance bonds or warranties or guarantees relating to
the Premises or the Improvements, all to the extent assignable (the “Permits, Plans and Warranties”);

 

(5) all now or hereafter existing leases or licenses (under which
Mortgagor is landlord or licensor) and subleases (under which Mortgagor is
sublandlord), concession, management, mineral or other agreements of a similar
kind that permit the use or occupancy of the Premises or the Improvements for
any purpose in return for any payment, or the extraction or taking of any gas,
oil, water or other minerals from the Premises in return for payment of any fee,
rent or royalty (collectively,

 

4

 

“Leases”), and all agreements or contracts
for the sale or other disposition of all or any part of the Premises or the
Improvements, now or hereafter entered into by Mortgagor, together with all
charges, fees, income, issues, profits, receipts, rents, revenues or royalties
payable thereunder (“Rents”);

 

(6) all real estate tax refunds and all proceeds of the
conversion, voluntary or involuntary, of any of the Mortgaged Property into
cash or liquidated claims (“Proceeds”),
including, subject to the rights of Mortgagor under the Term Loan Credit
Agreement or other Term Loan Security Documents, Proceeds of insurance
maintained by the Mortgagor and condemnation awards, any awards that may become
due by reason of the taking by eminent domain or any transfer in lieu thereof
of the whole or any part of the Premises or Improvements or any rights
appurtenant thereto, and any awards for change of grade of streets, together
with any and all moneys now or hereafter on deposit for the payment of real
estate taxes, assessments or common area charges levied against the Mortgaged
Property, unearned premiums on policies of fire and other insurance maintained
by the Mortgagor covering any interest in the Mortgaged Property or required by
the Term Loan Credit Agreement; and

 

(7) to the extent assignable, all extensions, improvements,
betterments, renewals, substitutes and replacements of and all additions and
appurtenances to, the Land, the Premises, the Improvements, the Personal
Property, the Permits, Plans and Warranties and the Leases, hereinafter
acquired by or released to the Mortgagor or constructed, assembled or placed by
the Mortgagor on the Land, the Premises or the Improvements, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, deed of
trust, conveyance, assignment or other act by the Mortgagor, all of which shall
become subject to the lien of this Mortgage as fully and completely, and with
the same effect, as though now owned by the Mortgagor and specifically
described herein.

 

TO
HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its successors and
assigns, for the ratable benefit of the Secured Parties, forever, subject only
to Permitted Liens (as defined in the Term Loan Credit Agreement), and to
satisfaction and release as provided in Section 3.04.

 

ARTICLE I

 

Representations,
Warranties and Covenants of Mortgagor

 

Mortgagor
agrees, covenants, represents and/or warrants as follows:

 

SECTION 1.01.  Title, Mortgage Lien.  Mortgagor
has good and marketable fee simple title to the Mortgaged Property, subject
only to Permitted Liens.  Mortgagor will forever warrant and defend its
title to the Mortgaged Property, the rights of Mortgagee

 

5

 

therein
under this Mortgage and the validity and priority of the lien of this Mortgage
thereon against the claims of all persons and parties except those having
rights under Permitted Liens (but to the extent of those rights).

 

SECTION 1.02.  Term Loan Credit Agreement.  This
Mortgage is given pursuant to the Term Loan Credit Agreement.  Mortgagor
expressly covenants and agrees to pay when due, and to timely perform, and to
cause the other Loan Parties to pay when due, and to timely perform, the
Obligations in accordance with the terms of the Term Loan Documents.

 

SECTION 1.03.  Maintenance of Mortgaged Property. 
Mortgagor will maintain the Improvements and the Personal Property in the
manner required by the Term Loan Credit Agreement.

 

SECTION 1.04.  Insurance.  Mortgagor will keep
or cause to be kept the Improvements and Personal Property insured against such
risks, and in the manner, pursuant to the Term Loan Credit Agreement and the
Security Agreement and shall purchase such additional insurance as may be
required from time to time pursuant to the Term Loan Credit Agreement and the
Security Agreement.  Federal Emergency Management Agency Standard Flood
Hazard Determination Forms will be purchased by Mortgagor for each Mortgaged
Property on which Improvements are located.  If any portion of
Improvements constituting part of the Mortgaged Property is located in an area
identified as a special flood hazard area by Federal Emergency Management
Agency or other applicable agency, Mortgagor will purchase flood insurance in
an amount reasonably satisfactory to Mortgagee, but in no event less than the
maximum limit of coverage available under the National Flood Insurance Act of
1968, as amended.

 

SECTION 1.05.  Casualty Condemnation/Eminent Domain. 
Mortgagor shall give Mortgagee prompt written notice of any casualty or other
damage to the Mortgaged Property or any proceeding for the taking of the
Mortgaged Property or any portion thereof or interest therein under power of
eminent domain or by condemnation or any similar proceeding in accordance with,
and to the extent required by, the Term Loan Credit Agreement.  Any net
proceeds received by or on behalf of the Mortgagor in respect of any such
casualty, damage or taking shall constitute trust funds held by the Mortgagor
for the benefit of the Secured Parties to be applied to repair, restore or
replace the Mortgaged Property or, if a prepayment event shall occur with
respect to any such net proceeds, to be applied in accordance with the Term
Loan Credit Agreement and the Security Agreement.

