Document:

Exhibit 10.1

 

EXECUTION

 

 

STOCK PURCHASE AGREEMENT

 

by and among

 

CLARIENT, INC.

 

and

 

OAK INVESTMENT PARTNERS XII, LIMITED PARTNERSHIP

 

March 25, 2009

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  PURCHASE
  AND SALE OF PREFERRED SHARES.

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  PURCHASE OF PREFERRED SHARES.

  	
  2

  
	
   

  	
  (B)

  	
  THE CLOSING DATES.

  	
  2

  
	
   

  	
  (C)

  	
  FORM OF PAYMENT

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE PURCHASER

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  INVESTMENT PURPOSE

  	
  3

  
	
   

  	
  (B)

  	
  ACCREDITED INVESTOR STATUS

  	
  3

  
	
   

  	
  (C)

  	
  RELIANCE ON EXEMPTIONS

  	
  3

  
	
   

  	
  (D)

  	
  INFORMATION

  	
  3

  
	
   

  	
  (E)

  	
  NO GOVERNMENTAL REVIEW

  	
  4

  
	
   

  	
  (F)

  	
  TRANSFER OR RESALE

  	
  4

  
	
   

  	
  (G)

  	
  LEGENDS

  	
  4

  
	
   

  	
  (H)

  	
  AUTHORIZATION; ENFORCEMENT; VALIDITY

  	
  5

  
	
   

  	
  (I)

  	
  RESIDENCY

  	
  5

  
	
   

  	
  (J)

  	
  OWNERSHIP

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  ORGANIZATION AND QUALIFICATION

  	
  6

  
	
   

  	
  (B)

  	
  AUTHORIZATION; ENFORCEMENT; VALIDITY

  	
  7

  
	
   

  	
  (C)

  	
  EQUITY CAPITALIZATION.

  	
  7

  
	
   

  	
  (D)

  	
  INDEBTEDNESS AND OTHER CONTRACTS

  	
  8

  
	
   

  	
  (E)

  	
  ISSUANCE OF SECURITIES

  	
  9

  
	
   

  	
  (F)

  	
  NO CONFLICTS.

  	
  9

  
	
   

  	
  (G)

  	
  SEC DOCUMENTS; FINANCIAL STATEMENTS.

  	
  10

  
	
   

  	
  (H)

  	
  ABSENCE OF LITIGATION

  	
  11

  
	
   

  	
  (I)

  	
  ACKNOWLEDGMENT REGARDING THE PURCHASER’S PURCHASE OF PREFERRED SHARES

  	
  11

  
	
   

  	
  (J)

  	
  NO GENERAL SOLICITATION

  	
  11

  
	
   

  	
  (K)

  	
  NO INTEGRATED OFFERING

  	
  12

  
	
   

  	
  (L)

  	
  EMPLOYEE RELATIONS; BENEFIT PLANS.

  	
  12

  
	
   

  	
  (M)

  	
  INTELLECTUAL PROPERTY RIGHTS

  	
  13

  
	
   

  	
  (N)

  	
  TITLE

  	
  14

  
	
   

  	
  (O)

  	
  INSURANCE

  	
  14

  
	
   

  	
  (P)

  	
  REGULATORY PERMITS; COMPLIANCE WITH LAW

  	
  14

  
	
   

  	
  (Q)

  	
  DISCLOSURE CONTROLS

  	
  15

  
	
   

  	
  (R)

  	
  TAX STATUS

  	
  15

  
	
   

  	
  (S)

  	
  TRANSACTIONS WITH AFFILIATES

  	
  15

  
	
   

  	
  (T)

  	
  CONTRACTS

  	
  16

  
	
   

  	
  (U)

  	
  APPLICATION OF TAKEOVER PROTECTIONS

  	
  17

  
	
   

  	
  (V)

  	
  POISON PILL

  	
  17

  
	
   

  	
  (W)

  	
  INVESTMENT COMPANY

  	
  17

  

 

 

i

 

	
   

  	
  (X)

  	
  NO MARKET MANIPULATION

  	
  17

  
	
   

  	
  (Y)

  	
  SPECIAL REGULATORY AND OTHER MATTERS

  	
  17

  
	
   

  	
  (Z)

  	
  SOLVENCY

  	
  19

  
	
   

  	
  (AA)

  	
  FOREIGN CORRUPT PRACTICES

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  COVENANTS.

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  CERTAIN PRE-CLOSING COVENANTS

  	
  19

  
	
   

  	
  (B)

  	
  INFORMATION STATEMENT

  	
  20

  
	
   

  	
  (C)

  	
  FORM D AND BLUE SKY

  	
  20

  
	
   

  	
  (D)

  	
  USE OF PROCEEDS

  	
  21

  
	
   

  	
  (E)

  	
  ACCESS

  	
  21

  
	
   

  	
  (F)

  	
  RESERVATION OF SHARES

  	
  21

  
	
   

  	
  (G)

  	
  LISTING

  	
  21

  
	
   

  	
  (H)

  	
  EXPENSES

  	
  21

  
	
   

  	
  (I)

  	
  FILING OF FORM 8-K; PRESS RELEASES

  	
  22

  
	
   

  	
  (J)

  	
  TRANSACTIONS WITH AFFILIATES

  	
  22

  
	
   

  	
  (K)

  	
  LOCK-UP AGREEMENT.

  	
  22

  
	
   

  	
  (L)

  	
  CERTAIN TRADING ACTIVITIES

  	
  23

  
	
   

  	
  (M)

  	
  OWNERSHIP DISCLOSURE

  	
  24

  
	
   

  	
  (N)

  	
  BOARD SEATS

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  TRANSFER
  AGENT INSTRUCTIONS

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  CONDITIONS
  TO THE COMPANY’S OBLIGATION TO SELL ON THE CLOSING DATES.

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL ON THE INITIAL CLOSING
  DATE

  	
  25

  
	
   

  	
  (B)

  	
  CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL ON THE SECOND CLOSING
  DATE

  	
  26

  
	
   

  	
  (C)

  	
  CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL ON EACH SUBSEQUENT
  CLOSING DATE

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  CONDITIONS
  TO THE PURCHASER’S OBLIGATION TO PURCHASE ON THE CLOSING DATES.

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  CONDITIONS TO THE PURCHASER’S OBLIGATION TO PURCHASE ON THE INITIAL
  CLOSING DATE

  	
  28

  
	
   

  	
  (B)

  	
  CONDITIONS TO THE PURCHASER’S OBLIGATION TO PURCHASE ON THE SECOND
  CLOSING DATE

  	
  30

  
	
   

  	
  (C)

  	
  CONDITIONS TO THE PURCHASER’S OBLIGATION TO PURCHASE ON EACH SUBSEQUENT
  CLOSING DATE

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  TERMINATION.

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  TERMINATION.

  	
  32

  
	
   

  	
  (B)

  	
  EFFECT OF TERMINATION

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  GOVERNING
  LAW; MISCELLANEOUS.

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  GOVERNING LAW; JURISDICTION; JURY TRIAL

  	
  34

  
	
   

  	
  (B)

  	
  COUNTERPARTS

  	
  35

  

 

 

ii

 

	
   

  	
  (C)

  	
  HEADINGS

  	
  35

  
	
   

  	
  (D)

  	
  SEVERABILITY

  	
  35

  
	
   

  	
  (E)

  	
  ENTIRE AGREEMENT; AMENDMENTS

  	
  35

  
	
   

  	
  (F)

  	
  NOTICES

  	
  35

  
	
   

  	
  (G)

  	
  SUCCESSORS AND ASSIGNS

  	
  37

  
	
   

  	
  (H)

  	
  NO THIRD PARTY BENEFICIARIES

  	
  37

  
	
   

  	
  (I)

  	
  SURVIVAL

  	
  37

  
	
   

  	
  (J)

  	
  PUBLICITY

  	
  38

  
	
   

  	
  (K)

  	
  FURTHER ASSURANCES

  	
  38

  
	
   

  	
  (L)

  	
  PLACEMENT AGENT

  	
  38

  
	
   

  	
  (M)

  	
  NO STRICT CONSTRUCTION

  	
  38

  
	
   

  	
  (N)

  	
  REMEDIES

  	
  38

  
	
   

  	
  (O)

  	
  RELIANCE

  	
  38

  
	
   

  	
  (P)

  	
  PAYMENT SET ASIDE

  	
  39

  
	
   

  	
  (Q)

  	
  FORM, REGISTRATION, TRANSFER AND EXCHANGE OF PREFERRED STOCK; LOST
  PREFERRED STOCK

  	
  39

  
	
   

  	
  (R)

  	
  DEFINITIONS

  	
  39

  

 

 

iii

 

SCHEDULES

 

	
  Schedule 3(a)

  	
  Subsidiaries of the Company

  
	
  Schedule 3(c)

  	
  No Preemptive Rights, Outstanding Warrants, Etc.

  
	
  Schedule 3(d)

  	
  Indebtedness

  
	
  Schedule 3(f)

  	
  No Violation

  
	
  Schedule 3(h)

  	
  Litigation

  
	
  Schedule 3(l)

  	
  Employee Relations; Benefits Plans

  
	
  Schedule 3(m)

  	
  Intellectual Property Claims

  
	
  Schedule 3(n)

  	
  Title Matters

  
	
  Schedule 3(s)

  	
  Transactions With Affiliates

  
	
  Schedule 3(t)

  	
  Contracts

  
	
  Schedule 3(y)

  	
  Regulatory Matters

  

 

EXHIBITS

 

	
  Exhibit A

  	
  Form of Certificate of Designations, Preferences and Rights of
  Series A Convertible Preferred Stock

  
	
  Exhibit B

  	
  Form of Registration Rights Agreement

  
	
  Exhibit C

  	
  Form of Irrevocable Transfer Agent Instructions

  
	
  Exhibit D

  	
  Form of Company Counsel Opinion

  
	
  Exhibit E

  	
  Form of Safeguard Agreement

  

 

 

iv

 

 

STOCK
PURCHASE AGREEMENT

 

STOCK
PURCHASE AGREEMENT (the “Agreement”),
dated as of March 25, 2009, by and among CLARIENT, INC., a Delaware
corporation, with headquarters located at 31 Columbia, Aliso Viejo, California
92656 (the “Company”), and OAK
INVESTMENT PARTNERS XII, LIMITED PARTNERSHIP, a Delaware limited partnership,
with headquarters located at One Gorham Island, Westport, Connecticut 06880
(the “Purchaser”).  Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed thereto in Section 9(r) hereof.

 

RECITALS

 

The Company and the
Purchaser are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Rule 506 of Regulation
D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as
amended (the “Securities Act”).  (Unless otherwise indicated, capitalized
terms used in this Agreement shall have the meanings ascribed to such terms
herein.)

 

The Company’s Board of
Directors has authorized 6,578,948  shares of its
preferred stock, par value $0.01 per share to be denominated as the Company’s Series A
Convertible Preferred Stock (the “Series A
Preferred Stock”), which shall be convertible into shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”), in accordance with the
terms of the Company’s Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock, substantially in the form attached hereto as Exhibit A
(the “Certificate of Designations”).

 

Subject to the terms and
conditions set forth in this Agreement, the Purchaser wishes to purchase an
aggregate of up to 5,263,158 shares of the Series A Preferred Stock in the
Initial Closing and Second Closing, and up to an additional 1,315,790 shares of
the Series A Preferred Stock in one or more Subsequent Closings (the “Preferred Shares”), at a purchase price
per share of $7.60 (the “Purchase Price”).  All of the shares of Common Stock which are potentially
issuable upon conversion of the Preferred Shares are referred to herein as the “Conversion Shares.”

 

Contemporaneously with the
execution and delivery of this Agreement, the Company and the Purchaser are
executing and delivering a Registration Rights Agreement substantially in the
form attached hereto as Exhibit B (the “Registration Rights Agreement”) pursuant to which the Company
has agreed to provide certain registration rights under the Securities Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws.

 

NOW
THEREFORE, the Company and the Purchaser hereby agree as
follows:

 

 

 

1.             PURCHASE
AND SALE OF PREFERRED SHARES.

 

(a)           Purchase
of Preferred Shares.

