Document:

Exhibit 10.2

 

Equitable Resources, Inc.

 

 

2005 DIRECTORS’ DEFERRED
COMPENSATION PLAN

 

 

ARTICLE I

 

1.1                               Purpose of Plan.

 

This Equitable Resources, Inc. 2005 Directors’ Deferred
Compensation Plan (the “2005 Plan”)
hereby is created to provide an opportunity for the members of the Board of
Directors of Equitable Resources, Inc. (the “Board”)
to defer payment of all or a portion of the fees to which they are entitled as
compensation for their services as members of the Board.  The 2005 Plan also shall administer the
payment of stock units and phantom stock awarded pursuant to the 1999 Equitable
Resources, Inc. Non-Employee Directors’ Stock Incentive Plan (the “NEDSIP”).

 

ARTICLE II

 

DEFINITIONS

 

When used in this 2005 Plan and initially capitalized,
the following words and phrases shall have the meanings indicated:

 

2.1                               “Account” means the total
of a Participant’s Deferral Account and Phantom Stock Account under the 2005
Plan.  

 

2.2                               “Beneficiary” means the
person or persons designated or deemed to be designated by the Participant
pursuant to Section 7.1 of the 2005 Plan to receive benefits payable under
the 2005 Plan in the event of the Participant’s death.

 

2.3                               “Change in Control” means
any of the following events:

 

(a)                                  The sale or other disposition by the Company of
all or substantially all of its assets to a single purchaser or to a group of
purchasers, other than to a corporation with respect to which, following such
sale or disposition, more than eighty percent (80%) of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding

 

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voting securities entitled to
vote generally in the election of the Board of Directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
outstanding Company common stock and the combined voting power of the then
outstanding voting securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the outstanding Company
common stock and voting power immediately prior to such sale or disposition.

 

(b)                                 The acquisition in one or more transactions by
any person or group, directly or indirectly, of beneficial ownership of twenty
percent (20%) or more of the outstanding shares of Company common stock or the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of the Board; provided, however,
that any acquisition by (x) the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any of its subsidiaries or (y) any person that is eligible, pursuant to
Rule 13d-1(b) under the Exchange Act (as such rule is in effect as of February 25,
2004) to file a statement on Schedule 13G with respect to its beneficial
ownership of Company common stock and other voting securities whether or not
such person shall have filed a statement on Schedule 13G, unless such
person shall have filed a statement on Schedule 13D with respect to
beneficial ownership of fifteen percent (15%) or more of the Company’s voting
securities, shall not constitute a Change in Control;

 

(c)                                  The Company’s termination of its business and
liquidation of its assets;

 

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(d)                                 The reorganization, merger or consolidation of
the Company into or with another person or entity, by which reorganization,
merger or consolidation the persons who hold one hundred percent (100%) of the
voting securities of the Company prior to such reorganization, merger or
consolidation receive or continue to hold less than sixty percent (60%) of the
outstanding voting shares of the new or continuing corporation; or

 

(e)                                  If, during any two-year period, less than a
majority of the members of the Board are persons who were either
(i) nominated or recommended for election by at least two-thirds vote of
the persons who were members of the Board or Nominating Committee of the Board
at the beginning of the period, or (ii) elected by at least two-thirds
vote of the persons who were members of the Board at the beginning of the
period.

 

2.4                               “Code” means the Internal Revenue Code of 1986, as amended.

 

2.5                               “Committee” means the
Compensation Committee of the Board.

 

2.6                               “Company” means Equitable
Resources, Inc. and any successor thereto.

 

2.7                               “Deferral Account” means
the recordkeeping account established on the books and records of the Company
to record a Participant’s deferral amounts under Section 5.1 of the 2005
Plan, plus or minus any investment gain or loss allocable thereto under Section 5.4
of the 2005 Plan.

 

2.8                               “Directors’ Fees” means
the fees that are paid by the Company to members of the Board as compensation
for services performed by them as members of the Board.

 

2.9                               “Enrollment Form” means
the agreement to participate and related elections filed by a Participant
pursuant to Section 5.1 of the 2005 Plan, in the form prescribed by the
Committee,

 

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directing the Company to reduce the amount of Directors’
Fees otherwise currently payable to the Participant and credit such amount to
the Participant’s Deferral Account hereunder.

 

2.10                        “Hardship Withdrawal” shall
have the meaning set forth in Section 6.3 of the 2005 Plan.

 

2.11                        “Investment Options” means
the investment options described in Exhibit A to the 2005 Plan into which a
Participant may direct all or part of his or her Deferral Account.

 

2.12                        “Investment Return Rate” means:

 

(a)                                  In the case of an Investment Option named in
Exhibit A of a fixed income nature, the interest deemed to be credited as
determined in accordance with the procedures applicable to the same investment
option provided under the Equitable Resources, Inc. Employee Savings Plan,
originally adopted September 1, 1985, as amended (“Equitable
401(k) Plan”);

 

(b)                                 In the case of a Investment Option named in
Exhibit A of an equity investment nature, the increase or decrease in deemed
value and any dividends deemed to be credited as determined in accordance with
the procedures applicable to the same investment option provided under the
Equitable 401(k) Plan; or

 

(c)                                  In the case of the Equitable Resources Common
Stock Fund, the increase or decrease in the deemed value, and the reinvestment
in the Equitable Resources Common Stock Fund of any dividends deemed to be
credited, as determined in accordance with the procedures applicable to
investments in the Equitable Resources Common Stock Fund under the Equitable
401(k) Plan.

 

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2.13                        “Irrevocable Trust” means
a grantor trust that may be
established prior to the occurrence of a Change in Control of the Company to
assist the Company in fulfilling its obligations under this 2005 Plan but which
shall be established by the Company
in the event of a Change in Control of the Company.  All amounts held in such Irrevocable Trust
shall remain subject to the claims of the general creditors of the Company and
Participants in this 2005 Plan shall have no greater rights to any amounts held
in any such Irrevocable Trust than any other unsecured general creditor of the
Company.

 

2.14                        “Participant” means any
non-employee member of the Board (i) who receives an award of Phantom Stock
under the NEDSIP and/or (ii) who elects to participate in the 2005 Plan for
purposes of deferring his or her Directors’ Fees by filing an Enrollment Form
with the Committee pursuant to Section 5.1 of the 2005 Plan.

 

2.15                        “Phantom Stock” means
those shares of the common stock or stock units of the Company:

 

(i)                                     awarded pursuant to the NEDSIP, and

 

(ii)                                  which will be distributed to eligible 2005 Plan
Participants in the form elected by the 2005 Plan Participant and on the date
specified in the Phantom Stock Agreement referred to in Section 2.17 of
the 2005 Plan, which date is deemed to be incorporated by reference herein.

 

2.16                        “Phantom Stock Account” means
the recordkeeping account established on the books and records of the Company
to record the number of shares of Phantom Stock allocated to a Participant
under the 2005 Plan.

 

2.17                        “Phantom Stock Agreement” means
any agreements and/or terms of award of Phantom Stock under the NEDSIP pursuant
to which Phantom Stock is or may be payable.

 

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2.18                        “2005 Plan” means this
Equitable Resources, Inc. 2005 Directors’ Deferred Compensation Plan, as
amended from time to time.

 

2.19                        “Plan Year” means the
twelve-month period commencing January 1, 2005 and ending on December 31,
2005.

 

2.20                        “Valuation Date” means the
last day of each calendar quarter and any other date determined by the
Committee or specified herein.

 

ARTICLE III

 

ELIGIBILITY AND PARTICIPATION

 

3.1                               Eligibility for Phantom Stock Account.

 

Eligibility to participate in the 2005 Plan for purposes
of the Phantom Stock Account under Article IV of the 2005 Plan is limited
to those non-employee members of the Board who receive Phantom Stock pursuant
to the terms of the NEDSIP.  An eligible
Board member shall commence participation in the 2005 Plan for purposes of the
Phantom Stock Account on the date on which an award of Phantom Stock is made
pursuant to the terms of the NEDSIP.

 

3.2                               Eligibility for Deferral Account.

 

Eligibility to participate in the 2005 Plan for purposes
of deferring Directors’ Fees under Section 5.1 of the 2005 Plan is limited
to non-employee members of the Board.  An
eligible Board member shall commence participation in the 2005 Plan for
purposes of deferring Directors’ Fees as of the first day of the Plan Year
following the receipt of his or her Enrollment Form by the Committee in the
preceding calendar year or within 30 days of becoming a Participant if such
date occurs after the commencement of the Plan Year.

 

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3.3                               Ineligible Participant.

 

Notwithstanding any other provisions of this 2005 Plan
to the contrary, if the Committee determines that the participation in the 2005
Plan by any Board member will jeopardize the status of the 2005 Plan as exempt
from the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or regulations thereunder, the Committee may, in
its sole discretion, determine that such Participant shall cease to be eligible
to participate in the 2005 Plan.

 

ARTICLE IV

 

PHANTOM STOCK ACCOUNT

 

4.1                               Phantom Stock Award.

 

As of the date of any Phantom Stock award pursuant to
the terms of the NEDSIP, the Phantom Stock Account of a Participant eligible
for such award shall be credited with the number of Phantom Stock units as
specified in such award.  The Company
shall not be required to contribute any shares or other property to the
Irrevocable Trust for such awards.

 

4.2                               Valuation of Phantom Stock Account; Deemed Reinvestment of Dividends

 

As of each Valuation Date, the value of a Participant’s
Phantom Stock Account shall equal (i) the value of the number of shares of
Phantom Stock credited to such account as of the last Valuation Date, plus (ii)
the value of the number of shares of Phantom Stock deemed to have been credited
to such account as a result of the deemed reinvestment of any dividends deemed
to have been paid on such Phantom Stock since the last Valuation Date.  Any dividends paid on the common stock of the
Company shall be deemed to be paid on the Phantom Stock under the 2005 Plan in
an equal amount; provided, however, that to the extent they are paid in a form
other than additional shares of the common stock of the Company, they shall be
deemed to be immediately reinvested in such number of shares of the common
stock of the Company as are represented by

 

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the aggregate amount of the dividends divided by the
value of one share of the common stock of the Company on the date the dividend is
paid.

 

For purposes of this 2005 Plan, the “value” of a share
of Phantom Stock shall be deemed to equal the closing price of a share of
Company common stock as listed on the New York Stock Exchange (“NYSE”) on any date of reference.  In the event that the date of reference is a
date on which the NYSE is not open for business, the value of a share of
Phantom Stock shall equal the average of the closing prices on the dates
immediately preceding and following the date of reference during which the NYSE
was open for business.  Notwithstanding
anything in this 2005 Plan to the contrary, the Company may adopt alternate
procedures for determining the value of Phantom Stock in the event Company
common stock ceases to be traded on the NYSE or to reflect the occurrence of a
Conversion Event described in Section 4.3.

 

For purposes of determining the value of the Phantom
Stock credited to a Participant’s Phantom Stock Account as of any time of
reference, each share of Phantom Stock shall be deemed equivalent in value to
one share of the outstanding shares of common stock of the Company.  For purposes of valuing a Participant’s
Phantom Stock Account upon the termination of his or her membership on the
Board, the Valuation Date shall be the business day coincident with or
immediately preceding the termination of the Participant’s Board membership.

 

4.3                               Adjustment and Substitution of Phantom Stock

 

In the event of: 
(a) a stock split (or reverse stock split) with respect to the common
stock of the Company; (b) the conversion of the common stock of the Company
into another form of security or debt instrument of the Company; (c) the
reorganization, merger or consolidation of the Company into or with another
person or entity; or (d) any other action which would alter the number of,
and/or shareholder rights of, holders of outstanding shares of the common stock
of the Company (collectively, a “Conversion Event”),
then, notwithstanding the fact that 2005 Plan Participants have no rights to
the shares of Company common stock represented by their

 

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Phantom Stock Account nor to the shares of such Company
common stock which may be contributed by the Company to the Irrevocable Trust,
the number of shares of Phantom Stock then allocated to a Participant’s Phantom
Stock Account shall be deemed to be converted, to the extent possible, to
reflect any such Conversion Event to the same extent as the shares of holders
of outstanding shares of Company common stock would have been converted upon the
occurrence of the Conversion Event.  On
and after any such Conversion Event, this 2005 Plan shall be applied, mutatis mutandis, as if the Participant’s Phantom Stock
Account was comprised of the cash, securities, notes or other instruments into
which the outstanding shares of Company common stock was converted.  Following the occurrence of a Conversion
Event, the Board is authorized to amend the 2005 Plan as it, in its sole
discretion, determines to be necessary or appropriate to address any
administrative or operational details presented by the Conversion Event which
are not addressed in the 2005 Plan.

 

4.4                               Shareholder Rights.

 

Except as specifically provided herein, an award of
Phantom Stock under the 2005 Plan shall not entitle a Participant to voting
rights or any other rights of a shareholder of the Company.

 

4.5                               Statement of Phantom Stock Account.

 

As soon as administratively feasible following the last
day of each calendar quarter, the Committee shall provide to each eligible
Participant a statement of the value of his or her Phantom Stock Account as of
the most recent Valuation Date.

 

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ARTICLE V

 

DEFERRAL ACCOUNT

 

5.1                               Deferral of Directors’ Fees.

 

Any non-employee member of the Board may elect to defer
a specified percentage of his or her Directors’ Fees under the 2005 Plan by
submitting to the Committee a written Enrollment Form.  Such election shall be effective with respect
to Directors’ Fees paid for services performed by such Participant beginning
the first day of the Plan Year following the receipt by the Committee of the
Participant’s Enrollment Form in the preceding calendar year and shall remain
in effect for the Plan Year.  A
Participant may not withdraw his or her Enrollment Form during the Plan Year.

 

5.2                               Investment Direction.

 

A
Participant may direct that amounts deferred pursuant to his or her Enrollment
Form be deemed to be invested in one or more of the Investment Options listed
in Exhibit A to the 2005 Plan (a “New Money Election”)
and credited with shares or units in each such Investment Option in the same
manner as equivalent contributions would be invested under the same Investment
Options available under the Equitable 401(k) Plan.  Except as otherwise provided with respect to
directions to invest in the Equitable Resources Common Stock Fund (“Company Stock Fund”), a Participant may direct that amounts
previously credited to his or her Deferral Account and deemed invested in the
available Investment Options be transferred between and among the then
available Investment Options (a “Reallocation Election”).

 

Special rules apply to directions to invest in the
Company Stock Fund.  No restrictions are
placed on New Money Elections. 
Accordingly, a Participant may make a New Money Election to invest in
the Company Stock Fund or to cease future investments in such Fund in the same
manner as any other Investment Option. 
Reallocation Elections, however, may not
direct that

 

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amounts previously credited to a Participant’s Deferral
Account and which were directed to be invested in the Company Stock Fund be
transferred out of such Fund and into
another Investment Option.

 

Reallocation Elections into
the Company Stock Fund are permitted. 
Accordingly, no restrictions apply to Reallocation Elections directing
that amounts previously credited to a Participant’s Deferral Account and which
were directed to be invested in an Investment Option other
than the Company Stock Fund be transferred out of such other
Investment Option and into the Company Stock Fund.

 

Except as otherwise provided with respect to the Company
common stock, regardless of whether the investment direction is a New Money
Election or a Reallocation Election, a Participant’s Deferral Account shall
only be deemed to be invested in such Investment Options for purposes of
crediting investment gain or loss under Section 5.4 of the 2005 Plan and
the Company shall not be required to actually invest, on behalf of any
Participant, in any Investment Option listed on Exhibit A to the 2005
Plan.  Notwithstanding the preceding
sentence, the Company may, but shall not be required to, elect to make
contributions to an Irrevocable Trust in an amount equal to the amounts
deferred by Participants and actually invest such contributions in the
Investment Options elected by a particular Participant; provided, however,
that the Company shall contribute shares of Company common stock to the
Irrevocable Trust in an amount equal to the aggregate number of shares of
Company common stock represented by Participant investment directions to the
Company Stock Fund.  Any such
contributions to an Irrevocable Trust and related investments shall be solely
to assist the Company in satisfying its obligations under this 2005 Plan and no
Participant shall have any right, title or interest whatsoever in any such
contributions or investments.

 

All
investment elections shall be made by written notice to the Committee in
accordance with uniform procedures established by the Committee; provided,
however, that investment directions

 

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to an
Investment Option must be in multiples of whole percents (1%) or whole dollars
($1.00).  Any such investment election
shall be effective as of the Valuation Date immediately following the date on
which the written notice is received and shall remain in effect until changed
by the Participant.  In the event that a
Participant fails to direct the investment of his or her account, the Committee
shall direct such Participant’s Deferral Account to an Investment Option named
in Exhibit A of a fixed income nature.

 

5.3                               No Right to Investment Options.

 

Notwithstanding anything in the 2005 Plan to the
contrary, the Investment Options offered under the 2005 Plan may be changed or
eliminated at any time in the sole discretion of the Benefits Investment
Committee of the Company.  Prior to the
change or elimination of any Investment Option under the 2005 Plan, the
Committee shall provide written notice to each Participant with respect to whom
a Deferral Account is maintained under the 2005 Plan and any Participant who
has directed any part of his or her Deferral Account to such Investment Option
shall be permitted to redirect such portion of his or her Deferral Account to
another Investment Option offered under the 2005 Plan.

 

5.4                               Crediting of Investment Return.

 

Each Participant’s Deferral Account shall be credited
with deemed investment gain or loss at the Investment Return Rate as of each
Valuation Date, based on the average daily balance of the Participant’s
Deferral Account since the immediately preceding Valuation Date, but after such
Deferral Account has been adjusted for any contributions or distributions to be
credited or deducted for such period. 
Until a Participant or his or her Beneficiary receives his or her entire
Deferral Account, the unpaid balance thereof shall be credited with investment
gain or loss at the Investment Return Rate, as provided in this Section 5.4
of the 2005 Plan.

 

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5.5                               Valuation of Deferral Account.

 

As of each Valuation Date, a Participant’s Deferral
Account shall equal (i) the balance of the Participant’s Deferral Account as of
the immediately preceding Valuation Date, plus (ii) the Participant’s deferred
Directors’ Fees since the immediately preceding Valuation Date, plus or minus
(iii) investment gain or loss credited as of such Valuation Date pursuant to Section 5.4
of the 2005 Plan, and minus (iv) the aggregate amount of distributions, if any,
made from such Deferral Account since the immediately preceding Valuation
Date.  For purposes of valuing a
Participant’s Deferral Account upon the termination of the Participant’s
membership on the Board, the Valuation Date shall be the business day
coinciding with or immediately preceding the date of the termination of the
Participant’s Board membership.

 

5.6                               Statement of Deferral Account.

 

As soon as administratively feasible following the last
day of each calendar quarter, the Committee shall provide to each Participant a
statement of the value of his or her Deferral Account as of the most recent
Valuation Date.

 

ARTICLE VI

 

PAYMENT OF BENEFITS

 

6.1                               Payment of Phantom Stock Account.

 

As soon as administratively feasible following the date
provided for payment pursuant to the terms of a Phantom Stock Agreement
described in Section 2.17 of the 2005 Plan, which date is deemed to be
incorporated by reference herein, and, if and to the extent permitted under Section 409A
of the Code and the regulations thereunder, in accordance with the election
provided in Section 6.4, the Company shall pay or distribute to the
Participant or, in the event of the Participant’s death, to his Beneficiary,
either an amount equal to the value of the Participant’s

 

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Phantom Stock Account then payable, or the number of
shares of Company common stock then payable, whichever form is elected by the
Participant, based on awards credited to the Participant’s Phantom Stock Account
pursuant to Section 4.1 of the 2005 Plan, as determined in accordance with
Article IV of the 2005 Plan, less any income tax withholding required
under applicable law.

 

6.2                               Payment of Deferral Account.

 

Subject to the last sentence of this Section 6.2, as
soon as administratively feasible following a Participant’s termination of
membership on the Board and in accordance with the election provided in Section 6.4
of the 2005 Plan, and without regard to whether the Participant is entitled to
payment of his or her Phantom Stock Account, the Company shall pay to the
Participant or, in the event of the Participant’s death, to his Beneficiary, an
amount equal to the  value of the
Participant’s Deferral Account, as determined in accordance with Article V
of the 2005 Plan, less any income tax withholding required under applicable
law.  Except as otherwise provided in the
following sentence, such payment shall be made in cash in the form elected by
the Participant pursuant to Section 6.4 of the 2005 Plan.  Notwithstanding the preceding sentence, to
the extent the Participant had directed that any portion of his Deferral
Account be invested in the Company Stock Fund, the Company shall distribute
such portion in such number of shares of Equitable Resources Common Stock as
would be represented by an equal amount invested in the Company Stock Fund
under the Company 401(k) Plan.

 

6.3                               Hardship Withdrawal from Deferral Account.

 

In the event that the Committee, in its sole discretion,
determines upon the written request of a Participant in accordance with uniform
procedures established from time to time by the Committee, that the Participant
has suffered an unforeseeable emergency, the Company may pay to the Participant
in a lump sum as soon as administratively feasible following such
determination, an amount necessary to meet the emergency, but not exceeding the
aggregate

 

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balance of such Participant’s Deferral Account as of the
date of such payment (a “Hardship Withdrawal”).  Any such Hardship Withdrawal shall be subject
to any income tax withholding required under applicable law.  The Participant shall provide to the
Committee such evidence as the Committee may require to demonstrate that such
emergency exists and financial hardship would occur if the withdrawal were not
permitted.

 

For purposes of this Section 6.3, an “unforeseeable
emergency” shall mean a severe financial hardship to the Participant or
Beneficiary resulting from a sudden and unexpected illness or hardship to the
Participant or Beneficiary, the Participant’s or Beneficiary’s spouse, or the
Participant’s or Beneficiary’s dependent (as defined in Section 152(a) of
the Code), loss of the Participant’s or Beneficiary’s property due to casualty,
or other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant or Beneficiary.  The amount of a Hardship Withdrawal may not
exceed the amount the Committee reasonably determines to be necessary to meet
such emergency needs (including taxes incurred by reason of a taxable
distribution).

 

The form of payment of the Hardship Withdrawal shall be
a lump sum cash payment.  For purposes of
reducing a Participant’s Deferral Account and adjusting the balances in the various
Investment Options in which such reduced Deferral Account is deemed to be
invested to reflect such Hardship Withdrawal, amounts represented by such
Hardship Withdrawal shall be deemed to have been withdrawn first, on a pro rata
basis, from that portion of his Deferral Account deemed to be invested in
Investment Options other than
the Equitable Common Stock Fund (the “Non Stock Investments”)
and, second, to the extent the Hardship Withdrawal cannot be fully satisfied by
a deemed withdrawal of the Non Stock Investments, from the portion deemed
invested in the Company Stock Fund.

 

Notwithstanding the preceding, to the extent the
Participant had directed that any portion of his Deferral Account be invested
in the Company Stock Fund, the Company shall distribute such

 

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portion in such number of shares of Equitable Resources
Common Stock based on the value at the date of distribution.

 

6.4                               Form of Payment.

 

(a)                                  In General.  A Participant may elect to receive
that portion of his or her Account payable hereunder in one of the following
forms:

 

(i)                                     Annual payments of a fixed amount which shall
amortize the value of the Account over a period of five, ten, or fifteen years
(together, in the case of each annual payment, with interest and dividends
credited thereto after the payment commencement date pursuant to Section 5.4
of the 2005 Plan); or

 

(ii)                                  A lump sum.

 

Such an election must be made in writing in accordance
with uniform procedures established by the Committee at the time of filing the
Enrollment Form with respect to the Plan Year. 
In the event a Participant fails to make a distribution election within
the time period prescribed, his or her Account shall be distributed in the form
of a lump sum.  Payment of the Deferral
Account may not commence earlier than (i) separation from service, (ii)
disability or (iii) death.

 

(b)                                 Distribution of Company Common Stock.  In the
event the Company is required to distribute some or all of a Participant’s
Account in shares of Equitable Resources Common Stock in accordance with 2005
Plan Sections 6.1 and/or 6.2, the aggregate amount of such shares shall be
distributed in the same manner as the Participant elected in subsection (a).  To the extent the Participant elected an installment
form of payment, the number of shares of Equitable Common Stock to be
distributed in each installment shall be determined by multiplying (i) the
aggregate number of shares of Equitable Resources Common Stock deemed credited
to the Participant’s Account as of the installment payment date by (ii) a
fraction, the numerator of which is one and

 

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the denominator of which is the number of unpaid
installments, and by rounding the resulting number down to the next whole
number.

 

6.5                               Payments to Beneficiaries.

 

In the event of a Participant’s death prior to the
Participant’s termination of membership on the Board, the Participant’s
Beneficiary shall receive payment of the Phantom Stock Account (if any) in the
form provided in the Phantom Stock Agreement and/or Participant’s Deferral
Account as soon as administratively feasible following the Participant’s death
in the form elected by the Participant pursuant to Section 6.4 of the 2005
Plan, less any income tax withholding required under applicable law.  If no such election was made by the
Participant, the Participant’s Beneficiary shall receive payment of the
Participant’s Account in the form of a lump sum.  In the event of the Participant’s death after
commencement of installment payments under the 2005 Plan, but prior to receipt
of his or her entire Account, the Participant’s Beneficiary shall receive the
remaining installment payments at such times as such installments would have
been paid to the Participant until the Participant’s entire Account is paid.

 

6.6                               Limited Account Size; Lump Sum Payment.

 

In the event that the value of a Participant’s Account
is less than $10,000 as of the Valuation Date immediately preceding the
commencement of payment to the Participant under the 2005 Plan (or such other
amount permitted by law to be distributed), or the balance of the Participant’s
Account payable to any Beneficiary is less than $10,000 as of the Valuation
Date immediately preceding the commencement of payment to the Participant’s
Beneficiary under the 2005 Plan (or such other amount permitted by law to be
distributed), the Committee may inform the Company and the Company, in its
discretion, may choose to pay the benefit in the form of a lump sum,
notwithstanding any provision of the 2005 Plan or an election of a Participant
under Section 6.4 of the 2005 Plan to the contrary.

 

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6.7                               Limitation on Distributions.

 

In the case of a change in ownership or effective control
of the Company, as defined in Section 409A of the Code or the regulations
thereunder, no distributions may be made earlier than the date permitted under Section 409A
of the Code and the regulations thereunder to any Participant who is subject to
such requirements.

 

ARTICLE VII

 

BENEFICIARY DESIGNATION

 

7.1                               Beneficiary Designation.

 

Each Participant shall have the sole right, at any time,
to designate any person or persons as his or her Beneficiary to whom payment
may be made of any amounts which may become payable in the event of his or her
death prior to the complete distribution to the Participant of his or her
Account.  Any Beneficiary designation
shall be made in writing in accordance with uniform procedures established by
the Committee.  A Participant’s most
recent Beneficiary designation shall supersede all prior Beneficiary
designations.  In the event a Participant
does not designate a Beneficiary under the 2005 Plan, any payments due under
the 2005 Plan shall be made first to the Participant’s spouse; if no spouse,
then in equal amounts to the Participant’s children; if no children, then to
the Participant’s estate.

 

ARTICLE VIII

 

ADMINISTRATION

 

8.1                               Committee.

 

The Committee shall have sole discretion to:  (i) designate non-employee directors eligible
to participate in the 2005 Plan; (ii) interpret the provisions of the 2005
Plan; (iii) supervise the

 

18

 

administration and operation of the 2005 Plan; and
(iv) adopt rules and procedures governing the 2005 Plan.

 

8.2                               Investments.

 

The Benefits Investment Committee of the Company shall
have the sole discretion to choose the Investment Options available under the
2005 Plan and to change or eliminate such Investment Options, from time to
time, as it deems appropriate.

 

8.3                               Agents.

 

The Committee may delegate its administrative duties
under the 2005 Plan to one or more individuals, who may or may not be employees
of the Company.

 

8.4                               Binding Effect of Decisions.

 

Any decision or action of the Committee with respect to
any question arising out of or in connection with the eligibility,
participation, administration, interpretation, and application of the 2005 Plan
shall be final and binding upon all persons having any interest in the 2005
Plan.

 

8.5                               Indemnification of Committees.

 

The Company shall indemnify and hold harmless the
members of the Committee and the Benefits Investment Committee and their duly
appointed agents under Section 8.3 against any and all claims, losses,
damages, expenses, or liabilities arising from any action or failure to act
with respect to the 2005 Plan, except in the case of gross negligence or
willful misconduct by any such member or agent of the Committee or Benefits
Investment Committee.

 

19

 

ARTICLE IX

 

AMENDMENT AND TERMINATION OF PLAN

 

9.1                               Amendment.

 

The Company (or its delegate) may at any time, or from
time to time, modify or amend any or all of the provisions of the 2005
Plan.  Where the action is to be taken by
the Company, it shall be accomplished by written action of the Board at a
meeting duly called at which a quorum is present and acting throughout.  Where the action is to be taken by a delegate
of the Company, it shall be accomplished pursuant to any procedures established
in the instrument delegating the authority. 
Regardless of whether the action is taken by the Company or its
delegate, no such modification or amendment shall have the effect of reducing
the value of any Participant’s Account under the 2005 Plan as it existed as of
the day before the effective date of such modification or amendment, without
such Participant’s prior written consent. 
Written notice of any modification or amendment to the 2005 Plan shall
be provided to each Participant under the 2005 Plan.

 

9.2                               Termination.

 

The Company, in its sole discretion, may terminate this
2005 Plan at any time and for any reason whatsoever by written action of the
Board at a meeting duly called at which a quorum is present and acting
throughout; provided that such termination shall not have the effect of
reducing the value of any Participant’s Account under the 2005 Plan as it
existed on the day before the effective date of the termination of the 2005
Plan without such Participant’s prior written consent.  The Valuation Date for purposes of
determining the value of Participants’ Accounts upon termination of the 2005
Plan shall be the date prior to the date of the termination of the 2005 Plan.

 

20

 

ARTICLE X

 

MISCELLANEOUS

 

10.1                        Funding.

 

The Company’s obligation to pay benefits under the 2005
Plan shall be merely an unfunded and unsecured promise of the Company to pay
money in the future.  Except as otherwise
provided in Section 5.2, prior to the occurrence of a Change in Control,
the Company, in its sole discretion, may elect to make contributions to an
Irrevocable Trust to assist the Company in satisfying all or any portion of its
obligations under the 2005 Plan. 
Regardless of whether the Company elects to or otherwise contributes to
an Irrevocable Trust, 2005 Plan Participants, their Beneficiaries, and their
heirs, successors and assigns, shall have no secured interest or right, title
or claim in any property or assets of the Company.

 

Notwithstanding the foregoing, upon the occurrence of an
event resulting in a Change in Control, the Company shall make a contribution
to an Irrevocable Trust in an amount which, when added to the then value of any
amounts previously contributed to an Irrevocable Trust to assist the Company in
satisfying all or any portion of its obligations under the 2005 Plan, shall be
sufficient to bring the total value of assets held in the Irrevocable Trust to
an amount not less than the total value of all Participants’ Accounts under the
2005 Plan as of the Valuation Date immediately preceding the Change in Control;
provided that any such funds contributed to an Irrevocable Trust pursuant to
this Section 10.1 shall remain subject to the claims of the Company’s
general creditors and provided, further, that such contribution shall reflect
any Conversion Event described in Section 4.3.  Upon the occurrence of the Change in Control
of the Company, all deferrals to the 2005 Plan shall cease, any adjustments
required by Section 4.3 shall be made and the Company shall provide to the
trustee of the Irrevocable Trust all 2005 Plan records and other information
necessary for the trustee to make payments to Participants under the 2005 Plan
in accordance with the terms of the 2005 Plan.

 

21

 

10.2                        Nonassignability.

 

No right or interest of a Participant or Beneficiary
under the 2005 Plan may be assigned, transferred, or subjected to alienation,
anticipation, sale, pledge, encumbrance or other legal process or in any manner
be liable for or subject to the debts or liabilities of any such Participant or
Beneficiary, or any other person.

 

10.3                        Legal Fees and Expenses.

 

It is the intent of the Company that no Participant be
required to incur the expenses associated with the enforcement of his or her
rights under this 2005 Plan by litigation or other legal action because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to the Participant hereunder. 
Accordingly, if after a Change in Control it should appear that the
Company has failed to comply with any of its obligations under this 2005 Plan,
or in the event that the Company or any other person takes any action to
declare this 2005 Plan void or unenforceable, or institutes any litigation
designed to deny, or to recover from, the Participant the benefits intended to
be provided to such Participant hereunder, the Company irrevocably authorizes
such Participant to retain counsel of his or her choice, at the expense of the
Company as hereafter provided, to represent such Participant in connection with
the initiation or defense of any litigation or other legal action, whether by
or against the Company or any director, officer, stockholder or other person
affiliated with the Company in any jurisdiction.  The Company shall pay and be solely
responsible for any and all attorneys’ and related fees and expenses incurred
by such Participant as a result of the Company’s failure to perform under this
2005 Plan or any provision thereof; or as a result of the Company or any person
contesting the validity or enforceability of this 2005 Plan or any provision
thereof.

 

22

 

10.4                        No Acceleration of Benefits.

 

Notwithstanding anything to the contrary herein, there
shall be no acceleration of the time or schedule of any payments under the
2005 Plan, except as may be provided in regulations under Section 409(A)
of the Code.

 

10.5                        Captions.

 

The captions contained herein are for convenience only
and shall not control or affect the meaning or construction hereof.

 

10.6                        Governing Law.

 

The provisions of the 2005 Plan shall be construed and
interpreted according to the laws of the Commonwealth of Pennsylvania.

 

10.7                        Successors.

 

The provisions of the 2005 Plan shall bind and inure to
the benefit of the Company, its affiliates, and their respective successors and
assigns.  The term successors as used
herein shall include any corporate or other business entity which shall, whether
by merger, consolidation, purchase or otherwise, acquire all or substantially
all of the business and assets of the Company or a participating affiliate and
successors of any such corporation or other business entity.

 

10.8                        No Right to Continued Service.

 

Nothing contained herein shall be construed to confer
upon any Participant the right to continue to serve as a member of the Board or
in any other capacity.

 

23Exhibit
4.1

 

CONFORMED COPY

 

 

SENIOR
SUBORDINATED LOAN AGREEMENT

 

 

 

Dated as of
November 21, 2004

 

among

 

J. CREW OPERATING
CORP., as Borrower

 

and

 

the SUBSIDIARIES OF THE BORROWER
party hereto,

as
Guarantors,

 

and

 

the
LENDERS party hereto

 

and

 

U.S. Bank National
Association, as Administrative Agent

 

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE 1

  
	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Defined Terms.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.02.

  	
  Other Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.03.

  	
  Accounting Terms; GAAP

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.04.

  	
  Rules of Construction

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  
	
  THE LOANS; THE EXCHANGE
  NOTES

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Term Loan Commitments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.02.

  	
  Additional Loans

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.03.

  	
  Loan Notes and Evidence
  of Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.04.

  	
  Additional Loan Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.05.

  	
  Payment of
  Loans; Pro Rata Treatment; Sharing of Setoffs

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.06.

  	
  Interest on the Loans

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.07.

  	
  Default Rate

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.08.

  	
  Computation of Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.09.

  	
  Fees

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.10.

  	
  Exchange Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.11.

  	
  Replacement Loan Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  
	
  PREPAYMENT OF LOANS

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Notice of
  Prepayment to Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.02.

  	
  Selection of Loans to
  be Prepaid

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.03.

  	
  Notice of Prepayment to
  Lenders

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.04.

  	
  Effect of Notice of
  Prepayment

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.05.

  	
  Deposit of Prepayment Price

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.06.

  	
  Loans Prepaid in Part

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.07.

  	
  Voluntary Prepayment

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.08.

  	
  Mandatory Prepayment

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.09.

  	
  Asset Sale Offers

  	
   

  

 

i

 

	
  ARTICLE 4

  
	
  COVENANTS

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Maintenance of Office
  or Agency

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.02.

  	
  Commission Reports

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.03.

  	
  Compliance Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.04.

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.05.

  	
  Stay, Extension and Usury Laws

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.06.

  	
  Restricted Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.07.

  	
  Dividends and Other Payment Restrictions
  Affecting Restricted Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.08.

  	
  Incurrence of Indebtedness and Issuance of
  Preferred Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.09.

  	
  Asset Sales

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.10.

  	
  Transactions with Affiliates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.11.

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.12.

  	
  Offer to Prepay Upon a Change of Control

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.13.

  	
  Corporate Existence

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.14.

  	
  Business Activities

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.15.

  	
  No Layering of Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.16.

  	
  Additional
  Loan Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  
	
  SUCCESSORS

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Merger, Consolidation of Sale of Assets

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.02.

  	
  Successor Corporation Substituted

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  
	
  DEFAULTS AND REMEDIES

  
	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.02.

  	
  Acceleration

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.03.

  	
  Other Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.04.

  	
  Waiver of Past Defaults

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.05.

  	
  Control by Majority

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.06.

  	
  Limitation on Suits

  	
   

  

 

ii

 

	
  Section 6.07.

  	
  Rights of Lenders to Receive Payment

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.08.

  	
  Collection Suit by Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.09.

  	
  Administrative Agent May File Proofs of
  Claim

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.10.

  	
  Priorities

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.11.

  	
  Undertaking for Costs

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  
	
  ADMINISTRATIVE AGENT

  
	
   

  	
   

  	
   

  
	
  Section 7.01.

  	
  Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.02.

  	
  Additional Rights and Duties of the
  Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.03.

  	
  Successor Administrative Agent by Merger,
  Etc

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  
	
  REPRESENTATIONS AND
  WARRANTIES

  
	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
  Representations and Warranties of the
  Borrower and the Guarantors

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 8.02.

  	
  Representations and Warranties of the
  Lenders

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  
	
  CONDITIONS
  PRECEDENT TO CREDIT EXTENTIONS

  
	
   

  	
   

  	
   

  
	
  Section 9.01.

  	
  Conditions Precedent to Execution of this
  Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.02.

  	
  Conditions Precedent to Credit Extensions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  10

  
	
  SUBORDINATION

  
	
   

  	
   

  	
   

  
	
  Section 10.01.

  	
  Agreement to Subordinate

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.02.

  	
  Liquidation; Dissolution; Bankruptcy

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.03.

  	
  Default On Designated Senior Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.04.

  	
  Acceleration of Loans

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.05.

  	
  When Distribution Must Be Paid Over

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.06.

  	
  Notice by the Borrower

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.07.

  	
  Subrogation

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.08.

  	
  Relative Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.09.

  	
  Subordination May Not Be Impaired by the
  Borrower

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.10.

  	
  Distribution or Notice of Representative

  	
   

  

 

iii

 

	
  Section 10.11.

  	
  Rights of Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.12.

  	
  Authorization to Effect Subordination

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.13.

  	
  Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.14.

  	
  Reliance by Holders of Senior Debt on
  Subordination Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  11

  
	
  COLLATERAL AND SECURITY

  
	
   

  	
   

  	
   

  
	
  Section 11.01.

  	
  Security Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.02.

  	
  Release of Collateral

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.03.

  	
  Certificates of the Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.04.

  	
  Authorization of Actions to Be Taken by
  the Administrative Agent Under the Security Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.05.

  	
  Authorization of Receipt of Funds by the
  Administrative Agent Under the Security Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.06.

  	
  Termination of Security Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.07.

  	
  Collateral Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.08.

  	
  Designations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  12

  
	
  LOAN
  GUARANTEES

  
	
   

  	
   

  	
   

  
	
  Section 12.01.

  	
  Loan Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 12.02.

  	
  Execution and Delivery of the Loan
  Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 12.03.

  	
  Guarantors May Consolidate, etc., on
  Certain Terms

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.04.

  	
  Releases of
  Loan Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.05.

  	
  Limitation
  on Guarantor Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.06.

  	
  Subordination
  of Loan Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  13

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  Section 13.01.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.02.

  	
  Waivers; Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  13.03.

  	
  Expenses;
  Indemnity; Damage Waiver

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.04.

  	
  Successors and
  Assigns

  	
   

  

 

iv

 

	
  Section
  13.05.

  	
  No
  Personal Liability of Directors, Officers, Employees, Organizers and Members

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.06.

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  13.07.

  	
  Certificate
  and Opinion as to Conditions Precedent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  13.08.

  	
  Statements
  Required in Certificate or Opinion

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.09.

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.10.

  	
  Waiver of Jury
  Trial

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  13.11.

  	
  No
  Adverse Interpretation of Other Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.12.

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  13.13.

  	
  Counterpart
  Originals; Integration; Effectiveness

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.14.

  	
  Table of Contents,
  Headings, Etc

  	
   

  

 

v

 

EXHIBITS

 

	
  EXHIBIT A

  	
  FORM OF
  LOAN NOTE

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  FORM OF
  LOAN GUARANTEES

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  C

  	
  FORM
  OF NEW COMMITMENT AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  D

  	
  FORM
  OF SUPPLEMENTAL SENIOR SUBORDINATED LOAN AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  E

  	
  FORM
  OF NOTICE OF BORROWING

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  F

  	
  FORM
  OF INDENTURE

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  G

  	
  FORM
  OF LEGAL OPINIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  H

  	
  FORM
  OF ASSIGNMENT AND ASSUMPTION

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  I

  	
  FORM
  OF SECRETARY’S CERTIFICATE

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  J

  	
  FORM
  OF OFFICER’S CERTIFICATE

  	
   

  

 

 

SCHEDULES

 

	
  2.01

  	
  COMMITMENTS AND
  APPLICABLE PERCENTAGES

  
	
   

  	
   

  
	
  8.01(j)

  	
  LITIGATION

  
	
   

  	
   

  
	
  8.01(m)

  	
  NO MATERIAL ADVERSE
  CHANGE

  

 

vi

 

SENIOR SUBORDINATED LOAN AGREEMENT dated as of
November 21, 2004 (this “Agreement”) among J. CREW OPERATING CORP., a
Delaware corporation, as Borrower, the Guarantors (as defined below), the
LENDERS party hereto and U.S. Bank National Association, as Administrative
Agent.

 

WHEREAS, the Borrower
seeks to borrow an amount in U.S. dollars it deems necessary to pursue its
business purposes and the Lenders are willing to lend such amount to the
Borrower, subject to the terms and conditions set forth herein; and

 

WHEREAS, in consideration
for the Lender’s willingness to lend such amount to the Borrower, upon the
occurrence of the Exchange Triggering Event and subject to the terms and
conditions set forth below, the Borrower shall exchange the Loans (as defined
below) for the Borrower’s 93⁄4% Senior Subordinated Notes due 2014, to be issued
pursuant to the Indenture (as defined below).

 

NOW, THEREFORE, the
Lenders, the Borrower and the Guarantors hereby agree as follows:

 

ARTICLE
1

DEFINITIONS

 

Section 1.01.                         Defined Terms.

 

“Acquired Debt” means, with respect to any
specified Person, (i) Indebtedness of any other Person existing at the
time such other Person is merged with or into or became a Restricted Subsidiary
of such specified Person, whether or not such Indebtedness is incurred in
connection with, or in contemplation of, such other Person merging with or into
or becoming a Restricted Subsidiary of such specified Person and
(ii) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.

 

“Additional Assets” means any
property or assets (other than Indebtedness and Capital Stock) to be used by
the Borrower or a Restricted Subsidiary of the Borrower in a Permitted
Business.

 

“Additional Interest” means all additional
interest then owing pursuant to Section 2.10 hereof.

 

“Additional Loans” means additional Loans
incurred after the Closing Date in connection with an increase in Term Loan
Commitments pursuant to Section 2.02.

 

“Additional Loan Guarantees” means
additional Loan Guarantees incurred after the Closing Date in connection with
an increase in Term Loan Commitments pursuant to Section 2.02.

 

“Additional Loan Notes” means the Loan Notes originally issued after the
Closing Date pursuant to Section 2.04, including any replacement Loan Notes.

 

 

“Affiliate” of any specified Person means
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.  For purposes of this definition, “control”
(including, with correlative meanings, the terms “controlling,” “controlled by”
and “under common control with”), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.  Beneficial ownership of 10% or more of the
voting securities of a Person shall be deemed to be control.  No Person in whom a Receivables Subsidiary
makes an Investment in connection with a Qualified Receivables Transaction will
be deemed to be an Affiliate of the Borrower or any of its Subsidiaries solely
by reason of such Investment.

 

“Approved Fund” means any Person (other
than a natural person) that is engaged in making, purchasing, holding or
investing in bank loans and similar extensions of credit in the ordinary course
of business and that is administered or managed by (i) a Lender, (ii) an
Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that
administers and manages a Lender.

 

“Asset Sale” means (i) the sale, lease
(other than an operating lease), conveyance or other disposition of any assets
or rights (including, without limitation, by way of a sale and leaseback) other
than in the ordinary course of business (provided that the sale, lease
(other than an operating lease), conveyance or other disposition of all or
substantially all of the assets of the Borrower and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of this Agreement described
in Section 4.12 and Section 5.01 and not by the provisions of Section 4.09 of
this Agreement, and (ii) the issuance of Equity Interests in any of the
Borrower’s Restricted Subsidiaries or the sale of Equity Interests in any of
its Subsidiaries (other than directors’ qualifying Equity Interests or Equity
Interests required by applicable law to be held by a Person other than the
Borrower or a Restricted Subsidiary of the Borrower).

 

Notwithstanding the preceding, none of the following
items shall be deemed to be an Asset Sale:

 

(1)                                  any single transaction or series of related transactions
that involves assets having a Fair Market Value of less than $5.0 million;

 

(2)                                  a transfer of assets between or among the Borrower and its
Restricted Subsidiaries;

 

(3)                                  an issuance of Equity Interests by a Restricted Subsidiary
of the Borrower to the Borrower or to a Restricted Subsidiary of the Borrower;

 

(4)                                  the
sale or lease of products, services or accounts receivable (including at a
discount) in the ordinary course of business and any sale or other disposition
of damaged, worn-out, negligible, surplus or obsolete assets in the ordinary
course of business;

 

(5)                                  the sale or other disposition of Cash Equivalents;

 

2

 

(6)                                  a Restricted Payment that does not violate Section 4.06 of
this Agreement or is a Permitted Investment;

 

(7)                                  a sale and leaseback transaction with respect to any assets
within 180 days of the acquisition of such assets;

 

(8)                                  any exchange of like-kind property of the type described in
Section 1031 of the Internal Revenue Code of 1986 for use in a Permitted
Business;

 

(9)                                  the sale or disposition of any assets or property received
as a result of a foreclosure by the Borrower or any of its Restricted
Subsidiaries on any secured Investment or any other transfer of title with
respect to any secured Investment in default;

 

(10)                            the licensing of intellectual property in the ordinary
course of business or in accordance with industry practice;

 

(11)                            the sale,
lease, conveyance, disposition or other transfer of (a) the Capital Stock of,
or any Investment in, any Unrestricted Subsidiary or (b) Permitted Investments
made pursuant to clause (xxii) of the definition of “Permitted Investments”;

 

(12)                            surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind;

 

(13)                            leases or subleases to third persons in the ordinary course
of business that do not interfere in any material respect with the business of
the Borrower or any of its Restricted Subsidiaries;

 

(14)                            sales
of accounts receivable and related assets of the type specified in the
definition of Qualified Receivables Transaction to a Receivables Subsidiary for
the Fair Market Value thereof, less amounts required to be established as
reserves and customary discounts pursuant to contractual agreements with
entities that are not Affiliates of the Borrower entered into as part of a
Qualified Receivables Transactions; and

 

(15)                            transfers of accounts receivable and related assets of the
type specified in the definition of Qualified Receivables Transaction (or a
fractional undivided interest therein) by a Receivables Subsidiary in a
Qualified Receivables Transaction.

 

“Attributable
Debt” in respect of a sale and leaseback transaction means, at the
time of determination, the present value of the obligation of the lessee for
net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended.  Such present value shall be calculated using
a discount rate equal to the rate of interest implicit in such transaction,
determined in good faith by a responsible financial or accounting officer of
the Borrower.

 

“Bankruptcy Law” means Title 11, U.S. Code
or any similar federal or state law for the relief of debtors.

 

3

 

“Board of Directors” means, with respect to
any Person, the board of directors, management committee or similar governing
body of such Person or any duly authorized committee thereof.

 

“Borrower” means J. Crew Operating Corp., a
Delaware corporation, and any and all successors
thereto.

 

“Business
Day” means any day other than a Legal Holiday.

 

“Capital Lease Obligation” means, at the
time any determination thereof is to be made, the amount of the liability in
respect of a capital lease that would at such time be required to be
capitalized on a balance sheet prepared in accordance with GAAP, and the Stated
Maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may
be prepaid by the lessee without payment of a penalty.

 

“Capital Stock” means (i) in the case
of a corporation, corporate stock, (ii) in the case of an association or
business entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, (iii) in the case of
a partnership or limited liability company, partnership (whether general or
limited) or membership interests and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person but
excluding from all of the foregoing any debt securities convertible into
Capital Stock, whether or not such debt securities include any right of
participation with Capital Stock.

 

“Cash Equivalents”
means:

 

(i)                                     U.S.
dollars or any other currencies held from time to time in the ordinary course
of business;

 

(ii)                                  securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality of the United States government (provided  that the full faith and credit of the
United States is pledged in support of those securities) having maturities of
not more than twelve (12) months from the date of acquisition;

 

(iii)                               direct
obligations issued by any state of the United States of America or any
political subdivision of any such state, or any public instrumentality thereof,
in each case having maturities of not more than twelve (12) months from the
date of acquisition;

 

(iv)                              certificates
of deposit and eurodollar time deposits with maturities of twelve (12) months
or less from the date of acquisition, bankers’ acceptances with maturities not
exceeding twelve (12) months and overnight bank deposits, in each case, with
any lender party to the Congress Credit Facility or with any domestic
commercial bank that is at least “adequately capitalized” (as defined in the
regulations of its primary Federal banking regulator) and has Tier 1 Capital
(as defined in such regulations) of not less than $250.0 million;

 

4

 

(v)                                 repurchase
obligations with a term of not more than one (1) year for underlying securities
of the types described in clauses (ii) and (iv) above entered into with any
financial institution meeting the qualifications specified in clause (iv)
above;

 

(vi)                              commercial
paper having one of the two highest ratings obtainable from Moody’s Investors
Service, Inc. or Standard & Poor’s Rating Services and, in each case,
maturing within twelve (12) months after the date of acquisition;

 

(vii)                           Indebtedness
or preferred stock issued by Persons with a rating of “A” or higher from
Standard & Poor’s Rating Services or “A2” or higher from Moody’s Investors
Service, Inc. with maturities of twelve (12) months or less from the date of
acquisition; and

 

(viii)                        money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through (vi)
of this definition.

 

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

 

(i)                                     the
direct or indirect sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of the
Borrower and its Subsidiaries taken as a whole to any “person” (as such term is
used in Section 13(d)(3) of the Exchange Act),
other than Permitted Holders;

 

(ii)                                  the adoption of a plan relating to the liquidation or
dissolution of the Borrower; or

 

(iii)                               the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any “person” (as defined above),
other than the Permitted Holders, becomes the “beneficial owner” (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act),
directly or indirectly, of 50% or more of the Voting Stock of the Borrower
(measured by voting power rather than number of shares)  provided,  however, for purposes of this
clause (iii), each Person will be deemed to beneficially own any Voting Stock
of another Person held by one or more of its Subsidiaries.

 

“Closing Date” means December 23, 2004, or
such later date on which the conditions precedent to closing set forth in Section
9.02 shall have been satisfied or waived pursuant to Section 13.02.

 

“Collateral” means all property and assets
of the Borrower and all property and assets of each Subsidiary of the Borrower
that is a Guarantor hereunder, in each case, with respect to which from time to
time a Lien is granted as security for the Loans pursuant to the applicable
Security Documents.

 

“Collateral  Agent” means U.S. Bank National Association in its capacity
as the “Collateral Agent” under and as defined in the Security Documents and
any successor thereto in such capacity.

 

5

 

“Collateral Permitted Liens” means:

 

(i)                                     Liens
existing as of the Effective Date plus renewals and extensions of such Liens;

 

(ii)                                  Liens
securing any First-Lien Obligations;

 

(iii)                               Liens
securing the Loans (or the Loan Guarantees) and any Other Second-Lien
Obligations;

 

(iv)                              Liens
securing Permitted Refinancing Indebtedness permitted to be incurred under this
Agreement; provided that such Liens securing Permitted Refinancing
Indebtedness that ranks equal to or junior in right of payment with the Loans
(A) are not materially less favorable to the Lenders and are not
materially more favorable to the lienholders with respect to such Liens than
the Liens in respect of the Indebtedness being refinanced and (B) are
limited to all or part of the same property and assets that secured or, under
the written agreements pursuant to which the original Lien arose, could secure
the original Lien (plus improvements and accessions to such property or
proceeds or distributions thereof);

 

(v)                                 Liens
for taxes, assessments or governmental charges or claims either (A) not
delinquent or (B) contested in good faith by appropriate proceedings and
as to which the Borrower or its Restricted Subsidiaries shall have set aside on
their books such reserves as may be required pursuant to GAAP;

 

(vi)                              statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens imposed by law incurred in the ordinary
course of business;

 

(vii)                           Liens
incurred or deposits or pledges made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types
of social security or similar obligations, including any Lien securing letters
of credit issued in the ordinary course of business in connection therewith, or
to secure the performance of tenders, public or statutory obligations, progress
payments, surety and appeal bonds, bids, leases, contracts (other than
contracts for the payment of money), performance and return-of-money bonds and
other similar obligations;

 

(viii)                        Liens
arising out of judgments, decrees, orders or awards in respect of which the
Borrower shall in good faith be prosecuting an appeal or proceedings for review
which appeal or proceedings shall not have been finally terminated, or if the
period within which such appeal or proceedings may be initiated shall not have
expired;

 

(ix)                                survey
exceptions, easements, rights of way, zoning restrictions, licenses,
reservations, provisions, encroachments, encumbrances, protrusion permits,
servitudes, covenants, conditions, waivers, restrictions on the use of property
or title defects (and with respect to leasehold interests, mortgages,
obligations, liens and other encumbrances incurred, created, assumed or
permitted to exist and arising by, through or under a landlord or owner of the
leased property, with or without the consent of the lessee) and

 

6

 

other
similar charges, restrictions or encumbrances in respect of real property that
do not in the aggregate materially adversely affect the ordinary conduct of the
business of the Borrower or any of its Restricted Subsidiaries;

 

(x)                                   any interest or title of a lessor under any lease, whether
or not characterized as capital or operating; provided that such Liens
do not extend to any property or asset which is not leased property subject to
such lease;

 

(xi)                                Liens
securing Capital Lease Obligations and purchase money Indebtedness incurred in
accordance with Section 4.08(b) hereof; provided that the Indebtedness
shall not be secured by any property or assets of the Borrower or any
Restricted Subsidiary of the Borrower other than the property and assets being
acquired or constructed or improved or financed by such Indebtedness;

 

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

 

(xiii)                          Liens
securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof;

 

(xiv)                         Liens to
secure obligations arising from statutory, regulatory, contractual, or warranty
requirements of the Borrower or any of its Restricted Subsidiaries, including
rights of offset and set-off;

 

(xv)                            Liens
securing Hedging Obligations;

 

(xvi)                         Liens on
property or assets of a Person, plus renewals and extensions of such Liens,
existing at the time such Person is merged with or into or consolidated with
the Borrower or any Subsidiary of the Borrower; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation
and do not extend to any assets other than those of the Person merged into or
consolidated with the Borrower or the Subsidiary;

 

(xvii)                      Liens on
property (including Capital Stock) existing at the time of acquisition of the
property by the Borrower or any Restricted Subsidiary of the Borrower; provided
that such Liens were in existence prior to such acquisition and not incurred in
contemplation of such acquisition;

 

(xviii)                   leases, subleases, licenses or sublicenses to third parties
entered into in the ordinary course of business;

 

(xix)                           Liens
arising out of consignment or similar arrangements for the sale of goods
entered into by the Borrower or any Restricted Subsidiary in the ordinary
course of business;

 

7

 

(xx)                              Liens
in favor of the Borrower or the Guarantors;

 

(xxi)                           Liens
on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or
other obligations of such Unrestricted Subsidiary;

 

(xxii)                        Liens of a
bank, broker or securities intermediary on whose records a deposit account or
securities account is maintained securing the payment of customary fees and
commissions to the bank, broker or securities intermediary or, which respect to
a deposit account, items deposited but returned unpaid;

 

(xxiii)                     Liens on the
assets of Non-Guarantor Subsidiaries securing Indebtedness of the Borrower or
its Restricted Subsidiaries that was permitted by the terms of this Agreement
to be incurred;

 

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

 

(xxv)                       Liens
incurred in the ordinary course of business of the Borrower or any Subsidiary
of the Borrower with respect to obligations that do not exceed (A) $5.0 million
at any one time outstanding prior to the Initial Call Termination Date and (B)
thereafter, $15.0 million at any one time outstanding.

 

“Commission” means the Securities and
Exchange Commission.

 

“Congress Credit Facility” means the Loan
and Security Agreement, dated as of December 23, 2002 by and among the
Borrower, J. Crew Inc., Grace Holmes, Inc. and H.F.D. No. 55, Inc., as
borrowers, Congress Financial Corporation, as administrative and collateral
agent, and certain other parties named therein, including any related notes,
Guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, extended, modified, renewed,
refunded, replaced or refinanced from time to time, whether or not by the same
or any other agent, lender or group of lenders.

 

“Congress Credit Facility Amendment No. 3”
means the Amendment No. 3, dated as of November 21, 2004 to the Congress Credit
Facility.

 

“Consolidated Cash Flow” means, with
respect to any specified Person for any period, the Consolidated Net Income of
such Person for such period plus, without duplication and to the extent
deducted in determining such Consolidated Net Income, the amounts for such
period of:

 

(i)                                     the Fixed Charges of such Person and its Restricted
Subsidiaries for such period;

 

(ii)                                  the consolidated income tax expense of such Person and its
Restricted Subsidiaries for such period;

 

(iii)                               fees,
costs and expenses paid or payable in cash by the Borrower or any of its
Subsidiaries during such period in connection with the incurrence of the Loans
and the

 

8

 

Loan
Guarantees or the exchange of the Loans and the Loan Guarantees for the
Exchange Notes and the Exchange Note Guarantees;

 

(iv)                              any management fees to be paid or payable by the Borrower
and any of its Subsidiaries during such period to any Permitted Holder not to
exceed $2.0 million in any fiscal year;

 

(v)                                 non-recurring redundancy and restructuring charges;

 

(vi)                              other
non-cash expenses and charges for such period reducing Consolidated Net Income
(excluding any such non-cash item to the extent representing an accrual or
reserve for potential cash items in any future period or amortization of a
prepaid cash item that was paid in a prior period);

 

(vii)                           any
non-recurring out-of-pocket expenses or charges for such period relating to any
offering of Equity Interests by the Borrower or any direct or indirect parent
of the Borrower, any Asset Sale, Investment or merger, recapitalization or
acquisition transactions made by the Borrower or any of its Restricted
Subsidiaries or any direct or indirect parent of the Borrower, or any
Indebtedness incurred by the Borrower or any of its Restricted Subsidiaries or
any direct or indirect parent of the Borrower (in each case, whether or not
successful);

 

(viii)                        Net Income
attributable to minority interests of a Restricted Subsidiary of the Borrower
that is not a Wholly Owned Subsidiary; and

 

(ix)                                all
depreciation and amortization charges (including the amortization of any
premiums, fees or expenses incurred in connection with the incurrence of the
Loans and the Loan Guarantees or the exchange of the Loans and the Loan
Guarantees for the Exchange Notes and the Exchange Note Guarantees and the amortization
of any amounts required or permitted by Accounting Principles Board Opinions
Nos. 16 (including non-cash write-ups and non-cash charges relating to
inventory and fixed assets) and 17 (including non-cash charges relating to
intangibles and goodwill)), other than in respect of the amortization of
prepaid cash expenses that were paid in a prior period;

 

minus,
without duplication, other non-cash items (other than the accrual of revenue in
accordance with GAAP consistently applied in the ordinary course of business)
increasing Consolidated Net Income for such items (excluding any such non-cash
item to the extent it represents the reversal of an accrual or reserve for
potential cash items in any prior period).

 

“Consolidated Net Income” means, with
respect to any specified Person for any period, the aggregate of the Net Income
of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP, provided that:

 

(i)                                     the
Net Income (but not loss) of any Person that is not a Restricted Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
specified Person or a Restricted Subsidiary thereof;

 

9

 

(ii)                                  the
Net Income of any Restricted Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or other distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders;

 

(iii)                               any gain or loss, together with any related provision for
taxes on such gain or loss, realized in connection with (A) any Asset Sale or
(B) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries will be excluded;

 

(iv)                              any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss will be excluded;

 

(v)                                 all non-recurring or unusual gains and losses and all
restructuring charges will be excluded;

 

(vi)                              income or losses attributable to discontinued operations and
ownership interests therein (including, without limitation, operations disposed
during such period whether or not such operations were classified as
discontinued) will be excluded;

 

(vii)                           any non-cash impact of capitalized interest on Subordinated
Shareholder Funding will be excluded;

 

(viii)                        any non-cash charges attributable to applying the purchase
method of accounting will be excluded;

 

(ix)                                all
non-cash charges relating to employee benefit or other management or stock
compensation plans of the Borrower or a Restricted Subsidiary of the Borrower
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization of a
prepaid cash expense incurred in a prior period) will be excluded to the extent
that such non-cash charges are deducted in computing such Consolidated Net
Income; provided,  further,
that if the Borrower or any Restricted Subsidiary of the Borrower makes a cash
payment in respect of such non-cash charge in any period, such cash payment
will (without duplication) be deducted from the Consolidated Net Income of the
Borrower for such period;

 

(x)                                   the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded; and

 

(xi)                                the cumulative effect of a change in accounting principles
shall be excluded.

 

“Consolidated Total
Indebtedness to Consolidated Cash Flow Ratio” means, with respect to
the Borrower as of any determination date, the ratio of the aggregate amount of
Total Indebtedness for the Borrower as of such determination date to
Consolidated Cash Flow for the

 

10

 

Borrower
for the four most recent full fiscal quarters for which financial statements
are available ending prior to such determination date.

 

In addition, for purposes
of calculating Consolidated Total
Indebtedness to Consolidated Cash Flow Ratio:

 

(i)                                     Investments,
acquisitions, mergers, consolidations and dispositions that have been made by
the specified Person or any of its Restricted Subsidiaries, or any Person or
any of its Restricted Subsidiaries acquired by, merged or consolidated with the
specified Person or any of its Restricted Subsidiaries, and including any
related financing transactions and including increases in ownership of
Restricted Subsidiaries, during the four-quarter reference period or subsequent
to such reference period and on or prior to such determination date shall be given pro
forma effect and deemed to have occurred on the first day of the
four-quarter reference period, and Consolidated Cash Flow and Fixed Charges for
such reference period shall reflect any pro
forma expense and cost reductions attributable to any such
transactions;

 

(ii)                                  the
Total Indebtedness and Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
(and ownership interests therein) disposed of prior to such determination date, shall be excluded,
and Total Indebtedness and Consolidated Cash Flow for such reference period
shall reflect any pro forma
expense or cost reductions relating to such discontinuance or disposition;

 

(iii)                               the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses (and ownership interests
therein) disposed of prior to such determination date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the specified Person or any of its Subsidiaries following
such determination date;

 

(iv)                              any Person that is a Restricted Subsidiary on the
determination date will be deemed to have been a Restricted Subsidiary at all
times during such four-quarter reference period;

 

(v)                                 any
Person that is not a Restricted Subsidiary on the determination date will be
deemed not to have been a Restricted Subsidiary at any times during such
four-quarter reference period; and

 

(vi)                              if any Indebtedness bears a floating rate of interest, the
interest expense on such Indebtedness shall be calculated as if the rate in
effect on the determination date had been the applicable rate for the entire
period (taking into account any Hedging Obligations applicable to such
Indebtedness).

 

For purposes of this
definition, whenever pro forma effect
is given to a transaction, the pro forma
calculations shall be made in good faith by the chief financial officer of the
Borrower in an Officer’s Certificate. 
For purposes of determining whether any Indebtedness constituting a
Guarantee may be incurred, the interest on the Indebtedness to be guaranteed
shall be included in calculating the Consolidated Total Indebtedness to
Consolidated Cash Flow Ratio on a pro forma

 

11

 

basis.  Interest on a Capital Lease Obligation shall
be deemed to accrue at an interest rate reasonably determined by a responsible
financial or accounting officer of the Borrower to be the rate of interest
implicit in such Capital Lease Obligation in accordance with GAAP.  Interest on Indebtedness that may optionally
be determined at an interest rate based upon a factor of a prime or similar
rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to
have been based upon the rate actually chosen, or, if none, then based upon
such optional rate chosen as the Borrower may designate.

 

“Corporate Trust Office of the Administrative Agent”
shall be at the address of the Administrative Agent specified in Section 13.01
hereof or such other address as to which the Administrative Agent may give
notice to the Borrower.

 

“Credit Agent” means Congress Financial
Corporation, in its capacity as administrative and collateral agent for the
lenders party to the Congress Credit Facility or any successor thereto, or any
Person at any time becoming the “Senior Credit Agent” under the Intercreditor
Agreement pursuant to the terms thereof.

 

“Credit Documents” means any of this
Agreement, the Loan Notes, the Loan Guarantees, the Intercreditor Agreement,
the Security Documents, the Congress Credit Facility Amendment No. 3, the
Amendment No. 1, dated as of November 21, 2004 to the Credit Agreement, dated
as of February 4, 2003 by and among TPG-MD INVESTMENT, LLC, as Lender, the
Borrower, Holdings and the Guarantors (the “TPG-MD Credit Agreement Amendment”),
the Letter Agreement dated as of November 21, 2004 by and among the Borrower,
Private Capital Partners LLC and Canpartners Investment IV, LLC relating to
certain fees payable, certain transfer restrictions and other matters described
therein and all other documents, instruments or agreements executed and
delivered by the Borrower or the Guarantors for the benefit of the Lenders in
connection herewith.

 

“Credit Facilities” means one or more debt
facilities (including, without limitation, the Congress Credit Facility and
this Agreement) or commercial paper facilities, in each case, with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit or any other Indebtedness, in each case, as
amended, restated, modified, renewed, refunded, replaced (whether upon or after
termination or otherwise) or refinanced (including by means of sales of debt
securities and including any amendment, restatement, modification, renewal,
refunding, replacement or refinancing that increases the amount borrowed
thereunder or extends the maturity thereof) in whole or in part from time to
time, whether or not by the same or any other agent, lender or group of
lenders.

 

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

 

“Designated Noncash Consideration” means any non-cash
consideration received by the Borrower or a Restricted Subsidiary of the
Borrower in connection with an Asset Sale that is designated as Designated
Noncash Consideration pursuant to an Officer’s Certificate, executed by the
president and the principal financial officer of the Borrower.

 

12

 

“Designated Preferred Stock” means preferred stock of
the Borrower (other than Disqualified Stock), that is issued for cash (other
than to a Restricted Subsidiary of the Borrower) and is so designated as
Designated Preferred Stock, pursuant to an Officer’s Certificate executed on
the date of such issuance.

 

“Designated Senior Debt” means (i) any
Senior Debt outstanding under any Credit Facility and (ii) any other Senior
Debt permitted under this Agreement the principal amount of which is $25.0
million or more and that has been designated as “Designated Senior Debt.”

 

“Discharge of First-Lien Obligations” means
payment in full in cash of the principal of and interest and premium, if any,
on all Indebtedness in respect of the outstanding First-Lien Obligations or,
with respect to Hedging Obligations or letters of credit outstanding
thereunder, delivery of cash collateral or backstop letters of credit in
respect thereof in compliance with such First-Lien Obligations, in each case
after or concurrently with termination of all commitments to extend credit
thereunder, and payment in full in cash of any other Obligations in respect of
the First-Lien Obligations that are due and payable or otherwise accrued and
owing.

 

“Disqualified Stock” means any
Capital Stock that, by its terms (or by the terms of any security into which it
is convertible, or for which it is exchangeable, in each case, at the option of
the holder of the Capital Stock), or upon the happening of any event, matures
or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder of the Capital Stock, in
whole or in part, on or prior to the date that is ninety (90) days after the
date on which the Loans mature.

 

Notwithstanding the
preceding sentence, (i) any Capital Stock that would constitute Disqualified
Stock solely because the holders of the Capital Stock have the right to require
the Borrower or its Subsidiary that issued such Capital Stock to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
will not constitute Disqualified Stock, (ii) any Capital Stock that would
constitute Disqualified Stock solely as a result of any redemption feature that
is conditioned upon, and subject to, compliance with Section 4.06 hereof shall
not constitute Disqualified Stock and (iii) any Capital Stock issued to any
plan for the benefit of employees will not constitute Disqualified Stock solely
because it may be required to be repurchased by the Borrower or its Subsidiary
that issued such Capital Stock in order to satisfy applicable statutory or
regulatory obligations.  The amount of
Disqualified Stock deemed to be outstanding at any time for purposes of this
Agreement will be the maximum amount that the Borrower and its Restricted
Subsidiaries may become obligated to pay upon the maturity of, or pursuant to
any mandatory redemption provisions of, such Disqualified Stock.

 

“Effective Date” means the date of
execution of this Agreement.

 

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

 

“Equity Offering” means a public or private
offering of Qualified Capital Stock of the Borrower or a direct or indirect
parent or a Subsidiary of the Borrower.

 

“Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

13

 

“Exchange Date” means the date on which the
Exchange Notes are exchanged for the outstanding Loans pursuant to Section 2.10.

 

“Exchange Notes” means any of the Borrower’s
93⁄4% Senior Subordinated Notes to be issued, authenticated and delivered
pursuant to the Indenture.

 

“Exchange Note Guarantees” means the
Guarantee by each Guarantor of the Borrower’s obligations under the Exchange
Notes and the Indenture.

 

“Exchange Triggering Event” means the date
on which Intermediate and its Restricted Subsidiaries are no longer subject to
the terms of the indenture governing the Senior Discount Contingent Principal
Notes as a result of defeasance, redemption, repurchase, retirement or
repayment of the Senior Discount Contingent Principal Notes on or prior to
their stated maturity.

 

“Excluded Contributions” means net cash proceeds,
marketable securities or Qualified Proceeds received by the Borrower from (i)
contributions to its common equity capital, including Subordinated Shareholder
Funding and (ii) the sale (other than to a Subsidiary of the Borrower or
to any management equity plan or stock option plan or any other management or
employee benefit plan or agreement of the Borrower) of Equity Interests (other than
Disqualified Stock and Designated Preferred Stock) of the Borrower, in each
case designated as Excluded Contributions pursuant to an Officer’s Certificate
on the date such capital contributions are made or the date such Equity
Interests are sold, as the case may be, that are excluded from the calculation
set forth in clause (C) of Section 4.06(a)(iv) hereof.

 

“Existing Debentures” means the 131⁄8%
Senior Discount Debentures due 2008 issued by Holdings.

 

“Existing Indebtedness” means Indebtedness
existing on the Effective Date, plus interest accruing thereon.

 

“Fair Market Value” means the value that
would be paid by a willing buyer to an unaffiliated willing seller in a
transaction not involving distress or necessity of either party, determined in
good faith by the Board of Directors, chief executive officer or chief
financial officer of the Borrower.

 

“Federal Funds Effective Rate” means, for
any day, the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for such day for such transactions
received by the Administrative Agent from three (3) Federal funds brokers of
recognized standing selected by the Administrative Agent.

 

“Final Maturity Date” means the tenth
anniversary of the Closing Date.

 

“First-Lien Obligations” means all Obligations
under (i) the Congress Credit Facility and (ii) any other Indebtedness that
constitutes Senior Debt permitted to be incurred under this Agreement that,
pursuant to its terms, is secured by Liens on property and assets that
constitute

 

14

 

Collateral hereunder and,
except for the Congress Credit Facility, is designated by the Borrower as
constituting “First-Lien Obligations” for the purposes of this Agreement.

 

“Fixed Charge Coverage Ratio” means with
respect to any Person for any period, the ratio of the Consolidated Cash Flow
of such Person for such period to the Fixed Charges of such Person for such
period.  In the event that the specified
Person or any of its Restricted Subsidiaries incurs, assumes, guarantees,
repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness
(other than ordinary working capital borrowings) or issues, repurchases or
redeems preferred stock or Disqualified Stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated and
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee,
repayment, repurchase, redemption, defeasance or other discharge of
Indebtedness, or such issuance, repurchase or redemption  of preferred stock or Disqualified Stock, and
the use of proceeds therefrom, as if the same had occurred at the beginning of
the applicable four-quarter reference period.

 

In addition, for purposes of calculating the Fixed
Charge Coverage Ratio:

 

(i)                                     Investments,
acquisitions, mergers, consolidations and dispositions that have been made by
the specified Person or any of its Restricted Subsidiaries, or any Person or
any of its Restricted Subsidiaries acquired by, merged or consolidated with the
specified Person or any of its Restricted Subsidiaries, and including any
related financing transactions and including increases in ownership of
Restricted Subsidiaries, during the four-quarter reference period or subsequent
to such reference period and on or prior to the Calculation Date shall be given
pro forma effect and deemed to
have occurred on the first day of the four-quarter reference period, and
Consolidated Cash Flow and Fixed Charges for such reference period shall
reflect any pro forma expense and
cost reductions attributable to any such transactions;

 

(ii)                                  the
Consolidated Cash Flow and Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
(and ownership interests therein) disposed of prior to the Calculation Date,
shall be excluded, and Consolidated Cash Flow and Fixed Charges for such
reference period shall reflect any pro forma
expense or cost reductions relating to such discontinuance or disposition;

 

(iii)                               the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses (and ownership interests
therein) disposed of prior to the Calculation Date, shall be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges will not
be obligations of the specified Person or any of its Subsidiaries following the
Calculation Date;

 

(iv)                              any Person that is a Restricted Subsidiary on the
Calculation Date will be deemed to have been a Restricted Subsidiary at all
times during such four-quarter reference period;

 

15

 

(v)                                 any
Person that is not a Restricted Subsidiary on the Calculation Date will be
deemed not to have been a Restricted Subsidiary at any times during such
four-quarter reference period; and

 

(vi)                              if any Indebtedness bears a floating rate of interest, the
interest expense on such Indebtedness will be calculated as if the rate in
effect on the Calculation Date had been the applicable rate for the entire
period (taking into account any Hedging Obligation applicable to such
Indebtedness).