 

SECTION 1.06.  Assignment of Leases and Rents.  (a) 
Mortgagor hereby irrevocably and absolutely grants, transfers and assigns all
of its right title and interest in all Leases, together with any and all
extensions and renewals thereof for purposes of securing and discharging the
performance by Mortgagor of the Obligations.  Mortgagor has not assigned
or executed any assignment of, and will not assign or execute any assignment
of, any Leases or the Rents payable thereunder to anyone other than Mortgagee.

 

(b)  All Leases entered into by Mortgagor at
the Mortgaged Property following the date hereof shall be subordinate to the
lien of this Mortgage unless otherwise contemplated

 

6

 

under
the Term Loan Credit Agreement.  Mortgagor will not enter into, any Lease
if such Lease, as entered into, will not be subordinate to the lien of this
Mortgage unless otherwise contemplated under the Term Loan Credit Agreement.

 

(c)  Subject to Section 1.06(d), Mortgagor
has assigned and transferred to Mortgagee all of Mortgagor’s right, title and
interest in and to the Rents now or hereafter arising from each Lease
heretofore or hereafter made or agreed to by Mortgagor, it being intended that
this assignment establish, subject to Section 1.06(d), an absolute
transfer and assignment of all Rents and all Leases to Mortgagee and not merely
to grant a security interest therein.  Subject to Section 1.06(d),
Mortgagee may in Mortgagor’s name and stead (with or without first taking
possession of any of the Mortgaged Property personally or by receiver as
provided herein) operate the Mortgaged Property and rent, lease or let all or
any portion of any of the Mortgaged Property to any party or parties at such
rental and upon such terms as Mortgagee shall, in its sole discretion,
determine, and may collect and have the benefit of all of said Rents arising
from or accruing at any time thereafter or that may thereafter become due under
any Lease.

 

(d)  So long as an Event of Default (as defined
in the Security Agreement) shall not have occurred and be continuing, Mortgagee
will not exercise any of its rights under Section 1.06(c), and Mortgagor
shall receive and collect the Rents accruing under any Lease; but after the
occurrence and during the continuance of any Event of Default, Mortgagee may, at
its option, receive and collect all Rents and enter upon the Premises and
Improvements through its officers, agents, employees or attorneys for such
purpose and for the operation and maintenance thereof.  Mortgagor hereby
irrevocably authorizes and directs each tenant, if any, and each successor, if
any, to the interest of any tenant under any Lease, respectively, to rely upon
any notice of a claimed Event of Default sent by Mortgagee to any such tenant
or any of such tenant’s successors in interest, and thereafter to pay Rents to
Mortgagee without any obligation or right to inquire as to whether an Event of
Default actually exists and even if some notice to the contrary is received
from the Mortgagor, who shall have no right or claim against any such tenant or
successor in interest for any such Rents so paid to Mortgagee.  Each
tenant or any of such tenant’s successors in interest from whom Mortgagee or
any officer, agent, attorney or employee of Mortgagee shall have collected any
Rents, shall be authorized to pay Rents to Mortgagor only after such tenant or
any of their successors in interest shall have received written notice from
Mortgagee that the Event of Default is no longer continuing, unless and until a
further notice of an Event of Default is given by Mortgagee to such tenant or
any of its successors in interest.

 

(e)  Mortgagee will not become a mortgagee in
possession so long as it does not enter or take actual possession of the
Mortgaged Property.  In addition, Mortgagee shall not be responsible or
liable for performing any of the obligations of the landlord under any Lease,
for any waste by any tenant, or others, for any dangerous or defective
conditions of any of the Mortgaged Property, for negligence in the management,
upkeep, repair or control of any of the Mortgaged Property or any other act or
omission by any other person unless and until it enters or takes actual
possession of the Mortgaged Property.

 

7

 

(f)  Mortgagor shall furnish to Mortgagee,
within 30 days after a request by Mortgagee to do so, a written statement
containing the names of all tenants, subtenants and concessionaires of the
Premises or Improvements, and a copy of any Lease.

 

SECTION 1.07.  Security Agreement.  This
Mortgage is both a mortgage of real property and a grant of a security interest
in personal property, and shall constitute and serve as a “Security Agreement”
within the meaning of the uniform commercial code as adopted in the state
wherein the Premises are located (“UCC”). 
Mortgagor has hereby granted unto Mortgagee a security interest in and to all
the Mortgaged Property described in this Mortgage that is not real property,
and simultaneously with the recording of this Mortgage, Mortgagor has filed or
will file UCC financing statements, and will file continuation statements prior
to the lapse thereof, at the appropriate offices in the jurisdiction of
formation of the Mortgagor to perfect the security interest granted by this
Mortgage in all the Mortgaged Property that is not real property. 
Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and
agent, for Mortgagor and in its name, place and stead, in any and all
capacities, to execute any document and to file the same in the appropriate offices
(to the extent it may lawfully do so), and to perform each and every act and
thing reasonably requisite and necessary to be done to perfect the security
interest contemplated by the preceding sentence.  Mortgagee shall have all
rights with respect to the part of the Mortgaged Property that is the subject
of a security interest afforded by the UCC in addition to, but not in
limitation of, the other rights afforded Mortgagee hereunder and under the
Security Agreement.  In the case of any conflict between this Mortgage and
the Security Agreement, the Security Agreement shall govern.