 

(i)            Subject to the terms and conditions of this Agreement,
including, without limitation, the satisfaction (or waiver) of the conditions
set forth in Sections 6(a) and 7(a) below, the Company
shall issue and sell to the Purchaser, and the Purchaser agrees to purchase
from the Company, at a purchase price per share equal to the Purchase Price, a
number of Preferred Shares such that the number of Conversion Shares issuable
upon conversion thereof equals 19.9% of the Company’s outstanding shares
calculated in accordance with NASDAQ rules and regulations (the “Initial Closing”).

 

(ii)           Subject to the terms and conditions of this Agreement,
including, without limitation, the satisfaction (or waiver) of the conditions
set forth in Sections 6(b) and 7(b) below, the Company shall issue
and sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, at a purchase price per share equal to the Purchase Price, a number of
Preferred Shares equal to 5,263,158 minus the number of Preferred Shares
purchased and sold at the Initial Closing (the “Second Closing”).  The
Initial Closing and the Second Closing collectively are referred to in this
Agreement as the “Closings”).

 

(iii)          Following the Second Closing, subject to the mutual
agreement of the Company and the Purchaser, the Purchaser will purchase, and
the Company shall issue and sell, up to an additional $10,000,000 of Preferred
Shares (which amount may be allocated between up to two subsequent $5,000,000
closings), subject to the terms and conditions of this Agreement, including,
without limitation, the satisfaction (or waiver) of the conditions set forth in
Sections 6(c) and 7(c) below (each, a “Subsequent Closing”).

 

(b)           The
Closing Dates.

 

(i)            The Initial Closing shall occur as soon as practicable,
but in no event later than the second Business Day after the satisfaction or
waiver of the conditions to the Initial Closing set forth herein (excluding
conditions, that, by their terms, cannot be satisfied until the Initial
Closing) or such later date as is mutually agreed to by the Company and the
Purchaser (the “Initial  Closing Date”).

 

(ii)           Only if the Initial Closing has previously occurred, the
Second Closing shall occur as soon as practicable, but in no event later than
the second Business Day after the satisfaction or waiver of the conditions to
the Second Closing set forth herein (excluding conditions, that, by their
terms, cannot be satisfied until the Second Closing) or such later date as is
mutually agreed to by the Company and the Purchaser (the “Second  Closing
Date”).

 

(iii)          In the event that the parties elect to hold a Subsequent
Closing, each Subsequent Closing shall occur on such date mutually determined
by the parties (the “Subsequent Closing Date”).  Each of the Closing Date, the Second Closing
Date and the Subsequent Closing Date may also be referred to in this Agreement
as the “Closing Date”.

 

 

2

 

(iv)          Each Closing shall occur on the applicable Closing Date at
the offices of Stradling, Yocca, Carlson & Rauth located at 660
Newport Center Drive Suite 1600, Newport Beach, California 92660, or at
such other location as the Company and the Purchaser may mutually agree.

 

(c)           Form of Payment.  On the applicable Closing Date, (i) the
Purchaser shall pay the Purchase Price to the Company for the applicable
Preferred Shares by wire transfer of immediately available funds in accordance
with the Company’s written wire instructions (to be delivered not less than two
(2) Business Days prior to the applicable Closing) and (ii) the
Company shall deliver to the Purchaser stock certificates (in the denominations
as the Purchaser shall request) (the “Preferred
Stock Certificates”) representing such number of the Preferred
Shares which the Purchaser is then purchasing hereunder, duly executed on
behalf of the Company and registered in the name of the Purchaser.

 

2.             REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER.  The Purchaser represents and
warrants, as of the date hereof, as follows:

 

(a)           Investment Purpose.  The Purchaser is acquiring (i) the
Preferred Shares and (ii) upon conversion of the Preferred Shares, the
Conversion Shares (the Preferred Shares and the Conversion Shares collectively
are referred to herein as the “Securities”),
for its own account and not with a view towards, or for resale in connection
with, the distribution thereof, provided, however, that by making
the representations herein, the Purchaser does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with the Securities
Act,  the Exchange Act and state
securities laws.

 

(b)           Accredited Investor Status.  The Purchaser is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D and a “qualified
institutional buyer” as that term is defined in Rule 144A promulgated
under the Securities Act.

 

(c)           Reliance on Exemptions.  The Purchaser understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of the United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of,
and the Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Securities.

 

(d)           Information.  The Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Purchaser.  The Purchaser and its advisors, if any, have
been afforded the opportunity to ask questions of the Company.  The Purchaser understands that its investment
in the Securities involves a high degree of risk.  The Purchaser has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.  Nothing contained in this Section 2(d) (nor
any of the inquiries described herein nor any other due diligence
investigations conducted by the Purchaser or its advisors, if any, or its
representatives) shall modify, amend or affect the Purchaser’s right to rely on
the Company’s representations and warranties contained in Sections 3 and
9(l) below or in any certificate delivered hereunder.

 

 

3

 

(e)           No Governmental Review.  The Purchaser understands that no court,
administrative agency or commission or other governmental or quasi-governmental
authority or instrumentality, domestic or foreign, Federal, state, county or
local (each a “Governmental Entity”)
has passed on or made any recommendation or endorsement of the Securities or
the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

 

(f)            Transfer or Resale.  The Purchaser understands that: (i) the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and may not be offered for sale, sold, assigned
or transferred unless (A) subsequently registered thereunder, (B) the
Purchaser shall have delivered to the Company an opinion of counsel (or such
other evidence reasonably acceptable to the Company), in a generally acceptable
form, to the effect that such Securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) the Purchaser provides the Company with evidence
satisfactory to the Company that such Securities may be sold, assigned or
transferred pursuant to Rule 144 promulgated under the Securities Act, as amended
(or a successor rule thereto) (“Rule 144”);
and (ii) except as provided in the Registration Rights Agreement, neither
the Company nor any other person is under any obligation to register the
Securities under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.  Notwithstanding the foregoing, no such
registration statement or opinion of counsel shall be necessary for a transfer
by the Purchaser (A) that is a partnership to a liquidating trust for the
benefit of its partners, to its partners or former partners in accordance with
partnership interests or to the estate of any such partner or former partner, (B) that
is a limited liability company to its members or former members in accordance
with their interest in the limited liability company, (C) that is a
corporation to its shareholders in connection with a distribution of the shares
without value or (E) that is an individual to the Purchaser’s family
member or trust for the benefit of the Purchaser or his or her family members
or an entity whose equity owners consist solely of the Purchaser and his or her
family members in a transfer by gift, will or intestate succession, provided
that in each case the transferee will be subject to the terms of this Agreement
to the same extent as if he, she or it were the original Purchaser hereunder.

 

(g)           Legends.

 

(i)            The Purchaser understands that the certificates or other
instruments representing the Preferred Shares and, until such time as the sale
of the Conversion Shares have been registered under the Securities Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (in addition to any
legend required under applicable state securities laws):

 

 

4

 

THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER SAID ACT AND (II) IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS.

 

The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities, if, unless
otherwise required by state securities laws, (i) such Securities are
registered for resale under the Securities Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in form to the reasonable satisfaction of the Company, to the effect that a
public sale, assignment or transfer of the Securities may be made without
registration under the Securities Act, or (iii) such holder provides the
Company with evidence satisfactory to the Company that the Securities may be
sold pursuant to Rule 144 without any restriction as to the number of
securities sold or the manner of sale.

 

(ii)           The Purchaser understands that the certificates or other
instruments representing the Preferred Shares and the Conversion Shares, except
as set forth below, shall bear a restrictive legend in substantially the
following form:

 

THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET
FORTH IN A STOCK PURCHASE AGREEMENT DATED ON OR ABOUT MARCH 25, 2009
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THE SECURITIES.

 

The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities, upon written
request by the holder thereof following the expiration of the restrictions on
transfer set forth in Section 4(k) hereof.

 

(h)           Authorization; Enforcement;
Validity.  Purchaser has full power
and authority to enter into this Agreement and the Registration Rights
Agreement.  This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Purchaser and are valid and binding agreements
of the Purchaser enforceable against the Purchaser in accordance with their
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

 

(i)            Residency.  The Purchaser is a resident of, and has its
principal executive offices located in, the State of Connecticut.

 

(j)            Ownership.  The Purchaser does not own any Common Stock
or any other securities of the Company.

 

 

5

 

3.             REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.  The Company represents and warrants to the
Purchaser as follows in this Section 3, except to the extent (i) disclosed
with reasonable specificity on the schedules to this Agreement, and (ii) with
respect to all subsections in this Section 3, other than Sections
3(b), 3(f) and 3(n), disclosed or incorporated by
reference in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2007, Quarterly Reports on Form 10-Q and current
reports on Form 8-K filed since December 31, 2007 and the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2008 (the “2008 Filings”) filed by
the Company (other than (x) those sections of the 2008 Filings entitled or
captioned “Risk Factors”, (y) any disclosure of risks included in any
forward-looking statements disclaimer or other statements that are similarly
non-specific and are predictive or forward-looking in nature and (z) specific
disclosures contained in those documents which are filed as exhibits to such
2008 Filings).  Without limiting the
generality of the foregoing clause (z), the mere filing or incorporation
by reference of an exhibit to such 2008 Filings shall not be deemed to
adequately disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
exhibit itself, as opposed to the contents thereof).

 

(a)           Organization and Qualification.  The Company and its “Subsidiaries” (which for purposes of this
Agreement means any Person in which the Company, directly or indirectly, owns
fifty percent (50%) or more of the outstanding voting securities) are
corporations, limited partnerships, limited liability companies or foreign
business entities duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are incorporated or formed, as
applicable, and have the requisite corporate, limited partnership, limited
liability company or respective foreign entity power and authorization to own
their respective properties and to carry on their respective business as now
being conducted.  Each of the Company and
its Subsidiaries is duly qualified to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect.  As used
in this Agreement, “Material Adverse Effect”
means any material adverse effect on the business, properties, assets,
operations, prospects, results of operations or financial condition of the
Company and its Subsidiaries, if any, taken as a whole, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as hereinafter defined) or the Certificate of Designations, other
than such changes, effects or circumstances demonstrably attributable to: (i) economic
conditions generally in the United States, or conditions in general in the
industry and markets in which the Company and its Subsidiaries conducts its
businesses, except to the extent such changes materially and disproportionately
affect, in an adverse manner, the Company and its Subsidiaries considered as a
whole, (ii) any change in the laws or regulations generally applicable to
the industry or markets in which such Person and its Subsidiaries operate,
except to the extent such changes materially and disproportionately affect, in
an adverse manner, the Company and its Subsidiaries considered as a whole, or (iii) the
entry into and consummation of this Agreement or any of the Transaction
Documents or Certificate of Designations. 
The Company has no Subsidiaries except as set forth on Schedule 3(a).

 

 

6

 

(b)           Authorization; Enforcement;
Validity.  The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the “Transaction Documents”), to execute and file the Certificate
of Designations, and, with respect of the Preferred Shares to be issued at the
Second Closing, after receipt of the NASDAQ Stockholder Approval, to issue the
Securities in accordance with the terms hereof and thereof.  The execution and delivery of the Transaction
Documents by the Company and the execution and filing of the Certificate of
Designations by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Preferred Shares and the reservation for issuance and the issuance of all
Conversion Shares issuable upon conversion of the Preferred Shares, have been
duly authorized by the Company’s Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, except the NASDAQ Stockholder Approval, which shall be obtained
prior to the Second Closing.  The
Transaction Documents have been duly executed and delivered by the Company, and
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except that any rights to indemnity
or contribution under the Registration Rights Agreement may be subject to
limitation by public policy under federal securities laws, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.  The Certificate of
Designations will be filed as promptly as practicable with the Secretary of
State of the State of Delaware and will be in full force and effect as of the
Initial Closing Date, enforceable against the Company in accordance with its
terms.  Neither the Certificate of
Incorporation nor the Certificate of Designations shall have been amended prior
to any Closing Date.

 

(c)           Equity
Capitalization.