 

For purposes of this
definition, whenever pro forma
effect is given to a transaction, the pro
forma calculations shall be made in good faith by the chief
financial officer of the Borrower in an Officer’s Certificate.  For purposes of determining whether any
Indebtedness constituting a Guarantee may be incurred, the interest on the
Indebtedness to be guaranteed shall be included in calculating the Fixed Charge
Coverage Ratio on a pro forma
basis.  Interest on a Capital Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
by a responsible financial or accounting officer of the Borrower to be the rate
of interest implicit in such Capital Lease Obligation in accordance with GAAP.  For purposes of making the computation
referred to above, interest on any Indebtedness under a revolving credit
facility computed on a pro forma
basis shall be computed based upon the average daily balance of such
Indebtedness during the applicable period. 
Interest on Indebtedness that may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rate, shall be deemed to have been based upon
the rate actually chosen, or, if none, then based upon such optional rate
chosen as the Borrower may designate.

 

“Fixed Charges”
means, with respect to any specified Person for any period, the sum, without
duplication, of:

 

(i)                                     the
consolidated interest expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued (including, without limitation,
original issue discount, non-cash interest payments (but excluding capitalized
interest in relation to Subordinated Shareholder Funding), the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers’
acceptance financings, and net cash payments (if any) pursuant to Hedging
Obligations in respect of interest rates); provided, however,
that in no event shall any amortization of any deferred financing costs be
included in Fixed Charges; plus

 

(ii)                                  the
consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period (but excluding capitalized interest in
relation to Subordinated Shareholder Funding); plus

 

(iii)                               any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon); plus

 

16

 

(iv)                              the
product of (A) (without duplication) (1) all dividends paid or
accrued in respect of Disqualified Stock which are not included in the interest
expense of such Person for tax purposes for such period and (2) all cash
dividend payments on any series of preferred stock of such Person or any of its
Restricted Subsidiaries (other than to the Borrower or a Restricted Subsidiary
of the Borrower), times (B) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.

 

“GAAP” means generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on the
Effective Date.

 

“Guarantee” means a guarantee other than by
endorsement of negotiable instruments for collection in the ordinary course of
business, direct or indirect, in any manner including, without limitation, by
way of a pledge of assets or through letters of credit or reimbursement
agreements in respect thereof, of all or any part of any Indebtedness (whether
arising by virtue of partnership arrangements, or by agreements to keep-well,
to purchase assets, goods, securities or services, to take or pay or to
maintain financial statement conditions or otherwise).

 

“Guarantor” means each Subsidiary of the
Borrower that executes a Loan Guarantee in accordance with the provisions of
this Agreement, and their respective successors and assigns, in each case,
until the Loan Guarantee of such Person has been released in accordance with
the provisions of this Agreement.

 

“Hedging Obligations” means, with respect to any
specified Person, the obligations of such Person under (i) interest rate swap
agreements (whether from fixed to floating or from floating to fixed), interest
rate cap agreements and interest rate collar agreements; (ii) other agreements
or arrangements designed to manage interest rates or interest rate risk; and (iii)
other agreements or arrangements designed to protect such Person against
fluctuations in currency exchange rates or commodity prices.

 

“Holdings” means J. Crew Group, Inc., a New
York corporation.

 

“Indebtedness” means, with respect to any specified
Person, the principal and premium (if any) of any indebtedness of such Person
(excluding accrued expenses and trade payables), whether or not contingent:

 

(i)                                     in respect of borrowed money;

 

(ii)                                  evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) (other
than letters of credit issued in respect of trade payables);

 

(iii)                               in respect of banker’s acceptances;

 

(iv)                              representing Capital Lease Obligations;

 

17

 

(v)                                 representing
the balance deferred and unpaid of the purchase price of any property or
services due more than twelve (12) months after such property is acquired or
such services are completed (except any such balance that constitutes a trade
payable or similar obligation to a trade creditor); or

 

(vi)                              representing the net obligations under any Hedging
Obligations,

 

if and
to the extent any of the preceding items (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP.  In addition, the term “Indebtedness” includes
all Indebtedness of others secured by a Lien on any asset of the specified
Person (whether or not such Indebtedness is assumed by the specified Person)
and, to the extent not otherwise included, the Guarantee by the specified
Person of any Indebtedness of any other Person.

 

“Indenture” means the Indenture, to be
dated as of the Exchange Date by and among the Borrower, the guarantors named
therein, and US Bank National Association, as trustee, as amended or
supplemented from time to time, relating to the Borrower’s 93⁄4% Senior
Subordinated Notes due 2014, substantially in the form of Exhibit F
hereto.

 

“Initial Call Termination Date” means the
earlier of (i) the date which is eighteen (18) months following the Closing
Date and (ii) the date on which the Borrower elects to terminate its right to
prepay the Loans pursuant to clause (i) of Section 3.07(a).

 

“Intercreditor Agreement” means (i) the
Intercreditor Agreement, dated as of November 21, 2004, among the Borrower, the
Guarantors, Intermediate, Congress Financial Corporation, as senior credit
agent, and the Collateral Agent, as amended, supplemented or otherwise modified
from time to time and (ii) any substantially identical agreement hereafter
entered into pursuant to Section 11.07(c).

 

“Intermediate” means J. Crew Intermediate
LLC, a Delaware limited liability company.

 

“Investments” means, with respect to any Person, all direct
or indirect investments by such Person in other Persons (including Affiliates)
in the forms of loans (including Guarantees or other obligations), advances or
capital contributions (excluding commission, travel, relocation and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with
GAAP.  If the Borrower or any Restricted
Subsidiary of the Borrower sells or otherwise disposes of any Equity Interests
of any direct or indirect Restricted Subsidiary of the Borrower such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Borrower, the Borrower will be deemed to have made an
Investment on the date of any such sale or disposition equal to the Fair Market
Value of the Borrower’s Investments in such Subsidiary that were not sold or
disposed of in an amount determined as provided in Section 4.06(d) hereof.  The acquisition by the Borrower or any
Restricted Subsidiary of the Borrower of a Person that holds an Investment in a
third Person will be deemed to be an Investment by the Borrower or such
Restricted Subsidiary in such third Person in an amount equal to the Fair
Market Value of the Investments held by the acquired

 

18

 

Person in such
third Person in an amount determined as provided in Section 4.06(d)
hereof.  The outstanding amount of any
Investment shall be the original cost thereof, reduced by all returns on such
Investment (including dividends, interest, distributions, returns
of principal and profits on sale).

 

“Lender” means a Person in whose name a
Loan is registered.

 

“Legal Holiday” means a Saturday, a Sunday
or a day on which banking institutions in the City of New York, the city in
which the principal Corporate Trust Office of the Administrative Agent is located
or at a place of payment are authorized by law, regulation or executive order
to remain closed.  If a payment date is a
Legal Holiday at a place of payment, payment shall be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.

 

“Lien” means, with respect to any asset,
any mortgage, lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any option or other
agreement to sell or give a security interest therein).

 

“Loan” or “Loans”
means one or more of the Loans made to the Borrower pursuant to Article 2,
including any Additional Loans.

 

“Loan Notes” means any of the Borrower’s
notes issued pursuant to this Agreement, including any replacement Loan Notes
and Additional Loan Notes.

 

“Loan Guarantees” means the Guarantee,
substantially in the form of Exhibit B hereto, by each Guarantor of the
Borrower’s obligations under the Loans and this Agreement, executed pursuant to
Article 2 and Article 12.

 

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

 

“Net Proceeds” means the aggregate cash proceeds
received by the Borrower or any of its Restricted Subsidiaries in respect of
any Asset Sale (including, without limitation, any cash received upon the sale
or other disposition of any non-cash consideration received in any Asset Sale),
net of the direct costs relating to such Asset Sale, including, without
limitation, legal, accounting and investment banking fees, payments made in
order to obtain a necessary consent or required by applicable law, and sales
commissions, and any relocation expenses incurred as a result of the Asset
Sale, taxes paid or payable as a result of the Asset Sale, including taxes
resulting from the transfer of the proceeds of such Asset Sale to the Borrower,
in each case, after taking into account:

 

(i)                                     any available tax credits or deductions and any payments
that are required to be made under tax sharing arrangements (including the Tax
Sharing Agreement);

 

19

 

(ii)                                  amounts required to be applied to the repayment of
Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets
that were the subject of such Asset Sale;

 

(iii)                               any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP;

 

(iv)                              any reserve for adjustment in respect of any liabilities
associated with the asset disposed of in such transaction and retained by the
Borrower or any Restricted Subsidiary of the Borrower after such sale or other
disposition thereof;

 

(v)                                 any
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Sale; and

 

(vi)                              in
the event that a Restricted Subsidiary of the Borrower consummates an Asset
Sale and makes a pro rata payment
of dividends to all of its stockholders from any cash proceeds of such Asset
Sale, the amount of dividends paid to any stockholder other than the Borrower
or any other Restricted Subsidiary of the Borrower; provided  that any net proceeds of an Asset Sale by
a Non-Guarantor Subsidiary that are subject to restrictions on repatriation to
the Borrower will not be considered Net Proceeds for so long as such proceeds
are subject to such restrictions.

 

“Non-Guarantor Subsidiary” means, subject to Section
4.16, (A) any Unrestricted Subsidiary, (B) any Receivables Subsidiary and (C)
any Subsidiary of the Borrower that does not guarantee any Indebtedness under
the Congress Credit Facility.  The Board
of Directors of the Borrower may designate any Restricted Subsidiary as a
Non-Guarantor Subsidiary by filing with the Administrative Agent a certified
copy of a resolution of such Board of Directors giving effect to such
designation and an Officer’s Certificate certifying as to the applicable clause
of the immediately preceding sentence that warrants such designation.  In addition, if a Guarantor that is a
guarantor under the Congress Credit Facility is released from its Guarantee of
the Congress Credit Facility, it shall be released automatically from its Loan
Guarantee and will be a Non-Guarantor Subsidiary.

 

“Non-Recourse Debt” means Indebtedness (i) as to which
neither the Borrower nor any of its Restricted Subsidiaries (A) provides credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (B) is directly or indirectly liable as a
guarantor or otherwise, or (C) constitutes the lender; (ii) no default
with respect to which (including any rights that the holders of the
Indebtedness may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of any
other Indebtedness of the Borrower or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment of such other
Indebtedness to be accelerated or payable prior to its Stated Maturity; and
(iii) as to which the lenders have been notified in writing or have agreed in
writing (in the agreement relating thereto or otherwise) that they will not
have any recourse to the stock or assets of the Borrower or any of its
Restricted Subsidiaries.

 

“Obligations” means, with respect to any
Indebtedness, any principal, interest, penalties, fees, indemnifications,
reimbursements, damages, costs, expenses and other liabilities payable under
the documentation governing any Indebtedness, including the payment of interest
at the

 

20

 

rate provided in such
documentation that would be applicable and other reasonable fees, costs or
charges which would accrue and become due but for the commencement of any case
in bankruptcy, in each case as to such interest or other amounts whether or not
allowed or allowable in whole or in part in such case.

 

“Officer” means, with respect to any
Person, the Chairman of the Board, the Chief Executive Officer, the President,
the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Controller, the Secretary or any Vice-President of
such Person.

 

“Officer’s Certificate” means, with respect
of any Person, a certificate signed on behalf of such Person by one Officer of
such Person, who must be the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of such
Person that meets the requirements of Section 13.08 hereof.

 

“Opinion of Counsel” means an opinion from
legal counsel that meets the requirements of Section 13.08 hereof.  The counsel may be an employee of or counsel
to the Borrower or any Subsidiary of the Borrower.

 

“Other Second-Lien Obligations” means all
Obligations under (i) the Senior Discount Contingent Principal Notes and (ii)
any Indebtedness permitted to be incurred under this Agreement that, pursuant
to its terms, is secured by Liens on property and assets that constitute
Collateral hereunder and is designated by the Borrower as “Other Second-Lien
Obligations” for the purposes of this Agreement.

 

“Permitted Business” means (i) any
business engaged in by the Borrower or any of its Restricted Subsidiaries on
the Effective Date, (ii) any business or other activities that are
reasonably similar, ancillary, complementary or related to, or a reasonable
extension, development or expansion of, the businesses in which the Borrower
and its Restricted Subsidiaries are engaged on the Effective Date and (iii) the
design, manufacture, importing, exporting, distribution, marketing, licensing
and wholesale and retail sale of apparel, housewares, home furnishings and
related items.

 

“Permitted Holders” means, collectively,
(i) TPG Partners II, L.P. and its Affiliates, (ii) Millard S. Drexler and his
immediate family members and (iii) trusts for the benefit of any of the
foregoing Persons, or any of their heirs, executors, successors or legal
representatives.

 

“Permitted
Investments” means:

 

(i)                                     any Investment in the Borrower or in a Restricted Subsidiary
of the Borrower (other than a Receivables Subsidiary);

 

(ii)                                  any Investment in cash and Cash Equivalents;

 

(iii)                               any
Investment by the Borrower or any Restricted Subsidiary of the Borrower in a
Person, if as a result of such Investment (A) such Person becomes a
Restricted Subsidiary of the Borrower (other than a Receivables Subsidiary) or
(B) such Person, in one transaction or a series of transactions, is
merged, consolidated or

 

21

 

amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Borrower or a Restricted Subsidiary of the Borrower (other
than a Receivables Subsidiary);

 

(iv)                              any
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.09
hereof;

 

(v)                                 any Investment solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Borrower;

 

(vi)                              any
Investments received in compromise, settlement or resolution of (A) obligations
of trade creditors or customers that were incurred in the ordinary course of
business of the Borrower or any of its Restricted Subsidiaries, including
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any trade creditor or customer,
(B) litigation, arbitration or other disputes with Persons who are not
Affiliates or (C) as a result of a foreclosure by the Borrower or any
Restricted Subsidiary of the Borrower with respect to any secured Investment or
other transfer of title with respect to any secured Investment in default;

 

(vii)                           Investments
represented by Hedging Obligations;

 

(viii)                        any
Investment in payroll, travel and similar advances to cover business-related
travel expenses, moving expenses or other similar expenses, in each case
incurred in the ordinary course of business;

 

(ix)                                Investments
in receivables owing to the Borrower or any Restricted Subsidiary of the
Borrower if created or acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the
Borrower or any such Restricted Subsidiary deems reasonable under the
circumstances;

 

(x)                                   Investments
in prepaid expenses, negotiable instruments held for collection and lease,
utility and workers’ compensation, performance and similar deposits entered
into as a result of the operations of the business in the ordinary course of
business;

 

(xi)                                obligations
of one or more officers or other employees of the Borrower or any of its
Restricted Subsidiaries in connection with such officer’s or employee’s
acquisition of shares of common stock of the Borrower so long as no cash or
other assets are paid by the Borrower or any of its Restricted Subsidiaries to
such officers or employees in connection with the acquisition of any such
obligations;

 

(xii)                             loans or advances to and Guarantees provided for the benefit
of employees made in the ordinary course of business of the Borrower or the
Restricted Subsidiary of the Borrower in an aggregate principal amount not to
exceed $5.0 million at any one time outstanding;

 

22

 

(xiii)                          Investments
existing as of the Effective Date or an Investment consisting of any extension,
modification or renewal of any Investment existing as of the Effective Date
(excluding any such extension, modification or renewal involving additional
advances, contributions or other investments of cash or property or other
increases thereof unless it is a result of the accrual or accretion of interest
or original issue discount or payment-in-kind pursuant to the terms, as of the
Effective Date, of the original Investment so extended, modified or renewed);

 

(xiv)                         prepayments of the Loans;

 

(xv)                            the
acquisition by a Receivables Subsidiary in connection with a Qualified
Receivables Transaction of Equity Interests of a trust or other Person
established by such Receivables Subsidiary to effect such Qualified Receivables
Transaction;

 

(xvi)                         any other
Investment by the Borrower or a Subsidiary of the Borrower in a Receivables
Subsidiary or any Investment by a Receivables Subsidiary in any other Person in
connection with a Qualified Receivables Transaction customary for such
transactions;

 

(xvii)                      Guarantees
permitted to be incurred by Section 4.08;

 

(xviii)                   joint ventures
(A) engaged in a Permitted Business or (B) for the purpose of outsourcing the
internal administrative functions of the Borrower or any of its Restricted
Subsidiaries; provided, however, that all Investments permitted
pursuant to this clause (xviii) shall not exceed, at any time outstanding,
$15.0 million in the aggregate;

 

(xix)                           Investments
held by a Person (other than an Affiliate) that becomes a Restricted
Subsidiary, provided that (A) such Investments were not acquired in
contemplation of the acquisition of such Person and (B) at the time such Person
becomes a Restricted Subsidiary, such Investments would not, individually or in
the aggregate, constitute a Significant Subsidiary of such acquired Person;

 

(xx)                              Investments
made with Excluded Contributions;

 

(xxi)                           Investments
in any Person where such Investment was acquired by the Borrower or any of its
Restricted Subsidiaries in exchange for any other Investment or accounts
receivable held by the Borrower or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or accounts receivable;
and

 

(xxii)                        other
Investments in any Person having an aggregate Fair Market Value (measured on
the date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (xxii) that are at the time outstanding not to exceed (A) $10.0
million prior to the Initial Call Termination Date and (B) thereafter, $25.0
million; provided, however, that if any Investment pursuant to
this clause (xxii) is made in any Person that is not a Restricted Subsidiary of
the Borrower at the date of the making of such Investment and such Person
becomes a Restricted Subsidiary of the Borrower after

 

23

 

such date, such
Investment shall thereafter be deemed to have been made pursuant to clause (i)
above and shall cease to have been made pursuant to this clause (xxii) for so
long as such Person continues to be a Restricted Subsidiary of the Borrower (it
being understood that if such Person thereafter ceases to be a Restricted
Subsidiary of the Borrower, such Investment will again be deemed to have been
made pursuant to this clause (xxii)) and provided, further, if
any Investment made pursuant to this clause (xxii) is subsequently sold or
repaid for cash or Cash Equivalents, the amount available under this clause
(xxii) for future Investments will be increased by the amount of cash or Cash
Equivalents received from such sale or repayment.

 

“Permitted Refinancing Indebtedness” means any
Indebtedness of the Borrower or any of its Restricted Subsidiaries issued in
exchange for, or the net proceeds of which are used to extend, renew, refund,
refinance, prepay, replace, defease or discharge other Indebtedness of the
Borrower or any of its Restricted Subsidiaries (other than intercompany
Indebtedness); provided  that:

 

(i)                                     the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness extended, renewed, refunded,
refinanced, prepaid, replaced, defeased or discharged (plus all accrued
interest on the Indebtedness and the amount of all fees, commissions, discounts
and expenses, including premiums, incurred in connection therewith);

 

(ii)                                  if
such Indebtedness is not Senior Debt, either (A) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended, renewed,
refunded, refinanced, prepaid, replaced, defeased or discharged or (B) all
scheduled payments on or in respect of such Permitted Refinancing Indebtedness
(other than interest payments) shall be at least ninety-one (91) days following
the final scheduled maturity of the Loans; and if such Indebtedness is Senior
Debt and has a final stated maturity later than the final stated maturity of
the Loans, such Permitted Refinancing Indebtedness has a final stated maturity
later than the final maturity of the Loans;

 

(iii)                               if
the Indebtedness being extended, renewed, refunded, refinanced, prepaid,
replaced, defeased or discharged is subordinated in right of payment to the
Loans, such Permitted Refinancing Indebtedness is subordinated in right of
payment to the Loans on terms at least as favorable to the Lenders as those
contained in the documentation governing the Indebtedness being extended,
renewed, refunded, refinanced, replaced, defeased or discharged; and

 

(iv)                              if such Indebtedness is not Senior Debt, such Indebtedness
is incurred

 

(A)                              by the Borrower or by the Restricted Subsidiary who is the
obligor on the Indebtedness being renewed, refunded, refinanced, replaced,
defeased or discharged;

 

(B)                                by any Guarantor if the obligor on the Indebtedness being
renewed, refunded, refinanced, replaced, defeased or discharged is a Guarantor;
or

 

24

 

(C)                                by any Non-Guarantor Subsidiary if the obligor on the
Indebtedness being renewed, refunded, refinanced, replaced, defeased or
discharged is a Non-Guarantor Subsidiary.

 

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

 

“Pro Rata Share” means, with respect to any Lender,
the percentage obtained by dividing (i) the sum of the Term Loan Commitments of
that Lender by (ii) the sum of the aggregate Term Loan Commitments of all
Lenders, in any such case as the applicable percentage may be adjusted by
assignments permitted pursuant to Section 13.04.

 

“Purchase Money Note” means a promissory
note evidencing a line of credit, or evidencing other Indebtedness owed to the
Borrower or any Restricted Subsidiary in connection with a Qualified
Receivables Transaction, which note shall be repaid from cash available to the
maker of such note, other than amounts required to be established as reserves
pursuant to agreement, amounts paid to investors in respect of interest,
principal and other amounts owing to such investors and amounts paid in
connection with the purchase of newly generated receivables.

 

“QIB” means a “qualified institutional
buyer” as defined in Rule 144A under the Securities Act.

 

“Qualified Capital Stock” means any Capital Stock that
is not Disqualified Stock.

 

“Qualified Proceeds” means any of the following or any
combination of the following: (i) Cash Equivalents; (ii) the Fair Market Value
of assets that are used or useful in the Permitted Business; and (iii) the Fair
Market Value of the Capital Stock of any Person engaged primarily in a
Permitted Business if, in connection with the receipt by the Borrower or any of
its Restricted Subsidiaries of such Capital Stock, such Person becomes a Restricted
Subsidiary of the Borrower or such Person is merged or consolidated into the
Borrower or any of its Restricted Subsidiaries; provided  that Qualified Proceeds shall not include
Excluded Contributions.

 

“Qualified Receivables Transaction” means any
transaction or series of transactions entered into by the Borrower or any of
its Subsidiaries pursuant to which the Borrower or any of its Subsidiaries
sells, conveys or otherwise transfers, or grants a security interest, to: (i) a
Receivables Subsidiary (in the case of a transfer by the Borrower or any of its
Subsidiaries, which transfer may be effected through the Borrower or one or
more of its Subsidiaries); and (ii) if applicable, any other Person (in the
case of a transfer by a Receivables Subsidiary), in each case, in any
Receivables of the Borrower or any of its Subsidiaries, and any assets related
thereto, including, without limitation, all collateral securing such
Receivables, all contracts, contract rights and all Guarantees or other
obligations in respect of such Receivables, proceeds of such Receivables and
any other assets, which are customarily transferred or in respect of which
security interests are customarily granted in connection with receivables
financings and asset securitization transactions of such type, together with
any related transactions customarily entered into in a receivables financings
and asset securitizations, including servicing arrangements.

 

25

 

“Receivables” means, with respect to any
Person or entity, all of the following property and interests in property of
such Person or entity, whether now existing or existing in the future or
hereafter acquired or arising: (i) accounts, (ii) accounts receivable
incurred in the ordinary course of business, including, without limitation, all
rights to payment created by or arising from sales of goods, leases of goods or
the rendition of services no matter how evidenced, whether or not earned by
performance, (iii) all rights to any goods or merchandise represented by
any of the foregoing after creation of the foregoing, including, without
limitation, returned or repossessed goods, (iv) all reserves and credit
balances with respect to any such accounts receivable or account debtors, (v) all
letters of credit, security or Guarantees for any of the foregoing,
(vi) all insurance policies or reports relating to any of the foregoing,
(vii) all collection or deposit accounts relating to any of the foregoing,
(viii) all proceeds of the foregoing and (ix) all books and records
relating to any of the foregoing.

 

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

 

“Receivables Subsidiary” means a Subsidiary of the
Borrower which engages in no activities other than in connection with the
financing of accounts receivable and in businesses related or ancillary thereto
and that is designated by the Board of Directors of the Borrower (as provided
below) as a Receivables Subsidiary (i) no portion of the Indebtedness or any
other Obligations (contingent or otherwise) of which: (A) is guaranteed by the
Borrower or any Subsidiary of the Borrower (excluding Guarantees of Obligations
(other than the principal of, and interest on, Indebtedness) pursuant to
representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified Receivables
Transaction), (B) is recourse to or obligates the Borrower or any Subsidiary of
the Borrower in any way other than pursuant to representations, warranties,
covenants and indemnities customarily entered into in connection with a
Qualified Receivables Transaction or (C) subjects any property or asset of the
Borrower or any Subsidiary of the Borrower (other than accounts receivable and
related assets as provided in the definition of Qualified Receivables
Transaction), directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to representations, warranties,
covenants and indemnities customarily entered into in connection with a
Qualified Receivables Transaction; (ii) with which neither the Borrower nor any
Subsidiary of the Borrower has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to the Borrower or such
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Borrower, other than as may be customary in a Qualified
Receivables Transaction including for fees payable in the ordinary course of
business in connection with servicing accounts receivable; and (iii) with which
neither the Borrower nor any Subsidiary of the Borrower has any obligation to
maintain or preserve such Subsidiary’s financial condition or cause such
Subsidiary to achieve certain levels of operating results.  Any such designation by the Board of
Directors of the Borrower will be evidenced to the Administrative Agent by
filing with the Administrative Agent a certified copy of the resolution of the
Board of Directors of the Borrower giving effect to such designation and an
Officer’s Certificate certifying that such designation complied with the
foregoing conditions.

 

26

 

“Related Party” means, with respect to any specified Person,
such Person’s Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person’s Affiliates.

 

“Replacement Preferred Stock” means any
Disqualified Stock or preferred stock of the Borrower or any of its Restricted
Subsidiaries issued in exchange for, or the net proceeds of which are used to
renew, refund, refinance, replace or discharge any other preferred stock of the
Borrower or any of its Restricted Subsidiaries (other than intercompany
preferred stock).

 

“Required Lenders” means, at any time,
Lenders holding a majority in aggregate principal amount of the then
outstanding Loans at such time.

 

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

 

“Restricted Subsidiary” of a Person means
any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

 

“Rule 144A” means Rule 144A
promulgated under the Securities Act or any successor rule.

 

“Securities Act” means the Securities Act
of 1933, as amended.

 

“Security Agreement” means the Security
Agreement dated as of November 21, 2004 among the Borrower, the Guarantors,
Intermediate and the Collateral Agent.

 

“Security Documents” means the Security
Agreement and any other document or instrument pursuant to which a Lien is
granted by the Borrower or any Guarantor to secure any Obligations hereunder or
under which rights or remedies with respect to such Lien are governed, as such
agreements may be amended, modified or supplemented from time to time.

 

“Senior Debt” means:

 

(i)                                     all Indebtedness of the Borrower or any Guarantor
outstanding under the Congress Credit Facility (including post-petition
interest at the rate provided in the documentation with respect thereto,
whether or not allowed as a claim in any bankruptcy proceeding) and all Hedging
Obligations and Treasury Management Obligations with respect thereto;

 

(ii)                                  any
other Indebtedness of the Borrower or any Guarantor permitted to be incurred
under the terms of this Agreement, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Loans; and

 

(iii)                               all Obligations with respect to the foregoing.

 

Notwithstanding
anything to the contrary in the foregoing, Senior Debt will not include (A) the
Loans and the Loan Guarantees, (B) any liability for federal, state, local or
other taxes owed or owing by the Borrower, (C) any Indebtedness of the Borrower
to

 

27

 

any of
its Subsidiaries or other Affiliates, (D) any trade payables, (E) Indebtedness
which is classified as non-recourse in accordance with GAAP or any unsecured
claim arising in respect thereof by reason of the application of Section
1111(b)(1) of the Bankruptcy Code or (F) that portion of any Indebtedness that
is incurred in violation of the Agreement (but only to the extent so incurred);
provided  that Indebtedness
outstanding under the Congress Credit Facility will not cease to be Senior Debt
as a result of this clause (F) if the lenders or agents thereunder obtained a
representation from the Borrower or any of its Subsidiaries on the date such
Indebtedness was incurred to the effect that such Indebtedness was not
prohibited by this Agreement.

 

“Senior Discount Contingent Principal Notes”
means the 16.0% Senior Discount Contingent Principal Notes due 2008 issued by
Intermediate.

 

“Significant Subsidiary” means any
Subsidiary that would be a “significant subsidiary” as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the Effective Date.

 

“Stated Maturity” means, with respect to
any installment of interest or principal on any series of Indebtedness, the
date on which the payment of interest or principal was scheduled to be paid in
the documentation governing such Indebtedness as of the Effective Date, and
shall not include any contingent obligations to repay, redeem or repurchase any
such interest or principal prior to the date originally scheduled for the
payment thereof.

 

“Subordinated Shareholder Funding” means
any Indebtedness of the Borrower (and any security into with such Indebtedness
is converted or for which it is exchangeable at the option of the holder)
issued to and held by a direct or indirect parent of the Borrower or one or
more shareholders of such parent that:

 

(i)                                     does
not mature or require any amortization, redemption or other repayment of
principal or any sinking fund payment prior to the first anniversary of the
Stated Maturity of the Loans (other than through conversion or exchange of such
Indebtedness into Capital Stock (other than Disqualified Stock) of the Borrower
or such parent or any Indebtedness meeting the requirements of this
definition),

 

(ii)                                  does
not require, prior to the first anniversary of the Stated Maturity of the
Loans, payment of cash interest, cash withholding amounts or other gross-ups,
or any similar amounts,

 

(iii)                               does not provide for or require any security interest or
encumbrance over any property and assets of the Borrower or any of its
Restricted Subsidiaries,

 

(iv)                              does not contain any covenants (financial or otherwise)
other than a covenant to pay such Subordinated Shareholder Funding at maturity;
and

 

(v)                                 is
fully subordinated and junior in right of payment to the Loans and the
performance of all obligations under the Agreement and the Security Documents
pursuant to customary subordination terms for similar Indebtedness and
otherwise reflecting the terms above.

 

28

 

“Subsidiary” means, with respect to any specified
Person, (i) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency and after giving effect to any
voting agreement or stockholders’ agreement that effectively transfers voting
power) to vote in the election of directors, managers or trustees of the
corporation, association or other business entity is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and (ii) any
partnership (A) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (B) the only general
partners of which are that Person or one or more Subsidiaries of that Person
(or any combination thereof).

 

“Supplemental
Senior Subordinated Loan Agreement” means the agreement,
substantially in the form of Exhibit D hereto, by each Guarantor of the
Borrower’s obligations under the Loans and this Agreement, executed pursuant to
the provisions of this Agreement.

 

“Tax Sharing Agreement” means the tax
sharing agreement in effect as of the Closing Date among the Borrower,
Intermediate, Holdings and any one or more of subsidiaries of the Borrower, as
amended from time to time, so long as the amount of the Borrower’s (or any of
its Restricted Subsidiaries’) payments for which the Borrower and its Restricted Subsidiaries are
responsible, or the time when such payments are required to be made thereunder
or any other of the Borrower’s
rights, duties, and obligations thereunder are no less favorable to the
Borrower than as provided in such
agreement as in effect on the Effective Date, as determined in good
faith by a majority of the members of the Board of Directors of the Borrower.

 

“Term Loan Commitment” means, as to each
Lender, its obligation to make its portion of the Loan to the Borrower pursuant
to Section 2.01, in the principal amount set forth opposite such Lender’s name
on Schedule 2.01, or in the Assignment and Assumption or New Commitment
Agreement, as applicable, pursuant to which such Lender becomes a party
hereto.  The aggregate principal amount
of the Term Loan Commitments of all of the Lenders on the Closing Date is
$275.0 million.

 

“Total
Indebtedness”  means, with respect to the Borrower, as of
any date of determination, an amount equal to the aggregate amount (without
duplication) of all Indebtedness of the Borrower and its Restricted
Subsidiaries outstanding as of such determination date, excluding Indebtedness
incurred under clauses (vi), (viii), (ix), (x), (xi), (xiii), (xv), (xvi) and
(xviii) of Section 4.08(b).

 

“Treasury Management Obligations”  means obligations under any agreement
governing the provision of treasury or cash management services, including
deposit accounts, funds transfer, automated clearing house, zero balance
accounts, returned check concentration, controlled disbursement, lock box,
account reconciliation and reporting and trade finance services.  Treasury Management Obligations shall not
constitute Indebtedness.

 

“Treasury Rate” means, with respect to any
redemption date, the yield to maturity at the time of computation of United
States Treasury securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Statistical Release H.15(519) that has become
publicly available at least two (2) Business Days prior to such redemption date
(or, if such

 

29

 

Statistical Release is no
longer published, any publicly available source of similar market data)) most
nearly equal to the period from such redemption date to the Final Maturity
Date; provided that if
the period from such redemption date to the Final Maturity Date is not equal to
the constant maturity of the United States Treasury security for which a weekly
average yield is given, the Treasury Rate will be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from such redemption date to the Final
Maturity Date is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year will be used.  The Treasury Rate
shall be calculated on the third Business Day preceding the redemption date.

 

“Unrestricted Subsidiary” means any Subsidiary of the
Borrower and any Subsidiary of an Unrestricted Subsidiary that is designated by
the Board of Directors of the Borrower as an Unrestricted Subsidiary pursuant
to a resolution of the Board of Directors, but only to the extent that such
Subsidiary (i) has no Indebtedness other than Non-Recourse Debt; (ii) except as
permitted by Section 4.10 hereof, is not party to any agreement, contract,
arrangement or understanding with the Borrower or any Restricted Subsidiary of
the Borrower unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Borrower or such Restricted
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Borrower; (iii) is a Person with respect to which neither
the Borrower nor any of its Restricted Subsidiaries has any direct or indirect
obligation (A) to subscribe for additional Equity Interests or (B) to maintain
or preserve such Person’s financial condition or to cause such Person to
achieve any specified levels of operating results; and (iv) has not guaranteed
or otherwise directly or indirectly provided credit support for any
Indebtedness of the Borrower or any of its Restricted Subsidiaries, except in
the case of clauses (iii) and (iv), to the extent (1) that the Borrower or such
Restricted Subsidiary could otherwise provide such a Guarantee or incur such
Indebtedness (other than as Permitted Debt) pursuant to Section 4.08 hereof and
(2) the provision of such Guarantee and the incurrence of such indebtedness
otherwise would be permitted by Section 4.06 hereof.

 

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

 

“Weighted Average Life to Maturity” means,
when applied to any Indebtedness at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (A) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payments of principal, including payment at final maturity, in
respect of the Indebtedness, by (B) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such
payment, by (ii) the then outstanding principal amount of such
Indebtedness.

 

“Wholly Owned Subsidiary” of any specified Person
means a Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interest of which (other than directors’ qualifying shares) will as
that time be owned by such Person or by one or more Wholly Owned Subsidiaries
of such person.

 

30

 

Section 1.02.                         Other Definitions.

 

	
  Term

  	
   

  	
  Defined
  in

  Section

  
	
   

  	
   

  	
   

  
	
  “Affiliate Transaction”
  ....................................................................................................

  	
   

  	
  Section 4.10

  
	
  “Asset Sale Offer”............................................................................................................

  	
   

  	
  Section 3.09

  
	
  “Change of Control Offer”...............................................................................................

  	
   

  	
  Section 4.12

  
	
  “Change of Control Payment”.........................................................................................

  	
   

  	
  Section 4.12

  
	
  “Change of Control Payment Date”................................................................................

  	
   

  	
  Section 4.12

  
	
  “Custodian”......................................................................................................................

  	
   

  	
  Section 6.01

  
	
  “Event of Default”............................................................................................................

  	
   

  	
  Section 6.01

  
	
  “Excess Proceeds”............................................................................................................

  	
   

  	
  Section 4.09

  
	
  “incur”..............................................................................................................................

  	
   

  	
  Section 4.08

  
	
  “Liens Securing Loan Note Obligations”.........................................................................

  	
   

  	
  Section 11.07

  
	
  “Liens Securing Other Second-Lien Obligations”............................................................

  	
   

  	
  Section 11.07

  
	
  “Offer Amount”.................................................................................................................

  	
   

  	
  Section 3.09

  
	
  “Offer Period”..................................................................................................................

  	
   

  	
  Section 3.09

  
	
  “Payment Default”............................................................................................................

  	
   

  	
  Section 6.01

  
	
  “Payment Blockage Notice”..............................................................................................

  	
   

  	
  Section 10.03

  
	
  “Permitted Debt”..............................................................................................................

  	
   

  	
  Section 4.08

  
	
  “Prepayment Date”...........................................................................................................

  	
   

  	
  Section 3.09

  
	
  “Representative”...............................................................................................................

  	
   

  	
  Section 10.03

  
	
  “Restricted Payments”......................................................................................................

  	
   

  	
  Section 4.06

  

 

Section 1.03.                         Accounting
Terms; GAAP.

 

(a)                                  Generally.  All accounting terms not specifically or
completely defined herein shall be construed in conformity with, and all
financial data (including financial ratios and other financial calculations)
required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to
time.

 

(b)                                 Changes
in GAAP.  If the Borrower notifies
the Administrative Agent that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such
provision, regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

 

Section 1.04.                         Rules of Construction.

 

With reference to this
Agreement and each other Loan Document, unless otherwise specified herein or in
such other Loan Document:

 

(a)                                  a term has the meaning assigned to it herein;

 

(b)                                 “or” is not exclusive;

 

31

 

(c)                                  words in the singular include the plural, and in the plural
include the singular;

 

(d)                                 “will” shall be interpreted to express a command;

 

(e)                                  provisions apply to successive events and transactions;

 

(f)                                    references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections or
rules adopted by the Commission from time to time;

 

(g)                                 “including” shall be interpreted to mean “including without
limitation;” and

 

(h)                                 references to the payment of principal of the Loans shall
include applicable premium, if any.

 

ARTICLE
2

THE LOANS; THE EXCHANGE NOTES

 

Section 2.01.                         Term Loan
Commitments.

 

(a)                                  Subject
to the terms and conditions of this Agreement, the Lenders jointly and
severally agree to lend to the Borrower on the Closing Date an amount not
exceeding their Pro Rata Share of the aggregate amount of the Term Loan
Commitments, which Pro Rata Share is set forth opposite each Lender’s name on Schedule
2.01 attached hereto.  The amounts of
each Lender’s Term Loan Commitment are set forth opposite such Lender’s name on
Schedule 2.01 attached hereto. 
The aggregate amount of the Term Loan Commitments on the Closing Date
shall not exceed $275.0 million.  The
Borrower may make only one borrowing under the Term Loan Commitments on the
Closing Date.  Amounts borrowed under
this Section 2.01 and subsequently repaid or prepaid may not be reborrowed.

 

(b)                                 Loans
made on the Closing Date shall be in minimum denominations of $1,000 and
integral multiples thereof.  The Borrower
shall deliver to the Administrative Agent a Notice of Borrowing in the form of Exhibit
E hereto no later than 3:00 p.m. (New York time) one (1) Business Day
before the proposed Closing Date.  The
Notice of Borrowing shall specify (i) the proposed Closing Date (which shall be
a Business Day) and (ii) the amount of Loans requested.

 

(c)                                  All
Loans shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Share of the Term Loan Commitments.  Promptly after receipt by the Administrative
Agent of the Notice of Borrowing pursuant to Section

2.01(b), the Administrative Agent shall notify each Lender of the proposed
borrowing.  Upon notification by the
Administrative Agent to the Lenders as to satisfaction or waiver of the
conditions precedent specified in Article 9, each Lender shall make the amount
of its Loan available by wire transfer to the account or accounts designated by
the Borrower in the Notice of Borrowing not later than 12:00 noon (New York
time) on the Closing Date, in same day funds in U.S. dollars.

 

32

 

Section 2.02.                         Additional Loans.

 

(a)                                  The
Borrower shall have the right from time to time on one or more occasions to
incur Additional Loans by an increase or increases of the Term Loan Commitments
in an amount not to exceed $50.0 million in the aggregate for all such
increases to the Term Loan Commitments, subject, however, to
satisfaction of the following conditions precedent:

 

(i)                                     the Borrower’s Consolidated Cash Flow for the Borrower’s
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such Term Loan
Commitments are increased is greater than $75.0 million;

 

(ii)           no Default or Event of Default exists under this Agreement
on the date on which such increase is to become effective and will not occur as
a result of such increase of the Term Loan Commitments;

 

(iii)          each such increase of the Term Loan Commitment shall be in a
minimum aggregate principal amount of $10.0 million;

 

(iv)                              on
or before the date such Additional Loans are funded, (A) each lender providing
the Additional Loans shall have executed an agreement in the form of Exhibit
C hereto (each such agreement, a “New Commitment Agreement”),
accepted in writing therein by the Administrative Agent (and, with respect to
any lender that is not at such time a Lender hereunder, the Borrower) and (B)
the Administrative Agent shall have received from the Borrower a Notice of
Borrowing with respect to the funding of such Additional Loans;

 

(v)                                 the
Administrative Agent shall have received a Secretary’s Certificate of the
Borrower and the Guarantors substantially in the form attached hereto as Exhibit
I, attaching (i) any amendments to the copies of the organizational
documents of the Borrower and the Guarantors delivered on the Closing Date
pursuant to Section 9.02; (ii) executed incumbency certificates of the officer
of the Borrower and the Guarantors party to this Agreement; (iii) any
amendments to the copies of the resolutions of the governing body of the
Borrower and each Guarantor approving and authorizing the Loans and the
Additional Loans delivered on the Closing Date pursuant to Section 9.02,
certified by its secretary or an assistant secretary as being in full force and
effect without modification or amendment; and (iv) a good standing certificate
from the applicable governmental authority of each of the Borrower and
Guarantors’ jurisdiction of incorporation, organization or formation, dated a
recent date prior to the date on which such increase is to become effective;
and

 

(vi)                              The
Administrative Agent shall have received an Officer’s Certificate of the
Borrower and the Guarantors substantially in the form attached hereto as Exhibit
J stating that (i) no Default or Event of Default exists under this

 

33

 

Agreement on the date on
which such increase is to become effective and will not occur as a result of
such increase of the Term Loan Commitments and (ii) the representations and
warranties provided in Section 8.01(a), (b), (c), (d), (e), (f), (g) (other
than the representations and warranties set forth in clause (iii) thereof), (i) and (k) shall be true and
correct in all material respects as of the date on which such increase is to
become effective.

 

(b)                                 Any
increase in the Loans pursuant to Section 2.02(a) shall become effective on the
date set forth in the applicable New Commitment Agreement.  Upon the effectiveness of each such increase,
each Lender’s Pro Rata Share of the Term Loan Commitments shall be
automatically adjusted to give effect to such increase; provided that
the amount of each Lender’s Term Loan Commitment (other than a Lender whose
Term Loan Commitment shall have been increased in connection with such
increase) shall remain unchanged.

 

Section 2.03.                         Loan Notes and Evidence of Debt.

 

(a)                                  The
credit extensions made by each Lender pursuant to such Lender’s Term Loan
Commitments shall be evidenced by one or more accounts or records maintained by
such Lender and by the Administrative Agent in the ordinary course of
business.  The accounts or records
maintained by the Administrative Agent and each Lender shall be conclusive
absent manifest error of the amount of the credit extensions made by the
Lenders pursuant to their Term Loan Commitments to the Borrower and the
interest and payments thereon.  Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount
owing with respect to such obligations. 
In the event of any conflict between the accounts and records maintained
by any Lender and the accounts and records of the Administrative Agent in
respect of such matters, the accounts and records of the Administrative Agent
shall control in the absence of manifest error.

 

(b)                                 The
Borrower shall execute and deliver to each Lender (through the Administrative
Agent) a Loan Note in the form of Exhibit A, with blanks appropriately completed
in conformity herewith, and each Guarantor shall execute and deliver to each
Lender a Loan Guarantee in the form of Exhibit B, with blanks
appropriately completed in conformity herewith, which shall evidence such
Lender’s Loans in addition to those accounts or records maintained by each
Lender and the Administrative Agent.  The
Loan Notes initially shall be issued in minimum denominations of $1,000 and
integral multiples thereof.

 

(c)                                  The
terms and provisions of the Loan Notes and the Loan Guarantees shall
constitute, and are hereby expressly made, a part of this Agreement, and, to
the extent applicable, the Borrower,
the Guarantors and the Lenders, by their execution and delivery of this
Agreement expressly agree to such terms and provisions and to be bound
thereby.  Except as otherwise expressly
permitted in this Agreement and with blanks appropriately completed in
conformity herewith, all Loan Notes shall be identical in all respects.  Notwithstanding any differences among them,
all Loan Notes issued under this Agreement shall vote and consent together on
all matters as one class pursuant to the terms of this Agreement.

 

34

 

Section 2.04.                         Additional
Loan Notes.

 

Upon the effectiveness of
each increase in the Loans pursuant to Section 2.02(a), the Borrower shall
execute and deliver to each Lender (through the Administrative Agent) an
Additional Loan Note substantially in the form of Exhibit A, with blanks
appropriately completed in conformity herewith, and each Guarantor shall
execute and deliver to each Lender an Additional Loan Guarantee in the form of Exhibit
B, with blanks appropriately completed in conformity herewith, which shall
evidence such Lender’s Additional Loans in addition to those accounts or
records maintained by each Lender and the Administrative Agent.  The Additional Loan Notes initially shall be
issued in minimum denominations of $1,000 and integral multiples thereof.  Additional Loan Notes issued pursuant to this Section 2.04 shall have
terms and conditions identical to those of the Loan Notes issued on the Closing
Date, except with respect to:

 

(a)                                  the date of issuance;

 

(b)                                 the amount of interest payable on the first interest payment
date; and

 

(c)                                  the aggregate principal amount of each such Additional Loan
Note.

 

The Loan Notes issued on the Closing Date and any
Additional Loan Notes shall be treated as a single class for all purposes under
this Agreement.

 

Section 2.05.                         Payment of Loans; Pro Rata Treatment; Sharing of Setoffs.

 

(a)                                  The
Borrower shall pay or cause to be paid the principal of, premium, if any, and
interest on the Loans on the dates and in the manner provided in the Loan
Notes.  Principal, premium, if any, and
interest shall be considered paid for all purposes hereunder on the date due if
the Administrative Agent holds, as of 10:00 a.m. (New York City time) money
deposited by or on behalf of the Borrower in immediately available funds and
designated for and sufficient to pay all such principal, premium, if any, and
interest then due.

 

(b)                                 The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof.  In the event that the
Administrative Agent fails to distribute to any Lender such Lender’s share of
any such payments within one (1) Business Day of the Administrative Agent’s
receipt thereof, the Administrative Agent shall pay to such Lender forthwith on
demand such corresponding amount with interest thereon, for each day from and
including the date such amount is received by the Administrative Agent to but
excluding the date of payment to such Lender, at the Federal Funds Effective
Rate.  If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day.  All
payments hereunder shall be made in U.S. dollars.

 

(c)                                  If
at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, interest and fees
then due hereunder, such funds shall be applied (i) first, towards payment of
interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such

 

35

 

parties,
and (ii) second, towards payment of principal and then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of principal
then due to such parties.

 

(d)                                 If
any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Loans resulting in such Lender receiving payment of a greater proportion of
the aggregate principal amount of its Loans and accrued interest thereon than
the proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in
the Loans of other Lenders to the extent necessary so that the benefit of all
such payments shall be shared by the Lenders ratably in accordance with the
aggregate principal amount of and accrued interest on their respective Loans; provided
that (i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest and (ii) the provisions of this paragraph shall not be
construed to apply to any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by
a Lender as consideration for the assignment of or sale of a participation in
any of its Loans to any assignee or participant, other than to the Borrower or
any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply).

 

(e)                                  If
any Lender shall fail to make any payment required to be made by it pursuant to
Section 2.05(d), then the Administrative Agent may, in consultation with such
Lender (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
to satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid.

 

Section 2.06.                         Interest on the
Loans.

 

(a)                                  Subject
to the provisions of Section 2.07 and Section 2.10, each Loan shall bear
interest on the unpaid principal amount thereof from the Closing Date until the
payment thereof at a rate equal to 9.75% per annum.

 

(b)                                 Subject
to the provisions of Section 2.07, interest on each Loan shall be payable in
arrears, pursuant to Section 2.08, (i) on each interest payment date, (ii) upon
any prepayment of that Loan (to the extent accrued on the amount being
prepaid), (iii) at maturity (whether by acceleration or otherwise) and (iv)
after maturity, on demand.

 

(c)                                  Under
certain circumstances, the Borrower may be obligated to pay Additional Interest
to Lenders, all as and to the extent set forth in Section 2.10.  The Borrower shall advise the Administrative
Agent promptly and, if requested by the Administrative Agent, confirm such
advice in writing, of whether the Exchange Triggering Event has occurred as set
forth in Section 2.10.  The
Administrative Agent may rely on such notices without further inquiry.  Unless the Administrative Agent receives a
notice from the Borrower to the effect that the Exchange Date occurred within
the deadlines set forth in Section 2.10, the Administrative Agent may assume
that the deadline has been missed, in which case the Administrative Agent will
impose Additional Interest in accordance with Section 2.10.

 

36

 

Section 2.07.                         Default Rate.

 

(a)                                  If
the Borrower defaults in a payment of interest on the Loan Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Lenders on a
subsequent special record date, which date shall be the earliest practicable
date but in all events at least ten (10) Business Days prior to the interest
payment date, in each case at the rate provided in the Loans and in Section
2.06 hereof.  The Borrower shall fix or
cause to be fixed each such special record date and interest payment date, and
shall promptly thereafter, notify the Administrative Agent of any such date and
of the amount of defaulted interest proposed to be paid on each Loan.  At least fifteen (15) days before the special
record date, the Borrower (or, upon the written request of the Borrower, the
Administrative Agent, in the name and at the expense of the Borrower) shall
mail or cause to be mailed to Lenders a notice that states the special record
date, the related interest payment date and the amount of such interest to be
paid.

 

(b)                                 Payment
or acceptance of the increased rates of interest provided for in this Section
2.07 is not a permitted alternative to timely payment and shall not constitute
a waiver of any Event of Default or otherwise prejudice or limit any rights or
remedies of the Administrative Agent or any Lender.

 

Section 2.08.                         Computation
of Interest.

 

Interest on the Loans
shall be computed on the basis of a 360-day year, consisting of twelve 30-day
months and in each case shall be payable for the actual number of days elapsed
in the period during which it accrues. 
In computing interest on any Loan, the date of the making of such Loan
shall be included, and the date of payment of such Loan (if payment is received
prior to 1:00 p.m. (New York time)) shall be excluded, provided that if
a Loan is repaid on the same day on which it is made, one day’s interest shall
be paid on that Loan.

 

Section 2.09.                         Fees.

 

The Borrower agrees to
pay to the Administrative Agent and Lenders such other fees in the amounts and
at the times separately agreed upon between the Borrower, the Administrative
Agent and Lenders.

 

Section 2.10.                         Exchange Notes.

 

(a)                                  Upon
the occurrence of the Exchange Triggering Event, the Borrower shall furnish to
the Administrative Agent, at least ten (10) Business Days before the Exchange
Date (unless a shorter period is acceptable to the Administrative Agent), an
Officer’s Certificate setting forth (i) that the Exchange Triggering Event
has occurred and (ii) the Exchange Date. 
At any time prior to giving the notice to the Lenders pursuant to Section
2.10(b) below, the Borrower may withdraw, revoke or rescind any notice
delivered to the Administrative Agent pursuant to this Section 2.10(a).

 

(b)                                 At
least ten (10) Business Days before the Exchange Date (unless a shorter period
is acceptable to the Required Lenders), the Borrower shall mail or cause to be
mailed by first class

 

37

 

mail
a notice of the Exchange Date to each Lender at its registered address.  The notice shall identify the Loan Notes and
Loan Guarantees to be surrendered and shall state:

 

(1)                                  the Exchange Date;

 

(2)                                  the date by which the Loan Notes and Loan Guarantees shall
be surrendered to the Administrative Agent;

 

(3)                                  the name and address of the Administrative Agent;

 

(4)                                  that the Loan Notes must be surrendered to the
Administrative Agent in order to exchange the Loan Notes and Loan Guarantees
for the Exchange Notes and Exchange Note Guarantees, issued pursuant to the
Indenture;

 

(5)                                  that interest on Loan Notes ceases to accrue on and after
the Exchange Date; and

 

(6)                                  the aggregate principal amount of the Exchange Notes and
Exchange Note Guarantees the Lender shall receive on the Exchange Date upon
properly tendering its Loan Notes and Loan Guarantees.

 

At the Borrower’s
request, the Administrative Agent shall give this notice in the Borrower’s name
and at the Borrower’s expense; provided, however, that the
Borrower shall have delivered to the Administrative Agent, at least fifteen
(15) Business Days prior to the Exchange Date (or such shorter period as shall
be acceptable to the Administrative Agent and the Required Lenders), an Officer’s
Certificate requesting that the Administrative Agent give such notice and
setting forth the information to be stated in the notice as provided in this Section
2.10(b).  The notice mailed in the manner
herein provided shall be conclusively presumed to have been duly given whether
or not each Lender receives such notice. 
In any case, failure to give such notice by mail or any defect in the
notice to any Lender shall not affect the validity of the proceeding for the
exchange of any other Loan Notes and Loan Guarantees.

 

(c)                                  On
or before 3:00 p.m. (New York City time) on the Exchange Date,

 

(i)                                     the Borrower, the Guarantors, Intermediate and the
Administrative Agent, in its capacity as trustee under the Indenture, shall
enter into the Indenture relating to the Exchange Notes and the Exchange Note
Guarantees with blanks appropriately completed;

 

(ii)                                  the
Borrower shall execute the Exchange Notes and the Guarantors and Intermediate
shall execute the Exchange Note Guarantees and the trustee under the Indenture
shall authenticate and transfer book-entry positions for such Exchange Notes in
accordance with the terms of the Indenture to the Lenders who surrendered their
Loan Notes and Loan Guarantees in accordance with the notice delivered pursuant
to Section 2.10(b); and

 

(iii)                               the Administrative Agent shall have received, dated as of
the Exchange Date, a Secretary’s Certificate of the Borrower, the Guarantors
and

 

38

 

Intermediate, as a
guarantor under the Indenture, substantially in the form attached hereto as Exhibit
I (provided, however, that such Secretary’s Certificate shall
only pertain to (A) the execution, delivery and performance of the Indenture,
(B) the authorization, issuance, execution and delivery of the Exchange Notes
and (C) the execution delivery and performance of the Exchange Note
Guarantees), attaching (1) copies of organizational documents of Intermediate
and any amendments to the copies of the organizational documents of the
Borrower and the Guarantors delivered on the Closing Date pursuant to Section
9.02; (2) executed incumbency certificates of the officer of the Borrower,
Intermediate and the Guarantors; (3) any amendments to the copies of the
resolutions of the governing body of the Borrower, Intermediate and each
Guarantor approving and authorizing the Indenture delivered on the Closing Date
pursuant to Section 9.02, certified by its secretary or an assistant secretary
as being in full force and effect without modification or amendment; and (4) a
good standing certificate from the applicable governmental authority of each of
the Borrower, Intermediate and Guarantors’ jurisdiction of incorporation,
organization or formation, dated a recent date prior to the date on which such
increase is to become effective.

 

(d)                                 If
the Borrower complies with the provisions of this Section 2.10, on and after
the Exchange Date, whether or not such Loan Notes and Loan Guarantees are
surrendered for exchange, interest shall cease to accrue on the Loan Notes.

 

(e)                                  If
the Exchange Date has not occurred by the date which is eighteen (18) months
following the Closing Date, then the Borrower hereby agrees to pay Additional
Interest (in addition to interest paid on the Loans pursuant to Section 2.06)
to each Lender in an amount equal to 0.25% per annum until the occurrence of
the Exchange Date.  If the Exchange Date
has not occurred by the date which is thirty (30) months following the Closing
Date, then the Borrower hereby agrees to pay further Additional Interest (in
addition to interest paid on the Loans pursuant to Section 2.06 and the immediately
preceding sentence) to each Lender in an amount equal to 0.25% per annum until
the occurrence of the Exchange Date.  The
maximum Additional Interest payable pursuant to this Section 2.10 shall not
exceed 0.50% per annum.  The Additional
Interest shall cease to accrue and be payable on the Exchange Date.  All references to interest in this Agreement
shall include such applicable Additional Interest.

 

Section 2.11.                         Replacement
Loan Notes.

 

(a)                                  If
any mutilated Loan Note is surrendered to the Administrative Agent, or the
Borrower and the Administrative Agent receives evidence to their satisfaction
of the destruction, loss or theft of any Loan Note, the Borrower shall issue a
replacement Loan Note if the Administrative Agent’s requirements are met.  If required by the Administrative Agent or
the Borrower, an indemnity bond must be supplied by the Lender that is
sufficient in the judgment of the Administrative Agent and the Borrower to
protect the Borrower and the Administrative Agent from any loss that any of
them may suffer if a Loan Note is replaced. 
The Borrower and the Administrative Agent may charge for their expenses
in replacing a Loan Note.

 

39

 

(b)                                 Every
replacement Loan Note is an additional obligation of the Borrower and the
Guarantors and shall be entitled to all of the benefits of this Agreement
equally and proportionately with all other Loan Notes duly issued hereunder.

 

ARTICLE
3

PREPAYMENT OF LOANS

 

Section 3.01.                         Notice of Prepayment to Administrative Agent.

 

If the Borrower elects to
prepay Loans pursuant to the voluntary prepayment provisions of Section 3.07
hereof, it shall furnish to the Administrative Agent at least thirty (30) days
but not more than sixty (60) days (unless a shorter period is acceptable to the
Administrative Agent) prior written notice (or telephonic notice promptly
confirmed in writing) of its intent to prepay Loans.  Each such notice shall specify (a) the
Section of this Agreement pursuant to which the prepayment shall occur,
(b) the date of prepayment, (c) the principal amount of Loans to be
prepaid and (d) the prepayment price. 
Promptly following receipt of any such notice, the Administrative Agent
shall advise the Lenders of the contents thereof.

 

Section 3.02.                         Selection
of Loans to be Prepaid.

 

(a)                                  If
less than all of the Loans are to be prepaid at any time, the Administrative
Agent shall select Loans for prepayment on a pro rata
basis.

 

(b)                                 Loans
and portions of Loans selected for prepayment shall be in amounts of $1,000 or
whole multiples of $1,000; except that if all of the Loans of a Lender
are to be prepaid, the entire outstanding amount of Loans held by such Lender,
even if not a multiple of $1,000, shall be prepaid.  Except as provided in the preceding sentence,
provisions of this Agreement that apply to Loans called for prepayment also
apply to portions of Loans called for prepayment.

 

Section 3.03.                         Notice of Prepayment to Lenders.

 

(a)                                  Subject
to provisions of Section 3.09 and Section 4.12, at least thirty (30) days but
not more than sixty (60) days before a before a date of prepayment, the
Borrower shall mail or cause to be mailed by first class mail a notice of
prepayment to each Lender whose Loans are to be prepaid at its registered
address.

 

(b)                                 The
notice shall identify the Loans to be redeemed and shall state:

 

(1)                                  the date of prepayment;

 

(2)                                  the prepayment price;

 

(3)                                  if
any Loan is being prepaid in part, the portion of the principal amount of such
Loans to be prepaid and that, after the date of prepayment, upon surrender of
such Loan Note evidencing the Loans, a new Loan Note or Loan Notes in principal
amount equal to the unredeemed portion shall be issued upon cancellation of the
original Loan Note;

 

40

 

(4)                                  the name and address of the Administrative Agent;

 

(5)                                  that Loan Notes evidencing the Loans called for prepayment
must be surrendered to the Administrative Agent to collect the prepayment
price;

 

(6)                                  that,
unless the Borrower defaults in making such redemption payment, interest on
Loans called for prepayment ceases to accrue on and after the date of
prepayment; and

 

(7)                                  the paragraph of the Loan Notes and/or Section of this
Agreement pursuant to which the Loan Notes called for prepayment are being
prepaid.

 

(c)                                  At
the Borrower’s request, the Administrative Agent shall give the notice of
prepayment in the Borrower’s name and at the Borrower’s expense; provided,
however, that the Borrower shall have delivered to the Administrative
Agent, at least forty-five (45) days prior to the date of prepayment (or such
shorter period as shall be acceptable to the Administrative Agent), an Officer’s
Certificate requesting that the Administrative Agent give such notice and
setting forth the information to be stated in the notice as provided in Section
3.03(b).  The notice mailed in the manner
herein provided shall be conclusively presumed to have been duly given whether
or not the Lender receives such notice. 
In any case, failure to give such notice by mail or any defect in the
notice to the Lender of any Loan shall not affect the validity of the
proceeding for the prepayment of any other Loan.

 

Section 3.04.                         Effect of Notice of Prepayment.

 

At any time prior to
giving notice of prepayment to the Lenders pursuant to Section 3.03, the
Borrower may withdraw, revoke or rescind any notice of prepayment delivered to
the Administrative Agent without any continuing obligation to prepay the
Loans.  Notwithstanding the foregoing, a
notice of prepayment given to the Lenders may not be conditional or subject to
revocation.

 

Section 3.05.                         Deposit
of Prepayment Price.

 

(a)                                  On
or before 10:00 a.m. (New York City time) on each date of prepayment or the
date on which Loans must be accepted for prepayment pursuant to Section 4.09 or
Section 4.12, the Borrower shall deposit with the Administrative Agent money
sufficient to pay the prepayment price of and accrued and unpaid interest on
all Loans to be prepaid on that date. 
The Administrative Agent shall promptly return to the Borrower any money
deposited with the Administrative Agent by the Borrower in excess of the
amounts necessary to pay the prepayment price of (including any applicable
premium) and accrued interest on all Loans to be prepaid.

 

(b)                                 If
the Borrower complies with the provisions of Section 3.05(a), on and after the
date of prepayment, whether or not such Loan Notes evidencing the Loans are
presented for payment, interest shall cease to accrue on the Loans or the
portions of Loans called for prepayment. 
If a Loan is prepaid on or after a record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Loan was registered at the close of
business on such record date.  If any
Loan called for prepayment is not so paid because of the failure of the
Borrower to comply with the preceding paragraph, interest

 

41

 

shall be paid on the unpaid principal, from the
prepayment date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided
in the Loans and in Section 2.06 hereof.

 

Section 3.06.                         Loans Prepaid in Part.

 

Upon surrender of a Loan
Note evidencing the Loans that is prepaid in part, the Borrower shall issue a
new Loan Note equal in principal amount to the unpaid portion of the Loan Note
surrendered.

 

Section 3.07.                         Voluntary
Prepayment.

 

(a)                                  Voluntary
Prepayment.

 

(i)                                     Prior
to the date which is eighteen (18) months following the Closing Date, the
Borrower may prepay the Loans, at its option, in whole at any time or in part
from time to time at a prepayment price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon, to the date of prepayment; provided,
however, the Borrower may, at its option at any time prior to such date,
irrevocably elect to terminate its right to voluntarily prepay the Loans
pursuant to this clause (i) by delivering a written notice to the
Administrative Agent and upon delivering such notice, the Initial Call
Termination Date shall be deemed to have occurred.

 

(ii)                                  Commencing
from the date which is the fifth anniversary of the Closing Date, the Borrower
may voluntarily prepay the Loans, at its option, in whole at any time or in
part from time to time, at the following prepayment prices, expressed as
percentages of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of prepayment, if prepaid during the twelve-month period
commencing on the anniversary of the Closing Date in any year set forth below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2009

  	
   

  	
  104.875

  	
  %

  
	
  2010

  	
   

  	
  102.438

  	
  %

  
	
  2011

  	
   

  	
  101.219

  	
  %

  
	
  2012 and
  thereafter

  	
   

  	
  100.0

  	
  %

  

 

(b)                                 Voluntary
Prepayment upon a Change of Control. 
Upon the occurrence of a Change of Control, at any time after the
consummation of the Change of Control Offer in accordance with the provisions
of Section 4.12 and prior to the date which is fifty-four (54) months following
the Closing Date, the Borrower may prepay Loans not tendered in the Change of
Control Offer, in whole at any time or in part from time to time, at the
Borrower’s option at a prepayment price equal to 100% of the principal amount
thereof plus the excess of:

 

(i)                                      the present value at such date of prepayment of (A) the
prepayment price of such Loans on the date which is fifty-four (54) months
following the

 

42

 

Closing Date (as determined pursuant to Section
3.07(a); plus (B) all required remaining scheduled interest payments due
on such Loans through the date which is fifty-four (54) months following the
Closing Date, other than accrued interest to such date of prepayment, computed
using a discount rate equal to the Treasury Rate plus 75 basis points per annum
discounted on a semi-annual bond equivalent basis; over

 

(ii)                                   the principal amount of such Loans on such date of
prepayment; plus

 

accrued
and unpaid interest on such Loans to the date of prepayment.  The Treasury Rate shall be calculated by the
Borrower or on behalf of the Borrower by such Persons as the Borrower shall
designate (and will not be a duty or obligation of the Administrative Agent) on
the third Business Day preceding the date of prepayment and notice thereof
shall promptly be given by the Borrower to the Administrative Agent.

 

(c)                                  Voluntary
Prepayment upon Equity Offerings.  At
any time prior to the third anniversary of the Initial Call Termination Date,
the Borrower may, at its option, use the net cash proceeds of one or more
Equity Offerings or a contribution to the common equity capital of the Borrower
from the net proceeds of one or more Equity Offerings by a direct or indirect
parent of the Borrower (in each case, other than Excluded Contributions and the
net proceeds of a sale of Designated Preferred Stock) to prepay up to 40% of
the aggregate principal amount of the Loans at a prepayment price equal to
109.75% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of prepayment; provided that the Borrower shall make
such prepayment not more than ninety (90) days after the closing of such Equity
Offering or equity contribution.

 

Section 3.08.                         Mandatory
Prepayment.

 

Except as set forth under
Section 3.09, Section 4.09 and Section 4.12 hereof, the Borrower shall not be
required to make mandatory prepayments or sinking fund payments with respect to
the Loans.

 

Section 3.09.                         Asset Sale
Offers.

 

(a)                                  In
the event that the Borrower shall be required to commence an offer to all
Lenders to prepay Loans pursuant to Section 4.09 hereof (an “Asset Sale Offer”),
the Borrower shall follow the procedures specified below.

 

(b)                                 The
Asset Sale Offer shall be made to all Lenders and if the Borrower elects (or is
required by the terms of other pari passu
Indebtedness), to all holders of other Indebtedness that is pari passu with the Loans.  The Asset Sale Offer shall remain open for a
period of at least twenty (20) Business Days following its commencement and not
more than thirty (30) Business Days, except to the extent that a longer period
is required by applicable law (the “Offer Period”).  No later than five (5) Business Days after
the termination of the Offer Period (the “Prepayment Date”), the
Borrower shall apply all Excess Proceeds (the “Offer Amount”) to the
prepayment of the Loans and such other pari
passu Indebtedness, if any, required to be purchased pursuant to Section
4.09 hereof, on a pro rata basis,
if applicable, or, if less than the Offer Amount has been

 

43

 

tendered,
to all Loans and other pari passu
Indebtedness tendered in response to the Asset Sale Offer.  Payment for any Loans so prepaid shall be
made pursuant to Section 2.05 hereof.

 

(c)                                  If
the Prepayment Date is on or after an interest record date and on or before the
related interest payment date, any accrued and unpaid interest shall be paid to
the Person in whose name a Loan is registered at the close of business on such
record date, and no additional interest shall be payable to Lenders who tender
Loans pursuant to the Asset Sale Offer.

 

(d)                                 Upon
the commencement of an Asset Sale Offer, the Borrower shall send, by first
class mail, a notice to the Administrative Agent and each of the Lenders, with
a copy to the Administrative Agent.  The
notice shall contain all instructions and materials necessary to enable such
Lenders to tender Loans pursuant to the Asset Sale Offer.  The notice, which shall govern the terms of
the Asset Sale Offer, shall describe the transaction or transactions giving
rise to the Asset Sale Offer and shall state:

 

(i)                                     that
the Asset Sale Offer is being made pursuant to this Section 3.09 and Section
4.09 hereof and the length of time the Asset Sale Offer shall remain open;

 

(ii)                                  the Offer Amount, the prepayment price and the Prepayment
Date;

 

(iii)                               that any Loan not tendered or accepted for payment shall
continue to accrue interest;

 

(iv)                              that, unless the Borrower defaults in making such
prepayment, any Loan accepted for prepayment pursuant to the Asset Sale Offer
shall cease to accrue interest after the Prepayment Date;

 

(v)                                 that Lenders electing to have a Loan prepaid pursuant to an
Asset Sale Offer may elect to have Loans prepaid in integral multiples of
$1,000 only;

 

(vi)                              that
Lenders electing to have Loans prepaid pursuant to any Asset Sale Offer shall
be required to surrender the Loan Notes evidencing such Loans, with the form
entitled “Option of Holder to Elect Prepayment” attached to the Loan Notes
completed, to the Borrower or the Administrative Agent at the address specified
in the notice at least three (3) Business Days before the Prepayment Date;

 

(vii)                           that
Lenders shall be entitled to withdraw their election if the Borrower or the
Administrative Agent, as the case may be, receives, not later than on the
expiration of the Offer Period, a telegram, telex, facsimile transmission or
letter setting forth the name of the Lender, the principal amount of the Loan
the Lender delivered for prepayment and a statement that such Lender is
withdrawing his election to have such Loan prepaid;

 

(viii)                        that, if the aggregate principal amount of Loans and other pari passu Indebtedness surrendered by holders thereof
exceeds the Offer Amount,

 

44

 

the Borrower shall select
the Loans and other pari passu
Indebtedness to be preapid on a pro rata
basis based on the principal amount of Loans and such other pari passu Indebtedness surrendered (with such adjustments
as may be deemed appropriate by the Borrower so that only Loans in
denominations of $1,000, or integral multiples thereof, shall be prepaid); and

 

(ix)                                that
Lenders whose Loans were prepaid only in part shall be issued new Loan Notes
equal in principal amount to the unpaid portion of the Loan Notes surrendered
evidencing the Loans.

 

(e)                                  On
the Prepayment Date, the Borrower shall, to the extent lawful, accept for
prepayment, on a pro rata basis
to the extent necessary, the Loan Notes or portions thereof evidencing the
Loans tendered pursuant to the Asset Sale Offer in an aggregate principal
amount up to and including the Offer Amount, or if less than the Offer Amount
has been tendered, all Loan Notes evidencing the Loans that have been tendered
and shall deliver or cause to be delivered to the Administrative Agent the Loan
Notes evidencing the Loans properly accepted, together with an Officer’s
Certificate stating that such Loan Notes evidencing the Loans or portions
thereof were accepted for prepayment by the Borrower in accordance with the
terms of this Section 3.09.  The Borrower
shall promptly (but in any case not later than five (5) Business Days after the
Prepayment Date) mail or deliver to each tendering Lender an amount equal to
the prepayment price of the Loans tendered by such Lender and accepted by the
Borrower for prepayment, and the Borrower shall promptly issue a new Loan Note,
and the Administrative Agent, upon written request from the Borrower, shall
mail or deliver such new Loan Note to such Lender, in principal amount equal to
any unpaid portion of the Loan Notes surrendered.  Any Loan Note not so accepted by the Borrower
shall be promptly mailed or delivered by the Borrower to such Lender.  The Borrower shall publicly announce the
results of the Asset Sale Offer on the Prepayment Date.

 

(f)                                    Other
than as specifically provided in this Section 3.09, any prepayment by the
Borrower pursuant to this Section 3.09 shall be made pursuant to the provisions
of Section 3.01, Section 3.02, Section 3.05 and Section 3.06 hereof.

 

ARTICLE
4

COVENANTS

 

Section 4.01.                         Maintenance of Office or Agency.

 

(a)                                  The
Borrower shall maintain in the Borough of Manhattan, the City of New York an
office or agency (which may be an office of the Administrative Agent or an
Affiliate of the Administrative Agent) where the Loan Notes evidencing the
Loans may be surrendered for registration of transfer or for exchange and where
notices and demands to or upon the Borrower in respect of the Loans and this
Agreement may be served.  The Borrower
shall give prompt written notice to the Administrative Agent of the location,
and any change in the location, of such office or agency.  If at any time the Borrower shall fail to
maintain any such required office or agency or shall fail to furnish the
Administrative Agent with the address thereof, such

 

45

 

presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Administrative Agent.

 

(b)                                 The
Borrower may also from time to time designate one or more other offices or
agencies where the Loans may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Borrower
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. 
The Borrower shall give prompt written notice to the Administrative
Agent of any such designation or rescission and of any change in the location
of any such other office or agency.

 

Section 4.02.                         Commission Reports.

 

(a)                                  Whether
or not required by the rules and regulations of the Commission, so long as any
Loans are outstanding, the Borrower shall be required to file with the
Commission and shall furnish to the Lenders (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K, including a “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” that describes the
financial condition and results of operation of the Borrower and its
consolidated Subsidiaries and, with respect to the annual information only, a
report on the Borrower’s consolidated financial statements by the Borrower’s
certified independent accountants and (ii) all current reports on Form
8-K, in each case within the time periods set forth in the Commission’s rules
and regulations.

 

(b)                                 In
addition, the Borrower and the Guarantors have agreed that, for so long as any
Loans remain outstanding, at any time when the Borrower is not current in its
reporting obligations or the Commission does not accept such filings provided
for in Section 4.02(a), they shall furnish to the Lenders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.  The financial
information to be distributed to Lenders shall be filed with the Administrative
Agent and mailed to the Lenders at their addresses appearing in the Register
maintained by the Administrative Agent, within ninety (90) days after the end
of the Borrower’s fiscal years and within forty-five (45) days after the end of
each of the first three quarters of each such fiscal year.

 

(c)                                  The
Borrower shall provide the Administrative Agent with a sufficient number of
copies of all reports and other documents and information and, if requested by
the Borrower and at the Borrower’s expense, the Administrative Agent will
deliver such reports to the Lenders under this Section 4.02.

 

(d)                                 Notwithstanding
the foregoing, the availability of the foregoing materials on either the Commission’s Electronic Data Gathering, Analysis
and Retrieval System (or any successor system) or on the Borrower’s website, as
the case may be, will be deemed to satisfy the Borrower’s delivery obligations.