 

SECTION 1.08.  Filing and Recording.  Mortgagor
will cause this Mortgage, the UCC financing statements referred to in
Section 1.09, any other security instrument creating a security interest
in or evidencing the lien hereof upon the Mortgaged Property and each UCC
continuation statement and instrument of further assurance to be filed,
registered or recorded and, if necessary, refiled, rerecorded and reregistered,
in such manner and in such places as may be required by any present or future
law in order to publish notice of and fully to perfect the lien hereof upon,
and the security interest of Mortgagee in, the Mortgaged Property until this
Mortgage is terminated and released in full in accordance with
Section 3.04 hereof.  Mortgagor will pay all filing, registration and
recording fees, all Federal, state, county and municipal recording, documentary
or intangible taxes and other taxes, duties, imposts, assessments and charges,
and all reasonable expenses incidental to or arising out of or in connection
with the execution, delivery and recording of this Mortgage, UCC continuation
statements any mortgage supplemental hereto, any security instrument with
respect to the Personal Property, Permits, Plans and Warranties and Proceeds or
any instrument of further assurance.

 

SECTION 1.09.  Further Assurances.  Upon demand
by Mortgagee, Mortgagor will, at the cost of Mortgagor and without expense to
Mortgagee, do, execute, acknowledge and deliver all such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as Mortgagee shall from time to time reasonably require for the
better assuring, conveying, assigning, transferring and confirming unto
Mortgagee the

 

8

 

property
and rights hereby conveyed or assigned or intended now or hereafter so to be,
or which Mortgagor may be or may hereafter become bound to convey or assign to
Mortgagee, or for carrying out the intention or facilitating the performance of
the terms of this Mortgage, or for filing, registering or recording this
Mortgage, and on demand, Mortgagor will also execute and deliver and hereby
appoints Mortgagee, following the occurrence and during the continuance of an
Event of Default, as its true and lawful attorney-in-fact and agent, for
Mortgagor and in its name, place and stead, in any and all capacities, to
execute and file to the extent it may lawfully do so, one or more financing statements,
chattel mortgages or comparable security instruments reasonably requested by
Mortgagee to evidence more effectively the lien hereof upon the Personal
Property and to perform each and every act and thing requisite and necessary to
be done to accomplish the same.

 

SECTION 1.10.  Additions to Mortgaged Property. 
All right, title and interest of Mortgagor in and to all extensions,
improvements, betterments, renewals, substitutes and replacements of, and all
additions and appurtenances to, the Mortgaged Property hereafter acquired by or
released to Mortgagor or constructed, assembled or placed by Mortgagor upon the
Premises or the Improvements, and all conversions of the security constituted
thereby, immediately upon such acquisition, release, construction, assembling,
placement or conversion, as the case may be, and in each such case without any
further mortgage, conveyance, assignment or other act by Mortgagor, shall
become subject to the lien and security interest of this Mortgage as fully and
completely and with the same effect as though now owned by Mortgagor and
specifically described in the grant of the Mortgaged Property above, but at any
and all times Mortgagor will execute and deliver to Mortgagee any and all such
further assurances, mortgages, conveyances or assignments thereof as Mortgagee
may reasonably require for the purpose of expressly and specifically subjecting
the same to the lien and security interest of this Mortgage.

 

SECTION 1.11.  No Claims Against Mortgagee. 
Nothing contained in this Mortgage shall constitute any consent or request by
Mortgagee, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof, nor as giving Mortgagor any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Mortgagee in respect thereof.

 

SECTION 1.12.  Fixture Filing.  (a) 
Certain portions of the Mortgaged Property are or will become “fixtures” (as
that term is defined in the UCC) on the Land, and this Mortgage, upon being
filed for record in the real estate records of the county wherein such fixtures
are situated, shall operate also as a financing statement filed as a fixture
filing in accordance with the applicable provisions of said UCC upon such
portions of the Mortgaged Property that are or become fixtures.

 

(b)  The real property to which the fixtures
relate is described in Exhibit A attached hereto.  The record owner
of the real property described in Exhibit A attached hereto is
Mortgagor.  The name, type of organization and jurisdiction of
organization of the debtor for

 

9

 

purposes
of this financing statement are the name, type of organization and jurisdiction
of organization of the Mortgagor set forth in the first paragraph of this
Mortgage, and the name of the secured party for purposes of this financing
statement is the name of the Mortgagee set forth in the first paragraph of this
Mortgage.  The mailing address of the Mortgagor/debtor is the address of
the Mortgagor set forth in the first paragraph of this Mortgage.  The
mailing address of the Mortgagee/secured party from which information
concerning the security interest hereunder may be obtained is the address of
the Mortgagee set forth in the first paragraph of this Mortgage. 
Mortgagor’s organizational identification number is 95-4119509.

 

SECTION 1.13.  Conflicts.  In the event of a
conflict between any provision of this First Priority Mortgage and any
provision of the Security Agreement, the Security Agreement shall govern. 
In the event of a conflict between any provision of this First Priority
Mortgage and any provision of the Security Agreement, the Security Agreement
shall govern.