 

(i)            As of the date hereof, the authorized capital stock of
the Company consists of (A) 150,000,000 shares of Common Stock, of which
as of March 10, 2009, 77,195,120 shares are issued and outstanding and (B) 8,000,000
shares of Preferred Stock, of which no shares are issued and outstanding.  All of such outstanding shares have been
validly issued and are fully paid and nonassessable.  Immediately prior to the Initial Closing
Date, no shares of Preferred Stock shall be outstanding and as of each Closing
Date the Series A Preferred Stock shall be the sole authorized or
designated series of Preferred Stock.

 

(ii)           Except as set forth in Schedule 3(c), no shares of
the Company’s capital stock are subject to preemptive rights or any other
similar rights.  Except as set forth in Schedule
3(c), and except for (a) contingent warrants issuable pursuant to that
certain Second Amended and Restated Senior Subordinated Revolving Credit
Agreement, dated February 27, 2009, by and between the Company and
Safeguard Delaware, Inc., including the Continuance Warrant and the
Monthly Warrants (each as defined therein), (b) options to purchase
2,330,849 shares of Common Stock issued or issuable pursuant to the Company’s
1996 Equity Incentive Plan, (c) options to purchase 3,705,325 shares of
Common Stock issued or issuable pursuant to the Company’s 2007 Incentive Award
Plan, and (d) options to purchase 1,350,000 shares of Common Stock issued
or issuable outside of the Company’s 1996 Equity Incentive Plan and

 

 

7

 

2007 Incentive Award Plan, (A) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable for, any shares of capital stock of the Company
or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls relating to, or
securities or rights convertible into or exercisable for, any shares of capital
stock of the Company or any of its Subsidiaries; (B) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (C) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (D) the Company does
not have any stock appreciation rights or “phantom stock” plans or agreements
or any similar plan or agreement.

 

(iii)          The Company has furnished or made available to each
Purchaser true and correct copies of the Company’s Certificate of Incorporation,
as amended and as in effect on the date hereof (the “Certificate of Incorporation”) and the Company’s Bylaws, as
amended and as in effect on the date hereof and as of the applicable Closing
(the “Bylaws”).  The Company does not have any certificate of
designations in effect as of the date hereof or as of any Closing Date (other
than the Certificate of Designations, which will be effective prior to the
Initial Closing Date).

 

(d)           Indebtedness and Other Contracts.  Except as set forth on Schedule 3(d),
neither the Company not any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iii) is
a party to any contract, agreement or instrument relating to any Indebtedness,
the performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. 
For purposes of this agreement “Indebtedness”
means, with respect to any Person, whether recourse is secured by or is
otherwise available against all or only a portion of such Person’s assets, and
whether or not contingent, (A) all obligations for borrowed money, whether
current, funded, secured or unsecured, and every obligation of such Person
evidenced by bonds, debentures, notes or similar instruments, (B) all
indebtedness of such Person for the deferred purchase price of property or
services (other than trade payables incurred in the ordinary course of
business), (C) all indebtedness of such Person created or arising under
any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (D) all indebtedness of such
Person secured by a Lien to secure all or part of the purchase price of the
property subject to such mortgage or Lien, (E) all obligations under
leases which have been or must be, in accordance with GAAP, recorded as capital
leases in respect of which such Person is liable as lessee, (F) any liability
of such Person in respect of banker’s acceptances or letters of credit, (G) all
interest, fees and other expenses owed with respect to the indebtedness
referred to above, and (H) all indebtedness referred to above which is
directly or indirectly guaranteed by such Person or which such Person has
agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured a creditor against loss.

 

 

8

 

(e)           Issuance of Securities.  Upon the filing of the Certificate of
Designations with the Secretary of State of the State of Delaware, as of each
Closing, the applicable Preferred Shares will be duly authorized and, upon
issuance in accordance with the terms hereof, shall be (i) validly issued,
fully paid and non-assessable, (ii) free from all taxes, Liens and charges
with respect to the issuance thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Designations.  Upon the filing of the Certificate of
Designations with the Secretary of State of the State of Delaware, and as of
each Closing, a sufficient number of shares of Common Stock to permit the
conversion in full of such Preferred Shares shall be duly authorized and
reserved for issuance upon conversion of the Preferred Shares.  Upon conversion in accordance with the
Certificate of Designations, the Conversion Shares will be validly issued,
fully paid and nonassessable and free from all taxes, Liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. 
Subject only to accuracy of the representations set forth in Section 2,
the issuance by the Company of the Securities is exempt from registration under
the Securities Act and all applicable state securities laws.

 

(f)            No
Conflicts.

 

(i)            Except as set forth on Schedule 3(f), the
execution, delivery and performance of the Transaction Documents by the
Company, the performance by the Company of its obligations under the
Certificate of Designations and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Conversion Shares) will not:

 

(A)          result in a violation of the Certificate of Incorporation
(after giving effect to the Certificate of Designations), or the Bylaws;

 

(B)           conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or incremental, additional or varied rights under, any material agreement,
indenture or instrument (including, without limitation, any stock option,
employee stock purchase or similar plan or any employment or similar agreement)
to which the Company or any of its Subsidiaries is a party (including, without
limitation, triggering the application of any change of control or similar
provision (whether “single trigger” or “double trigger”)); or

 

(C)           result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of the Principal Market (as hereinafter
defined)) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected.

 

 

9

 

(ii)           Neither the Company nor its Subsidiaries is in violation
of any term of its Certificate of Incorporation or Bylaws or, in the case of
Subsidiaries, their organizational charter or bylaws, respectively.

 

(iii)          The business of the Company and its Subsidiaries is not
being conducted, in violation of any law, ordinance or regulation of any
Governmental Entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.

 

(iv)          Except for (A) the filing of an information statement
relating to the NASDAQ Stockholder Approval as required under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”) and the rules and regulations promulgated thereunder, (B) with
respect to the Second Closing and any Subsequent Closings, the NASDAQ
Stockholder Approval, (C) as may be required by any applicable state
securities laws, or (D) the filing of the Certificate of Designations with
the Secretary of State of the State of Delaware, the Company is not required to
obtain any consent, authorization or order of, or make any filing or registration
with, any Governmental Entity in order for it to execute, deliver or perform
any of its obligations under or contemplated by the Transaction Documents or to
perform its obligations under the Certificate of Designations, in each case in
accordance with the terms hereof or thereof. 
All consents, authorizations, orders, filings and registrations which
the Company is required to obtain as described in the preceding sentence shall
have been obtained or effected on or prior to each Closing Date and shall not
be the subject of any pending or, to the knowledge of the Company, threatened
proceeding or other action.  The Company
is not, and as of each Closing Date will not be, in violation of the listing
requirements of the NASDAQ, and the Conversion Shares shall be authorized for
listing thereon.

 

(g)           SEC
Documents; Financial Statements.

 

(i)            Since December 31, 2008, the Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Exchange Act
(all of the foregoing (including all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein) and all forms, documents and instruments filed by the Company with the
SEC pursuant to the Securities Act (including all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein) being hereinafter referred to as the “SEC Documents”).  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act or Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents.  None of the SEC Documents, at the time they
were or are filed with the SEC, contained or will contain any untrue statement
of a material fact or omitted or will omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.

 

(ii)           As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form (and will comply
as to form) in all material respects with U.S. generally accepted accounting
principles (“GAAP”) and the
published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared
in accordance with GAAP, consistently applied, during the periods involved
(except (A) as may be

 

 

10

 

 

otherwise specifically indicated in such
financial statements or the notes thereto, or (B) in the case of unaudited
statements, to the extent they may exclude footnotes or may be condensed or
summary statements or as otherwise, in each case, may be permitted by the SEC
under the Exchange Act) and fairly present in all material respects the
consolidated financial position of the Company as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).  KPMG LLP, which has
examined certain of such financial statements, is an independent certified
public accounting firm within the meaning of the Securities Act.  As of the date of this Agreement and as of
each Closing Date, the Company meets the requirements for use of Form S-3
for registration of the resale of Registrable Securities (as defined in the
Registration Rights Agreement).

 

(iii)          Since December 31, 2008, except as specified in the
2008 Filings, the Company has not incurred or suffered any liability or
obligation of any nature (absolute, accrued, contingent or otherwise) which are
not properly reserved against in the Company’s financial statements to the
extent required to be so reflected or reserved against in accordance with GAAP,
except in the ordinary course of business and except any such liability or
obligation that has not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

(h)           Absence of Litigation.  There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, Governmental Entity or
self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the
Company, the Common Stock or any of its Subsidiaries, except where any of the
foregoing would not reasonably be expected to result, either individually or in
the aggregate, in a Material Adverse Effect and except as set forth on Schedule
3(h).

 

(i)            Acknowledgment Regarding the
Purchaser’s Purchase of Preferred Shares. 
The Company acknowledges and agrees that the Purchaser is acting solely
in the capacity of an arm’s length purchaser with respect to the Company in
connection with the Transaction Documents and the Certificate of Designations
and the transactions contemplated hereby and thereby.  The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
Certificate of Designations and the transactions contemplated hereby and
thereby and any advice given by the Purchaser or any representative or agent in
connection with the Transaction Documents and/or the Certificate of
Designations and the transactions contemplated hereby and thereby is merely
incidental to the Purchaser’s purchase of the Securities.  The Company further represents to the
Purchaser that the Company’s decision to enter into the Transaction Documents
has been based solely on the independent evaluation by the Company and its
representatives.

 

(j)            No General Solicitation.  Neither the Company, nor any of its
Affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities.

 

 

11

 

(k)           No Integrated Offering.  Neither the Company, nor any of its
Affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the Securities Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of NASDAQ,
nor will the Company or any of its Subsidiaries take any action or steps (other
than by compliance with the Registration Rights Agreement) that would require
registration of any of the Securities under the Securities Act or cause the
offering of the Securities to be integrated with other offerings.

 

(l)            Employee Relations; Benefit Plans.  Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of
the Company or any of its Subsidiaries, is any such dispute threatened.  Except as set forth on Schedule 3(l),
none of the Company’s or its Subsidiaries’ employees is a member of a union
which relates to such employee’s relationship with the Company, and neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement.  Except as set forth on Schedule  3(l), no executive officer of
the Company or any of its Subsidiaries has notified the Company or any such
Subsidiary that such executive officer intends to leave the Company or any such
Subsidiary or otherwise terminate such executive officer’s employment with the
Company or any such Subsidiary.  To the
knowledge of the Company, no executive officer of the Company or any of its
Subsidiaries is in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.

 

(ii)           The Company and its Subsidiaries are in compliance with
all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.

 

(iii)          There are no material employee benefit plans, as defined in
Section 3(3) of ERISA, maintained by the Company or any Subsidiary,
or with respect to which the Company or any Subsidiary has incurred or has
reason to expect that it will incur any direct or indirect material liability,
other than those described in the 2008 Filings or as described in Schedule 3(l) (“Benefit Plans”).

 

(iv)          No Benefit Plan is subject to Title IV of ERISA or section
412 of the Code.  Except as set forth on
Schedule 3(l), no Benefit Plan is a “Multiple Employer Plan” within the meaning
of the Code or ERISA.

 

(v)           With respect to each Benefit Plan:  (A) if it is intended to qualify under
section 401(a) or 403(a) of the Code, the Company has no knowledge of
any circumstance that could be reasonably expected to result in such Benefit
Plan’s failure to be so qualified; (B) such Benefit Plan has been
maintained and administered at all times in substantial compliance with its
terms and applicable laws and regulations, except where the failure to comply
would not have a Material Adverse Effect; (C) to the Company’s knowledge
no event has occurred and there exists

 

 

12

 

no circumstances under which the Company or
any Subsidiary could be reasonably expected to incur material liability under
ERISA, the Code or otherwise (other than routine claims for benefits) with
respect to such Benefit Plan or with respect to any other entity’s employee
benefit plan; and (D) all contributions and premiums that are due have
been paid with respect to such Benefit Plan.

 

(vi)          With respect to each Benefit Plan which is an “employee
welfare benefit plan” (as defined in ERISA section 3(1)) which is maintained or
contributed to by the Company or any Subsidiary or with respect to which the
Company or any Subsidiary has or could have any direct or indirect liability as
of a Closing Date: (A) no such plan provides medical or death benefits
with respect to current or former employees of the Company or any Subsidiary
beyond their termination of employment (other than as required to avoid an
excise tax under Code section 4980B); and (B) to the Company’s knowledge
the Company and each Subsidiary has substantially complied with the
requirements of Code section 4980B.