 

46

 

Section 4.03.                         Compliance Certificate.

 

(a)                                  The
Borrower and each Guarantor shall deliver to the Administrative Agent, within
105 days after the end of each fiscal year, an Officer’s Certificate stating
that a review of the activities of the Borrower, and the Borrower’s
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether each has
kept, observed, performed and fulfilled its obligations under this Agreement,
and further stating, as to each such Officer signing such certificate, that, to
the best of his or her knowledge, each entity has kept, observed, performed and
fulfilled each and every covenant contained in this Agreement and is not in
default in the performance or observance of any of the terms, provisions and
conditions of this Agreement (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he or she
may have knowledge and what action the Borrower is taking or proposes to take
with respect thereto) and that, to the best of his or her knowledge, no event
has occurred and remains in existence by reason of which payments on account of
the principal of, premium or interest on the Loans is prohibited or if such
event has occurred, a description of the event and what action the Borrower is
taking or proposes to take with respect thereto.

 

(b)                                 The
Borrower shall, so long as any of the Loans are outstanding, deliver to the
Administrative Agent, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officer’s Certificate specifying such Default or Event
of Default and what action the Borrower is taking or proposes to take with
respect thereto.

 

Section 4.04.                         Taxes.

 

The Borrower shall pay, and
shall cause each of its Subsidiaries to pay, prior to delinquency all material
taxes, assessments and governmental levies, except such as are contested in
good faith and by appropriate proceedings or where the failure to effect such
payment is not adverse in any material respect to the Lenders.

 

Section 4.05.                         Stay, Extension and Usury Laws.

 

The Borrower and the
Guarantors covenant (to the extent that they may lawfully do so) that they
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants
or the performance of this Agreement; and the Borrower and the Guarantors (to
the extent that they may lawfully do so) hereby expressly waive all benefit or
advantage of any such law, and covenant that they shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Administrative Agent, but shall suffer and permit the execution of every
such power as though no such law has been enacted.

 

Section 4.06.                         Restricted Payments.

 

(a)                                  The
Borrower shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly take any of the following actions (each, a “Restricted
Payment”):

 

47

 

(i)                                     declare
or pay any dividend or make any other payment or distribution on account of the
Borrower’s or any of its Restricted Subsidiaries’ Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Borrower or any of its
Restricted Subsidiaries), other than dividends or distributions payable
in Equity Interests (other than Disqualified Stock) of the Borrower or
dividends or distributions payable to the Borrower or any Wholly Owned
Subsidiary of the Borrower or payments of cash interest on Subordinated
Shareholder Funding;

 

(ii)                                  purchase,
redeem, retire or otherwise acquire for value (including, without
limitation, in connection with any merger or consolidation involving the
Borrower) any Equity Interests or Subordinated Shareholder Funding of
the Borrower held by any Person (other
than a Restricted Subsidiary) including in connection with any merger or
consolidation and including the exercise of any option to exchange any Equity
Interests (other than into Equity Interests of the Borrower that do not
constitute Disqualified Stock);

 

(iii)                               make
any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is subordinated to the Loans or Loan Guarantees (excluding any intercompany
Indebtedness between or among the Borrower and any of its Restricted
Subsidiaries), except (A) a
payment of interest or principal at the Stated Maturity thereof or (B) the purchase, repurchase or other acquisition of any such
subordinated Indebtedness in anticipation of satisfying a sinking fund
obligation, principal installment or payment at final maturity, in each case
within one year of the date of acquisition; or

 

(iv)                              make
any Restricted Investment, unless, at the time of and immediately after giving
effect to such Restricted Payment:

 

(A)                              no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence of such Restricted Payment;

 

(B)                                the
Borrower would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.08(a); and

 

(C)                                such
Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Borrower and its Restricted Subsidiaries after the
Effective Date (excluding Restricted Payments permitted by clauses (ii), (iii),
(iv), (v), (vi), (vii), (viii),

 

48

 

(ix), (x), (xii), (xiii), (xiv), (xv), (xvi), (xvii),
(xviii), (xix), (xx), (xxi), (xxii), (xxiii) and (xxiv) of Section 4.06(b)), is
less than the sum (without duplication) of:

 

(1)                                  50%
of the Consolidated Net Income of the Borrower for the period (taken as one
accounting period) from the beginning of the fiscal quarter which includes the
Effective Date to the end of the Borrower’s most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
loss, less 100% of such loss), plus

 

(2)                                  100%
of the aggregate Qualified Proceeds received by the Borrower since the
Effective Date as a contribution to its common equity or from the issue or sale
of Equity Interests of the Borrower (other than Disqualified Stock, Excluded
Contributions and the net proceeds from a sale of Designated Preferred Stock)
or from Subordinated Shareholder
Funding (to the extent not designated as an Excluded Contribution) subsequent
to the Effective Date or from the
issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt securities
of the Borrower that have been converted into or exchanged for such Equity
Interests (other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of the Borrower), plus

 

(3)                                  100% of the aggregate Qualified Proceeds from
(x) the sale or other disposition (other than to the Borrower or a Restricted
Subsidiary) of any Restricted Investment that was made after the Effective Date
and (y) repurchases, redemptions and repayments of such Restricted Investments
and the receipt of any dividends or distributions from such Restricted
Investments, plus

 

(4)                                  to the extent that any Unrestricted Subsidiary
of the Borrower designated as such after the Effective Date is redesignated as
a Restricted Subsidiary after the Effective Date, the Fair Market Value of the Borrower’s Investment in such Subsidiary as
of the date of such redesignation, plus

 

(5)                                  in the event the Borrower and/or any Restricted
Subsidiary of the Borrower makes any Investment in a Person that, as a result
of or in connection with such Investment, becomes a Restricted Subsidiary of
the Borrower, an amount equal to the existing Investment of the Borrower and/or
any of its Restricted Subsidiaries in such Person that was previously treated
as a Restricted Payment, plus

 

(6)                                  (A)
$10.0 million prior to the date which is eighteen (18) months following the
Closing Date and (B) thereafter, $25.0 million.

 

49

 

(b)                                 The
provisions of paragraph (a) above of this Section 4.06 will not prohibit:

 

(i)                                     the
payment of any dividend or other
distribution or the consummation of any irrevocable prepayment within sixty
(60) days after the date of declaration
of the dividend or giving of the prepayment notice, as the case may be,
if at the date of declaration or notice, the
dividend or prepayment would have
complied with the provisions of this Agreement;

 

(ii)                                  the making of any Restricted Payment in
exchange for, or out of net cash proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of the Borrower) of, Equity Interests of
the Borrower (other than Disqualified Stock) or from the substantially
concurrent contribution of common equity capital to the Borrower, provided
that the amount of any such net cash proceeds that are utilized for any such
Restricted Payment will be excluded from clause (C)(ii) of Section
4.06(a)(iv);

 

(iii)                               the
defeasance, redemption, repurchase, retirement or other acquisition for value of any Indebtedness of the
Borrower or any Guarantor that is contractually subordinated to the Loans or any
Loan Guarantee with the net cash proceeds from a substantially concurrent incurrence
of Permitted Refinancing Indebtedness;

 

(iv)                              the
declaration and payment of any regularly scheduled or accrued dividends to holders of any class or series of
Disqualified Stock of the Borrower or any Restricted Subsidiary of the Borrower
issued on or after the Effective Date in accordance with the provisions of Section
4.08;

 

(v)                                 the repurchase, redemption or other acquisition
or retirement for value of Disqualified Stock of the Borrower or any Restricted
Subsidiary of the Borrower made by exchange for, or out of the proceeds of the
substantially concurrent sale of Replacement Preferred Stock that is permitted
to be incurred in accordance with the provisions of Section 4.08;

 

(vi)                              the payment of any dividend or other
distributions to holders of any class or series of Designated Preferred Stock
(other than Disqualified Stock) issued by the Borrower after the Effective
Date;

 

(vii)                           the payment of any dividend (or any similar
distribution) by a Restricted Subsidiary of the Borrower to the holders
of its Equity Interests on a pro rata basis;

 

(viii)                        the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Borrower or any Restricted Subsidiary of the Borrower,
held by any current or former officer,
director, employee or consultant of the Borrower or any of its
Restricted Subsidiaries, and any dividend
payment or other distribution by the Borrower or any of its Restricted
Subsidiaries to a direct or indirect parent holding company of the
Borrower utilized for the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of such direct or indirect

 

50

 

parent
holding company held by any current or former officer, director, employee or
consultant of the Borrower or any of its Restricted Subsidiaries, in each case,
pursuant to any equity
subscription agreement, stock option agreement, shareholders’ agreement or similar agreement or benefit plan of any kind;
provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity Interests
may not exceed $7.5 million in any fiscal year (it being understood, however,
that any unused amounts permitted to be paid pursuant to this clause are
available to be carried over to subsequent fiscal years); provided, however,
notwithstanding clause (C) of Section 4.06(a)(iv), the amount of any such
Restricted Payments made prior to the Initial Call Termination Date will be
included in the calculation of the amount of Restricted Payments; provided,
further, that such amount in any fiscal year may be increased by an
amount not to exceed:

 

(A)                              the cash proceeds from the sale of Equity
Interests of the Borrower and, to the extent contributed to the Borrower as
common equity capital, Equity Interests of the Borrower’s direct or indirect
parent entities, in each case to members of management, directors or
consultants of the Borrower, and any of its Subsidiaries or any of its direct
or indirect parent entities that occurs after the Effective Date, to the extent
the cash proceeds from the sale of such Equity Interests have not otherwise
been applied to the payment of Restricted Payments by virtue of clause (C)(ii)
of Section 4.06(a)(iv), and excluding Excluded Contributions, plus

 

(B)                                the
cash proceeds of key man life insurance policies received by the Borrower and
its Restricted Subsidiaries after the Effective Date; provided, however,
such proceeds are used to repurchase, redeem, acquire or retire for value
Equity Interests of the Borrower or any of its Restricted Subsidiaries held by
(1) the estate, executors, administrators, testamentary trustees, legatees or
beneficiaries of any such officer, director, employee or consultant of the
Borrower or any of its Restricted Subsidiaries or (2) any trust or
custodianship a beneficiary of which was such officer, director, employee or
consultant of the Borrower or any of its Restricted Subsidiaries or any such
Person’s spouse or lineal descendants (by blood or adoption), less

 

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

 

and provided, further, that cancellation of Indebtedness owing
to the Borrower from members of management, directors or consultants of the
Borrower or any of its Restricted Subsidiaries, or any direct or indirect
parent holding company of the Borrower, in connection with a repurchase of
Equity Interests of the Borrower or any direct or indirect parent holding

 

51

 

company of the Borrower
shall not be deemed to constitute a Restricted Payment for purposes of this
covenant or any other provision of this Agreement;

 

(ix)                                the
repurchase of Equity Interests deemed to occur upon the exercise of options,
rights or warrants to the extent such Equity Interests represent a portion of
the exercise price of those options, rights or warrants;

 

(x)                                   the
repurchase, redemption, defeasance or other acquisition or retirement for value
of Indebtedness of the Borrower or any Guarantor that is contractually
subordinated to the Loans or to the Loan Guarantees with any Excess Proceeds
that remain after consummation of an Asset Sale Offer;

 

(xi)                                so
long as no Default has occurred and is continuing or would be caused thereby,
after the occurrence of a Change of Control and within sixty (60) days after
the completion of the offer to prepay the Loans pursuant to Section 4.12 of
this Agreement (including the prepayment of the Loans tendered), any prepayment
of Indebtedness that is contractually subordinated to the Loans or to the Loan
Guarantees required pursuant to the terms thereof as a result of such Change of
Control at a prepayment price not to exceed 101% of the outstanding principal
amount or accreted value thereof, plus any accrued and unpaid interest; provided,
however, that the Borrower would be able to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.08(a) after giving pro
forma effect to such Restricted Payment;

 

(xii)                             cash
payments in lieu of fractional shares issuable as dividends on preferred stock
or upon the conversion of any convertible debt securities of the Borrower or
any of its Restricted Subsidiaries;

 

(xiii)                          so long
as no Default has occurred and is continuing or would be caused thereby, the
payment:

 

(A)                              by
the Borrower or any Restricted Subsidiary of the Borrower to any direct or
indirect parent of the Borrower, which payment is used by the Person receiving
such payment, following the first initial public offering of common Equity
Interests by such Person, to pay dividends of up to 6% per annum of the net
proceeds received by such Person in such public offering that are contributed
to the Borrower as common equity capital, or

 

(B)                                by
the Borrower, following the first initial public offering of common Equity
Interests by the Borrower, to pay dividends of up to 6% per annum of the net
proceeds received by the Borrower in such public offering,

 

52

 

(excluding, in the case
of both clause (A) and clause (B), public offerings of common Equity Interests
registered on Form S-8 and any other public sale to the extent the proceeds
thereof are Excluded Contributions);

 

(xiv)                         Investments that are made with Excluded Contributions;

 

(xv)                            Distributions or payments of Receivables Fees;

 

(xvi)                         so
long as no Default or Event of Default will have occurred and be continuing,
payments required to be made under the Tax Sharing Agreement;

 

(xvii)                      so
long as no Default or Event of Default will have occurred and be continuing,
payments of cash dividends or the making of loans or advances to a direct or
indirect parent of the Borrower not to exceed $1.0 million in any fiscal year
for costs and expenses incurred by such direct or indirect parent of the
Borrower in its capacity as a holding company or for services rendered by such
direct or indirect parent of the Borrower on behalf of the Borrower;

 

(xviii)                   so
long as no Default or Event of Default will have occurred and be continuing,
payments of cash dividends to a direct or indirect parent of the Borrower in
order to enable such direct or indirect parent of the Borrower to make payments
of interest required to be made in respect of the Existing Debentures in
accordance with the terms thereof in effect on the Effective Date;

 

(xix)                           so long as no Default or Event of Default will
have occurred and be continuing, payments of cash dividends to a direct or
indirect parent of the Borrower in order to enable such direct or indirect
parent of the Borrower to defease, redeem, repurchase or retire the Existing
Debentures;

 

(xx)                              so long as no Default or Event of Default will
have occurred and be continuing, payments of cash dividends to a direct or
indirect parent of the Borrower in order to enable such direct or indirect
parent of the Borrower to make payments of interest required to be made in
respect of the Senior Discount Contingent Principal Notes;

 

(xxi)                           so long as no Default or Event of Default will
have occurred and be continuing, payments of cash dividends to a direct or
indirect parent of the Borrower in order to enable such direct or indirect
parent of the Borrower to defease, redeem, repurchase or retire the Senior
Discount Contingent Principal Notes;

 

(xxii)                        so long as
no Default or Event of Default will have occurred and be continuing, payments
of cash dividends to a direct or indirect
parent of the Borrower, from Net Cash Proceeds from Asset Sales
remaining after the application thereof as required by the provisions of Section
4.09

 

53

 

(including after making
any Asset Sale Offer required to be made pursuant to Section 4.09 and the
application of the entire Offer Amount to prepay all Loan Notes tendered
pursuant to such Asset Sale Offer) in an aggregate principal amount not to
exceed $25.0 million;

 

(xxiii)                     payments of
cash dividends to any direct or indirect parent of the Borrower in order to pay
any out-of-pocket expenses or charges for such period relating to any offering
of Equity Interests by any direct or indirect parent of the Borrower, any Asset
Sale, Investment or merger, recapitalization or acquisition transactions made
by any direct or indirect parent of the Borrower, or any Indebtedness incurred
by any direct or indirect parent of the Borrower (in each case, whether or not
successful); and

 

(xxiv)                    purchases of
shares of Capital Stock for contribution to an employee stock ownership plan of
the Borrower or the direct or indirect parent company of the Borrower not in
excess of (A) $5.0 million in the aggregate prior to the Initial Call
Termination Date and (B) thereafter, $15.0 million in the aggregate.

 

(c)                                  The
Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default or an
Event of Default.  For purposes of making
such determination, all outstanding Investments by the Borrower and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under Section
4.06(a).  All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greater of (i) the net book value of such Investments at the time of such
designation and (ii) the Fair Market Value of such Investments at the time
of such designation.  Such designation
will only be permitted if such Restricted Payment would be permitted at such
time and if such Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary.

 

(d)                                 The
amount of all Restricted Payments (other than cash) shall be the Fair Market
Value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Borrower or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment.  The Fair Market Value of any
assets or securities that are required to be valued by Section 4.06 shall be
determined by the Board of Directors whose resolution with respect thereto
shall be delivered to the Administrative Agent.

 

For
purposes of determining compliance with the provisions of this Section 4.06, in
the event that a Restricted Payment meets the criteria of more than one of the
types of Restricted Payments described in clauses (i) through (xxiv) above or
is entitled to be made pursuant to Section 4.06(a), the Borrower may, in its
sole discretion, classify such Restricted Payment on the date of such
Restricted Payment or later reclassify all or a portion of such Restricted
Payment, in any manner that complies with this covenant.  Restricted Payments permitted by this Section
4.06 need not be permitted solely by reference to one provision permitting such
Restricted

 

54

 

Payments
but may be permitted in part by one such provision and in part by one or more
other provisions of this covenant permitting such Restricted Payments.

 

Section 4.07.                         Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries.

 

The Borrower shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance
or restriction on the ability of any Restricted Subsidiary to:

 

(a)                                  (1)
pay dividends or make any other distributions to the Borrower or any of its
Restricted Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits or (2) pay any
Indebtedness owed to the Borrower or any of its Restricted Subsidiaries;

 

(b)                                 make
loans or advances to the Borrower or any of its Restricted Subsidiaries; or

 

(c)                                  sell, lease or transfer any of its
properties or assets to the Borrower or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:

 

(i)                                     agreements governing Existing Indebtedness and
Credit Facilities as in effect on the Effective Date, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of those agreements, provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to
dividend and other payment restrictions contained in those agreements on the
Effective Date;

 

(ii)                                  the
Agreement, the Loans and the Loan Guarantees;

 

(iii)                               applicable
law or any applicable rule, regulation, order or governmental permit or
concession;

 

(iv)                              any
agreement or instrument governing Indebtedness or Capital Stock of a Restricted
Subsidiary acquired by the Borrower or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such agreement or
instrument was created or entered into in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person or
any of its Subsidiaries, so acquired, provided that in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Agreement to be incurred;

 

(v)                                 customary
non-assignment provisions in contracts
and licenses entered into in the ordinary course of business;

 

55

 

(vi)                              customary restrictions in leases (including
capital leases), security agreements or mortgages or other purchase money
obligations for property acquired in the ordinary course of business that
impose restrictions on the property
purchased or leased of the nature described in clause (c) above;

 

(vii)                           any
Purchase Money Note, or other Indebtedness or contractual requirements incurred
with respect to a Qualified Receivables Transaction relating to a Receivables
Subsidiary;

 

(viii)                        Permitted
Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained
in the agreements governing the Indebtedness being refinanced;

 

(ix)                                any agreement for the sale or other disposition
of all or substantially all the Capital Stock or the assets of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary pending
the sale or other disposition;

 

(x)                                   Liens permitted to be incurred under the
provisions of Section 4.11 that limit the right of the debtor to dispose of the
assets subject to such Liens;

 

(xi)                                provisions limiting the disposition or
distribution of assets or property in joint venture agreements, asset sale
agreements, sale-leaseback agreements, stock sale agreements and other similar
agreements, which limitation is applicable only to the assets that are the
subject of such agreements;

 

(xii)                             restrictions on cash or other deposits or net
worth imposed by customers under contracts entered into in the ordinary course
of business;

 

(xiii)                          customary provisions imposed on the transfer of
copyrighted or patented materials;

 

(xiv)                         customary provisions restricting dispositions
of real property interests set forth in any reciprocal easement agreements of
the Borrower or any Restricted Subsidiary;

 

(xv)                            contracts entered into in the ordinary course
of business, not relating to any Indebtedness, and that do not, individually or
in the aggregate, detract from the value of property or assets of the Borrower
or any Restricted Subsidiary of the Borrower in any manner material to the Borrower
or any Restricted Subsidiary of the Borrower; and

 

(xvi)                         restrictions on the transfer of property or
assets required by any regulatory authority having jurisdiction over the
Borrower or any Restricted Subsidiary of the Borrower or any of their businesses.

 

56

 

Section 4.08.                         Incurrence of Indebtedness and Issuance of
Preferred Stock.

 

(a)                                  Except
as otherwise provided in this Section 4.08, the Borrower shall not, and shall
not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively, “incur”)
any Indebtedness (including Acquired Debt) and the Borrower shall not issue any
Disqualified Stock and shall not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the
Borrower or any of its Restricted Subsidiaries may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock or preferred stock if the Fixed Charge
Coverage Ratio for the Borrower’s most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock or such preferred stock is
issued, as the case may be, would
have been at least 2.0 to 1.0, determined on a pro
forma basis (including a pro
forma application of the net proceeds therefrom as determined in
good faith by the chief financial officer of the Borrower in an Officer’s
Certificate), as if the additional Indebtedness had been incurred, or the
Disqualified Stock or the preferred stock
had been issued, as the case may be, at the beginning of such four-quarter
period.

 

(b)                                 Except
as otherwise provided in Section 4.08(c), the provisions of Section 4.08(a)
will not apply to the incurrence of any of the following items of Indebtedness or the issuance of any of the following items
of Disqualified Stock or preferred stock (collectively, “Permitted
Debt”):

 

(i)                                     the incurrence by the Borrower and/or its Restricted Subsidiaries (and the Guarantee thereof by the Guarantors
and the Non-Guarantor Subsidiaries) of Indebtedness under the Credit Facilities;
provided that the aggregate principal amount of all Indebtedness (with
letters of credit being deemed to have a principal amount equal to the maximum
potential liability of the Borrower and its Restricted Subsidiaries thereunder)
outstanding under all Credit Facilities after giving effect to such incurrence,
including all Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (i), does not exceed (A) an
amount equal to $250.0 million prior to the Initial Call Termination Date and
thereafter (B) the greater of (x) $250.0 million and (y) 85% of the total
tangible assets of the Borrower and its Restricted Subsidiaries on a
consolidated basis as of the end of the most recently completed fiscal quarter
prior to such incurrence, as determined in accordance with GAAP, in each case,
less the aggregate principal amount of all principal payments thereunder
constituting permanent reductions of such Indebtedness pursuant to and in
accordance with Section 4.09.

 

(ii)                                  the incurrence by the Borrower and those
Restricted Subsidiaries that are Guarantors of Indebtedness in respect
of the Loans, replacement Loans, if any, and the Loan Guarantees and upon the
occurrence of the Exchange Triggering Event, in respect of Indebtedness under the Indenture
(including the Exchange Notes and Exchange Note Guarantees);

 

57

 

(iii)                               the
incurrence by the Borrower or any of its Restricted Subsidiaries of
Indebtedness (including Capital Lease
Obligations, mortgage financings,
Attributable Debt arising out of sale and leaseback transactions or purchase
money obligations), Disqualified Stock or preferred stock, in each case
(A) incurred for the purpose of financing all or any part of the purchase price
or cost of design, construction, lease, installation or improvements of
property, plant or equipment used or useful in the business of the
Borrower or such Restricted Subsidiary or (B) otherwise constituting
Attributable Debt arising out of sale and leaseback transactions in an
aggregate principal amount not to exceed (A) $20.0 million at any time
outstanding prior to the Initial Call Termination Date and (B) thereafter,
$30.0 million at any time outstanding;

 

(iv)                              the incurrence by the Borrower and its
Restricted Subsidiaries of Existing
Indebtedness;

 

(v)                                 the
incurrence by the Borrower or any of its Restricted Subsidiaries of Permitted
Refinancing Indebtedness or Replacement
Preferred Stock in exchange for, or the net proceeds of which are used
to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) or any Disqualified Stock
or preferred stock that was permitted by this Agreement to exist or be
incurred;

 

(vi)                              the
incurrence by the Borrower or any of its
Restricted Subsidiaries of intercompany Indebtedness between or among the Borrower and any of its
Restricted Subsidiaries; provided, however, that
(1) if the Borrower or any Restricted Subsidiary that is a Guarantor is
the obligor on such Indebtedness and the payee is not the Borrower or such
Guarantor, such Indebtedness is expressly subordinated to the prior payment in
full in cash of all Obligations then due with
respect to the Loans, in the case of the Borrower, or Loan Guarantees, in the
case of such Guarantor, and (2) (x) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being held
by a Person other than the Borrower or a Restricted Subsidiary of the Borrower
and (y) any sale or other transfer of any such Indebtedness to a Person
that is not either the Borrower or a Restricted Subsidiary of the Borrower
shall be deemed, in each case, to constitute an incurrence of such Indebtedness
by the Borrower or such Restricted Subsidiary,
as the case may be, which new incurrence
is not permitted by this clause (vi);

 

(vii)                           the issuance by any of the Borrower’s
Restricted Subsidiaries to the Borrower or to any of its Restricted
Subsidiaries of shares of preferred stock; provided, however,
that (1) any subsequent issuance or transfer of Equity Interests that results
in any such preferred stock being held by a Person other than the Borrower or a
Restricted Subsidiary of the Borrower and (2) any sale or other transfer of any
such preferred stock to a Person that is not either the Borrower or a
Restricted Subsidiary of the Borrower

 

58

 

will
be deemed, in each case, to constitute a new issuance of such preferred stock
by such Restricted Subsidiary, which new issuance is not permitted by this clause
(vii);

 

(viii)                        the
incurrence by the Borrower or any of the Restricted Subsidiaries of Hedging
Obligations in the ordinary course of business;

 

(ix)                                the
guarantee: (1) by the Borrower or any Restricted Subsidiary of the Borrower of
Indebtedness of the Borrower or any
Restricted Subsidiary of the Borrower that was permitted to be incurred by
another provision of this covenant; provided
that if the Indebtedness being guaranteed is subordinated to or pari passu with the Loans, then the
guarantee shall be subordinated or pari
passu, as applicable, to the same extent as the Indebtedness
guaranteed and (2) by any Non-Guarantor Subsidiary of Indebtedness of a
Non-Guarantor Subsidiary;

 

(x)                                   the incurrence by the Borrower or any of its
Restricted Subsidiaries of Indebtedness in respect of workers’
compensation claims, self-insurance obligations, bankers’ acceptances, letters of credit, performance, surety bonds, appeal bonds or other similar
bonds and completion guarantees provided by the Borrower or a Restricted Subsidiary
in the ordinary course of business;

 

(xi)                                Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is
extinguished within five (5) Business Days of incurrence;

 

(xii)                             the incurrence of Indebtedness arising
from Guarantees of Indebtedness of the Borrower or any Restricted Subsidiary or the agreements of the Borrower or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price, holdback, contingency payment
obligations or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or Capital Stock of the Borrower or any Restricted Subsidiary; provided that the maximum aggregate
liability in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Borrower and its Restricted Subsidiaries in
connection with such disposition;

 

(xiii)                          the incurrence of Indebtedness resulting from
endorsements of negotiable instruments for collection in the ordinary course of
business;

 

(xiv)                         Indebtedness
(which may include Disqualified Stock or preferred stock) of Persons that are
acquired by the Borrower or any Restricted Subsidiary (including by way of
merger or consolidation) in accordance with the terms of this Agreement; provided
that such Indebtedness, Disqualified

 

59

 

Stock or preferred stock
is not incurred in contemplation of such acquisition or merger; and provided,
further, that after giving effect to such acquisition or merger, either
(A) the Borrower would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio; or (B) the Borrower’s
Fixed Charge Coverage Ratio after giving pro
forma effect to such acquisition or merger would be greater than the
Borrower’s actual Fixed Charge Coverage Ratio immediately prior to such
acquisition or merger;

 

(xv)                            Indebtedness of the Borrower or a Restricted
Subsidiary in respect of netting services, overdraft protection and otherwise
in connection with deposit accounts; provided that such Indebtedness
remains outstanding for ten (10) Business Days or less;

 

(xvi)                         the
incurrence by a Receivables Subsidiary of Indebtedness in a Qualified
Receivables Transaction;

 

(xvii)                      the incurrence by the Borrower of Additional
Loans and Additional Loan Notes evidencing such Additional Loans pursuant to Section
2.02 and Section 2.04;

 

(xviii)                   the incurrence by the Borrower of Indebtedness
consisting of Subordinated Shareholder Funding; and

 

(xix)                           the
incurrence or issuance by the
Borrower or any Restricted Subsidiary of additional Indebtedness, Disqualified Stock or preferred stock
in an aggregate principal amount (or
accreted value or liquidation preference, as applicable) at any time
outstanding, including all Permitted
Refinancing Indebtedness and all Replacement Preferred Stock incurred to
renew, refund, refinance, replace, defease or discharge any such
Indebtedness, Disqualified Stock and
preferred stock incurred or issued
pursuant to this clause (xix), not to exceed (A) $15.0 million
prior to the Initial Call Termination Date and (B) thereafter, $40.0 million.

 

(c)                                  Notwithstanding
the provisions of Section 4.08(a) and (b), prior to the date which is eighteen
(18) months following the Closing Date, neither the Borrower nor any Restricted
Subsidiary of the Borrower shall incur any Senior Debt if, at the time of the
incurrence of such Senior Debt, the Borrower’s Consolidated Total Indebtedness
to Consolidated Cash Flow Ratio (after giving pro
forma effect thereto) would have been greater than 3.75 to 1.00; provided,
however, that this Section 4.08(c) shall not apply to:

 

(i)                                     the
incurrence by the Company or any Restricted Subsidiary of the Company of Senior
Debt otherwise permitted to be incurred under the Congress Credit Facility; and

 

(ii)                                  the
incurrence by the Company or any Restricted Subsidiary of the Company of
Indebtedness otherwise permitted to be incurred under clause (viii), (ix), (x),
(xi), (xii), (xiii), (xv) or (xvi) of Section 4.08(b).

 

60

 

(d)                                 Notwithstanding
the provisions of Section 4.08(a), prior to the Initial Call Termination Date,
neither the Borrower nor any Restricted Subsidiary of the Borrower shall incur
any Indebtedness permitted to be incurred pursuant to Section 4.08(a) if, at
the time of the incurrence of such Indebtedness, the Borrower’s Consolidated
Total Indebtedness to Consolidated Cash Flow Ratio (after giving a pro forma effect thereto) would have been
greater than 3.75 to 1.00.

 

(e)                                  For
purposes of determining compliance with this covenant, in the event that an
item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xix) above or is entitled
to be incurred pursuant to Section 4.08(a), the Borrower may, in its sole
discretion, classify such item of Indebtedness on the date of its incurrence,
or later reclassify all or a portion of such item of Indebtedness, in any
manner that complies with this covenant. 
Indebtedness permitted by this Section 4.08 need not be permitted solely
by reference to one provision permitting such Indebtedness but may be permitted
in part by one such clause and in part by one or more other provisions of this Section
4.08 permitting such Indebtedness.  The
outstanding principal amount of any particular Indebtedness shall be counted
only once and any obligations arising under any Guarantee, Lien, letter of
credit or similar instrument supporting such Indebtedness shall not be double
counted.  The accrual of interest, the accretion or amortization of original
issue discount, the payment of interest
on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of
preferred stock as Indebtedness due to a change in accounting principles, and
the payment of dividends on Disqualified Stock or preferred stock in the form
of additional shares of the same class of Disqualified Stock or preferred stock
will not be deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Stock or preferred stock for purposes of this Section 4.08; provided that, in each such case, the
amount thereof is included in Fixed Charges of the Borrower as accrued (other
than the reclassification of preferred stock as Indebtedness due to a change in
accounting principles).

 

(f)                                    The amount of any Indebtedness outstanding on
any date will be (1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; (2) the principal amount of
the Indebtedness, in the case of any other Indebtedness; and (3) in respect of
Indebtedness of another Person secured by a Lien on the assets of the specified
Person, the lesser of (x) the Fair Market Value of such assets at the date of
determination and (y) the amount of the Indebtedness of the other Person.

 

Section 4.09.                         Asset Sales.

 

(a)                                  The
Borrower shall not, and shall not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:

 

(i)                                     the
Borrower (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of the Asset Sale at least equal to the Fair Market
Value of the assets or Equity Interests issued or sold or otherwise disposed
of; and

 

(ii)                                  at
least 75% of the consideration received in the Asset Sale by the Borrower or
such Restricted Subsidiary is in the form of cash.  For

 

61

 

purposes of this
provision, each of the following shall be deemed to be cash:

 

(A)                              Cash
Equivalents;

 

(B)                                any
liabilities, as shown on the Borrower’s most recent consolidated balance sheet,
of the Borrower or any Restricted Subsidiary of the Borrower (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Loans or the Loan Guarantees) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the
Borrower or such Restricted Subsidiary from further liability;

 

(C)                                any
securities, notes or other obligations received by the Borrower or any such
Restricted Subsidiary from such transferee that are converted by the Borrower
or such Restricted Subsidiary into cash within 180 days of receipt, to the
extent of the cash received in that conversion;

 

(D)                               any
Designated Noncash Consideration the Fair Market Value of which, when taken
together with all other Designated Noncash Consideration received pursuant to
this clause (D) (and not subsequently converted into Cash Equivalents that are
treated as Net Proceeds of an Asset Sale) does not exceed $15.0 million since
the Effective Date, with the Fair Market Value of each item of Designated
Noncash Consideration being measured at the time received and without giving
effect to subsequent changes in value; and

 

(E)                                 any
stock or assets of the kind referred to in clauses (ii) or (iv) of Section
4.09(b) hereof.

 

(b)                                 Within
360 days after the receipt of any Net Proceeds from an Asset Sale, the Borrower
(or the applicable Restricted Subsidiary, as the case may be) may apply such
Net Proceeds at its option:

 

(i)                                     to
repay Senior Debt and if the Senior Debt repaid is revolving credit
Indebtedness, to (A) correspondingly reduce commitments with respect thereto or
(B) acquire Additional Assets;

 

(ii)                                  to
acquire all or substantially all of the assets of, or any Capital Stock of,
another Permitted Business, if, after giving effect to any such acquisition of
Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of
the Borrower;

 

(iii)                               to
buy out or purchase a release from lease obligations on existing retail stores
or distribution centers;

 

62

 

(iv)                              to
make a capital expenditure; or

 

(v)                                 to
acquire Additional Assets.

 

Pending the final
application of any Net Proceeds, the Borrower may temporarily reduce revolving
credit borrowings or otherwise invest such Net Proceeds in any manner that is
not prohibited by this Agreement.

 

(c)                                  Any
Net Proceeds from Asset Sales that are not applied or invested as provided in Section
4.09(b) hereof shall constitute “Excess Proceeds.”  When the aggregate amount of Excess Proceeds
exceeds $15.0 million, within ten (10) Business Days thereof, the Borrower
shall make an Asset Sale Offer to all Lenders and if the Borrower elects (or is
required by the terms of such other pari
passu Indebtedness), all holders of other Indebtedness that is pari passu with the Loans.  The offer price in any Asset Sale Offer shall
be equal to 100% of the principal amount plus accrued and unpaid interest, if
any, to the date of prepayment (or, in respect of any pari passu Indebtedness, such lesser price,
if any, as may be provided for by its terms), and shall be payable in
cash.  If any Excess Proceeds remain
after consummation of an Asset Sale Offer, the Borrower may use such Excess
Proceeds for any purpose not otherwise prohibited by this Agreement.  If the aggregate principal amount of Loans
and such other pari passu
Indebtedness tendered in such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Administrative Agent shall select the Loans and such other pari passu Indebtedness to be prepaid on a
pro rata basis.  Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.

 

Section 4.10.                         Transactions with Affiliates.

 

(a)                                  The
Borrower shall not, and shall not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding,
loan, advance or Guarantee with, or for the benefit of, any Affiliate of the Borrower involving aggregate
consideration in excess of $5.0 million (each of the foregoing, an “Affiliate
Transaction”), unless (i) such Affiliate Transaction is on terms that,
taken as a whole, are not materially less favorable to the Borrower or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Borrower or such Restricted Subsidiary with an
unrelated Person and (ii) the Borrower delivers to the Administrative
Agent (A) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $10.0 million, a resolution of the Board of
Directors set forth in an Officer’s Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the Board of Directors of the Borrower and (B) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $20.0 million, an opinion as to
the fairness to Borrower or such
Restricted Subsidiary of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment banking firm of
national standing.

 

63

 

(b)                                 The
following items shall not be deemed to be Affiliate Transactions and,
therefore, shall not be subject to the provisions of Section 4.10(a):

 

(i)                                     transactions
with customers, suppliers, contractors, joint venture partners or
purchasers or sellers of goods or services, in each case in the ordinary
course of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in accordance with the terms of this Agreement, which
are fair to the Borrower, in the reasonable determination of the Board of
Directors of the Borrower or the senior management of the Borrower and are on
terms at least as favorable as might reasonably have been obtained at such time
from an unaffiliated party;

 

(ii)                                  any
employment agreement, stock option or other compensation agreement or employee benefit plan, officer or director indemnification agreement
or any similar arrangement entered into by the Borrower or any of its
Restricted Subsidiaries in the ordinary course of business and payments or the issuance of securities thereunder;

 

(iii)                               transactions
between or among the Borrower and/or its Restricted Subsidiaries;

 

(iv)                              transactions with a Person (other than an Unrestricted
Subsidiary of the Borrower) that is an Affiliate of the Borrower solely because
the Borrower owns, directly or through a Restricted Subsidiary, an Equity
Interest in, or controls, such Person;

 

(v)                                 payment of reasonable directors’ fees;

 

(vi)                              any issuance of Equity Interests (other than
Disqualified Stock) of the Borrower to Affiliates of the Borrower;

 

(vii)                           loans (or cancellation of loans) or advances to
employees in the ordinary course of business;

 

(viii)                        sales
or other transfers or dispositions of accounts receivable and other related
assets customarily transferred in an asset securitization transaction involving
accounts receivable to a Receivables Subsidiary in a Qualified Receivables
Transaction, and acquisitions of Permitted Investments in connection with a
Qualified Receivables Transaction;

 

(ix)                                Permitted Investments or Restricted
Payments that do not violate the
provisions of Section 4.06;

 

(x)                                   the existence of, or the performance by the
Borrower or any Restricted Subsidiary of their obligations under the terms of,
any stockholders agreement, partnership agreement or limited liability company
agreement (including any registration rights agreement or purchase agreement
related thereto) to which it is a part as of the Effective Date and any similar
agreements which it may enter into thereafter; provided, however,
that the existence of, or the performance by the Borrower or any Restricted

 

64

 

Subsidiary
of obligations under any future amendment to any such existing agreement or
under any similar agreement entered into after the Effective Date will only be
permitted by this clause (x) to the extent that the terms of any such amendment
or new agreement, taken as a whole, are not materially disadvantageous to the Lenders,
as determined in good faith by the Board of Directors of the Borrower or the
senior management of the Borrower;

 

(xi)                                any management, financial advisory, financing,
underwriting or placement services or any other investment banking, banking or
similar services involving the Borrower and any of its Restricted Subsidiaries
(including, without limitation, any payments in cash, Equity Interests or other
consideration made by the Borrower or any of its Restricted Subsidiaries in
connection therewith) on the one hand and the Permitted Holders on the other
hand, which services (and payments and other transactions in connection
therewith) are approved by a majority of the members of the Board of Directors
of the Borrower in good faith;

 

(xii)                             the issuance of Equity Interests (other than
Disqualified Stock) in the Borrower or any Restricted Subsidiary for
compensation purposes;

 

(xiii)                          the issuance of any Subordinated Shareholder
Funding;

 

(xiv)                         intellectual property licenses between or among
the Borrower and/or any Subsidiary of the Borrower in the ordinary course of
business;

 

(xv)                            tax sharing arrangements (including the Tax
Sharing Agreement);

 

(xvi)                         the issuance or sale of any Capital Stock by
the Borrower; and

 

(xvii)                      Existing Indebtedness and any other obligations
pursuant to an agreement existing on the Effective Date, including any
amendment thereto (so long as such amendment is not disadvantageous to the Lenders
in any material respect).

 

Section 4.11.                         Liens.

 

The Borrower shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, assume or suffer to exist any Lien against or upon any of the
Collateral or any proceeds therefrom or assign or convey any right to receive
income therefrom for purposes of security, except Collateral Permitted Liens.

 

Section 4.12.                         Offer to Prepay Upon a Change of Control.

 

(a)                                  Upon
the occurrence of a Change of Control and subject to Section 3.07(c), each
Lender shall have the right to require the Borrower to make an offer (the “Change
of Control Offer”) to prepay all or any part (equal to $1,000 or any
integral multiple thereof) of such Lender’s Loans at a prepayment price equal
to 101% of the principal amount
thereof, plus

 

65

 

accrued and unpaid interest
on the Loans prepaid, if any, to the date of prepayment subject to the rights
of the Lenders on the relevant record date to receive interest due on the
relevant interest payment date (the “Change of Control Payment”).  Within thirty (30) days following any Change
of Control, the Borrower shall mail, by first class mail, a notice to each
Lender, with a copy to the Administrative Agent, describing the transaction or
transactions that constitute the Change of Control and stating:

 

(i)                                     that
the Change of Control Offer is being made pursuant to this Section 4.12 and
that all Loan Notes tendered shall be accepted for payment;

 

(ii)                                  the
prepayment price and the date of prepayment, which shall be no earlier than
thirty (30) days and no later than sixty (60) days from the date such notice is
mailed (the “Change of Control Payment Date”);

 

(iii)                               that
any Loan Note not tendered shall continue to accrue interest;

 

(iv)                              that,
unless the Borrower defaults in making the Change of Control Payment, all Loan
Notes accepted for prepayment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;

 

(v)                                 that
Lenders electing to have any Loan Notes prepaid pursuant to a Change of Control
Offer shall be required to surrender the Loan Notes, with the form entitled “Option
of Holder to Elect Purchase” attached to the Loan Notes completed, to the
Administrative Agent at the address specified in the notice prior to the close
of business on the third Business Day preceding the Change of Control Payment
Date;

 

(vi)                              that
Lenders shall be entitled to withdraw their election if the Administrative
Agent receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Lender, the principal
amount of Loan Notes evidencing the Loans delivered for prepayment, and a
statement that such Lender is withdrawing his election to have the Loan Notes
prepaid;

 

(vii)                           that
Lenders whose Loan Notes are being prepaid only in part shall be issued new
Loan Notes equal in principal amount to the unpaid portion of the Loan Notes
surrendered, which unpaid portion must be equal to $1,000 in principal amount
or an integral multiple thereof; and

 

(viii)                        that
Lenders electing to have a Loan Note prepaid pursuant to a Change of Control
Offer may elect to have Loan Notes prepaid in integral multiples of $1,000
only.

 

66

 

(b)                                 On
the Change of Control Payment Date, the Borrower shall, to the extent lawful,

 

(i)                                     accept
for prepayment all Loans or portions thereof properly tendered pursuant to the
Change of Control Offer,

 

(ii)                                  deposit
with the Administrative Agent an amount equal to the Change of Control Payment
in respect of all Loans or portions thereof properly tendered, and

 

(iii)                               deliver
or cause to be delivered to the Administrative Agent the Loans so accepted,
together with an Officer’s Certificate stating the aggregate principal amount
of Loans or portions thereof being prepaid by the Borrower.

 

(c)                                  The
Administrative Agent will promptly mail to each Lender who properly tendered
their Loans, the Change of Control Payment for such Loans, and the
Administrative Agent shall promptly mail to each Lender a new Loan Note equal
in principal amount to any unpaid portion of the Loans surrendered, if
any.  The Borrower shall publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.

 

(d)                                 Prior
to complying with any of the provisions of this Section 4.12, but in any event
within ninety (90) days following a Change of Control, the Borrower shall
either repay all of its outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing its outstanding Senior Debt to
permit the repayment of Loans required by this Section 4.12.

 

(e)                                  The
Change of Control provisions described above will be applicable whether or not
any other provisions of this Agreement are applicable.  Except as described above with respect to a
Change of Control, this Agreement does not contain provisions that permit the
Lenders to require that the Borrower prepay the Loans in the event of a takeover,
recapitalization, leveraged buy out or similar transaction which is not a
Change of Control.

 

(f)                                    Notwithstanding
anything to the contrary contained in this Section 4.12, the Borrower shall not
be required to make a Change of Control Offer upon a Change of Control if (i) a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements in this Section 4.12 and prepays all Loans validly tendered and
not withdrawn under the Change of Control Offer or (ii) notice of voluntary prepayment has been given pursuant to Section
3.07 hereof, unless and until there is a Default in payment of the applicable prepayment
price.

 

Section 4.13.                         Corporate Existence.

 

Subject to Section 4.12
and Article 5 hereof, as the case may be, the Borrower shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership or other existence of each
of its Restricted Subsidiaries in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Borrower or any
such Restricted Subsidiary and the rights (charter and statutory), licenses and
franchises of the Borrower and its Restricted Subsidiaries; provided
that the Borrower shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Restricted Subsidiaries, if the Board of Directors of the Borrower shall
determine that the preservation thereof is no longer desirable in

 

67

 

the conduct of the
business of the Borrower and its Restricted Subsidiaries, taken as a whole, and
that the loss thereof is not adverse in any material respect to the Lenders.

 

Section 4.14.                         Business Activities.

 

The Borrower shall not,
and shall not permit any Restricted Subsidiary to engage in any business other
than Permitted Businesses,
except to such extent as would not be material to the Borrower and its
Restricted Subsidiaries taken as a whole.

 

Section 4.15.                         No Layering of Debt.

 

Notwithstanding the
provisions of Section 4.08 hereof, (a) the Borrower shall not incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that
is contractually subordinate or junior in right of payment to any Senior Debt
and senior in any respect in right of payment to the Loans and (b) no Guarantor
shall incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is contractually subordinate or junior in right of
payment to Senior Debt of such Guarantor and senior in any respect in right of
payment to such Guarantor’s Loan Guarantee.  No such
Indebtedness will be considered to be senior by virtue of being secured on a
first or junior priority basis and Indebtedness that is not guaranteed by a
particular Person shall not be deemed to be subordinate or junior to
Indebtedness that is so guaranteed solely because it is not so guaranteed.

 

Section 4.16.                         Additional Loan
Guarantees.

 

If
(a) the Borrower or any of its Restricted Subsidiaries acquires or creates
another Subsidiary after the date of this Agreement that guarantees
Indebtedness under the Congress Credit Facility or (b) any Subsidiary of the
Borrower or any of its Restricted Subsidiaries existing as of the date hereof
becomes a guarantor of Indebtedness under the Congress Credit Facility, then
such newly acquired or created Subsidiary or such Subsidiary guarantor of
Indebtedness under the Congress Credit Facility, as the case may be, shall
become a Guarantor and execute a Loan Guarantee, the form of which is attached
as Exhibit B, pursuant to a Supplemental Senior Subordinated Loan
Agreement (the form of which is attached as Exhibit D) and deliver an
Opinion of Counsel in form and substance satisfactory to the Administrative
Agent within thirty (30) Business Days of the date on which it was acquired or
created.

 

ARTICLE 5

SUCCESSORS

 

Section 5.01.                         Merger, Consolidation of Sale of Assets.

 

(a)                                  The
Borrower shall not consolidate or merge with or into (whether or not the
Borrower is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Borrower and its Restricted
Subsidiaries, taken as a whole, in one or more related transactions, to
another Person unless (i) either the
Borrower is the surviving Person or the Person formed by or surviving any such
consolidation or merger (if other than the Borrower) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is an entity organized or
existing under the laws of the United States, any state of the United States or
the District of Columbia;

 

68

 

(ii) the Person formed by or surviving any such
consolidation or merger (if other than the Borrower) or the Person to which
such sale, assignment, transfer, lease, conveyance or other disposition has been made assumes all the
obligations of the Borrower under the Loans and this Agreement pursuant to agreements reasonably satisfactory to
the Administrative Agent; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) except in the case of a merger of the
Borrower with or into a Wholly Owned Subsidiary of the Borrower (other than a
Receivables Subsidiary), the Borrower or the Person formed by or surviving any
such consolidation or merger (if other than the Borrower), or to which such
sale, assignment, transfer, lease, conveyance or other disposition has been made at the time of such
transaction and after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, would (1) be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.08(a) or (2) have a Fixed Charge Coverage Ratio that is
greater than the actual Fixed Charge Coverage Ratio of the Borrower immediately
prior to such transaction.

 

(b)                                 Section
5.01(a) will not prohibit (A) a merger of the Borrower into a Wholly Owned
Subsidiary of the Borrower created for the purpose of holding the Capital Stock
of the Borrower, (B) any consolidation or merger, or any sale, assignment,
transfer, conveyance, lease or other disposition of assets between or among the
Borrower and its Restricted Subsidiaries, (C) a merger between the
Borrower and an Affiliate incorporated solely for the purpose of
reincorporating the Borrower in another State of the United States, (D) any merger of a Restricted Subsidiary
into the Borrower or (E) transfers of accounts receivable and related assets of
the type specified in the definition of Qualified Receivables Transaction (or a
fractional undivided interest therein) by a Receivables Subsidiary) in a
Qualified Receivables Transaction, so long as, in each case, the amount
of Indebtedness of the Borrower and its Restricted Subsidiaries, taken as a whole is not increased
thereby.

 

Section 5.02.                         Successor Corporation Substituted.

 

Upon any consolidation or
merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of the Borrower in a
transaction that is subject to, and that complies with the provisions of Section
5.01 hereof, the successor Person formed by such consolidation or into or with
which the Borrower is merged or to which such sale, assignment, transfer,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation,
assignment, transfer, merger, sale, lease, conveyance or other disposition, the
provisions of this Agreement or the Loans referring to the “Borrower” shall
refer instead to the successor Person and not to the Borrower), and shall
exercise every right and power of the Borrower under this Agreement and the
Loans with the same effect as if such successor Person had been named as the
Borrower herein; provided, however, that the predecessor
Borrower, if any, shall not be relieved from the obligation to pay the
principal of and interest on the Loans except in the case of a sale of all or
substantially all of the properties or assets of the Borrower and its
Restricted Subsidiaries taken as whole in a transaction that is subject to, and
that complies with the provisions of, Section 5.01 hereof.

 

69

 

ARTICLE 6

DEFAULTS AND REMEDIES

 

Section 6.01.                         Events of Default.

 

Each of the following
constitutes an “Event of Default”:

 

(i)                                     default
for thirty (30) days in the payment when due of interest on the Loans;

 

(ii)                                  default
in payment when due (at maturity, upon redemption or otherwise) of principal of
or premium, if any, on the Loans;

 

(iii)                               failure
by the Borrower or any of its Restricted Subsidiaries for thirty (30) days
after notice by the Administrative Agent or by the Lenders holding at least 25%
in principal amount of the Loans then outstanding voting as a single class to comply with the provisions described
under Section 4.06, Section 4.08, Section 4.09 or Section 4.12;

 

(iv)                              failure
by the Borrower or any of its Restricted Subsidiaries for sixty (60) days after
notice to the Borrower by the Administrative Agent or by the Required Lenders voting as a single class to comply with
any of its other agreement in this Agreement or the Loans;

 

(v)                                 default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Borrower or any of its Significant Subsidiaries (or the payment of which
is guaranteed by the Borrower or any of its Significant Subsidiaries) whether
such Indebtedness or Guarantee now exists, or is created after the Effective
Date, which default (a) is caused by a failure to pay principal of such
Indebtedness after giving effect to any grace period provided in such
Indebtedness on the date of such default (a “Payment Default”) or
(b) results in the acceleration of such Indebtedness prior to its stated
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $25.0 million or more;

 

(vi)                              failure
by the Borrower or any of its Subsidiaries to pay final, non-appealable
judgments aggregating in excess of $25.0 million (net of any amounts covered by
a reputable and credit worthy insurance company that has not contested coverage
or reserved rights with respect to an underlying claim), which judgments are
not paid, discharged, waived or stayed for a period of more than sixty (60)
consecutive days after such judgments become final and non-appealable;

 

70

 

(vii)                           the
Borrower or any of its Restricted Subsidiaries that is a Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:

 

(A)                              commences
a voluntary case;

 

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

 

(C)                                consents
to the appointment of a Custodian of it or for all or substantially all of its
property; or

 

(D)                               makes
a general assignment for the benefit of its creditors;

 

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

 

(A)                              is
for relief against the Borrower or any of its Restricted Subsidiaries that is a
Significant Subsidiary in an involuntary case;

 

(B)                                appoints
a Custodian of the Borrower or any of its Restricted Subsidiaries that is a
Significant Subsidiary for all or substantially all of the property of the
Borrower or any of its Restricted Subsidiaries that is a Significant
Subsidiary; or

 

(C)                                orders
the liquidation of the Borrower or any of its Restricted Subsidiaries that is a
Significant Subsidiary; and the order or decree remains unstayed and in effect
for sixty (60) consecutive days;

 

(ix)                                except
as permitted herein, any Loan Guarantee is held to be unenforceable or invalid
by any final and non-appealable judgment or decree or ceases for any reason to
be in full force and effect or any Guarantor that is a Significant Subsidiary,
or any Person acting on behalf of any Guarantor that is a Significant
Subsidiary, denies or disaffirms such Guarantor’s obligations under its Loan Guarantee
and such Default continues for ten (10) days after receipt of the notice
specified in this Agreement; or

 

(x)                                   except
as permitted herein, any Security Document or any security interest granted
thereby is held to be unenforceable or invalid by any final and non-appealable
judgment or decree or ceases for any reason to be in full force and effect and
such Default continues for ten (10) days after receipt of the notice specified
in this Agreement, or the Borrower or any Guarantor that is a Significant
Subsidiary, or any Person acting on behalf of such Person, denies or disaffirms
the Borrower’s or the Guarantor’s obligations under any Security Document.

 

71

 

The term “Custodian”
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.

 

Section 6.02.                         Acceleration.

 

In the case of an Event of Default specified in clause
(vii) or (viii) of Section 6.01 hereof, all outstanding Loans shall become due
and payable immediately without further action or notice.  If any other Event of Default occurs and is
continuing, the Administrative Agent or the Lenders holding at least 25% in
aggregate principal amount of the then outstanding Loans may declare all the
Loans to be due and payable immediately; provided that so long as any
Indebtedness permitted to be incurred pursuant to the Credit Facilities is
outstanding, such acceleration shall not be effective until the earlier of (a)
the acceleration of such Indebtedness under the Credit Facilities or (b) five
(5) Business Days after receipt by the Borrower of written notice of such
acceleration.  Lenders may not enforce
this Agreement or the Loans except as provided in this Agreement.

 

Upon any such declaration, the Loan Notes shall become
due and payable immediately.  The
Required Lenders by written notice to the Administrative Agent may, on behalf
of all of the Lenders, rescind an acceleration or waive any existing Default or
Event of Default and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default (except nonpayment
of principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.

 

Section 6.03.                         Other Remedies.

 

(a)                                  If
an Event of Default occurs and is continuing, the Administrative Agent may
pursue any available remedy to collect the payment of principal, premium, if
any, interest on the Loans or to enforce the performance of any provision of
the Loan Notes evidencing the Loans or this Agreement.

 

(b)                                 The
Administrative Agent may maintain a proceeding even if it does not possess any
of the Loans or does not produce any of them in the proceeding.  A delay or omission by the Administrative
Agent or any Lender in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. 
All remedies are cumulative to the extent permitted by law.

 

Section 6.04.                         Waiver of Past Defaults.

 

Required Lenders, by notice to the Administrative
Agent, may on behalf of the Lenders of all of the Loans waive an existing
Default or Event of Default and its consequences hereunder, except a continuing
Default or Event of Default in the payment of the principal of, premium, if
any, or interest on, the Loans (including in connection with an offer to
prepay); provided, however, that the Required
Lenders may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration.  Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Agreement; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.

 

72

 

Section 6.05.                         Control by Majority.

 

The Required Lenders may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Administrative Agent or exercising any trust power
conferred on it.  However, (a) the
Administrative Agent may refuse to follow any direction that conflicts with law
or this Agreement that the Administrative Agent determines may be unduly prejudicial
to the rights of other Lenders or that may involve the Administrative Agent in
personal liability and (b) the Administrative Agent may take any other
action deemed proper by the Administrative Agent which is not inconsistent with
such direction.

 

Section 6.06.                         Limitation on Suits.

 

A Lender may pursue a
remedy with respect to this Agreement, the Loans or the Loan Guarantees only
if:

 

(i)                                     the
Lender gives to the Administrative Agent written notice of a continuing Event
of Default;

 

(ii)                                  the
Lenders holding at least 25% in aggregate principal amount of the then
outstanding Loans make a written request to the Administrative Agent to pursue
the remedy;

 

(iii)                               such
Lender or Lenders offer and, if requested, provide to the Administrative Agent
reasonable security or indemnity against any loss, liability or expense;

 

(iv)                              the
Administrative Agent does not comply with the request within sixty (60) days
after receipt of the request and the offer and, if requested, the provision of
security or indemnity; and

 

(v)                                 during
such 60-day period the Required Lenders do not give the Administrative Agent a
direction inconsistent with the request.

 

A Lender may not use this
Agreement to prejudice the rights of another Lender or to obtain a preference
or priority over another Lender.

 

Section 6.07.                         Rights of Lenders to Receive Payment.

 

Notwithstanding any other
provision of this Agreement, the right of any Lender to receive payment of
principal, premium, if any, and interest on such Loan, on or after the
respective payment due dates (including in connection with an offer to prepay),
or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Lender.

 

Section 6.08.                         Collection Suit by Administrative Agent.

 

If an Event of Default
specified in Section 6.01(i) or (ii) hereof occurs and is continuing, the
Administrative Agent is authorized to recover judgment in its own name for the
whole

 

73

 

amount of principal of,
premium, if any, and interest remaining unpaid on the Loans and interest on
overdue principal and, to the extent lawful, interest and such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent, its agents and counsel.

 

Section 6.09.                         Administrative Agent May File Proofs of
Claim.

 

The Administrative Agent
is authorized to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Administrative Agent, its agents and counsel)
and the Lenders allowed in any judicial proceeding relative to the Borrower (or
any other obligor upon the Loans), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
securities or property payable or deliverable on any such claims and any
Custodian in any such judicial proceeding is hereby authorized by each Lender
to make such payments to the Administrative Agent, and in the event that the
Administrative Agent shall consent to the making of such payments directly to
the Lenders, to pay to the Administrative Agent any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the
Administrative Agent, its agents and counsel, and any other amounts due the
Administrative Agent under Article 7 hereof. 
To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Administrative Agent, its agents and counsel,
and any other amounts due the Administrative Agent under Article 7 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment
of the same shall be secured by a Lien on, and shall be paid out of, any and
all distributions, dividends, money, securities and other properties that the
Lenders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise.  Nothing herein contained shall be deemed to
authorize the Administrative Agent to authorize or consent to or accept or adopt
on behalf of any Lender any plan of reorganization, arrangement, adjustment or
composition affecting the Loans or the rights of any Lender, or to authorize
the Administrative Agent to vote in respect of the claim of any Lender in any
such proceeding.

 

Section 6.10.                         Priorities.

 

If the Administrative
Agent collects any money pursuant to this Article 6, it shall pay out the money
in the following order:

 

(1)                                  First:
to the Administrative Agent, its agents and attorneys for amounts due under Article
7 hereof, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Administrative Agent and the costs and
expenses of collection;

 

(2)                                  Second:
to Lenders for amounts due and unpaid on the Loans for principal, premium, if
any, interest ratably, without preference or priority of any kind, according to
the amounts due and payable on the Loans for principal, premium, if any, and
interest, respectively; and

 

74

 

(3)                                  Third:
to the Borrower or, to the extent the Administrative Agent collects any amount
pursuant to Article 7 from the Guarantors, to such Guarantors, or to such party
as a court of competent jurisdiction shall direct.

 

The Administrative Agent
may fix a record date and payment date for any payment to Lenders pursuant to
this Section 6.10.

 

Section 6.11.                         Undertaking for Costs.

 

In any suit for the
enforcement of any right or remedy under this Agreement or in any suit against
the Administrative Agent for any action taken or omitted by it as a
Administrative Agent, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorneys’ fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party
litigant.  This Section 6.11 does not
apply to a suit by the Administrative Agent, a suit by a Lender pursuant to Section
6.07 hereof, or a suit by Lenders holding more than 10% in principal amount of
the then outstanding Loans.

 

ARTICLE 7

ADMINISTRATIVE AGENT

 

Section 7.01.                         Administrative Agent.

 

Each of the Lenders
hereby irrevocably appoints the Administrative Agent as its agent and
authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms
hereof, together with such actions and powers as are reasonably incidental
thereto.

 

The Administrative Agent
shall not have any duties or obligations except those expressly set forth
herein.  Without limiting the generality
of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary
or other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent
is required to exercise in writing as directed by the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 13.02) and (c) except as expressly set
forth herein, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
the Borrower or any of the Subsidiaries that is communicated to or obtained by
the Administrative Agent or any of its Affiliates in any capacity.  The Administrative Agent shall not be liable
for any action taken or not taken by it in good faith with the consent or at
the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
13.02) or in the absence of its own willful misconduct, bad faith or
negligence.  The Administrative Agent
shall be deemed not to have knowledge of any Default unless and until written
notice thereof is given to the Administrative Agent at the Corporate Trust
Office of the Administrative Agent by the Borrower or a Lender, and the
Administrative Agent shall not be

 

75

 

responsible for or have
any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement, (ii) the contents
of any certificate, report or other document delivered hereunder or in
connection herewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement or any
other agreement, instrument or document or (v) the satisfaction of any
condition set forth in Article 9 or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative
Agent.

 

The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed
or sent by the proper Person.  The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any
liability for relying thereon.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

 

The Administrative Agent
may perform any and all its duties and exercise its rights and powers by or
through any one or more sub-agents appointed by the Administrative Agent.  The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. 
The exculpatory provisions of the preceding paragraphs shall apply to
any such sub-agent and to the Related Parties of the Administrative Agent and
any such sub-agent, and shall apply to their respective activities in
connection with the activities as Administrative Agent.

 

Subject to the
appointment and acceptance of a successor Administrative Agent as provided in
this paragraph, the Administrative Agent may resign at any time by notifying
the Lenders and the Borrower.  Upon any
such resignation, the Required Lenders shall have the right, with the Borrower’s
consent (such consent not to be unreasonably withheld), to appoint a
successor.  If no successor shall have
been so appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Administrative Agent gives notice of
its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent or apply to a court of
competent jurisdiction to appoint a successor Administrative Agent which shall
be a bank with an office in New York, New York, or an Affiliate of any such
bank.  Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor.  After the Administrative Agent’s resignation
hereunder, the provisions of this Article 7 and Section 13.03 shall continue in
effect for the benefit of such retiring Administrative Agent, its sub-agents
and their respective Related Parties in respect of any actions taken or omitted
to be taken by any of them while it was acting as Administrative Agent.

 

76

 

Each Lender acknowledges
that it has, independently and without reliance upon the Administrative Agent
or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement.  Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any related agreement or any document furnished hereunder or
thereunder.

 

Section 7.02.                         Additional Rights and Duties of the Administrative
Agent.

 

(a)                                  No
provision of this Agreement shall require the Administrative Agent to expend or
risk its own funds or incur any liability.

 

(b)                                 Before
the Administrative Agent acts or refrains from acting in connection with a
request from the Borrower, it may require an Officer’s Certificate or an
Opinion of Counsel or both from the Borrower. 
The Administrative Agent shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officer’s Certificate or
Opinion of Counsel.  The Administrative
Agent may consult with counsel and the written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.

 

(c)                                  The
Administrative Agent shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Agreement; provided, however,
that the Administrative Agent’s conduct does not constitute willful misconduct,
bad faith or negligence.

 

(d)                                 The
Administrative Agent shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement at the request or direction of any of
the Lenders unless such Lenders shall have offered to the Administrative Agent
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.

 

Section 7.03.                         Successor Administrative Agent by Merger,
Etc.

 

If the Administrative
Agent consolidates, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the successor
corporation without any further act shall be the successor Administrative
Agent, as applicable.

 

ARTICLE 8

REPRESENTATIONS AND WARRANTIES

 

Section 8.01.                         Representations and Warranties of the
Borrower and the Guarantors.

 

On and as of the date
hereof, each of the Borrower and the Guarantors represents and warrants to and
agrees with each of the Lenders as follows:

 

77

 

(a)                                  Organization.  Each of the Borrower and the Guarantors has
been duly organized and is validly existing as a corporation or limited
liability company, as applicable, in good standing under the laws of its
respective jurisdiction of incorporation or formation, except where the failure
to be so duly organized, validly existing and in good standing would not have a
material adverse effect on the business, financial condition or results of
operations of the Borrower and the Guarantors taken as a whole (a “Material
Adverse Effect”), with corporate or limited liability company power and
authority to own or lease its properties and conduct its business, except where
the failure to have such power and authority would not have a Material Adverse
Effect, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification, except in jurisdictions where the failure to
be so qualified or in good standing has not had, and would not be reasonably
expected to have, a Material Adverse Effect;

 

(b)                                 Authority.  Each of the Borrower and the Guarantors has
all requisite corporate or limited liability company power and authority to
execute, deliver and perform its obligations under the Credit Documents to
which it is a party and the Indenture, Exchange Notes and Exchange Note
Guarantees to which it will become a party;

 

(c)                                  Title
to Properties.  The Borrower and its
Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except Collateral
Permitted Liens; and any real property and buildings held under lease by the
Borrower and its Subsidiaries are held by them under valid, subsisting and
enforceable leases, in each case with such exceptions as do not result in a
Material Adverse Effect;

 

(d)                                 Capitalization.  All of the issued equity interests of the
Borrower are duly and validly authorized and issued and fully paid and
non-assessable and not subject to any preemptive or similar rights; and all of
the issued shares of capital stock or other equity interests of each Subsidiary
of the Borrower are validly authorized and issued, are fully paid, non-assessable
and are owned directly or indirectly by the Borrower free and clear of any
liens, encumbrances, equities or claims except Collateral Permitted Liens;

 

(e)                                  Execution
and Validity.  (i) Each of the Credit
Documents has been duly authorized, executed and delivered by the Borrower and
the Guarantors party thereto and, assuming due authorization, execution and
delivery by the other parties thereto, will constitute a valid and binding
agreement of the Borrower and such Guarantors, enforceable against the Borrower
and such Guarantors in accordance with their respective terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors’ rights and to general
equity principles;

 

(ii)                                  The
Indenture has been duly authorized and, if and when duly executed and delivered
by the Borrower and the Guarantors and the trustee thereunder, will constitute
a valid and binding instrument, enforceable in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors’ rights and to
general equity principles;

 

78

 

(iii)                               The
Exchange Notes have been duly authorized and, if and when duly issued and
authenticated by the trustee in accordance with the Indenture, upon delivery in
accordance with the Indenture, will constitute valid and binding obligations of
the Borrower entitled to the benefits provided by the Indenture, enforceable
against the Borrower in accordance with their terms, subject as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles; and

 

(iv)                              The
Exchange Note Guarantees have been duly authorized and, when duly issued,
executed and delivered by the Guarantors in accordance with the Indenture, will
constitute valid and binding obligations of the Guarantors entitled to the
benefits provided by the Indenture, enforceable against them in accordance with
their terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors’ rights and to general equity principles;

 

(f)                                    No
Conflict.  The execution, delivery
and performance by the Borrower and the
Guarantors of the Credit Documents, the Indenture, the Exchange Notes and the
Exchange Note Guarantees to which they are parties will
not (i) result in any violation of the provisions of the certificate of
incorporation or formation or by-laws or limited liability company agreement or
other organizational documents of the Borrower or any of the Guarantors, (ii)
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument that is material to the
Borrower and the Guarantors taken as a whole and to which the Borrower or any
of the Guarantors is a party or to which any of the property or assets of the
Borrower or any of the Guarantors is subject or (iii) result in any violation
of the provisions of any law or statute or any order, rule or regulation,
judgment or decree of any court or governmental agency or body having
jurisdiction over the Borrower or any of the Guarantors or any of their
respective properties or assets, except for breaches or violations that in the
case of clauses (ii) and (iii) only, individually or in the aggregate, would
not have a Material Adverse Effect; no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body is required for execution, delivery and performance of, or the
consummation of the transactions contemplated by, the Credit Documents, the
Indenture, the Exchange Notes and the Exchange Note Guarantees, except any
consent, approval, authorization, order, registration or qualification (A) the
failure of which to obtain would not have a Material Adverse Effect, (B) that
is not required to be obtained prior to the Closing Date and that the Borrower
reasonably believes will be obtained in the ordinary course of business or (C)
as may be required under state securities or blue sky laws in connection with
the exchange and issuance of the Exchange Notes and the Exchange Note
Guarantees to the Lenders;

 

(g)                                 Compliance
with Other Agreements, Organizational Documents and Laws.  Neither the Borrower nor any of the
Guarantors is (i) in default in the performance or observance of any
obligation, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument that is material
to the Borrower and the Guarantors taken as a whole to which it is a party or
by which it or any of its properties may be

 

79

 

bound, (ii) in violation of its certificate of
incorporation or formation or by-laws or limited liability company agreement or
other organizational documents or (iii) in violation of any provisions of law
or statute or any order, rule or regulation, judgment or decree of any court or
governmental agency or body having jurisdiction over the Borrower or any of the
Guarantors or any of their respective properties or assets;  except, in the case of clauses (i)
and (iii), for such defaults,
violations and failures as would not reasonably be expected to have a Material
Adverse Effect;

 

(h)                                 Financial
Statements.  The historical consolidated
financial statements, a copy of which has been delivered to the Lenders, fairly
present, in all material respects, the consolidated financial position, results
of operations and cash flows of the Borrower and its Subsidiaries at the
respective dates or for the respective periods to which they apply, subject, in
the case of any such unaudited financial statements, to changes resulting from
audit and normal year-end adjustments; such financial statements have been
prepared in accordance with generally accepted accounting principles and
commonly followed industry accounting practices at the time such financial
statements were prepared consistently applied throughout the periods specified,
except as disclosed therein;

 

(i)                                     Margin
Stock.  No part of the proceeds of
the Loans made to the Borrower will be used to purchase or carry any Margin
Stock (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) or to extend credit to others for the purpose of purchasing or
carrying any such Margin Stock or for any purpose that violates the provisions
of Regulation T, U or X of said Board of Governors;

 

(j)                                     Litigation.  Except as set forth in Schedule 8.01(j),
there are no legal or governmental proceedings pending to which the Borrower or
any of the Guarantors is a party or of which any property or assets of the
Borrower or any of the Guarantors is the subject that would reasonably be
expected to have a Material Adverse Effect; and, to the best of the Borrower’s
knowledge, no such proceedings are threatened by governmental authorities or
others;

 

(k)                                  Investment
Company Status.  The Borrower is not,
and after giving effect to the transactions contemplated by this Agreement will
not be, an “investment company,” or an entity “controlled by an investment
company,” as such terms are defined in the United States Investment Company Act
of 1940, as amended, and the rules and regulations thereunder (the “Investment
Company Act”);

 

(l)                                     Solvency.  As of the date hereof, the fair saleable
value of the assets of the Borrower and its Subsidiaries, taken as a whole,
exceeds the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including identified contingent
liabilities at any time, which shall be computed to be an amount that, in light
of the facts and circumstances existing at such time, represent the amount that
can reasonably be expected to become an actual or matured liability) of the
Borrower and its Subsidiaries, taken as a whole, as they mature; the assets of
the Borrower and its Subsidiaries, taken as a whole, do not constitute
unreasonably small capital for the Borrower and its Subsidiaries to carry out
their respective businesses as now conducted or as proposed to be conducted
including the capital needs of the Borrower and its Subsidiaries, taken as a
whole, and projected capital requirements and capital availability

 

80

 

thereof; and the Borrower does not intend to, and does
not intend to permit any of its Subsidiaries to, incur debts beyond their
respective ability to pay such debts as they mature;

 

(m)                               No
Material Adverse Change.  Since July
31, 2004, and except as disclosed in any filing by the Borrower with the
Commission prior to the Closing Date or in Schedule 8.01(m), (i) there
has not occurred any material adverse change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Borrower
and the Guarantors, taken as a whole, (ii) there has not been any material
adverse change in the capital stock or other equity interests or in the
long-term debt of the Borrower or any of the Guarantors and (iii) neither the
Borrower nor any of the Guarantors has entered into any transaction or
agreement not in the ordinary course of business material to the Borrower and
the Guarantors, taken as a whole;

 

(n)                                 Insurance.  Each of the Borrower and the Guarantors
carries, or is covered by, insurance in such amounts and covering such risks as
is customary for companies engaged in similar businesses and owning similar
properties in localities where the Borrower and the Guarantors operate;

 

(o)                                 Environmental
Matters.  The Borrower and the
Guarantors (i) are in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to (x) the protection of
the environment or (y) hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not have
a Material Adverse Effect;

 

(p)                                 Intellectual
Property.  The Borrower and each of
the Guarantors own or possess adequate rights to use all patents, patent
applications, trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights and licenses necessary for and material
to the conduct of their respective businesses and the Borrower has no knowledge
that the conduct of their respective businesses will conflict with, and the
Borrower and the Guarantors have not received any notice of any claim of
conflict with any such rights of others, except in each case as set forth in Schedule
8.01(j) or as would not have a Material Adverse Effect;

 

(q)                                 Employment
Matters.  There are no existing or,
to the best knowledge of the Borrower, threatened labor disputes with the
employees of the Borrower or any of the Guarantors that would reasonably be
expected to have a Material Adverse Effect; and

 

(r)                                    ERISA.  To the Borrower’s knowledge, neither the
Borrower nor any of the Guarantors has violated any foreign, federal, state or
local law or regulation relating to any provisions of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), or any provisions of
the Foreign Corrupt Practices Act or the rules and regulations promulgated
thereunder, except for such violations which would not have a Material Adverse
Effect.

 

81

 

Section 8.02.                         Representations and Warranties of the
Lenders.