 

SECTION 1.14.  Performance Under First Mortgage.  The
Mortgagor shall perform or observe all covenants and conditions to be performed
or observed by the Mortgagor under the First Mortgage and shall not permit an
Event of Default under the First Mortgage to occur and continue.

 

SECTION 1.15.  Copies of Communication.  If at
any time the Mortgagor provides the First Mortgagee with any written communication,
information, documentation, notice or demand of any kind (including regular
monthly loan payments) relevant to the First Mortgage, including any appraisal
or other similar material, then the Mortgagor shall at the same time and by the
same means provide the Mortgagee with a copy of the same.  If at any time
the Mortgagor receives any written communication, information, documentation,
notice or demand of any kind from the First Mortgagee relevant to the First
Mortgage or the loan or other obligation secured thereby, then the Mortgagor
shall immediately provide the Mortgagee with a copy of the same.

 

SECTION 1.16.  Savings Clause.  Any
provision herein to the contrary notwithstanding, Mortgagor makes no assignment
or grant of rights with respect to any (i) personal property or
(ii) any general intangibles or any other rights to any Leases, Management
Agreements, contracts, insurance proceeds, instruments, licenses or other
documents (collectively, “Contract Rights”),
as to which the grant of a security interest therein would constitute a
violation of applicable law or of any valid and enforceable obligation in favor
of a third party relating to such personal property or under such Contract
Rights.

 

10

 

ARTICLE II

 

Defaults
and Remedies

 

SECTION 2.01.  Events of Default.  Any Event of
Default shall constitute an Event of Default under this Mortgage.

 

SECTION 2.02.  Demand for Payment.  Subject to
the terms of the Security Agreement, if an Event of Default shall occur and be
continuing, then, upon written demand of Mortgagee, Mortgagor will pay to
Mortgagee all amounts due hereunder and under the Term Loan Credit Agreement,
the Existing Indenture and the Security Agreement and such further amount as
shall be sufficient to cover the costs and expenses of collection, including
attorneys’ fees, disbursements and expenses incurred by Mortgagee, and
Mortgagee shall be entitled and empowered to institute an action or proceedings
at law or in equity for the collection of the sums so due and unpaid, to
prosecute any such action or proceedings to judgment or final decree, to
enforce any such judgment or final decree against Mortgagor and to collect, in
any manner provided by law, all moneys adjudged or decreed to be payable.

 

SECTION 2.03.  Rights To Take Possession, Operate and Apply
Revenues.  (a)  Subject to the terms of the Security
Agreement, if an Event of Default shall occur and be continuing, Mortgagor
shall, upon demand of Mortgagee, forthwith surrender to Mortgagee actual
possession of the Mortgaged Property and, if and to the extent not prohibited
by applicable law, Mortgagee itself, or by such officers or agents as it may
appoint, may then enter and take possession of all the Mortgaged Property
without the appointment of a receiver or an application therefor, exclude
Mortgagor and its agents and employees wholly therefrom, and have access to the
books, papers and accounts of Mortgagor.

 

(b)  If Mortgagor shall for any reason fail to
surrender or deliver the Mortgaged Property or any part thereof after such
demand by Mortgagee, Mortgagee may to the extent not prohibited by applicable
law, obtain a judgment or decree conferring upon Mortgagee the right to
immediate possession or requiring Mortgagor to deliver immediate possession of
the Mortgaged Property to Mortgagee, to the entry of which judgment or decree
Mortgagor hereby specifically consents.  Mortgagor will pay to Mortgagee,
upon demand, all reasonable expenses of obtaining such judgment or decree,
including reasonable compensation to Mortgagee’s attorneys and agents with
interest thereon at the rate per annum applicable to overdue amounts under the
Term Loan Credit Agreement (the “Interest
Rate”); and all such expenses and compensation shall, until paid, be
secured by this Mortgage.

 

(c)  Upon every such entry or taking of
possession, Mortgagee may, to the extent not prohibited by applicable law,
hold, store, use, operate, manage and control the Mortgaged Property, conduct
the business thereof and, from time to time, (i) make all necessary and
proper maintenance, repairs, renewals, replacements, additions, betterments and
improvements thereto and thereon, (ii) purchase or otherwise acquire
additional fixtures, personalty and other property, (iii) insure or keep
the Mortgaged Property insured, (iv) manage and operate the Mortgaged
Property and exercise all the rights and powers of

 

11

 

Mortgagor
to the same extent as Mortgagor could in its own name or otherwise with respect
to the same, or (v) enter into any and all agreements with respect to the
exercise by others of any of the powers herein granted Mortgagee, all as may
from time to time be directed or determined by Mortgagee to be in its best
interest and Mortgagor hereby appoints Mortgagee as its true and lawful
attorney-in-fact and agent, following the occurrence and during the continuance
of an Event of Default for Mortgagor and in its name, place and stead, in any
and all capacities, to perform any of the foregoing acts. Mortgagee may collect
and receive all the Rents, issues, profits and revenues from the Mortgaged
Property, including those past due as well as those accruing thereafter, and,
after deducting (i) all expenses of taking, holding, managing and
operating the Mortgaged Property (including compensation for the services of
all persons employed for such purposes), (ii) the costs of all such
maintenance, repairs, renewals, replacements, additions, betterments,
improvements, purchases and acquisitions, (iii) the costs of insurance,
(iv) such taxes, assessments and other similar charges as Mortgagee may at
its option pay, (v) other proper charges upon the Mortgaged Property or
any part thereof and (vi) the compensation, expenses and disbursements of the
attorneys and agents of Mortgagee, Mortgagee shall apply the remainder of the
moneys and proceeds so received first to the payment of the Mortgagee for the
satisfaction of the Obligations, and, if there is any surplus, to Mortgagor,
subject to the entitlement of others thereto under applicable law.