 

(vii)         The consummation of the transactions contemplated by this
Agreement and the other Transaction Documents will not: (A) entitle any
employee of the Company to severance or termination pay; (B) accelerate
the time of payment or vesting, or increase the amount of compensation due to
any employee of the Company; or (C) result in the payment that will be
taken into account in determining whether there is an “excess parachute payment”
under Code section 280G(b)(1).

 

(viii)        Schedule 3(l) lists every
benefit plan, policy, agreement or arrangement, covering two or more employees
or service providers, sponsored or contributed to by either the Company or any
of its Subsidiaries, which constitutes a “nonqualified deferred compensation
plan” (as defined in Section 409A(d)(1) of the Code and regulations
promulgated thereunder) with respect to any service provider to either the
Company or any Subsidiary.  Neither the
Company nor any Subsidiary is obligated to make any payment or payments and is
not a party to (or a participating employer in) any plan, policy, agreement or
arrangement that it has reason to expect would give rise to additional taxes or
interest under Section 409A of the Code (or any similar provision of
state, local or foreign Law), whether or not such plan, policy, agreement or
arrangement is required to be listed on Schedule 3(l).

 

(m)          Intellectual Property Rights.  The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and all other intellectual property rights necessary to conduct their
respective businesses as now, or as contemplated to be, conducted, except where
the failure to own or possess such rights would not result, either individually
or in the aggregate, in a Material Adverse Effect.  Neither the Company nor its Subsidiaries has
infringed trademarks, trade names, service marks, service mark registrations,
service names, copyrights, inventions, licenses, trade secrets or, to its
knowledge (after consultation with the Company’s senior officer in charge of
patents and patent applications), patents, patent rights or other intellectual
property rights of others, or of any development of similar or identical trade
secrets or technical information by others and, except as set forth on Schedule
3(m), there is no claim, action or proceeding being made or brought
against, the Company or its Subsidiaries regarding its trademarks, trade names,
service marks, service mark registrations, service names, patents,

 

 

13

 

patent rights, copyrights, inventions, licenses, trade secrets, or
infringement of other intellectual property rights, except where any of the
foregoing would not result, either individually or in the aggregate, in a
Material Adverse Effect.  The Company and
its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual properties.

 

(n)           Title.  The Company and its Subsidiaries have good
and marketable title to the leasehold estate in all real property described in
the 2008 Filings as being leased by them and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all Liens (other
than Permitted Liens) except (i) such as are set forth on Schedule 3(n),
(ii) such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries, (iii) such Liens against any landlord’s
or owner’s interest in any leased property, and (iv) for taxes not yet due
and payable.  Any real property and
facilities held under lease by the Company and any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and facilities by the Company and its Subsidiaries.

 

(o)           Insurance.  All of the insurance policies covering the
Company and its Subsidiaries are in full force and effect, neither the Company
nor any of its Subsidiaries is in material default with respect to its
obligations under any of such insurance policies and neither the Company nor
any of its Subsidiaries has received any notification of cancellation or
modification of any of such insurance policies. 
The Company and its Subsidiaries maintain insurance coverage of a type
and amount customary for entities of similar size engaged in similar lines of
business.  Neither the Company nor any of
its Subsidiaries is or ever has been a party to, or a beneficiary of, any other
policy, insurance pool or sharing agreement whereby any other Person(s) maintains
or maintained insurance covering the business of the Company.

 

(p)           Regulatory Permits; Compliance
with Law.  Except the absence of
which would not result or be expected to result, either individually or in the
aggregate, in a Material Adverse Effect, (i) the Company and its
Subsidiaries possess all licenses, certificates, authorizations, permits,
consents, orders and approvals issued by, and have made all filings,
applications and registrations with, the appropriate Governmental Entities
necessary to own or lease their respective properties and assets and to conduct
their respective businesses as conducted and as contemplated to be conducted,
and (ii) neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
license, certificate, authorization, permit, consent, order or approval.  The Company and each of its Subsidiaries has
complied in all material respects and is not in default or violation in any
material respect of, and none of them is, to the knowledge of the Company,
under investigation with respect to or, to the knowledge of the Company, has
been threatened to be charged with or given notice of any material violation
of, any applicable material domestic (federal, state or local) or foreign law,
statute, ordinance, license, rule, regulation, policy or guideline, order,
demand, writ, injunction, decree or judgment of any Governmental Entity, other
than such noncompliance, defaults or violations that would not reasonably be
expected to have a Material Adverse Effect. 
Except for statutory or regulatory restrictions of general application,
no Governmental Entity has placed any material restriction on the business or
properties of the Company or any of its Subsidiaries.

 

 

14

 

(q)           Disclosure Controls.  The Company (A) has implemented and
maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of
the Exchange Act) to ensure that material information relating to the Company
and its Subsidiaries, is made known to the chief executive officer and the
chief financial officer of the Company by others within those entities, and (B) has
disclosed, based on its most recent evaluation prior to the date hereof, to the
Company’s outside auditors and the audit committee of the Board of Directors
that there were no (x) significant deficiencies or material weaknesses in
the design or operation of internal controls over financial reporting (as
defined in Rule 13a-15(f) of the Exchange Act) that are reasonably
likely to adversely affect the Company’s ability to record, process, summarize
and report financial information and (y) fraud, whether or not material,
that involves management or other employees who have a significant role in the
Company’s internal controls over financial reporting.  Since December 31, 2008 and until the
date of this Agreement, (A) to the knowledge of the Company, none of the
Company, any Company Subsidiary, or any director or executive officer of the
Company or any Company Subsidiary has received or otherwise been made aware of
any written material complaint, allegation, assertion or claim, regarding the
accounting or auditing practices, procedures, methodologies or methods of the
Company or any Company Subsidiary or their respective internal accounting
controls, and (B) to the Company’s knowledge, no attorney representing the
Company or any Company Subsidiary, whether or not employed by the Company or
any Company Subsidiary, has reported evidence of a material violation of
securities laws, breach of fiduciary duty or similar violation by the Company
or any of its executive officers, directors, employees or agents to the Board
of Directors or any committee thereof or to any director or executive officer
of the Company.

 

(r)            Tax Status.  The Company and each of its Subsidiaries (i) has
timely made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
and all such tax returns, reports and declarations were complete and correct in
all material respects and were prepared in substantial compliance with all
applicable laws and regulations, (ii) other than taxes that in an
aggregate amount would not be material (and the nonpayment of which would not
have a Material Adverse Effect), has paid all taxes and other governmental
assessments owed, except those being contested in good faith and for which the
Company has made appropriate reserves on its books and financial statements,
and (iii) other than accruals for taxes in an aggregate amount that would
not be material (and the nonpayment of which would not have a Material Adverse
Effect), has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations (referred to in clause (i) above)
apply.

 

(s)           Transactions With Affiliates.  Except (i) as set forth on Schedule
3(s), (ii) in the SEC Documents filed with the SEC prior to the date
of this Agreement, (iii) routine compensation to directors in accordance
with policies duly adopted by the Company’s Board of Directors, (iv) the
grant of incentive equity issued under duly adopted incentive equity plans, and
(v) transactions between the Company and its Subsidiaries and parent
companies, as of the date hereof, to the knowledge of the Company, none of the
executive officers or directors of the Company is presently a party to any
transaction with the Company (other than for services as 

 

 

15

 

employees, officers and directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such executive officer or director or, to the
knowledge of the Company, any Person in which any such executive officer or
director has a substantial interest or is an officer, director, trustee or
partner.

 

(t)            Contracts.  Except for the contracts, agreements and
commitments, whether written or oral, described on Schedule 3(t), or
filed as exhibits to the SEC Documents filed with the SEC prior to the date of
this Agreement (other than with respect to the contracts described in Section 3(t)(ii),
if any, which shall be described on Schedule 3(t)), neither the Company
nor any Subsidiary is a party to or bound by any of the following contracts,
agreements or commitments, whether written or oral (the “Material
Contracts”):

 

(i)            any contract or agreement which is a “material contract”
within the meaning of Item 601(b)(10) of Regulation S-K to be performed in
whole or in part after the date of this Agreement;

 

(ii)           any contract which limits or purports to limit the freedom
of the Company or any Subsidiary to engage in any line of business or to compete
with any other Person;

 

(iii)          any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise)
or Indebtedness of any other Person;

 

(iv)          any contract or agreement that grants any person a right of
first refusal, right of first offer or similar right with respect to any
material properties, assets or business of the Company or any of its
Subsidiaries;

 

(v)           any contract relating to the acquisition or disposition or
any material business or material assets (whether by merger, sale of stock or
assets or otherwise), which acquisition or disposition is not yet complete or
where such contract contains continuing material obligations, including
continuing material indemnity obligations, of the Company or any of its
Subsidiaries; and

 

(vi)          any contract with any Affiliate of the Company (A) with
a value in excess of $50,000, (B) which provides any Person with material
consent rights or material control rights, or (C) which was not entered
into in the ordinary course of business or was entered into on terms less
favorable than would have been obtainable by the Company or it Subsidiaries in
a comparable arm’s length transaction with an unrelated Person.

 

All of the Material
Contracts are in full force and effect and binding upon the parties thereto in
accordance with their terms.  Neither the
Company nor any Subsidiary, nor, to the knowledge of the Company, any other
party to such Material Contracts, is in default thereunder, nor to the
knowledge of the Company does any condition exist that with notice or lapse of
time or both would constitute a default thereunder.  Except as set forth on Schedule 3(t),
the Company has no knowledge of any proposed or pending cancellation or
termination of any such Material Contract.

 

 

16

 

(u)           Application of Takeover
Protections.  The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement), interested shareholder
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the State of Delaware (including, without limitation, Section 203
of the Delaware General Corporation Law, or any successor statute thereto) or
the State of California (collectively, “Takeover Provisions”)
which is or could become applicable to the Purchaser as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities, the Purchaser’s ownership of the
Securities and/or the Purchaser’s acquisition of the Conversion Shares.

 

(v)           Poison Pill.  The Company’s Rights Agreement, dated as of
February, 10, 1999, between the Company and Harris Trust Company of California,
as amended, expired by its terms on February 19, 2009.

 

(w)          Investment Company.  The Company is not, and after giving effect
to the offering and sale of the Securities hereunder and the application of the
proceeds thereof as described in this Agreement will not be, an “investment
company” as such term is defined in the Investment Company Act of 1940, as
amended.

 

(x)            No Market Manipulation.  Neither the Company nor its Subsidiaries nor,
to the knowledge of the Company, any of such entities’ directors, officers,
employees, agents or controlling persons have taken, directly or indirectly,
any action designed, or that might reasonably be expected, to cause or result
in, under the Securities Act or otherwise, or that has constituted,
stabilization or manipulation of the price of the Common Stock.

 

(y)           Special Regulatory and Other
Matters.  Except as set forth in Schedule
3(y), the Company represents and warrants to the Purchaser as follows:

 

(i)            The Company and each of its Subsidiaries (collectively,
the  “Regulated
Companies,” and each, a “Regulated
Company”) each hold all licenses and other rights, accreditations,
permits, approvals and authorizations (“Permits”)
required by law, ordinance, regulation, ruling, guidance or manual of any
Governmental Entity necessary to operate each line of business or facility
presently conducted and presently proposed to be conducted by each of the
Regulated Companies (each such line or facility, a “Business” and collectively, the “Businesses”), except for Permits, the absence of which would
not reasonably be expected to have a Material Adverse Effect. All Permits are
in full force and effect and will remain so immediately after the Closing and
no suspension or cancellation of any Permit is pending or, to the knowledge of
any Regulated Company, threatened.  None
of the Regulated Companies has received any notice or other communication from
any Governmental Entity regarding (i) any actual or possible violation of
or failure to comply with any term or requirement of any Permit, or (ii) any
actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Permit.