 

On and as of the date
hereof, each of the Lenders represents and warrants to and agrees with each of
the Borrower and the Guarantors as follows:

 

(a)                                  Authority.  Each of the Lenders has all requisite
corporate or limited liability company power and authority to execute, deliver
and perform its obligations under the Credit Documents to which it is a party;

 

(b)                                 Execution
and Validity.  Each of the Credit
Documents has been duly authorized, executed and delivered by each Lender and,
assuming due authorization, execution and delivery by the other parties
thereto, will constitute a valid and binding agreement of each of the Lenders,
enforceable against each Lender in accordance with their respective terms,
subject as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors’ rights and to
general equity principles;

 

(c)                                  Funding
of Loans.  Each Lender has sufficient
funds available to make the Loans in accordance with its Pro Rata Share of the
Term Loan Commitments as set forth in this Agreement and each Lender shall
maintain such funds in a segregated account until each Lender makes the amount of
its Loan available to the Administrative Agent on the Closing Date upon receipt
of a Notice of Borrowing in accordance with Section 2.01 hereof.

 

ARTICLE 9

CONDITIONS PRECEDENT TO CREDIT
EXTENTIONS

 

Section 9.01.                         Conditions Precedent to Execution of this
Agreement.

 

The obligations of the
Lenders to enter into this Agreement to make Loans hereunder as of the date
hereof is subject to satisfaction (or waiver in accordance with Section 13.02)
of the following conditions precedent:

 

(a)                                  The
Administrative Agent shall have received from each party hereto either (i) a
counterpart of the Credit Documents signed on behalf of such party or (ii)
written evidence satisfactory to the Administrative Agent (which may include
telecopy transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of the Credit Documents.

 

Section 9.02.                         Conditions Precedent to Credit Extensions.

 

The obligations of the
Lenders to make Loans hereunder on the Closing Date is subject to the
satisfaction (or waiver in accordance with Section 13.02) of the following
conditions precedent:

 

(a)                                  The
Administrative Agent shall have received, dated as of the Closing Date, (i) a
legal opinion of Cleary Gottlieb Steen & Hamilton, special counsel for the
Borrower and the Guarantors, substantially in the form attached hereto as Exhibit
G-1; (ii) a legal opinion of Gibbons, Del Deo, Dolan, Griffinger &
Vecchione, special New Jersey counsel for J. Crew Inc., a Guarantor,
substantially in the form attached hereto as Exhibit G-2; (iii) a legal
opinion of

 

82

 

Richards, Layton & Finger, P.A., special Delaware
counsel for the Borrower and the Guarantors, substantially in the form attached
hereto as Exhibit G-3; and (iv) a legal in-house opinion of the General
Counsel of the Borrower and the Guarantors, substantially in the form attached
hereto as Exhibit G-4; provided that opinions delivered pursuant
to clauses (ii) and (iv) shall be in a form reasonably satisfactory to the Lenders.

 

(b)                                 The
Administrative Agent shall have received, dated as of the Closing Date, a
Secretary’s Certificate of the Borrower and the Guarantors substantially in the
form attached hereto as Exhibit I, attaching (i) copies of the
organizational documents of the Borrower and each Guarantor executed and
delivered by the Borrower and each Guarantor, as applicable, and, to the extent
applicable, certified by the appropriate governmental official; (ii) executed
incumbency certificates of the officers of such Person executing the Credit
Documents to which it is a party; (iii) resolutions of the governing body of
the Borrower and each Guarantor approving and authorizing the execution,
delivery and performance of this Agreement and the other Credit Documents to which
it is a party or by which it or its assets may be bound as of the Closing Date,
certified as of the Closing Date by its secretary or an assistant secretary as
being in full force and effect without modification or amendment; and (iv) a
good standing certificate from the applicable governmental authority of each of
the Borrower and Guarantors’ jurisdiction of incorporation, organization or
formation dated a recent date prior to the Closing Date.

 

(c)                                  The
Administrative Agent shall have received, dated as of the Closing Date, an
Officer’s Certificate of the Borrower and the Guarantors substantially in the
form attached hereto as Exhibit J stating that, as of the Closing Date,
the conditions specified in Section 9.02(f) and Section 9.02(g) have been
satisfied.

 

(d)                                 The
Administrative Agent and the Lenders shall have received all fees and other
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all reasonable and documented
out-of-pocket costs and expenses required to be reimbursed or paid by the
Borrower under the Credit Documents.

 

(e)                                  The
Borrower shall have executed and delivered the Loan Notes and Loan Guarantees
in favor of the Lenders who have committed to make Loans (or affiliates of such
Lenders designated by them) in accordance with each such Lender’s Pro Rata
Share of such Loans.

 

(f)                                    The
representations and warranties set forth in Article 8 shall be true and correct
in all material respects on and as of the date specifically referred to within Article
8, except that the representations and warranties provided in Section 8.01(a),
(b), (c), (d), (e), (f), (g) (other than the representations and warranties set
forth in clause (iii) thereof),
(i) and (k) shall be true and correct in all material respects as of the
Closing Date.

 

(g)                                 There
shall be no Default or Event of Default existing under this Agreement other
than any Default or Event of Default resulting from failure by the Borrower or
any of its Restricted Subsidiaries to comply with the provisions described
under Section 4.03, Section 4.04 or Section 4.14.

 

(h)                                 The
Lenders shall have received UCC financing statements with respect to the
Collateral to be filed on the Closing Date, which shall be reasonably
acceptable to the Lenders.

 

83

 

The Administrative Agent
shall notify the Borrower and the Lenders of the Closing Date, and such notice
shall be conclusive and binding.

 

ARTICLE 10

SUBORDINATION

 

Section 10.01.                  Agreement to Subordinate.

 

The Borrower agrees, and
each Lender by accepting a Loan Note agrees, that all Obligations evidenced by
the Loans are subordinated in right of payment, to the extent and in the manner
provided in this Article 10, to the prior payment in full in cash of all Senior
Debt (whether outstanding on the Effective Date or created, incurred, assumed
or guaranteed thereafter), and that the subordination is for the benefit of the
holders of Senior Debt of the Borrower.

 

Section 10.02.                  Liquidation; Dissolution; Bankruptcy.

 

The holders of Senior
Debt of the Borrower will be entitled to receive payment in full in cash of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any bankruptcy proceeding at the rate that would be applicable
under the terms of the documentation governing the applicable Senior Debt and
other reasonable fees, costs or charges provided for under the applicable
Senior Debt which would accrue and become due under the terms of the applicable
Senior Debt but for the commencement of any case in bankruptcy, in each case as
to such interest or other amounts whether or not allowed or allowable in whole
or in part in such case) before the Lenders will be entitled to receive any
payment (by setoff or otherwise) with respect to the Loans:

 

(a)                                  in
a liquidation or dissolution of the Borrower;

 

(b)                                 in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Borrower or its property;

 

(c)                                  in
an assignment for the benefit of the Borrower’s creditors; or

 

(d)                                 in
any marshaling of the Borrower’s assets and liabilities;

 

and, if any of the
foregoing shall have occurred, until all Obligations with respect to Senior
Debt are paid in full in cash, any payment or distribution to which the Lenders
would be entitled shall be made to the holders of Senior Debt.

 

Section 10.03.                  Default On Designated Senior Debt.

 

(a)                                  The
Borrower shall not make any payment (by setoff or otherwise) or in respect of
the Loans if (i) a default in the payment of the principal or premium, if
any, or interest on Designated Senior Debt occurs and is continuing beyond any
applicable grace period or (ii) any other default occurs and is continuing with
respect to Designated Senior Debt that permits holders of the Designated Senior
Debt to accelerate its maturity, and the Administrative Agent receives a notice
of such default (a “Payment Blockage Notice”) from the holders of any

 

84

 

Designated Senior Debt or any agent or trustee for
such holders.  Payments on the Loans may
and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless a payment default has occurred and is continuing (as a result
of the maturity of any Designated Senior Debt having been accelerated).  No new period of payment blockage (other than
for a payment default) may be commenced unless and until (i) 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, premium, if any, and
interest on the Loans that have come due have been paid in full in cash.  No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Administrative Agent shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been cured or waived for a
period of not less than ninety (90) days.

 

(b)                                 Whenever
the Borrower is prohibited from making any payment in respect of the Loans, the
Borrower also shall be prohibited from making, directly or indirectly, any
payment of any kind on account of the purchase or other acquisition of the
Loans.  If any Lender receives any
payment or distribution that such Lender is not entitled to receive with
respect to the Loans, such Lender shall be required to pay the same over to the
holders of Designated Senior Debt or, in the event there are not any such
holders, to the holders of Senior Debt, or any representative of such holders
under the indenture or other agreement (if any) pursuant to which such
Designated Senior Debt or Senior Debt, as the case may be, may have been issued
(the “Representative”).

 

Section 10.04.                  Acceleration of Loans.

 

If payment of the Loans
is accelerated because of an Event of Default, the Borrower shall promptly
notify holders of Senior Debt of the acceleration.

 

Section 10.05.                  When Distribution Must Be Paid Over.

 

(a)                                  In
the event that the Administrative Agent or any Lender receives any payment
(including a payment by a Guarantor under its Loan Guarantee) of any
Obligations with respect to the Loans at a time when the Administrative Agent
or such Lender, as applicable, has actual knowledge that such payment is
prohibited by Section 10.03 hereof, such payment shall be held by the
Administrative Agent or such Lender, in trust for the benefit of, and shall be
paid forthwith over and delivered, upon written request, to, the holders of
Designated Senior Debt, or in the event there are not any such holders, to the
holders of Senior Debt, in each case as their interests may appear, or their
Representative, as their respective interests may appear, for application to
the payment of all Obligations with respect to such Designated Senior Debt or
such Senior Debt, as the case may be, remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of such
Designated Senior Debt or such Senior Debt, as the case may be.

 

(b)                                 With
respect to the holders of Designated Senior Debt and Senior Debt, the
Administrative Agent undertakes to perform only such obligations on the part of
the Administrative Agent as are specifically set forth in this Article 10, and
no implied covenants or

 

85

 

obligations with respect to the holders of Designated
Senior Debt or Senior Debt shall be read into this Agreement against the
Administrative Agent.  The Administrative
Agent shall not be deemed to owe any fiduciary duty to the holders of
Designated Senior Debt or Senior Debt and shall not be liable to any such
holders if the Administrative Agent shall pay over or distribute to or on
behalf of Lenders or the Borrower or any other Person money or assets to which
any holders of Designated Senior Debt or Senior Debt shall be entitled by
virtue of this Article 10, except if such payment is made as a result of the
willful misconduct or gross negligence of the Administrative Agent.

 

Section 10.06.                  Notice by the Borrower.

 

The Borrower shall
promptly notify the Administrative Agent of any facts known to the Borrower
that would cause a payment of any Obligations with respect to the Loans to
violate this Article 10, but failure to give such notice shall not affect the
subordination of the Loans to the Senior Debt as provided in this Article 10.

 

Section 10.07.                  Subrogation.

 

After all Senior Debt is
paid in full in cash and all commitments to make loans under such Senior Debt
have been terminated and until the Loans are paid in full, Lenders shall be
subrogated (equally and ratably with all other Indebtedness pari passu with the Loans) to the rights
of holders of Senior Debt to receive distributions applicable to Senior Debt to
the extent that distributions otherwise payable to the Lenders have been
applied to the payment of Senior Debt.  A
distribution made under this Article 10 to holders of Senior Debt that
otherwise would have been made to Lenders is not, as between the Borrower and
Lenders, a payment by the Borrower on the Loans.

 

Section 10.08.                  Relative Rights.

 

(a)                                  This
Article 10 defines the relative rights of Lenders and holders of Senior
Debt.  Nothing in this Agreement shall:

 

(i)                                     impair,
as between the Borrower and Lenders, the obligations of the Borrower, which are
absolute and unconditional, to pay principal of and interest on the Loans in
accordance with their terms;

 

(ii)                                  affect
the relative rights of Lenders and creditors of the Borrower other than their
rights in relation to holders of Senior Debt; or

 

(iii)                               prevent
the Administrative Agent or any Lender from exercising its available remedies
upon a Default or Event of Default, subject to the rights of holders of Senior
Debt to receive distributions and payments otherwise payable to Lenders.

 

(b)                                 If
the Borrower fails because of this Article 10 to pay principal of or interest
on a Loan on the due date, the failure is still a Default or Event of Default.

 

86

 

Section 10.09.                  Subordination May Not Be Impaired by the
Borrower.

 

No right of any
holder of Senior Debt to enforce the subordination of the Indebtedness
evidenced by the Loans shall be impaired by any act or failure to act by the
Borrower, any Subsidiary of the Borrower, the Administrative Agent or any
Lender or by the failure of the Borrower, any Subsidiary of the Borrower, the
Administrative Agent or any Lender to comply with this Agreement.

 

Section 10.10.                  Distribution or Notice of Representative.

 

(a)                                  Whenever
a distribution is to be made or a notice given to holders of Designated Senior
Debt or Senior Debt, as the case may be, the distribution may be made and the
notice given to the Representative of such holders.

 

(b)                                 Upon
any payment or distribution of assets of the Borrower referred to in this Article
10, the Administrative Agent and the Lenders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Administrative Agent or to the
Lenders for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Borrower, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.

 

Section 10.11.                  Rights of Administrative Agent.

 

(a)                                  Notwithstanding
the provisions of this Article 10 or any other provision of this Agreement, the
Administrative Agent shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment or distribution by the
Administrative Agent, and the Administrative Agent may continue to make
payments on the Loans unless the Administrative Agent shall have received at
its Corporate Trust Office at least three (3) Business Days prior to the date
of such payment written notice of facts that would cause the payment of any
Obligations with respect to the Loans to violate this Article 10.  Only the Borrower or a Representative may
give the notice.  Nothing in this Article
10 shall impair or subordinate the claims of or payments to, the Administrative
Agent under or pursuant to Article 7 hereof.

 

(b)                                 The
Administrative Agent in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Administrative
Agent.  Any Agent may do the same with
like rights.

 

Section 10.12.                  Authorization to Effect Subordination.

 

Each Lender by the Lender’s
acceptance thereof authorizes and directs the Administrative Agent on the
Lender’s behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article 10, and appoints the
Administrative Agent to act as the Lender’s attorney-in-fact for any and all
such purposes.  If the Administrative
Agent does not file a proper proof of claim or proof of debt in the form
required in any proceeding referred to in Section 6.09 hereof at least thirty
(30) days before the expiration

 

87

 

of the time of such
claim, the Representatives of the Designated Senior Debt, including the Credit
Agent, are hereby authorized to file an appropriate claim for and on behalf of
the Lenders.

 

Section 10.13.                  Amendments.

 

Any amendment to the
provisions of this Article 10 shall require (a) the consent of the Required
Lenders if such amendment would adversely affect the rights of the Lenders and
(b) the holders of Senior Debt if such amendment would adversely affect the
rights of the holders of such Senior Debt then outstanding (or any group or
representative thereof authorized to give such consent).

 

Section 10.14.                  Reliance by Holders of Senior Debt on
Subordination Provisions.

 

Each Lender by accepting
a Loan Note acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each holder
of any Senior Debt, whether such Senior Debt was created or acquired before or
after the issuance of the Loan Notes, to acquire and continue to hold, or to
continue to hold, such Senior Debt and such holder of such Senior Debt shall be
deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior Debt.

 

ARTICLE 11

COLLATERAL AND SECURITY

 

Section 11.01.                  Security Documents.

 

The due and punctual
payment of the principal of and interest on the Loans when and as the same
shall be due and payable, whether on an interest payment date, at maturity, by
acceleration, prepayment, repayment, or otherwise, and interest on the overdue
principal of and interest on the Loans and performance of all other obligations
of the Borrower and the Guarantors to the Lenders or the Administrative Agent
under this Agreement, the Loans and the Loan Guarantees, according to the terms
hereunder or thereunder, are secured as provided in the Security Documents
which the Borrower and the Guarantors have entered into prior to and
simultaneously with the execution of this Agreement, subject to the terms of
the Intercreditor Agreement.  Each
Lender, by its acceptance thereof, consents and agrees to the terms of the
Security Documents and the Intercreditor Agreement (including the provisions
providing for foreclosure and release of Collateral) as the same may be in
effect or may be amended from time to time in accordance with the terms thereof
and authorizes and directs the Collateral Agent to enter into the Security
Documents and the Intercreditor Agreement and other documents referenced in the
Intercreditor Agreement in connection therewith, confirms and ratifies each
prior entry by the Collateral Agent into any Security Documents and the
Intercreditor Agreement executed prior to the date hereof, and authorizes and
directs the Collateral Agent to perform its obligations and exercise its rights
thereunder in accordance therewith.  The
Borrower and the Guarantors shall deliver to the Administrative Agent (if it is
not itself then the Collateral Agent) copies of all documents delivered to the
Collateral Agent pursuant to the Security Documents, and will do or cause to be
done all such acts and things as may be required by the next sentence of this Section
11.01, to assure and confirm to the Administrative Agent and the Collateral
Agent

 

88

 

the security interest in
the Collateral contemplated hereby, by the Security Documents or any part
thereof, as from time to time constituted, so as to render the same available
for the security and benefit of this Agreement and of the Loans secured hereby,
according to the intent and purposes herein expressed.  Each of the Borrower and the Guarantors shall
take, and shall cause the Restricted Subsidiaries to take, any and all actions
reasonably required to cause the Security Documents to create and maintain, as
security for the Obligations of the Borrower and the Guarantors hereunder, a
valid and enforceable perfected second-priority Lien and security interest in
and on all the Collateral, in favor of the Collateral Agent for the benefit of
the Holders, second in priority (subject to Collateral Permitted Liens) to any
and all security interests at any time granted in the Collateral to secure the
First-Lien Obligations.

 

Section 11.02.                  Release of Collateral.

 

(a)                                  Subject
to paragraphs (b), (c) and (d) of this Section 11.02, Collateral may be
released from the Lien and security interest created by the Security Documents
at any time or from time to time in accordance with the provisions of the Security
Documents, the Intercreditor Agreement or as provided hereby.  Whether prior to or after the Discharge of
First-Lien Obligations, upon the request of the Borrower pursuant to an Officer’s
Certificate certifying that all conditions precedent hereunder have been met
and without the consent of any Lender, the Borrower and the Guarantors will be
entitled to releases of assets included in the Collateral from the Liens
securing the Loans under any one or more of the following circumstances:

 

(i)                                     if
all other Liens on that asset securing Obligations under First-Lien Obligations
and any Other Second-Lien Obligations then secured by that asset (including all
commitments thereunder) are released; provided that after giving effect
to the release, obligations secured by the first-priority Liens on the
remaining Collateral remain outstanding;

 

(ii)                                  to
enable the Borrower or Guarantors to consummate any sale, lease, conveyance or
other disposition of any assets or rights permitted or not prohibited under Section
4.09 hereof;

 

(iii)                               if
the Borrower or any Guarantor, as the case may be, provides substitute
collateral with at least an equivalent fair value, as determined in good faith
by its Board of Directors;

 

(iv)                              in
respect of assets subject to a Lien securing purchase money Indebtedness
permitted under Section 4.08(b) hereof;

 

(v)                                 if
any Guarantor is released from the Loan Guarantees, any of its assets
comprising Collateral will also be released;

 

(vi)                              in
respect of assets included in the Collateral with a fair value, as determined
in good faith by the Board of Directors, of up to $2.0 million in any calendar
year, subject to a cumulative carryover for any amount not used in any prior
calendar year; or

 

89

 

(vii)                           pursuant
to an amendment, waiver or supplement in accordance with Section 13.02 hereof.

 

Upon receipt of such
Officer’s Certificate, the Collateral Agent shall execute, deliver or
acknowledge any necessary or proper instruments of termination, satisfaction or
release to evidence the release of any Collateral permitted to be released
pursuant to this Agreement or the Security Documents.

 

(b)                                 Except
as otherwise provided in the Intercreditor Agreement, no Collateral may be
released from the Lien and security interest created by the Security Documents
pursuant to the provisions of the Security Documents unless the Officer’s
Certificate required by this Section 11.02 has been delivered to the Collateral
Agent.

 

(c)                                  At
any time when a Default or Event of Default has occurred and is continuing and
the maturity of the Loans has been accelerated (whether by declaration or
otherwise) and the Administrative Agent has delivered a notice of acceleration
to the Collateral Agent, no release of Collateral pursuant to the provisions of
the Security Documents will be effective as against the Lenders, except as
otherwise provided in the Intercreditor Agreement.

 

Section 11.03.                  Certificates of the Administrative Agent.

 

In the event that the
Borrower or any Guarantor wishes to release Collateral in accordance with the
Security Documents at a time when the Administrative Agent is not itself also
the Collateral Agent and has delivered the certificates and documents required
by the Security Documents and Section 11.02 hereof, the Administrative Agent
will determine whether it has received all documentation required by the
Security Documents in connection with such release and, based on such
determination, will deliver a certificate to the Collateral Agent setting forth
such determination.

 

Section 11.04.                  Authorization of Actions to Be Taken by the
Administrative Agent Under the Security Documents.

 

Subject to the provisions
of Article 7 hereof and the Intercreditor Agreement, the Administrative Agent
may, if requested by the Required Lenders, direct, on behalf of the Lenders,
the Collateral Agent to, take all actions it deems necessary or appropriate in order to:

 

(a)                                  enforce
any of the terms of the Security Documents; and

 

(b)                                 collect
and receive any and all amounts payable in respect of the Obligations of the
Borrower hereunder.

 

Subject to the provisions
of the Intercreditor Agreement, the Administrative Agent will have power to
institute and maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Collateral by any acts that may be unlawful or in
violation of the Security Documents or this Agreement, and such suits and
proceedings as the Administrative Agent may deem expedient to preserve or
protect its interests and the interests of the Lenders in the Collateral
(including power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or

 

90

 

order that may be unconstitutional
or otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Lenders or of the Administrative Agent).

 

Section 11.05.                  Authorization of Receipt of Funds by the
Administrative Agent Under the Security Documents.

 

The Administrative Agent
is authorized to receive any funds for the benefit of the Lenders distributed
under the Security Documents and the Intercreditor Agreement, and to make
further distributions of such funds to the Lenders according to the provisions
of this Agreement.

 

Section 11.06.                  Termination of Security Interest.

 

The Administrative Agent
will, at the request of the Borrower, deliver a certificate to the Collateral
Agent stating that the Obligations under the Credit Documents have been paid in
full, and instruct the Collateral Agent to release the Liens pursuant to this
Agreement and the Security Documents upon payment in full of the principal of
and accrued and unpaid interest on the Loans and all other Obligations under
the Credit Documents that are due and payable at or prior to the time such
principal and accrued and unpaid interest are paid.  Upon receipt of such instruction, the
Collateral Agent shall execute, deliver or acknowledge any necessary or proper
instruments of termination, satisfaction or release to evidence the release of
all such Liens.

 

Section 11.07.                  Collateral Agent.

 

(a)                                  U.S.
Bank National Association shall act as Collateral Agent and shall be authorized
to appoint co-Collateral Agents as necessary in its sole discretion.  Except as otherwise explicitly provided
herein or in the Security Documents, neither the Collateral Agent nor any of
its respective officers, directors, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.  The Collateral Agent shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and neither the Collateral Agent nor any of its officers, directors,
employees or agents shall be responsible for any act or failure to act
hereunder, except for its own willful misconduct, negligence or bad faith.

 

(b)                                 The
Administrative Agent, as Collateral Agent, is authorized and directed to (i)
enter into the Security Documents, (ii) enter into the Intercreditor Agreement,
(iii) bind the Lenders on the terms as set forth in the Security Documents and
the Intercreditor Agreement and (iv) perform and observe its obligations under
the Security Documents and the Intercreditor Agreement.

 

(c)                                  If
the Borrower (i) incurs Indebtedness constituting Senior Debt at any time when
no Intercreditor Agreement is in effect or at any time when Indebtedness
constituting First-Lien Obligations entitled to the benefit of an existing
Intercreditor Agreement is concurrently retired, and (ii) delivers to the
Collateral Agent an Officer’s Certificate so stating and designating such
Senior Debt as First-Lien Obligations and requesting the Collateral Agent to
enter into an Intercreditor Agreement in favor of a designated agent or
representative for the holders of the

 

91

 

Indebtedness so incurred, the Collateral Agent shall
(and is hereby authorized and directed to) enter into such Intercreditor
Agreement and other documents referenced in the Intercreditor Agreement in
connection therewith, bind the Lenders on the terms set forth therein, and
perform and observe its obligations thereunder.

 

(d)                                 If
(i) the Borrower at any time incurs any Indebtedness constituting Other
Second-Lien Obligations, (ii) the indenture or agreement governing such
Indebtedness provides that, notwithstanding the date, manner or order of grant,
attachment or perfection of any Liens granted to the Collateral Agent under the
Security Documents (the “Liens Securing Loan Note Obligations”) or
granted to the holders of Other Second-Lien Obligations or any agent or
representative for the holders of Other Second-Lien Obligations (the “Liens
Securing Other Second-Lien Obligations”), the Liens Securing Loan Note
Obligations and the Liens Securing Other Second-Lien Obligations shall be of
equal dignity, priority and rank, (iii) the Borrower delivers to the Collateral
Agent an Officer’s Certificate so stating and requesting that the Collateral
Agent serve as collateral agent and enter into security documents with respect
thereto and (iv) the Borrower delivers to the Collateral Agent an Opinion of
Counsel stating that, in the opinion of such counsel, the Collateral Agent is
empowered and obligated (on substantially the terms applicable to the
Collateral Agent pursuant to the Credit Documents) to hold the Liens Securing
Loan Note Obligations and all Liens Securing Other-Second Lien Obligations and
all proceeds of all such Liens for the equal and ratable benefit of the holders
of all Obligations secured thereby, giving effect to the assignment or transfer
requested in such Officer’s Certificate, then (A) the Liens Securing Loan Note
Obligations shall be of equal dignity, priority and rank with all such Liens
Securing Other Second-Lien Obligations and (B) the Collateral Agent shall enter
into such security documents as requested in such Officer’s Certificate.

 

Section 11.08.                  Designations.

 

For purposes of the
provisions hereof and the Intercreditor Agreement requiring the Borrower to
designate Indebtedness for the purposes of the terms “First-Lien Obligations,” “Other
Second-Lien Obligations” or any other such designations hereunder or under the
Intercreditor Agreement, any such designation shall be sufficient if the
relevant designation is set forth in writing, signed on behalf of the Borrower
by an Officer and delivered to the Administrative Agent, the Collateral Agent
and the Credit Agent.

 

ARTICLE 12

LOAN GUARANTEES

 

Section 12.01.                  Loan Guarantees.

 

(a)                                  Subject
to Section 12.05 hereof, each Guarantor hereby unconditionally guarantees to
each Lender and to the Administrative Agent and its successors and assigns,
irrespective of the validity and enforceability of this Agreement, the Loans and
the Obligations of the Borrower hereunder and thereunder, that: (i) the
principal of, premium, if any, and interest on the Loans will be promptly paid
in full when due, subject to any applicable grace period, whether at maturity,
by acceleration, prepayment or otherwise, and interest on the overdue
principal, premium, if any, (to the extent permitted by law) and interest on
any interest, if any, on the Loans, and all other payment Obligations of the
Borrower to the Lenders or the Administrative

 

92

 

Agent hereunder or thereunder will be promptly paid in
full and performed, all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Loans or any
of such other Obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, subject to
any applicable grace period, whether at stated maturity, by acceleration,
prepayment or otherwise.  Failing payment
when so due of any amount so guaranteed for whatever reason each Guarantor will
be obligated to pay the same immediately. 
An Event of Default under this Agreement or the Loans shall constitute
an event of default under the Loan Guarantees, and shall entitle the Lenders to
accelerate the Obligations of the Guarantors hereunder in the same manner and
to the same extent as the Obligations of the Borrower.

 

(b)                                 Each
Guarantor hereby agrees that its Obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Loans or this
Agreement or by release in accordance with the provisions of this Agreement,
the absence of any action to enforce the same, any waiver or consent by any
Lender with respect to any provisions hereof or thereof, the recovery of any
judgment against the Borrower, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of such Guarantor.  Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Borrower,
any right to require a proceeding first against the Borrower, protest, notice
and all demands whatsoever and covenants that the Loan Guarantees will not be
discharged except by complete performance of the Obligations contained in the
Loans and this Agreement.  If any Lender
or the Administrative Agent is required by any court or otherwise to return to
the Borrower, the Guarantors, or any Administrative Agent, liquidator or other
similar official acting in relation to either the Borrower or the Guarantors,
any amount paid by either to the Administrative Agent or such Lender, the Loan
Guarantees, to the extent theretofore discharged, shall be reinstated in full
force and effect.  Each Guarantor agrees
that it shall not be entitled to, and hereby waives, any right of subrogation
in relation to the Lenders in respect of any Obligations guaranteed hereby.

 

(c)                                  Each
Guarantor further agrees that, as between such Guarantor, on the one hand, and
the Lenders and the Administrative Agent, on the other hand, (i) the maturity
of the Obligations guaranteed hereby may be accelerated as provided in Article
6 for the purposes of the Loan Guarantees, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of the Loan Guarantees.

 

(d)                                 The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Lenders under the Loan Guarantees.

 

Section 12.02.                  Execution and Delivery of the Loan
Guarantees.

 

(a)                                  To
evidence the Loan Guarantees set forth in Section 12.01, each Guarantor hereby
agrees that a notation of its Loan Guarantee substantially in the form of Exhibit
B shall be endorsed by an Officer of such Guarantor on each Loan Note
delivered by the Administrative

 

93

 

Agent and that this Agreement shall be executed on
behalf of such Guarantor, by manual or facsimile signature, by an Officer of
such Guarantor.

 

(b)                                 Each
Guarantor hereby agrees that its Loan Guarantees set forth in Section 12.01
shall remain in full force and effect notwithstanding any failure to endorse on
each Loan Note a notation of such Loan Guarantee.

 

(c)                                  If
an Officer whose signature is on this Agreement or on a Loan Guarantee no
longer holds that office at the time the Administrative Agent delivers the Loan
Note on which such Loan Guarantee is endorsed, the Loan Guarantee shall be
valid nevertheless.

 

(d)                                 The
delivery of any Loan Note by the Administrative Agent shall constitute due
delivery of the Loan Guarantee set forth in this Agreement on behalf of the
Guarantors.

 

(e)                                  In
the event that the Borrower or any of its Restricted Subsidiaries creates or
acquires any Subsidiary after the date of this Agreement, if required by Section
4.16 hereof, the Borrower shall cause such Subsidiary to comply with the
provisions of Section 4.16 hereof and this Article 12, to the extent
applicable.

 

Section 12.03.                  Guarantors May Consolidate, etc., on Certain
Terms

 

(a)                                  Except
as set forth in Article 4 and Article 5 hereof, nothing contained in this
Agreement shall prohibit any consolidation or merger of Guarantor with or into
the Borrower or another Guarantor, or shall prevent any sale or conveyance of
the property of a Guarantor as an entirety or substantially as an entirety to
the Borrower or another Guarantor.

 

(b)                                 Subject
to Section 12.04 hereof, no Guarantor may consolidate with or merge with or
into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with the Guarantor
unless, subject to the provisions of the following paragraph, (i) the Person
formed by or surviving any such consolidation or merger (if other than the
Guarantor) assumes all the obligations of the Guarantor pursuant to a
Supplemental Senior Subordinated Loan Agreement, under this Agreement and the
Loan Guarantees and (ii) immediately after giving effect to such transaction,
no Default or Event of Default exists.

 

(c)                                  In
the case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by Supplemental Senior Subordinated Loan
Agreement, executed and delivered to the Administrative Agent of the Loan
Guarantee endorsed upon the Loan Notes and the due and punctual performance of
all of the covenants and conditions of this Agreement to be performed by the
Guarantor, such successor Person shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a
Guarantor.  Such successor Person
thereupon may cause to be signed the Loan Guarantee to be endorsed upon all of
the Loan Notes issuable hereunder which theretofore shall not have been signed
by the Borrower and delivered to the Administrative Agent.  Any Loan Guarantee so issued shall in all
respects have the same legal rank and benefit under this Agreement as the Loan
Guarantees theretofore and thereafter issued in accordance with the terms of
this Agreement as though such Loan Guarantee had been issued at the date of the
execution hereof.

 

94

 

Section 12.04.      Releases of Loan Guarantees.

 

The Loan Guarantee of each Guarantor shall be
released:

 

(i)                                     in
connection with any sale or other disposition of all or substantially all of
the assets of that Guarantor (including by way of merger or consolidation) to a
Person that is not (either before or after giving effect to such transaction)
the Borrower or a Restricted Subsidiary of the Borrower, if the sale or other
disposition does not violate Section 4.09 hereof;

 

(ii)                                  in
connection with any sale or other disposition of all of the Capital Stock of
that Guarantor to a Person that is not (either before or after giving effect to
such transaction) the Borrower or a Restricted Subsidiary of the Borrower, if
the sale or other disposition does not violate Section 4.09 hereof;

 

(iii)                               if
the Borrower designates any Restricted Subsidiary that is a Guarantor to be an
Unrestricted Subsidiary;

 

(iv)                              if
that Guarantor is released from its Guarantee under this Agreement; or

 

(v)                                 if
that Guarantor is designated as a Non-Guarantor Subsidiary in accordance with
the definition of Non-Guarantor Subsidiary.

 

If any Guarantor is released from its Loan Guarantee,
any of its Subsidiaries that are Guarantors shall be released from their Loan
Guarantees, if any.

 

Section 12.05.      Limitation on Guarantor Liability.

 

Each Guarantor, and by its acceptance of Loan Notes,
each Lender, hereby confirms that it is the intention of all such parties that
the Loan Guarantee of each Guarantor not constitute a fraudulent transfer or
conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to
the extent applicable to such Loan Guarantee. 
To effectuate the foregoing intention, the Administrative Agent, the
Lenders and the Guarantors hereby irrevocably agree that the obligations of
each Guarantor shall be limited to the maximum amount that shall, after giving
effect to such maximum amount and all other contingent and fixed liabilities of
such Guarantor that are relevant under such laws and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 12, result in the obligations of such Guarantor
under its Loan Guarantee not constituting a fraudulent transfer or conveyance.

 

Section 12.06.      Subordination of Loan Guarantees.

 

The Obligations of each Guarantor under its Loan
Guarantee pursuant to this Article 12 shall be junior and subordinated to the
Senior Debt of such Guarantor on the same basis as the Loans are junior and
subordinated to Senior Debt of the Borrower. 
For the purposes of the foregoing sentence, the Administrative Agent and
the Lenders shall have the right to receive

 

95

 

and/or retain payments by any of the Guarantors only at such times as
they may receive and/or retain payments in respect of the Loans pursuant to
this Agreement, including Article 12 hereof.

 

ARTICLE 13

MISCELLANEOUS

 

Section
13.01.      Notices.

 

(a)           Any
notice or communication by the Borrower, any Guarantor or the Administrative
Agent to the others is duly given if in writing and delivered in person or
mailed by first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others’ address:

 

If to the Borrower and/or any Guarantor:

 

J. Crew Operating Corp.

770 Broadway

New York, New York 10003

Telecopier No.:  (212) 209-2666

Attention:  Chief Financial Officer

 

With a copy to:

 

Cleary Gottlieb, Steen & Hamilton

One Liberty Plaza

New York, New York 10006

Telecopier No.:  (212) 225-3999

Attention:  Michael L. Ryan

 

If to the Administrative Agent:

 

U.S. Bank National Association

Goodwin Square

225 Asylum Street

Hartford, Connecticut 06103

Telecopier No.:  860-241-6897

Attention:  Corporate Trust Department /
Michael Hopkins

 

(b)           The
Borrower, any Guarantor or the Administrative Agent, by notice to the others
may designate additional or different addresses for subsequent notices or
communications.

 

(c)           All
notices and communications (other than those sent to Lenders) shall be deemed
to have been duly given: at the time delivered by hand, if personally delivered;
five (5) Business Days after being deposited in the mail, postage prepaid, if
mailed; when receipt acknowledged, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.

 

96

 

(d)           Any
notice or communication to a Lender shall be mailed by first class mail or by
overnight air courier guaranteeing next day delivery to its address shown on
the Register kept by the Administrative Agent. 
Failure to mail a notice or communication to a Lender or any defect in
it shall not affect its sufficiency with respect to other Lenders.

 

(e)           If
a notice or communication is mailed in the manner provided above within the
time prescribed, it is duly given, whether or not the addressee receives it.

 

(f)            If
the Borrower mails a notice or communication to Lenders, it shall mail a copy
to the Administrative Agent and each Agent at the same time.

 

(g)           Any
notice or communication delivered to the Borrower under the provisions herein
shall constitute notice to the Guarantors.

 

Section 13.02.      Waivers; Amendments.

 

(a)           No
failure or delay by the Administrative Agent or any Lender 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 Administrative
Agent and the Lenders hereunder 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 the Borrower therefrom shall in any event be
effective unless the same shall be permitted by Section 13.02(b), and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.  Without
limiting the generality of the foregoing, the making of a Loan shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent or any Lender may have had notice or knowledge of such Default at the
time.

 

(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 the
Borrower and the Required Lenders or by the Borrower and the Administrative
Agent with the consent of the Required Lenders; provided that no such agreement
shall (i) increase the Term Loan Commitment of any Lender without the written
consent of such Lender, (ii) reduce the principal amount of any Loan or reduce
the rate of interest thereon, or reduce any fees payable hereunder, without the
written consent of each Lender affected thereby, (iii) postpone the scheduled
date of payment of the principal amount of any Loan, or any date for the
payment of any interest or fees payable hereunder, or reduce the amount of,
waive or excuse any such scheduled payment, or postpone the scheduled date of
expiration of any Term Loan Commitment, without the written consent of each
Lender affected thereby, (iv) change Section 2.05(c) or (d) in a manner that
would alter the pro rata sharing
of payments required thereby without the written consent of each Lender or (v)
change any of the provisions of this Section 13.02 or the percentage set forth
in the definition of Required Lenders or any other provision hereof specifying
the number or percentage of Lenders required to waive, amend or modify any
rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender; provided, further,
that no such agreement shall amend, modify or otherwise affect the rights or

 

97

 

duties of the Administrative Agent hereunder without the prior written
consent of the Administrative Agent.

 

Section 13.03.      Expenses; Indemnity; Damage Waiver.

 

(a)           The
Borrower shall pay (i) all reasonable documented out-of-pocket costs and
expenses incurred by the Administrative Agent and its Affiliates, including the
reasonable and documented fees, charges and disbursements of one counsel in
each applicable jurisdiction for the Administrative Agent in connection with
preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated) and (ii) all
reasonable and documented out-of-pocket costs and expenses incurred by the
Administrative Agent or any Lender, including the all reasonable and documented
fees, charges and disbursements of any counsel for the Administrative Agent or
any Lender, in connection with the enforcement or protection of its rights in
connection with this Agreement, including its rights under this Section 13.03,
or in connection with the Loans made hereunder, including all such all
reasonable and documented out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans.

 

(b)           The
Borrower shall indemnify the Administrative Agent and each Lender, and each
Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including all
reasonable and documented fees, charges and disbursements of any counsel for
any Indemnitee, incurred by or asserted against any Indemnitee arising out of,
in connection with, or as a result of (i) the execution or delivery of this
Agreement or any other agreement or instrument contemplated hereby, the
performance by the parties hereto of their respective obligations hereunder or
the consummation of the this Agreement or any other transactions contemplated
hereby or (ii) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory and regardless of whether any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses resulted
from the gross negligence or willful misconduct of such Indemnitee or any
Related Party of such Indemnitee.

 

(c)           To
the extent that the Borrower fails to pay any amount required to be paid by it
to the Administrative Agent under Section 13.03(a) or (b) above, each Lender
severally agrees to pay to the Administrative Agent, such Lender’s Pro Rata
Share (determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent in its capacity as such.

 

(d)           To
the extent permitted by applicable law, the Borrower shall not assert, and
hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby.

 

98

 

(e)           All
amounts due under this Section 13.03 shall be payable promptly after written
demand therefor.

 

Section 13.04.      Successors and Assigns.

 

(a)           The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted
hereby, except that (i) the Borrower may not assign or otherwise transfer any
of its rights or obligations hereunder without the prior written consent of
each Lender (and any attempted assignment or transfer by the Borrower without
such consent shall be null and void) and (ii) no Lender may assign or otherwise
transfer its rights or obligations hereunder except in accordance with this Section
13.04.  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of each
of the Administrative Agent and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.

 

(b)           (i)            Subject
to the conditions set forth in paragraph (b)(ii) below, any Lender may assign
to one or more assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Term Loan Commitment and the
Loans at the time owing to it) with the prior written consent (such consent not
to be unreasonably withheld) of the Administrative Agent; provided that
no assignment shall be made to an assignee that is not a QIB.

 

(ii)                                  Assignments
shall be subject to the following additional conditions:

 

(A)                              the
amount of the Term Loan Commitment or Loans of the assigning Lender subject to
each such assignment (determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Administrative Agent) shall
not be less than $1,000,000 or, if smaller, the entire remaining amount of the
assigning Lender’s Term Loan Commitment or Loans unless each of the Borrower
and the Administrative Agent shall otherwise consent, provided that in
the event of concurrent assignments to two or more assignees that are
Affiliates of one another, or to two or more Approved Funds managed by the same
investment advisor or by affiliated investment advisors, all such concurrent
assignments shall be aggregated in determining compliance with this subsection;

 

(B)                                each
partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lender’s rights and obligations under this Agreement;

 

(C)                                the
parties to each such assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption substantially in the form of Exhibit H
attached hereto; provided that in the event

 

99

 

of concurrent assignments
to two or more assignees that are Affiliates of one another, or to two or more
Approved Funds managed by the same investment advisor or by affiliated
investment advisors, only one such fee shall be payable; and

 

(D)                               the
assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent such information and applicable tax forms as the Administrative Agent
shall reasonably request to effect such assignment.

 

(iii)                               Subject
to acceptance and recording thereof pursuant to paragraph (b)(v) of this Section
13.04, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 13.03).

 

(iv)                              The
Administrative Agent, acting for this purpose as an agent of the Borrower,
shall maintain at one of its offices a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses
of the Lenders, and the Term Loan Commitment of, and principal amount of the
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”).  The entries in the
Register shall be conclusive, and the Borrower, the Administrative Agent and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection
by the Borrower and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.

 

(v)                                 Upon
its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, such information and applicable tax forms as
the Administrative Agent shall reasonably request pursuant to Section
13.04(b)(ii)(D) (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in Section 13.04(b) and any written
consent to such assignment required by Section 13.04(b), the Administrative
Agent shall accept such Assignment and Assumption and record the information
contained therein in the Register.  No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.

 

100

 

Section 13.05.      No Personal Liability of Directors, Officers, Employees, Organizers and
Members.

 

No director, officer, employee, incorporator,
stockholder, member or other holders of Equity Interests of the Borrower or the
Guarantors, as such, shall have any liability for any obligations of the
Borrower or the Guarantors under this Agreement, the Loans or the Guarantees or
for any claim based on, in respect of, or by reason of, such obligations or
their creation.  Each Lender by accepting
a Loan Note waives and releases all such liability.  The waiver and release are part of the
consideration for issuance of the Loan Notes.

 

Section
13.06.      Survival.

 

All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to 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 and the making of any
Loans regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any Loan is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid and so long as the Term Loan Commitments have not expired or
terminated.  The provisions of Section
13.03 and Article 7 shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans and the Term Loan Commitments or the termination of this
Agreement or any provision hereof.

 

Section 13.07.      Certificate and Opinion as to Conditions
Precedent.

 

Upon any request or application by the Borrower or the
Guarantors to the Administrative Agent to take any action under this Agreement,
the Borrower or the Guarantors shall furnish to the Administrative Agent upon
request:

 

(a)           an
Officer’s Certificate in form and substance reasonably satisfactory to the
Administrative Agent (which shall include the statements set forth in Section
13.08 hereof) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Agreement relating to the
proposed action have been satisfied; and

 

(b)           an
Opinion of Counsel in form and substance reasonably satisfactory to the
Administrative Agent (which shall include the statements set forth in Section
13.08 hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.

 

Section 13.08.      Statements Required in Certificate or
Opinion

 

Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Agreement shall include:

 

101

 

(a)           a
statement that the Person making such certificate or opinion has read such
covenant or condition;

 

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

 

(c)           a
statement that, in the opinion of such Person, he or she has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and

 

(d)           a
statement as to whether or not, in the opinion of such Person, such condition
or covenant has been satisfied.

 

Section
13.09.      Governing Law.

 

(a)           THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER, THE GUARANTORS AND
THE LENDERS HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTURED AND ENFORCED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)           The
Borrower 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 applicable 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 applicable law.  Nothing in
this Agreement shall affect any right that the Administrative Agent, or any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement against the Borrower or its properties in the courts of any
jurisdiction.

 

(c)           The
Borrower 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 Section 13.09(b).  Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by applicable 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 13.01. 
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by applicable law.

 

102

 

Section 13.10.      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 OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY).  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 13.10.

 

Section 13.11.      No Adverse Interpretation of Other
Agreements.

 

This Agreement may not be used to interpret any other
indenture, loan or debt agreement of the Borrower or any of its Subsidiaries or
of any other Person.  Any such indenture,
loan or debt agreement may not be used to interpret this Agreement.

 

Section
13.12.      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.

 

Section 13.13.      Counterpart Originals; Integration;
Effectiveness.

 

This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract.  The Credit Documents
(including any separate letter agreements with respect to fees payable to the
Administrative Agent and all other agreements and documents required for
execution, delivery and performance of, or the consummation of the transactions
contemplated by, the Credit Documents, the Indenture, the Exchange Notes and
the Exchange Note Guarantees) constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.  Except as provided in Article 9,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of
a manually executed counterpart of this Agreement.

 

103

 

Section
13.14.      Table of Contents,
Headings, Etc.

 

The Table of Contents and Headings of the Articles and
Sections of this Agreement have been inserted for convenience of reference
only, are not to be considered a part of this Agreement and shall in no way
modify or restrict any of the terms or provisions hereof.

 

[Signatures on following
page]

 

104

 

SIGNATURES

 

Dated as of November 21, 2004

 

	
   

  	
  J. CREW OPERATING CORP.

  
	
   

  	
   

  	
  as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Amanda
  J. Bokman

  	
   

  
	
   

  	
   

  	
  Name: Amanda J. Bokman

  
	
   

  	
   

  	
  Title: Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRACE HOLMES, INC.
  d/b/a

  J. CREW RETAIL

  
	
   

  	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Amanda
  J. Bokman

  	
   

  
	
   

  	
   

  	
  Name: Amanda J. Bokman

  
	
   

  	
   

  	
  Title: Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  H.F.D. NO 55, INC.
  d/b/a J. CREW

  FACTORY

  
	
   

  	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Amanda
  J. Bokman

  	
   

  
	
   

  	
   

  	
  Name: Amanda J. Bokman

  
	
   

  	
   

  	
  Title: Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J. CREW, INC.

  
	
   

  	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Amanda
  J. Bokman

  	
   

  
	
   

  	
   

  	
  Name: Amanda J. Bokman

  
	
   

  	
   

  	
  Title: Chief Financial
  Officer

  

 

 

	
   

  	
  J. CREW INTERNATIONAL,
  INC.

  
	
   

  	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Nicholas P. Lamberti

  	
   

  
	
   

  	
   

  	
  Name: Nicholas P.
  Lamberti

  
	
   

  	
   

  	
  Title: VP Controller

  

 

 

	
   

  	
  U.S. Bank National
  Association

  
	
   

  	
   

  	
  as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Michael
  M. Hopkins

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael M. Hopkins

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

 

	
   

  	
  Private Capital
  Partners LLC, a Delaware Limited

  
	
   

  	
   

  	
  Liability Company

  
	
   

  	
   

  	
  BY BLACK CANYON CAPITAL
  LLC,

  
	
   

  	
   

  	
  as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Mark W.
  Lanigan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mark W. Lanigan

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Canpartners Investments
  IV, LLC, a California

  
	
   

  	
   

  	
  Limited Liability
  Company,

  
	
   

  	
   

  	
  as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Joshua
  S. Friedman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joshua S. Friedman

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
						

 

 

EXHIBIT
A

 

FORM OF LOAN NOTE

 

New York, New York

 

$                         

 

[Issue Date]

 

FOR VALUE RECEIVED, J.
CREW OPERATING CORP., a Delaware corporation (the “Borrower”), promises
to pay to                                   
or registered assigns (the “Lender”), the principal amount of                     
Dollars ($                    )
on [                  ],
2014.

 

The Borrower also promises to pay interest on the
unpaid principal amount of this Loan Note at the rate of 9.75% per annum and
the applicable Additional Interest, if any. 
The Borrower will pay interest in U.S. dollars (except as otherwise
provided herein) semi-annually in arrears on [                ]
and [                  ],
commencing on [                ],
200  , or if any such day is not a Business Day, on the next
succeeding Business Day (each an “Interest Payment Date”).  Interest on this Loan Note shall accrue from
the most recent date to which interest has been paid or, if no interest has
been paid, from [                    ],
200  .  The Borrower
shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in
excess of the then applicable interest rate on this Loan Note to the extent
lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.  Interest shall be computed on
the basis of a 360-day year comprised of twelve 30-day months.

 

The Borrower will pay interest on this Loan Note
(except defaulted interest) on the applicable Interest Payment Date to the
registered Lender at the close of business on the [                    ]
or [                    ]
next preceding the Interest Payment Date, even if this Loan Note is cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.07 of the Loan Agreement with respect to defaulted
interest.  This Loan Note shall be
payable as to principal, premium and interest at the office or agency of the
Borrower maintained for such purpose within or without the City and State of
New York, or, at the option of the Borrower, payment of interest may be made by
check mailed to the Lender at its addresses set forth in the register of
Lenders.  Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.

 

This Loan Note evidences a portion of the Term Loan
Commitments and is issued pursuant to and entitled to the benefits of the
Senior Subordinated Loan Agreement dated as of November 21, 2004 (the “Loan
Agreement”) among the Borrower, the Guarantors and the Lenders.  The terms of this Loan Note include those
stated in the Loan Agreement.  This Loan
Note is subject to all such terms, and Lenders are referred to the Loan Agreement
for a statement

 

A-1

 

of such terms.  Subject to the
conditions set forth in the Loan Agreement and without the consent of the
Lenders, the Borrower may issue
Additional Loan Notes.  All Loan Notes
will be treated as a single class of securities under the Loan Agreement.

 

This Loan Note is subject to mandatory prepayments and
voluntary prepayments, each as provided in the Loan Agreement.

 

This Loan Note is
subordinated in right of payment, as set forth in the Loan Agreement, to the
prior payment in full of all existing and future Senior Debt of the
Borrower.  This Loan Note in all respects
ranks pari passu with, or senior
to, all other Indebtedness of the Borrower. 
By accepting the Loan Note, the Lender agrees to the subordination
provisions set forth in the Loan Agreement, authorizes the Administrative Agent
to acknowledge such subordination provisions and give them effect and appoints
the Administrative Agent as attorney-in-fact for such purpose.

 

The terms of this Loan Note may be amended only in the
manner provided in the Loan Agreement.

 

Upon the occurrence of an Event of Default, the unpaid
balance of the principal amount of this Loan Note, together with all accrued
and unpaid interest thereon, may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in the
Loan Agreement.

 

THIS LOAN NOTE AND THE RIGHTS AND OBLIGATIONS OF THE
BORROWER AND THE LENDER HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTURED
AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW EXCEPT
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

IN WITNESS WHEREOF,
the Borrower has caused this Loan Note to be duly executed and delivered by its
officer thereunto duly authorized as of the date and at the place first written
above.

 

 

	
   

  	
  J. CREW OPERATING CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

A-2

 

OPTION OF LENDER TO ELECT PREPAYMENT

 

If you want to elect to have this Loan Note purchased
by the Borrower pursuant to Section 3.09 or Section 4.12 of the Loan Agreement,
check the box below:

 

o
Section 3.09      o Section 4.12

 

If you want to elect to have only part of the Loan
Note purchased by the Borrower pursuant to Section 3.09 or Section 4.12 of the
Loan Agreement, state the amount you elect to have purchased:

 

$                            

 

	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  

 

(Sign exactly as your
name appears on the face of this Loan Note)

 

Tax Identification No.:                    

 

A-3

 

EXHIBIT B

 

FORM OF LOAN
GUARANTEES

 

Subject to Section 12.05 of the Loan Agreement, each
Guarantor hereby unconditionally guarantees to each Lender and the
Administrative Agent and its successors and assigns, irrespective of the
validity and enforceability of the Loan Agreement, the Loan Notes and the
Obligations of the Borrower under the Loan Notes or under the Loan Agreement,
that: (a) the principal of, premium, if any, and interest on the Loan Notes
will be promptly paid in full when due, subject to any applicable grace period,
whether at maturity, by acceleration, redemption or otherwise, and interest on
overdue principal, premium, if any, (to the extent permitted by law) and
interest on any interest, if any, on the Loan Notes and all other payment
Obligations of the Borrower to the Lenders or the Administrative Agent under
the Loan Agreement or under the Loan Notes will be promptly paid in full and
performed, all in accordance with the terms thereof; and (b) in case of any
extension of time of payment or renewal of any Loan Notes or any of such other
payment Obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, subject to
any applicable grace period, whether at stated maturity, by acceleration,
redemption or otherwise. Failing payment when so due of any amount so
guaranteed or any performance so guaranteed for whatever reason, each Guarantor
will be jointly and severally obligated to pay the same immediately.

 

The obligations of each Guarantor to the Lenders and
to the Administrative Agent pursuant to this Loan Guarantee and the Loan
Agreement are expressly set forth in Article 12 of the Loan Agreement, and
reference is hereby made to such Loan Agreement for the precise terms of this
Loan Guarantee.  The terms of Article 12
of the Loan Agreement are incorporated herein by reference.  This Loan Guarantee is subject to release as
and to the extent provided in Section 12.04 of the Loan Agreement.

 

This is a continuing Guarantee and shall remain in
full force and effect and shall be binding upon each Guarantor and its
respective successors and assigns to the extent set forth in the Loan Agreement
until full and final payment of all of the Borrower’s Obligations under the
Loan Notes and the Loan Agreement and shall inure to the benefit of the
successors and assigns of the Administrative Agent and the Lenders and, in the
event of any transfer or assignment of rights by any Lender or the
Administrative Agent, the rights and privileges herein conferred upon that
party shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof.  This is a Loan Guarantee of payment and not a
guarantee of collection.

 

This Loan Guarantee is
subordinated in right of payment, as set forth in the Loan Agreement, to the
prior payment in full of all existing and future Senior Debt of any
Guarantor.  This Loan Guarantee in all
respects ranks pari passu with,
or senior to, all other Indebtedness of the Guarantors.  By accepting the Loan Guarantee, the Lender
agrees to the subordination provisions set forth in the Loan Agreement,
authorizes the Administrative Agent to acknowledge such subordination
provisions and give them effect and appoints the Administrative Agent as
attorney-in-fact for such purpose.

 

B-1

 

Capitalized terms used herein have the same meanings
given in the Loan Agreement unless otherwise indicated.

 

	
   

  	
  Dated as of 

  	
   

  	
  , 200

  	
   

  	
   

  	
  GRACE HOLMES, INC.
  d/b/a

  
	
   

  	
  J. CREW RETAIL

  
	
   

  	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  H.F.D. NO 55, INC.
  d/b/a J. CREW

  FACTORY

  
	
   

  	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J. CREW, INC.

  
	
   

  	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J. CREW INTERNATIONAL,
  INC.

  
	
   

  	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

B-2

 

EXHIBIT C

 

FORM OF NEW COMMITMENT AGREEMENT

 

Reference is made to the Senior Subordinated Loan
Agreement dated as of November 21, 2004 (as amended, modified, extended or
restated from time to time, the “Loan Agreement”) among J. CREW
OPERATING CORP., a Delaware corporation (the “Borrower”), the Guarantors
party thereto, the Lenders party thereto and U.S. Bank National Association, in
its capacity as administrative agent (in such capacity, the “Administrative
Agent”) for the lenders from time to time party to the Loan Agreement.  All of the defined terms in the Loan Agreement
are incorporated herein by reference.

 

1.             Effective
as of the Effective Date set forth below, the undersigned Lender hereby
confirms its Term Loan Commitment, in an aggregate principal amount of up to
the amount of set forth below, to make Loans in accordance with the provisions
of Section 2.01 of the Loan Agreement. 
If the undersigned Lender is already a Lender under the Loan Agreement,
such Lender acknowledges and agrees that such Term Loan Commitment is in
addition to any existing Term Loan Commitment of such Lender under the Loan
Agreement.  If the undersigned Lender is
not already a Lender under the Loan Agreement, such Lender hereby acknowledges,
agrees and confirms that, by its execution of this New Commitment Agreement,
such Lender will, as of the Effective Date, be a party to the Loan Agreement
and be bound by the provisions of the Loan Agreement and, to the extent of its
new Term Loan Commitment, have the rights and obligations of a Lender
thereunder.

 

2.             This New
Commitment Agreement shall be governed by and construed in accordance with the
laws of the State of New York.

 

	
  Amount of Term Loan
  Commitment

  	
  $

  
	
   

  	
   

  
	
  Effective Date of Term
  Loan Commitment

  	
                                  ,
            

  

 

C-1

 

The terms set forth above

are hereby agreed to:

 

	
  [Lender]

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CONSENTED TO AND
  AGREED:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  U.S. Bank
  National Association,

  	
  J. CREW
  OPERATING CORP.,

  
	
  as
  Administrative Agent

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
												

 

C-2

 

EXHIBIT D

 

FORM OF SUPPLEMENTAL SENIOR SUBORDINATED LOAN
AGREEMENT

 

THIS SUPPLEMENTAL SENIOR SUBORDINATED LOAN
AGREEMENT (the “Agreement”), dated as of _________________, 20___,
is by and between _________________, a _________________ (the “Subsidiary”),
and U.S. Bank National Association,
in its capacity as Administrative Agent under that certain Senior Subordinated
Loan Agreement (as it may be amended, modified, restated or supplemented from
time to time, the “Loan Agreement”), dated as of November 21, 2004, by
and among J. CREW OPERATING CORP., a Delaware corporation (the “Borrower”),
the Guarantors party thereto, the Lenders party thereto and U.S. Bank National
Association, as Administrative Agent. 
All of the defined terms in the Loan Agreement are incorporated herein
by reference.

 

The Loan Parties are required by Section 4.16
of the Loan Agreement to cause the Subsidiary to become a “Guarantor.”

 

Accordingly, the Subsidiary hereby agrees as follows
with the Administrative Agent, for the benefit of the Lenders:

 

1.             The
Subsidiary hereby acknowledges, agrees and confirms that, by its execution of
this Agreement, the Subsidiary will be deemed to be a party to the Loan
Agreement and a Guarantor for all purposes of the Loan Agreement, and shall
have all of the obligations of a Guarantor thereunder as if it had executed the
Loan Agreement.  The Subsidiary hereby
ratifies, as of the date hereof, and agrees to be bound by, all of the terms,
provisions and conditions applicable to the Guarantors contained in the Loan
Agreement.  Without limiting the
generality of the foregoing terms of this paragraph 1, the Subsidiary hereby
jointly and severally together with the other Guarantors, guarantees to each
Lender and the Administrative Agent the prompt payment and performance of the
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the terms
thereof.

 

2.             The
Subsidiary hereby acknowledges, agrees and confirms that, by its execution of
this Agreement, the Subsidiary will be deemed to be a party to the Security
Agreement, and shall have all the obligations of an Obligor (as such term is
defined in the Security Agreement) thereunder as if it had executed the
Security Agreement.  The Subsidiary
hereby ratifies, as of the date hereof, and agrees to be bound by, all of the
terms, provisions and conditions contained in the Security Agreement.

 

3.             The
address of the Subsidiary for purposes of all notices and other communications
is _________________, ___________________________, Attention of _________________
(Facsimile No. _________________).

 

4.             The
Subsidiary hereby waives acceptance by the Administrative Agent and the Lenders
of the guaranty by the Subsidiary under Article 12 of the Loan Agreement upon
the execution of this Agreement by the Subsidiary.

 

D-1

 

5.             This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute
one contract.

 

6.             This
Agreement shall be governed by and construed and interpreted in accordance with
the laws of the State of New York.

 

D-2

 

IN WITNESS WHEREOF, the Subsidiary has caused this
Supplemental Senior Subordinated Loan Agreement to be duly executed by its
authorized officers, and the Administrative Agent, for the benefit of the
Lenders, has caused the same to be accepted by its authorized officer, as of
the day and year first above written.

 

 

	
   

  	
  [SUBSIDIARY]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Acknowledged and
  accepted:

  
	
   

  	
   

  
	
   

  	
  U.S. Bank National
  Association,

  
	
   

  	
  as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

D-3

 

EXHIBIT E

 

FORM OF NOTICE OF BORROWING

 

Date:                       ,
          

 

To:          U.S.
Bank National Association, as Administrative Agent

 

Ladies and Gentlemen:

 

Reference is made to that certain Senior Subordinated
Loan Agreement, dated as of November 21, 2004, (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the “Loan
Agreement;” the terms defined therein being used herein as therein
defined), among J. CREW OPERATING CORP., a Delaware corporation (the “Borrower”),
the Guarantors from time to time party thereto, the Lenders from time to time
party thereto, and U.S. Bank National Association, as Administrative Agent.

 

The undersigned hereby requests the following:

 

•                  a borrowing of Loans in the amount of
$                        ;

 

•                  the Loans to be funded on                         ,
200   (the proposed Closing Date); and

 

•                  the funds to be wire transferred as
indicated:

 

•                  $                        
amount to be wire transferred into Account Number                         
(Account Name                         );

 

•                  $                        
amount to be wire transferred into Account Number                         
(Account Name                         ).

 

 

	
   

  	
  J. CREW OPERATING CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

E-1

 

EXHIBIT F

 

FORM OF INDENTURE

 

F-1

 

J. Crew
Operating Corp.

 

 

93⁄4% SENIOR
SUBORDINATED NOTES DUE 2014

 

 

INDENTURE

DATED AS OF [        ]

 

 

U.S. Bank National
Association

 

TRUSTEE

 

F-2

 

	
  ARTICLE 1

  
	
  DEFINITIONS
  AND INCORPORATION BY REFERENCE

  
	
   

  
	
  Section 1.01.

  	
  Definitions.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.02.

  	
  Other Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.03.

  	
  Rules of
  Construction

  	
   

  
	
   

  
	
  ARTICLE 2

  
	
  THE NOTES

  
	
   

  
	
  Section 2.01.

  	
  Form and Dating

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.02.

  	
  Execution
  and Authentication

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.03.

  	
  Registrar and
  Paying Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.04.

  	
  Paying
  Agent to Hold Money in Trust

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.05.

  	
  Holder Lists

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.06.

  	
  Global Note
  Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.07.

  	
  Legends

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.08.

  	
  Transfer and
  Exchange

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.09.

  	
  Replacement Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.10.

  	
  Outstanding Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.11.

  	
  Treasury Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.12.

  	
  Temporary Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.13.

  	
  Cancellation

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.14.

  	
  Defaulted Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.15.

  	
  Record Date

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.16.

  	
  Computation Of
  Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.17.

  	
  CUSIP Number

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.18.

  	
  Additional Notes

  	
   

  
	
   

  
	
  ARTICLE 3

  
	
  REDEMPTION AND PREPAYMENT

  
	
   

  
	
  Section 3.01.

  	
  Notices to Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.02.

  	
  Selection
  of Notes to be Redeemed or Purchased

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.03.

  	
  Notice of Redemption

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.04.

  	
  Effect of
  Notice of Redemption

  	
   

  

 

F-3

 

	
  Section
  3.05.

  	
  Deposit
  of Redemption or Purchase Price

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.06.

  	
  Notes
  Redeemed or Purchased in Part

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.07.

  	
  Optional Redemption

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.08.

  	
  Mandatory
  Redemption

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.09.

  	
  Asset Sale Offers

  	
   

  
	
   

  
	
  ARTICLE 4

  
	
  COVENANTS

  
	
   

  
	
  Section 4.01.

  	
  Payment of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.02.

  	
  Maintenance
  of Office or Agency

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.03.

  	
  Commission Reports

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.04.

  	
  Compliance
  Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.05.

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.06.

  	
  Stay, Extension and Usury Laws

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.07.

  	
  Restricted Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.08.

  	
  Dividends
  and Other Payment Restrictions Affecting Restricted Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.09.

  	
  Incurrence
  of Indebtedness and Issuance of Preferred Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.10.

  	
  Asset Sales

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.11.

  	
  Transactions
  with Affiliates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.12.

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.13.

  	
  Offer
  to Purchase Upon a Change of Control

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.14.

  	
  Corporate
  Existence

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.15.

  	
  Business
  Activities

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.16.

  	
  No
  Layering of Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.17.

  	
  Additional
  Note Guarantees

  	
   

  
	
   

  
	
  ARTICLE
  5

  
	
  SUCCESSORS

  
	
   

  	
   

  	
   

  
	
  Section
  5.01.

  	
  Merger,
  Consolidation of Sale of Assets

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  5.02.

  	
  Successor
  Corporation Substituted

  	
   

  
	
   

  
	
  ARTICLE
  6

  
	
  DEFAULTS AND REMEDIES

  
	
   

  
	
  Section
  6.01.

  	
  Events
  of Default

  	
   

  

 

F-4

 

	
  Section
  6.02.

  	
  Acceleration

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.03.

  	
  Other
  Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.04.

  	
  Waiver
  of Past Defaults

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.05.

  	
  Control
  by Majority

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.06.

  	
  Limitation
  on Suits

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.07.

  	
  Rights
  of Holders of Notes to Receive Payment

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.08.

  	
  Collection
  Suit by Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.09.

  	
  Trustee
  May File Proofs of Claim

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.10.

  	
  Priorities

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.11.

  	
  Undertaking
  for Costs

  	
   

  
	
   

  
	
  ARTICLE
  7

  
	
  TRUSTEE

  
	
   

  
	
  Section
  7.01.

  	
  Duties
  of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.02.

  	
  Rights
  of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.03.

  	
  Individual
  Rights of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.04.

  	
  Trustee’s
  Disclaimer

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.05.

  	
  Notice
  of Defaults

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.06.

  	
  Reports
  by Trustee to Holders of the Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.07.

  	
  Compensation
  and Indemnity

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.08.

  	
  Replacement
  of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.09.

  	
  Successor
  Trustee by Merger, Etc

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.10.

  	
  Eligibility;
  Disqualification

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.11.

  	
  Preferential
  Collection of Claims Against the Company

  	
   

  
	
   

  
	
  ARTICLE
  8

  
	
  LEGAL
  DEFEASANCE AND COVENANT DEFEASANCE

  
	
   

  
	
  Section
  8.01.

  	
  Option
  to Effect Legal Defeasance or Covenant Defeasance

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.02.

  	
  Legal
  Defeasance and Discharge

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.03.

  	
  Covenant
  Defeasance

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.04.

  	
  Conditions
  to Legal or Covenant Defeasance

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.05.

  	
  Deposited
  Money and U.S

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.06.

  	
  Repayment
  to the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.07.

  	
  Reinstatement

  	
   

  

 

F-5

 

	
  ARTICLE
  9

  
	
  AMENDMENT, SUPPLEMENT
  AND WAIVER

  
	
   

  
	
  Section
  9.01.

  	
  Without
  Consent of Holders of the Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  9.02.

  	
  With
  Consent of Holders of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  9.03.

  	
  Revocation
  and Effect of Consents

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  9.04.

  	
  Notation
  on or Exchange of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  9.05.

  	
  Trustee
  to Sign Amendments, Etc

  	
   

  
	
   

  
	
  ARTICLE
  10

  
	
  SUBORDINATION

  
	
   

  
	
  Section
  10.01.

  	
  Agreement
  to Subordinate

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.02.

  	
  Liquidation;
  Dissolution; Bankruptcy

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.03.

  	
  Default
  On Designated Senior Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.04.

  	
  Acceleration
  of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.05.

  	
  When
  Distribution Must Be Paid Over

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.06.

  	
  Notice
  by the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.07.

  	
  Subrogation

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.08.

  	
  Relative
  Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.09.

  	
  Subordination
  May Not Be Impaired by the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.10.

  	
  Distribution
  or Notice of Representative

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.11.

  	
  Rights
  of Trustee and Paying Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.12.

  	
  Authorization
  to Effect Subordination

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.13.

  	
  Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.14.

  	
  Reliance
  by Holders of Senior Debt on Subordination Provisions

  	
   

  
	
   

  
	
  ARTICLE
  11

  
	
  COLLATERAL AND SECURITY

  
	
   

  
	
  Section
  11.01.

  	
  Security
  Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  11.02.

  	
  Release
  of Collateral

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  11.03.

  	
  Certificates
  of the Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  11.04.

  	
  Authorization
  of Actions to Be Taken by the Trustee Under the Security Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  11.05.

  	
  Authorization
  of Receipt of Funds by the Trustee Under the Security Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  11.06.

  	
  Termination
  of Security Interest

  	
   

  

 

F-6

 

	
  Section
  11.07.

  	
  Collateral
  Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  11.08.

  	
  Designations

  	
   

  
	
   

  
	
  ARTICLE
  12

  
	
  NOTE
  GUARANTEES

  
	
   

  
	
  Section
  12.01.

  	
  Note
  Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.02.

  	
  Execution
  and Delivery of the Note Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.03.

  	
  Guarantors
  May Consolidate, etc., on Certain Terms

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.04.

  	
  Releases
  of Note Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.05.

  	
  Limitation
  on Guarantor Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.06.

  	
  “Trustee”
  to Include Paying Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.07.

  	
  Subordination
  of Note Guarantees

  	
   

  
	
   

  
	
  ARTICLE
  13

  
	
  SATISFACTION AND DISCHARGE

  
	
   

  
	
  Section
  13.01.

  	
  Satisfaction
  and Discharge

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  13.02.

  	
  Application
  of Trust Money

  	
   

  
	
   

  
	
  ARTICLE
  14

  
	
  MISCELLANEOUS

  
	
   

  
	
  Section
  14.01.

  	
  Trust
  Indenture Act

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.02.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.03.

  	
  Certificate
  and Opinion as to Conditions Precedent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.04.

  	
  Statements
  Required in Certificate or Opinion

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.05.

  	
  Rules
  by Trustee and Agents

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.06.

  	
  No
  Personal Liability of Directors, Officers, Employees, Organizers and Members

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.07.

  	
  Governing
  Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.08.

  	
  No
  Adverse Interpretation of Other Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.09.

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.10.

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.11.

  	
  Counterpart
  Originals

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.12.

  	
  Table
  of Contents, Headings, Etc

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.13.

  	
  Entire
  Agreement

  	
   

  

 

F-7

 

EXHIBITS

 

	
   

  	
   

  	
   

  
	
  EXHIBIT
  A

  	
  FORM
  OF NOTE

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  FORM OF NOTE GUARANTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  FORM OF SUPPLEMENTAL
  INDENTURE

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  D

  	
  FORM
  OF CERTIFICATE FOR TRANSFER TO QIB

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  E

  	
  FORM
  OF CERTIFICATE FOR TRANSFER PURSUANT TO RULE 144

  	
   

  

 

F-8

 

Indenture, dated as of [                ]
among J. Crew Operating Corp., a Delaware corporation, as issuer, the
Guarantors (as defined herein), and U.S. Bank National Association, as trustee.

 

The parties hereto agree
as follows for the benefit of each other and for the equal and ratable benefit
of the holders of the J. Crew Operating Corp.’s 93⁄4% Senior Subordinated Notes
due 2014:

 

ARTICLE 1

DEFINITIONS AND INCORPORATION

BY REFERENCE

 

Section 1.01.        Definitions.

 

“Acquired Debt” means, with respect to any
specified Person, (i) Indebtedness of any other Person existing at the
time such other Person is merged with or into or became a Restricted Subsidiary
of such specified Person, whether or not such Indebtedness is incurred in
connection with, or in contemplation of, such other Person merging with or into
or becoming a Restricted Subsidiary of such specified Person and
(ii) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.

 

“Additional
Assets” means any property or assets (other than Indebtedness and
Capital Stock) to be used by the Company or a Restricted Subsidiary of the
Company in a Permitted Business.

 

“Additional Note Board Resolutions” means
resolutions duly adopted by the Board of Directors of the Company and delivered
to the Trustee in an Officer’s Certificate providing for the issuance of
Additional Notes.

 

“Additional Notes” means the Company’s 93⁄4% Senior Subordinated Notes originally
issued after the Issue Date pursuant to Section 2.18, including any replacement
Notes as specified in the relevant Additional Note Board Resolutions.

 

“Affiliate” of any specified Person means
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.  For purposes of this definition, “control”
(including, with correlative meanings, the terms “controlling,” “controlled by”
and “under common control with”), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise. Beneficial ownership
of 10% or more of the voting securities of a Person shall be deemed to be
control.  No Person in whom a Receivables
Subsidiary makes an Investment in connection with a Qualified Receivables
Transaction will be deemed to be an Affiliate of the Company or any of its
Subsidiaries solely by reason of such Investment.

 

“Agent” means any Registrar, Paying Agent,
co-registrar or additional paying agent.

 

“Asset Sale” means (i) the sale, lease
(other than an operating lease), conveyance or other disposition of any assets
or rights (including, without limitation, by way of a sale and leaseback)

 

F-9

 

other than in the ordinary course of business (provided that the
sale, lease (other than an operating lease), conveyance or other disposition of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of this
Indenture described in Section 4.13 and Section 5.01 and not by the
provisions of Section 4.10 of this Indenture, and (ii) the issuance of
Equity Interests in any of the Company’s Restricted Subsidiaries or the sale of
Equity Interests in any of its Subsidiaries (other than directors’ qualifying
Equity Interests or Equity Interests required by applicable law to be held by a
Person other than the Company or a Restricted Subsidiary of the Company).