 

(d)  Whenever, before any sale of the Mortgaged
Property under Section 2.06, all Obligations that are then due shall have
been paid and all Events of Default fully cured, Mortgagee will surrender
possession of the Mortgaged Property back to Mortgagor, its successors or
assigns.  The same right of taking possession shall, however, arise again
if any subsequent Event of Default shall occur and be continuing.

 

SECTION 2.04.  Right To Cure Mortgagor’s Failure to Perform. 
Subject to the terms of the Security Agreement, should Mortgagor fail in the
payment, performance or observance of any term, covenant or condition required
by this Mortgage, or the Term Loan Credit Agreement, or the Existing Notes
Indenture (with respect to the Mortgaged Property), Mortgagee may pay, perform
or observe the same, and all payments made or costs or expenses incurred by
Mortgagee in connection therewith shall be secured hereby and shall be, without
demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at
the Interest Rate.  Mortgagee shall be the judge using reasonable
discretion of the necessity for any such actions and of the amounts to be
paid.  Mortgagee is hereby empowered to enter and to authorize others to enter
upon the Premises or the Improvements or any part thereof for the purpose of
performing or observing any such defaulted term, covenant or condition without
having any obligation to so perform or observe and without thereby becoming
liable to Mortgagor, to any person in possession holding under Mortgagor or to
any other person.

 

SECTION 2.05.  Right to a Receiver.  If an Event
of Default shall occur and be continuing, Mortgagee, shall be entitled to make
application to a court of competent jurisdiction for, and (to the extent
permitted by law) obtain from such a court, as a matter of right to the
appointment of a receiver to take possession of and to operate the Mortgaged
Property and to collect and apply the Rents.  The receiver shall have all
of the rights and

 

12

 

powers
permitted under the laws of the state wherein the Mortgaged Property is
located.  Mortgagor shall pay to Mortgagee upon demand all reasonable
expenses, including receiver’s fees, reasonable attorney’s fees and
disbursements, costs and agent’s compensation incurred pursuant to the
provisions of this Section 2.05; and all such expenses shall be secured by
this Mortgage and shall be, without demand, immediately repaid by Mortgagor to
Mortgagee with interest thereon at the Interest Rate.

 

SECTION 2.06.  Foreclosure and Sale.  (a) 
Subject to the terms of the Security Agreement, if an Event of Default shall
occur and be continuing, Mortgagee may elect to sell the Mortgaged Property or
any part of the Mortgaged Property by exercise of the power of foreclosure or
of sale granted to Mortgagee by applicable law or this Mortgage.  In such
case, Mortgagee may commence a civil action to foreclose this Mortgage, or it
may proceed and sell the Mortgaged Property to satisfy any Obligation. 
Mortgagee or an officer appointed by a judgment of foreclosure to sell the
Mortgaged Property, may sell all or such parts of the Mortgaged Property as may
be chosen by Mortgagee at the time and place of sale fixed by it in a notice of
sale, either as a whole or in separate lots, parcels or items as Mortgagee
shall deem expedient, and in such order as it may determine, at public auction
to the highest bidder.  Mortgagee or an officer appointed by a judgment of
foreclosure to sell the Mortgaged Property may postpone any foreclosure or
other sale of all or any portion of the Mortgaged Property by public
announcement at such time and place of sale, and from time to time thereafter
may postpone such sale by public announcement or subsequently noticed
sale.  Without further notice, Mortgagee or an officer appointed to sell
the Mortgaged Property may make such sale at the time fixed by the last
postponement, or may, in its discretion, give a new notice of sale.  Any
person, including Mortgagor or Mortgagee or any designee or affiliate thereof,
may purchase at such sale.

 

(b)  The Mortgaged Property may be sold subject
to unpaid taxes and Permitted Liens, and, after deducting all costs, fees and
expenses of Mortgagee (including costs of evidence of title in connection with
the sale), Mortgagee or an officer that makes any sale shall apply the proceeds
of sale in the manner set forth in Section 2.08.

 

(c)  Any foreclosure or other sale of less than
the whole of the Mortgaged Property or any defective or irregular sale made
hereunder shall not exhaust the power of foreclosure or of sale provided for
herein; and subsequent sales may be made hereunder until the Obligations have
been satisfied, or the entirety of the Mortgaged Property has been sold.

 

(d)  If an Event of Default shall occur and be
continuing, Mortgagee may instead of, or in addition to, exercising the rights
described in Section 2.06(a) above and either with or without entry
or taking possession as herein permitted, proceed by a suit or suits in law or
in equity or by any other appropriate proceeding or remedy (i) to
specifically enforce payment of some or all of the Obligations, or the
performance of any term, covenant, condition or agreement of this Mortgage or
any other Loan Document or any other right, or (ii) to pursue any other
remedy available to Mortgagee, all as Mortgagee shall determine most effectual
for such purposes.