 

 

17

 

(ii)           Each Regulated Company that directly receives
reimbursement or payments under Title XVIII or XIX of the Social Security Act
(the “Medicare And Medicaid Programs”)
is enrolled for participation and reimbursement under the Medicare and Medicaid
programs.  Each Regulated Company that
directly or indirectly receives reimbursement or payments under the Medicare
and Medicaid Programs, the  TRICARE
program and such other similar federal, state or local reimbursement or
governmental programs (collectively the “Government
Programs”) has current provider numbers and provider enrollments and
agreements required for each of such Government Programs.  Each Regulated Company that receives direct
payments under any non-governmental program, including without limitation any
private insurance program (collectively, the “Private
Programs”) has all provider agreements and provider numbers that are
required under such Private Programs.

 

(iii)          Each Regulated Company has not claimed or received
reimbursements from Government Programs or Private Programs in excess of
amounts permitted by law or applicable contract, and has no liability under any
Government Program or Private Program (known or unknown, contingent or
otherwise) for any refund, overpayment, discount or adjustment, except for any
of the foregoing that would not reasonably be expected to have a Material
Adverse Effect on the business, results of operations or prospects of any
particular Regulated Company or group thereof, including by virtue of having a
Material Adverse Effect on the ability to operate in the ordinary course or by
virtue of resulting in a material liability. 
Except as described on Schedule 3(y), no Regulated Company has
any reimbursement or payment rate appeals, disputes or contested positions
currently pending before any Governmental Entity or any administrator of any
Private Programs with respect to any Business.

 

(iv)          All activities of each Business of each Regulated Company
and of any officers, directors, agents and employees of any of the Regulated
Companies undertaken on behalf of any Business, have been, and are currently
being, conducted in compliance in all respects with all applicable legal
requirements, permits, licenses, certificates, governmental requirements,
Government Program manuals and guidance, orders and other similar items of any
Governmental Entity including, without limitation, requirements under laws
administered by the Food and Drug Administration, requirements under the
Clinical Laboratory Improvement Amendments, and all legal requirements
currently in effect pertaining to confidentiality of patient information,
occupational safety and health, workers’ compensation, unemployment, building
and zoning codes (collectively, “Regulations”),
other than any non-compliance that does not or would not have a Material
Adverse Effect on the assets, business, properties, prospects, operations or
financial or other condition of any Business. 
None of the Businesses of any of the Regulated Companies has violated or
become liable for, or received any unresolved notice or charge asserting any
such violation or liability with respect to, any Regulation, nor are there any
facts or circumstances that are known or that reasonably should be known to the
Regulated Companies that could form the basis for any such violation or
liability, which violation or liability would reasonably be expected to have a
Material Adverse Effect on the business, results of operations or prospects of
any particular Regulated Company or group thereof, including by virtue of
having a Material Adverse Effect on the ability to operate in the ordinary
course or by virtue of resulting in a material liability.

 

(v)           None of the Regulated Companies, or any officer, director
or managing employee of any of the Regulated Companies, and, to the knowledge
of the Regulated Companies after due and reasonable inquiry, no person or
entity providing professional services in connection with any Business, has
engaged with respect to the Regulated Companies in any

 

 

18

 

activities that are prohibited, or cause for
the imposition of penalties or mandatory or permissive exclusion, under 42
U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b, 1395nn, or 1396b, 31 U.S.C. §§
3729-3733, or the federal TRICARE statute (or other federal or state statutes
related to false or fraudulent claims) or the regulations promulgated
thereunder pursuant to such statutes, or similar state or local statutes or regulations,
or under any criminal laws, statutes, ordinances, regulations, rulings or
manuals of any Governmental Entity relating to health care services or
payments, or that are prohibited by rules of professional conduct, other
than any of the foregoing that would not reasonably be expected to have a
Material Adverse Effect.

 

(z)            Solvency.  Immediately after the consummation of the
transactions contemplated by this Agreement and the other Transaction
Documents, the fair value and present fair saleable value of the assets of each
of the Company and its Subsidiaries will exceed the sum of their stated
liabilities and identified contingent liabilities.  The Company and its Subsidiaries are not, nor
will they be, after giving effect to the execution, delivery and performance of
this Agreement and the other Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby, (i) left with unreasonably
small capital with which to carry on their business as it is proposed to be
conducted, (ii) unable to pay their debts (contingent or otherwise) as
they mature or (iii) otherwise insolvent.

 

(aa)         Foreign Corrupt Practices.  Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of the Company (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds, (iii) violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.

 

4.             COVENANTS.

 

(a)           Certain Pre-Closing Covenants.  The parties agree as follows with respect to
the period between the execution of this Agreement and each Closing:

 

(i)            General.  Each of the parties will use its commercially
reasonable efforts to take all action and to do all things necessary, proper,
or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
conditions to each Closing set forth in Sections 6(a) and/or 6(b) and
Sections 7(b) and/or 7(c), as applicable; provided, however,
that nothing in this Section 4(a) shall be deemed to require
the Purchaser to purchase, or the Company to sell, the Preferred Shares unless
and until the conditions set forth in Sections 6(a) and/or 6(b) and
Section 7(b) and/or 7(c), respectively, are satisfied
or, in the sole discretion of the Company or Purchaser, as the case may be,
waived.

 

(ii)           Notices and Consents.  The Company will give any notices to third
parties and Governmental Entities and shall use commercially reasonable efforts
to obtain any third party consents that the Purchaser may reasonably request in
connection with the matters referred to in Section 3(f) hereof.  Each of the parties will give any notices to,
make any filings with, and use its commercially reasonable efforts to obtain
any authorizations, consents, and approvals of Government Entities in
connection with the matters referred to in Section 3(f) hereof.

 

 

19

 

(iii)          Full Access.  The Company will permit representatives of
the Purchaser to have reasonable access at reasonable times to its premises,
properties, personnel and other third parties whose consent is required in
order to consummate the transactions contemplated hereby, and to the books and
documents of or pertaining to the Company.

 

(iv)          Notice of Developments.  The Company will give prompt written notice
to the Purchaser of any development causing a breach of any of the
representations and warranties in Section 3.  The Purchaser shall give prompt written
notice to the Company of any development causing a breach of any of its own
representations and warranties in Section 2.  No disclosure by any party pursuant to this Section 4(a)(iv),
however, shall be deemed to amend or supplement the schedules hereto or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant, unless the other parties consent to the incorporation of such
amendment or supplement or disclosure by consummating the transactions
contemplated hereby.

 

(v)           Board of Directors;
Indemnification Agreement.  Effective
upon the Initial Closing the Company will cause Ann H. Lamont and Andrew Adams
(or other designees of the Purchaser) (the “Purchaser
Designees”) to be appointed to fill such vacancies.  Concurrently with the appointment of the
Purchaser Designees, the Company, the Purchaser and the Purchaser Designees
shall enter into an indemnification agreement in form and substance mutually
agreeable to the Purchaser and its counsel on the one hand, and the Company and
its counsel, on the other hand, for the benefit of the Purchaser Designees (the
“Indemnification Agreement”).  It is understood that the appointment of
Andrew Adams as a director will be subject to satisfaction of the “independent
director” requirements as such term is defined in the rules and
regulations promulgated by NASDAQ, as well as all legal and governance
requirements regarding service as a director of the Company and to the
reasonable approval of the Nominating and Governance Committee of the Board of
Directors, all of which shall occur prior to the Initial Closing.

 

(b)           Information Statement.  Promptly following
the written consent of Safeguard to the transactions contemplated hereby, the
Company shall use its commercially reasonable efforts to (i) promptly
prepare and file with the SEC an information statement in conformance with the rules and
regulations under the Exchange Act and in accordance with Delaware law, and
mail such information statement to its stockholders of record and (ii) obtain
the NASDAQ Stockholder Approval, each within 45 days of the Initial
Closing.  The Company shall inform the
Purchaser upon the completion of the information statement and shall distribute
a copy of the information statement to the Purchaser.

 

(c)           Form D and Blue Sky.  The Company agrees to file a Form D with
respect to the Securities as required under Regulation D.  The Company shall, on or before each Closing
Date, take such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify the Securities for sale to
the Purchaser at the Closings pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the state of residence of Purchaser as
disclosed by the Purchaser in this Agreement, and shall provide evidence of any
such action so taken to the Purchaser on or prior to each Closing Date.  The Company shall make all filings and
reports relating to the offer and sale of the Securities to the Purchaser
required under applicable securities or “Blue Sky” laws of the states of the
United States following each Closing Date.

 

 

20

 

(d)           Use of Proceeds.  The Company will use the proceeds from the
sale of the Preferred Shares (i) to
repay in full the outstanding Indebtedness of the Company under that certain Amended
and Restated Loan Agreement, dated as of February 28, 2008 (as modified
and amended from time to time), by and between Comerica Bank and the Company
(the “Comerica Loan” and that certain Second
Amended and Restated Senior Subordinated Revolving Credit Agreement, dated as
of February 27, 2009, by and between the Company and Safeguard Delaware, Inc.
(the “Safeguard Loan”) and (ii) for
general working capital.  In addition,
the Company may use the proceeds from the sale of the Preferred Shares to repay
all or part of the Indebtedness of the Company under that certain Credit
Agreement, dated as of July 31, 2008 (as modified and amended from time to
time, by and among Gemino Healthcare Finance, LLC and the Company, Clarient
Diagnostic Services, Inc. and ChromaVision International, Inc. (the “Gemino Loan”).  No
portion of the proceeds from the issuance of Preferred Shares shall be used in
any manner which would violate Regulation U, T or X of the Board of Governors
of the Federal Reserve System or any other regulation of such Board or to
violate the Exchange Act, as in effect on the date or dates of such use of
proceeds.

 

(e)           Access.  So long as the Purchaser holds at least
2,105,263 shares of Preferred Stock (as adjusted for any stock split,
consolidation, reorganization, merger, dissolution and the like with respect to
such shares), and subject to customary confidentiality terms, the Company shall
permit the Purchaser and its designated representatives, upon reasonable
notice, to visit and inspect any of the properties of the Company or any of its
Subsidiaries, to examine the books of account of the Company and its
Subsidiaries (and to make copies thereof and extracts therefrom), and to
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with, and to be advised as to the same by, their officers and accountants, all
at such reasonable times and intervals during normal business hours as any the
Purchaser may reasonably request.

 

(f)            Reservation of Shares.  The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, no
less than 100% of the number of shares of Common Stock needed to provide for
the issuance of the Conversion Shares upon full conversion of all outstanding
Preferred Shares.

 

(g)           Listing.  The Company shall use its best efforts to
maintain the Common Stock’s authorization for quotation of the Common Stock on
NASDAQ or to obtain and maintain a listing on The New York Stock Exchange, Inc.
or another national securities exchange (collectively, as applicable, the “Principal Market”).  The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(g).

 

(h)           Expenses.  At each Closing, and, if applicable, upon
termination of this Agreement or termination of the obligation to consummate
the Second Closing (but, in the case of either such termination, only if the
termination is not a result of a material breach by the Purchaser), the Company
shall reimburse the Purchaser for its reasonable legal fees and expenses
actually incurred in due diligence and negotiating and preparing the
Transaction Documents and all related documents and consummating the
transactions contemplated hereby and thereby, up to 

 

 

21

 

an aggregate of $100,000 for all payments pursuant to this sentence; provided,
however, if the Closing (or Initial Closing, as applicable) does not
occur for any reason, the aforementioned aggregate cap shall be reduced to
$50,000.  In the event of litigation
related to this Agreement, if a court of competent jurisdiction determines in a
final, non-appealable order in favor of a party, the non-prevailing party shall
reimburse the prevailing party for all reasonable costs and expenses (including
legal fees) incurred in connection with such litigation.  In the event the court order results in both
parties prevailing in part, the court shall determine the appropriate
allocation of fees and expenses to be reimbursed by the parties or may determine
to instead have each party bear their own respective fees and costs if such
result is the most equitable in light of the court order.

 

(i)            Filing of Form 8-K; Press
Releases.  On or before the third (3rd) Business Day following the
date hereof, the Company shall file a Form 8-K with the SEC (the “Initial 8-K”) describing the terms of the
transactions contemplated by the Transaction Documents and including as
exhibits to such Form 8-K this Agreement, the Certificate of Designations
and the Registration Rights Agreement, in the form required by the Exchange
Act.  The Company shall file a press
release or other announcement of this Agreement or the transactions
contemplated hereby concurrently with the filing of the Initial 8-K with the
SEC.  On or before the third (3rd) Business Day following the
Second Closing Date, the Company shall file a Form 8-K with the SEC
describing the transaction consummated on such date.