 

Notwithstanding
the preceding, none of the following items shall be deemed to be an Asset Sale:

 

(1)
any single transaction or series of related transactions that involves assets
having a Fair Market Value of less than $5.0 million;

 

(2) a
transfer of assets between or among the Company and its Restricted
Subsidiaries;

 

(3) an
issuance of Equity Interests by a Restricted Subsidiary of the Company to the
Company or to a Restricted Subsidiary of the Company;

 

(4)
the sale or lease of products, services or accounts receivable (including at a discount)
in the ordinary course of business and any sale or other disposition of
damaged, worn-out, negligible, surplus or obsolete assets in the ordinary
course of business;

 

(5)
the sale or other disposition of Cash Equivalents;

 

(6) a
Restricted Payment that does not violate Section 4.07 of this Indenture or is a
Permitted Investment;

 

(7) a
sale and leaseback transaction with respect to any assets within 180 days of
the acquisition of such assets;

 

(8)
any exchange of like-kind property of the type described in Section 1031 of the
Internal Revenue Code of 1986 for use in a Permitted Business;

 

(9)
the sale or disposition of any assets or property received as a result of a
foreclosure by the Company or any of its Restricted Subsidiaries on any secured
Investment or any other transfer of title with respect to any secured
Investment in default;

 

(10)
the licensing of intellectual property in the ordinary course of business or in
accordance with industry practice;

 

(11)
the sale, lease, conveyance, disposition or other transfer of (a) the Capital
Stock of, or any Investment in, any Unrestricted Subsidiary or (b) Permitted
Investments made pursuant to clause (xxii) of the definition of “Permitted
Investments”;

 

F-10

 

(12)
surrender or waiver of contract rights or the settlement, release or surrender
of contract, tort or other claims of any kind;

 

(13)
leases or subleases to third persons in the ordinary course of business that do
not interfere in any material respect with the business of the Company or any
of its Restricted Subsidiaries;

 

(14)
sales of accounts receivable and related assets of the type specified in the
definition of Qualified Receivables Transaction to a Receivables Subsidiary for
the Fair Market Value thereof, less amounts required to be established as
reserves and customary discounts pursuant to contractual agreements with
entities that are not Affiliates of the Company entered into as part of a
Qualified Receivables Transactions; and

 

(15)
transfers of accounts receivable and related assets of the type specified in
the definition of Qualified Receivables Transaction (or a fractional undivided
interest therein) by a Receivables Subsidiary in a Qualified Receivables
Transaction.

 

“Attributable Debt” in respect of a sale
and leaseback transaction means, at the time of determination, the present
value of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
including any period for which such lease has been extended or may, at the
option of the lessor, be extended. Such present value shall be calculated using
a discount rate equal to the rate of interest implicit in such transaction,
determined in good faith by a responsible financial or accounting officer of
the Company.

 

“Bankruptcy
Law” means Title 11, U.S. Code or any similar federal or state law
for the relief of debtors.

 

“Black Canyon
Credit Facility” means the Loan Agreement, including any related
notes, Guarantees, collateral documents, instruments and agreements executed in
connection therewith, in each case, as amended, extended, modified, renewed,
refunded, replaced or refinanced from time to time, whether or not by the same
or any other agent, lender or group of lenders.

 

“Board of
Directors” means, with respect to any Person, the board of
directors, management committee or similar governing body of such Person or any
duly authorized committee thereof.

 

“Business Day”
means any day other than a Legal Holiday.

 

“Capital Lease Obligation” means, at the
time any determination thereof is to be made, the amount of the liability in
respect of a capital lease that would at such time be required to be
capitalized on a balance sheet prepared in accordance with GAAP, and the Stated
Maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may
be prepaid by the lessee without payment of a penalty.

 

“Capital Stock” means (i) in the case
of a corporation, corporate stock, (ii) in the case of an association or
business entity, any and all shares, interests, participations, rights or other

 

F-11

 

equivalents (however designated) of corporate stock, (iii) in the
case of a partnership or limited liability company, partnership (whether
general or limited) or membership interests and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person but
excluding from all of the foregoing any debt securities convertible into
Capital Stock, whether or not such debt securities include any right of
participation with Capital Stock.

 

“Cash Equivalents” means:

 

(i)
United States dollars or any other currencies held from time to time in the
ordinary course of business;

 

(ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality of the United States
government (provided that
the full faith and credit of the United States is pledged in support of those
securities) having maturities of not more than 12 months from the date of
acquisition;

 

(iii)
direct obligations issued by any state of the United States of America or any
political subdivision of any such state, or any public instrumentality thereof,
in each case having maturities of not more than 12 months from the date of
acquisition;

 

(iv)
certificates of deposit and eurodollar time deposits with maturities of 12
months or less from the date of acquisition, bankers’ acceptances with
maturities not exceeding 12 months and overnight bank deposits, in each case,
with any lender party to the Congress Credit Facility or with any domestic
commercial bank that is at least “adequately capitalized” (as defined in the
regulations of its primary Federal banking regulator) and has Tier 1 Capital
(as defined in such regulations) of not less than $250.0 million;

 

(v)
repurchase obligations with a term of not more than one year for underlying
securities of the types described in clauses (ii) and (iv) above entered into
with any financial institution meeting the qualifications specified in clause
(iv) above;

 

(vi)
commercial paper having one of the two highest ratings obtainable from Moody’s
Investors Service, Inc. or Standard & Poor’s Rating Services and, in each
case, maturing within 12 months after the date of acquisition;

 

(vii)
Indebtedness or preferred stock issued by Persons with a rating of “A” or
higher from Standard & Poor’s Rating Services or “A2” or higher from Moody’s
Investors Service, Inc. with maturities of 12 months or less from the date of
acquisition; and

 

(viii)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i) through (vi) of this
definition.

 

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

 

F-12

 

(i) the
direct or indirect sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of the
Company and its Subsidiaries taken as a whole to any “person” (as such term is
used in Section 13(d)(3) of the Exchange Act), other than Permitted
Holders;

 

(ii) the
adoption of a plan relating to the liquidation or dissolution of the Company;
or

 

(iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any “person” (as defined above),
other than the Permitted Holders, becomes the “beneficial owner” (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act),
directly or indirectly, of 50% or more of the Voting Stock of the Company
(measured by voting power rather than number of shares); provided, however,
for purposes of this clause (iii), each Person will be deemed to beneficially
own any Voting Stock of another Person held by one or more of its Subsidiaries.

 

“Closing Date” means December 23, 2004, or
such later date on which the conditions precedent set forth in Section 9.02 of
the Loan Agreement shall be satisfied or waived pursuant to Section 13.02 of
the Loan Agreement.

 

“Collateral” means the Capital Stock of the
Company held by Intermediate, all property and assets of the Company, and all
property and assets of each Subsidiary of the Company that is a Guarantor
hereunder, in each case, with respect to which from time to time a Lien is
granted as security for the Notes pursuant to the applicable Security
Documents.

 

“Collateral Agent” means U.S. Bank National
Association in its capacity as the “Collateral Agent” under and as defined in
the Security Documents and any successor thereto in such capacity.

 

“Collateral Permitted Liens” means:

 

(i) Liens
existing as of the Effective Date plus renewals and extensions of such Liens;

 

(ii) Liens
securing any First-Lien Obligations;

 

(iii)
Liens securing the Notes (or the Note Guarantees) and any Other Second-Lien
Obligations;

 

(iv) Liens
securing Permitted Refinancing Indebtedness permitted to be incurred under this
Indenture; provided that such Liens securing Permitted Refinancing
Indebtedness that ranks equal to or junior in right of payment with the Notes
(A) are not materially less favorable to the Holders and are not
materially more favorable to the lienholders with respect to such Liens than
the Liens in respect of the Indebtedness being refinanced and (B) are
limited to all or part of the same property and assets that secured or, under
the written agreements pursuant to which the original Lien arose, could secure

 

F-13

 

the original Lien (plus improvements and accessions to
such property or proceeds or distributions thereof);

 

(v) Liens
for taxes, assessments or governmental charges or claims either (A) not
delinquent or (B) contested in good faith by appropriate proceedings and
as to which the Company or its Restricted Subsidiaries shall have set aside on
their books such reserves as may be required pursuant to GAAP;

 

(vi) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens imposed by law incurred in the ordinary
course of business;

 

(vii) Liens
incurred or deposits or pledges made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types
of social security or similar obligations, including any Lien securing letters
of credit issued in the ordinary course of business in connection therewith, or
to secure the performance of tenders, public or statutory obligations, progress
payments, surety and appeal bonds, bids, leases, contracts (other than
contracts for the payment of money), performance and return-of-money bonds and
other similar obligations;

 

(viii) Liens
arising out of judgments, decrees, orders or awards in respect of which the
Company shall in good faith be prosecuting an appeal or proceedings for review
which appeal or proceedings shall not have been finally terminated, or if the
period within which such appeal or proceedings may be initiated shall not have
expired;

 

(ix) survey
exceptions, easements, rights of way, zoning restrictions, licenses, reservations,
provisions, encroachments, encumbrances, protrusion permits, servitudes,
covenants, conditions, waivers, restrictions on the use of property or title
defects (and with respect to leasehold interests, mortgages, obligations, liens
and other encumbrances incurred, created, assumed or permitted to exist and
arising by, through or under a landlord or owner of the leased property, with
or without the consent of the lessee) and other similar charges, restrictions
or encumbrances in respect of real property that do not in the aggregate
materially adversely affect the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;

 

(x) any
interest or title of a lessor under any lease, whether or not characterized as
capital or operating; provided that such Liens do not extend to any
property or asset which is not leased property subject to such lease;

 

(xi) Liens
securing Capital Lease Obligations and purchase money Indebtedness incurred in
accordance with Section 4.09(b) hereof; provided that the Indebtedness
shall not be secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets being acquired or
constructed or improved or financed by such Indebtedness;

 

(xii) Liens
upon specific items of inventory or other goods and proceeds of any Person
securing such Person’s obligations in respect of bankers’ acceptances issued or

 

F-14

 

created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;

 

(xiii) Liens
securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof;

 

(xiv) Liens
to secure obligations arising from statutory, regulatory, contractual, or
warranty requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;

 

(xv) Liens
securing Hedging Obligations;

 

(xvi) Liens
on property or assets of a Person, plus renewals and extensions of such Liens,
existing at the time such Person is merged with or into or consolidated with
the Company or any Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation
and do not extend to any assets other than those of the Person merged into or
consolidated with the Company or the Subsidiary;

 

(xvii)
Liens on property (including Capital Stock) existing at the time of acquisition
of the property by the Company or any Restricted Subsidiary of the Company; provided
that such Liens were in existence prior to such acquisition and not incurred in
contemplation of such acquisition;

 

(xviii) leases,
subleases, licenses or sublicenses to third parties entered into in the
ordinary course of business;

 

(xix) Liens
arising out of consignment or similar arrangements for the sale of goods
entered into by the Company or any Restricted Subsidiary in the ordinary course
of business;

 

(xx)
Liens in favor of the Company or the Guarantors;

 

(xxi)
Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness
or other obligations of such Unrestricted Subsidiary;

 

(xxii)
Liens of a bank, broker or securities intermediary on whose records a deposit
account or securities account is maintained securing the payment of customary
fees and commissions to the bank, broker or securities intermediary or, which
respect to a deposit account, items deposited but returned unpaid;

 

(xxiii)
Liens on the assets of Non-Guarantor Subsidiaries securing Indebtedness of the
Company or its Restricted Subsidiaries that was permitted by the terms of this
Indenture to be incurred;

 

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

 

F-15

 

(xxv)
Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed (A)
$5.0 million at any one time outstanding prior to the Initial Call Termination
Date and (B) thereafter $15.0 million at any one time outstanding.

 

“Commission” means the Securities and
Exchange Commission.

 

“Company” means J. Crew Operating Corp., a
Delaware corporation, and any and all successors thereto.

 

“Congress Credit Facility” means the Loan
and Security Agreement, dated as of December 23, 2002 by and among the Company,
J. Crew Inc., Grace Holmes, Inc. and H.F.D. No. 55, Inc., as borrowers,
Congress Financial Corporation, as administrative and collateral agent, and
certain other parties named therein, including any related notes, Guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, extended, modified, renewed, refunded,
replaced or refinanced from time to time, whether or not by the same or any
other agent, lender or group of lenders.

 

“Consolidated Cash Flow” means, with
respect to any specified Person for any period, the Consolidated Net Income of
such Person for such period plus,
without duplication and to the extent deducted in determining such Consolidated
Net Income, the amounts for such period of:

 

(i)
the Fixed Charges of such Person and its Restricted Subsidiaries for such
period;

 

(ii)
the consolidated income tax expense of such Person and its Restricted
Subsidiaries for such period;

 

(iii)
fees, costs and expenses paid or payable in cash by the Company or any of its
Subsidiaries during such period in connection with the issuance of the Notes
and the Note Guarantees;

 

(iv)
any management fees to be paid or payable by the Company and any of its
Subsidiaries during such period to any Permitted Holder not to exceed $2.0
million in any fiscal year;

 

(v)
non-recurring redundancy and restructuring charges;

 

(vi)
other non-cash expenses and charges for such period reducing Consolidated Net
Income (excluding any such non-cash item to the extent representing an accrual
or reserve for potential cash items in any future period or amortization of a
prepaid cash item that was paid in a prior period);

 

(vii)
any non-recurring out-of-pocket expenses or charges for such period relating to
any offering of Equity Interests by the Company or any direct or indirect
parent of the Company, any Asset Sale, Investment or merger, recapitalization
or acquisition transactions made by the Company or any of its Restricted
Subsidiaries or any direct or indirect parent of the Company, or any Indebtedness
incurred by the Company or any of

 

F-16

 

its Restricted Subsidiaries or any direct or indirect
parent of the Company (in each case, whether or not successful);

 

(viii)
Net Income attributable to minority interests of a Restricted Subsidiary of the
Company that is not a Wholly Owned Subsidiary; and

 

(ix)
all depreciation and amortization charges (including the amortization of any
premiums, fees or expenses incurred in connection with the issuance of the
Notes and the Note Guarantees and the amortization of any amounts required or
permitted by Accounting Principles Board Opinions Nos. 16 (including non-cash
write-ups and non-cash charges relating to inventory and fixed assets) and 17
(including non-cash charges relating to intangibles and goodwill)), other than
in respect of the amortization of prepaid cash expenses that were paid in a
prior period;

 

minus,
without duplication, other non-cash items (other than the accrual of revenue in
accordance with GAAP consistently applied in the ordinary course of business)
increasing Consolidated Net Income for such items (excluding any such non-cash
item to the extent it represents the reversal of an accrual or reserve for
potential cash items in any prior period).

 

“Consolidated Net Income” means, with
respect to any specified Person for any period, the aggregate of the Net Income
of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP, provided that:

 

(i)
the Net Income (but not loss) of any Person that is not a Restricted Subsidiary
or that is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions paid in cash to
the specified Person or a Restricted Subsidiary thereof;

 

(ii)
the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or other distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders;

 

(iii) any gain or loss, together with any
related provision for taxes on such gain or loss, realized in connection with
(A) any Asset Sale or (B) the disposition of any securities by such Person or
any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries will be excluded;

 

(iv)
any extraordinary gain or loss, together with any related provision for taxes
on such extraordinary gain or loss will be excluded;

 

(v)
all non-recurring or unusual gains and losses and all restructuring charges
will be excluded;

 

F-17

 

(vi)
income or losses attributable to discontinued operations and ownership
interests therein (including, without limitation, operations disposed during
such period whether or not such operations were classified as discontinued)
will be excluded;

 

(vii) any non-cash impact of capitalized
interest on Subordinated Shareholder Funding will be excluded;

 

(viii)
any non-cash charges attributable to applying the purchase method of accounting
will be excluded;

 

(ix)
all non-cash charges relating to employee benefit or other management or stock
compensation plans of the Company or a Restricted Subsidiary of the Company
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization of a
prepaid cash expense incurred in a prior period) will be excluded to the extent
that such non-cash charges are deducted in computing such Consolidated Net
Income; provided, further
that if the Company or any Restricted Subsidiary of the Company makes a cash
payment in respect of such non-cash charge in any period, such cash payment
will (without duplication) be deducted from the Consolidated Net Income of the
Company for such period;

 

(x)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded; and

 

(xi)
the cumulative effect of a change in accounting principles shall be excluded.

 

“Consolidated Total Indebtedness to Consolidated Cash
Flow Ratio” means, with respect to the Company as of any
determination date, the ratio of the aggregate amount of Total Indebtedness for
the Company as of such determination date to Consolidated Cash Flow for the
Company for the four most recent full fiscal quarters for which financial
statements are available ending prior to such determination date.

 

In addition, for purposes
of calculating Consolidated Total
Indebtedness to Consolidated Cash Flow Ratio:

 

(i)            Investments,
acquisitions, mergers, consolidations and dispositions that have been made by
the specified Person or any of its Restricted Subsidiaries, or any Person or
any of its Restricted Subsidiaries acquired by, merged or consolidated with the
specified Person or any of its Restricted Subsidiaries, and including any
related financing transactions and including increases in ownership of
Restricted Subsidiaries, during the four-quarter reference period or subsequent
to such reference period and on or prior to such determination date shall be given pro forma effect and deemed to
have occurred on the first day of the four-quarter reference period, and
Consolidated Cash Flow and Fixed Charges for such reference period shall
reflect any pro forma expense and cost reductions attributable to any such
transactions;

 

(ii)           the
Total Indebtedness and Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
(and ownership interests therein) disposed of prior to such determination date,

 

F-18

 

shall be excluded, and Total Indebtedness and
Consolidated Cash Flow for such reference period shall reflect any pro forma
expense or cost reductions relating to such discontinuance or disposition;

 

(iii)          the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses (and ownership interests
therein) disposed of prior to such determination date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the specified Person or any of its Subsidiaries following
such determination date;

 

(iv)          any
Person that is a Restricted Subsidiary on the determination date will be deemed
to have been a Restricted Subsidiary at all times during such four-quarter
reference period;

 

(v)           any
Person that is not a Restricted Subsidiary on the determination date will be
deemed not to have been a Restricted Subsidiary at any times during such
four-quarter reference period; and

 

(vi)          if
any Indebtedness bears a floating rate of interest, the interest expense on
such Indebtedness shall be calculated as if the rate in effect on the
determination date had been the applicable rate for the entire period (taking
into account any Hedging Obligations applicable to such Indebtedness).

 

For purposes of this
definition, whenever pro forma effect is given to a transaction, the pro forma
calculations shall be made in good faith by the chief financial officer of the
Company in an Officer’s Certificate.  For
purposes of determining whether any Indebtedness constituting a Guarantee may
be incurred, the interest on the Indebtedness to be guaranteed shall be
included in calculating the Consolidated Total Indebtedness to Consolidated
Cash Flow Ratio on a pro forma basis. Interest on a Capital Lease Obligation shall
be deemed to accrue at an interest rate reasonably determined by a responsible
financial or accounting officer of the Company to be the rate of interest
implicit in such Capital Lease Obligation in accordance with GAAP.  Interest on Indebtedness that may optionally
be determined at an interest rate based upon a factor of a prime or similar
rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to
have been based upon the rate actually chosen, or, if none, then based upon
such optional rate chosen as the Company may designate.

 

“Corporate Trust Office of the Trustee”
shall be at the address of the Trustee specified in Section 14.02 hereof or
such other address as to which the Trustee may give notice to the Company.

 

“Credit Agent” means Congress Financial
Corporation, in its capacity as administrative and collateral agent for the
lenders party to the Congress Credit Facility or any successor thereto, or any
Person at any time becoming the “Senior Credit Agent” under the Intercreditor
Agreement pursuant to the terms thereof.

 

“Credit Facilities” means one or more debt
facilities (including, without limitation, the Congress Credit Facility and the
Black Canyon Credit Facility) or commercial paper facilities, in each case,
with banks or other institutional lenders providing for revolving credit loans,
term

 

F-19

 

loans, receivables financing (including through the sale of receivables
to such lenders or to special purpose entities formed to borrow from such
lenders against such receivables) or letters of credit or any other
Indebtedness, in each case, as amended, restated, modified, renewed, refunded,
replaced (whether upon or after termination or otherwise) or refinanced
(including by means of sales of debt securities and including any amendment,
restatement, modification, renewal, refunding, replacement or refinancing that
increases the amount borrowed thereunder or extends the maturity thereof) in
whole or in part from time to time, whether or not by the same or any other
agent, lender or group of lenders.

 

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

 

“Definitive Notes” means Notes issued in fully-registered
certificated form (other than a Global Note), which shall be substantially in
the form of Exhibit A, with appropriate legends as specified in
Section 2.07 and Exhibit A.

 

“Depositary” means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to this Indenture, and, thereafter, “Depositary” shall mean or include
such successor.

 

“Designated Noncash Consideration” means
any non-cash consideration received by the Company or a Restricted Subsidiary
of the Company in connection with an Asset Sale that is designated as
Designated Noncash Consideration pursuant to an Officer’s Certificate, executed
by the president and the principal financial officer of the Company.

 

“Designated Preferred Stock” means
preferred stock of the Company (other than Disqualified Stock), that is issued
for cash (other than to a Restricted Subsidiary of the Company) and is so
designated as Designated Preferred Stock, pursuant to an Officer’s Certificate
executed on the date of such issuance.

 

“Designated Senior Debt” means (i) any Senior Debt outstanding
under any Credit Facility and (ii) any other Senior Debt permitted under this
Indenture the principal amount of which is $25.0 million or more and that has
been designated as “Designated Senior Debt.”

 

“Discharge of First-Lien Obligations” means payment in full in cash of the
principal of and interest and premium, if any, on all Indebtedness in respect
of the outstanding First-Lien Obligations or, with respect to Hedging
Obligations or letters of credit outstanding thereunder, delivery of cash
collateral or backstop letters of credit in respect thereof in compliance with
such First-Lien Obligations, in each case after or concurrently with
termination of all commitments to extend credit thereunder, and payment in full
in cash of any other Obligations in respect of the First-Lien Obligations that
are due and payable or otherwise accrued and owing.

 

“Disqualified
Stock” means any Capital Stock that, by
its terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable, in each case, at the option of the holder of the
Capital Stock), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of

 

F-20

 

the holder of the Capital Stock, in whole or in part, on or prior to
the date that is 90 days after the date on which the Notes mature.

 

Notwithstanding the
preceding sentence, (i) any Capital Stock that would constitute Disqualified
Stock solely because the holders of the Capital Stock have the right to require
the Company or its Subsidiary that issued such Capital Stock to repurchase such
Capital Stock upon the occurrence of a change of control or an asset sale will
not constitute Disqualified Stock, (ii) any Capital Stock that would constitute
Disqualified Stock solely as a result of any redemption feature that is
conditioned upon, and subject to, compliance with Section 4.07 hereof shall not
constitute Disqualified Stock and (iii) any Capital Stock issued to any plan
for the benefit of employees will not constitute Disqualified Stock solely
because it may be required to be repurchased by the Company or its Subsidiary
that issued such Capital Stock in order to satisfy applicable statutory or
regulatory obligations. The amount of Disqualified Stock deemed to be
outstanding at any time for purposes of this Indenture will be the maximum
amount that the Company and its Restricted Subsidiaries may become obligated to
pay upon the maturity of, or pursuant to any mandatory redemption provisions
of, such Disqualified Stock.

 

“Effective
Date” means the date of execution of
the Loan Agreement.

 

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

 

“Equity Offering” means a public or private offering of Qualified Capital
Stock of the Company or a direct or indirect parent or a Subsidiary of the
Company.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded
Contributions” means net cash
proceeds, marketable securities or Qualified Proceeds received by the Company
from (i) contributions to its common equity capital, including Subordinated
Shareholder Funding and (ii) the sale (other than to a Subsidiary of the
Company or to any management equity plan or stock option plan or any other
management or employee benefit plan or agreement of the Company) of Equity
Interests (other than Disqualified Stock and Designated Preferred Stock) of the
Company, in each case designated as Excluded Contributions pursuant to an
Officer’s Certificate on the date such capital contributions are made or the
date such Equity Interests are sold, as the case may be, that are excluded from
the calculation set forth in clause (C) of Section 4.07(a)(iv) hereof.

 

“Existing Debentures” means the 131/8%
Senior Discount Debentures due 2008 issued by Holdings.

 

“Existing Indebtedness” means Indebtedness existing on the
Effective Date, plus interest accruing thereon.

 

“Fair Market Value” means the value that would be paid by a
willing buyer to an unaffiliated willing seller in a transaction not involving
distress or necessity of either party, determined in good faith by the Board of
Directors, chief executive officer or chief financial officer of the Company.

 

F-21

 

“Final Maturity Date” means the tenth anniversary of the
Closing Date.

 

“First-Lien Obligations” means all Obligations under (i) the
Congress Credit Facility and (ii) any other Indebtedness that constitutes
Senior Debt permitted to be incurred under this Indenture that, pursuant to its
terms, is secured by Liens on property and assets that constitute Collateral
hereunder and, except for the Congress Credit Facility, is designated by the
Company as constituting “First-Lien Obligations” for the purposes of this
Indenture.

 

“Fixed Charge Coverage Ratio” means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period.  In the event that the specified Person or any
of its Restricted Subsidiaries incurs, assumes, guarantees, repays,
repurchases, redeems, defeases or otherwise discharges any Indebtedness (other
than ordinary working capital borrowings) or issues, repurchases or redeems
preferred stock or Disqualified Stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated and prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee, repayment, repurchase, redemption, defeasance or other
discharge of Indebtedness, or such issuance, repurchase or redemption of
preferred stock or Disqualified Stock, and the use of proceeds therefrom, as if
the same had occurred at the beginning of the applicable four-quarter reference
period.

 

In addition, for purposes
of calculating the Fixed Charge Coverage Ratio:

 

(i)
Investments, acquisitions, mergers, consolidations and dispositions that have
been made by the specified Person or any of its Restricted Subsidiaries, or any
Person or any of its Restricted Subsidiaries acquired by, merged or
consolidated with the specified Person or any of its Restricted Subsidiaries,
and including any related financing transactions and including increases in
ownership of Restricted Subsidiaries, during the four-quarter reference period
or subsequent to such reference period and on or prior to the Calculation Date
shall be given pro forma effect and deemed to have occurred on the first day of
the four-quarter reference period, and Consolidated Cash Flow and Fixed Charges
for such reference period shall reflect any pro forma expense and cost
reductions attributable to any such transactions;

 

(ii)
the Consolidated Cash Flow and Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
(and ownership interests therein) disposed of prior to the Calculation Date,
shall be excluded, and Consolidated Cash Flow and Fixed Charges for such
reference period shall reflect any pro forma expense or cost reductions relating
to such discontinuance or disposition;

 

(iii)
the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses (and ownership interests
therein) disposed of prior to the Calculation Date, shall be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges will not
be obligations of the specified Person or any of its Subsidiaries following the
Calculation Date;

 

F-22

 

(iv)
any Person that is a Restricted Subsidiary on the Calculation Date will be
deemed to have been a Restricted Subsidiary at all times during such
four-quarter reference period;

 

(v)
any Person that is not a Restricted Subsidiary on the Calculation Date will be
deemed not to have been a Restricted Subsidiary at any times during such
four-quarter reference period; and

 

(vi)
if any Indebtedness bears a floating rate of interest, the interest expense on
such Indebtedness will be calculated as if the rate in effect on the
Calculation Date had been the applicable rate for the entire period (taking
into account any Hedging Obligation applicable to such Indebtedness).

 

For purposes of this
definition, whenever pro forma effect is given to a transaction, the pro forma
calculations shall be made in good faith by the chief financial officer of the
Company in an Officer’s Certificate.  For
purposes of determining whether any Indebtedness constituting a Guarantee may
be incurred, the interest on the Indebtedness to be guaranteed shall be
included in calculating the Fixed Charge Coverage Ratio on a pro forma basis.
Interest on a Capital Lease Obligation shall be deemed to accrue at an interest
rate reasonably determined by a responsible financial or accounting officer of
the Company to be the rate of interest implicit in such Capital Lease
Obligation in accordance with GAAP.  For
purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period.  Interest
on Indebtedness that may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rate, shall be deemed to have been based upon the rate actually
chosen, or, if none, then based upon such optional rate chosen as the Company
may designate.

 

“Fixed Charges” means, with
respect to any specified Person for any period, the sum, without duplication,
of:

 

(i)
the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, original issue discount, non-cash interest payments (but excluding
capitalized interest in relation to Subordinated Shareholder Funding), the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers’ acceptance financings, and net cash payments (if any) pursuant to
Hedging Obligations in respect of interest rates); provided, however,
that in no event shall any amortization of any deferred financing costs be
included in Fixed Charges; plus

 

(ii) the
consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period (but excluding capitalized interest in
relation to Subordinated Shareholder Funding); plus

 

F-23

 

(iii) any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon); plus

 

(iv) the
product of (A) (without duplication) (1) all dividends paid or
accrued in respect of Disqualified Stock which are not included in the interest
expense of such Person for tax purposes for such period and (2) all cash
dividend payments on any series of preferred stock of such Person or any of its
Restricted Subsidiaries (other than to the Company or a Restricted Subsidiary
of the Company), times (B) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.

 

“GAAP” means
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
have been approved by a significant segment of the accounting profession, which
are in effect on the Effective Date.

 

“Global Note Legend” means the legend set forth in Exhibit
A, which is required to be placed on all Global Notes issued under this
Indenture.

 

“Global Notes” means any Note issued in fully-registered certificated form
to DTC (or its nominee), as depositary for the beneficial owners thereof, which
shall be substantially in the form of Exhibit A, with appropriate
legends as specified in Section 2.07 and Exhibit A.

 

“Government Securities” means direct
obligations of, or obligations guaranteed by, the United States of America
(including any agency or instrumentality thereof) and the payment for which the
United States pledges its full faith and credit.

 

“Guarantee” means a
guarantee other than by endorsement of negotiable instruments for collection in
the ordinary course of business, direct or indirect, in any manner including,
without limitation, by way of a pledge of assets or through letters of credit
or reimbursement agreements in respect thereof, of all or any part of any
Indebtedness (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services, to
take or pay or to maintain financial statement conditions or otherwise).

 

“Guarantor” means Intermediate, each Subsidiary of the Company that executes a
Note Guarantee in accordance with the provisions of this Indenture and their
respective successors and assigns, in each case, until the Note Guarantee of
such Person has been released in accordance with the provisions of this
Indenture.

 

“Hedging Obligations” means, with
respect to any specified Person, the obligations of such Person under (i)
interest rate swap agreements (whether from fixed to floating or from floating
to fixed), interest rate cap agreements and interest rate collar 

agreements; (ii) other agreements or arrangements designed to manage
interest rates or interest rate risk; and (iii) other

 

F-24

 

agreements or arrangements designed to protect such Person against
fluctuations in currency exchange rates or commodity prices.

 

“Holder” means a Person in whose name a Note is registered.

 

“Holdings” means J. Crew Group, Inc., a New York corporation.

 

“Indebtedness” means, with
respect to any specified Person, the principal and premium (if any) of any
indebtedness of such Person (excluding accrued expenses and trade payables),
whether or not contingent:

 

(i) in
respect of borrowed money;

 

(ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) (other than letters of
credit issued in respect of trade payables);

 

(iii)
in respect of banker’s acceptances;

 

(iv)
representing Capital Lease Obligations;

 

(v)
representing the balance deferred and unpaid of the purchase price of any
property or services due more than twelve months after such property is
acquired or such services are completed (except any such balance that
constitutes a trade payable or similar obligation to a trade creditor); or

 

(vi)
representing the net obligations under any Hedging Obligations,

 

if and to the extent any
of the preceding items (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of the specified Person
prepared in accordance with GAAP.  In
addition, the term “Indebtedness” includes all Indebtedness of others secured
by a Lien on any asset of the specified Person (whether or not such
Indebtedness is assumed by the specified Person) and, to the extent not
otherwise included, the Guarantee by the specified Person of any Indebtedness
of any other Person.

 

“Indenture” means this Indenture, as amended or supplemented from time to time.

 

“Initial Call Termination Date” means the earlier of (i) the date which
is eighteen (18) months following the Closing Date and (ii) the date on which
the Company elects to terminate its right to redeem the Notes pursuant to
clause (i) of Section 3.07(a).

 

“Intercreditor Agreement” means (i) the Intercreditor Agreement,
dated as of November 21, 2004, among the Company, the Guarantors, Congress
Financial Corporation, as senior credit agent, and the Collateral Agent, as
amended, supplemented or otherwise modified from time to time and (ii) any
substantially identical agreement hereafter entered into pursuant to Section
11.07(c).

 

“Intermediate” means J. Crew Intermediate LLC, a Delaware limited
liability company.

 

F-25

 

“Investments” means, with
respect to any Person, all direct or indirect investments by such Person in
other Persons (including Affiliates) in the forms of loans (including
Guarantees or other obligations), advances or capital contributions (excluding
commission, travel, relocation and similar advances to officers and employees
made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP. 
If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the Company
will be deemed to have made an Investment on the date of any such sale or
disposition equal to the Fair Market Value of the Company’s Investments in such
Subsidiary that were not sold or disposed of in an amount determined as
provided in Section 4.07(d) hereof.  The
acquisition by the Company or any Restricted Subsidiary of the Company of a
Person that holds an Investment in a third Person will be deemed to be an
Investment by the Company or such Restricted Subsidiary in such third Person in
an amount equal to the Fair Market Value of the Investments held by the
acquired Person in such third Person in an amount determined as provided in
Section 4.07(d) hereof.  The outstanding
amount of any Investment shall be the original cost thereof, reduced by all
returns on such Investment (including dividends, interest, distributions,
returns of principal and profits on sale).

 

“Issue Date” means the date on which Notes are first issued and
authenticated under this Indenture.

 

“Issue Date Notes” means the Notes originally issued on the
Issue Date having an aggregate principal amount of $[___,000,000], and any
replacement Notes issued therefor in accordance with this Indenture.

 

“Legal Holiday” means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the city in which the principal Corporate
Trust Office of the Trustee is located or at a place of payment are authorized
by law, regulation or executive order to remain closed.  If a payment date is a Legal Holiday at a
place of payment, payment shall be made at that place on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for the intervening
period.

 

“Lien” means,
with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, whether or not
filed, recorded or otherwise perfected under applicable law (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
any option or other agreement to sell or give a security interest therein).

 

“Loan
Agreement” means the
Senior Subordinated Loan Agreement, dated as of November 21, 2004, among the
Company, as borrower, the guarantors named therein, the lenders party thereto
and U.S. Bank National Association, as administrative agent.

 

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

 

F-26

 

“Net Proceeds” means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, payments made in order to obtain a necessary
consent or required by applicable law, and sales commissions, and any
relocation expenses incurred as a result of the Asset Sale, taxes paid or
payable as a result of the Asset Sale, including taxes resulting from the
transfer of the proceeds of such Asset Sale to the Company, in each case, after
taking into account:

 

(i)
any available tax credits or deductions and any payments that are required to
be made under tax sharing arrangements (including the Tax Sharing Agreement);

 

(ii)
amounts required to be applied to the repayment of Indebtedness, other than
Senior Debt, secured by a Lien on the asset or assets that were the subject of
such Asset Sale;

 

(iii)
any reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP;

 

(iv)
any reserve for adjustment in respect of any liabilities associated with the
asset disposed of in such transaction and retained by the Company or any Restricted
Subsidiary of the Company after such sale or other disposition thereof;

 

(v)
any distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Sale; and

 

(vi)
in the event that a Restricted Subsidiary of the Company consummates an Asset
Sale and makes a pro rata payment of dividends to
all of its stockholders from any cash proceeds of such Asset Sale, the amount
of dividends paid to any stockholder other than the Company or any other
Restricted Subsidiary of the Company; provided that any net proceeds of an Asset Sale by a Non-Guarantor
Subsidiary that are subject to restrictions on repatriation to the Company will
not be considered Net Proceeds for so long as such proceeds are subject to such
restrictions.

 

“Non-Guarantor Subsidiary” means, subject
to the provisions of Section 4.17, (A) any Unrestricted Subsidiary, (B) any
Receivables Subsidiary and (C) any Subsidiary of the Company that does not
guarantee any Indebtedness under the Congress Credit Facility.  The Board of Directors of the Company may
designate any Restricted Subsidiary as a Non-Guarantor Subsidiary by filing
with the Trustee a certified copy of a resolution of such Board of Directors
giving effect to such designation and an Officer’s Certificate certifying as to
the applicable clause of the immediately preceding sentence that warrants such
designation.  In addition, if a Guarantor
that is a guarantor under the Congress Credit Facility is released from its
Guarantee of the Congress Credit Facility, it shall be released automatically
from its Note Guarantee and will be a Non-Guarantor Subsidiary.

 

“Non-Recourse Debt” means
Indebtedness (i) as to which neither the Company nor any of its Restricted
Subsidiaries (A) provides credit support of any kind (including any
undertaking,

 

F-27

 

agreement or instrument that would constitute Indebtedness), (B) is
directly or indirectly liable as a guarantor or otherwise, or (C) constitutes
the lender; (ii) no default with respect to which (including any rights that
the holders of the Indebtedness may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder
of any other Indebtedness of the Company or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment of such
other Indebtedness to be accelerated or payable prior to its Stated Maturity;
and (iii) as to which the lenders have been notified in writing or have agreed
in writing (in the agreement relating thereto or otherwise) that they will not
have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.

 

“Note Custodian” means the Trustee when serving as custodian for the
Depositary with respect to the Notes in global form, or any successor entity
thereto.

 

“Note Guarantee” means the Guarantee, substantially in the form of Exhibit
B hereto, by each Guarantor of the Company’s obligations under the Notes
and this Indenture, executed pursuant to the provisions of this Indenture.

 

“Notes” means
any of the Company’s 93⁄4% Senior Subordinated Notes issued and authenticated
pursuant to this Indenture, including any Additional Notes.

 

“Obligations” means, with respect to any Indebtedness, any principal,
interest, penalties, fees, indemnifications, reimbursements, damages, costs,
expenses and other liabilities payable under the documentation governing any
Indebtedness, including the payment of interest at the rate provided in such
documentation that would be applicable and other reasonable fees, costs or
charges which would accrue and become due but for the commencement of any case
in bankruptcy, in each case as to such interest or other amounts whether or not
allowed or allowable in whole or in part in such case.

 

“Officer” means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.

 

“Officer’s Certificate” means, with respect of any Person, a
certificate signed on behalf of such Person by one Officer of such Person, who
must be the principal executive officer, the principal financial officer, the
treasurer or the principal accounting officer of such Person that meets the
requirements of Section 14.04 hereof.

 

“Opinion of Counsel” means an opinion from legal counsel that
meets the requirements of Section 14.04 hereof. 
The counsel may be an employee of or counsel to the Company or any
Subsidiary of the Company.

 

“Other Second-Lien Obligations” means all Obligations under (i) the
Senior Discount Contingent Principal Notes and (ii) any Indebtedness permitted
to be incurred under this Indenture that, pursuant to its terms, is secured by
Liens on property and assets that constitute Collateral hereunder and is
designated by the Company as “Other Second-Lien Obligations” for the purposes
of this Indenture.

 

F-28

 

“Permitted Business” means (i) any business engaged in by
the Company or any of its Restricted Subsidiaries on the Effective Date,
(ii) any business or other activities that are reasonably similar,
ancillary, complementary or related to, or a reasonable extension, development
or expansion of, the businesses in which the Company and its Restricted
Subsidiaries are engaged on the Effective Date and (iii) the design,
manufacture, importing, exporting, distribution, marketing, licensing and
wholesale and retail sale of apparel, housewares, home furnishings and related
items.

 

“Permitted Holders” means, collectively, (i) TPG Partners II,
L.P. and its Affiliates, (ii) Millard S. Drexler and his immediate family
members and (iii) trusts for the benefit of any of the foregoing Persons, or
any of their heirs, executors, successors or legal representatives.

 

“Permitted Investments” means:

 

(i) any
Investment in the Company or in a Restricted Subsidiary of the Company (other
than a Receivables Subsidiary);

 

(ii) any
Investment in cash and Cash Equivalents;

 

(iii) any
Investment by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (A) such Person becomes a
Restricted Subsidiary of the Company (other than a Receivables Subsidiary) or
(B) such Person, in one transaction or a series of transactions, is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company (other than a Receivables Subsidiary);

 

(iv) any
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10
hereof;

 

(v) any
Investment solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company;

 

(vi)
any Investments received in compromise, settlement or resolution of (A)
obligations of trade creditors or customers that were incurred in the ordinary
course of business of the Company or any of its Restricted Subsidiaries,
including pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of any trade creditor or customer,
(B) litigation, arbitration or other disputes with Persons who are not
Affiliates or (C) as a result of a foreclosure by the Company or any Restricted
Subsidiary of the Company with respect to any secured Investment or other
transfer of title with respect to any secured Investment in default;

 

(vii)
Investments represented by Hedging Obligations;

 

(viii)
any Investment in payroll, travel and similar advances to cover
business-related travel expenses, moving expenses or other similar expenses, in
each case incurred in the ordinary course of business;

 

F-29

 

(ix)
Investments in receivables owing to the Company or any Restricted Subsidiary of
the Company if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary
trade terms as the Company or any such Restricted Subsidiary deems reasonable
under the circumstances;

 

(x)
Investments in prepaid expenses, negotiable instruments held for collection and
lease, utility and workers’ compensation, performance and similar deposits
entered into as a result of the operations of the business in the ordinary
course of business;

 

(xi)
obligations of one or more officers or other employees of the Company or any of
its Restricted Subsidiaries in connection with such officer’s or employee’s
acquisition of shares of common stock of the Company so long as no cash or
other assets are paid by the Company or any of its Restricted Subsidiaries to
such officers or employees in connection with the acquisition of any such
obligations;

 

(xii)
loans or advances to and Guarantees provided for the benefit of employees made
in the ordinary course of business of the Company or the Restricted Subsidiary
of the Company in an aggregate principal amount not to exceed $5.0 million at
any one time outstanding;

 

(xiii)
Investments existing as of the Effective Date or an Investment consisting of
any extension, modification or renewal of any Investment existing as of the
Effective Date (excluding any such extension, modification or renewal involving
additional advances, contributions or other investments of cash or property or
other increases thereof unless it is a result of the accrual or accretion of
interest or original issue discount or payment-in-kind pursuant to the terms,
as of the Effective Date, of the original Investment so extended, modified or
renewed);

 

(xiv)
repurchases of the Notes;

 

(xv)
the acquisition by a Receivables Subsidiary in connection with a Qualified
Receivables Transaction of Equity Interests of a trust or other Person
established by such Receivables Subsidiary to effect such Qualified Receivables
Transaction;

 

(xvi)
any other Investment by the Company or a Subsidiary of the Company in a
Receivables Subsidiary or any Investment by a Receivables Subsidiary in any
other Person in connection with a Qualified Receivables Transaction customary
for such transactions;

 

(xvii)
Guarantees permitted to be incurred by Section 4.09;

 

(xviii)
joint ventures (A) engaged in a Permitted Business or (B) for the purpose of
outsourcing the internal administrative functions of the Company or any of its
Restricted Subsidiaries; provided, however, that all Investments
permitted pursuant to this clause (xviii) shall not exceed, at any time
outstanding, $15.0 million in the aggregate;

 

F-30

 

(xix)
Investments held by a Person (other than an Affiliate) that becomes a
Restricted Subsidiary, provided, that (A) such Investments were not
acquired in contemplation of the acquisition of such Person and (B) at the time
such Person becomes a Restricted Subsidiary, such Investments would not,
individually or in the aggregate, constitute a Significant Subsidiary of such
acquired Person;

 

(xx)
Investments made with Excluded Contributions;

 

(xxi)
Investments in any Person where such Investment was acquired by the Company or
any of its Restricted Subsidiaries in exchange for any other Investment or
accounts receivable held by the Company or any such Restricted Subsidiary in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or accounts receivable;
and

 

(xxii)
other Investments in any Person having an aggregate Fair Market Value (measured
on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (xxii) that are at the time outstanding not to
exceed (A) $10.0 million prior to the Initial Call Termination Date and (B)
thereafter $25.0 million; provided, however, that if any
Investment pursuant to this clause (xxii) is made in any Person that is not a
Restricted Subsidiary of the Company at the date of the making of such
Investment and such Person becomes a Restricted Subsidiary of the Company after
such date, such Investment shall thereafter be deemed to have been made
pursuant to clause (i) above and shall cease to have been made pursuant to this
clause (xxii) for so long as such Person continues to be a Restricted
Subsidiary of the Company (it being understood that if such Person thereafter
ceases to be a Restricted Subsidiary of the Company, such Investment will again
be deemed to have been made pursuant to this clause (xxii)) and provided,
further, if any Investment made pursuant to this clause (xxii) is
subsequently sold or repaid for cash or Cash Equivalents, the amount available
under this clause (xxii) for future Investments will be increased by the amount
of cash or Cash Equivalents received from such sale or repayment.

 

“Permitted Junior Securities” means Equity Interests in the Company or
any Guarantor or debt securities that are subordinated to all Senior Debt (and
any debt securities issued in exchange for Senior Debt) to substantially the
same extent as, or to a greater extent than, the Notes and the Note Guarantees
are subordinated to Senior Debt under this Indenture (including, in the case of
Senior Debt under the Credit Facilities, with respect to payment blockage and
turnover, and the maturity and weighted average life to maturity of which are
six months greater than that of the Senior Debt and debt securities issued in
exchange for Senior Debt).

 

“Permitted Refinancing Indebtedness” means
any Indebtedness of the Company or any of its Restricted Subsidiaries issued in
exchange for, or the net proceeds of which are used to extend, renew, refund,
refinance, prepay, replace, defease or discharge other Indebtedness of the
Company or any of its Restricted Subsidiaries (other than intercompany
Indebtedness); provided that:

 

(i)
the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if

 

F-31

 

applicable) of the Indebtedness extended, renewed,
refunded, refinanced, prepaid, replaced, defeased or discharged (plus all
accrued interest on the Indebtedness and the amount of all fees, commissions,
discounts and expenses, including premiums, incurred in connection therewith);

 

(ii)
if such Indebtedness is not Senior Debt, either (A) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended, renewed,
refunded, refinanced, prepaid, replaced, defeased or discharged or (B) all
scheduled payments on or in respect of such Permitted Refinancing Indebtedness
(other than interest payments) shall be at least 91 days following the final
scheduled maturity of the Notes; and if such Indebtedness is Senior Debt and
has a final stated maturity later than the final stated maturity of the Notes,
such Permitted Refinancing Indebtedness has a final stated maturity later than
the final maturity of the Notes;

 

(iii)
if the Indebtedness being extended, renewed, refunded, refinanced, prepaid,
replaced, defeased or discharged is subordinated in right of payment to the
Notes, such Permitted Refinancing Indebtedness is subordinated in right of
payment to the Notes on terms at least as favorable to the Holders as those
contained in the documentation governing the Indebtedness being extended,
renewed, refunded, refinanced, replaced, defeased or discharged; and

 

(iv) if such Indebtedness is not Senior Debt, such
Indebtedness is incurred

 

(A) by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being renewed, refunded, refinanced, replaced, defeased or
discharged;

 

(B) by
any Guarantor if the obligor on the Indebtedness being renewed, refunded,
refinanced, replaced, defeased or discharged is a Guarantor; or

 

(C) by
any Non-Guarantor Subsidiary if the obligor on the Indebtedness being renewed,
refunded, refinanced, replaced, defeased or discharged is a Non-Guarantor
Subsidiary.

 

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

 

“Purchase Money Note” means a promissory note evidencing a line
of credit, or evidencing other Indebtedness owed to the Company or any
Restricted Subsidiary in connection with a Qualified Receivables Transaction,
which note shall be repaid from cash available to the maker of such note, other
than amounts required to be established as reserves pursuant to agreement,
amounts paid to investors in respect of interest, principal and other amounts
owing to such investors and amounts paid in connection with the purchase of
newly generated receivables.

 

“QIB” means
a “qualified institutional buyer” as defined in Rule 144A under the
Securities Act.

 

“Qualified
Capital Stock” means any
Capital Stock that is not Disqualified Stock.

 

F-32

 

“Qualified
Proceeds” means any of
the following or any combination of the following: (i) Cash Equivalents; (ii)
the Fair Market Value of assets that are used or useful in the Permitted
Business; and (iii) the Fair Market Value of the Capital Stock of any Person
engaged primarily in a Permitted Business if, in connection with the receipt by
the Company or any of its Restricted Subsidiaries of such Capital Stock, such
Person becomes a Restricted Subsidiary of the Company or such Person is merged
or consolidated into the Company or any of its Restricted Subsidiaries; provided that Qualified Proceeds shall not
include Excluded Contributions.

 

“Qualified
Receivables Transaction” means any
transaction or series of transactions entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any of its Subsidiaries sells,
conveys or otherwise transfers, or grants a security interest, to: (i) a
Receivables Subsidiary (in the case of a transfer by the Company or any of its
Subsidiaries, which transfer may be effected through the Company or one or more
of its Subsidiaries); and (ii) if applicable, any other Person (in the case of
a transfer by a Receivables Subsidiary), in each case, in any Receivables of
the Company or any of its Subsidiaries, and any assets related thereto,
including, without limitation, all collateral securing such Receivables, all
contracts, contract rights and all Guarantees or other obligations in respect
of such Receivables, proceeds of such Receivables and any other assets, which
are customarily transferred or in respect of which security interests are
customarily granted in connection with receivables financings and asset
securitization transactions of such type, together with any related
transactions customarily entered into in a receivables financings and asset
securitizations, including servicing arrangements.

 

“Receivables” means, with respect to any Person or entity, all of the
following property and interests in property of such Person or entity, whether
now existing or existing in the future or hereafter acquired or arising:  (i) accounts, (ii) accounts
receivable incurred in the ordinary course of business, including without
limitation, all rights to payment created by or arising from sales of goods,
leases of goods or the rendition of services no matter how evidenced, whether
or not earned by performance, (iii) all rights to any goods or merchandise
represented by any of the foregoing after creation of the foregoing, including,
without limitation, returned or repossessed goods, (iv) all reserves and
credit balances with respect to any such accounts receivable or account
debtors, (v) all letters of credit, security, or Guarantees for any of the
foregoing, (vi) all insurance policies or reports relating to any of the
foregoing, (vii) all collection or deposit accounts relating to any of the
foregoing, (viii) all proceeds of the foregoing and (ix) all books
and records relating to any of the foregoing.

 

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

 

“Receivables
Subsidiary” means a
Subsidiary of the Company which engages in no activities other than in
connection with the financing of accounts receivable and in businesses related
or ancillary thereto and that is designated by the Board of Directors of the
Company (as provided below) as a Receivables Subsidiary (i) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which: (A)
is guaranteed by the Company or any Subsidiary of the Company (excluding
Guarantees of Obligations (other than the principal of,

 

F-33

 

and interest on, Indebtedness) pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction); (B) is recourse to or
obligates the Company or any Subsidiary of the Company in any way other than
pursuant to representations, warranties, covenants and indemnities customarily
entered into in connection with a Qualified Receivables Transaction; or (c)
subjects any property or asset of the Company or any Subsidiary of the Company
(other than accounts receivable and related assets as provided in the
definition of Qualified Receivables Transaction), directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant to
representations, warranties, covenants and indemnities customarily entered into
in connection with a Qualified Receivables Transaction; and (ii) with which
neither the Company nor any Subsidiary of the Company has any material
contract, agreement, arrangement or understanding other than on terms no less
favorable to the Company or such Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company, other than as
may be customary in a Qualified Receivables Transaction including for fees
payable in the ordinary course of business in connection with servicing
accounts receivable; and (iii) with which neither the Company nor any
Subsidiary of the Company has any obligation to maintain or preserve such
Subsidiary’s financial condition or cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Board of Directors of
the Company will be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors of the Company
giving effect to such designation and an Officer’s Certificate certifying that
such designation complied with the foregoing conditions.

 

“Replacement Preferred Stock” means any Disqualified Stock or preferred
stock of the Company or any of its Restricted Subsidiaries issued in exchange
for, or the net proceeds of which are used to renew, refund, refinance, replace
or discharge any other preferred stock of the Company or any of its Restricted
Subsidiaries (other than intercompany preferred stock).

 

“Resale Restriction Termination Date” means for any Restricted Note (or
beneficial interest therein), two years (or such other period specified in Rule
144(k)) from the Issue Date or, if any Additional Notes that are Restricted
Notes have been issued before the Resale Restriction Termination Date for any
Restricted Notes, from the latest such original issue date of such Additional
Notes.

 

“Responsible Officer” when used with respect to the Trustee,
means any officer in the Corporate Trust Services Division of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject and who shall have
responsibility for the administration of this Indenture.

 

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

 

“Restricted Note” means any Issue Date Note (or beneficial interest therein)
or any Additional Note (or beneficial interest therein) not originally issued
and sold pursuant to an effective registration statement under the Securities
Act until such time as:

 

F-34

 

(i)            the
Resale Restriction Termination Date therefor has passed; or

 

(ii)           the
Private Placement Legend therefor has otherwise been removed pursuant to
Section 2.08 or, in the case of a beneficial interest in a Global Note, such beneficial
interest has been exchanged for an interest in a Global Note not bearing a
Private Placement Legend.

 

“Restricted Subsidiary” of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.

 

“Rule 144” means Rule 144 promulgated under the Securities Act or
any successor rule.

 

“Rule 144A” means Rule 144A promulgated under the Securities Act
or any successor rule.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security Agreement” means the Security Agreement, dated as of
November 21, 2004, among the Company, the Guarantors and the Collateral Agent.

 

“Security Documents” means the Security Agreement and any
other document or instrument pursuant to which a Lien is granted by the Company
or any Guarantor to secure any Obligations hereunder or under which rights or
remedies with respect to such Lien are governed, as such agreements may be
amended, modified or supplemented from time to time.

 

“Senior Debt” means (i) all Indebtedness of the Company or any Guarantor
outstanding under the Congress Credit Facility (including post-petition
interest at the rate provided in the documentation with respect thereto,
whether or not allowed as a claim in any bankruptcy proceeding) and all Hedging
Obligations and Treasury Management Obligations with respect thereto; (ii) any
other Indebtedness of the Company or any Guarantor permitted to be incurred
under the terms of this Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes; and (iii) all Obligations with
respect to the foregoing. 
Notwithstanding anything to the contrary in the foregoing, Senior Debt
will not include (A) the Notes and the Note Guarantees, (B) any liability for
federal, state, local or other taxes owed or owing by the Company, (C) any
Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (D)
any trade payables, (E) Indebtedness which is classified as non-recourse in accordance
with GAAP or any unsecured claim arising in respect thereof by reason of the
application of Section 1111(b)(1) of the Bankruptcy Code, or (F) that portion
of any Indebtedness that is incurred in violation of the Indenture (but only to
the extent so incurred); provided that Indebtedness outstanding under the Congress Credit Facility will
not cease to be Senior Debt as a result of this clause (F) if the lenders or
agents thereunder obtained a representation from the Company or any of its
Subsidiaries on the date such Indebtedness was incurred to the effect that such
Indebtedness was not prohibited by this Indenture.

 

“Senior Discount Contingent Principal Notes” means the 16.0% Senior Discount
Contingent Principal Notes due 2008 issued by Intermediate.

 

F-35

 

“Significant Subsidiary” means any Subsidiary that would be a “significant
subsidiary” as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect
on the Effective Date.

 

“Stated Maturity” means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the documentation governing such
Indebtedness as of the Effective Date, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.

 

“Subordinated Shareholder Funding” means any Indebtedness of the Company
(and any security into with such Indebtedness is converted or for which it is
exchangeable at the option of the holder) issued to and held by a direct or
indirect parent of the Company or one or more shareholders of such parent that:

 

(i)
does not mature or require any amortization, redemption or other repayment of
principal or any sinking fund payment prior to the first anniversary of the
Stated Maturity of the Notes (other than through conversion or exchange of such
Indebtedness into Capital Stock (other than Disqualified Stock) of the Company
or such parent or any Indebtedness meeting the requirements of this
definition),

 

(ii)
does not require, prior to the first anniversary of the Stated Maturity of the
Notes, payment of cash interest, cash withholding amounts or other gross-ups,
or any similar amounts,

 

(iii)
does not provide for or require any security interest or encumbrance over any
property and assets of the Company or any of its Restricted Subsidiaries,

 

(iv)
does not contain any covenants (financial or otherwise) other than a covenant
to pay such Subordinated Shareholder Funding at maturity; and

 

(v) is
fully subordinated and junior in right of payment to the Notes and the
performance of all obligations under the Indenture and the Security Documents
pursuant to customary subordination terms for similar Indebtedness and
otherwise reflecting the terms above.

 

“Subsidiary” means, with respect to any specified Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency and after giving effect to any voting agreement
or stockholders’ agreement that effectively transfers voting power) to vote in
the election of directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person (or a combination thereof); and (ii) any partnership (A) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (B) the only general partners of which are that
Person or one or more Subsidiaries of that Person (or any combination thereof).

 

F-36

 

“Tax Sharing Agreement” means the tax sharing agreement in effect
as of the Effective Date among the Company, Intermediate, Holdings and any one
or more of subsidiaries of the Company, as amended from time to time, so long
as the amount of the Company’s (or any of its Restricted Subsidiaries’)
payments for which the Company and its Restricted Subsidiaries are responsible,
or the time when such payments are required to be made thereunder or any other
of the Company’s rights, duties, and obligations thereunder are no less
favorable to the Company than as provided in such agreement as in effect on the
Effective Date, as determined in good faith by a majority of the members of the
Board of Directors of the Company.

 

“TIA” means
the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect
on the date of this Indenture.

 

“Total
Indebtedness” means, with
respect to the Company, as of any date of determination, an amount equal to the
aggregate amount (without duplication) of all Indebtedness of the Company and
its Restricted Subsidiaries outstanding as of such determination date,
excluding Indebtedness incurred under clauses (vi), (viii), (ix), (x), (xi),
(xiii), (xv), (xvi) and (xviii) of Section 4.09(b).

 

“Transaction Documents” means any of this Indenture, the Notes,
the Note Guarantees, the Intercreditor Agreement, the Security Documents, the
Loan Agreement, the Loan Notes (as defined in the Loan Agreement), the Loan
Guarantees (as defined in the Loan Agreement), the Congress Credit Facility
Amendment No. 3 (as defined in the Loan Agreement), the Amendment No. 1, dated
as of November 21, 2004, to the Credit Agreement, dated as of February 4, 2003,
by and among TPG-MD INVESTMENT, LLC, as Lender, the Company, Holdings and
certain of the Guarantors party thereto, the Letter Agreement, dated as of
November 21, 2004, by and among the Company, Private Capital Partners LLC and
Canpartners Investment IV, LLC, relating to certain fees payable, certain
transfer restrictions and other matters described therein and all other
documents, instruments or agreements executed and delivered by the Company or
the Guarantors for the benefit of the Holders in connection herewith.

 

“Treasury Management Obligations” means obligations under any agreement
governing the provision of treasury or cash management services, including
deposit accounts, funds transfer, automated clearing house, zero balance
accounts, returned check concentration, controlled disbursement, lock box,
account reconciliation and reporting and trade finance services.  Treasury Management Obligations shall not
constitute Indebtedness.

 

“Treasury Rate” means, with respect to any redemption date, the yield to
maturity at the time of computation of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15(519) that has become publicly available at least two
Business Days prior to such redemption date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data))
most nearly equal to the period from such redemption date to the Final Maturity
Date; provided that if
the period from such redemption date to the Final Maturity Date is not equal to
the constant maturity of the United States Treasury security for which a weekly
average yield is given, the Treasury Rate will be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from such redemption date to the Final
Maturity Date is less

 

F-37

 

than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year will be
used.  The Treasury Rate shall be
calculated on the third Business Day preceding the redemption date.

 

“Trustee” means U.S. Bank National Association until a successor replaces it
in accordance with the applicable provisions of this Indenture, and thereafter
means the successor serving hereunder.

 

“Unrestricted Subsidiary” means any
Subsidiary of the Company and any Subsidiary of an Unrestricted Subsidiary that
is designated by the Board of Directors of the Company as an Unrestricted
Subsidiary pursuant to a resolution of the Board of Directors, but only to the
extent that such Subsidiary (i) has no Indebtedness other than Non-Recourse
Debt; (ii) except as permitted by Section 4.11 hereof, is not party to any
agreement, contract, arrangement or understanding with the Company or any
Restricted Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (iii) is a Person with respect
to which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation (A) to subscribe for additional Equity Interests
or (B) to maintain or preserve such Person’s financial condition or to cause
such Person to achieve any specified levels of operating results; and
(iv) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries, except in the case of clauses (iii) and (iv), to the extent (1)
that the Company or such Restricted Subsidiary could otherwise provide such a
Guarantee or incur such Indebtedness (other than as Permitted Debt) pursuant to
Section 4.09 hereof, and (2) the provision of such Guarantee and the incurrence
of such indebtedness otherwise would be permitted by Section 4.07 hereof.

 

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

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (A) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect of the Indebtedness, by
(B) the number of years (calculated to the nearest one-twelfth) that will
elapse between such date and the making of such payment, by (ii) the then
outstanding principal amount of such Indebtedness.

 

“Wholly Owned Subsidiary” of any
specified Person means a Subsidiary of such Person all of the outstanding
Capital Stock or other ownership interest of which (other than directors’
qualifying shares) will as that time be owned by such Person or by one or more
Wholly Owned Subsidiaries of such person.

 

F-38

 

Section 1.02.        Other
Definitions.

 

	
   

  	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
   

  	
  “Affiliate Transaction”

  	
  Section 4.11

  
	
   

  	
  “Agent Members”

  	
  Section 2.06

  
	
   

  	
  “Asset Sale Offer”

  	
  Section 3.09

  
	
   

  	
  “Authenticating Agent”

  	
  Section 2.02

  
	
   

  	
  “Change of Control Offer”

  	
  Section 4.13

  
	
   

  	
  “Change of Control Payment”

  	
  Section 4.13

  
	
   

  	
  “Change of Control Payment
  Date”

  	
  Section 4.13

  
	
   

  	
  “Company Order”

  	
  Section 2.02

  
	
   

  	
  “Covenant Defeasance”

  	
  Section 8.03

  
	
   

  	
  “Custodian”

  	
  Section 6.01

  
	
   

  	
  “DTC”

  	
  Section 2.01

  
	
   

  	
  “Event of Default”

  	
  Section 6.01

  
	
   

  	
  “Excess Proceeds”

  	
  Section 4.10

  
	
   

  	
  “incur”

  	
  Section 4.09

  
	
   

  	
  “Legal Defeasance”

  	
  Section 8.02

  
	
   

  	
  “Liens Securing Note
  Obligations”

  	
  Section 11.07

  
	
   

  	
  “Liens Securing Other
  Second-Lien Obligations”

  	
  Section 11.07

  
	
   

  	
  “Offer Amount”

  	
  Section 3.09

  
	
   

  	
  “Offer Period”

  	
  Section 3.09

  
	
   

  	
  “Paying Agent”

  	
  Section 2.03

  
	
   

  	
  “Payment Default”

  	
  Section 6.01

  
	
   

  	
  “Payment Blockage Notice”

  	
  Section 10.03

  
	
   

  	
  “Permitted Debt”

  	
  Section 4.09

  
	
   

  	
  “Private Placement Legend”

  	
  Section 2.07

  
	
   

  	
  “Purchase Date”

  	
  Section 3.09

  
	
   

  	
  “Registrar”

  	
  Section 2.03

  
	
   

  	
  “Representative”

  	
  Section 10.03

  
	
   

  	
  “Restricted Payments”

  	
  Section 4.07

  

 

Section 1.03.        Rules of
Construction.

 

Unless the context
otherwise requires:

 

(a)           a
term has the meaning assigned to it herein;

 

(b)           an
accounting term not otherwise defined herein has the meaning assigned to it in
accordance with GAAP;

 

(c)           “or”
is not exclusive;

 

(d)           words
in the singular include the plural, and in the plural include the singular;

 

(e)           “will”
shall be interpreted to express a command;

 

F-39

 

(f)            provisions
apply to successive events and transactions;

 

(g)           references
to sections of or rules under the Securities Act shall be deemed to include
substitute, replacement or successor sections or rules adopted by the
Commission from time to time;

 

(h)           “including”
shall be interpreted to mean “including without limitation”; and

 

(i)            references
to the payment of principal of the Notes shall include applicable premium, if
any.

 

ARTICLE 2

THE NOTES

 

Section 2.01.        Form and
Dating.

 

(a)           The
Notes and the Trustee’s certificate of authentication to be borne by the Notes
shall be substantially in the form of Exhibit A hereto.  The Notes may have notations, legends or
endorsements as specified in Section 2.07 or as otherwise required by law,
stock exchange rule or The Depository Trust Company (“DTC”) rule or usage.  The Company and the Trustee shall approve the
form of the Notes and any notation, legend or endorsement on them.  Each Note shall be dated the date of its
authentication.  The Notes initially
shall be issued in minimum denominations of $1,000 and integral multiples thereof.

 

(b)           The
terms and provisions of the Notes shall constitute, and are hereby expressly
made, a part of this Indenture, and, to the extent applicable, the Company, the Guarantors and the
Trustee, by their execution and delivery of this Indenture expressly agree to
such terms and provisions and to be bound thereby.  Except as otherwise expressly permitted in
this Indenture, all Notes shall be identical in all respects.  Notwithstanding any differences among them,
all Notes issued under this Indenture shall vote and consent together on all matters
as one class.

 

(c)           Notes
originally issued to QIBs in reliance on Rule 144A will be issued in the
form of one or more permanent Global Notes.

 

(d)           Each
Global Note shall represent such of the outstanding Notes as shall be specified
therein and each shall provide that it represents the aggregate principal
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate principal amount of outstanding Notes represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges,
repurchases, and redemptions.  Any
endorsement of a Global Note to reflect the amount of any increase or decrease
in the aggregate principal amount of outstanding Notes represented thereby
shall be made by the Trustee or the Note Custodian, at the direction of the Trustee,
in accordance with instructions given by the Holder thereof as required by
Section 2.08 hereof and shall be made on the records of the Trustee and the
Depositary.

 

F-40

 

Section 2.02.        Execution
and Authentication.

 

(a)           One
Officer of the Company shall sign the Notes for the Company by manual or
facsimile signature.  If an Officer of
the Company whose signature is on a Note no longer holds that office at the
time the Note is authenticated, the Note shall nevertheless be valid.

 

(b)           A
Note shall not be valid until authenticated by the manual signature of the
Trustee.  The signature of the Trustee
shall be conclusive evidence that the Note has been duly authenticated under
this Indenture.

 

(c)           At
any time and from time to time after the execution and delivery of this
Indenture, the Trustee shall authenticate and make available for delivery Notes
upon a written order of the Company signed by an Officer of the Company (the “Company
Order”).  A Company Order shall specify
the amount of the Notes to be authenticated and the date on which the original
issue of Notes is to be authenticated.

 

(d)           The
Trustee may appoint an authenticating agent (the “Authenticating Agent”)
acceptable to the Company to authenticate Notes.  Unless limited by the terms of such
appointment, any such Authenticating Agent may authenticate Notes whenever the
Trustee may do so.  Each reference in
this Indenture to authentication by the Trustee includes authentication by the
Authenticating Agent.  An Authenticating
Agent has the same rights as an Agent to deal with the Company or an Affiliate
of the Company.

 

Section 2.03.        Registrar
and Paying Agent.

 

(a)           The
Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (“Registrar”) and
(ii) an office or agency where Notes may be presented for payment (“Paying
Agent”).  The Registrar shall keep a
register of the Notes and of their transfer and exchange.  The Company may appoint one or more
co-registrars and one or more additional paying agents.  The term “Registrar” includes any
co-registrar and the term “Paying Agent” includes any additional paying
agent.  The Company may change any Paying
Agent or Registrar without notice to any Holder.  The Company shall notify the Trustee in
writing of the name and address of any Agent not a party to this
Indenture.  If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such.  The Company, the
Guarantors or any of the Company’s Subsidiaries may act as Paying Agent or
Registrar.

 

(b)           The
Company initially appoints DTC to act as Depositary with respect to the Global
Notes.  The Company initially appoints
the Trustee to act as the Registrar and Paying Agent and to act as Note
Custodian with respect to the Global Notes. 
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent with respect to the Definitive Notes.

 

Section 2.04.        Paying Agent
to Hold Money in Trust.

 

The Company shall require
each Paying Agent other than the Trustee to agree in writing that the Paying
Agent shall hold in trust for the benefit of Holders or the Trustee all money
held by the Paying Agent for the payment of principal, premium or interest on the
Notes, and shall notify the Trustee of any default by the Company or the
Guarantors in making any such

 

F-41

 

payment.  While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it
to the Trustee.  The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee.  Upon payment over to the Trustee, the Paying
Agent (if other than the Company, the Guarantors or a Subsidiary) shall have no
further liability for the money.  If the
Company, the Guarantors or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent.  Upon
the occurrence of events specified in Section 6.01(vii) or (viii) hereof, the
Trustee shall serve as Paying Agent for the Notes.

 

Section 2.05.        Holder
Lists.

 

The Trustee shall
preserve in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of all Holders.  If the Trustee is not the Registrar, the
Company and the Guarantors shall furnish to the Trustee at least seven (7)
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders.

 

Section 2.06.        Global Note
Provisions.

 

(a)           Each
Global Note initially shall (i) be registered in the name of DTC or the
nominee of DTC, (ii) be delivered to the Note Custodian, and
(iii) bear the appropriate legend, as set forth in Section 2.07 and Exhibit A.  Any Global Note may be represented by more
than one certificate.  The aggregate
principal amount of each Global Note may from time to time be increased or
decreased by adjustments made on the records of the Note Custodian, as provided
in this Indenture.

 

(b)           Members
of, or participants in, DTC (“Agent Members”) shall have no rights under this
Indenture with respect to any Global Note held on their behalf by DTC or by the
Note Custodian under such Global Note, and DTC may be treated by the Company, the Trustee, the Paying Agent
and the Registrar and any of their agents as the absolute owner of such Global
Note for all purposes whatsoever. 
Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, the Paying Agent
or the Registrar or any of their agents from giving effect to any written
certification, proxy or other authorization furnished by DTC or impair, as
between DTC and its Agent Members, the operation of customary practices of DTC
governing the exercise of the rights of an owner of a beneficial interest in
any Global Note.  The registered Holder
of a Global Note may grant proxies and otherwise authorize any person,
including Agent Members and persons that may hold interests through Agent
Members, to take any action that a Holder is entitled to take under this
Indenture or the Notes.

 

(c)           Except
as provided below, owners of beneficial interests in Global Notes will not be
entitled to receive Definitive Notes. 
Definitive Notes shall be issued to all owners of beneficial interests
in a Global Note in exchange for such interests if:

 

(i)                                     DTC
notifies the Company that it is
unwilling or unable to continue as depositary for such Global Note or DTC
ceases to be a clearing agency registered under the Exchange Act, at a time
when DTC is required to be

 

F-42

 

so registered in order to act as depositary, and in each
case a successor depositary is not appointed by the Company within 120 days of such notice;

 

(ii)                                  the
Company executes and delivers to the Trustee and Registrar an Officer’s
Certificate stating that such Global Note shall be so exchangeable; or

 

(iii)                               an
Event of Default has occurred and is continuing and the Registrar has received
a request from DTC.

 

In connection with the
exchange of an entire Global Note for Definitive Notes pursuant to this
subsection (c), such Global Note shall be deemed to be surrendered to the
Trustee for cancellation, and the Company
shall execute, and upon Company Order the Trustee shall authenticate and
deliver, to each beneficial owner identified by DTC in exchange for its
beneficial interest in such Global Note, an equal aggregate principal amount of
Definitive Notes of authorized denominations.

 

Section 2.07.        Legends.

 

(a)           Each
Global Note shall bear the legend specified therefor in Exhibit A
on the face thereof.

 

(b)           Each
Restricted Note shall bear the private placement legend specified therefor in Exhibit A
on the face thereof (the “Private Placement Legend”).

 

Section 2.08.        Transfer and
Exchange.

 

(a)           Transfers.  If the owner of a Restricted Note that is a
Definitive Note wishes to transfer such Restricted Note (or any portion
thereof) to a Person that it reasonably believes is a QIB, it shall provide to
the Registrar:

 

(i)                                     such
Note,

 

(ii)                                  instructions
directing the Registrar to deliver to the transferee a Note in an equivalent
principal amount to the Note (or portion thereof) being transferred and, if the
entire principal amount of such Note is not being transferred, to the
transferor in an amount equal to the principal amount not transferred and

 

(iii)                               a
certificate in the form of Exhibit D duly executed by the transferor.

 

Any other transfer of
Restricted Notes (other than a transfer of a beneficial interest in a Global
Note that does not involve an exchange of such interest for a Definitive Note
or a beneficial interest in another Global Note, which must be effected in accordance
with applicable law and the rules and procedures of DTC, but is not subject to
any procedure required by this Indenture) shall be made only upon receipt by
the Registrar of such opinions of counsel, certificates and/or other
information reasonably required by and satisfactory to it in order to ensure
compliance with the Securities Act or in accordance with Section 2.08(b).

 

(b)           Use
and Removal of Private Placement Legends. 
Upon the transfer, exchange or replacement of Notes (or beneficial
interests in a Global Note) not bearing (or not required to bear upon such
transfer, exchange or replacement) a Private Placement Legend, the Note
Custodian and Registrar shall exchange such Notes (or beneficial interests) for
beneficial interests in a Global Note (or Definitive Notes if they have been
issued pursuant to Section 2.06(c)) that does not bear a Private Placement
Legend.  Upon the transfer, exchange or
replacement of Notes (or beneficial interests in a Global Note) bearing a
Private Placement Legend, the Note Custodian and Registrar shall deliver only
Notes (or beneficial interests in a Global Note) that bear a Private Placement
Legend unless:

 

(i)                                     such
Notes (or beneficial interests) are transferred pursuant to Rule 144 upon
delivery to the Registrar of a certificate of the transferor in the form

 

F-43

 

of Exhibit E and an Opinion of Counsel
reasonably satisfactory to the Registrar;

 

(ii)                                  such
Notes (or beneficial interests) are transferred, replaced or exchanged after
the Resale Restriction Termination Date therefor; or

 

(iii)                               in
connection with such transfer, exchange or replacement the Registrar shall have
received an Opinion of Counsel and other evidence reasonably satisfactory to it
to the effect that neither such Private Placement Legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.