 

13

 

(e)  Notwithstanding anything in this Section 2.06
to the contrary, the exercise of the rights granted in this Section 2.06
are subject to the Security Agreement.

 

SECTION 2.07.  Other Remedies.  (a) 
Subject to the terms of the Security Agreement, in case an Event of Default
shall occur and be continuing, Mortgagee may also exercise, to the extent not
prohibited by law, any or all of the remedies available to a secured party
under the UCC.

 

(b)  In connection with a sale of the Mortgaged
Property or any Personal Property and the application of the proceeds of sale
as provided in Section 2.08, Mortgagee shall be entitled to enforce
payment of and to receive up to the principal amount of the Obligations, plus
all other charges, payments and costs due under this Mortgage, and to recover a
deficiency judgment for any portion of the aggregate principal amount of the
Obligations remaining unpaid, with interest.

 

SECTION 2.08.  Application of Sale Proceeds and Rents. 
Subject to the terms of the Security Agreement, after any foreclosure sale of
all or any of the Mortgaged Property, Mortgagee shall receive and apply the
proceeds of the sale together with any Rents that may have been collected and
any other sums that then may be held by Mortgagee under this Mortgage in
accordance with the Security Agreement, subject to the terms of the Security
Agreement.

 

SECTION 2.09.  Mortgagor as Tenant Holding Over. 
Subject to the terms of the Security Agreement, if Mortgagor remains in
possession of any of the Mortgaged Property after any foreclosure sale by
Mortgagee, at Mortgagee’s election Mortgagor shall be deemed a tenant holding
over and shall forthwith surrender possession to the purchaser or purchasers at
such sale or be summarily dispossessed or evicted according to provisions of
law applicable to tenants holding over.

 

SECTION 2.10.  Waiver of Appraisement, Valuation, Stay, Extension
and Redemption Laws.  Subject to the terms of the Security
Agreement, Mortgagor waives, to the extent not prohibited by law, (i) the
benefit of all laws now existing or that hereafter may be enacted
(x) providing for any appraisement or valuation of any portion of the
Mortgaged Property and/or (y) in any way extending the time for the
enforcement or the collection of amounts due under any of the Obligations or
creating or extending a period of redemption from any sale made in collecting
said debt or any other amounts due Mortgagee, (ii) any right to at any
time insist upon, plead, claim or take the benefit or advantage of any law now
or hereafter in force providing for any homestead exemption, stay, statute of
limitations, extension or redemption, or sale of the Mortgaged Property as
separate tracts, units or estates or as a single parcel in the event of
foreclosure or notice of deficiency, and (iii) all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of or each of the Obligations and marshaling in the event
of foreclosure of this Mortgage.

 

SECTION 2.11.  Discontinuance of Proceedings. 
Subject to the terms of the Security Agreement, in case Mortgagee shall proceed
to enforce any right, power or remedy under this

 

14

 

Mortgage
by foreclosure, entry or otherwise, and such proceedings shall be discontinued
or abandoned for any reason, or shall be determined adversely to Mortgagee,
then and in every such case Mortgagor and Mortgagee shall be restored to their
former positions and rights hereunder, and all rights, powers and remedies of
Mortgagee shall continue as if no such proceeding had been taken.

 

SECTION 2.12.  Suits To Protect the Mortgaged Property. 
Subject to the terms of the Security Agreement, Mortgagee shall have power
(a) to institute and maintain suits and proceedings to prevent any
impairment of the Mortgaged Property by any acts that may be unlawful or in
violation of this Mortgage, (b) to preserve or protect its interest in the
Mortgaged Property and in the Rents arising therefrom and (c) to restrain
the enforcement of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid
if the enforcement of or compliance with such enactment, rule or order
would impair the security or be prejudicial to the interest of Mortgagee
hereunder.

 

SECTION 2.13.  Filing Proofs of Claim.  Subject
to the terms of the Security Agreement, in case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Mortgagor, Mortgagee shall, to the extent permitted
by law, be entitled to file such proofs of claim and other documents as may be
necessary or advisable in order to have the claims of Mortgagee allowed in such
proceedings for the Obligations secured by this Mortgage at the date of the
institution of such proceedings and for any interest accrued, late charges and
additional interest or other amounts due or that may become due and payable
hereunder after such date.

 

SECTION 2.14.  Possession by Mortgagee.  Subject
to the terms of the Security Agreement, notwithstanding the appointment of any
receiver, liquidator or trustee of Mortgagor, any of its property or the
Mortgaged Property, Mortgagee shall be entitled, to the extent not prohibited
by law, to remain in possession and control of all parts of the Mortgaged
Property now or hereafter granted under this Mortgage to Mortgagee in
accordance with the terms hereof and applicable law.