 

(j)            Transactions With Affiliates.  So long as at least 2,105,263 shares of Series A
Preferred Stock remain outstanding (as adjusted for stock splits, reverse stock
splits, stock dividends and similar transactions with respect to the Series A
Preferred Stock), the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement any material
agreement, transaction, commitment or arrangement that is an interested party
transaction (A) having a value in excess of $50,000, (B) which
provides a Person with material consent rights or material control rights, or (C) is
outside the ordinary course of business or contains terms less favorable that
would be obtained by the Company or its Subsidiaries in a comparable arm’s
length transaction with an unrelated Person, in each case unless such
agreement, transaction, commitment or arrangement is approved by a majority of
the disinterested directors of the Company.

 

(k)           Lock-Up
Agreement.

 

(i)            (A)          The
Purchaser hereby agrees that from the Closing Date (or the Initial Closing
Date, as applicable) until the date which is one year after the Closing Date
(or the Initial Closing Date, as applicable), the Purchaser will not offer,
sell, contract to sell, pledge, transfer, or otherwise dispose of, directly or
indirectly, any of the Preferred Shares or the Conversion Shares actually
issued upon conversion thereof (collectively, the “Restricted
Securities”), enter into a transaction that would have the same
effect, or enter into any swap, hedge or other arrangement that transfers, in
whole or in part, any of the economic consequences of ownership of the
Restricted Securities, without, in each case, the prior written consent of the
Company.

 

 

22

 

 

(B)           As of the 12-month anniversary of the Closing Date (or the
Initial Closing Date, as applicable), the restrictions in Section 4(k)(i)(A) shall
lapse and be of no further effect as to the Restricted Securities.

 

(ii)           The restrictions in Section 4(k)(i) shall
not apply to (A) transactions relating to any securities of the Company
acquired by any the Purchaser or any of its Affiliates (1) prior to the
execution of this Agreement or (2) in the open market after the date of
this Agreement, or (B) with respect to transfers to immediate family
members, Affiliates, partners, members, former partners or members or
shareholders of the Purchaser in private transactions in which the transferee
agrees to be bound by the provisions of this Section 4(k) as
if such transferee were the Purchaser.

 

(iii)          The restrictions in this Section 4(k) shall
expire in their entirety:

 

(A)          immediately before the acquisition of a majority of the
outstanding voting securities of the Company by another person or entity,
whether by merger, asset sale or otherwise, excluding any strategic transaction
previously disclosed to the Purchaser by the Company or its advisors and
affirmatively accepted by the Purchaser on or before the Initial Closing (the “Strategic Transaction”).

 

(B)           immediately (1) upon the breach by the Company of any
material obligation to the Purchaser in the Transaction Documents or the
Certificate of Designations, unless such breach is capable of being and is
cured within twenty (20) Business Days after written notice to the Company of
such breach from any Purchaser, (2) upon the failure to elect either
Purchaser nominee to the Board of Directors of the Company in accordance with Section 9(d) of
the Certificate of Designations (if the Purchaser has exercised its right to
elect either such director) unless such failure is cured within twenty (20)
Business Days after written notice to the Company of such failure from the
Purchaser, (3) upon evidence that any representation or warranty set forth
in Section 3 was materially untrue when made or deemed made, and
such breach has had or is reasonably likely to have a materially adverse effect
on the value of the Purchaser’s investment in the Company pursuant to this
Agreement, and the Purchaser has notified the Company in writing of such event
and evidence and (4) upon a material breach by the Company of any of the
protective provisions in Section 9(b) of the Certificate of
Designations, unless such breach is capable of being and is cured within
fifteen (15) Business Days after written notice to the Company of such breach
from the Purchaser.

 

(l)            Certain Trading Activities.  Other than signing this Agreement, the
Purchaser nor any Affiliate of the Purchaser which (x) had knowledge of
the transactions contemplated hereby, (y) has or shares discretion
relating to the Purchaser’s investments or trading or information concerning
the Purchaser’s investments, including in respect of the Securities, and (z) is
subject to the Purchaser’s review or input concerning such Affiliate’s
investments or trading (collectively, “Trading Affiliates”)
has directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with the Purchaser or Trading Affiliate, effected or
agreed to effect any sales or purchases of the securities of the Company or
derivatives of the Company’s securities (including, without limitation, any
Short Sales (as defined below) involving the Company’s securities, but not
including the location and/or reservation of 

 

 

23

 

borrowable shares of Common Stock). Notwithstanding the foregoing, in
the case of the Purchaser and/or Trading Affiliate that is, individually or
collectively, a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of the Purchaser’s or Trading Affiliate’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of the
Purchaser’s or Trading Affiliate’s assets, the representation set forth above
shall apply only with respect to the portion of assets managed by the portfolio
manager that have knowledge about the financing transaction contemplated by
this Agreement.  Until the Second Closing
hereunder or the earlier termination of this Agreement prior to the Second
Closing, Purchaser shall not effect any sales or purchases of the securities of
the Company or derivatives of the Company’s securities (including, without
limitation, any Short Sales (as defined below) involving the Company’s
securities, but not including the location and/or reservation of borrowable
shares of Common Stock). For purposes of this Section 4(l), “Short
Sales” include, without limitation, (i) all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act, whether or not against
the box, and all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, short sales, “naked” short sales, swaps, “put
equivalent positions” (as defined in Rule 16a-1(h) under the Exchange
Act) and similar arrangements (including on a total return basis), and (ii) sales
and other transactions through non-U.S. broker dealers or foreign regulated
brokers, but, with respect to clause (i) and (ii) above, not including
the location and/or reservation of borrowable shares of Common Stock.

 

(m)          Ownership Disclosure.  At the time of each Closing, Purchaser shall
disclose in writing to the Company its holdings of any of the Company’s
securities, including its Common Stock.

 

(n)           Board Seats.  In the event that all of the shares of Series A
Preferred Stock are converted into Common Stock, (A) the Company shall not
increase the number of members of the Board of Directors in excess of nine (9) members
and (B) to the extent not inconsistent with the fiduciary duties of the
Board of Directors upon the request of Purchaser in a writing signed by
Purchaser and referencing this Section 4(n) (a “Designation Notice”), the Company will
request that the Board of Directors appoint (in the case of vacancies) or
nominate for election by the stockholders to the Board of Directors, up to two (2) nominees
designated by Purchaser in the Designation Notice (as well as replacement
nominees for vacancies created by the death, resignation or removal of any
director serving as a result of such a nomination).

 

(ii)           After the earlier of the expiration
of the lock-up period set forth in Section 4(k) and the Second
Closing, at such time as the Purchaser and its Affiliates sell or otherwise
transfer securities of the Company causing them to own less than 16.67% of the
voting power of all outstanding securities of the Company entitling the holders
thereof to vote generally in the election of directors, Purchaser shall
negotiate in good faith with the Company an appropriate amendment to the terms
of this Section 4(n) and, if applicable, the Certificate of
Designations in light of such diminished ownership.

 

(iii)          So long as Safeguard is entitled to
elect at least one director of the Company pursuant to the Securities Purchase
Agreement, dated as of June 13, 2002, between the Company and Safeguard,
as amended, this Section 4(n) may not be amended without the prior
written consent of Safeguard.

 

 

24

 

(iv)          This Section 4(n) shall
terminate on the date that Purchaser and its Affiliates own less than 5% of the
voting power of all outstanding securities of the Company entitling the holders
thereof to vote generally in the election of directors.

 

5.             TRANSFER AGENT
INSTRUCTIONS.  As of the
date hereof, and conditioned only upon the issuance of the applicable Preferred
Shares at each Closing, the Company shall issue irrevocable instructions to its
transfer agent in the form attached hereto as Exhibit C (the “Irrevocable Transfer Agent Instructions”),
and any subsequent transfer agent, to promptly issue certificates, registered
in the name of the Purchaser or its respective nominee(s), for the Conversion
Shares in such amounts as specified from time to time by the Purchaser to the
Company upon conversion of the Preferred Shares.

 

6.             CONDITIONS TO
THE COMPANY’S OBLIGATION TO SELL ON THE CLOSING DATES.

 

(a)           Conditions to the Company’s
Obligation to Sell on the Initial Closing Date.  The obligation of the Company to issue and sell
the applicable Preferred Shares to the Purchaser at the Initial Closing is
subject to the satisfaction, at or before the Initial Closing Date, of each of
the following conditions, provided these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion by
providing the Purchaser with prior written notice thereof:

 

(i)            The Purchaser shall have executed and delivered each of
the Transaction Documents to which it is a party and delivered the same to the
Company.

 

(ii)           The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware.

 

(iii)          The Purchaser shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by the Purchaser at the
Initial Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.

 

(iv)          The representations and warranties of the Purchaser shall
be true and correct in all material respects as of the date when made and as of
the Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Purchaser shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Purchaser at or
prior to the Initial Closing Date.

 

(v)           All Governmental Entity, third party and self-regulatory
organizations approvals (or notices or filings therewith) listed on Schedule
3(f) or otherwise required in connection with the transactions
contemplated by the Transaction Documents shall have been obtained or made on
terms reasonably satisfactory to the Company and shall be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
materially restrain, prevent or otherwise impose material adverse conditions on
the transactions contemplated by this Agreement or any other Transaction
Documents.

 

 

25

 

(vi)          No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or Governmental Entity of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement or
any other Transaction Documents.

 

(vii)         No action, suit or proceeding before any arbitrator or any
Governmental Entity shall have been commenced, and no investigation by any
Governmental Entity shall have been threatened, against the Company, or any of
the officers, directors or Affiliates of the Company seeking to restrain,
prevent or change the transactions contemplated by this Agreement or any other
Transaction Documents, or seeking damages in connection with such transactions.

 

(b)           Conditions to the Company’s
Obligation to Sell on the Second Closing Date.  The obligation of the Company to issue and
sell the applicable Preferred Shares to the Purchaser at the Second Closing is
subject to the satisfaction, at or before the Second Closing Date, of each of
the following conditions, provided these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion by
providing the Purchaser with prior written notice thereof:

 

(i)            The Purchaser shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by the Purchaser at the
Second Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.

 

(ii)           The representations and warranties of the Purchaser shall
be true and correct in all material respects as of the date when made and as of
the Second Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the Purchaser shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Purchaser at or prior to the
Second Closing Date.

 

(iii)          The Company shall have received the NASDAQ Stockholder
Approval.

 

(iv)          All Governmental Entity, third party and self-regulatory
organizations approvals (or notices or filings therewith) listed on Schedule
3(f) or otherwise required in connection with the transactions
contemplated by the Transaction Documents shall have been obtained or made on
terms reasonably satisfactory to the Company and shall be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
materially restrain, prevent or otherwise impose material adverse conditions on
the transactions contemplated by this Agreement or any other Transaction
Documents.

 

(v)           No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or Governmental Entity of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement or
any other Transaction Documents.

 

 

26

 

(vi)          No action, suit or proceeding before any arbitrator or any
Governmental Entity shall have been commenced, and no investigation by any
Governmental Entity shall have been threatened, against the Company, or any of
the officers, directors or Affiliates of the Company seeking to restrain,
prevent or change the transactions contemplated by this Agreement or any other
Transaction Documents, or seeking damages in connection with such transactions.

 

(c)           Conditions to the Company’s
Obligation to Sell on each Subsequent Closing Date.  The obligation of the Company to issue and
sell the applicable Preferred Shares to the Purchaser at each Subsequent
Closing is subject to the satisfaction, at or before such Subsequent Closing
Date, of each of the following conditions, provided these conditions are for
the Company’s sole benefit and may be waived by the Company at any time in its
sole discretion by providing the Purchaser with prior written notice thereof:

 

(i)            The Purchaser shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by the Purchaser at
such Subsequent Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.

 

(ii)           The representations and warranties of the Purchaser shall
be true and correct in all material respects as of the date when made and as of
such Subsequent Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Purchaser shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Purchaser at or
prior to such Subsequent Closing Date.

 

(iii)          The Company shall have received the NASDAQ Stockholder
Approval.