 

The Private Placement
Legend on any Note shall be removed at the request of the Holder on or after
the Resale Restriction Termination Date therefor.  The Holder of a Global Note may exchange an
interest therein for an equivalent interest in a Global Note not bearing a
Private Placement Legend upon transfer of such interest pursuant to any of clauses
(i) through (iii) of Section 2.08(b).

 

(c)           Retention
of Documents. The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to this Article 2.  The Company
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Registrar.

 

(d)           Execution,
Authentication of Notes, etc.

 

(i)                                     Subject
to the other provisions of this Section 2.08, when Notes are presented to the
Registrar with a request to register the transfer of such Notes or to exchange
such Notes for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange
as requested if its requirements for such transaction are met; provided
that any Notes presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing and such additional
information and documents as may be reasonably requested by the Registrar to
document compliance with the provisions of this Section 2.08 of the
Indenture.  To permit registrations of
transfers and exchanges and subject to the other terms and conditions of this
Article 2, the Company will
execute and, upon Company Order, the Trustee will authenticate Definitive Notes
and Global Notes at the Registrar’s request.

 

(ii)                                  No
service charge shall be made to a Holder for any registration of transfer or
exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax, assessments, or
similar governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charges payable upon
exchange or

 

F-44

 

transfer pursuant to
Section 3.07, Section 4.10, Section 4.13 or Section 9.04).

 

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

 

(iv)                              The
Registrar and the Company shall not be required:  (A) to issue, to register the transfer of or
to exchange Notes during a period beginning at the opening of fifteen (15)
Business Days before the day of any selection of Notes for redemption under
Section 3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so selected
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part or (C) to register the transfer of or to exchange a Note
between a record date and the next succeeding interest payment date.

 

(v)                                 Prior
to due presentment for the registration of a transfer of any Note, the Trustee,
any Agent and the Company may deem and treat the Person in whose name any Note
is registered as the absolute owner of such Note for the purpose of receiving
payment of principal of and interest on such Notes and for all other purposes,
and neither the Trustee, any Agent nor the Company shall be affected by notice
to the contrary.

 

(vi)                              The
Trustee shall authenticate Global Notes and Definitive Notes in accordance with
the provisions of Section 2.02 hereof.

 

(vii)                           All
certifications, certificates and Opinions of Counsel required to be submitted
to the Registrar pursuant to this Section 2.08 to effect a registration of
transfer or exchange may be submitted by facsimile.

 

Section 2.09.        Replacement
Notes.

 

(a)           If
any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receives evidence to their satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by an Officer of the Company, shall authenticate a
replacement Note if the Trustee’s requirements are met.  If required by the Trustee or the Company, an
indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may
suffer if a Note is replaced.  The
Company and the Trustee may charge for their expenses in replacing a Note.

 

(b)           Every
replacement Note is an additional obligation of the Company and the Guarantors
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.

 

F-45

 

Section 2.10.        Outstanding
Notes.

 

(a)           The
Notes outstanding at any time are all the Notes authenticated by the Trustee
except for those cancelled by it, those delivered to it for cancellation, those
reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section 2.10
as not outstanding.  Except as set forth
in Section 2.11 hereof, a Note does not cease to be outstanding because the
Company, the Guarantors or any of their Affiliates holds the Note.  If a Note is replaced pursuant to Section
2.09 hereof, it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Note is held by a bona fide purchaser.

 

(b)           If
the principal amount of any Note is considered paid under Section 4.01 hereof,
it ceases to be outstanding and interest on it ceases to accrue.

 

(c)           If
the Paying Agent (other than the Company, the Guarantors, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.

 

Section 2.11.        Treasury
Notes.

 

In determining whether
the Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by the Company, the Guarantors or any
of their respective Affiliates shall be considered as though not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes shown
on the Trustee’s register as being so owned shall be so disregarded.

 

Section 2.12.        Temporary
Notes.

 

Until certificates
representing Notes are ready for delivery, the Company may prepare and the
Trustee shall authenticate temporary Notes upon a written order of the Company
signed by an Officer of the Company. 
Temporary Notes shall be substantially in the form of certificated Notes
but may have variations that the Company considers appropriate for temporary
Notes.  Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate Definitive Notes in
exchange for temporary Notes.  Holders of
temporary Notes shall be entitled to all of the benefits of this Indenture.

 

Section 2.13.        Cancellation.

 

The Company at any time
may deliver to the Trustee for cancellation any Notes previously authenticated
and delivered hereunder or which the Company may have acquired in any manner
whatsoever, and all Notes so delivered shall be promptly cancelled by the
Trustee.  All Notes surrendered for
registration of transfer, exchange or payment, if surrendered to any Person
other than the Trustee, shall be delivered to the Trustee.  The Trustee and no one else shall cancel all
Notes surrendered for registration of transfer, exchange, payment, replacement
or cancellation and shall destroy cancelled Notes (subject to the record
retention requirement of the Exchange Act). 
Upon request, certification of the destruction of all cancelled Notes
shall be

 

F-46

 

delivered to the Company.  The
Company may not issue new Notes to replace Notes that it has paid or that have
been delivered to the Trustee for cancellation.

 

Section 2.14.        Defaulted
Interest.

 

If the Company defaults
in a payment of interest on the Notes, it shall pay the defaulted interest in
any lawful manner plus, to the extent lawful, interest payable on the defaulted
interest, to the Persons who are Holders on a subsequent special record date,
which date shall be at the earliest practicable date but in all events at least
ten (10) Business Days prior to the payment date, in each case at the rate
provided in the Notes and in Section 4.01 hereof.  The Company shall fix or cause to be fixed
each such special record date and payment date, and shall promptly thereafter,
notify the Trustee of any such date and of the amount of defaulted interest
proposed to be paid on each Note.  At
least fifteen (15) days before the special record date, the Company (or, upon
the written request of the Company, the Trustee, in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that
states the special record date, the related payment date and the amount of such
interest to be paid.

 

Section 2.15.        Record Date.

 

The Company may, but
shall not be obligated to, fix a record date for the purpose of determining the
Holders entitled to give their consent or take any other action required or
permitted to be taken pursuant to this Indenture.  If a record date is fixed, those Persons who
were Holders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. 
No such consent shall be valid or effective for more than 90 days after
such record date.

 

Section 2.16.        Computation
Of Interest.

 

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

 

Section 2.17.        CUSIP
Number.

 

The Company in issuing
the Notes may use a “CUSIP” number (if then generally in use), and if it does
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes and that reliance may be placed
only on the other identification numbers printed on the Notes, and that any
such redemption or exchange will not be affected by any defect in or omission
of such numbers.  The Company shall
promptly notify the Trustee of any change in the CUSIP number.

 

Section 2.18.        Additional
Notes.

 

(a)           The
Company may, from time to time, in each case in a minimum aggregate principal
amount of $10.0 million, subject to compliance with any applicable provisions
of this Indenture, without the consent of the Holders, create and issue
pursuant to this Indenture Additional Notes,

 

F-47

 

if the Company’s Consolidated Cash Flow for the
Company’s most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
Additional Notes are issued is greater than $75.0 million.  Additional Notes issued pursuant to this Section
2.18 shall have terms and conditions identical to those of the Notes
issued on the Issue Date, except with respect to:

 

(i)                                     the
date of issuance;

 

(ii)                                  the
amount of interest payable on the first interest payment date;

 

(iii)                               issue
price; and

 

(iv)                              any
adjustments in order to conform to and ensure compliance with the Securities
Act (or other applicable securities laws).

 

The Notes issued on the
Issue Date and any Additional Notes shall be treated as a single class for all
purposes under this Indenture.  The
aggregate principal amount of Notes and Additional Notes that may be issued under this Indenture is limited to
$325.0 million.

 

(b)           With
respect to any Additional Notes, the Company will set forth in an Officer’s
Certificate pursuant to a resolution of the Board of Directors of the Company,
copies of which will be delivered to the Trustee, the following information:

 

(i)                                     the
aggregate principal amount of such Additional Notes to be authenticated and
delivered pursuant to this Indenture;

 

(ii)                                  the
issue price, the issue date and the CUSIP number of such Additional Notes; provided
that no Additional Notes may be issued at a price that would cause such
Additional Notes to have “original issue discount” within the meaning of
Section 1273 of the Internal Revenue Code of 1986, as amended; and

 

(iii)                               whether
such Additional Notes will be subject to transfer restrictions under the
Securities Act (or other applicable securities laws).

 

ARTICLE 3

REDEMPTION AND PREPAYMENT

 

Section 3.01.        Notices to
Trustee.

 

If the Company elects to
redeem Notes pursuant to the optional redemption provisions of Section 3.07
hereof, it shall furnish to the Trustee, at least 30 days but not more than 60
days before a redemption date (unless a shorter period is acceptable to the
Trustee) an Officer’s Certificate setting forth (a) the Section of this
Indenture pursuant to which the redemption shall occur, (b) the redemption
date, (c) the principal amount of Notes to be redeemed and (d) the
redemption price.

 

F-48

 

Section 3.02.        Selection of
Notes to be Redeemed or Purchased.

 

(a)           If
less than all of the Notes are to be redeemed or purchased in an offer to
purchase at any time, the Trustee shall select Notes for redemption or purchase
on a pro rata basis except (a)
if the Notes are listed on any national securities exchange, in compliance with
the requirements of the principal national securities exchange on which the
Notes are listed; or (b) if otherwise required by law.

 

(b)           In
the event of partial redemption or purchase by lot, the particular Notes to be
redeemed or purchased shall be selected, unless otherwise provided herein, not
less than 30 nor more than 60 days prior to the redemption or purchase date by
the Trustee from the outstanding Notes not previously called for redemption or
purchase.

 

(c)           The
Trustee shall promptly notify the Company in writing of the Notes selected for
redemption or purchase and, in the case of any Note selected for partial
redemption or purchase, the principal amount thereof to be redeemed or
purchased.  Notes and portions of Notes
selected shall be in amounts of $1,000 or whole multiples of $1,000; except
that if all of the Notes of a Holder are to be redeemed or purchased, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed or purchased. 
Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption or purchase also apply to
portions of Notes called for redemption or purchase.

 

Section 3.03.        Notice of
Redemption.

 

(a)           Subject
to the provisions of Section 3.09 and Section 4.13 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed by first class mail a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address, except that redemption
notices may be mailed more than 60 days prior to a redemption date if the
notice is issued in connection with a defeasance of the Notes or a satisfaction
and discharge of this Indenture pursuant to Article 8 or Article 13 of this
Indenture.

 

(b)           The
notice shall identify the Notes to be redeemed and shall state:

 

(i)                                     the
redemption date;

 

(ii)                                  the
redemption price;

 

(iii)                               if
any Note is being redeemed in part, the portion of the principal amount of such
Notes to be redeemed and that, after the redemption date, upon surrender of
such Note, a new Note or Notes in principal amount equal to the unredeemed
portion shall be issued upon cancellation of the original Note;

 

(iv)                              the name
and address of the Paying Agent;

 

(v)                                 that
Notes called for redemption must be surrendered to the Paying Agent to collect
the redemption price;

 

F-49

 

(vi)                              that,
unless the Company defaults in making such redemption payment, interest on
Notes called for redemption ceases to accrue on and after the redemption date;

 

(vii)                           the
paragraph of the Notes and/or section of this Indenture pursuant to which the
Notes called for redemption are being redeemed; and

 

(viii)                        that no
representation is made as to the correctness or accuracy of the CUSIP number,
if any, listed in such notice or printed on the Notes.

 

(c)           At
the Company’s request, the Trustee shall give the notice of redemption in the
Company’s name and at the Company’s expense; provided, however,
that the Company shall have delivered to the Trustee, at least 45 days prior to
the redemption date (or such shorter period as shall be acceptable to the
Trustee), an Officer’s Certificate requesting that the Trustee give such notice
and setting forth the information to be stated in the notice as provided in
Section 3.03(b).  The notice mailed in
the manner herein provided shall be conclusively presumed to have been duly
given whether or not the Holder receives such notice.  In any case, failure to give such notice by
mail or any defect in the notice to the Holder of any Note shall not affect the
validity of the proceeding for the redemption of any other Note.

 

Section 3.04.        Effect of
Notice of Redemption.

 

Except in connection with
a defeasance pursuant to Article 8 of this Indenture, at any time prior to
giving notice of redemption to the Holders pursuant to Section 3.03, the
Company may withdraw, revoke or rescind any notice of redemption delivered to
the Trustee without any continuing obligation to redeem the Notes.  Notwithstanding the foregoing, a notice of
redemption given to the Holders may not be conditional or subject to
revocation.

 

Section 3.05.        Deposit of
Redemption or Purchase Price.

 

(a)           On
or before 10:00 a.m. (New York City time) on each redemption date or the date
on which Notes must be accepted for purchase pursuant to Section 4.10 or
Section 4.13, the Company shall deposit with the Trustee or with the Paying
Agent money sufficient to pay the redemption or purchase price of and accrued
and unpaid interest on all Notes to be redeemed or purchased on that date.  The Trustee or the Paying Agent shall
promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption or purchase price of (including any applicable premium) and accrued
interest on all Notes to be redeemed or purchased.

 

(b)           If
the Company complies with the provisions of Section 3.05(a), on and after the
redemption or purchase date, whether or not such Notes are presented for
payment, interest shall cease to accrue on the Notes or the portions of Notes
called for redemption or purchase.  If a
Note is redeemed or purchased on or after an interest record date but on or
prior to the related interest payment date, then any accrued and unpaid
interest shall be paid to the Person in whose name such Note was registered at
the close of business on such record date. 
If any Note called for redemption or purchase is not so paid upon
surrender for redemption or purchase because of the failure of the Company to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption or purchase date until such principal is paid,
and to the

 

F-50

 

extent lawful on any interest not paid on such unpaid principal, in
each case at the rate provided in the Notes and in Section 4.01 hereof.

 

Section 3.06.        Notes
Redeemed or Purchased in Part.

 

Upon surrender of a Note
that is redeemed or purchased in part, the Company shall issue and, upon the
Company’s written request, the Trustee shall authenticate for the Holder at the
expense of the Company a new Note equal in principal amount to the unredeemed or
unpurchased portion of the Note surrendered.

 

Section 3.07.        Optional
Redemption.

 

(a)           Optional
Redemption.

 

(i)                                     Prior
to the date which is eighteen (18) months following the Closing Date, the
Company may redeem the Notes, at its option, in whole at any time or in part
from time to time, at a redemption price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date; provided,
however, the Company may, at its option at any time prior to such date,
irrevocably elect to terminate its right to redeem the Notes pursuant to this
clause (i) by delivering a written notice to the Trustee and upon delivering
such notice, the Initial Call Termination Date shall be deemed to have
occurred.

 

(ii)                                  Commencing
from the date which is the fifth anniversary of the Closing Date, the Company
may redeem the Notes, at its option, in whole at any time or in part from time
to time, at the following redemption prices, expressed as percentages of the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date, if redeemed during the twelve-month period commencing on the
anniversary of the Closing Date in any year set forth below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2009

  	
   

  	
  104.875

  	
  %

  
	
  2010

  	
   

  	
  102.438

  	
  %

  
	
  2011

  	
   

  	
  101.219

  	
  %

  
	
  2012 and
  thereafter

  	
   

  	
  100.0

  	
  %

  

 

(b)           Optional
Redemption upon a Change of Control. 
Upon the occurrence of a Change of Control, at any time after the
consummation of the Change of Control Offer in accordance with the provisions
of Section 4.13 and prior to the date which is fifty-four (54) months following
the Closing Date, the Company may redeem the Notes not tendered in the Change
of Control Offer, in whole at any time or in part from time to time, at the
Company’s option at a redemption price equal to 100% of the principal amount
thereof plus the excess of:

 

(i)                                      the
present value at such redemption date of (A) the redemption price of such Notes
on the date which is fifty-four (54) months following the Closing Date (as
determined pursuant to Section 3.07(a); plus (B) all

 

F-51

 

required remaining scheduled interest payments due on
such Notes through the date which is fifty-four (54) months following the
Closing Date, other than accrued interest to such redemption date, computed
using a discount rate equal to the Treasury Rate plus 75 basis points per annum
discounted on a semi-annual bond equivalent basis; over

 

(ii)                                   the
principal amount of such Notes on such redemption date; plus

 

accrued and unpaid
interest on such Notes to the redemption date. 
The Treasury Rate shall be calculated by the Company or on behalf of the
Company by such Persons as the Company shall designate (and will not be a duty
or obligation of the Trustee) on the third Business Day preceding the redemption
date and notice thereof shall promptly be given by the Company to the Trustee.

 

(c)           Optional
Redemption upon Equity Offerings.  At
any time prior to the third anniversary of the Initial Call Termination Date,
the Company may, at its option, use the net cash proceeds of one or more Equity
Offerings or a contribution to the common equity capital of the Company from
the net proceeds of one or more Equity Offerings by a direct or indirect parent
of the Company (in each case, other than Excluded Contributions and the net
proceeds of a sale of Designated Preferred Stock) to redeem up to 40% of the
aggregate principal amount of the Notes at a redemption price equal to 109.75%
of the principal amount thereof, plus accrued and unpaid interest thereon to the
date of redemption; provided that the Company shall make such redemption
not more than 90 days after the closing of such Equity Offering or equity
contribution.

 

Section 3.08.        Mandatory
Redemption.

 

Except as set forth under
Section 3.09, Section 4.10 and Section 4.13 hereof, the Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.

 

Section 3.09.        Asset Sale
Offers.

 

(a)           In
the event that the Company shall be required to commence an offer to all Holders
to repurchase Notes pursuant to Section 4.10 hereof (an “Asset Sale Offer”),
the Company shall follow the procedures specified below.

 

(b)           The
Asset Sale Offer shall be made to all Holders and if the Company elects (or is
required by the terms of other pari
passu Indebtedness), to all holders of other Indebtedness that is pari passu with the Notes.  The Asset Sale Offer shall remain open for a
period of at least 20 Business Days following its commencement and not more
than 30 Business Days, except to the extent that a longer period is required by
applicable law (the “Offer Period”).  No
later than five Business Days after the termination of the Offer Period (the “Purchase Date”), the Company shall
apply all Excess Proceeds (the “Offer
Amount”) to the purchase of Notes and such other pari passu Indebtedness, if any, required
to be purchased pursuant to Section 4.10 hereof, on a pro rata basis,
if applicable, or, if less than the Offer Amount has been tendered, all Notes
and other pari passu Indebtedness
tendered in response to the Asset Sale Offer. 
Payment for any Notes so purchased shall be made pursuant to Section
4.01 hereof.

 

F-52

 

(c)           If
the Purchase Date is on or after an interest record date and on or before the
related interest payment date, any accrued and unpaid interest shall be paid to
the Person in whose name a Note is registered at the close of business on such
record date, and no additional interest shall be payable to Holders who tender
Notes pursuant to the Asset Sale Offer.

 

(d)           Upon
the commencement of an Asset Sale Offer, the Company shall send, by first class
mail, a notice to the Trustee and each of the Holders, with a copy to the
Trustee.  The notice shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Asset Sale Offer.  The
notice, which shall govern the terms of the Asset Sale Offer, shall describe
the transaction or transactions giving rise to the Asset Sale Offer and shall
state:

 

(i)                                     that
the Asset Sale Offer is being made pursuant to this Section 3.09 and Section
4.10 hereof and the length of time the Asset Sale Offer shall remain open;

 

(ii)                                  the
Offer Amount, the purchase price and the Purchase Date;

 

(iii)                               that
any Note not tendered or accepted for payment shall continue to accrue
interest;

 

(iv)                              that,
unless the Company defaults in making such payment, any Note accepted for
payment pursuant to the Asset Sale Offer shall cease to accrue interest after
the Purchase Date;

 

(v)                                 that
Holders electing to have a Note purchased pursuant to an Asset Sale Offer may
elect to have Notes purchased in integral multiples of $1,000 only;

 

(vi)                              that
Holders electing to have Notes purchased pursuant to any Asset Sale Offer shall
be required to surrender the Note, with the form entitled “Option of Holder to
Elect Purchase” attached to the Notes completed, or transfer by book-entry
transfer, to the Company, the Depositary, or the Paying Agent at the address
specified in the notice at least three (3) Business Days before the Purchase
Date;

 

(vii)                           that
Holders shall be entitled to withdraw their election if the Company, the
Depositary or the Paying Agent, as the case may be, receives, not later than on
the expiration of the Offer Period, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Note the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;

 

(viii)                        that, if
the aggregate principal amount of Notes and other pari passu Indebtedness surrendered by holders thereof
exceeds the Offer Amount, the Company shall select the Notes and other pari passu Indebtedness to be purchased on
a pro rata basis based on the principal amount
of Notes and such other pari passu Indebtedness
surrendered (with such

 

F-53

 

adjustments as may be
deemed appropriate by the Company so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be purchased); and

 

(ix)                                that
Holders whose Notes were purchased only in part shall be issued new Notes equal
in principal amount to the unpurchased portion of the Notes surrendered (or
transferred by book-entry transfer).

 

(e)           On
or before the Purchase Date, the Company shall, to the extent lawful, accept
for payment, on a pro rata basis to the extent
necessary, Notes or portions thereof tendered pursuant to the Asset Sale Offer
in an aggregate principal amount up to and including the Offer Amount, or if
less than the Offer Amount has been tendered, all Notes tendered, and shall
deliver or cause to be delivered to the Trustee the Notes properly accepted
together with an Officer’s Certificate stating that such Notes or portions
thereof were accepted for payment by the Company in accordance with the terms
of this Section 3.09.  The Company, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five Business Days after the Purchase Date) mail or deliver
to each tendering Holder an amount equal to the purchase price of the Notes
tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written request
from the Company shall authenticate and mail or deliver (or cause to be
transferred by book entry) such new Note to such Holder, in a principal amount
equal to any unpurchased portion of the Note surrendered.  Any Note not so accepted by the Company shall
be promptly mailed or delivered by the Company to the Holder thereof.  The Company shall publicly announce the
results of the Asset Sale Offer on the Purchase Date.

 

(f)            Other
than as specifically provided in this Section 3.09, any purchase pursuant to
this Section 3.09 shall be made pursuant to the provisions of Section 3.01,
Section 3.02, Section 3.05 and Section 3.06 hereof.

 

ARTICLE 4

COVENANTS

 

Section 4.01.        Payment of
Notes.

 

(a)           The
Company shall pay or cause to be paid the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided in the
Notes.  Principal, premium, if any, and
interest shall be considered paid for all purposes hereunder on the date due if
the Paying Agent if other than the Company, the Guarantors or a Subsidiary of the
Company holds, as of 10:00 a.m. (New York City time) money deposited by or on
behalf of the Company in immediately available funds and designated for and
sufficient to pay all such principal, premium, if any, and interest then due.

 

(b)           The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal at the rate equal to 1% per
annum in excess of the then applicable interest rate on the Notes to the extent
lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.

 

F-54

 

Interest on the Notes shall accrue from the date of original issuance
or, if interest has already been paid, from the date it was most recently paid.
Interest shall be computed on the basis of a 360-day year comprised of twelve
30-day months.

 

Section 4.02.        Maintenance
of Office or Agency.

 

(a)           The
Company shall maintain in the Borough of Manhattan, the City of New York an
office or agency (which may be an office of the Trustee or an Affiliate of the
Trustee or Registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Company
in respect of the Notes and this Indenture may be served.  The Company shall give prompt written notice
to the Trustee of the location, and any change in the location, of such office
or agency.  If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.

 

(b)           The
Company may also from time to time designate one or more other offices or
agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. 
The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.

 

(c)           The
Company hereby designates the office of U.S. Bank Trust National Association,
100 Wall Street, 16th Floor, in the Borough of Manhattan, City of
New York, as one such office or agency of the Company in accordance with
Section 2.03 hereof.

 

Section 4.03.        Commission
Reports.

 

(a)           Whether
or not required by the rules and regulations of the Commission, so long as any Notes
are outstanding, the Company shall be required to file with the Commission and
shall furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K, including a “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” that describes the
financial condition and results of operation of the Company and its
consolidated Subsidiaries and, with respect to the annual information only, a
report on the Company’s consolidated financial statements by the Company’s
certified independent accountants and (ii) all current reports Form 8-K,
in each case within the time periods set forth in the Commission’s rules and
regulations.

 

(b)           In
addition, the Company and the Guarantors have agreed that, for so long as any
Notes remain outstanding, at any time
when the Company is not current in its reporting obligations or the Commission
does not accept the filings provided for in Section 4.03(a), they shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act. 
The financial information to be distributed to Holders of Notes shall be
filed with

 

F-55

 

the Trustee and mailed to the Holders at their addresses appearing in
the register of Notes maintained by the Registrar, within 90 days after the end
of the Company’s fiscal years and within 45 days after the end of each of the
first three quarters of each such fiscal year.

 

(c)           The
Company shall provide the Trustee with a sufficient number of copies of all
reports and other documents and information and, if requested by the Company
and at the Company’s expense, the Trustee will deliver such reports to the
Holders under this Section 4.03.

 

(d)           Notwithstanding
the foregoing, the availability of the foregoing materials on either the
Commission’s Electronic Data Gathering, Analysis and Retrieval System (or any
successor system) or on the Company’s website, as the case may be, will be
deemed to satisfy the Company’s delivery obligations.

 

Section 4.04.        Compliance
Certificate.

 

(a)           The
Company and each Guarantor shall deliver to the Trustee, within 105 days after
the end of each fiscal year, an Officer’s Certificate stating that a review of
the activities of the Company, and the Company’s Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether each has kept, observed, performed
and fulfilled its obligations under this Indenture, and further stating, as to
each such Officer signing such certificate, that, to the best of his or her knowledge,
each entity has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and
that, to the best of his or her knowledge, no event has occurred and remains in
existence by reason of which payments on account of the principal of, premium
or interest on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.

 

(b)           The
Company shall, so long as any of the Notes are outstanding, deliver to the
Trustee, forthwith upon any Officer becoming aware of any Default or Event of
Default, an Officer’s Certificate specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.

 

Section 4.05.        Taxes.

 

The Company shall pay,
and shall cause each of its Subsidiaries to pay, prior to delinquency all
material taxes, assessments and governmental levies, except such as are
contested in good faith and by appropriate proceedings or where the failure to
effect such payment is not adverse in any material respect to the Holders.

 

Section 4.06.        Stay, Extension and Usury Laws.

 

The Company and each Guarantor
covenant (to the extent that they may lawfully do so) that they shall not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law wherever enacted, now
or at any time

 

F-56

 

hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Company and each Guarantor (to the extent that they may
lawfully do so) hereby expressly waive all benefit or advantage of any such
law, and covenant that they shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.

 

Section 4.07.        Restricted
Payments.

 

(a)           The
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly take any of the following actions (each, a “Restricted
Payment”):

 

(i) declare
or pay any dividend or make any other payment or distribution on account of the
Company’s or any of its Restricted Subsidiaries’ Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company or
any of its Restricted Subsidiaries), other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or dividends or distributions payable to the Company or any Wholly
Owned Subsidiary of the Company or payments of cash interest on Subordinated
Shareholder Funding;

 

(ii) purchase,
redeem, retire or otherwise acquire for value (including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests or
Subordinated Shareholder Funding of the Company held by any Person (other than a Restricted Subsidiary), including in
connection with any merger or consolidation and including the exercise of any
option to exchange any Equity Interests (other than into Equity Interests of
the Company that do not constitute Disqualified Stock);

 

(iii) make
any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is subordinated to the Notes or any Note Guarantee (excluding any
intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries), except (A)
a payment of interest or principal at the Stated Maturity thereof or (B) the purchase, repurchase or other
acquisition of any such subordinated Indebtedness in anticipation of satisfying
a sinking fund obligation, principal installment or payment at final maturity,
in each case within one year of the date of acquisition; or

 

(iv) make
any Restricted Investment, unless, at the time of and immediately after giving
effect to such Restricted Payment:

 

(A)                             no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence of such Restricted Payment;

 

(B)                               the
Company would, at the time of such Restricted Payment and after giving pro
forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00

 

F-57

 

of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in Section 4.09(a); and

 

(C)                               such
Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Company and its Restricted Subsidiaries after the Effective
Date (excluding Restricted Payments permitted by clauses (ii), (iii), (iv),
(v), (vi), (vii), (viii), (ix), (x), (xii), (xiii), (xiv), (xv), (xvi), (xvii),
(xviii), (xix), (xx), (xxi), (xxii), (xxiii) and (xxiv) of Section 4.07(b)), is less than the sum (without
duplication) of:

 

(1)          50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the fiscal quarter which
includes the Effective Date to the end of the Company’s most recently ended fiscal
quarter for which internal financial statements are available at the time of
such Restricted Payment (or, if such Consolidated Net Income for such period is
a loss, less 100% of such loss), plus

 

(2)          100% of the aggregate
Qualified Proceeds received by the Company since the Effective Date as a
contribution to its common equity or from the issue or sale of Equity Interests
of the Company (other than Disqualified Stock, Excluded Contributions and the
net proceeds from a sale of Designated Preferred Stock) or from Subordinated
Shareholder Funding (to the extent not designated as an Excluded Contribution)
subsequent to the Effective Date or from the
issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt securities
of the Company that have been converted into or exchanged for such Equity
Interests (other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of the Company), plus

 

(3)          100% of the aggregate Qualified Proceeds from (x) the sale or other
disposition (other than to the Company or a Restricted Subsidiary) of any Restricted
Investment that was made after the Effective Date and (y) repurchases,
redemptions and repayments of such Restricted Investments and the receipt of
any dividends or distributions from such Restricted Investments, plus

 

(4)          to the extent that any Unrestricted Subsidiary of the Company designated as
such after the Effective Date is redesignated as a Restricted Subsidiary after
the Effective Date, the Fair Market
Value of the Company’s Investment in such Subsidiary as of the date of such
redesignation, plus

 

(5)          in the event the Company and/or any Restricted Subsidiary of the Company
makes any Investment in a Person that, as a result of or in connection with
such Investment, becomes a Restricted Subsidiary of the Company, an amount
equal to the existing Investment of the Company and/or any of its Restricted
Subsidiaries in such Person that was previously treated as a Restricted
Payment, plus

 

F-58

 

(6)          (x) $10.0 million prior
to the date which is eighteen (18) months following the Closing Date and (y)
thereafter $25.0 million.

 

(b)           The provisions of
Section 4.07(a) will not prohibit:

 

(i)                                     the payment of any
dividend or other distribution or the
consummation of any irrevocable redemption within 60 days after the date
of declaration of the dividend or giving
of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with
the provisions of this Indenture;

 

(ii)                                  the making of any Restricted Payment in
exchange for, or out of net cash proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of the Company) of, Equity Interests of
the Company (other than Disqualified Stock) or from the substantially
concurrent contribution of common equity capital to the Company, provided
that the amount of any such net cash proceeds that are utilized for any such
Restricted Payment will be excluded from clause (C)(2) of Section
4.07(a)(iv);

 

(iii)                               the
defeasance, redemption, repurchase, retirement or other acquisition for value of any Indebtedness of the
Company or any Guarantor that is contractually subordinated to the Notes or any
Note Guarantee with the net cash proceeds from a substantially concurrent
incurrence of Permitted Refinancing Indebtedness;

 

(iv)                              the declaration and payment of any regularly scheduled or accrued dividends to holders of any class or series of
Disqualified Stock of the Company or any Restricted Subsidiary of the Company
issued on or after the Effective Date in accordance with the provisions of Section
4.09;

 

(v)                                 the repurchase, redemption or other acquisition
or retirement for value of Disqualified Stock of the Company or any Restricted
Subsidiary of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of Replacement Preferred Stock that is permitted
to be incurred in accordance with the provisions of Section 4.09;

 

(vi)                              the payment of any dividend or other distributions to holders of any class
or series of Designated Preferred Stock (other than Disqualified Stock) issued
by the Company after the Effective Date;

 

(vii)                           the payment of any dividend (or any similar distribution)
by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis;

 

(viii)                        the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary of the Company,
held by any current or former officer,
director, employee or consultant of the Company or any of its Restricted
Subsidiaries, and any

 

F-59

 

dividend payment or other
distribution by the Company or any of its Restricted Subsidiaries to a
direct or indirect parent holding company of the Company utilized for the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of such direct or indirect parent holding company held by any current or former
officer, director, employee or consultant of the Company or any of its
Restricted Subsidiaries, in each case, pursuant to any equity subscription agreement, stock
option agreement, shareholders’ agreement
or similar agreement or benefit plan of any kind; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests may not exceed $7.5
million in any fiscal year (it being understood, however, that any unused
amounts permitted to be paid pursuant to this clause are available to be
carried over to subsequent fiscal years); provided, however,
notwithstanding clause (C) of Section 4.07(a)(iv), the amount of any such
Restricted Payments made prior to the Initial Call Termination Date will be
included in the calculation of the amount of Restricted Payments; provided,
further, that such amount in any fiscal year may be increased by an
amount not to exceed:

 

(A)                              the cash proceeds from the sale of Equity
Interests of the Company and, to the extent contributed to the Company as
common equity capital, Equity Interests of the Company’s direct or indirect
parent entities, in each case to members of management, directors or
consultants of the Company, and any of its Subsidiaries or any of its direct or
indirect parent entities that occurs after the Effective Date, to the extent
the cash proceeds from the sale of such Equity Interests have not otherwise
been applied to the payment of Restricted Payments by virtue of clause (C)(2)
of Section 4.07(a)(iv), and excluding Excluded Contributions plus

 

(B)                                the
cash proceeds of key man life insurance policies received by the Company and
its Restricted Subsidiaries after the Effective Date; provided, however,
such proceeds are used to repurchase, redeem, acquire or retire for value
Equity Interests of the Company or any of its Restricted Subsidiaries held by
(1) the estate, executors, administrators, testamentary trustees, legatees or
beneficiaries of any such officer, director, employee or consultant of the
Company or any of its Restricted Subsidiaries or (2) any trust or custodianship
a beneficiary of which was such officer, director, employee or consultant of
the Company or any of its Restricted Subsidiaries or any such Person’s spouse
or lineal descendants (by blood or adoption), less

 

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

 

F-60

 

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

 

(ix)                                the
repurchase of Equity Interests deemed to occur upon the exercise of options,
rights or warrants to the extent such Equity Interests represent a portion of
the exercise price of those options, rights or warrants;

 

(x)                                   the
repurchase, redemption, defeasance or other acquisition or retirement for value
of Indebtedness of the Company or any Guarantor that is contractually
subordinated to the Notes or to the Note Guarantees with any Excess Proceeds
that remain after consummation of an Asset Sale Offer;

 

(xi)                                so
long as no Default has occurred and is continuing or would be caused thereby,
after the occurrence of a Change of Control and within 60 days after the
completion of the offer to repurchase the Notes pursuant to Section 4.13 of
this Indenture (including the purchase of the Notes tendered), any purchase or
redemption of Indebtedness that is contractually subordinated to the Notes or
to the Note Guarantees required pursuant to the terms thereof as a result of
such Change of Control at a purchase or redemption price not to exceed 101% of
the outstanding principal amount or accreted value thereof, plus any accrued
and unpaid interest; provided, however, that the Company would be
able to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in Section 4.09(a) after giving pro forma
effect to such Restricted Payment;

 

(xii)                             cash
payments in lieu of fractional shares issuable as dividends on preferred stock
or upon the conversion of any convertible debt securities of the Company or any
of its Restricted Subsidiaries;

 

(xiii)                          so long
as no Default has occurred and is continuing or would be caused thereby, the
payment:

 

(A)                              by
the Company or any Restricted Subsidiary of the Company to any direct or
indirect parent of the Company, which payment is used by the Person receiving
such payment, following the first initial public offering of common Equity
Interests by such Person, to pay dividends of up to 6% per annum of the net
proceeds received by such Person in such public offering that are contributed
to the Company as common equity capital, or

 

F-61

 

(B)                                by
the Company, following the first initial public offering of common Equity
Interests by the Company, to pay dividends of up to 6% per annum of the net
proceeds received by the Company in such public offering,

 

(excluding, in the case
of both clause (A) and clause (B), public offerings of common Equity Interests
registered on Form S-8 and any other public sale to the extent the proceeds
thereof are Excluded Contributions);

 

(xiv)                         Investments that are made with Excluded
Contributions;

 

(xv)                            Distributions or payments of Receivables Fees;

 

(xvi)                         so long
as no Default or Event of Default will have occurred and be continuing,
payments required to be made under the Tax Sharing Agreement;

 

(xvii)                      so long as
no Default or Event of Default will have occurred and be continuing, payments
of cash dividends or the making of loans or advances to a direct or indirect
parent of the Company not to exceed $1.0 million in any fiscal year for costs
and expenses incurred by such direct or indirect parent of the Company in its
capacity as a holding company or for services rendered by such direct or
indirect parent of the Company on behalf of the Company;

 

(xviii)                   so long as no
Default or Event of Default will have occurred and be continuing, payments of
cash dividends to a direct or indirect parent of the Company in order to enable
such direct or indirect parent of the Company to make payments of interest
required to be made in respect of the Existing Debentures in accordance with
the terms thereof in effect on the Effective Date;

 

(xix)                           so long as no Default or Event of Default will
have occurred and be continuing, payments of cash dividends to a direct or
indirect parent of the Company in order to enable such direct or indirect
parent of the Company to defease, redeem, repurchase or retire the Existing
Debentures;

 

(xx)                              so long as no Default or Event of Default will have occurred and be
continuing, payments of cash dividends to a direct or indirect parent of the
Company in order to enable such direct or indirect parent of the Company to
make payments of interest required to be made in respect of the Senior Discount
Contingent Principal Notes;

 

(xxi)                           so long as no Default or Event of Default will
have occurred and be continuing, payments of cash dividends to a direct or
indirect parent of the Company in order to enable such direct or indirect
parent of the Company to defease, redeem, repurchase or retire the Senior
Discount Contingent Principal Notes;

 

F-62

 

(xxii)                        so long as
no Default or Event of Default will have occurred and be continuing, payments
of cash dividends to a direct or indirect parent of the Company, from Net Cash
Proceeds from Asset Sales remaining after the application thereof as required
by the provisions of Section 4.10 (including after making any Asset Sale Offer
required to be made pursuant to Section 4.10 and the application of the entire
Offer Amount to purchase all Notes tendered pursuant to such Asset Sale Offer)
in an aggregate principal amount not to exceed $25.0 million;

 

(xxiii)                     payments of
cash dividends to any direct or indirect parent of the Company in order to pay
any out-of-pocket expenses or charges for such period relating to any offering
of Equity Interests by any direct or indirect parent of the Company, any Asset
Sale, Investment or merger, recapitalization or acquisition transactions made
by any direct or indirect parent of the Company, or any Indebtedness incurred
by any direct or indirect parent of the Company (in each case, whether or not
successful); and

 

(xxiv)                    purchases of
shares of Capital Stock for contribution to an employee stock ownership plan of
the Company or the direct or indirect parent company of the Company not in
excess of (A) $5.0 million in the aggregate prior to the Initial Call
Termination Date and (B) thereafter $15.0 million in the aggregate.

 

(c)           The
Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default or an
Event of Default.  For purposes of making
such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under Section 4.07(a).  All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the greater of
(i) the net book value of such Investments at the time of such designation
and (ii) the Fair Market Value of such Investments at the time of such
designation.  Such designation will only
be permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.

 

(d)           The amount of all
Restricted Payments (other than cash) shall be the Fair Market Value on the
date of the Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or such Restricted Subsidiary, as the case
may be, pursuant to the Restricted Payment.  The Fair Market Value of any assets or
securities that are required to be valued by Section 4.07 shall be determined
by the Board of Directors whose resolution with respect thereto shall be
delivered to the Trustee.

 

(e)           For purposes of determining compliance with the provisions of this Section
4.07, in the event that a Restricted Payment meets the criteria of more than
one of the types of Restricted Payments described in clauses (i) through (xxiv)
above or is entitled to be made pursuant to Section 4.07(a), the Company, in
its sole discretion, may classify such Restricted Payment on the

 

F-63

 

date of such Restricted Payment or later
reclassify all or a portion of such Restricted Payment, in any manner that
complies with this covenant.  Restricted
Payments permitted by this Section 4.07 need not be permitted solely by
reference to one provision permitting such Restricted Payments but may be
permitted in part by one such provision and in part by one or more other
provisions of this covenant permitting such Restricted Payments.

 

Section 4.08.        Dividends and
Other Payment Restrictions Affecting Restricted Subsidiaries.

 

The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance
or restriction on the ability of any Restricted Subsidiary to:

 

(a)           (i) pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits or (ii) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries;

 

(b)           make
loans or advances to the Company or any of its Restricted Subsidiaries; or

 

(c)           sell, lease or transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:

 

(i)                                     agreements governing Existing Indebtedness and
Credit Facilities as in effect on the Effective Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of those agreements, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are not materially more restrictive,
taken as a whole, with respect to dividend and other payment
restrictions contained in those agreements on the Effective Date;

 

(ii)                                  the
Indenture, the Notes and the Note Guarantees;

 

(iii)                               applicable
law or any applicable rule, regulation, order or governmental permit or
concession;

 

(iv)                              any
agreement or instrument governing Indebtedness or Capital Stock of a Restricted
Subsidiary acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such agreement or
instrument was created or entered into in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person or
any of its Subsidiaries, so acquired, provided that in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Indenture to be incurred;

 

F-64

 

(v)                                 customary
non-assignment provisions in contracts
and licenses entered into in the ordinary course of business;

 

(vi)                              customary restrictions in leases (including
capital leases), security agreements or mortgages or other purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions on the property
purchased or leased of the nature described in clause (iii) above;

 

(vii)                           any
Purchase Money Note, or other Indebtedness or contractual requirements incurred
with respect to a Qualified Receivables Transaction relating to a Receivables
Subsidiary;

 

(viii)                        Permitted
Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained
in the agreements governing the Indebtedness being refinanced;

 

(ix)                                any agreement for the sale or other disposition of all or substantially all
the Capital Stock or the assets of a Restricted Subsidiary that restricts
distributions by that Restricted Subsidiary pending the sale or other
disposition;

 

(x)                                   Liens permitted to be incurred under the
provisions of Section 4.12 that limit the right of the debtor to dispose of the
assets subject to such Liens;

 

(xi)                                provisions limiting the disposition or distribution of assets or property
in joint venture agreements, asset sale agreements, sale-leaseback agreements,
stock sale agreements and other similar agreements, which limitation is
applicable only to the assets that are the subject of such agreements;

 

(xii)                             restrictions on cash or other deposits or net
worth imposed by customers under contracts entered into in the ordinary course
of business;

 

(xiii)                          customary provisions imposed on the transfer of
copyrighted or patented materials;

 

(xiv)                         customary provisions restricting dispositions
of real property interests set forth in any reciprocal easement agreements of
the Company or any Restricted Subsidiary;

 

(xv)                            contracts entered into in the ordinary course of business, not relating to
any Indebtedness, and that do not, individually or in the aggregate, detract
from the value of property or assets of the Company or any Restricted
Subsidiary of the Company in any manner material to the Company or any
Restricted Subsidiary of the Company; and

 

F-65

 

(xvi)                         restrictions on the transfer of property or
assets required by any regulatory authority having jurisdiction over the
Company or any Restricted Subsidiary of the Company or any of their businesses.

 

Section 4.09.        Incurrence
of Indebtedness and Issuance of Preferred Stock.

 

(a)           Except
as otherwise provided in this Section 4.09, the Company shall not, and shall
not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively, “incur”)
any Indebtedness (including Acquired Debt) and the Company shall not issue any
Disqualified Stock and shall not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the
Company or any of its Restricted Subsidiaries may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock or preferred stock if the Fixed Charge Coverage Ratio for the
Company’s most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or such preferred stock is issued, as the case may be, would have been at
least 2.0 to 1.0, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom as determined in good faith by the
chief financial officer of the Company in an Officer’s Certificate) as if the
additional Indebtedness had been incurred, or the Disqualified Stock or the preferred stock had been issued,
as the case may be, at the beginning of such four-quarter period.

 

(b)           Except
as otherwise provided in Section 4.09(c), the provisions of Section 4.09(a)
will not apply to the incurrence of any of the following items of Indebtedness or the issuance of any of the following items
of Disqualified Stock or preferred stock (collectively, “Permitted Debt”):

 

(i)                                     the incurrence by the Company and/or its Restricted Subsidiaries (and the Guarantee thereof by the Guarantors
and the Non-Guarantor Subsidiaries) of Indebtedness under the Credit
Facilities; provided that the aggregate principal amount of all
Indebtedness (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of the Company and its Restricted
Subsidiaries thereunder) outstanding under all Credit Facilities after giving
effect to such incurrence, including all Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this
clause (i), does not exceed (A) an amount equal to $250.0 million prior to
the Initial Call Termination Date and thereafter (B) the greater of (x) $250.0
million and (y) 85% of the total tangible assets of the Company and its
Restricted Subsidiaries on a consolidated basis as of the end of the most
recently completed fiscal quarter prior to such incurrence, as determined in
accordance with GAAP, in each case, less the aggregate principal amount of all
principal payments thereunder constituting permanent reductions of such
Indebtedness pursuant to and in accordance with Section 4.10;

 

F-66

 

(ii)                                  the incurrence by the Company and those
Restricted Subsidiaries that are Guarantors of Indebtedness in respect
of the Notes, replacement Notes, if any, and the Note Guarantees;

 

(iii)                               the
incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
(including Capital Lease
Obligations, mortgage financings,
Attributable Debt arising out of sale and leaseback transactions or purchase
money obligations), Disqualified Stock or preferred stock, in each case (x)
incurred for the purpose of financing all or any part of the purchase price or
cost of design, construction, lease, installation or improvements of
property, plant or equipment used or useful in the business of the
Company or such Restricted Subsidiary, or (y) otherwise constituting
Attributable Debt arising out of sale and leaseback transactions, in an
aggregate principal amount not to exceed (A) $20.0 million at any time
outstanding prior to the Initial Call Termination Date and (B) thereafter $30.0
million at any time outstanding;

 

(iv)                              the incurrence by the Company and its
Restricted Subsidiaries of Existing
Indebtedness;

 

(v)                                 the
incurrence by the Company or any of its Restricted Subsidiaries of Permitted
Refinancing Indebtedness or Replacement
Preferred Stock in exchange for, or the net proceeds of which are used
to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) or any Disqualified Stock
or preferred stock that was permitted by this Indenture to exist or be
incurred;

 

(vi)                              the
incurrence by the Company or any of its
Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that
(1) if the Company or any Restricted Subsidiary that is a Guarantor is the
obligor on such Indebtedness and the payee is not the Company or such
Guarantor, such Indebtedness is expressly subordinated to the prior payment in
full in cash of all Obligations then due with
respect to the Notes, in the case of the Company, or the Note Guarantees, in
the case of such Guarantor, and (2) (x) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being held
by a Person other than the Company or a Restricted Subsidiary of the Company
and (y) any sale or other transfer of any such Indebtedness to a Person
that is not either the Company or a Restricted Subsidiary of the Company shall
be deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary,
as the case may be, which new incurrence
is not permitted by this clause (vi);

 

(vii)                           the issuance by any of the Company’s Restricted
Subsidiaries to the Company or to any of its Restricted Subsidiaries of shares
of preferred stock; provided, however, that (1) any subsequent
issuance or transfer of

 

F-67

 

Equity Interests that results
in any such preferred stock being held by a Person other than the Company or a
Restricted Subsidiary of the Company and (2) any sale or other transfer of any
such preferred stock to a Person that is not either the Company or a Restricted
Subsidiary of the Company will be deemed, in each case, to constitute a new
issuance of such preferred stock by such Restricted Subsidiary, which new
issuance is not permitted by this clause (vii);

 

(viii)                        the
incurrence by the Company or any of the Restricted Subsidiaries of Hedging
Obligations in the ordinary course of business;

 

(ix)                                the
guarantee: (1) by the Company or any Restricted Subsidiary of the Company of
Indebtedness of the Company or any
Restricted Subsidiary of the Company that was permitted to be incurred by
another provision of this covenant; provided
that if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes, then the guarantee shall be
subordinated or pari passu, as applicable, to the
same extent as the Indebtedness guaranteed and (2) by any Non-Guarantor
Subsidiary of Indebtedness of a Non-Guarantor Subsidiary;

 

(x)                                   the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness in respect of workers’
compensation claims, self-insurance obligations, bankers’ acceptances, letters of credit, performance, surety bonds, appeal bonds or other similar
bonds and completion guarantees provided by the Company or a Restricted
Subsidiary in the ordinary course of business;

 

(xi)                                Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is
extinguished within five Business Days of incurrence;

 

(xii)                             the incurrence of Indebtedness arising
from Guarantees of Indebtedness of the Company or any Restricted Subsidiary or the agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price, holdback, contingency payment
obligations or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or Capital Stock of the Company or any Restricted Subsidiary; provided that the maximum aggregate
liability in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;

 

(xiii)                          the incurrence of Indebtedness resulting from
endorsements of negotiable instruments for collection in the ordinary course of
business;

 

F-68

 

(xiv)                         Indebtedness
(which may include Disqualified Stock or preferred stock) of Persons that are
acquired by the Company or any Restricted Subsidiary (including by way of
merger or consolidation) in accordance with the terms of this Indenture; provided
that such Indebtedness, Disqualified Stock or preferred stock is not incurred
in contemplation of such acquisition or merger; and provided, further,
that after giving effect to such acquisition or merger, either (A) the Company
would be permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio or (B) the Company’s Fixed Charge Coverage
Ratio after giving pro forma effect to such acquisition or merger would be
greater than the Company’s actual Fixed Charge Coverage Ratio immediately prior
to such acquisition or merger;

 

(xv)                            Indebtedness of the Company or a Restricted
Subsidiary in respect of netting services, overdraft protection and otherwise
in connection with deposit accounts; provided that such Indebtedness
remains outstanding for ten Business Days or less;

 

(xvi)                         the
incurrence by a Receivables Subsidiary of Indebtedness in a Qualified
Receivables Transaction;

 

(xvii)                      the incurrence by the Company of Additional
Notes pursuant to Section 2.18;

 

(xviii)                   the incurrence by the Company of Indebtedness
consisting of Subordinated Shareholder Funding; and

 

(xix)                           the
incurrence or issuance by the
Company or any Restricted Subsidiary of additional Indebtedness, Disqualified Stock or preferred stock
in an aggregate principal amount (or
accreted value or liquidation preference, as applicable) at any time
outstanding, including all Permitted
Refinancing Indebtedness and all Replacement Preferred Stock incurred to
renew, refund, refinance, replace, defease or discharge any such
Indebtedness, Disqualified Stock and
preferred stock incurred or issued
pursuant to this clause (xix), not to exceed (A) $15.0 million prior to
the Initial Call Termination Date and (B) thereafter $40.0 million.

 

(c)           Notwithstanding
the provisions of Section 4.09(a) and Section 4.09(b), prior to the date which
is eighteen (18) months following the Closing Date, neither the Company nor any
Restricted Subsidiary of the Company shall incur any Senior Debt if, at the
time of the incurrence of such Senior Debt, the Company’s Consolidated Total
Indebtedness to Consolidated Cash Flow Ratio (after giving a pro forma effect
thereto) would have been greater than 3.75 to 1.00; provided, however,
that this Section 4.09(c) shall not apply to:

 

(i)                                     the
incurrence by the Company or any Restricted Subsidiary of the Company of Senior
Debt otherwise permitted to be incurred under the Congress Credit Facility; and

 

F-69

 

(ii)                                  the
incurrence by the Company or any Restricted Subsidiary of the Company of
Indebtedness otherwise permitted to be incurred under clause (viii), (ix), (x), (xi), (xii), (xiii), (xv)
or (xvi) of Section 4.09(b).

 

(d)           Notwithstanding
the provisions of Section 4.09(a), prior to the Initial Call Termination Date,
neither the Company nor any Restricted Subsidiary of the Company shall incur
any Indebtedness permitted to be incurred pursuant to Section 4.09(a) if, at the
time of the incurrence of such Indebtedness, the Company’s Consolidated Total
Indebtedness to Consolidated Cash Flow Ratio (after giving a pro forma effect
thereto) would have been greater than 3.75 to 1.00.

 

(e)           For
purposes of determining compliance with this covenant, in the event that an
item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xix) above or is entitled
to be incurred pursuant to Section 4.09(a), the Company may, in its sole
discretion, classify such item of Indebtedness on the date of its incurrence,
or later reclassify all or a portion of such item of Indebtedness, in any
manner that complies with this covenant. 
Indebtedness permitted by this Section 4.09 need not be permitted solely
by reference to one provision permitting such Indebtedness but may be permitted
in part by one such clause and in part by one or more other provisions of this
Section 4.09 permitting such Indebtedness. 
The outstanding principal amount of any particular Indebtedness shall be
counted only once and any obligations arising under any Guarantee, Lien, letter
of credit or similar instrument supporting such Indebtedness shall not be
double counted.  The accrual of interest, the accretion or amortization of original
issue discount, the payment of interest
on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of
preferred stock as Indebtedness due to a change in accounting principles, and
the payment of dividends on Disqualified Stock or preferred stock in the form
of additional shares of the same class of Disqualified Stock or preferred stock
will not be deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Stock or preferred stock for purposes of this Section 4.09; provided that, in each such case, the
amount thereof is included in Fixed Charges of the Company as accrued (other
than the reclassification of preferred stock as Indebtedness due to a change in
accounting principles).

 

(f)            The amount of any Indebtedness outstanding on
any date will be (1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; (2) the principal amount of
the Indebtedness, in the case of any other Indebtedness; and (3) in respect of
Indebtedness of another Person secured by a Lien on the assets of the specified
Person, the lesser of (x) the Fair Market Value of such assets at the date of
determination and (y) the amount of the Indebtedness of the other Person.

 

Section 4.10.        Asset Sales.

 

(a)           The
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:

 

(i)                                     the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of the Asset Sale at least equal to the Fair Market

 

F-70

 

Value of the assets or Equity Interests issued or sold
or otherwise disposed of; and

 

(ii)                                  at
least 75% of the consideration received in the Asset Sale by the Company or
such Restricted Subsidiary is in the form of cash.  For purposes of this provision, each of the
following shall be deemed to be cash:

 

(A)                              Cash
Equivalents;

 

(B)                                any
liabilities, as shown on the Company’s most recent consolidated balance sheet,
of the Company or any Restricted Subsidiary of the Company (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or the Note Guarantees) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability;

 

(C)                                any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash within 180 days of receipt, to the extent
of the cash received in that conversion;

 

(D)                               any
Designated Noncash Consideration the Fair Market Value of which, when taken
together with all other Designated Noncash Consideration received pursuant to
this clause (D) (and not subsequently converted into Cash Equivalents that are
treated as Net Proceeds of an Asset Sale) does not exceed $15.0 million since
the Effective Date, with the Fair Market Value of each item of Designated
Noncash Consideration being measured at the time received and without giving
effect to subsequent changes in value; and

 

(E)                                 any
stock or assets of the kind referred to in clauses (ii) or (iv) of Section
4.10(b) hereof.

 

(b)           Within
360 days after the receipt of any Net Proceeds from an Asset Sale, the Company
(or the applicable Restricted Subsidiary, as the case may be) may apply such
Net Proceeds at its option:

 

(i)                                     to
repay Senior Debt and, if the Senior Debt repaid is revolving credit
Indebtedness, to (A) correspondingly reduce commitments with respect
thereto or (B) acquire Additional Assets;

 

(ii)                                  to
acquire all or substantially all of the assets of, or any Capital Stock of,
another Permitted Business, if, after giving effect to any such acquisition

 

F-71

 

of Capital Stock, the Permitted Business is or becomes
a Restricted Subsidiary of the Company;

 

(iii)                               to
buy out or purchase a release from lease obligations on existing retail stores
or distribution centers;

 

(iv)                              to
make a capital expenditure; or

 

(v)                                 to
acquire Additional Assets.

 

Pending the final
application of any Net Proceeds, the Company may temporarily reduce revolving
credit borrowings or otherwise invest such Net Proceeds in any manner that is
not prohibited by this Indenture.

 

(c)           Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
Section 4.10(b) hereof shall constitute “Excess Proceeds.”  When the aggregate amount of Excess Proceeds
exceeds $15.0 million, within ten Business Days thereof, the Company shall make
an Asset Sale Offer to all Holders and if the Company elects (or is required by
the terms of such other pari passu Indebtedness),
all holders of other Indebtedness that is pari passu with
the Notes.  The offer price in any Asset
Sale Offer shall be equal to 100% of the principal amount plus accrued and
unpaid interest, if any, to the date of purchase (or, in respect of any pari passu Indebtedness, such lesser price, if any, as may be
provided for by its terms), and shall be payable in cash.  If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by this Indenture.  If the aggregate principal amount of Notes
and such other pari passu Indebtedness tendered
in such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee
shall select the Notes and such other pari passu Indebtedness
to be purchased on a pro rata basis. 
Upon completion of each Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.

 

(d)           The
Company shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with each repurchase of Notes
pursuant to an Asset Sale Offer.  To the
extent that the provisions of any securities laws or regulations conflict with
the provisions of Section 3.09 or Section 4.10 of this Indenture, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under Section 3.09 or this Section
4.10 by virtue of such compliance.

 

Section 4.11.        Transactions
with Affiliates.

 

(a)           The
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding,
loan, advance or Guarantee with, or for the benefit of, any Affiliate of the Company involving aggregate
consideration in excess of $5.0 million (each of the foregoing, an “Affiliate
Transaction”), unless (i) such Affiliate Transaction is on terms that,
taken as a whole, are not materially less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the

 

F-72

 

Company delivers to the Trustee (A) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $10.0 million, a resolution of the Board of Directors set forth in an
Officer’s Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by
a majority of the Board of Directors of
the Company and (B) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $20.0 million, an opinion as to the fairness to Company or such Restricted Subsidiary of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.

 

(b)           The following items
shall not be deemed to be Affiliate Transactions and, therefore, shall not be
subject to the provisions of Section 4.11(a):

 

(i)                                     transactions with customers, suppliers, contractors, joint venture partners or
purchasers or sellers of goods or services, in each case in the ordinary
course of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in accordance with the terms of this Indenture which
are fair to the Company, in the reasonable determination of the Board of
Directors of the Company or the senior management of the Company and are on
terms at least as favorable as might reasonably have been obtained at such time
from an unaffiliated party;

 

(ii)                                  any employment
agreement, stock option or other compensation agreement or employee benefit plan, officer or director indemnification agreement
or any similar arrangement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and payments or the issuance of securities thereunder;

 

(iii)                               transactions
between or among the Company and/or its Restricted Subsidiaries;

 

(iv)                              transactions with a Person (other than an Unrestricted Subsidiary of the
Company) that is an Affiliate of the Company solely because the Company owns,
directly or through a Restricted Subsidiary, an Equity Interest in, or controls,
such Person;

 

(v)                                 payment of reasonable directors’ fees;

 

(vi)                              any issuance of Equity Interests (other than Disqualified Stock) of the
Company to Affiliates of the Company;

 

(vii)                           loans (or cancellation of loans) or advances to
employees in the ordinary course of business;

 

(viii)                        sales or
other transfers or dispositions of accounts receivable and other related assets
customarily transferred in an asset securitization transaction involving
accounts receivable to a Receivables Subsidiary in a Qualified

 

F-73

 

Receivables Transaction, and acquisitions of Permitted
Investments in connection with a Qualified Receivables Transaction;

 

(ix)                                Permitted Investments or Restricted Payments that do not violate the provisions of
Section 4.07;

 

(x)                                   the existence of, or the performance by the
Company or any Restricted Subsidiary of their obligations under the terms of,
any stockholders agreement, partnership agreement or limited liability company
agreement (including any registration rights agreement or purchase agreement
related thereto) to which it is a part as of the Effective Date and any similar
agreements which it may enter into thereafter; provided, however,
that the existence of, or the performance by the Company or any Restricted
Subsidiary of obligations under any future amendment to any such existing
agreement or under any similar agreement entered into after the Effective Date
will only be permitted by this clause (x) to the extent that the terms of any
such amendment or new agreement, taken as a whole, are not materially
disadvantageous to the Holders of the Notes, as determined in good faith by the
Board of Directors of the Company or the senior management of the Company;

 

(xi)                                any management, financial advisory, financing, underwriting or placement
services or any other investment banking, banking or similar services involving
the Company and any of its Restricted Subsidiaries (including, without
limitation, any payments in cash, Equity Interests or other consideration made
by the Company or any of its Restricted Subsidiaries in connection therewith)
on the one hand and the Permitted Holders on the other hand, which services
(and payments and other transactions in connection therewith) are approved by a
majority of the members of the Board of Directors of the Company in good faith;

 

(xii)                             the issuance of Equity Interests (other than
Disqualified Stock) in the Company or any Restricted Subsidiary for
compensation purposes;

 

(xiii)                          the issuance of any Subordinated Shareholder
Funding;

 

(xiv)                         intellectual property licenses between or among
the Company and/or any Subsidiary of the Company in the ordinary course of
business;

 

(xv)                            tax sharing arrangements (including the Tax Sharing Agreement);

 

(xvi)                         the issuance or sale of any Capital Stock by
the Company; and

 

(xvii)                      Existing Indebtedness and any other obligations
pursuant to an agreement existing on the Effective Date, including any
amendment thereto (so long as such amendment is not disadvantageous to the
Holders of the Notes in any material respect).

 

F-74

Section 4.12.                         Liens.

 

The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien against or upon
any of the Collateral or any proceeds therefrom or assign or convey any right
to receive income therefrom for purposes of security, except Collateral
Permitted Liens.

 

Section 4.13.                         Offer
to Purchase Upon a Change of Control.

 

(a)                                  Upon
the occurrence of a Change of Control and subject to Section 3.07(c), each
Holder shall have the right to require the Company to make an offer (a “Change
of Control Offer”) to repurchase all or any part (equal to $1,000 or an
integral multiple of $1,000) of that Holder’s Notes at a purchase price equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, on the Notes repurchased to the date of purchase subject to
the rights of Holders on the relevant record date to receive interest due on
the relevant interest payment date, (the “Change of Control Payment”). Within
30 days following any Change of Control, the Company shall mail a notice to
each Holder, with a copy to the Trustee, describing the transaction or
transactions that constitute the Change of Control and stating:

 

(i)                                     that
the Change of Control Offer is being made pursuant to this Section 4.13
and that all Notes tendered shall be accepted for payment;

 

(ii)                                  the
purchase price and the purchase date, which shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the “Change of
Control Payment Date”);

 

(iii)                               that
any Note not tendered shall continue to accrue interest;

 

(iv)                              that,
unless the Company defaults in the payment of the Change of Control Payment,
all Notes accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;

 

(v)                                 that
Holders electing to have any Notes purchased pursuant to a Change of Control
Offer shall be required to surrender the Notes, with the form entitled “Option
of Holder to Elect Purchase” attached to the Notes completed, or transfer by
book-entry transfer, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change
of Control Payment Date;

 

(vi)                              that
Holders shall be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased;

 

F-75

 

(vii)                           that
Holders whose Notes are being purchased only in part shall be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof; and

 

(viii)                        that
Holders electing to have a Note purchased pursuant to a Change of Control Offer
may elect to have Notes purchased in integral multiples of $1,000 only.

 

(b)                                 The
Company shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with the repurchase of the
Notes as a result of a Change of Control. 
To the extent that the provisions of any securities laws or regulations
conflict with the provisions of this Section 4.13, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.13 by virtue
of such compliance.

 

(c)                                  On
the Change of Control Payment Date, the Company shall, to the extent lawful:

 

(i)                                     accept
for payment all Notes or portions of Notes properly tendered pursuant to the
Change of Control Offer;

 

(ii)                                  deposit
with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Notes or portions of Notes properly tendered; and

 

(iii)                               deliver
or cause to be delivered to the Trustee the Notes so accepted together with an
Officer’s Certificate stating the aggregate principal amount of Notes or
portions of Notes being purchased by the Company.

 

(d)                                 The
Paying Agent shall promptly mail to each Holder of Notes properly tendered the
Change of Control Payment for such Notes, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any.  The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.

 

(e)                                  Prior
to complying with any of the provisions of this Section 4.13, but in any
event within 90 days following a Change of Control, the Company shall either
repay all its outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing its outstanding Senior Debt to permit the
repurchase of Notes required by this Section 4.13.

 

(f)                                    The
Change of Control provisions described above will be applicable whether or not
any other provisions of this Indenture are applicable.  Except as described above with respect to a
Change of Control, this Indenture does not contain provisions that permit the
Holders of the Notes to require that the Company repurchase or redeem the Notes
in the event of a takeover, recapitalization, leveraged buy out or similar
transaction which is not a Change of Control.

 

F-76

 

(g)                                 Notwithstanding
anything to the contrary in this Section 4.13, the Company shall not be
required to make a Change of Control Offer upon a Change of Control if (i) a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this Section 4.13
and purchases all Notes validly tendered and not withdrawn under the Change of
Control Offer or (ii) notice of redemption has been given pursuant to Section 3.07
of this Indenture unless and until there is a Default in payment of the
applicable redemption price.

 

Section 4.14.                         Corporate
Existence.

 

Subject to Section 4.13
and Article 5 hereof, as the case may be, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership or other existence of each
of its Restricted Subsidiaries in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and the rights (charter and statutory), licenses and
franchises of the Company and its Restricted Subsidiaries; provided that
the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Restricted Subsidiaries, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of the Company and its Restricted Subsidiaries, taken as a
whole, and that the loss thereof is not adverse in any material respect to the
Holders of the Notes.

 

Section 4.15.                         Business
Activities.

 

The Company shall not,
and shall not permit any Restricted Subsidiary to engage in any business other
than Permitted Businesses,
except to such extent as would not be material to the Company and its
Restricted Subsidiaries taken as a whole.

 

Section 4.16.                         No
Layering of Debt.

 

Notwithstanding the
provisions of Section 4.09 hereof, (a) the Company shall not incur,
create, issue, assume, guarantee or otherwise become liable for any Indebtedness
that is contractually subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Notes, and (b) no
Guarantor shall incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is contractually subordinate or junior in
right of payment to Senior Debt of such Guarantor and senior in any respect in
right of payment to such Guarantor’s Note Guarantee.  No such
Indebtedness will be considered to be senior by virtue of being secured on a
first or junior priority basis and Indebtedness that is not guaranteed by a
particular Person shall not be deemed to be subordinate or junior to
Indebtedness that is so guaranteed solely because it is not so guaranteed.

 

Section 4.17.                         Additional Note Guarantees.

 

If
(a) the Company or any of its Restricted Subsidiaries acquires or creates
another Subsidiary after the date of this Indenture that guarantees
Indebtedness under the Congress Credit Facility or (b) any Subsidiary of the
Company or any of its Restricted Subsidiaries existing as of the date hereof
becomes a guarantor of Indebtedness under the Congress Credit Facility, then
such newly acquired or created Subsidiary or such Subsidiary guarantor of

 

F-77

 

Indebtedness
under the Congress Credit Facility, as the case may be, shall become a
Guarantor and execute a Note Guarantee, the form of which is attached as Exhibit
B, pursuant to a supplemental indenture, the form of which is attached as Exhibit
C, and deliver an Opinion of Counsel in form and substance satisfactory to
the Trustee within 30 Business Days of the date on which it was acquired or
created.

 

ARTICLE 5

SUCCESSORS

 

Section 5.01.                         Merger,
Consolidation of Sale of Assets.

 

(a)                                  The
Company shall not consolidate or merge with or into (whether or not the Company
is the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted
Subsidiaries, taken as a whole, in one or more related transactions, to
another Person unless (i) either the
Company is the surviving Person or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is an entity organized or
existing under the laws of the United States, any state of the United States or
the District of Columbia; (ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, lease, conveyance or other disposition has been made assumes all the
obligations of the Company under the Notes and this Indenture pursuant to agreements reasonably satisfactory to
the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Wholly Owned Subsidiary of the Company (other than a Receivables
Subsidiary), the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition has been made at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, would (i)
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in Section 4.09(a) or (ii) have
a Fixed Charge Coverage Ratio that is greater than the actual Fixed Charge
Coverage Ratio of the Company immediately prior to such transaction.

 

(b)                                 Section 5.01(a)
will not prohibit (A) a merger of the Company into a Wholly Owned
Subsidiary of the Company created for the purpose of holding the Capital Stock
of the Company, (B) any consolidation or merger, or any sale, assignment,
transfer, conveyance, lease or other disposition of assets between or among the
Company and its Restricted Subsidiaries (C) a merger between the Company
and an Affiliate incorporated solely for the purpose of reincorporating the
Company in another State of the United States, (D) any merger of a Restricted Subsidiary into the Company or (E)
transfers of accounts receivable and related assets of the type specified in
the definition of Qualified Receivables Transaction (or a fractional undivided
interest therein) by a Receivables Subsidiary in a Qualified Receivables Transaction,
so long as, in each case, the amount of Indebtedness of the Company and its
Restricted Subsidiaries, taken as a whole,
is not increased thereby.

 

F-78

 

Section 5.02.                         Successor
Corporation Substituted.

 

Upon any consolidation or
merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in a
transaction that is subject to, and that complies with the provisions of Section 5.01
hereof, the successor Person formed by such consolidation or into or with which
the Company is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted
for (so that from and after the date of such consolidation, assignment,
transfer, merger, sale, lease, conveyance or other disposition, the provisions
of this Indenture or the Notes referring to the “Company” shall refer instead
to the successor Person and not to the Company), and shall exercise every right
and power of the Company under this Indenture and the Notes with the same
effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor
Company, if any, shall not be relieved from the obligation to pay the principal
of and interest on the Notes except in the case of a sale of all or
substantially all of the properties or assets of the Company and its Restricted
Subsidiaries taken as whole in a transaction that is subject to, and that
complies with the provisions of, Section 5.01 hereof.

 

ARTICLE 6

DEFAULTS AND REMEDIES

 

Section 6.01.                         Events
of Default.

 

Each of the following
constitutes an “Event of Default”:

 

(i)                                     default
for 30 days in the payment when due of interest on the Notes;

 

(ii)                                  default
in payment when due (at maturity, upon redemption or otherwise) of principal of
or premium, if any, on the Notes;

 

(iii)                               failure
by the Company or any of its Restricted Subsidiaries for 30 days after notice
by the Trustee or by the Holders of at least 25% in principal amount of the
Notes then outstanding voting as a single
class to comply with the provisions described under Section 4.07, Section 4.09,
Section 4.10 or Section 4.13;

 

(iv)                              failure
by the Company or any of its Restricted Subsidiaries for 60 days after notice
to the Company by the Trustee or the Holders of at least a majority in
principal amount of the then outstanding voting as a single class to comply with any other agreement in this
Indenture or the Notes;

 

(v)                                 default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Significant Subsidiaries (or the payment of which
is guaranteed by the Company or any of its Significant Subsidiaries) whether
such Indebtedness or Guarantee now exists, or is created after the Issue Date,
which default (a) is caused by a failure to pay principal of such
Indebtedness after giving effect to any grace period provided in such

 

F-79

 

Indebtedness on the date
of such default (a “Payment Default”) or (b) results in the acceleration
of such Indebtedness prior to its stated maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal amount
of any other such Indebtedness under which there has been a Payment Default or
the maturity of which has been so accelerated, aggregates $25.0 million or
more;

 

(vi)                              failure
by the Company or any of its Subsidiaries to pay final, non-appealable
judgments aggregating in excess of $25.0 million (net of any amounts covered by
a reputable and credit worthy insurance company that has not contested coverage
or reserved rights with respect to an underlying claim), which judgments are
not paid, discharged, waived or stayed for a period of more than 60 consecutive
days after such judgments become final and non-appealable;

 

(vii)                           the
Company or any of its Restricted Subsidiaries that is a Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:

 

(A)                              commences
a voluntary case;

 

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

 

(C)                                consents
to the appointment of a Custodian of it or for all or substantially all of its
property; or

 

(D)                               makes
a general assignment for the benefit of its creditors;

 

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

 

(A)                              is
for relief against the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary in an involuntary case;

 

(B)                                appoints
a Custodian of the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary for all or substantially all of the property of the
Company or any of its Restricted Subsidiaries that is a Significant Subsidiary;
or

 

(C)                                orders
the liquidation of the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary;

 

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

 

	
  (ix)

  	
  except as permitted
  herein, any Note Guarantee is held to be unenforceable or invalid by any
  final and non-appealable judgment or decree or ceases for any reason to be in
  full force and effect or any

  

 

F-80

 

	
   

  	
  Guarantor that is a
  Significant Subsidiary, or any Person acting on behalf of any Guarantor that
  is a Significant Subsidiary, denies or disaffirms such Guarantor’s
  obligations under its Note Guarantee and such Default continues for 10 days
  after receipt of the notice specified in this Indenture; or

  
	
   

  	
   

  
	
  (x)

  	
  except as permitted
  herein, any Security Document or any security interest granted thereby is
  held to be unenforceable or invalid by any final and non-appealable judgment
  or decree or ceases for any reason to be in full force and effect and such
  Default continues for 10 days after receipt of the notice specified in this
  Indenture, or the Company or any Guarantor that is a Significant Subsidiary,
  or any Person acting on behalf of such Person, denies or disaffirms the
  Company’s or such Guarantor’s obligations under any Security Document.

  

 

The term “Custodian”
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.

 

Section 6.02.                         Acceleration.

 

In the case of an Event
of Default specified in clause (vii) or (viii) of Section 6.01 hereof, all
outstanding Notes shall become due and payable immediately without further
action or notice. If any other Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
then outstanding Notes may declare all the Notes to be due and payable
immediately; provided that so long as any Indebtedness permitted to be
incurred pursuant to the Credit Facilities is outstanding, such acceleration
shall not be effective until the earlier of (a) the acceleration of such
Indebtedness under the Credit Facilities or (b) five Business Days after
receipt by the Company of written notice of such acceleration.  Holders of the Notes may not enforce this
Indenture or the Notes except as provided in this Indenture.

 

Upon any such
declaration, the Notes shall become due and payable immediately.  The Holders of a majority in aggregate
principal amount of the then outstanding Notes by written notice to the Trustee
may, on behalf of all of the Holders, rescind an acceleration or waive any
existing Default or Event of Default and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.