 

SECTION 2.15.  Waiver.  (a)  Subject to the
terms of the Security Agreement, no delay or failure by Mortgagee to exercise
any right, power or remedy accruing upon any breach or Event of Default shall
exhaust or impair any such right, power or remedy or be construed to be a
waiver of any such breach or Event of Default or acquiescence therein; and
every right, power and remedy given by this Mortgage to Mortgagee may be
exercised from time to time and as often as may be deemed expedient by
Mortgagee.  No consent or waiver by Mortgagee to or of any breach or Event
of Default by Mortgagor in the performance of the Obligations shall be deemed
or construed to be a consent or waiver to or of any other breach or Event of
Default in the performance of the same or of any other Obligations by Mortgagor
hereunder.  No failure on the part of Mortgagee to complain of any act or
failure to act or to declare an Event of Default, irrespective of how long such
failure continues, shall constitute a waiver by Mortgagee of its rights
hereunder or impair any rights, powers or remedies consequent on any future
Event of Default by Mortgagor.

 

15

 

(b)  Even if Mortgagee (i) grants some
forbearance or an extension of time for the payment of any sums secured hereby,
(ii) takes other or additional security for the payment of any sums
secured hereby, (iii) waives or does not exercise some right granted
herein or under the Term Loan Documents, (iv) releases a part of the
Mortgaged Property from this Mortgage, (v) agrees to change some of the
terms, covenants, conditions or agreements of any of the Term Loan Documents,
(vi) consents to the filing of a map, plat or replat affecting the
Premises, (vii) consents to the granting of an easement or other right
affecting the Premises or (viii) makes or consents to an agreement
subordinating Mortgagee’s lien on the Mortgaged Property hereunder; no such act
or omission shall preclude Mortgagee from exercising any other right, power or
privilege herein granted or intended to be granted in the event of any breach
or Event of Default then made or of any subsequent default; nor, except as
otherwise expressly provided in an instrument executed by Mortgagee, shall this
Mortgage be altered thereby.  In the event of the sale or transfer by
operation of law or otherwise of all or part of the Mortgaged Property,
Mortgagee is hereby authorized and empowered to deal with any vendee or
transferee with reference to the Mortgaged Property secured hereby, or with
reference to any of the terms, covenants, conditions or agreements hereof, as
fully and to the same extent as it might deal with the original parties hereto
and without in any way releasing or discharging any liabilities, obligations or
undertakings.

 

SECTION 2.16.  Waiver of Trial by Jury.  To the
fullest extent permitted by applicable law, Mortgagor and Mortgagee each hereby
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein.  Mortgagor hereby waives all rights to interpose any counterclaim
in any suit brought by Mortgagee hereunder and all rights to have any such suit
consolidated with any separate suit, action or proceeding.

 

SECTION 2.17.  Remedies Cumulative.  No right,
power or remedy conferred upon or reserved to Mortgagee by this Mortgage is
intended to be exclusive of any other right, power or remedy, and each and
every such right, power and remedy shall be cumulative and concurrent and in
addition to any other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or by statute.

 

ARTICLE III

 

Miscellaneous

 

SECTION 3.01.  Partial Invalidity.  In the event
any one or more of the provisions contained in this Mortgage shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
validity, illegality or unenforceability shall, at the option of Mortgagee, not
affect any other provision of this Mortgage, and this Mortgage shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein or therein.

 

SECTION 3.02.  Notices.  All notices and
communications hereunder shall be in writing and given to Mortgagor in
accordance with the terms of the Security Agreement at

 

16

 

the
address set forth on the first page of this Mortgage and to the Mortgagee
as provided in the Security Agreement.

 

SECTION 3.03.  Successors and Assigns.  All of
the grants, covenants, terms, provisions and conditions herein shall run with
the Premises and the Improvements and shall apply to, bind and inure to, the
benefit of the permitted successors and assigns of Mortgagor and the successors
and assigns of Mortgagee.

 

SECTION 3.04.  Satisfaction and Cancelation. 
(a)  This Mortgage shall continue in effect until (i) the Term Loan
Credit Agreement has terminated pursuant to its express terms and (ii) all
of the Specified Obligations have been indefeasibly paid and performed in full.

 

(b)  Subject to the terms of the Security
Agreement, upon any sale or other transfer by Mortgagor of the Mortgaged
Property that is permitted under Section 4.1(d) of the Security
Agreement to any Person that is not another Grantor or, upon the effectiveness
of any written consent to the release of the security interest granted hereby
in the Mortgaged Property pursuant to Section 10.02 of the Term Loan
Credit Agreement, the security interest in the Mortgaged Property shall be
automatically released.

 

(c)  In connection with any termination or
release pursuant to paragraph (a) or (b), the Mortgage shall be
marked “satisfied” by the Mortgagee, and this Mortgage shall be canceled of
record at the request and at the expense of the Mortgagor.  Mortgagee
shall execute any documents reasonably requested by Mortgagor to accomplish the
foregoing or to accomplish any release contemplated by this Section 3.04
and Mortgagor will pay all costs and expenses, including reasonable attorneys’
fees, disbursements and other charges, incurred by Mortgagee in connection with
the preparation and execution of such documents.