 

(iv)          All Governmental Entity, third party and self-regulatory
organizations approvals (or notices or filings therewith) listed on Schedule
3(f) or otherwise required in connection with the transactions
contemplated by the Transaction Documents shall have been obtained or made on
terms reasonably satisfactory to the Company and shall be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
materially restrain, prevent or otherwise impose material adverse conditions on
the transactions contemplated by this Agreement or any other Transaction
Documents.

 

(v)           No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or Governmental Entity of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement or
any other Transaction Documents.

 

(vi)          No action, suit or proceeding before any arbitrator or any
Governmental Entity shall have been commenced, and no investigation by any
Governmental Entity shall have been threatened, against the Company, or any of
the officers, directors or Affiliates of the Company seeking to restrain,
prevent or change the transactions contemplated by this Agreement or any other
Transaction Documents, or seeking damages in connection with such transactions.

 

 

27

 

(vii)         Such other conditions as are mutually agreeable between the
Purchaser and the Company.

 

7.             CONDITIONS TO
THE PURCHASER’S OBLIGATION TO PURCHASE ON THE CLOSING DATES.

 

(a)           Conditions to the Purchaser’s
Obligation to Purchase on the Initial Closing Date.  The obligation of the Purchaser hereunder to
purchase the applicable Preferred Shares from the Company at the Initial
Closing is subject to the satisfaction, at or before the Initial Closing Date,
of each of the following conditions. 
These conditions are for the Purchaser’s sole benefit and may be waived
by the Purchaser at any time in its sole discretion:

 

(i)            The Purchaser shall have received a facsimile copy of a
form of stock certificate representing the Series A Preferred Stock to be
issued to the Purchaser on the Initial Closing Date, with the original
certificate held in trust by counsel for the Company until delivery thereof on
the fourth (4th) Business Day
following the Initial Closing.

 

(ii)           The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware, and copies thereof shall have
been certified by such Secretary of State shall have been delivered to the
Purchaser.

 

(iii)          The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of
the Initial Closing Date (both before and after giving effect to the Initial
Closing) as though made at that time (except to the extent that any of such
representations and warranties is already qualified as to materiality or
Material Adverse Effect in Section 3 above, in which case, such
representations and warranties shall be true and correct in all respects).

 

(iv)          The Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Initial Closing Date.

 

(v)           The Purchaser shall have received a certificate, executed
by both the Chief Executive Officer and Chief Financial Officer of the Company,
dated as of the Initial Closing Date and including an update as of such Closing
Date, certifying as to the matters in clauses (i) and (ii) of
the representation contained in Section 3(c) and certifying as
to the satisfaction of Sections 7(b)(iii) and 7(b)(iv) (subject
to update of clauses (i) and (ii) of Section 3(c)).

 

(vi)          The Purchaser shall have received the opinion of Stradling,
Yocca, Carlson & Rauth, counsel to the Company, dated as of the
Initial Closing Date, in form, scope and substance reasonably satisfactory to
the Purchaser and in substantially the form of Exhibit D attached
hereto.

 

(vii)         The Company shall have executed and delivered to the Purchaser
the Preferred Stock Certificates (in such denominations as the Purchaser shall
request) for the Preferred Shares being purchased by the Purchaser at the
Initial Closing.

 

 

28

 

(viii)        The Purchaser shall have received a
certificate, executed by the Secretary of the Company, certifying the
following:

 

(A)          A copy of the resolutions of the Board of Directors of the
Company approving the transactions contemplated by this Agreement (the “Resolutions”),

 

(B)           The Company’s Certificate of Incorporation, together with
all amendments thereof and restatements thereto, and

 

(C)           A copy of its Bylaws, as then in full effect and force.

 

(ix)           As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares, at least
21,052,623 shares of Common Stock (subject to adjustment for splits, reverse
splits, stock dividends, combinations and the like).

 

(x)            The Company shall have delivered to the Purchaser a copy
of the Irrevocable Transfer Agent Instructions, executed by each of the Company
and its transfer agent.  The Company
shall have delivered to the Purchaser a letter from the Company’s transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five (5) days of the Initial Closing Date.

 

(xi)           The Company shall have delivered to the Purchaser a
certificate evidencing the incorporation and good standing of the Company in
Delaware issued by the Secretary of State of the State of Delaware as of a date
within ten (10) days of the Initial Closing Date.

 

(xii)          The Company shall have delivered to the Purchaser evidence
reasonably acceptable to the Purchaser that the Company has taken appropriate
corporate action to render inapplicable any Takeover Provision which is or
could become applicable to the Purchaser as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of Securities, the Purchaser’s ownership of the Securities and/or the
issuance of the Conversion Shares.

 

(xiii)         Safeguard shall have entered into the
Safeguard Agreement.

 

(xiv)        With respect to Indebtedness of the Company under the
Comerica Loan (including, for the avoidance of doubt, any guarantees or
indemnification obligations of the Company related to the Comerica Loan), the
Purchaser shall have received such pay-off letters, termination agreements,
termination statements, releases of funded mortgages and other releases to be
delivered against repayment by the Company at or prior to the Initial Closing
as the Purchaser shall have reasonably requested, all in form and substance
satisfactory to the lender(s) to the Company (in their sole discretion)
and reasonably satisfactory to the Purchaser. 
The Purchaser shall have received duly executed releases (including
UCC-3 termination statements) of all Liens (other than Permitted Liens) on the
assets of the Company relating to the Comerica Loan in form and substance
reasonably satisfactory to the Purchaser and its counsel.

 

 

29

 

(xv)         There shall not have occurred any events or changes (A) since
December 31, 2008 that, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect, before and after
giving effect to the transactions contemplated by the Transaction Documents or (B) that
have had or could reasonably be expected to have an adverse effect on the
rights or remedies of the Purchaser, or on the ability of the Company to
perform its obligations to the Purchaser; and trading in any securities of the
Company shall not have been suspended or materially limited by the SEC or the
Principal Market.

 

(xvi)        All Governmental Entity, third party and self-regulatory
organizations approvals (or notices or filings therewith) listed on Schedule
3(f) or otherwise required in connection with the transactions
contemplated by the Transaction Documents shall have been obtained or made on
terms reasonably satisfactory to the Purchaser and shall be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
materially restrain, prevent or otherwise impose material adverse conditions on
the transactions contemplated by this Agreement or any other Transaction
Documents.

 

(xvii)       No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or Governmental Entity of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or any other Transaction Documents.

 

(xviii)      No action, suit or proceeding before any
arbitrator or any Governmental Entity shall have been commenced, and no
investigation by any Governmental Entity shall have been threatened, against
the Company, or any of the officers, directors or Affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement or any other Transaction Documents, or seeking damages in connection
with such transactions.

 

(xix)         The Purchaser Designees shall have been appointed to serve
on the Company’s Board of Directors effective as of the Initial Closing Date,
and the Company shall have executed and delivered to the Purchaser the
Indemnification Agreement for each Purchaser Designee, effective as of the
Initial Closing Date.

 

(xx)          Safeguard and the Company shall have entered into that
certain Amendment to Securities Purchase Agreement in form and substance
reasonably acceptable to Purchaser.

 

(b)           Conditions to the Purchaser’s
Obligation to Purchase on the Second Closing Date.  The Obligation of the Purchaser hereunder to
purchase the applicable Preferred Shares from the Company at the Second Closing
is subject to the satisfaction, at or before the Second Closing, of each of the
following conditions.  These conditions
are for the Purchaser’s sole benefit and may be waived by the Purchaser at any
time in its sole discretion:

 

(i)            The Company shall have obtained the NASDAQ Stockholder
Approval prior to the date that is forty-five (45) days after the Initial
Closing.

 

 

30

 

(ii)           There shall not have occurred or become known to the
Purchaser any events or changes since the Initial Closing Date that,
individually or in the aggregate, (A) have had or could reasonably be
expected to have a Material Adverse Effect, before and after giving effect to
the transactions contemplated by the Transaction Documents or (B) that
have had or could reasonably be expected to have a material adverse effect on
the rights or remedies of the Purchaser, or on the ability of the Company to
perform its obligations to the Purchaser; and trading in any securities of the
Company shall not have been suspended or materially limited by the SEC or the
Principal Market.

 

(iii)          The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of
the Second Closing Date as though made at that time (except to the extent that
any of such representations and warranties is already qualified as to
materiality or Material Adverse Effect in Section 3 above, in which
case, such representations and warranties shall be true and correct in all
respects).

 

(iv)          The Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Second Closing Date.

 

(v)           The Purchaser shall have received a certificate, executed
by both the Chief Executive Officer and Chief Financial Officer of the Company,
dated as of the Second Closing Date and including an update as of such Second
Closing Date, certifying as to the matters in clauses (i) and (ii) of
the representation contained in Section 3(c) and certifying as
to the satisfaction of Sections 7(b)(iii) and 7(b)(iv) (subject
to update of clauses (i) and (ii) of Section 3(c)).

 

(vi)          The Company shall not have breached any material provision
of any of the Transaction Documents or the Certificate of Designations.

 

(vii)         With respect to Indebtedness of the Company under the
Safeguard Loan (including, for the avoidance of doubt, any guarantees or
indemnification obligations of the Company related to the Safeguard Loan), the
Purchaser shall have received such pay-off letters, termination agreements,
termination statements, releases of funded mortgages and other releases to be
delivered against repayment by the Company at or prior to the Second Closing as
the Purchaser shall have reasonably requested, all in form and substance
satisfactory to the lender(s) to the Company (in their sole discretion)
and reasonably satisfactory to the Purchaser. 
The Purchaser shall have received duly executed releases (including
UCC-3 termination statements) of all Liens (other than Permitted Liens) on the assets
of the Company relating to the Safeguard Loan in form and substance reasonably
satisfactory to the Purchaser and its counsel.

 

(c)           Conditions to the Purchaser’s
Obligation to Purchase on each Subsequent Closing Date.  The Obligation of the Purchaser hereunder to
purchase the applicable Preferred Shares from the Company at each Subsequent
Closing is subject to the satisfaction, at or before each Subsequent Closing,
of each of the following conditions. 
These conditions are for the Purchaser’s sole benefit and may be waived
by the Purchaser at any time in its sole discretion:

 

 

31

 

(i)            There shall not have occurred or become known to the
Purchaser any events or changes since the Initial Closing Date that,
individually or in the aggregate, (A) have had or could reasonably be
expected to have a Material Adverse Effect, before and after giving effect to
the transactions contemplated by the Transaction Documents or (B) that
have had or could reasonably be expected to have a material adverse effect on
the rights or remedies of the Purchaser, or on the ability of the Company to
perform its obligations to the Purchaser; and trading in any securities of the
Company shall not have been suspended or materially limited by the SEC or the
Principal Market.

 

(ii)           The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of
such Subsequent Closing Date as though made at that time (except to the extent
that any of such representations and warranties is already qualified as to
materiality or Material Adverse Effect in Section 3 above, in which
case, such representations and warranties shall be true and correct in all
respects).

 

(iii)          The Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to such Subsequent Closing Date.

 

(iv)          The Purchaser shall have received a certificate, executed
by both the Chief Executive Officer and Chief Financial Officer of the Company,
dated as of such Subsequent Closing Date and including an update as of such
Subsequent Closing Date, certifying as to the matters in clauses (i) and
(ii) of the representation contained in Section 3(c) and
certifying as to the satisfaction of Sections 7(b)(iii) and 7(b)(iv) (subject
to update of clauses (i) and (ii) of Section 3(c)).

 

(v)           The Company shall not have breached any material provision
of any of the Transaction Documents or the Certificate of Designations.

 

(vi)          Such other conditions as are mutually agreeable between the
Purchaser and the Company.

 

8.             TERMINATION.

 

(a)           Termination.

 

(i)            The Purchaser and the Company may terminate this
Agreement by mutual written consent at any time prior to the Initial Closing.

 

(ii)           The Purchaser may terminate this Agreement by giving
written notice to the Company at any time prior to the Initial Closing:

 

(A)          in the event that the Company has breached any representation,
warranty, or covenant contained in this Agreement or in any other Transaction
Document in any material respect, the Purchaser has notified the Company of the
breach, and the breach has continued without cure for a period of fifteen (15)
days after the notice of breach, or

 

 

32

 

(B)           if the Initial Closing shall not have occurred on or
before the Initial Closing Date, by reason of the failure of any condition
precedent under Section 7(b) hereof or if satisfaction of any
such condition by such date is or becomes impossible (unless the failure
results primarily from any Purchaser itself breaching any representation,
warranty, or covenant contained in this Agreement or any other Transaction
Document).