 

Section 6.03.                         Other
Remedies.

 

(a)                                  If
an Event of Default occurs and is continuing, the Trustee may pursue any available
remedy to collect the payment of principal, premium, if any, interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.

 

(b)                                 The
Trustee may maintain a proceeding even if it does not possess any of the Notes or
does not produce any of them in the proceeding. 
A delay or omission by the Trustee or any Holder of a Note in exercising
any right or remedy accruing upon an Event of Default shall not

 

F-81

 

impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default.  All remedies are cumulative to the extent
permitted by law.

 

Section 6.04.                         Waiver
of Past Defaults.

 

Holders of a majority in
aggregate principal amount of the then outstanding Notes by notice to the
Trustee may on behalf of the Holders of all of the Notes waive an existing
Default or Event of Default and its consequences hereunder, except a continuing
Default or Event of Default in the payment of the principal of, premium, if
any, or interest on, the Notes (including in connection with an offer to
purchase); provided, however, that the Holders of a
majority in aggregate principal amount of the then outstanding Notes may
rescind an acceleration and its consequences, including any related payment
default that resulted from such acceleration. 
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.

 

Section 6.05.                         Control
by Majority.

 

The Holders of a majority
in principal amount of the then outstanding Notes may direct the time, method
and place of conducting any proceeding for exercising any remedy available to
the Trustee or exercising any trust power conferred on it.  However, (i) the Trustee may refuse to
follow any direction that conflicts with law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of other Holders of
Notes or that may involve the Trustee in personal liability, and (ii) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.

 

Section 6.06.                         Limitation
on Suits.

 

A Holder of a Note may
pursue a remedy with respect to this Indenture, the Notes or the Note
Guarantees only if:

 

(i)                                     the
Holder of a Note gives to the Trustee written notice of a continuing Event of
Default;

 

(ii)                                  the
Holders of at least 25% in aggregate principal amount of the then outstanding
Notes make a written request to the Trustee to pursue the remedy;

 

(iii)          such
Holder of a Note or Holders of Notes offer and, if requested, provide to the
Trustee reasonable security or indemnity against any loss, liability or
expense;

 

(iv)                              the
Trustee does not comply with the request within 60 days after receipt of the
request and the offer and, if requested, the provision of security or
indemnity; and

 

F-82

 

(v)                                 during
such 60-day period the Holders of a majority in aggregate principal amount of
the then outstanding Notes do not give the Trustee a direction inconsistent
with the request.

 

A Holder of a Note may
not use this Indenture to prejudice the rights of another Holder of a Note or
to obtain a preference or priority over another Holder of a Note.

 

Section 6.07.                         Rights
of Holders of Notes to Receive Payment.

 

Notwithstanding any other
provision of this Indenture, the right of any Holder of a Note to receive
payment of principal, premium, if any, and interest on such Note, on or after
the respective due dates expressed in such Note (including in connection with
an offer to purchase), or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without
the consent of such Holder.

 

Section 6.08.                         Collection
Suit by Trustee.

 

If an Event of Default
specified in Section 6.01(i) or (ii) hereof occurs and is continuing, the
Trustee is authorized to recover judgment in its own name and as trustee of an
express trust against the Company and each Guarantor for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.

 

Section 6.09.                         Trustee
May File Proofs of Claim.

 

The Trustee is authorized
to file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Holders of the Notes allowed in any
judicial proceeding relative to the Company (or any other obligor upon the
Notes), its creditors or its property and shall be entitled and empowered to
collect, receive and distribute any money or other securities or property
payable or deliverable on any such claims and any Custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee, and in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay to the Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof.  To the
extent that the payment of any such compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be
secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. 
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization,

 

F-83

 

arrangement, adjustment
or composition affecting the Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such proceeding.

 

Section 6.10.                         Priorities.

 

If the Trustee collects
any money pursuant to this Article 6, it shall pay out the money in the
following order:

 

First:  to the Trustee, its agents and attorneys for
amounts due under Section 7.07 hereof, including payment of all
compensation, expense and liabilities incurred, and all advances made, by the
Trustee and the costs and expenses of collection;

 

Second:  to Holders of Notes for amounts due and
unpaid on the Notes for principal, premium, if any, interest ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for principal, premium, if any, and interest, respectively; and

 

Third:  to the Company or, to the extent the Trustee
collects any amount pursuant to Article 12 from the Guarantors, to such
Guarantors, or to such party as a court of competent jurisdiction shall direct.

 

The Trustee may fix a
record date and payment date for any payment to Holders of Notes pursuant to
this Section 6.10.

 

Section 6.11.                         Undertaking
for Costs.

 

In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as a Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys’ fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant.  This Section 6.11 does not apply to a
suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07
hereof, or a suit by Holders of more than 10% in principal amount of the then
outstanding Notes.

 

ARTICLE 7

TRUSTEE

 

Section 7.01.                         Duties
of Trustee.

 

(a)                                  If
an Event of Default has occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by this Indenture and use the same
degree of care and skill in its exercise, as a prudent person would exercise or
use under the circumstances in the conduct of such person’s own affairs.

 

F-84

 

(b)                                 Except
during the continuance of an Event of Default:

 

(i)                                     the
duties of the Trustee shall be determined solely by the express provisions of
this Indenture and the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and

 

(ii)                                  in
the absence of bad faith or gross negligence on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.  However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.

 

(c)                                  The
Trustee may not be relieved from liabilities for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:

 

(i)                                     this
Section 7.01(c) does not limit the effect of Section 7.01(b);

 

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

 

(iii)                               the
Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to Section 6.05
hereof.

 

(d)                                 Whether
or not therein expressly so provided, every provision of this Indenture that in
any way relates to the Trustee is subject to paragraphs (a), (b), (c) and
(e) of this Section 7.01.

 

(e)                                  No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or incur any liability.

 

(f)                                    The
Trustee shall not be liable for interest on any money received by it except as
the Trustee may agree in writing with the Company.  Money held in trust by the Trustee need not
be segregated from other funds except to the extent required by law.

 

Section 7.02.                         Rights
of Trustee.

 

(a)                                  The
Trustee may conclusively rely on the truth of the statements and correctness of
the opinions contained in, and shall be protected from acting or refraining
from acting upon, any document believed by it to be genuine and to have been
signed or presented by the proper Person. 
The Trustee need not investigate any fact or matter stated in the
document.

 

(b)                                 Before
the Trustee acts or refrains from acting, it may require an Officer’s
Certificate or an Opinion of Counsel or both. 
The Trustee shall not be liable for any action it takes or omits

 

F-85

 

to take in good faith in
reliance on such Officer’s Certificate or Opinion of Counsel.  The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.

 

(c)                                  The
Trustee may act through its attorneys and agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.

 

(d)                                 The
Trustee shall not be liable for any action it takes or omits to take in good
faith that it believes to be authorized or within the rights or powers
conferred upon it by this Indenture; provided, however, that the
Trustee’s conduct does not constitute willful misconduct, bad faith or
negligence.

 

(e)                                  Unless
otherwise specifically provided in this Indenture, any demand, request,
direction or notice from the Company or any Guarantor shall be sufficient if
signed by an Officer of the Company or such Guarantor, as applicable.

 

(f)                                    The
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the
Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.

 

(g)                                 The
Trustee shall not be deemed to have notice of any Default or Event of Default
unless a Responsible Officer of the Trustee has actual knowledge thereof or
unless written notice of any event which is in fact such a default is received
by the Trustee at the Corporate Trust Office of the Trustee, and such notice
references the Notes and this Indenture.

 

(h)                                 The
rights, privileges, protections, immunities and benefits given to the Trustee,
including, without limitation, its right to be indemnified, are extended to,
and shall be enforceable by, the Trustee in each of its capacities hereunder.

 

Section 7.03.                         Individual
Rights of Trustee.

 

The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company, the Guarantors or any Affiliate of the
Company or the Guarantors with the same rights it would have if it were not
Trustee.  However, in the event that the
Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days or resign.  Any Agent may
do the same with like rights and duties. 
The Trustee is also subject to Section 7.10 and Section 7.11
hereof.

 

Section 7.04.                         Trustee’s
Disclaimer.

 

The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture, the Notes or the Note Guarantees, it shall not be accountable for
the Company’s use of the proceeds from the Notes or any money paid to the
Company or upon the Company’s direction under any provision of this Indenture,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee, and it shall not be responsible for
any statement or recital herein or any statement in the Notes or any other

 

F-86

 

document in connection
with the sale of the Notes or pursuant to this Indenture other than its
certificate of authentication.

 

Section 7.05.                         Notice
of Defaults.

 

If a Default or Event of
Default occurs and is continuing and if it is known to the Trustee, the Trustee
shall mail to Holders of Notes a notice of the Default or Event of Default
within 90 days after it occurs.  Except
in the case of a Default or Event of Default in payment on any Note pursuant to
Section 6.01(i) or (ii) hereof, the Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.

 

Section 7.06.                         Reports
by Trustee to Holders of the Notes.

 

Within 60 days after each
May 15 beginning with the May 15 following the date of this Indenture, and for
so long as Notes remain outstanding, the Trustee shall mail to the Holders of
the Notes a brief report dated as of such reporting date that complies with TIA
Section 313(a) as if it were applicable to this Indenture (but if no event
described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no such report need be transmitted).  The Trustee also shall comply with TIA Section 313(b)
and transmit by mail all reports as required by TIA Section 313(c), as if
TIA Section 313(b) and TIA Section 313(c) were applicable to this
Indenture.  The Company shall promptly
notify the Trustee when the Notes are listed on any stock exchange and of any
delisting thereof.

 

Section 7.07.                         Compensation
and Indemnity.

 

(a)                                  The
Company shall pay to the Trustee from time to time reasonable compensation for
its acceptance of this Indenture and services hereunder.  To the extent permitted by law, the Trustee’s
compensation shall not be limited by any law on compensation of a trustee of an
express trust.  The Company shall
reimburse the Trustee promptly upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the compensation
for its services.  Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee’s
agents and counsel.

 

(b)                                 The
Company and the Guarantors, jointly and severally, shall indemnify the Trustee
against any and all losses, liabilities or expenses incurred by it arising out
of or in connection with the acceptance or administration of its duties under
this Indenture, including the costs and expenses of enforcing this Indenture
against the Company and the Guarantors (including this Section 7.07) and
defending itself against any claim (whether asserted by the Company and the
Guarantors or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder except to
the extent any such loss, liability or expense may be attributable to its
negligence, willful misconduct or bad faith. 
The Trustee shall notify the Company and the Guarantors promptly of any
claim for which it may seek indemnity. 
Failure by the Trustee to so notify the Company and the Guarantors shall
not relieve the Company or the Guarantors of their obligations hereunder.  The Company and the Guarantors shall defend
the claim and the Trustee shall cooperate in the defense.  The Trustee may have separate counsel and the
Company and the Guarantors shall pay the reasonable fees

 

F-87

 

and expenses of such
counsel.  The Company and the Guarantors
need not pay for any settlement made without their consent, which consent shall
not be unreasonably withheld.

 

(c)                                  The
obligations of the Company and the Guarantors under this Section 7.07
shall survive the satisfaction and discharge of this Indenture.  To secure the Company’s and the Guarantors’
payment obligations in this Section 7.07, the Trustee shall have a Lien
prior to the Notes on all money or property held or collected by the Trustee,
except that held in trust to pay principal and interest on particular
Notes.  Such Lien shall survive the
satisfaction and discharge of this Indenture.

 

(d)                                 When
the Trustee incurs expenses or renders services after an Event of Default
specified in Section 6.01(vii) or (viii) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.

 

Section 7.08.                         Replacement
of Trustee.

 

(a)                                  A
resignation or removal of the Trustee and appointment of a successor Trustee
shall become effective only upon the successor Trustee’s acceptance of
appointment as provided in this Section 7.08.

 

(b)                                 The
Trustee may resign in writing at any time and be discharged from the trust
hereby created by so notifying the Company. 
The Holders of a majority in principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Company in
writing.  The Company may remove the
Trustee if:

 

(i)                                     the
Trustee fails to comply with Section 7.10 hereof;

 

(ii)                                  the
Trustee is adjudged bankrupt or insolvent or an order for relief is entered
with respect to the Trustee under any Bankruptcy Law;

 

(iii)                               a
Custodian or public officer takes charge of the Trustee or its property; or

 

(iv)                              the
Trustee becomes incapable of acting.

 

(c)                                  If
the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor
Trustee.  Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount
of the then outstanding Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.

 

(d)                                 If
a successor Trustee does not take office within 60 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company, or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.

 

(e)                                  If
the Trustee, after written request by any Holder of a Note who has been a
Holder of a Note for at least six months, fails to comply with Section 7.10
hereof, such Holder of a Note

 

F-88

 

may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.  A successor Trustee
shall deliver a written acceptance of its appointment to the retiring Trustee
and to the Company.  Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and the duties of the Trustee
under this Indenture.  The successor
Trustee shall mail a notice of its succession to the Holders of the Notes.  The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided
that all sums owing to the Trustee hereunder have been paid and subject to the
Lien provided for in Section 7.07 hereof. 
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company’s obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.

 

Section 7.09.                         Successor
Trustee by Merger, Etc.

 

If the Trustee or any
Agent consolidates, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee or any Agent, as
applicable.

 

Section 7.10.                         Eligibility;
Disqualification.

 

(a)                                  There
shall at all times be a Trustee hereunder that is a corporation organized and
doing business under the laws of the United States of America or of any state
thereof that is authorized under such laws to exercise corporate trustee power,
that is subject to supervision or examination by federal or state authorities
and that has a combined capital and surplus of at least $100.0 million as set
forth in its most recent annual report of condition.

 

(b)                                 This
Indenture shall always have a Trustee that satisfies the requirements of TIA Section 310(a)(1),
(2) and (5), as if such provisions were applicable to this Indenture.  The Trustee shall comply with TIA Section 310(b)
as if it were applicable to this Indenture; provided, however,
that for purposes of this Indenture, all references in TIA Section 310(b)
to actions by or application to the Commission shall be deemed deleted; and provided, further, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are
met.

 

Section 7.11.                         Preferential
Collection of Claims Against the Company.

 

The Trustee shall comply
with TIA Section 311(a) as if it were applicable to this Indenture,
excluding any creditor relationship listed in TIA Section 311(b).  A Trustee who has resigned or been removed
shall comply with the requirements of TIA Section 311(a) to the extent
indicated therein, as if they were applicable to this Indenture.

 

ARTICLE 8

LEGAL DEFEASANCE AND COVENANT
DEFEASANCE

 

Section 8.01.                         Option
to Effect Legal Defeasance or Covenant Defeasance.

 

The Company may, at any
time, elect to have either Section 8.02 or Section 8.03 hereof be
applied to all outstanding Notes and all obligations of the Guarantors with
respect to the Note

 

F-89

 

Guarantees then
outstanding upon compliance with the conditions set forth below in this Article 8.

 

Section 8.02.                         Legal
Defeasance and Discharge.

 

Upon the Company’s exercise
under Section 8.01 hereof of the option applicable to this Section 8.02,
the Company and each of the Guarantors shall, subject to the satisfaction of
the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from their respective obligations with respect to all Notes and the
Note Guarantees then outstanding on the date the conditions set forth below are
satisfied (“Legal Defeasance”).  For this
purpose, Legal Defeasance means that the Company and each Guarantor shall be
deemed to have paid and discharged the entire Indebtedness represented by the
Notes and the Note Guarantees outstanding, which shall thereafter be deemed to
be “outstanding” only for the purposes of Section 8.05 and the other
Sections of this Indenture referred to in (i) and (ii) below, and to have
satisfied all their respective other obligations under such Notes, the Note
Guarantees and this Indenture (and the Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging the same),
except for the following provisions which shall survive until otherwise
terminated or discharged hereunder: 
(i) the rights of Holders of outstanding Notes to receive payments
in respect of the principal amount, premium, if any, and interest on such Notes
when such payments are due from the trust referred to in Section 8.04;
(ii) the Company’s obligations with respect to such Notes under Section 2.03,
Section 2.04, Section 2.05, Section 2.08, Section 2.09, Section 2.12
and Section 4.02 hereof; (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company’s and the Guarantors’
obligations in connection therewith; and (iv) the provisions of this Section 8.02.  Subject to compliance with this Section 8.02,
the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03
hereof.

 

Section 8.03.                         Covenant
Defeasance.

 

Upon the Company’s
exercise under Section 8.01 hereof of the option applicable to this Section 8.03,
the Company and the Guarantors shall, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, be released from their
respective obligations under the covenants contained in Article 5 and in Section 4.03,
Section 4.05, Section 4.07, Section 4.08, Section 4.09, Section 4.10,
Section 4.11, Section 4.12, Section 4.13, Section 4.15, Section 4.16,
Section 4.17 and Section 12.01 hereof with respect to the outstanding
Notes and the Note Guarantees on and after the date the conditions set forth in
Section 8.04 are satisfied (hereinafter, “Covenant Defeasance”), and the
Notes shall thereafter be deemed not “outstanding” for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed “outstanding” for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes).  For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes and the Note
Guarantees, the Company and the Guarantors may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this

 

F-90

 

Indenture and such Notes
and the Note Guarantees shall be unaffected thereby.  In addition, upon the Company’s exercise
under Section 8.01 hereof of the option applicable to this Section 8.03,
subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Section 6.01(iii) through (v) hereof and, to the extent relating
to a Significant Subsidiary, Section 6.01(vii) and Section 6.01(viii)
shall not constitute Events of Default.

 

Section 8.04.                         Conditions
to Legal or Covenant Defeasance.

 

The following shall be
the conditions to the application of either Section 8.02 or Section 8.03
hereof to the outstanding Notes and the Note Guarantees:

 

In order to exercise
either Legal Defeasance or Covenant Defeasance:

 

(i)            the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as shall be sufficient,
in the opinion of a nationally recognized investment bank, appraisal firm or
firm of independent public accountants, to pay the principal amount of,
premium, if any, and interest on the outstanding Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be, and
the Company must specify whether the Notes are being defeased to such stated
date for payment or to a particular redemption date;

 

(ii)           in
the case of Legal Defeasance, the Company shall have delivered to the Trustee
an Opinion of Counsel reasonably acceptable to the Trustee confirming that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the Issue Date, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
subject to customary assumptions and exclusions, the Holders of the outstanding
Notes shall not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and shall be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;

 

(iii)          in
the case of Covenant Defeasance, the Company shall have delivered to the
Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming
that, subject to customary assumptions and exclusions, the Holders of the
outstanding Notes shall not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and shall be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;

 

F-91

 

(iv)                              such
Legal Defeasance or Covenant Defeasance shall not result in a breach or violation
of, or constitute a default under any material agreement (including, without
limitation, the Congress Credit Facility) or instrument (other than this
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound;

 

(v)                                 the
Company shall have delivered to the Trustee an Officer’s Certificate stating
that the deposit was not made by the Company with the intent of preferring the
Holders of Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or
others; and

 

(vi)                              the
Company shall have delivered to the Trustee an Officer’s Certificate and an
Opinion of Counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.

 

Section 8.05.                         Deposited
Money and U.S. Government Securities to be Held in Trust; Other Miscellaneous
Provisions.

 

(a)                                  Subject
to Section 8.06 hereof, all money and non-callable Government Securities
(including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”)
pursuant to Section 8.04 hereof in respect of the then outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest but
such money need not be segregated from other funds except to the extent
required by law.

 

(b)                                 The
Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.

 

(c)                                  Anything
in this Article 8 to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time at the Company’s request any
money or non-callable Government Securities held by it as provided in Section 8.04
hereof which, in the opinion of a nationally recognized investment bank,
appraisal firm or firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under clause (i) of Section 8.04 hereof), are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.

 

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Section 8.06.                         Repayment
to the Company.

 

Any money deposited with
the Trustee or any Paying Agent, or then held by the Company, in trust for the
payment of the principal of, premium, if any, or interest on any Note and
remaining unclaimed for one year after such principal, and premium, if any, or
interest, if any, have become due and payable shall be paid to the Company on
its request or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Note shall thereafter be permitted to look only
to the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Company
as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining shall be repaid to the Company.

 

Section 8.07.                         Reinstatement.

 

If the Trustee or Paying
Agent is unable to apply any United States dollars or non-callable Government
Securities in accordance with Section 8.02 hereof or Section 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of the Company and the Guarantors under this
Indenture, and the Notes and the Note Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02
hereof or Section 8.03 hereof, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.02 hereof or Section 8.03 hereof, as the case may be; provided,
however, that, if the Company makes any payment of principal of,
premium, if any, or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the cash or Government Securities held
by the Trustee or Paying Agent.

 

ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER

 

Section 9.01.                         Without
Consent of Holders of the Notes.

 

(a)                                  Notwithstanding
Section 9.02 of this Indenture, without the consent of any Holder of
Notes, the Company, the Guarantors and the Trustee may amend or supplement this
Indenture, the Notes or the Note Guarantees:

 

(i)                                     to
cure any ambiguity, defect or inconsistency;

 

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

 

(iii)                               to
provide for the assumption of the Company’s or a Guarantor’s obligations to the
Holders of the Notes in the case of a merger, or consolidation pursuant to Article 5
or Section 12.03 hereof;

 

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(iv)                              to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights
hereunder of any Holder of the Notes;

 

(v)                                 to
provide for the issuance of Additional Notes as permitted by Section 2.18;
or

 

(vi)                              to
allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee
with respect to the Notes.

 

(b)                                 Upon
the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section 7.02(b)
hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.

 

Section 9.02.                         With
Consent of Holders of Notes.

 

(a)                                  Except
as provided below in this Section 9.02, this Indenture, the Notes and the
Note Guarantees issued hereunder may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or a tender offer or exchange offer for, Notes),
and, subject to Section 6.04 and Section 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, or interest on the Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Notes or the Note
Guarantees may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including, without limitation,
consents obtained in connection with a purchase of, or a tender offer or
exchange offer for, Notes).

 

(b)                                 Upon
the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt
by the Trustee of the documents described in Section 7.02(b) hereof, the
Trustee shall join with the Company and the Guarantors in the execution of such
amended or supplemental indenture unless such amended or supplemental indenture
directly affects the Trustee’s own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may, but shall not be
obligated to, enter into such amended or supplemental indenture.

 

(c)                                  It
shall not be necessary for the consent of the Holders of Notes under this Section 9.02
to approve the particular form of any proposed amendment or waiver, but it
shall be sufficient if such consent approves the substance thereof.  After an amendment, supplement or waiver
under this Section 9.02 becomes effective, the Company shall mail to the
Holders of each

 

F-94

 

Note affected thereby a
notice briefly describing the amendment, supplement or waiver.  Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amended or supplemental indenture or waiver.

 

(d)                                 Subject
to Section 6.04 and Section 6.07 hereof, the Holders of a majority in
aggregate principal amount of the Notes then outstanding, voting as a single
class, may amend or waive compliance in a particular instance by the Company or
the Guarantors with any provision of this Indenture or the Notes or the Note
Guarantees.  However, without the consent
of each Holder affected, an amendment, or waiver may not (with respect to any Note
held by a non-consenting Holder):

 

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

 

(ii)           reduce
the principal of or change the fixed maturity of any Notes or alter the
provisions with respect to the redemption of the Notes (other than provisions
relating to Section 3.09, Section 4.10 and Section 4.13 hereof);

 

(iii)          reduce
the rate of or change the time for payment of interest on any Note;

 

(iv)                              waive
a Default or Event of Default in the payment of principal of or premium, if
any, or interest on the Notes (except a rescission of acceleration of the Notes
by the Holders of at least a majority in aggregate principal amount of the then
outstanding Notes and a waiver of the payment default that resulted from such
acceleration);

 

(v)                                 make
any Note payable in money other than that stated in the Notes;

 

(vi)                              make
any change in Section 6.04 or Section 6.07 hereof;

 

(vii)                           waive a
redemption or repurchase payment with respect to any Note (other than a payment
required by Section 3.09, Section 4.10 or Section 4.13 hereof);

 

(viii)                        except as
otherwise permitted herein, release any Guarantor from any of its obligations
under its Note Guarantee or this Indenture, or amend the provisions herein
relating to the release of any Guarantor; or

 

(ix)                                make
any change in the amendment and waiver provisions of this Article 9.

 

Section 9.03.                         Revocation
and Effect of Consents.

 

(a)                                  Until
an amendment, supplement or waiver becomes effective, a consent to it by a
Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder’s Note, even if notation of the consent is not made on any
Note.

 

F-95

 

(b)                                 However,
any such Holder or subsequent Holder of a Note may revoke the consent as to its
Note if the Trustee receives written notice of revocation before the date the
waiver, supplement or amendment becomes effective.  When an amendment, supplement or waiver
becomes effective in accordance with its terms, it thereafter binds every
Holder.

 

Section 9.04.                         Notation
on or Exchange of Notes.

 

(a)                                  The
Trustee may place an appropriate notation about an amendment, supplement or
waiver on any Note thereafter authenticated. 
The Company in exchange for all Notes may issue and the Trustee shall
authenticate new Notes that reflect the amendment, supplement or waiver.

 

(b)                                 Failure
to make the appropriate notation or issue a new Note shall not affect the
validity and effect of such amendment, supplement or waiver.

 

Section 9.05.                         Trustee
to Sign Amendments, Etc.

 

The Trustee shall sign
any amended or supplemental indenture authorized pursuant to this Article 9
if the amendment or supplement does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. 
The Company and the Guarantors may not sign an amendment or supplemental
indenture until their respective Board of Directors approves it.  In executing any amended or supplemental
indenture the Trustee shall be entitled to receive and (subject to Section 7.01
hereof) shall be fully protected in relying upon an Officer’s Certificate and
an Opinion of Counsel stating that the execution of such amended or
supplemental indenture is authorized or permitted by this Indenture.

 

ARTICLE 10

SUBORDINATION

 

Section 10.01.                  Agreement
to Subordinate.

 

The Company agrees, and
each Holder of Notes by accepting a Note agrees, that all Obligations evidenced
by the Notes are subordinated in right of payment, to the extent and in the
manner provided in this Article 10, to the prior payment in full in cash
of all Senior Debt (whether outstanding on the Effective Date or created,
incurred, assumed or guaranteed thereafter), and that the subordination is for
the benefit of the holders of Senior Debt of the Company.

 

Section 10.02.                  Liquidation;
Dissolution; Bankruptcy.

 

The holders of Senior
Debt of the Company will be entitled to receive payment in full in cash of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any bankruptcy proceeding at the rate that would be applicable
under the terms of the documentation governing the applicable Senior Debt and
other reasonable fees, costs or charges provided for under the applicable
Senior Debt which would accrue and become due under the terms of the applicable
Senior Debt but for the commencement of any case in bankruptcy, in each case as
to such interest or other amounts whether or not allowed or allowable in whole
or in part in such case) before the Holders of Notes will be entitled to
receive any payment (by setoff or otherwise) with respect to the Notes:

 

F-96

 

(a)                                  in
a liquidation or dissolution of the Company;

 

(b)                                 in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property;

 

(c)                                  in
an assignment for the benefit of the Company’s creditors; or

 

(d)                                 in
any marshaling of the Company’s assets and liabilities,

 

and, if any of the
foregoing shall have occurred, until all Obligations with respect to Senior
Debt are paid in full in cash, any payment or distribution to which the Holders
of Notes would be entitled shall be made to the holders of Senior Debt (except
that Holders of Notes may receive and retain Permitted Junior Securities and
payments made from any trust created pursuant to Section 8.04 or Article 13
hereof).

 

Section 10.03.                  Default
On Designated Senior Debt.

 

(a)                                  The
Company shall not make any payment (by setoff or otherwise) in respect of the
Notes (except in Permitted Junior Securities or from the trust created pursuant
to Section 8.04 or Article 13 hereof) if (i) a default in the
payment of the principal or premium, if any, or interest on Designated Senior
Debt occurs and is continuing beyond any applicable grace period or (ii) any
other default occurs and is continuing with respect to Designated Senior Debt
that permits holders of the Designated Senior Debt to accelerate its maturity,
and the Trustee receives a notice of such default (a “Payment Blockage Notice”)
from the holders of any Designated Senior Debt or any agent or trustee for such
holders.  Payments on the Notes may and
shall be resumed (a) in the case of a payment default, upon the date on which
such default is cured or waived and (b) in case of a nonpayment default, the
earlier of the date on which such nonpayment default is cured or waived or 179
days after the date on which the applicable Payment Blockage Notice is
received, unless a payment default has occurred and is continuing (as a result
of the maturity of any Designated Senior Debt having been accelerated).  No new period of payment blockage (other than
for a payment default) may be commenced unless and until (i) 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, premium, if any, and
interest on the Notes that have come due have been paid in full in cash.  No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of not
less than 90 days.

 

(b)                                 Whenever
the Company is prohibited from making any payment in respect of the Notes, the
Company also shall be prohibited from making, directly or indirectly, any
payment of any kind on account of the purchase or other acquisition of the
Notes.  If any Holder receives any
payment or distribution that such Holder is not entitled to receive with
respect to the Notes, such Holder shall be required to pay the same over to the
holders of Designated Senior Debt or, in the event there are not any such
holders, to the holders of Senior Debt, or any representative of such holders
under the indenture or other agreement (if any) pursuant to which such
Designated Senior Debt or Senior Debt, as the case may be, may have been issued
(the “Representative”).

 

F-97

 

Section 10.04.                  Acceleration
of Notes.

 

If payment of the Notes
is accelerated because of an Event of Default, the Company shall promptly
notify holders of Senior Debt of the acceleration.

 

Section 10.05.                  When
Distribution Must Be Paid Over.

 

(a)                                  In
the event that the Trustee or any Holder of a Note receives any payment
(including a payment by a Guarantor under its Note Guarantee) of any
Obligations with respect to the Notes (other than Permitted Junior Securities
and payments made from any trust created pursuant to Section 8.04 or Article 13
hereof) at a time when the Trustee or such Holder, as applicable, has actual
knowledge that such payment is prohibited by Section 10.03 hereof, such
payment shall be held by the Trustee or such Holder, in trust for the benefit
of, and shall be paid forthwith over and delivered, upon written request, to,
the holders of Designated Senior Debt or, in the event there are not any such
holders, to the holders of Senior Debt, in each case as their interests may
appear, or their respective Representative, as their respective interests may
appear, for application to the payment of all Obligations with respect to such
Designated Senior Debt or such Senior Debt, as the case may be, remaining
unpaid to the extent necessary to pay such Obligations in full in accordance
with their terms, after giving effect to any concurrent payment or distribution
to or for the holders of such Designated Senior Debt or such Senior Debt, as
the case may be.

 

(b)                                 With
respect to the holders of Designated Senior Debt and Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Designated Senior Debt or Senior
Debt shall be read into this Indenture against the Trustee.  The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Designated Senior Debt or Senior Debt and
shall not be liable to any such holders if the Trustee shall pay over or
distribute to or on behalf of Holders of the Notes or the Company or any other
Person money or assets to which any holders of Designated Senior Debt or Senior
Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of
the Trustee.

 

Section 10.06.                  Notice
by the Company.

 

The Company shall
promptly notify the Trustee and the Paying Agent of any facts known to the
Company that would cause a payment of any Obligations with respect to the Notes
to violate this Article 10, but failure to give such notice shall not
affect the subordination of the Notes to the Senior Debt as provided in this Article 10.

 

Section 10.07.                  Subrogation.

 

After all Senior Debt is
paid in full in cash and all commitments to make loans under such Senior Debt
have been terminated and until the Notes are paid in full, Holders of the Notes
shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of
Senior Debt to receive distributions applicable to Senior Debt to the extent
that distributions otherwise payable to the Holders of the Notes have been
applied to the payment of Senior Debt.  A
distribution made under this Article 10 to holders of Senior Debt that

 

F-98

 

otherwise would have been
made to Holders of the Notes is not, as between the Company and Holders of the
Notes, a payment by the Company on the Notes.

 

Section 10.08.                  Relative
Rights.

 

(a)                                  This
Article 10 defines the relative rights of Holders of the Notes and holders
of Senior Debt.  Nothing in this
Indenture shall:

 

(i)            impair,
as between the Company and Holders of the Notes, the obligations of the Company,
which are absolute and unconditional, to pay principal of and interest on the
Notes in accordance with their terms;

 

(ii)           affect
the relative rights of Holders of the Notes and creditors of the Company other
than their rights in relation to holders of Senior Debt; or

 

(iii)          prevent
the Trustee or any Holder of the Notes from exercising its available remedies
upon a Default or Event of Default, subject to the rights of holders of Senior
Debt to receive distributions and payments otherwise payable to Holders of the
Notes.

 

(b)                                 If
the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.

 

Section 10.09.                  Subordination
May Not Be Impaired by the Company.

 

No right of any holder of
Senior Debt to enforce the subordination of the Indebtedness evidenced by the
Notes shall be impaired by any act or failure to act by the Company, any
Subsidiary of the Company, the Trustee or any Holder or by the failure of the
Company, any Subsidiary of the Company, the Trustee or any Holder to comply
with this Indenture.

 

Section 10.10.                  Distribution
or Notice of Representative.

 

(a)                                  Whenever
a distribution is to be made or a notice given to holders of Designated Senior
Debt or Senior Debt, as the case may be, the distribution may be made and the
notice given to the Representative of such holders.

 

(b)                                 Upon
any payment or distribution of assets of the Company referred to in this Article 10,
the Trustee and the Holders of the Notes shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders of the
Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.

 

F-99

 

Section 10.11.                  Rights
of Trustee and Paying Agent.

 

(a)                                  Notwithstanding
the provisions of this Article 10 or any other provision of this Indenture,
the Trustee shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment or distribution by the Trustee,
and the Trustee and the Paying Agent may continue to make payments on the
Notes, unless the Trustee shall have received at its Corporate Trust Office at
least three Business Days prior to the date of such payment written notice of
facts that would cause the payment of any Obligations with respect to the Notes
to violate this Article 10.  Only the
Company or a Representative may give the notice.  Nothing in this Article 10 shall impair
or subordinate the claims of or payments to, the Trustee under or pursuant to Section 7.07
hereof.

 

(b)                                 The
Trustee in its individual or any other capacity may hold Senior Debt with the
same rights it would have if it were not Trustee.  Any Agent may do the same with like rights.

 

Section 10.12.                  Authorization
to Effect Subordination.

 

Each Holder of a Note by
the Holder’s acceptance thereof authorizes and directs the Trustee on the
Holder’s behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article 10, and appoints
the Trustee to act as the Holder’s attorney-in-fact for any and all such
purposes.  If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration
of the time of such claim, the Representatives of the Designated Senior Debt,
including the Credit Agent, are hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Notes.

 

Section 10.13.                  Amendments.

 

Any amendment to the
provisions of this Article 10 shall require the consent of (a) the
Holders of a majority in principal amount of the then outstanding Notes if such
amendment would adversely affect the rights of the Holders of Notes and (b) the
holders of Senior Debt if such amendment would adversely affect the rights of
the holders of such Senior Debt then outstanding (or any group or
representative thereof authorized to give such consent).

 

Section 10.14.                  Reliance
by Holders of Senior Debt on Subordination Provisions.

 

Each Holder by accepting
a Note acknowledges and agrees that the foregoing subordination provisions are,
and are intended to be, an inducement and a consideration to each holder of any
Senior Debt, whether such Senior Debt was created or acquired before or after
the issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Debt and such holder of such Senior Debt shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Debt.

 

F-100

 

ARTICLE 11

COLLATERAL AND SECURITY

 

Section 11.01.                  Security
Documents.

 

The due and punctual
payment of the principal of and interest on the Notes when and as the same
shall be due and payable, whether on an interest payment date, at maturity, by
acceleration, repurchase, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes and performance of all other obligations
of the Company and the Guarantors to the Holders or the Trustee under this
Indenture, the Notes and the Note Guarantees, according to the terms hereunder
or thereunder, are secured as provided in the Security Documents which the
Company and the Guarantors have entered into prior to and simultaneously with
the execution of this Indenture, subject to the terms of the Intercreditor
Agreement.  Each Holder, by its
acceptance thereof, consents and agrees to the terms of the Security Documents
and the Intercreditor Agreement (including the provisions providing for
foreclosure and release of Collateral) as the same may be in effect or may be
amended from time to time in accordance with the terms thereof and authorizes
and directs the Collateral Agent to enter into the Security Documents and the
Intercreditor Agreement and other documents referenced in the Intercreditor
Agreement in connection therewith, confirms and ratifies each prior entry by
the Collateral Agent into any Security Documents and the Intercreditor
Agreement executed prior to the date hereof, and authorizes and directs the
Collateral Agent to perform its obligations and exercise its rights thereunder
in accordance therewith.  The Company and
the Guarantors shall deliver to the Trustee (if it is not itself then the
Collateral Agent) copies of all documents delivered to the Collateral Agent pursuant
to the Security Documents, and will do or cause to be done all such acts and
things as may be required by the next sentence of this Section 11.01, to
assure and confirm to the Trustee and the Collateral Agent the security
interest in the Collateral contemplated hereby, by the Security Documents or
any part thereof, as from time to time constituted, so as to render the same
available for the security and benefit of this Indenture and of the Notes
secured hereby, according to the intent and purposes herein expressed.  Each of the Company and the Guarantors shall
take, and shall cause the Restricted Subsidiaries to take, any and all actions
reasonably required to cause the Security Documents to create and maintain, as
security for the Obligations of the Company and the Guarantors hereunder, a
valid and enforceable perfected second-priority Lien and security interest in
and on all the Collateral, in favor of the Collateral Agent for the benefit of
the Holders, second in priority (subject to Collateral Permitted Liens) to any
and all security interests at any time granted in the Collateral to secure the
First-Lien Obligations.

 

Section 11.02.                  Release
of Collateral.

 

(a)                                  Subject
to paragraphs (b), (c) and (d) of this Section 11.02, Collateral may be
released from the Lien and security interest created by the Security Documents
at any time or from time to time in accordance with the provisions of the
Security Documents, the Intercreditor Agreement, or as provided hereby.  Whether prior to or after the Discharge of
First-Lien Obligations, upon the request of the Company pursuant to an Officer’s
Certificate certifying that all conditions precedent hereunder have been met
and without the consent of any Holder, the Company and the Guarantors will be
entitled to releases of assets included in the Collateral from the Liens
securing the Notes under any one or more of the following circumstances:

 

F-101

 

(i)                                     if
all other Liens on that asset securing Obligations under First-Lien Obligations
and any Other Second-Lien Obligations then secured by that asset (including all
commitments thereunder) are released; provided, that after giving effect to the
release, obligations secured by the first-priority Liens on the remaining Collateral
remain outstanding;

 

(ii)           to
enable the Company or Guarantors to consummate any sale, lease, conveyance or
other disposition of any assets or rights permitted or not prohibited under Section 4.10
hereof;

 

(iii)          if
the Company or any Guarantor, as the case may be, provides substitute
collateral with at least an equivalent fair value, as determined in good faith
by its Board of Directors;

 

(iv)                              in
respect of assets subject to a Lien securing purchase money Indebtedness
permitted under Section 4.09(b) hereof;

 

(v)                                 if
any Guarantor is released from its Note Guarantee, any of its assets comprising
Collateral will also be released;

 

(vi)                              in
respect of assets included in the Collateral with a fair value, as determined
in good faith by the Board of Directors, of up to $2.0 million in any calendar year, subject to a cumulative carryover
for any amount not used in any prior calendar year; or

 

(vii)                           pursuant
to an amendment, waiver or supplement in accordance with Article 9 hereof.

 

Upon receipt of such
Officer’s Certificate, the Collateral Agent shall execute, deliver or
acknowledge any necessary or proper instruments of termination, satisfaction or
release to evidence the release of any Collateral permitted to be released
pursuant to this Indenture or the Security Documents.

 

(b)                                 Except
as otherwise provided in the Intercreditor Agreement, no Collateral may be
released from the Lien and security interest created by the Security Documents
pursuant to the provisions of the Security Documents unless the Officer’s Certificate
required by this Section 11.02 has been delivered to the Collateral Agent.

 

(c)                                  At
any time when a Default or Event of Default has occurred and is continuing and
the maturity of the Notes has been accelerated (whether by declaration or
otherwise) and the Trustee has delivered a notice of acceleration to the
Collateral Agent, no release of Collateral pursuant to the provisions of the
Security Documents will be effective as against the Holders, except as
otherwise provided in the Intercreditor Agreement.

 

Section 11.03.                  Certificates
of the Trustee.

 

In the event that the
Company or any Guarantor wishes to release Collateral in accordance with the
Security Documents at a time when the Trustee is not itself also the

 

F-102

 

Collateral Agent and has
delivered the certificates and documents required by the Security Documents and
Section 11.02 hereof, the Trustee will determine whether it has received
all documentation required hereunder in connection with such release and, based
on such determination, will deliver a certificate to the Collateral Agent
setting forth such determination.

 

Section 11.04.                  Authorization
of Actions to Be Taken by the Trustee Under the Security Documents.

 

Subject to the provisions
of Section 7.01 and Section 7.02 hereof and the Intercreditor
Agreement, the Trustee may, in its sole discretion and without the consent of
the Holders, direct, on behalf of the Holders, the Collateral Agent to, take
all actions it deems necessary or
appropriate in order to:

 

(a)                                  enforce
any of the terms of the Security Documents; and

 

(b)                                 collect
and receive any and all amounts payable in respect of the Obligations of the
Company hereunder.

 

Subject to the provisions
of the Intercreditor Agreement, the Trustee will have power to institute and
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or in violation
of the Security Documents or this Indenture, and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Collateral (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance with
any legislative 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 interest
hereunder or be prejudicial to the interests of the Holders or of the Trustee).

 

Section 11.05.                  Authorization
of Receipt of Funds by the Trustee Under the Security Documents.

 

The Trustee is authorized
to receive any funds for the benefit of the Holders distributed under the
Security Documents and the Intercreditor Agreement, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture.

 

Section 11.06.                  Termination
of Security Interest.

 

The Trustee will, at the
request of the Company, deliver a certificate to the Collateral Agent stating
that the Obligations under the Transaction Documents have been paid in full,
and instruct the Collateral Agent to release the Liens pursuant to this
Indenture and the Security Documents upon (a) payment in full of the principal
of and accrued and unpaid interest on the Notes and all other Obligations under
the Transaction Documents that are due and payable at or prior to the time such
principal and accrued and unpaid interest are paid, (b) satisfaction and
discharge of this Indenture as described in Article 8 or (c) legal
defeasance or covenant defeasance as described in Article 8.  Upon receipt of such instruction, the
Collateral Agent shall execute, deliver or acknowledge any necessary or proper
instruments of termination, satisfaction or release to evidence the release of
all such Liens.

 

F-103

 

Section 11.07.                  Collateral
Agent.

 

(a)                                  The
Trustee shall act as Collateral Agent and shall be authorized to appoint
co-Collateral Agents as necessary in its sole discretion. Except as otherwise
explicitly provided herein or in the Security Documents, neither the Collateral
Agent nor any of its respective officers, directors, employees or agents shall
be liable for failure to demand, collect or realize upon any of the Collateral
or for any delay in doing so or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of any other Person or to
take any other action whatsoever with regard to the Collateral or any part
thereof.  The Collateral Agent shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither the Collateral Agent nor any of its
officers, directors, employees or agents shall be responsible for any act or
failure to act hereunder, except for its own willful misconduct, negligence or
bad faith.

 

(b)                                 The
Trustee, as Collateral Agent, is authorized and directed to (i) enter into the
Security Documents, (ii) enter into the Intercreditor Agreement, (iii) bind the
Holders on the terms as set forth in the Security Documents and the
Intercreditor Agreement and (iv) perform and observe its obligations under the
Security Documents and the Intercreditor Agreement.

 

(c)                                  If
the Company (i) incurs Indebtedness constituting Senior Debt at any time when
no Intercreditor Agreement is in effect or at any time when Indebtedness
constituting First-Lien Obligations entitled to the benefit of an existing
Intercreditor Agreement is concurrently retired, and (ii) delivers to the
Collateral Agent an Officer’s Certificate so stating and designating such
Senior Debt as First-Lien Obligations and requesting the Collateral Agent to
enter into an Intercreditor Agreement in favor of a designated agent or
representative for the holders of the Indebtedness so incurred, the Collateral
Agent shall (and is hereby authorized and directed to) enter into such
Intercreditor Agreement and other documents referenced in the Intercreditor
Agreement in connection therewith, bind the Holders on the terms set forth
therein, and perform and observe its obligations thereunder.

 

(d)                                 If
(i) the Company at any time incurs any Indebtedness constituting Other
Second-Lien Obligations, (ii) the indenture or agreement governing such
Indebtedness provides that, notwithstanding the date, manner or order of grant,
attachment or perfection of any Liens granted to the Collateral Agent under the
Security Documents (the “Liens Securing Note Obligations”) or granted to the
holders of Other Second-Lien Obligations or any agent or representative for the
holders of Other Second-Lien Obligations (the “Liens Securing Other Second-Lien
Obligations”), the Liens Securing Note Obligations and the Liens Securing Other
Second-Lien Obligations shall be of equal dignity, priority and rank, (iii) the
Company delivers to the Collateral Agent an Officer’s Certificate so stating
and requesting that the Collateral Agent serve as collateral agent and enter
into security documents with respect thereto and (iv) the Company delivers to
the Collateral Agent an Opinion of Counsel stating that, in the opinion of such
counsel, the Collateral Agent is empowered and obligated (on substantially the
terms applicable to the Collateral Agent pursuant to the Indenture Documents)
to hold the Liens Securing Note Obligations and all Liens Securing Other-Second
Lien Obligations and all proceeds of all such Liens for the equal and ratable
benefit of the holders of all Obligations secured thereby, giving effect to the
assignment or transfer requested in such Officer’s Certificate, then (A) the
Liens Securing Note Obligations shall be of equal dignity, priority and rank
with all such Liens

 

F-104

 

Securing Other
Second-Lien Obligations and (B) the Collateral Agent shall enter into such
security documents as requested in such Officer’s Certificate.

 

Section 11.08.                  Designations.

 

For purposes of the
provisions hereof and the Intercreditor Agreement requiring the Company to
designate Indebtedness for the purposes of the terms “First-Lien Obligations,” “Other
Second-Lien Obligations” or any other such designations hereunder or under the
Intercreditor Agreement, any such designation shall be sufficient if the
relevant designation is set forth in writing, signed on behalf of the Company
by an Officer and delivered to the Trustee, the Collateral Agent and the Credit
Agent.

 

ARTICLE 12

NOTE GUARANTEES

 

Section 12.01.                  Note
Guarantees.

 

(a)                                  Subject
to Section 12.05 hereof, each Guarantor hereby unconditionally guarantees
to each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Notes and the Obligations of the Company
hereunder and thereunder, that: 
(i) the principal of, premium, if any, and interest on the Notes
will be promptly paid in full when due, subject to any applicable grace period,
whether at maturity, by acceleration, redemption or otherwise, and interest on
the overdue principal, premium, if any, (to the extent permitted by law) and
interest on any interest, if any, on the Notes, and all other payment
Obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full and performed, all in accordance with
the terms hereof and thereof; and (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other Obligations, the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration, redemption or otherwise.  Failing payment when so due of any amount so
guaranteed for whatever reason each Guarantor will be obligated to pay the same
immediately.  An Event of Default under
this Indenture or the Notes shall constitute an event of default under the Note
Guarantees, and shall entitle the Holders to accelerate the Obligations of the
Guarantors hereunder in the same manner and to the same extent as the
Obligations of the Company.

 

(b)                                 Each
Guarantor hereby agrees that its Obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Indenture or by release in accordance with the provisions of this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of such Guarantor.  Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice
and all demands whatsoever and covenants that its Note Guarantee will not be
discharged except by complete performance of the Obligations contained in the Notes
and this Indenture.  If any Holder or the
Trustee is required

 

F-105

 

by any court or otherwise
to return to the Company, the Guarantors, or any Note Custodian, Trustee,
liquidator or other similar official acting in relation to either the Company
or the Guarantors, any amount paid by either to the Trustee or such Holder, the
Note Guarantees, to the extent theretofore discharged, shall be reinstated in
full force and effect.  Each Guarantor
agrees that it shall not be entitled to, and hereby waives, any right of
subrogation in relation to the Holders in respect of any Obligations guaranteed
hereby.

 

(c)                                  Each
Guarantor further agrees that, as between such Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (i) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article 6
for the purposes of the Note Guarantees, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations
(whether or not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of the Note Guarantees.

 

(d)                                 The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Note Guarantee.

 

Section 12.02.                  Execution
and Delivery of the Note Guarantees.

 

(a)                                  To
evidence the Note Guarantees set forth in Section 12.01, each Guarantor
hereby agrees that a notation of its Note Guarantee substantially in the form
of Exhibit B shall be endorsed by an Officer of such Guarantor on each
Note authenticated and delivered by the Trustee and that this Indenture shall
be executed on behalf of such Guarantor, by manual or facsimile signature,by an Officer of such Guarantor.

 

(b)                                 Each
Guarantor hereby agrees that its Note Guarantee set forth in Section 12.01
shall remain in full force and effect notwithstanding any failure to endorse on
each Note a notation of such Note Guarantee.

 

(c)                                  If
an Officer whose signature is on this Indenture or on a Note Guarantee no
longer holds that office at the time the Trustee authenticates the Note on
which such Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.

 

(d)                                 The
delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Note Guarantees set forth in
this Indenture on behalf of the Guarantors.

 

(e)                                  In
the event that the Company or any of its Restricted Subsidiaries creates or
acquires any Subsidiary after the date of this Indenture, if required by Section 4.17
hereof, the Company shall cause such Subsidiary to comply with the provisions
of Section 4.17 hereof and this Article 12, to the extent applicable.

 

F-106

 

Section 12.03.                  Guarantors
May Consolidate, etc., on Certain Terms

 

(a)                                  Except
as set forth in Article 4 and Article 5 hereof, nothing contained in
this Indenture shall prohibit any consolidation or merger of a Guarantor with
or into the Company or another Guarantor, or shall prevent any sale or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety
to the Company or another Guarantor.

 

(b)                                 Subject
to Section 12.04 hereof, no Guarantor may consolidate with or merge with
or into (whether or not the Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with the Guarantor
unless, subject to the provisions of the following paragraph, (i) the Person
formed by or surviving any such consolidation or merger (if other than the Guarantor)
assumes all the obligations of the Guarantor pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee, under
this Indenture and the Note Guarantee; and (ii) immediately after giving effect
to such transaction, no Default or Event of Default exists.

 

(c)                                  In
the case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and in a form reasonably satisfactory to the Trustee,
of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor.  Such successor
Person thereupon may cause to be signed the Note Guarantee to be endorsed upon
all of the Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee.  Any Note Guarantee so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Note
Guarantee theretofore and thereafter issued in accordance with the terms of
this Indenture as though such Note Guarantee had been issued at the date of the
execution hereof.

 

Section 12.04.                  Releases
of Note Guarantees.

 

The Note Guarantee of
each Guarantor shall be released:

 

(i)                                     in
connection with any sale or other disposition of all or substantially all of
the assets of that Guarantor (including by way of merger or consolidation) to a
Person that is not (either before or after giving effect to such transaction)
the Company or a Restricted Subsidiary of the Company, if the sale or other
disposition does not violate Section 4.10 hereof;

 

(ii)                                  in
connection with any sale or other disposition of all of the Capital Stock of
that Guarantor to a Person that is not (either before or after giving effect to
such transaction) the Company or a Restricted Subsidiary of the Company, if the
sale or other disposition does not violate Section 4.10 hereof;

 

(iii)                               if
the Company designates any Restricted Subsidiary that is a Guarantor to be an
Unrestricted Subsidiary;

 

F-107

 

(iv)                              if
that Guarantor is released from its Guarantee under the Black Canyon Credit
Facility;

 

(v)                                 if
that Guarantor is designated as a Non-Guarantor Subsidiary in accordance with
the definition of Non-Guarantor Subsidiary; or

 

(vi)                              upon
legal defeasance in accordance with Article 8 hereof or satisfaction and
discharge in accordance with Article 13 hereof.

 

If any Guarantor is
released from its Note Guarantee, any of its Subsidiaries that are Guarantors
shall be released from their Note Guarantees, if any.

 

Section 12.05.                  Limitation
on Guarantor Liability.

 

Each Guarantor, and by
its acceptance of Notes, each Holder, hereby confirms that it is the intention
of all such parties that the Note Guarantee of each Guarantor not constitute a
fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal or state law to the extent applicable to such Note Guarantee.  To effectuate the foregoing intention, the
Trustee, the Holders and the Guarantors hereby irrevocably agree that the
obligations of each Guarantor shall be limited to the maximum amount that
shall, after giving effect to such maximum amount and all other contingent and
fixed liabilities of such Guarantor that are relevant under such laws and after
giving effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article 12, result in the
obligations of such Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.

 

Section 12.06.                  “Trustee”
to Include Paying Agent.

 

In case at any time any
Paying Agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term “Trustee” as used in this Article 12
shall in each case (unless the context shall otherwise require) be construed as
extending to and including such Paying Agent within its meaning as fully and
for all intents and purposes as if such Paying Agent were named in this Article 12
in place of the Trustee.

 

Section 12.07.                  Subordination
of Note Guarantees.

 

The Obligations of each
Guarantor under its Note Guarantee pursuant to this Article 12 shall be
junior and subordinated to the Senior Debt of such Guarantor on the same basis
as the Notes are junior and subordinated to the Senior Debt of the
Company.  For the purposes of the
foregoing sentence, the Trustee and the Holders shall have the right to receive
and/or retain payments by any of the Guarantors only at such times as they may
receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article 12 hereof.

 

F-108

 

ARTICLE 13

SATISFACTION AND DISCHARGE

 

Section 13.01.                  Satisfaction
and Discharge.

 

(a)                                  This
Indenture shall be discharged and shall cease to be of further effect as to all
Notes issued hereunder, when:

 

(i)                                     either:

 

(A)                              all
Notes that have been authenticated, except lost, stolen or destroyed Notes that
have been replaced or paid and Notes for which payment money has theretofore
been deposited in trust and thereafter repaid to the Company, have been
delivered to the Trustee for cancellation; or

 

(B)                                all
Notes that have not been delivered to the Trustee for cancellation have become
due and payable by reason of the mailing of a notice of redemption or otherwise
or shall become due and payable within one year and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust solely for the benefit of the Holders, cash in U.S.
dollars, non-callable Government Securities, or a combination of cash in U.S.
dollars and non- callable Government Securities, in amounts as shall be
sufficient, without consideration of any reinvestment of interest, to pay and
discharge the entire Indebtedness on the Notes not delivered to the Trustee for
cancellation for principal, premium, if any, and accrued interest to the date
of maturity or redemption;

 

(ii)                                  no
Default or Event of Default has occurred and is continuing on the date of the
deposit (other than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit) and the deposit shall not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company or any Guarantor is a party or by which the Company or any
Guarantor is bound;

 

(iii)                               the
Company or any Guarantor has paid or caused to be paid all sums payable by it
under this Indenture; and

 

(iv)                              the
Company has delivered irrevocable instructions to the Trustee under this
Indenture to apply the deposited money toward the payment of the Notes at
maturity or on the redemption date, as the case may be.

 

(b)                                 In
addition, the Company must deliver an Officer’s Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction
and discharge have been satisfied.

 

F-109

 

(c)                                  Notwithstanding
the satisfaction and discharge of this Indenture, if money has been deposited
with the Trustee pursuant to clause (B) of Section 13.01(a), the
provisions of Section 13.02 and Section 8.06 shall survive.  In addition, nothing in this Section 13.01
shall be deemed to discharge those provisions of Section 7.07 hereof,
that, by their terms, survive the satisfaction and discharge of this Indenture.

 

Section 13.02.                  Application
of Trust Money.

 

(a)                                  Subject
to the provisions of Section 8.06 hereof, all money deposited with the
Trustee pursuant to Section 13.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent (including
the Company acting as its own Paying Agent) as the Trustee may determine, to
the Persons entitled thereto, of the principal (and premium, if any) and
interest for whose payment such money has been deposited with the Trustee; but
such money need not be segregated from other funds except to the extent
required by law.

 

(b)                                 To
the extent that and so long as the Trustee or Paying Agent is unable to apply
any money or Government Securities in accordance with Section 13.01 hereof
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company’s and any Guarantor’s obligations under this
Indenture, the Notes and the Note Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to Section 13.01 hereof; provided,
however, that if the
Company has made any payment of principal of, premium, if any, or interest on
any Notes following the reinstatement of their obligations, the Company shall
be subrogated to the rights of the Holders of such Notes to receive such
payment from the money or Government Securities held by the Trustee or Paying
Agent.

 

ARTICLE 14

MISCELLANEOUS

 

Section 14.01.                  Trust
Indenture Act.

 

This Indenture shall in
no event be qualified under the TIA.

 

Section 14.02.                  Notices.

 

(a)                                  Any
notice or communication by the Company, any Guarantor or the Trustee to the
others is duly given if in writing and delivered in person or mailed by first
class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery:

 

If to the Company and/or
any Guarantor, to:

 

J. Crew Operating Corp.

770 Broadway

New York, New York 10003

Telecopier No.:  (212) 209-2666

Attention:  Chief Financial Officer

 

F-110

 

With a copy to:

 

Cleary Gottlieb, Steen
& Hamilton

One Liberty Plaza

New York, New York 10006

Telecopier No.:  (212) 225-3999

Attention:  Michael L. Ryan

 

If to the Trustee, to:

 

U.S. Bank National
Association

Goodwin Square

225 Asylum Street

Hartford, Connecticut 06103

 

(b)                                 The
Company, any Guarantor or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.

 

(c)                                  All
notices and communications (other than those sent to Holders) shall be deemed
to have been duly given:  at the time
delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, postage prepaid, if mailed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.

 

(d)                                 Any
notice or communication to a Holder shall be mailed by first class mail or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. 
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.

 

(e)                                  If
a notice or communication is mailed in the manner provided above within the
time prescribed, it is duly given, whether or not the addressee receives it.

 

(f)                                    If
the Company mails a notice or communication to Holders, it shall mail a copy to
the Trustee and each Agent at the same time.

 

(g)                                 Any
notice or communication delivered to the Company under the provisions herein
shall constitute notice to the Guarantors.

 

Section 14.03.                  Certificate
and Opinion as to Conditions Precedent.

 

Upon any request or
application by the Company or the Guarantor to the Trustee to take any action
under this Indenture (other than the initial issuance of the Notes), the
Company or the Guarantors shall furnish to the Trustee upon request:

 

(i)                                     an
Officer’s Certificate in form and substance reasonably satisfactory to the
Trustee (which shall include the statements set forth in Section 14.04
hereof) stating that, in the opinion of the signers, all conditions precedent

 

F-111

 

and covenants, if any,
provided for in this Indenture relating to the proposed action have been
satisfied; and

 

(ii)                                  an
Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
(which shall include the statements set forth in Section 14.04 hereof)
stating that, in the opinion of such counsel, all such conditions precedent and
covenants have been satisfied.

 

Section 14.04.                  Statements
Required in Certificate or Opinion.

 

Each certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Indenture shall include:

 

(i)                                     a
statement that the Person making such certificate or opinion has read such
covenant or condition;

 

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

 

(iii)                               a
statement that, in the opinion of such Person, he or she has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and

 

(iv)                              a
statement as to whether or not, in the opinion of such Person, such condition
or covenant has been satisfied.

 

Section 14.05.                  Rules
by Trustee and Agents.

 

The Trustee may make
reasonable rules for action by or at a meeting of Holders.  The Registrar or Paying Agent may make
reasonable rules and set reasonable requirements for its functions.

 

Section 14.06.                  No
Personal Liability of Directors, Officers, Employees, Organizers and Members.

 

No director, officer,
employee, incorporator, stockholder, member or other holders of Equity
Interests of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or the Guarantors under this Indenture, the
Notes or the Note Guarantees or for any claim based on, in respect of, or by
reason of, such obligations or their creation. 
Each Holder of Notes by accepting a Note waives and releases all such
liability.  The waiver and release are
part of the consideration for issuance of the Notes.  The waiver may not be effective to waive
liabilities under the federal securities laws.

 

F-112

 

Section 14.07.                  Governing
Law.

 

THE INTERNAL LAW OF THE
STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE
NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.

 

Section 14.08.                  No
Adverse Interpretation of Other Agreements.

 

This Indenture may not be
used to interpret any other indenture, loan or debt agreement of the Company or
its Subsidiaries or of any other Person. 
Any such indenture, loan or debt agreement may not be used to interpret
this Indenture.

 

Section 14.09.                  Successors.

 

All agreements of the
Company in this Indenture and the Notes shall bind its successors.  All agreements of the Trustee in this
Indenture shall bind its successors.  All
agreements of each Guarantor in this Indenture shall bind its successors,
except as otherwise provided in Section 12.03.

 

Section 14.10.                  Severability.

 

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

 

Section 14.11.                  Counterpart
Originals.

 

The parties may sign any
number of copies of this Indenture.  Each
signed copy shall be an original, but all of them together represent the same
agreement.

 

Section 14.12.                  Table
of Contents, Headings, Etc.

 

The Table of Contents and
Headings of the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part of this
Indenture and shall in no way modify or restrict any of the terms or provisions
hereof.

 

Section 14.13.                  Entire
Agreement.

 

The Transaction Documents
constitute the entire agreement among the parties hereto and supersede any
prior understandings, agreements or representations by or among such parties,
written or oral, that may have related in any way to the subject matter hereof.

 

[Signatures on
following page]

 

F-113

 

SIGNATURES

 

 

	
  Dated as of 

  	
   

  	
   

  	
   

  
	
   

  
	
   

  	
  J. CREW OPERATING CORP.

  
	
   

  	
  as
  Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J. CREW INTERMEDIATE
  LLC

  
	
   

  	
  as
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRACE HOLMES, INC.
  d/b/a

  
	
   

  	
  J. CREW RETAIL

  
	
   

  	
  as
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  H.F.D. NO 55, INC.
  d/b/a J. CREW

  
	
   

  	
  FACTORY

  
	
   

  	
  as
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

F-114

 

	
   

  	
  J. CREW, INC.

  
	
   

  	
  as
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J. CREW INTERNATIONAL,
  INC.

  
	
   

  	
  as
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. Bank National
  Association

  
	
   

  	
  as
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

F-115

 

EXHIBIT A

 

FORM OF NOTE

 

[Include
the following legend for Global Notes only:

 

“THIS IS A GLOBAL NOTE
WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER.

 

UNLESS THIS CERTIFICATE
IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES
OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE
REVERSE HEREOF.”]

 

[Include
the following legend on all Notes that are Restricted Notes:

 

“THIS NOTE AND ANY
RELATED NOTE GUARANTEE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER, OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF, THE SECURITIES ACT, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION AND
IN ACCORDANCE WITH THE TRANSFER RESTRICTIONS CONTAINED IN THE INDENTURE UNDER
WHICH THIS NOTE AND ANY RELATED GUARANTEE WAS ISSUED.  IN CONNECTION WITH ANY TRANSFER, THE HOLDER
WILL DELIVER TO THE REGISTRAR SUCH OPINIONS OF COUNSEL, CERTIFICATES AND/OR
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE IN FORM REASONABLY SATISFACTORY
TO IT AS PROVIDED FOR IN THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIED
WITH THE FOREGOING RESTRICTIONS AS PROVIDED FOR IN THE INDENTURE.”]

 

F-116

 

[FORM OF FACE OF
NOTE] 

93⁄4% Senior Subordinated Notes due 2014

 

	
  No.___

  	
   

  	
  Principal Amount
  $___________

  

 

 

[If the
Note is a Global Note include the following two lines:

as revised by the Schedule of
Increases and

Decreases in Global Note attached hereto]

[CUSIP][ISIN] NO. ________]

 

J. CREW OPERATING CORP.,
a Delaware corporation, promises to pay to _________ or registered assigns, the
principal amount of ____________ Dollars ($______) [If the Note
is a Global Note, add the following: as revised by the Schedule of Increases and Decreases in
Global Note attached hereto] on [_____], 2014.

 

	
  Interest Payment Dates:

  	
   

  	
  [_____] and [_____]

  
	
   

  	
   

  	
   

  
	
  Record Dates:

  	
   

  	
  [_____] and [_____]

  

 

Additional provisions of
this Note are set forth on the other side of this Note, which provisions shall
for all purposes have the same effect as if fully set forth at this place.

 

	
   

  	
  J. CREW OPERATING CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

 

This is one of the 93⁄4%
Senior Subordinated Notes due 2014 referred to in the within-mentioned
Indenture:

 

	
  Dated:

  	
   

  	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
    as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

F-117

 

[FORM OF BACK OF
NOTE]

93⁄4% Senior Subordinated Notes due 2014

 

Capitalized terms used
herein shall have the meanings assigned to them in the Indenture referred to
below unless otherwise indicated.

 

1.                                       INTEREST.

 

J. Crew Operating Corp.,
a Delaware corporation, or its successor (the “Company”), promises to pay
interest on the principal amount of this Note at the rate of 93⁄4% per
annum.  The Company will pay interest in
United States dollars (except as otherwise provided herein) semi-annually in
arrears on [________] and [_________], commencing on [________], 200_, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
“Interest Payment Date”).  Interest on
the Notes shall accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from [__________], 200_; provided
that if there is no existing Default or Event of Default on the payment of
interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date (but after [_______________],
200_), interest shall accrue from such next succeeding Interest Payment Date,
except in the case of the original issuance of Notes, in which case interest
shall accrue from [_____________], 200_. 
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest (without
regard to any applicable grace period) at the same rate to the extent
lawful.  Interest shall be computed on
the basis of a 360-day year comprised of twelve 30-day months.

 

2.                                       METHOD
OF PAYMENT.

 

The Company will pay
interest on the Notes (except defaulted interest) on the applicable Interest
Payment Date to the Persons who are registered Holders of Notes at the close of
business on the [__________] or [__________] next preceding the Interest
Payment Date, even if such Notes are cancelled after such record date and on or
before such Interest Payment Date, except as provided in Section_2.14 of the
Indenture with respect to defaulted interest. 
The Notes shall be payable as to principal, premium and interest at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, or, at the option of the Company, payment of
interest may be made by check mailed to the Holders at their addresses set
forth in the register of Holders; provided that payment by wire transfer
of immediately available funds shall be required with respect to principal of,
premium and interest on, all Global Notes. 
Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.

 

3.                                       PAYING
AGENT AND REGISTRAR.

 

Initially, U.S. Bank
National Association, the Trustee under the Indenture, shall act as Paying
Agent and Registrar.  The Company may
change any Paying Agent or Registrar without

 

F-118

 

notice to any
Holder.  The Company, the Guarantors or
any of the Company’s Subsidiaries may act in any such capacity.

 

4.                                       INDENTURE.

 

The Company issued the
Notes under an Indenture dated as of [         ],
200   (“Indenture”) among the Company, the Guarantors and the
Trustee.  The terms of the Notes include
those stated in the Indenture.  The Notes
are subject to all such terms, and Holders are referred to the Indenture for a
statement of such terms.  The Notes are
subordinated secured Obligations of the Company having an initial aggregate
principal amount of $[     ,000,000].  Subject to the conditions set forth in the
Indenture and without the consent of the Holders, the Company may issue Additional Notes in an aggregate principal
amount not to exceed $[     ,000,000].  All Notes will be treated as a single class
of securities under the Indenture.

 

To guarantee the due and
punctual payment of the principal of and interest on the Notes and all other
amounts payable by the Company under the Indenture and the Notes when and as
the same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Notes and the Indenture, J. Crew
Intermediate LLC and certain Subsidiaries of the Company have unconditionally
guaranteed such obligations pursuant to the terms of the Indenture.  The Note Guarantees will be subject to
release as provided in the Indenture. 
The obligations of any Guarantor in respect of its Note Guarantee will
be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from, rights to receive contributions from or payments made by
or on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under the Indenture, result in the obligations of such Guarantor
under its Note Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law.

 

5.                                       OPTIONAL
REDEMPTION.

 

(a)                                  Optional
Redemption.

 

(i)                                     Prior
to the date which is eighteen (18) months following the Closing Date, the
Company may redeem the Notes, at its option, in whole at any time or in part
from time to time, at a redemption price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date; provided,
however, the Company may, at its option at any time prior to such date,
irrevocably elect to terminate its right to redeem the Notes pursuant to this
clause (i) by delivering a written notice to the Trustee and upon delivering
such notice, the Initial Call Termination Date shall be deemed to have
occurred.

 

(ii)                                  Commencing
from the date which is the fifth anniversary of the Closing Date, the Company may
redeem the Notes, at its option, in whole at any time or in part from time to
time, at the following redemption prices, expressed as percentages of the
principal amount thereof, plus accrued and

 

F-119

 

unpaid interest thereon
to the redemption date, if redeemed during the twelve-month period commencing
on the anniversary of the Closing Date in any year set forth below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2009

  	
   

  	
  104.875

  	
  %

  
	
  2010

  	
   

  	
  102.438

  	
  %

  
	
  2011

  	
   

  	
  101.219

  	
  %

  
	
  2012
  and thereafter

  	
   

  	
  100.0

  	
  %

  

 

(b)                                 Optional
Redemption upon a Change of Control. 
Upon the occurrence of a Change of Control, at any time after the
consummation of the Change of Control Offer in accordance with the provisions
of Section 4.13 and prior to the date which is fifty-four (54) months
following the Closing Date, the Company may redeem the Notes not tendered in
the Change of Control Offer, in whole at any time or in part from time to time,
at the Company’s option at a redemption price equal to 100% of the principal
amount thereof plus the excess of:

 

(i)                                     the
present value at such redemption date of (A) the redemption price of the Notes
on the date which is fifty-four (54) months following the Closing Date (as
determined pursuant to Section 3.07(a)); plus (B) all required remaining
scheduled interest payments due on the Notes through the date which is
fifty-four (54) months following the Closing Date, other than accrued interest
to such redemption date, computed using a discount rate equal to the Treasury
Rate plus 75 basis points per annum discounted on a semi-annual bond equivalent
basis; over

 

(ii)                                  the
principal amount of the Notes on such redemption date; plus

 

accrued and unpaid
interest on the Notes to the redemption date. 
The Treasury Rate shall be calculated by the Company or on behalf of the
Company by such Persons as the Company shall designate (and will not be a duty
or obligation of the Trustee) on the third Business Day preceding the
redemption date and notice thereof shall promptly be given by the Company to
the Trustee.

 

(c)                                  Optional
Redemption upon Equity Offerings.  At
any time prior to the third anniversary of the Initial Call Termination Date,
the Company may, at its option, use the net cash proceeds of one or more Equity
Offerings or a contribution to the common equity capital of the Company from
the net proceeds of one or more Equity Offerings by a direct or indirect parent
of the Company (in each case, other than Excluded Contributions and the net
proceeds of a sale of Designated Preferred Stock) to redeem up to 40% of the
aggregate principal amount of the Notes at a redemption price equal to 109.75%
of the principal amount thereof, plus accrued and unpaid interest thereon to
the date of redemption; provided that the Company shall make such
redemption not more than 90 days after the closing of such Equity Offering or
equity contribution.

 

F-120

 

6.                                       MANDATORY
REDEMPTION.

 

Except as set forth in
paragraph 7 below, the Company shall not be required to make mandatory
redemption or sinking fund payments with respect to the Notes.

 

7.                                       REPURCHASE
AT OPTION OF HOLDER.

 

(a)                                  Upon
the occurrence of a Change of Control, each Holder of Notes will have the right
to require the Company to make an offer to repurchase all or any part (equal to
$1,000 or an integral multiple of $1,000) of such Holder’s Notes pursuant to
the offer described below (the “Change of Control Offer”) at a purchase price
equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of purchase.  Within 30
days following any Change of Control, the Company will mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and setting forth the procedures governing the Change of Control Offer
required by the Indenture.

 

(b)                                 When
the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company will
be required to make an offer to all Holders of Notes and, to the extent the
Company elects or is required by the terms of any pari passu Indebtedness,
to all holders of such pari passu Indebtedness
(an “Asset Sale Offer”) to purchase the maximum principal amount of Notes and
any such pari passu Indebtedness that may be
purchased out of the Excess Proceeds, at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of purchase (or, in respect of any pari passu Indebtedness, such lesser price, if any, as may be
provided by its terms) in accordance with the procedures set forth in the
Indenture or such pari passu Indebtedness.  If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the Indenture.  If the aggregate principal amount of Notes
and such other pari passu Indebtedness tendered
in such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee
shall select the Notes and such other pari passu Indebtedness
to be purchased on a pro rata basis. 
Upon completion of each Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.

 

(c)                                  Holders
of the Notes that are the subject of an offer to purchase will receive a Change
of Control Offer or Asset Sale Offer from the Company prior to any related
purchase date and may elect to have such Notes purchased by completing the form
titled “Option of Holder to Elect Purchase” appearing below.

 

8.                                       NOTICE
OF REDEMPTION.

 

Notice of redemption
shall be mailed pursuant to the terms of the Indenture to each Holder whose
Notes are to be redeemed at its registered address.  On and after the redemption date, interest
will cease to accrue on the Notes or portions thereof called for redemption as
long as the Company has deposited with the paying agent funds in satisfaction
of the applicable redemption price pursuant to the Indenture.

 

F-121

 

9.                                       SUBORDINATION.

 

This Note and the Note
Guarantees are subordinated in right of payment, as set forth in the Indenture,
to the prior payment in full in cash of all existing and future Senior Debt of
the Company or any Guarantor, as the case may be.  This Note and the Note Guarantees in all
respects rank pari passu with, or senior to,
all other Indebtedness of the Company or the Guarantors, as the case may
be.  By accepting a Note, each Holder
agrees to the subordination provisions set forth in the Indenture, authorizes
the Trustee to effectuate such subordination provisions and appoints the Trustee
as attorney-in-fact for such purpose.

 

10.                                 DENOMINATIONS,
TRANSFER, EXCHANGE.

 

The Notes are in
registered form without coupons.  The
transfer of the Notes may be registered and the Notes may be exchanged as
provided in the Indenture.  The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.  The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part.  Also, it need not exchange or register the
transfer of any Notes for a period of 15 days before a selection of Notes to be
redeemed or during the period between a record date and the corresponding
Interest Payment Date.