 

SECTION 3.05.  Definitions.  As used in this
Mortgage, the singular shall include the plural as the context requires and the
following words and phrases shall have the following meanings: (a) “including” shall mean “including but not
limited to”; (b) “provisions”
shall mean “provisions, terms, covenants and/or conditions”; (c) “lien” shall mean “lien, charge,
encumbrance, security interest, mortgage or deed of trust”; (d) “obligation” shall mean “obligation, duty,
covenant and/or condition”; and (e) “any of the Mortgaged Property” shall
mean “the Mortgaged Property or any part thereof or interest therein”. 
Any act that Mortgagee is permitted to perform hereunder may be performed at
any time and from time to time by Mortgagee or any person or entity designated
by Mortgagee.  Any act that is prohibited to Mortgagor hereunder is also
prohibited to all lessees of any of the Mortgaged Property.  Each
appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage
is irrevocable, with power of substitution and coupled with an interest. 
Subject to the applicable provisions hereof, Mortgagee has the right to refuse
to grant its consent, approval or acceptance or to indicate its satisfaction,
in its sole discretion, whenever such consent, approval, acceptance or
satisfaction is required hereunder.

 

SECTION 3.06.  Multisite Real Estate Transaction. 
Mortgagor acknowledges that this Mortgage is one of a number of Other Mortgages
and Term Loan Security Documents that secure the Obligations.  Mortgagor
agrees that the lien of this Mortgage shall be absolute

 

17

 

and
unconditional and shall not in any manner be affected or impaired by any acts
or omissions whatsoever of Mortgagee, and without limiting the generality of
the foregoing, the lien hereof shall not be impaired by any acceptance by the
Mortgagee of any security for or guarantees of any of the Obligations hereby
secured, or by any failure, neglect or omission on the part of Mortgagee to
realize upon or protect any Secured Obligation or indebtedness hereby secured
or any collateral security therefor including the Other Mortgages and other
Term Loan Security Documents.  The lien hereof shall not in any manner be
impaired or affected by any release (except as to the property released), sale,
pledge, surrender, compromise, settlement, renewal, extension, indulgence,
alteration, changing, modification or disposition of any of the Obligations
secured (unless all Specified Obligations are satisfied) or of any of the
collateral security therefor, including the Other Mortgages and other Term Loan
Security Documents or of any guarantee thereof, and Mortgagee may at its
discretion foreclose, exercise any power of sale, or exercise any other remedy
available to it under any or all of the Other Mortgages and other Term Loan
Security Documents without first exercising or enforcing any of its rights and
remedies hereunder.  Such exercise of Mortgagee’s rights and remedies
under any or all of the Other Mortgages and other Term Loan Security Documents
shall not in any manner impair the indebtedness hereby secured or the lien of
this Mortgage and any exercise of the rights or remedies of Mortgagee hereunder
shall not impair the lien of any of the Other Mortgages and other Term Loan
Security Documents or any of Mortgagee’s rights and remedies thereunder. 
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the Other Mortgages and other Term Loan
Security Documents separately or concurrently and in any order that it may deem
appropriate and waives any rights of subrogation.

 

SECTION 3.07.  No Oral Modification.  This
Mortgage may not be changed or terminated orally.

 

SECTION 3.08.  Subject to Security Agreement. 
Notwithstanding anything herein to the contrary, the first-priority lien and
security interest granted to the Collateral Agent pursuant to this First
Priority Mortgage and the exercise of any right or remedy by the Collateral
Agent hereunder are subject to the provisions of the Security Agreement. 
In the event of any conflict between the terms of the Security Agreement and
this First Priority Mortgage, the terms of the Security Agreement shall
govern.  So long as the Second Mortgage, or other senior mortgages are,
outstanding, Mortgagor shall not be in default hereunder for the failure to
comply with any term or provision contained in this First Priority Mortgage if
such compliance would result in a default under the terms and provisions of the
Second Mortgage or other senior mortgages.

 

18

 

ARTICLE IV

 

Particular
Provisions

 

This
Mortgage is subject to the following provisions relating to the particular laws
of the state wherein the Premises are located:

 

SECTION 4.01.  Applicable Law; Certain Particular Provisions. 
This Mortgage shall be governed by and construed in accordance with the
internal law of the state where the Mortgaged Property is located, except that
Mortgagor expressly acknowledges that by their terms, the Term Loan Credit
Agreement and other Term Loan Documents (aside from those Other Mortgages to be
recorded outside New York) shall be governed by the internal law of the
State of New York, without regard to principles of conflict of law. 
Mortgagor and Mortgagee agree to submit to jurisdiction and the laying of venue
for any suit on this Mortgage in the state where the Mortgaged Property is
located.  The terms and provisions set forth in Appendix A attached
hereto are hereby incorporated by reference as though fully set forth
herein.  In the event of any conflict between the terms and provisions
contained in the body of this Mortgage and the terms and provisions set forth
in Appendix A, the terms and provisions set forth in Appendix A shall
govern and control.

 

19

 

IN
WITNESS WHEREOF, this Mortgage has been duly executed and delivered to
Mortgagee by Mortgagor on the date of the acknowledgment attached hereto.

 

	
   

  	
  THE
  NEIMAN MARCUS GROUP, INC., a 

  Delaware corporation,

  
	
   

  	
   

  
	
   

  	
  by:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

20

 

[ADD LOCAL FORM OF ACKNOWLEDGMENT]

 

21

 

Exhibit A

to Mortgage

 

Description of the Land

 

22

 

Exhibit B

to Mortgage

 

Security Agreement

 

23

 

Exhibit A

to Mortgage

 

Local Law Provisions

 

None

 

24

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