 

11.                                 PERSONS
DEEMED OWNERS.

 

The registered Holder of
a Note may be treated as its owner for all purposes.

 

12.                                 AMENDMENT,
SUPPLEMENT AND WAIVER.

 

Subject to the following
paragraphs and to the provisions of the Indenture, the Indenture, the Notes and
the Note Guarantees may be amended or supplemented with the consent of the
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of or, tender offer or exchange offer for, Notes), and, subject
to the Indenture, any existing Default or Event of Default (other than a
Default or Event of Default in the payment of the principal of, premium or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of the Indenture, the
Notes and the Note Guarantees may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a purchase of, or a tender offer or
exchange offer for, Notes).

 

Without the consent of
any Holder of Notes, the Company, the Guarantors and the Trustee may amend or
supplement the Indenture, the Notes or the Note Guarantees to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company’s or a Guarantor’s obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, to provide for the
issuance of 

 

F-122

 

Additional Notes or to
allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee
with respect to the Notes.

 

13.                                 DEFAULTS
AND REMEDIES.

 

Events of Default include
(i) default for 30 days in the payment when due of interest on the Notes; (ii)
default in payment when due (at maturity, upon redemption or otherwise) of
principal of or premium, if any, on the Notes; (iii) failure by the Company or
any of its Restricted Subsidiaries for 30 days after notice by the Trustee or
by the Holders of at least 25% in principal amount of the Notes then
outstanding voting as a
single class to comply with the provisions described under Section 4.07,
Section 4.09, Section 4.10 or Section 4.13; (iv) failure by the
Company or any of its Restricted Subsidiaries for 60 days after notice to the
Company by the Trustee or the Holders of at least a majority in principal
amount of the then outstanding voting as
a single class to comply with any other agreement in the Indenture or
the Notes; (v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Significant
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Significant Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the Issue Date, which default (a) is caused by
a failure to pay principal of such Indebtedness after giving effect to any
grace period provided in such Indebtedness on the date of such default (a “Payment
Default”) or (b) results in the acceleration of such Indebtedness prior to
its stated maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $25.0 million or more; (vi) failure by the Company
or any of its Subsidiaries to pay final, non-appealable judgments aggregating
in excess of $25.0 million (net of any amounts covered by a reputable and
credit worthy insurance company that has not contested coverage or reserved
rights with respect to an underlying claim), which judgments are not paid,
discharged or stayed for a period of more than 60 consecutive days after such
judgments become final and non-appealable; (vii) the Company or any of its
Restricted Subsidiaries that is a Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law (A) commences a voluntary case, (B) consents
to the entry of an order for relief against it in an involuntary case, (C)
consents to the appointment of a Custodian of it or for all or substantially
all of its property or (D) makes a general assignment for the benefit of its
creditors; (viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against the Company or any of
its Restricted Subsidiaries that is a Significant Subsidiary in an involuntary
case, (B) appoints a Custodian of the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary for all or substantially all of
the property of the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary or (C) orders the liquidation of the Company or any of
its Restricted Subsidiaries that is a Significant Subsidiary and the order or
decree remains unstayed and in effect for 60 consecutive days; (ix) except as
permitted under the Indenture, any Note Guarantee is held to be unenforceable
or invalid by any final and non-appealable judgment or decree or ceases for any
reason to be in full force and effect or any Guarantor that is a Significant
Subsidiary, or any Person acting on behalf of any Guarantor that is a
Significant Subsidiary, denies or disaffirms such Guarantor’s obligations under
its Note Guarantee and such Default continues for 10 days after receipt of the
notice specified in the Indenture; or (x) except as permitted under the
Indenture, any Security Document or any security interest granted thereby is

 

F-123

 

held to be unenforceable
or invalid by any final and non-appealable judgment or decree or ceases for any
reason to be in full force and effect and such Default continues for 10 days
after receipt of the notice specified in the Indenture, or the Company or any
Guarantor that is a Significant Subsidiary, or any Person acting on behalf of
such Person, denies or disaffirms the Company’s or such Guarantor’s obligations
under any Security Document.

 

In the case of an Event
of Default specified in clause (vii) or (viii) of the immediately preceding
paragraph, all outstanding Notes shall become due and payable immediately
without further action or notice. If any other Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal amount
of the then outstanding Notes may declare all the Notes to be due and payable
immediately; provided that so long as any Indebtedness permitted to be
incurred pursuant to the Credit Facilities is outstanding, such acceleration
shall not be effective until the earlier of (a) the acceleration of such
Indebtedness under the Credit Facilities or (b) five Business Days after
receipt by the Company of written notice of such acceleration.  Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture.

 

Upon any such
declaration, the Notes shall become due and payable immediately.  The Holders of a majority in aggregate
principal amount of the then outstanding Notes by written notice to the Trustee
may, on behalf of all of the Holders, rescind an acceleration or waive any
existing Default or Event of Default and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default (except nonpayment of principal, interest or premium that has become
due solely because of the acceleration) have been cured or waived.

 

Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any
trust or power.  The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if and so long as it determines that withholding notice
is in their interest.   Holders of a
majority in aggregate principal amount of the then outstanding Notes by notice
to the Trustee may on behalf of the Holders of all of the Notes waive an
existing Default or Event of Default and its consequences hereunder, except a
continuing Default or Event of Default in the payment of the principal of,
premium, if any, or interest on, the Notes (including in connection with an
offer to purchase); provided,
however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration.  Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of the Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.

 

14.                                 TRUSTEE
DEALINGS WITH COMPANY.

 

The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company, the Guarantors or their Affiliates, and may
otherwise deal with the Company, the Guarantors or their Affiliates, as if it
were not the Trustee.

 

F-124

 

15.                                 NO
RECOURSE AGAINST OTHERS.

 

No director, officer,
employee, incorporator, stockholder, member or other holders of Equity
Interests of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or the Guarantors under the Notes, the Note
Guarantees or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. 
Each Holder of Notes by accepting a Note waives and releases all such liability.  The waiver and release are part of the
consideration for the issuance of the Notes.

 

16.                                 AUTHENTICATION.

 

This Note shall not be
valid until authenticated by the manual signature of the Trustee or an
authenticating agent.

 

17.                                 ABBREVIATIONS.

 

Customary abbreviations
may be used in the name of a Holder or an assignee, such as:  TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

 

18.                                 CUSIP
NUMBERS.

 

Pursuant to a
recommendation promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on the Notes and
the Trustee may use CUSIP numbers in notices of redemption as a convenience to
the Holders.  No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.

 

The Company shall furnish
to any Holder upon written request and without charge a copy of the
Indenture.  Requests may be made to:

 

J. Crew Operating Corp.

770 Broadway

New York, New York 10003

Telecopy:  (212) 209-2666

Attention:  Chief Financial Officer

 

F-125

 

ASSIGNMENT FORM

 

To assign this Note, fill
in the form below:

 

(I) or (we) assign and
transfer this Note to _________________ (Insert assignee’s soc. sec. or tax
I.D. no.) ______________

 

__________________________________________

__________________________________________

__________________________________________

(Print or type
assignee’s name, address and zip code)

 

and irrevocably appoint __________________________________________
to transfer this Note on the books of the Company.  The agent may substitute another to act for
him.

 

 

	
  __________________________________________

  	
   

  
	
  Date:

  	
  _______________

  	
   

  
	
  Your Signature:

  	
  _________________________________________________________________________________

  	
   

  
	
   

  	
  (Sign exactly as
  your name appears on the face of this Note)

  	
   

  
	
   

  
	
  Signature Guarantee:

  	
  ___________________________________

  	
   

  
	
   

  	
  (Signature must be
  guaranteed)

  	
   

  
								

 

Sign exactly as your name
appears on the other side of this Note.

 

The signature(s) should
be guaranteed by an eligible guarantor institution (banks, stockbrokers,
savings and loan associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-15.

 

F-126

OPTION OF HOLDER
TO ELECT PURCHASE

 

If you want to elect to
have this Note purchased by the Company pursuant to Section 4.10 or Section 4.13
of the Indenture, check the box below:

 

o Section 4.10                                                                 o
Section 4.13

 

If you want to elect to
have only part of the Note purchased by the Company pursuant to Section 4.10
or Section 4.13 of the Indenture, state the amount you elect to have
purchased:

 

$_________________

 

	
   

  	
  Date:

  	
  _______________

  	
   

  	
  Your Signature:

  	
  ___________________________

  	
   

  
	
   

  	
   

  
	
  (Sign exactly as
  your name appears on the face of this Note)

  
	
   

  	
   

  
	
  Tax Identification No.:
  ________________

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee:

  	
  __________________________________________

  	
   

  
	
   

  	
  (Signature must be
  guaranteed)

  	
   

  
									

 

Sign exactly as your name
appears on the other side of this Note.

 

The signature(s) should
be guaranteed by an eligible guarantor institution (banks, stockbrokers,
savings and loan associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-15.

 

F-127

 

[To be attached to Global Notes
only:

 

SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL NOTE

 

The following
increases or decreases in this Global Note have been made:

 

 

	
  Date of 

  Exchange

  	
   

  	
  Amount
  of decrease in Principal

  Amount of this Global Note

  	
   

  	
  Amount
  of increase in Principal

  Amount of this Global Note

  	
   

  	
  Principal
  Amount of this Global

  Note following such decrease or

  increase

  	
   

  	
  Signature
  of authorized

  signatory of Trustee or Note

  Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  ]

  

 

F-128

 

EXHIBIT B

 

FORM OF NOTE GUARANTEE

 

Subject to Section 12.05
of the Indenture, each Guarantor hereby unconditionally guarantees to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, irrespective of the validity and enforceability
of the Indenture, the Notes and the Obligations of the Company under the Notes
or under the Indenture, that: (a) the principal of, premium, if any, and
interest on the Senior Subordinated Notes will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration, redemption or otherwise, and interest on overdue principal,
premium, if any, (to the extent permitted by law) and interest on any interest,
if any, on the Notes and all other payment Obligations of the Company to the
Holders or the Trustee under the Indenture or under the Notes will be promptly
paid in full and performed, all in accordance with the terms thereof; and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other payment Obligations, the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, subject
to any applicable grace period, whether at stated maturity, by acceleration,
redemption or otherwise. Failing payment when so due of any amount so
guaranteed or any performance so guaranteed for whatever reason, each Guarantor
will be jointly and severally obligated to pay the same immediately.

 

The obligations of each
Guarantor to the Holders and to the Trustee pursuant to this Note Guarantee and
the Indenture are expressly set forth in Article 12 of the Indenture, and
reference is hereby made to such Indenture for the precise terms of this Note
Guarantee.  The terms of Article 12
of the Indenture are incorporated herein by reference.  This Note Guarantee is subject to release as
and to the extent provided in Section 12.04 of the Indenture.

 

This is a continuing
Guarantee and shall remain in full force and effect and shall be binding upon
each Guarantor and its respective successors and assigns to the extent set
forth in the Indenture until full and final payment of all of the Company’s
Obligations under the Notes and the Indenture and shall inure to the benefit of
the successors and assigns of the Trustee and the Holders and, in the event of
any transfer or assignment of rights by any Holder or the Trustee, the rights
and privileges herein conferred upon that party shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof.  This is a Note
Guarantee of payment and not a guarantee of collection.

 

This Note Guarantee shall
not be valid or obligatory for any purpose until the certificate of
authentication on the Note to which this Note Guarantee relates shall have been
executed by the Trustee under the Indenture by the manual signature of one of
its authorized officers.

 

Capitalized terms used herein
have the same meanings given in the Indenture unless otherwise indicated.

 

F-129

 

	
  Dated as of

  	
   ____________, 200_

  	
   

  	
  [NAME OF GUARANTOR(S)]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

F-130

 

EXHIBIT C

 

FORM OF SUPPLEMENTAL INDENTURE

 

SUPPLEMENTAL INDENTURE
(this “Supplemental Indenture”),
dated as of __________, 200  , among _________ (the “Guaranteeing Subsidiary”), a
subsidiary of ____________ (or its permitted successor), J. Crew Operating
Corp. (the “Company”) (or its permitted successor), the other Guarantors (as
defined in the Indenture referred to herein) and
([                       ]),
as trustee under the Indenture referred to below (the “Trustee”).

 

W I T N E S S E T H

 

WHEREAS, the Company has
heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of
[           ] providing
for the issuance of 93⁄4% Senior Subordinated Notes due 2014 (the “Notes”);

 

WHEREAS, the Indenture provides
that under certain circumstances the Guaranteeing Subsidiary shall execute and
deliver to the Trustee a supplemental indenture pursuant to which the
Guaranteeing Subsidiary shall unconditionally guarantee the Company’s
obligations under the Indenture on the terms and conditions set forth herein;
and

 

WHEREAS, pursuant to Section 9.01
of the Indenture, the Trustee is authorized to execute and deliver this
Supplemental Indenture.

 

NOW THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and
the Trustee mutually covenant and agree for the equal and ratable benefit of
the holders of the Notes as follows:

 

1.                                       CAPITALIZED
TERMS.  Capitalized terms used herein
without definition shall have the meanings assigned to them in the Indenture.

 

2.                                       AGREEMENT
TO GUARANTEE.  The Guaranteeing
Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and
subject to the conditions set forth herein and in the Indenture, including but
not limited to Article 12 thereof.

 

3.                                       NO
RECOURSE AGAINST OTHERS.  No past,
present or future director, officer, employee, incorporator, stockholder or
agent of the Guaranteeing Subsidiary, as such, shall have any liability for any
obligations of the Company or any Guarantor under the Notes, any Note
Guarantee, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation.  Each Holder of the Notes by accepting a Note
waives and releases all such liability. 
The waiver and release are part of the consideration for issuance of the
Notes.  Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of
the Commission that such a waiver is against public policy.

 

F-131

 

4.                                       NEW
YORK LAW TO GOVERN.  THE INTERNAL LAW OF
THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL
INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF
LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.

 

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

 

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

 

7.                                       THE
TRUSTEE.  The Trustee shall not be
responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Supplemental Indenture or for or in respect of the recitals
contained herein, all of which recitals are made solely by the Guaranteeing
Subsidiary and the Company.

 

F-132

 

EXHIBIT D

 

FORM OF
TRANSFER CERTIFICATE FOR TRANSFER TO QIB

 

[Date]

 

[Address of Trustee]

 

                Re:  93⁄4%
Senior Subordinated Notes due 2014 by J. Crew Operating Corp.

 

Ladies and Gentlemen:

 

                Reference is hereby made to the Indenture, dated as
of [      ] (as amended and supplemented
from time to time, the "Indenture"), among the Company, the
Guarantors (as defined in the Indenture) and [      ],
as Trustee.  Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.

 

                This letter relates to the transfer of $           aggregate principal amount of Notes
beneficially owned by the undersigned (the "Transferor").

 

                In connection with such request, and with respect to
such Notes, the Transferor does hereby certify that such Notes are being
transferred in accordance with Rule 144A under the Securities Act of 1933, as
amended ("Rule 144A"), to a transferee that the Transferor reasonably
believes is purchasing the Notes for its own account or an account with respect
to which the transferee exercises sole investment discretion, and the
transferee, as well as any such account, is a "qualified institutional
buyer" within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A and in accordance with applicable securities laws of
any state of the United States or any other jurisdiction.

 

                You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.

 

	
  Very truly yours,

  
	
   

  
	
  [Name of Transferor]

  
	
   

  
	
  By:

  
	
   

  
	
   

  
	
  Authorized Signature

  

F-133

 

EXHIBIT E

 

FORM OF
CERTIFICATE FOR TRANSFER PURSUANT TO RULE 144

 

[Date]

 

[Address of Trustee]

 

Re:  93⁄4% Senior Subordinated Notes due 2014 by
J. Crew Operating Corp.

 

Ladies and Gentlemen:

 

Reference is hereby made
to the Indenture, dated as of
[          ] (as amended and
supplemented from time to time, the “Indenture”), among the Company, the Guarantors (as defined in the Indenture) and
[          ], as
Trustee.  Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.

 

In connection with our
proposed sale of $_______   aggregate principal amount of the Notes, [in
the case of a transfer of an interest in a 144A Global Note: which represent an
interest in a 144A Global Note beneficially owned by the undersigned,] we
confirm that such sale has been effected pursuant to and in accordance with
Rule 144 under the Securities Act.

 

You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.

 

	
  Very truly yours,

  
	
   

  
	
  [Name of Transferor]

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
  Authorized Signature

  

 

F-134

 

EXHIBIT G

 

FORM OF LEGAL OPINIONS

 

G-1

 

Form of Legal
Opinion of Cleary Gottlieb Steen & Hamilton

 

G-2

 

[LETTERHEAD OF
CLEARY GOTTLIEB STEEN & HAMILTON]

 

 

	
  Writer’s Direct Dial:
  (212) 225-2520

  
	
  E-Mail: mryan@cgsh.com

  
	
   

  
	
   

  	
  [             ],
  2004

  

 

U.S. Bank National
Association

Goodwin Square

225 Asylum Street

Hartford, Connecticut
06103

Attention:  Michael Hopkins

 

Ladies and Gentlemen:

 

We have acted as
special counsel to J. Crew Operating Corp., a Delaware corporation (the “Company”),
J. Crew Group, Inc., a New York corporation (“J. Crew Group”), J. Crew
Intermediate LLC, a Delaware limited liability company (“Intermediate”),
Grace Holmes, Inc. a Delaware corporation doing business as J. Crew Retail (“J.
Crew Retail”), H.F.D. NO. 55, Inc., a Delaware corporation doing business
as J. Crew Factory (“J. Crew Factory”), J. Crew Inc., a New Jersey
corporation (“J. Crew Inc.”), and J. Crew International, Inc., a
Delaware corporation (“J. Crew International” and, together with J. Crew
Retail, J. Crew Factory and J. Crew Inc., the “Guarantors”), in
connection with that certain Senior Subordinated Loan Agreement dated as of November [•],
2004 (the “Loan Agreement”) among the Company, the Guarantors, the
lenders named therein as Lenders (the “Lenders”) and U.S. Bank National
Association, as administrative agent (in such capacity, the “Administrative
Agent”).  This opinion letter is
furnished pursuant to Section 9.02(a) of the Loan Agreement.  Capitalized terms used but not otherwise
defined herein have the meanings ascribed to them in the Loan Agreement.

 

In arriving at the
opinions expressed below, we have reviewed the following documents:

 

(a)                                  an
executed copy of the Loan Agreement;

 

G-3

 

 

(b)                                 a
copy of the Loan Notes as executed by the Company;

 

(c)                                  a
copy of the Loan Guarantees as executed by the Guarantors;

 

(d)                                 an
executed copy of the Security Agreement;

 

(e)                                  an
executed copy of the Intercreditor Agreement;

 

(f)                                    an
executed copy of the Amendment No. 1, dated as of November [  ], 2004, to the Credit Agreement, dated as of
February 4, 2003,  by and among
TPG-MD Investment, LLC, as lender, the Company, as borrower, the Guarantors, as
guarantors, and J. Crew Group (the “TPG-MD Credit Agreement Amendment”);

 

(g)                                 an
executed copy of the Amendment No. 3, dated as of November [  ], 2004, to the Loan and Security Agreement,
dated December 23, 2002, by and among the Company, J. Crew Retail, J. Crew
Factory, J. Crew Inc., as borrowers, J. Crew Group, Intermediate, J. Crew
International, as guarantors, the parties from time to time thereto as lenders,
Congress Financial Corporation, as administrative and collateral agent and
Wachovia Bank, National Association, as arranger, as amended by Amendment No. 1
thereto, dated February 7, 2003 and Amendment No. 2 thereto, dated April 4,
2003 (the “Congress Facility Amendment No. 3” and, together with the
Loan Agreement, the Loan Notes, the Loan Guarantees, the Security Agreement,
the Intercreditor Agreement and the TPG-MD Credit Agreement Amendment, the “Transaction
Documents”);

 

(h)                                 a
copy of the form of the Indenture;

 

(i)                                     a
copy of the form of the Exchange Notes;

 

(j)                                     a
copy of the form of the Exchange Note Guarantees (together with the Indenture
and the Exchange Notes, the “Exchange Documents”); and

 

(k)                                  the
documents delivered to you by the Company, the Guarantors, J. Crew Group and
Intermediate at the closing pursuant to the Transaction Documents, including
copies of the certificates of incorporation or certificate of formation of each
of the Company, J. Crew Group, Intermediate, J. Crew Retail, J. Crew Factory
and J. Crew International, as the case may be, each certified by the Secretary
of State of the State of Delaware or the Secretary of State of the State of New
York, as the case may be, and the by-laws or limited liability company
agreement of each of the Company, J. Crew Group, Intermediate, J. Crew Retail,
J. Crew Factory and J. Crew International, as applicable, each certified by the
corporate secretary or an authorized officer, as the case may be, of each of
the Company, J. Crew Group, Intermediate, J. Crew Retail, J. Crew Factory and
J. Crew International.

 

G-4

 

In addition, we have
reviewed the originals or copies certified or otherwise identified to our
satisfaction of all such corporate or limited liability company records of the
Company, the Guarantors, J. Crew Group and Intermediate and such other
instruments and other certificates of public officials, officers and
representatives of the Company, the Guarantors, J. Crew Group, Intermediate and
such other persons, and we have made such investigations of law, as we have
deemed appropriate as a basis for the opinions expressed below.

 

In arriving at the
opinions expressed below, we have assumed the authenticity of all documents
submitted to us as originals and the conformity to the originals of all
documents submitted to us as copies.  In
addition, we have assumed and have not verified the accuracy as to factual
matters of each document we have reviewed (including, without limitation, the
accuracy and completeness of the representations and warranties of the Company,
the Guarantors and Intermediate made in the Transaction Documents).

 

Based on the
foregoing, and subject to the further assumptions and qualifications set forth
below, it is our opinion that:

 

1.                                       Each
of the Company, J. Crew Group, J. Crew Retail, J. Crew Factory and J. Crew
International is validly existing as a corporation in good standing under the
laws of the State of Delaware, and Intermediate is validly existing as a
limited liability company in good standing under the laws of the State of Delaware.

 

2.                                       Each
of the Company, J. Crew Group, J. Crew Retail, J. Crew Factory and J. Crew
International has corporate power to own its properties and conduct its
business as now conducted, and to enter into each Transaction Document to which
it is a party and to perform its obligations thereunder, and has the corporate
power to enter into each Exchange Document to which it is a party on the
Exchange Date and to perform its obligations thereunder, and Intermediate has
limited liability company power to own its properties and conduct its business
as now conducted, and to enter into each Transaction Document to which it is a
party and to perform its obligations thereunder, and has the limited liability
company power to enter into the Indenture and the Exchange Note Guarantees on
the Exchange Date and to perform its obligations thereunder.

 

3.                                       The
execution and delivery of each of the Loan Agreement, the Security Agreement,
the Intercreditor Agreement, the TPG-MD Credit Agreement Amendment and the
Congress Facility Amendment No. 3 have been duly authorized by all necessary
corporate action of each of the Company, J. Crew Retail, J. Crew Factory and J.
Crew International, and each of the Loan Agreement, the Security Agreement, the
Intercreditor Agreement, the TPG-MD Credit Agreement Amendment and the Congress
Facility Amendment No. 3has been duly executed and delivered by each of the
Company, J. Crew Retail, J. Crew Factory and J. Crew International, and has
been duly executed and delivered by J. Crew Inc. under the law of the State of
New York, and is a valid, binding and enforceable agreement of each of the
Company and the Guarantors.

 

4.                                       The
execution and delivery of each of the TPG-MD Credit Agreement Amendment and the
Congress Facility Amendment No. 3 have been duly authorized by all necessary
corporate action of J. Crew Group, and each of the TPG-MD Credit Agreement

 

G-5

 

Amendment and the Congress Facility Amendment No. 3 has been duly
executed and delivered by J. Crew Group and is a valid, binding and enforceable
agreement of J. Crew Group.

 

5.                                       The
execution and delivery of each of the Congress Facility Amendment No. 3, the
Security Agreement and the Intercreditor Agreement have been duly authorized by
all necessary limited liability company action of Intermediate, and each of the
Congress Facility Amendment No. 3, the Security Agreement and the Intercreditor
Agreement has been duly executed and delivered by Intermediate and is a valid,
binding and enforceable agreement of Intermediate.

 

6.                                       The
execution and delivery of the Loan Notes have been duly authorized by all
necessary corporate action of the Company, and the Loan Notes have been duly
executed and delivered by the Company and are the valid, binding and enforceable
obligations of the Company.

 

7.                                       The
execution and delivery of the Loan Guarantees have been duly authorized by all
necessary corporate action of each of J. Crew Retail, J. Crew Factory and J.
Crew International, and the Loan Guarantees have been duly executed and
delivered by each of J. Crew Retail, J. Crew Factory and J. Crew International,
and have been duly executed and delivered by J. Crew Inc. under the law of the
State of New York, and are the valid, binding and enforceable obligations of each
of the Guarantors.

 

8.                                       The
execution and delivery of the Indenture have been duly authorized by all
necessary corporate action of each of the Company, J. Crew Retail, J. Crew
Factory and J. Crew International and by all necessary limited liability company
action of Intermediate, and the Indenture, when executed and delivered by the
Company, the Guarantors, Intermediate and the Trustee thereunder, will be a
valid, binding and enforceable agreement of each of the Company, the Guarantors
and Intermediate.

 

9.                                       The
execution and delivery of the Exchange Notes have been duly authorized by all
necessary corporate action of the Company, and the Exchange Notes, when duly
executed, authenticated, issued and delivered in accordance with the Indenture,
will be the valid, binding and enforceable obligations of the Company, entitled
to the benefits of the Indenture.

 

10.                                 The
execution and delivery of the Exchange Note Guarantees have been duly
authorized by all necessary corporate action of each of J. Crew Retail, J. Crew
Factory and J. Crew International and by all necessary limited liability
company action of Intermediate, and the Exchange Note Guarantees, when executed
and delivered by each of the Guarantors and Intermediate in accordance with the
Indenture, will be the valid, binding and enforceable obligations of each of
the Guarantors and Intermediate, entitled to the benefit of the Indenture.

 

11.                                 Except
for (i) such filings and other actions as may be required to perfect Liens in
favor of the Collateral Agent which the Security Documents purport to create,
(ii) such other consents, approvals, authorizations, registrations and filings
as have heretofore been obtained or made by the Company, the Guarantors, J.
Crew Group and Intermediate (iii) with respect to any securities pledged under
the Security Agreement, such actions as may be required

 

G-6

 

under federal or state securities laws in connection with a disposition
of such securities, the execution and delivery of any of the Transaction
Documents to which any of the Company, the Guarantors, J. Crew Group and
Intermediate is a party or the performance by any of the Company, the
Guarantors, J. Crew Group and Intermediate of its obligations thereunder, will
not (a) require any consent, approval, authorization, registration or
qualification of or with any governmental authority of the United States or the
State of New York that in our experience normally would be applicable to
general business entities with respect to such execution, delivery or
performance (but we express no opinion relating to the United States federal
securities laws or any state securities or Blue Sky laws), (b) result in a
breach of any of the terms and provisions of, or constitute a default under,
any of the agreements of the Company, the Guarantors, J. Crew Group or
Intermediate identified in Exhibit A hereto, or a violation of the certificates
of incorporation or by-laws of the Company, J. Crew Group, J. Crew Retail, J.
Crew Factory or J. Crew International or the certificate of formation or
limited liability company agreement of Intermediate, as the case may be, or (c)
result in a violation of any United States federal or New York State law or
published rule or regulation that in our experience normally would be
applicable to general business entities with respect to such execution,
delivery or performance (but we express no opinion relating to the United
States federal securities laws or any state securities or Blue Sky laws).

 

12.                                 The
Company is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

 

13.                                 The
Security Agreement creates in favor of the Collateral Agent for the ratable
benefit of the Lenders valid security interests in the Collateral to the extent
security interests in such Collateral can be created under Article 9 of
the Uniform Commercial Code as in effect in the State of New York (the “NYUCC”).

 

14.                                 Upon
delivery of certificates representing shares of capital stock of each of the
Guarantors owned by the Company (the “Pledged Securities”), that are
duly endorsed or accompanied by stock powers duly executed in blank to the
Collateral Agent or the Senior Credit Agent (as defined in the Intercreditor
Agreement), as applicable under the Intercreditor Agreement, in the State of
New York, the Collateral Agent will have a perfected security interest in the
Pledged Securities, which security interest will remain a perfected security
interest for as long as possession thereof is continuously maintained in the
State of New York by the Collateral Agent or the Senior Credit Agent in
accordance with the Security Agreement and the Intercreditor Agreement.

 

In arriving at the
opinions expressed in numbered paragraph 13 above, we have assumed that each of
the Company and the Guarantors, as the case may be, has rights in the subject
Collateral, and we note that, with respect to Collateral in which the Company
or any Guarantor has no present rights, the Security Agreement will create the
security interest referred to in numbered paragraph 13 only when the Company or
such Guarantor, as the case may be, acquires such rights.

 

In arriving at the
opinions expressed in numbered paragraph 14 above, we have assumed that each
signature on any endorsement or stock power is effective within the meaning of
the NYUCC.

 

G-7

 

Insofar as the
foregoing opinions relate to the valid existence and good standing of any of
the Company, J. Crew Group, Intermediate, J. Crew Retail, J. Crew Factory or J.
Crew International, they are based solely on certificates of good standing
received from the Secretary of State of the State of Delaware or the Secretary
of State of the State of New York, as the case may be, and on a telephonic
confirmation from such Secretary of State. 
Insofar as the foregoing opinions relate to the validity, binding effect
or enforceability of any agreement or obligation of any of the Company, the
Guarantors, J. Crew Group or Intermediate, (a) we have assumed that each party
to such agreement or obligation has satisfied those legal requirements that are
applicable to it to the extent necessary to make such agreement or obligation
enforceable against it (except that no such assumption is made as to the
Company, the Guarantors, J. Crew Group or Intermediate regarding matters of the
federal law of the United States of America, the law of the State of New York,
the Delaware General Corporation Law or the Delaware Limited Liability Company
Act that in our experience normally would be applicable to general business
entities with respect to such agreement or obligation) and (b) such opinions
are subject to applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and to general principals of equity.  In addition, certain of the remedial
provisions of the Loan Agreement and the Security Documents may be further
limited or rendered unenforceable by other applicable laws or judicially
adopted principles which, however, in our judgment do not make the remedies
provided for therein (taken as a whole) inadequate for the practical
realization of the principal benefits purported to be afforded thereby (except
for the economic consequences of procedural or other delay).

 

We note that the
designations (i) in Section 13.09(b) of the Loan Agreement, of the
United States District Court of the Southern District of New York and any
appellate court therefrom, (ii) in Section 9.1(b) of the Security
Agreement, of the United States District Court for the Southern District of New
York and (iii) in Section 7.6 of the Intercreditor Agreement, of any
federal court located in New York, New York, as the venue for actions or
proceedings relating to the Loan Agreement, the Security Assignment and the
Intercreditor Agreement, respectively, are (notwithstanding the waiver in Section 13.09(c)
of the Loan Agreement, Section 9.1(b) of the Security Agreement and Section 7.6
of the Intercreditor Agreement) subject to the power of such courts to transfer
actions pursuant to 28 U.S.C. §1404(a) or to dismiss such actions or
proceedings on the grounds that such a federal court is an inconvenient forum
for such action or proceeding.

 

With respect to
(i) the first sentence of Section 13.09(b) of the Loan Agreement, (ii) the
first sentence of Section 9.1(b) of the Security Agreement and
(iii) the first sentence of Section 7.6 of the Intercreditor
Agreement, we express no opinion as to the subject matter jurisdiction of any
United States federal court to adjudicate any action relating to the Loan Agreement,
the Security Agreement or the Intercreditor Agreement where jurisdiction based
on diversity of citizenship under 28 U.S.C. §1332 does not exist.

 

The foregoing
opinions are limited to the federal law of the United States of America, the
law of the State of New York, the Delaware General Corporation Law and the
Delaware Limited Liability Company Act.

 

G-8

 

We are furnishing
this opinion letter to you, as the Administrative Agent, solely for your
benefit in your capacity as such in connection with the Transaction Documents
and the Exchange Documents.  This opinion
letter is not to be relied on by or furnished to any other person or used,
circulated, quoted or otherwise referred to for any other purpose.  Notwithstanding the foregoing, a copy of this
opinion letter may be furnished to a Lender or a prospective or actual
permitted transferee under the Loan Agreement as a Lender thereunder (and may
be relied upon by any such Lender or actual permitted transferee that becomes a
party to the Loan Agreement), and you or any such Lender or transferee may show
this opinion to any governmental authority pursuant to requirements of
applicable law or regulations.  We assume
no obligation to advise you or any other person, or to make any investigations,
as to any legal developments or factual matters arising subsequent to the date
hereof that might affect the opinions expressed herein.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  CLEARY, GOTTLIEB, STEEN & HAMILTON

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Michael L. Ryan, a
  Partner

  	
   

  

 

G-9

 

Exhibit A

 

1.               16% Senior Discount
Contingent Principal Notes due 2008, issued under an indenture dated May 6,
2003, between J. Crew Intermediate LLC, as issuer, and U.S. Bank National Association,
as trustee;

 

2.               131/8% Senior Discount
Debentures due 2008, issued under an indenture dated October 17,
1997, by and among J. Crew Group, Inc., as issuer and State Street Bank and
Trust Company, as trustee, as amended by the First Supplemental Indenture dated
as of May 6, 2003;

 

3.               Credit Agreement,
dated as of February 4, 2003, by and among TPG-MD Investment, LLC, as
lender, the Company, as borrower, the Guarantors, as guarantors, and J. Crew
Group, as amended by Amendment No. 1 to Credit Agreement, dated as of November [  ], 2004; and

 

4.               Loan and Security
Agreement, dated December 23, 2002, by and among the Company, J. Crew
Retail, J. Crew Factory, J. Crew Inc., as borrowers, J. Crew Group,
Intermediate, J. Crew International, as guarantors, the parties from time to
time thereto as lenders, Congress Financial Corporation, as administrative and
collateral agent and Wachovia Bank, National Association, as arranger, as
amended by Amendment No. 1 thereto, dated February 7, 2003, Amendment No.
2 thereto, dated April 4, 2003 and Amendment No. 3 thereto, dated November [  ], 2004.

 

G-10

 

Form of Legal
Opinion of Gibbons, Del Deo, Dolan, Griffinger & Vecchione

 

1.                                      The Company [for
purposes of this form, shall mean J. Crew Inc., a New Jersey corporation] is
a corporation validly existing and in good standing under the laws of the State
of New Jersey.

 

2.                                      The Company has the corporate power to own
its properties and conduct its business as now conducted, and to enter into the
Transaction Documents [for purposes of this
form, shall mean the Loan Agreement, the Loan Guarantees, the Security
Agreement, the Intercreditor Agreement, the TPG-MD Credit Agreement Amendment
and the Congress Facility Amendment No. 3] and to perform its
obligations thereunder, and has the corporate power to enter into the Indenture
and the Exchange Note Guarantees on the Exchange Date and to perform its
obligations thereunder.

 

3.                                      The execution and delivery of each of the
Transaction Documents have been duly authorized by all necessary corporate
action of the Company, and each of the Transaction Documents has been duly
executed and delivered by the Company.

 

4.                                      The execution and delivery of each of the
Indenture and the Exchange Note Guarantees have been duly authorized by all
necessary corporate action of the Company.

 

5.                                      The execution and delivery of any of the
Transaction Documents to which the Company is a party or the performa nce by
the Company of its obligations thereunder, will not (a) require any consent,
approval, authorization, registration or qualification of or with any
governmental authority of the State of New Jersey that in our experience
normally would be applicable to New Jersey corporations with respect to such
execution, delivery or performance, (b) result in a violation of the
certificate of incorporation or by- laws of the Company, or (c) result in a
violation of any New Jersey State law or published rule or regulation that in
our experience normally would be applicable to New Jersey corporations with
respect to such execution, delivery or performance.

 

6.                                      If New Jersey law governed the Security
Agreement, the Security Agreement would create in favor of the Collateral Agent
for the ratable benefit of the Lenders valid security interests in the
Collateral to the extent security interests in such Collateral can be created
under Article 9 of the Uniform Commercial Code as in effect in the State
of New Jersey (the “NJUCC”).

 

7.                                      The Financing Statement is in the appropriate
form for filing in the office of the Treasurer of the State of New Jersey. Upon
the filing of the Financing Statement in such office, the Collateral Agent will
have a perfected security interest in that portion of the Collateral in which a
security interest can be perfected by the filing of financing statements under
the NJUCC.

 

G-11

 

Form of Legal
Opinion of Richards, Layton & Finger, P.A.

 

G-12

 

[LETTERHEAD OF
RICHARDS, LAYTON & FINGER, P.A.]

 

 

_______________
, 2004

 

To Each of the Persons Listed
 on Schedule A Attached Hereto

 

Re:                              J.
Crew Operating Corp.

 

Ladies and Gentlemen:

 

We have acted as special Delaware counsel for
J. Crew Operating Corp. (formerly known as J. CREW CORP.), a Delaware
corporation (the “Company”), in connection with the matters set forth
herein.  At your request, this opinion is
being furnished to you.

 

For purposes of giving the opinions
hereinafter set forth, our examination of documents has been limited to the
examination of originals or copies of the following:

 

(a)                                   The
Certificate of Incorporation of the Company, dated September 12, 1997, as
filed in the office of the Secretary of State of the State of Delaware (the “Secretary
of State”) on September 12, 1997, as amended by the Certificate of
Amendment of Certificate of Incorporation of the Company, dated September 29,
1997, as filed with the Secretary of State on September 29, 1997 (as so
amended, the “Certificate of Incorporation”);

 

(b)                                  The
Security Agreement, dated as of _______ , 2004 (the “Agreement”), among the
Company, J. Crew Inc., a New Jersey corporation, Grace Holmes, Inc., a Delaware
corporation doing business as J. Crew Retail, H.F.D. No. 55, Inc., a Delaware
corporation doing business as J. Crew Factory, J. Crew International Inc., a
Delaware corporation, and J. Crew Intermediate LLC, a Delaware limited
liability company, as grantors, and U.S. Bank National Association, as
collateral agent (the “Collateral Agent”);

 

(c)                                   A
financing statement on form UCC-1, naming the Company as debtor and the
Collateral Agent as secured party, in the form attached hereto and marked as
Exhibit “A” (the “Financing Statement”), to be filed with the Secretary of
State (Uniform Commercial Code Section) (the “Division”); and

 

(d)                                  A
Good Standing Certificate for the Company, dated _______ , 2004, obtained from
the Secretary of State.

 

Initially capitalized terms used herein and
not otherwise defined are used as defined in the Agreement.

 

G-13

 

For purposes of this opinion, we have not
reviewed any documents other than the documents listed in paragraphs (a)
through (d) above.  In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (d) above) that is referred to in or incorporated by reference into
any document reviewed by us.  We have
assumed that there exists no provision in any document that we have not
reviewed that is inconsistent with the opinions stated herein.  We have conducted no independent factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects.

 

With respect to all documents examined by us,
we have assumed that (i) all signatures on documents examined by us are
genuine, (ii) all documents submitted to us as originals are authentic, and
(iii) all documents submitted to us as copies conform with the original copies
of those documents.

 

For purposes of this opinion, we have assumed
(i) that the Certificate of Incorporation has not been amended and that no such
amendment is pending or has been proposed, (ii) that the Company is organized
solely under the laws of the State of Delaware, (iii) that there are no
proceedings pending or contemplated for (A) the merger, consolidation,
conversion, dissolution, liquidation or termination of the Company, or (B) the
Company’s transfer to or domestication in any other jurisdiction, (iv) that the
Company has not changed its name, whether by amendment of its organizational
documents, by reorganization or otherwise, within the last four months, (v) the
due organization, due formation or due creation, as the case may be, and valid
existence in good standing of each party to the documents examined by us under
the laws of the jurisdiction governing its organization, formation or creation,
(vi) the legal capacity of natural persons who are signatories to the documents
examined by us, (vii) that each of the parties to the documents examined by us
has the power and authority to execute and deliver, and to perform its
obligations under, such documents, (viii) the due authorization, execution and
delivery by all parties thereto of all documents examined by us, and (ix) that
each of the documents examined by us constitutes a valid and binding agreement
of the parties thereto, and is enforceable against the parties thereto, in
accordance with its terms.  We have not
participated in the preparation of any offering material relating to the
Company and assume no responsibility for the contents of any such material.  In addition, we assume no responsibility for
the filing of the Financing Statement with the Division or any other
governmental office or agency.

 

This opinion is limited to the laws of the
State of Delaware (excluding the insurance, securities and blue sky laws of the
State of Delaware), and we have not considered and express no opinion on the
laws of any other jurisdiction, including federal laws (including federal
bankruptcy law) and rules and regulations relating thereto.  Our opinions are rendered only with respect
to Delaware laws and rules, regulations and orders thereunder that are
currently in effect.

 

Based upon the foregoing, and upon our
examination of such questions of law and statutes of the State of Delaware as
we have considered necessary or appropriate, and subject to the assumptions,
qualifications, limitations and exceptions set forth herein, we are of the
opinion that:

 

G-14

 

1.                                       The
Financing Statement is in an appropriate form for filing in the State of
Delaware.

 

2.                                       Insofar
as Article 9 of the Uniform Commercial Code as in effect in the State of
Delaware on the date hereof (the “Delaware UCC”) is applicable (without regard
to conflict of laws principles), upon the filing of the Financing Statement
with the Division, the Collateral Agent will have a perfected security interest
in the Company’s rights in that portion of the J. Crew Companies’ Collateral
described in the Financing Statement in which a security interest may be
perfected by the filing of a UCC financing statement with the Division (the “Filing
Collateral”) and the proceeds (as defined in Section 9-102(a)(64) of the
Delaware UCC) thereof.

 

The opinions expressed above are subject to
the following additional assumptions, qualifications, limitations and
exceptions:

 

A.                                   We
have assumed that (i) the Company has sufficient rights in the J. Crew
Companies’ Collateral and has received sufficient value and consideration in
connection with the security interests granted under the Agreement for the
security interest of the Collateral Agent to attach, and we express no opinion
as to the nature or extent of the Company’s rights in, or title to, any portion
of the J. Crew Companies’ Collateral and (ii) each of the Agreement and the
Financing Statement reasonably identifies the J. Crew Companies’
Collateral.  Accordingly, we have assumed
that the security interests in the J. Crew Companies’ Collateral and the
proceeds (as defined in Section 9-102(a)(64) of the Delaware UCC) thereof
have been duly created and have attached. 
In addition, we have assumed (i) that the Company has no interests in
real property located in the State of Delaware, and (ii) that none of the
Filing Collateral consists of as-extracted collateral located in the State of
Delaware or timber to be cut located in the State of Delaware or fixtures
located in the State of Delaware or goods that are or are to become fixtures
located in the State of Delaware. 
Further, we have assumed that the Company has authorized the filing of
the Financing Statement with the Division.

 

B.                                     The
opinions set forth above are limited to Article 9 of the Delaware UCC, and
therefore such opinions do not address (i) laws of jurisdictions other than the
State of Delaware, and of the State of Delaware except for Article 9 of
the Delaware UCC, (ii) collateral of a type not subject to Article 9 of
the Delaware UCC, and (iii) what law governs perfection of the security
interests granted in the collateral covered by this opinion.

 

C.                                     We
note that further filings under the Delaware UCC may be necessary to preserve
and maintain (to the extent established and perfected by the filing of the
Financing Statement as described herein) the perfection of the security
interests of the Collateral Agent in the Filing Collateral, including, without
limitation, the following:

 

(i)                                     appropriate
continuation filings to be made within the period of six months prior to the
expiration of five year anniversary dates from the date of the original filing
of the Financing Statement;

 

(ii)                                  filings
required with respect to proceeds of collateral under Section 9-315(d) of
the Delaware UCC;

 

G-15

 

(iii)                               filings
required within four months of the change of name, identity or structure made
by or with respect to the Company, to the extent set forth in Sections 9-507
and 9-508 of the Delaware UCC;

 

(iv)                              filings
required within four months of a change by the Company of its location to
another jurisdiction, to the extent set forth in Sections 9-301 and 9-316 of
the Delaware UCC; and

 

(v)                                 filings
required within one year after the transfer of collateral to a person or entity
that becomes a debtor and is located in another jurisdiction, to the extent set
forth in Section 9-316 of the Delaware UCC.

 

D.                                    We
do not express any opinion as to the perfection of any security interest in any
portion of the J. Crew Companies’ Collateral in which a security interest
cannot be perfected by the filing of a financing statement with the
Division.  In addition, no opinion is
expressed herein concerning (i) any collateral other than the Filing Collateral
and the proceeds (as defined in Section 9-102(a)(64) of the Delaware UCC)
thereof, (ii) any portion of the Filing Collateral that constitutes a “commercial
tort claim” (as defined in Section 9-102(a)(13) of the Delaware UCC),
(iii) any consumer transaction, or (iv) any security interest in goods covered
by a certificate of title statute. 
Further, we do not express any opinion as to the perfection of any
security interest in proceeds (as defined in Section 9-102(a)(64) of the
Delaware UCC) of the Filing Collateral, except to the extent that such proceeds
consist of cash proceeds (as defined in Section 9-102(a)(9) of the
Delaware UCC) that are identifiable cash proceeds (as contemplated by Sections
9-315(b) and (d) of the Delaware UCC), subject, however, to the limitations of Section 9-315
of the Delaware UCC.

 

E.                                      We
do not express any opinion as to the priority of any security interest.

 

F.                                      We
call to your attention that under the Delaware UCC, actions taken by a secured
party (e.g., releasing or assigning the security interest, delivering
possession of the collateral to the debtor or another person and voluntarily
subordinating a security interest) may affect the validity, perfection or
priority of a security interest.

 

G.                                     The
opinion expressed in paragraph 2 above is subject to the effect of (i)
bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation,
fraudulent conveyance and transfer and other similar laws relating to or
affecting the rights and remedies of creditors generally, and (ii) principles
of equity (regardless of whether considered and applied in a proceeding in
equity or at law).

 

We understand that you will rely as to
matters of Delaware law upon this opinion in connection with the transactions
contemplated by the Agreement.  In
addition, your successors and assigns (including, without limitation, any
trustee in connection with a securitization) and any rating agency may rely as
to matters of Delaware law upon this opinion in connection with the matters set
forth herein, subject to the understanding that the opinions rendered herein
are given on the date hereof and such opinions are rendered only with respect
to facts existing on the date hereof and laws, rules and regulations currently
in effect.  In connection with the
foregoing, we hereby consent to your and your successors’ and assigns’
(including, without limitation, any

 

G-16

 

trustee in connection with a
securitization) and any such rating agency’s relying as to matters of Delaware
law upon this opinion.  Except as stated
above, without our prior written consent, this opinion may not be furnished or
quoted to, or relied upon by, any other person or entity for any purpose.

 

Very truly yours,

 

 

WAY/SXL

 

G-17

 

Schedule A

 

U.S. Bank National
Association

 

Private Capital Partners
LLC

 

Canpartners Investments
IV, LLC

 

G-18

 

Form
of In-House Counsel Opinion

 

1.                                         Except
as set forth in Schedule 9.01(j) to the Loan Agreement, there are no legal
or governmental proceedings pending to which the Borrower or any of the
Guarantors is a party or of which any property or assets of the Borrower or any
of the Guarantors is the subject which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect; and, to the best of
my knowledge, no such proceedings are threatened.

 

2.                                         Based
on my review of the corporate minute books, and assuming the correctness and
completeness thereof, all of the issued and outstanding shares of capital stock
of the Borrower are duly and validly authorized and issued and fully paid and
non-assessable and not subject to any preemptive or similar rights; and all of
the issued shares of capital stock or other equity interests of each Subsidiary
of the Borrower are validly authorized and issued, are fully paid,
non-assessable and are owned directly or indirectly by the Borrower free and
clear of any pledges, liens or encumbrances except Collateral Permitted Liens.

 

3.                                         None
of the execution, delivery or performance by each of the Borrower, Group,
Intermediate and the Guarantors of the Transaction Documents to which it is a
party nor compliance with the terms and provisions thereof, will violate any
applicable order, writ, injunction or decree of any court or governmental
instrumentality.

 

G-19

 

EXHIBIT H

 

FORM OF ASSIGNMENT AND ASSUMPTION

 

This Assignment
and Assumption (this “Assignment and Assumption”) is dated as of the
Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”).  Capitalized terms used but not defined herein
shall have the meanings given to them in the loan agreement identified below
(the “Loan Agreement”), receipt of a copy of which is hereby
acknowledged by the Assignee.  The
Standard Terms and Conditions set forth in Annex 1 attached hereto are
hereby agreed to and incorporated herein by reference and made a part of this
Assignment and Assumption as if set forth herein in full.

 

For an agreed
consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to and in accordance with the Standard Terms and Conditions
and the Loan Agreement (including Section 13.04 of the Loan Agreement), as
of the Effective Date inserted by the Administrative Agent as contemplated below
(i) all of the Assignor’s rights and obligations as a Lender under the Loan
Agreement and any other documents or instruments delivered pursuant thereto to
the extent related to the amount and percentage interest identified below of
all of such outstanding rights and obligations of the Assignor under the
respective facilities identified below (including, without limitation,
Guarantees included in such facilities) and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any
other right of the Assignor (in its capacity as a Lender) against any Person,
whether known or unknown, arising under or in connection with the Loan
Agreement, any other documents or instruments delivered pursuant thereto or the
loan transactions governed thereby or in any way based on or related to any of
the foregoing, including all claims at law or in equity related to the rights
and obligations sold and assigned pursuant to clause (i) above (the rights and
obligations sold and assigned pursuant to clauses (i) and (ii) above being
referred to herein collectively as, the “Assigned Interest”).  Such sale and assignment is without recourse
to the Assignor and, except as expressly provided in this Assignment and
Assumption, without representation or warranty by the Assignor.

 

Assignee enters
into this Assignment and Assumption Agreement subject to the transfer
restrictions set forth in Section 13.04 of the Loan Agreement.

 

	
  1.

  	
   

  	
  Assignor:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Assignee:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [and is an Affiliate/Approved
  Fund of [identify Lender](1)]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Borrower:

  	
   

  	
  J. Crew Operating Corp.

  

 

(1)  Select as
applicable.

 

H-1

 

	
  4.

  	
   

  	
  Agent:

  	
   

  	
  U.S. Bank National
  Association, as the administrative agent under the Loan Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Loan Agreement:

  	
   

  	
  The Senior Subordinated
  Loan Agreement dated as of November 21, 2004 among J. Crew Operating
  Corp., the guarantors party thereto, the lenders party hereto and U.S. Bank
  National Association, as Administrative Agent.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Assigned Interest:

  	
   

  	
   

  

 

	
  Facility Assigned

  	
   

  	
  Aggregate

  Amount of

  Commitment/Loans

  for all Lenders*

  	
   

  	
  Amount of

  Commitment/Loans

  Assigned*

  	
   

  	
  Percentage

  Assigned of

  Commitment/Loans(2)

  	
   

  	
  CUSIP Number

  	
   

  
	
                                     (3)

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
  %

  	
   

  	
   

  

 

	
  [7.

  	
   

  	
  Trade Date:

  	
   

  	
  ](4)

  

 

Effective Date:  _________, 20___ [TO BE INSERTED BY
ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]

 

 

(2)  Set forth,
to at least 9 decimals, as a percentage of the Term Loan Commitment/Loans of
all Lenders thereunder.

(3)  Fill in
the appropriate terminology for the types of facilities under the Loan
Agreement that are being assigned under this Assignment (e.g., “Term Loan Commitment”,
etc.).

(4)  To be
completed if the Assignor and the Assignee intend that the minimum assignment
amount is to be determined as of the Trade Date.

 

H-2

 

The terms set forth in
this Assignment and Assumption are hereby agreed to:

 

	
   

  	
  ASSIGNOR

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  
	
  Consented to and
  Accepted:

  
	
   

  
	
  U.S.
  Bank National Association as

  Administrative Agent

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
						

 

H-3

 

ANNEX 1

 

STANDARD TERMS AND
CONDITIONS FOR

 

ASSIGNMENT AND
ASSUMPTION

 

1.  Representations and Warranties.

 

1.1.  Assignor.  The Assignor (a) represents and warrants that
(i) it is the legal and beneficial owner of the Assigned Interest, (ii) the
Assigned Interest is free and clear of any lien, encumbrance or other adverse
claim and (iii) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or
representations made in or in connection with the Loan Agreement or any other
Credit Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Documents or any collateral
thereunder, (iii) the financial condition of the Borrower, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of any Loan
Document or (iv) the performance or observance by the Borrower, any of its
Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Credit Document.

 

1.2.  Assignee.  The Assignee (a) represents and warrants that
(i) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby and to become a Lender under the Loan
Agreement, (ii) it meets all requirements of an Eligible Assignee under the
Loan Agreement (subject to receipt of such consents as may be required under
the Loan Agreement), (iii) from and after the Effective Date, it shall be bound
by the provisions of the Loan Agreement as a Lender thereunder and, to the
extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, (iv) it has received a copy of the Loan Agreement, together with
copies of the most recent financial statements delivered pursuant to Section 8.01
thereof, as applicable, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Assumption and to purchase the Assigned Interest on the
basis of which it has made such analysis and decision independently and without
reliance on the Administrative Agent or any other Lender, and (v) if it is a
not a United States person under Section 7701(a)(30) of the Code, attached
to the Assignment and Assumption is any documentation required to be delivered
by it pursuant to the terms of the Loan Agreement, duly completed and executed
by the Assignee; and (b) agrees that (i) it will, independently and without
reliance on the Administrative Agent, the Assignor or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Documents, and (ii) it will perform in accordance with their terms
all of the obligations which by the terms of the Credit Documents are required
to be performed by it as a Lender.

 

2.   Payments.  From and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignor for amounts which have accrued to but excluding the Effective Date
and to the Assignee for amounts which have accrued from and after the Effective
Date.

 

3.  General Provisions. This Assignment
and Assumption shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns.  This Assignment and Assumption may be
executed in any number of counterparts, which together shall constitute one
instrument.  Delivery of an executed
counterpart of a signature page of this Assignment and Assumption by telecopy
shall be effective as delivery of a manually executed counterpart of this
Assignment and 

 

H-4

 

Assumption.  This Assignment and Assumption shall be
governed by, and construed in accordance with, the law of the State of New
York.

 

H-5

 

EXHIBIT I

 

FORM OF SECRETARY’S CERTIFICATE

 

J. CREW
OPERATING CORP.

J.
CREW GROUP, INC.

J.
CREW INTERMEDIATE LLC

GRACE
HOLMES, INC.

H.F.D.
NO. 55, INC.

J. CREW
INC.

770 Broadway

New York, New York 10003

 

____________, 2004

 

SECRETARY’S CERTIFICATE

 

The undersigned,
Arlene S. Hong, does hereby certify that she is the Secretary of each of J.
Crew Operating Corp., a Delaware corporation (the “Company”), J. Crew
Group, Inc., a New York corporation (“J. Crew Group”), J. Crew
Intermediate LLC, a Delaware limited liability company (“Intermediate”),
Grace Holmes, Inc., a Delaware corporation and a wholly owned subsidiary of the
Company (“J. Crew Retail”), H.F.D. NO 55, Inc., a Delaware corporation
and a wholly owned subsidiary of the Company (“J. Crew Factory”), and J.
Crew Inc., a New Jersey corporation and a wholly owned subsidiary of the Company
(“J. Crew Inc.”), and further certifies as follows.  Capitalized terms used herein without
definition have the meanings ascribed to them in the Senior Subordinated Loan
Agreement dated as of November 21, 2004 (the “Loan Agreement”),
among the Company, the guarantors party thereto, the lenders party thereto and
U.S. Bank National Association, as Administrative Agent.

 

1.                                       Attached
hereto as Exhibit A are true, complete and correct copies of the
Certificate of Incorporation, and all amendments thereto through the date
hereof, of each of the Company, J. Crew Retail, and J. Crew Factory and the
Certificate of Formation, and all amendments thereto through the date hereof,
of Intermediate, in each case, as filed with the Secretary of State of the
State of Delaware, the Certificate of Incorporation, and all amendments thereto
through the date hereof, of J. Crew Inc., as filed with the Secretary of State
of the State of New Jersey, and the Certificate of Incorporation, and all
amendments thereto through the date hereof, of J. Crew Group, as filed with the
Secretary of State of the State of New York. 
No documents with respect to
amendments to the Certificate of Incorporation or Certificate of Formation of
each of the Company, J. Crew Retail, J. Crew Factory, J. Crew Inc., J. Crew
Group and Intermediate have been filed with the Secretary of State of the State
of Delaware, the Secretary of State of the State of New Jersey or the Secretary
of New York, as applicable, since the date of the Certificate of Incorporation and
all amendments thereto or Certificate of Formation and all amendments thereto,
as applicable, attached hereto and no action has been taken or, to my
knowledge, is contemplated by any of the Company, J. Crew Retail, J. Crew Factory, J. Crew Inc., J. Crew Group or
Intermediate in connection with any such amendment or

 

I-1

 

the dissolution, merger or consolidation of any of the Company, J. Crew Retail, J. Crew Factory, J. Crew
Inc., J. Crew Group or Intermediate.

 

2.                                       Attached
hereto as Exhibit B are Certificates of Good Standing and/or Bring-Down
Certificates of Good Standing for each of the Company, J. Crew Retail, J. Crew Factory, J. Crew Inc., J. Crew Group and
Intermediate issued by the Secretary of State of the State of Delaware, the
State of New Jersey or the State of New York, as the case may be.

 

3.                                       Attached
hereto as Exhibit C are true, complete and correct copies of the By-laws
of each of the Company, J. Crew Retail,
J. Crew Factory, J. Crew Inc., and J. Crew Group and the Limited
Liability Company Agreement of Intermediate, as in effect at the date hereof.

 

4.                                       Attached
hereto as Exhibit D are true, complete and correct copies of the
resolutions adopted by the Board of Directors or Sole Member of each of the
Company, J. Crew Retail, J. Crew
Factory, J. Crew Inc., J. Crew Group and Intermediate on the date
indicated therein, pertaining to (i) the execution, delivery and performance of
the Loan Agreement; (ii) the authorization, issuance, execution and delivery of
the Loan Notes; (iii) the execution, delivery and performance of the Loan
Guarantees; (iv) the execution, delivery and performance of the Security
Agreement; (v) the execution, delivery and performance of the Intercreditor
Agreement, (vi) the execution, delivery and performance of the other Credit
Documents to which it is a party or by which it or its assets may be bound as
of the date hereof and (vii) all other transactions deemed necessary in
connection with the foregoing; said resolutions have not in any way been
amended, supplemented, modified, revoked or rescinded and remain in full force
and effect as of the date hereof; such resolutions are the only proceedings of
each of the Company, J. Crew Retail, J.
Crew Factory, J. Crew Inc., J. Crew Group and Intermediate now in force
relating to the foregoing.  Each person who, as a
director of the Company, J. Crew
Retail, J. Crew Factory, J. Crew Inc., J. Crew Group or Intermediate, signed the unanimous
consent adopting the resolutions described in this Paragraph 4, was duly
elected or appointed, qualified and acting as such a director at the respective
time of such singing, and the signature of each such person appearing on each
such consent is his or her genuine signature.

 

5.                                       The
persons whose names appear on Exhibit E hereto are the duly elected,
qualified and acting officers or attorneys-in-fact of the Company, J. Crew Retail, J. Crew Factory, J. Crew
Inc., J. Crew Group and Intermediate occupying the offices or holding
the authorization set forth opposite their respective names, and the signatures
set forth opposite their respective names are the true and genuine signatures
of such officers, and such officers, at the time or the respective times of the
execution of (i) the Loan Agreement, (ii) the Loan Notes, (iii) the Loan
Guarantees, (iv) the Security Agreement, (v) the Intercreditor Agreement, (vi)
the other Credit Documents and (vii) any other document delivered prior to or
on the date hereof in connection with the execution and delivery of the Loan
Agreement, the Loan Notes, the Loan Guarantees, the Security Agreement and the
Intercreditor Agreement (collectively, the “Documents”), were duly
elected, qualified and acting as such officer or attorney-in-fact and were
authorized to execute and deliver on behalf of the Company, J. Crew Retail, J. Crew Factory, J. Crew
Inc., J. Crew Group and Intermediate, the Documents to which each of the
Company, J. Crew Retail, J. Crew
Factory, J. Crew Inc., J. Crew Group and Intermediate is a party and the
signatures of such persons appearing on such Documents are their genuine
signatures.

 

I-2

 

6.                                       The
Documents, each as executed and delivered on behalf of the Company, J. Crew Retail, J. Crew Factory, J. Crew Inc.,
J. Crew Group and Intermediate, were approved by appropriate officers of the
Company, J. Crew Retail, J. Crew
Factory, J. Crew Inc., J. Crew Group and Intermediate pursuant to
authority granted to them by the Company, J.
Crew Retail, J. Crew Factory, J. Crew Inc., J. Crew Group or
Intermediate.

 

7.                                       Each
of the Documents, as executed and delivered on behalf of the Company, J. Crew Retail, J. Crew Factory, J. Crew
Inc., J. Crew Group and Intermediate, is substantially in the form
approved by the board of directors or sole member of each of the Company, J. Crew Retail, J. Crew Factory, J. Crew
Inc., J. Crew Group and Intermediate.

 

Cleary, Gottlieb,
Steen & Hamilton, Gibbons,
Del Deo, Dolan, Griffinger & Vecchione, and Richards, Layton & Finger,
P.A. are entitled to rely on this certificate in connection with the
opinion they are respectively rendering pursuant to 9.02(a) of the Loan
Agreement.

 

This certificate
may be executed in several counterparts, including, without limitation,
facsimile counterparts, each of which shall constitute an original and one and
the same instrument.

 

[Remainder of this page
has been left intentionally blank]

 

I-3

 

IN WITNESS
WHEREOF, I have signed my name on behalf of each of the Company, J. Crew Retail, J. Crew Factory, J. Crew
Inc., J. Crew Group and Intermediate as of _________, 2004.

 

	
   

  	
  J. CREW OPERATING CORP.

  
	
   

  	
  GRACE HOLMES, INC.

  
	
   

  	
  H.F.D. NO 55, INC.

  
	
   

  	
  J. CREW INC.

  
	
   

  	
  J. CREW GROUP, INC.

  
	
   

  	
  J. CREW INTERMEDIATE LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Arlene S. Hong

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  
					

 

I-4

 

I, Amanda K.
Bokman, the Chief Financial Officer of the Company, J. Crew Retail, J. Crew Factory, J. Crew
Inc., J. Crew Group and Intermediate, do hereby certify that Arlene S.
Hong is the duly appointed, qualified and acting Secretary of each of the
Company, J. Crew Retail, J. Crew
Factory, J. Crew Inc., J. Crew Group and Intermediate and that the
signature set forth above is her true and genuine signature.

 

IN WITNESS
WHEREOF, I have signed my name on behalf of the Company, J. Crew Retail, J. Crew Factory, J. Crew
Inc., J. Crew Group and Intermediate as of __________, 2004.

 

	
   

  	
  J. CREW OPERATING CORP.

  
	
   

  	
  GRACE HOLMES, INC.

  
	
   

  	
  H.F.D. NO 55, INC.

  
	
   

  	
  J. CREW INC.

  
	
   

  	
  J. CREW GROUP, INC.

  
	
   

  	
  J. CREW INTERMEDIATE LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Amanda K. Bokman

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
					

 

I-5

 

Exhibit E to Secretary’s
Certificate

 

	
  Name

  	
   

  	
  Office

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [
               ]

  	
   

  	
  [
               ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [
               ]

  	
   

  	
  [
               ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [
               ]

  	
   

  	
  [
               ]

  	
   

  	
   

  

 

I-6

 

J. CREW
INTERNATIONAL, INC.

770 Broadway

New York, New York 10003

 

_________, 2004

 

SECRETARY’S CERTIFICATE

 

The undersigned,
Nicholas Lamberti, does hereby certify that he is the Assistant Secretary of J.
Crew International, Inc., a Delaware corporation (“J. Crew International”),
and further certifies as follows. 
Capitalized terms used herein without definition have the meanings
ascribed to them in the Senior Subordinated Loan Agreement dated as of November 21,
2004 (the “Loan Agreement”), among the Company, the Guarantors, the
Lenders party thereto and U.S. Bank National Association, as Administrative
Agent.

 

1.                                       Attached
hereto as Exhibit A is a true, complete and correct copy of the
Certificate of Incorporation, and all amendments thereto through the date
hereof, of J. Crew International, as filed with the Secretary of State of the
State of Delaware.  No documents with respect to amendments to the
Certificate of Incorporation J. Crew International have been filed with the
Secretary of State of the State of Delaware since the date of the Certificate
of Incorporation and all amendments thereto, attached hereto and no action
has been taken or, to my knowledge, is contemplated by J. Crew International in
connection with any such amendment or the dissolution, merger or consolidation
of J. Crew International.

 

2.                                       Attached
hereto as Exhibit B is the Certificate of Good Standing and/or
Bring-Down Certificate of Good Standing for J. Crew International issued by the
Secretary of State of the State of Delaware.

 

3.                                       Attached
hereto as Exhibit C is a true, complete and correct copy of the By-laws
of J. Crew International, as in effect at the date hereof.

 

4.                                       Attached
hereto as Exhibit D is a true, complete and correct copy of the
resolutions adopted by the Board of Directors of J. Crew International on the
date indicated therein, pertaining to (i) the execution, delivery and
performance of the Loan Agreement; (ii) the execution, delivery and performance
of the Loan Guarantees; (iii) the execution, delivery and performance of the
Security Agreement; (iv) the execution, delivery and performance of the
Intercreditor Agreement, (v) the execution, delivery and performance of the
other Credit Documents to which it is a party or by which it or its assets may
be bound as of the date hereof and (vi) all other transactions deemed necessary
in connection with the foregoing; said resolutions have not in any way been
amended, supplemented, modified, revoked or rescinded and remain in full force
and effect as of the date hereof; such resolutions are the only proceedings of
J. Crew International now in force relating to the foregoing.  Each
person who, as a director of J. Crew International, signed the unanimous
consent adopting the resolutions described in this Paragraph 4, was duly
elected or appointed, qualified and acting as such a

 

I-7

 

director at the respective
time of such singing, and the signature of each such person appearing on each
such consent is his or her genuine signature.

 

5.                                       The
persons whose names appear on Exhibit E hereto are the duly elected,
qualified and acting officers or attorneys-in-fact of J. Crew International
occupying the offices or holding the authorization set forth opposite their
respective names, and the signatures set forth opposite their respective names
are the true and genuine signatures of such officers, and such officers, at the
time or the respective times of the execution of (i) the Loan Agreement, (ii)
the Loan Guarantees, (iii) the Security Agreement, (iv) the Intercreditor
Agreement, (v) the other Credit Documents and (vii) any other document
delivered prior to or on the date hereof in connection with the execution and
delivery of the Loan Agreement, the Loan Guarantees, the Security Agreement and
the Intercreditor Agreement (collectively, the “Documents”), were duly
elected, qualified and acting as such officer or attorney-in-fact and were
authorized to execute and deliver on behalf of J. Crew International, the
Documents to which J. Crew International is a party and the signatures of such
persons appearing on such Documents are their genuine signatures.

 

6.                                       The
Documents, each as executed and delivered on behalf of J. Crew International,
were approved by appropriate officers of J. Crew International pursuant to
authority granted to them by J. Crew International.

 

7.                                       Each
of the Documents, as executed and delivered on behalf of J. Crew International,
is substantially in the form approved by the board of directors of J. Crew
International.

 

Cleary, Gottlieb,
Steen & Hamilton, Gibbons,
Del Deo, Dolan, Griffinger & Vecchione, and Richards, Layton & Finger,
P.A. are entitled to rely on this certificate in connection with the
opinion they are respectively rendering pursuant to 9.02(a) of the Loan
Agreement.

 

This certificate
may be executed in several counterparts, including, without limitation, facsimile
counterparts, each of which shall constitute an original and one and the same
instrument.

 

[Remainder of this page has been left intentionally blank]

 

I-8

 

IN WITNESS
WHEREOF, I have signed my name on behalf of J. Crew International as of _______________,
2004.

 

 

	
   

  	
  J. CREW INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Nicholas Lamberti

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  
					

 

I-9

 

I, Arlene S. Hong,
the President of J. Crew International, do hereby certify that Nicholas
Lamberti is a duly appointed, qualified and acting Assistant Secretary of J.
Crew International and that the signature set forth above is his true and
genuine signature.

 

IN WITNESS
WHEREOF, I have signed my name on behalf of J. Crew International as of _______________,
2004.

 

 

	
   

  	
  J. CREW INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Arlene S. Hong

  
	
   

  	
   

  	
  Title:

  	
  President

  
					

 

I-10

 

Exhibit E to
Secretary’s Certificate

 

	
  Name

  	
   

  	
  Office

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [
               ]

  	
   

  	
  [
               ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [
               ]

  	
   

  	
  [
               ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [
               ]

  	
   

  	
  [
               ]

  	
   

  	
   

  

 

I-11

 

EXHIBIT J

 

FORM OF OFFICER’S CERTIFICATE

 

J. CREW OPERATING
CORP.

GRACE
HOLMES, INC.

H.F.D.
NO. 55, INC.

J. CREW
INC.

770 Broadway

New York, New York 10003

 

____________, 2004

 

OFFICER’S CERTIFICATE

 

This officers’
certificate is being delivered pursuant to Section 9.02(c) of the Senior
Subordinated Loan Agreement (the “Loan Agreement”), dated as of November 21,
2004, by and among J. Crew Operating Corp., a Delaware corporation (the “Company”),
the Guarantors, the Lenders party thereto and U.S. Bank National Association,
as Administrative Agent.  Capitalized
terms used herein but not otherwise defined herein have the respective meanings
ascribed to them in the Loan Agreement.

 

The undersigned,
in the capacity indicated beneath his signature below, hereby certifies on
behalf of each of the Company, Grace Holmes, Inc. (“J. Crew Retail”),
H.F.D. NO. 55, Inc. (“J. Crew Factory”) and J. Crew, Inc. (“J. Crew
Inc.”) that, to the best of his knowledge after reasonable investigation:

 

(i)                                     The
representations and warranties of each of the Company, J. Crew Retail, J. Crew
Factory and J. Crew Inc. set forth in Section 8.01 of the Loan Agreement
are true and correct in all material respects on and as of the date
specifically referred to within Section 8.01, except that the
representations and warranties provided in Section 8.01(a), Section 8.01(b),
Section 8.01(c), Section 8.01(d), Section 8.01(e), Section 8.01(f),
Section 8.01(g) (other than the representations and warranties set forth
in clause (iii) thereof), Section 8.01(i) and Section 8.01(k) are
true and correct in all material respects as of the Closing Date; and

 

(ii)                                  There
is no Default or Event of Default existing under the Loan Agreement other than
any Default or Event of Default resulting from failure by the Borrower or any
of its Restricted Subsidiaries to comply with the provisions described under Section 4.03,
Section 4.04 or Section 4.14.

 

J-1

 

Cleary, Gottlieb,
Steen & Hamilton, Gibbons,
Del Deo, Dolan, Griffinger & Vecchione, and Richards, Layton & Finger, P.A.
are entitled to rely on this certificate in connection with the opinion they
are respectively rendering pursuant to 9.02(a) of the Loan Agreement.

 

[Remainder of this page has been left intentionally blank]

 

J-2

 

IN WITNESS WHEREOF, I have signed my name on behalf of each of the
Company, J. Crew Retail, J. Crew Factory and J. Crew Inc. as of _____________, 2004.

 

 

	
   

  	
  J. CREW OPERATING CORP.

  
	
   

  	
  GRACE HOLMES, INC.

  
	
   

  	
  H.F.D. NO. 55, INC.

  
	
   

  	
  J. CREW INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Amanda K. Bokman

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
						

 

J-3

 

J. CREW
INTERNATIONAL, INC.

770 Broadway

New York, New York 10003

 

___________, 2004

 

OFFICER’S CERTIFICATE

 

This officers’
certificate is being delivered pursuant to Section 9.02(c) of the Senior
Subordinated Loan Agreement (the “Loan Agreement”), dated as of November 21,
2004, by and among J. Crew Operating Corp., a Delaware corporation, the
Guarantors, the Lenders party thereto and U.S. Bank National Association, as
Administrative Agent.  Capitalized terms
used herein but not otherwise defined herein have the respective meanings
ascribed to them in the Loan Agreement.

 

The undersigned,
in the capacity indicated beneath his signature below, hereby certifies on
behalf of J. Crew International, Inc. (“J. Crew International”) that, to
the best of his knowledge after reasonable investigation:

 

(i)                                     The
representations and warranties of J. Crew International set forth in Section 8.01
of the Loan Agreement are true and correct in all material respects on and as
of the date specifically referred to within Section 8.01, except that the
representations and warranties provided in Section 8.01(a), Section 8.01(b),
Section 8.01(c), Section 8.01(d), Section 8.01(e), Section 8.01(f),
Section 8.01(g) (other than the representations and warranties set forth
in clause (iii) thereof), Section 8.01(i) and Section 8.01(k) are
true and correct in all material respects as of the Closing Date; and

 

(ii)                                  There
is no Default or Event of Default existing under the Loan Agreement other than
any Default or Event of Default resulting from failure by the Borrower or any
of its Restricted Subsidiaries to comply with the provisions described under Section 4.03,
Section 4.04 or Section 4.14.

 

Cleary, Gottlieb,
Steen & Hamilton, Gibbons,
Del Deo, Dolan, Griffinger & Vecchione, and Richards, Layton & Finger,
P.A. are entitled to rely on this certificate in connection with the
opinion they are respectively rendering pursuant to 9.02(a) of the Loan
Agreement.

 

[Remainder of this page has been left intentionally blank]

 

J-4

 

IN WITNESS WHEREOF, I have signed my name on behalf of J. Crew
International as of ___________, 2004.

 

 

	
   

  	
  J. CREW INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Arlene S. Hong

  
	
   

  	
  Title:

  	
  President

  
						

 

J-5

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