 

(iii)          The Company may terminate this Agreement by giving written
notice to the Purchaser at any time prior to the Initial Closing:

 

(A)          in the event that the Purchaser has breached any
representation, warranty, or covenant contained in this Agreement or in any other
Transaction Document in any material respect, the Company has notified the
Purchaser of the breach, and the breach has continued without cure for a period
of fifteen (15) days after the notice of breach, or

 

(B)           if the Initial Closing shall not have occurred on or
before the Initial Closing Date, by reason of the failure of any condition
precedent under Section 6(b) hereof or if satisfaction of any
such condition by such date is or becomes impossible (unless the failure
results primarily from the Company breaching any representation, warranty, or
covenant contained in this Agreement or any other Transaction Document).

 

(iv)          After the Initial Closing, the Purchaser may terminate its
obligation to purchase the applicable Preferred Shares at the Second Closing by
giving written notice to the Company at any time prior to the Second Closing:

 

(A)          in the event that the Company has breached any
representation, warranty, or covenant contained in this Agreement or in any
other Transaction Document in any material respect, the Purchaser has notified
the Company of the breach, and the breach has continued without cure for a
period of fifteen (15) days after the notice of breach, or

 

(B)           if the Second Closing shall not have occurred on or before
the Second Closing Date, by reason of the failure of any condition precedent
under Section 7(c) hereof or if satisfaction of any such condition by such date
is or becomes impossible (unless the failure results primarily from any
Purchaser itself breaching any representation, warranty, or covenant contained
in this Agreement or any other Transaction Document).

 

(v)           After the Initial Closing, the Company may terminate its
obligation to sell the applicable Preferred Shares at the Second Closing by
giving written notice to the Purchaser at any time prior to the Second Closing:

 

 

33

 

 

(A)          in the event that the Purchaser has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, the Company has notified the Purchaser of the breach, and the
breach has continued without cure for a period of fifteen (15) days after the
notice of breach, or

 

(B)           if the Second Closing shall not have occurred on or before
the Second Closing Date, by reason of the failure of any condition precedent
under Section 6(c) hereof or if satisfaction of any such
condition by such date is or becomes impossible (unless the failure results
primarily from the Company breaching any representation, warranty, or covenant
contained in this Agreement or any other Transaction Document).

 

(b)           Effect of Termination.  Each party’s right of termination under Section 8(a) is
in addition to any other rights it may have under this Agreement or otherwise,
and the exercise of such right of termination will not be an election of
remedies.  If:

 

(i)            this Agreement is terminated pursuant to Sections
8(a)(i), (ii) or (iii), all obligations of the parties
under this Agreement will terminate, except that the obligations of the parties
in Section 4(h) (including with respect to legal fees and
expenses) and Section 9 will survive; or

 

(ii)           the Purchaser’s obligation to purchase, or the Company’s
obligation to sell, as the case may be, Preferred Shares at the Second Closing
is terminated pursuant to Section 8(a)(iv) or (v), (A) the
Second Closing shall not occur, and (B) otherwise, this Agreement, will
survive provided  however that the representations and warranties
of the Company shall only survive for a period of one (1) year following
the date this Agreement at which time such representations and warranties shall
terminate.

 

Notwithstanding
clauses (i) or (ii) above, if this Agreement (or the
Purchaser’s obligation to purchase, or the Company’s obligation to sell,
Preferred Shares at the Second Closing, as the case may be) is terminated
because of a breach of this Agreement by the non-terminating party or because
one or more of the conditions of the terminating party’s obligations under this
Agreement is not satisfied as a result of the non-terminating party’s failure
to comply with its obligations under this Agreement, the terminating party’s
right to pursue all legal remedies will survive such termination unimpaired.

 

9.             GOVERNING
LAW; MISCELLANEOUS.

 

(a)           Governing Law; Jurisdiction; Jury
Trial.  The corporate laws of the
State of Delaware shall govern all issues concerning the relative rights of the
Company and its stockholders.  All other
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of
Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.  Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the state
and federal courts sitting in Delaware, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or

 

 

34

 

proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is improper.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

(b)           Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective, with respect to a particular party, when
counterparts have been signed by such party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

 

(c)           Headings.  The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.

 

(d)           Severability.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

 

(e)           Entire Agreement; Amendments.  This Agreement and the instruments referenced
herein supersede all other prior oral or written agreements, negotiations or
correspondence between Purchaser, the Company, their Affiliates and persons
acting on their behalf with respect to the matters discussed herein (including
the term sheet related hereto), and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters.  This Agreement may only be amended, waived or
modified by an instrument in writing signed by the Company and (i) prior
to the Initial Closing, the Purchaser and (ii) from and after the Initial
Closing, the holders of at least a majority of the then-outstanding Preferred
Shares, or, if no Preferred Shares are then outstanding, those Purchasers who
hold at least a majority of the Conversion Shares still entitled to
registration rights under the Registration Rights Agreement.

 

(f)            Notices.  Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); (iii) one (1) Business Day after
deposit with a nationally 

 

 

35

 

recognized overnight delivery service, in each case properly addressed
to the party to receive the same; or (iv) three (3) days after
deposit in the U.S. Mail.  The addresses
and facsimile numbers for such communications shall be:

 

If to the Company:

 

Clarient, Inc.

31 Columbia

Aliso Viejo, California 92656

Facsimile: 
(949) 425-5701

Attention: 
Chief Executive Officer

 

With a copy to:

 

Stradling, Yocca, Carlson & Rauth

660 Newport Center Drive

Suite 1600

Newport Beach, California 92660

Facsimile: (949) 725-4100

Attention: 
Shivbir S. Grewal, Esq.

 

With a further copy to:

 

Safeguard Scientifics, Inc.

435 Devon Park Drive

Building 800

Wayne, Pennsylvania 19087

Attention:  General Counsel

Facsimile:  (610) 293-0601

 

If to the Purchaser:

 

Oak Investment Partners XII, Limited
Partnership

One Gorham Island

Westport, Connecticut 06880

Facsimile: (203) 227-0327

Attention: 
Annie H. Lamont

 

With a copy to:

 

Finn Dixon & Herling LLP

177 Broad Street

Stamford, Connecticut 06901

Facsimile: (203) 325-5001

Attention: 
Michael J. Herling, Esq.

 

If to the Transfer Agent:

 

Mellon Investor Services

400 South Hope Street, 4th
Floor

Los Angeles, CA 90071

Facsimile: (501) 760-1538

Attention: Ronald Lug

 

 

36

 

or
at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given
by the recipient of such notice, consent, waiver or other communication, (B) mechanically
or electronically generated by the sender’s facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above,
respectively.

 

(g)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares.  The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of (i) prior
to the Initial Closing, the Purchaser in its sole discretion and (ii) from
and after the Initial Closing, the holders of a majority of the Conversion
Shares issued or issuable upon conversion of the Preferred Shares still
entitled to registration rights under the Registration Rights Agreement) then
outstanding, including by merger or consolidation in which the Company is not
the surviving corporation, except pursuant to a deemed liquidation, dissolution
or winding up (as defined in Section 5(c) of the Certificate of
Designations) with respect to which the Company is in compliance with the
Certificate of Designations and except pursuant to a transaction in which there
is no change in control of the Company. 
From and after the date that no holders of Conversion Shares are entitled
to registration rights under the Registration Rights Agreement, the Company may
assign this Agreement without the consent of any party. The Purchaser shall not
assign their rights to purchase Preferred Shares at any Closing to any third
party without the prior written consent of the Company, and the consent of the
other Purchasers.

 

(h)           No Third Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

 

(i)            Survival.  Unless this Agreement is terminated under Section 8(a) without
the consummation of the Initial Closing, the representations and warranties of
the Company and the Purchaser contained in Sections 2 and 3, and
the agreements and covenants set forth in Sections 4, 5 and 8
shall survive the Closings for a period of one (1) year following the date
this Agreement at which time such representations and warranties shall terminate.  If this Agreement is terminated under Section 8(a) after
the consummation of the Initial Closing but without consummation of the Second
Closing, the representation and warranties of the Company and the Purchaser
contained in Sections 2 and 3, and the agreements and covenants
set forth in Sections 4, 5 and 8 shall nevertheless
survive the Initial Closing.  The
representations and warranties of the Company shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of the
Purchaser and their respective representatives and agents.  The Purchaser and the Company shall be
responsible only for their own respective representations, warranties,
agreements and covenants hereunder.

 

 

37

 

(j)            Publicity.  The Company and the Purchaser shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval
of the Purchaser, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations
(although the Purchaser shall be consulted by the Company (and be given a
reasonable opportunity to comment) in connection with any such press release or
other public disclosure prior to its release and shall be provided with a copy
thereof).

 

(k)           Further Assurances.  Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

(l)            Placement Agent.  The Company acknowledges that it has engaged
RBC Capital Markets (the “Placement Agent”)
as its placement agent or broker in connection with the sale of the Preferred
Shares.  The Company shall be responsible
for the payment of any placement agent’s fees or broker’s commissions payable
to RBC Capital Markets or otherwise relating to or arising out of the
transactions contemplated hereby.  The
Company shall pay, and indemnify, defend and hold Purchaser harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys’ fees and out-of-pocket expenses) arising in connection with any such
claim.

 

(m)          No Strict Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

 

(n)           Remedies.  The Purchaser and each holder of the
Securities shall have all rights and remedies set forth in the Transaction
Documents and the Certificate of Designations and all rights and remedies which
such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law.  Any person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.

 

(o)           Reliance.  The Purchaser acknowledges that it is relying
upon the representations and covenants of the Company contained in this
Agreement, and is not relying upon any person, firm, or corporation, in making
its investment or decision to invest in the Company.

 

 

38

 

(p)           Payment Set Aside.  To the extent that the Company makes a
payment or payments to the Purchaser hereunder or pursuant to the Registration
Rights Agreement or the Certificate of Designations or the Purchaser enforces
or exercises its rights hereunder or thereunder, and such payment or payments
or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, by a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

 

(q)           Form, Registration, Transfer and
Exchange of Preferred Stock; Lost Preferred Stock.  The Company shall keep at its principal
office a register in which the Company shall provide for the registration of Series A
Preferred Stock and of transfers of Series A Preferred Stock. Upon
surrender for registration of transfer of any share of Series A Preferred
Stock at the principal office of the Company, the Company shall, at its
expense, promptly execute and deliver one or more new certificates for shares
of Series A Preferred Stock of the like tenor and number, registered in
the name of such transferee or transferees. 
At the option of the holder of any share of Series A Preferred
Stock, such share may be exchanged for other Series A Preferred Stock of
like tenor and of a like number, upon surrender of the certificate for the
shares of Series A Preferred Stock to be exchanged at the principal office
of the Company. Whenever any shares of Series A Preferred Stock are so
surrendered for exchange, the Company shall, at its expense, execute and
deliver the certificate for the shares of Series A Preferred Stock which
the holder making the exchange is entitled to receive.  Every certificate of Series A Preferred
Stock surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed
by the holder of such certificate of Series A Preferred Stock or such
holder’s attorney duly authorized in writing. Any share of Series A
Preferred Stock issued in exchange for any share of Series A Preferred
Stock or upon transfer thereof shall carry the rights to unpaid dividends to
accrue which were carried by the share of Series A Preferred Stock so
exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. 
Upon receipt of written notice from the holder of any certificate of Series A
Preferred Stock of the loss, theft, destruction or mutilation of such
certificate share of Series A Preferred Stock and, in the case of any such
loss, theft or destruction, upon receipt of such holder’s affidavit and
indemnity as may be reasonably required by the Company, or in the case of any
such mutilation upon surrender and cancellation of such certificate of Series A
Preferred Stock, the Company will make and deliver a new certificate of Series A
Preferred Stock, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated certificate of Series A Preferred Stock.

 

(r)            Definitions.  In addition to the words and terms defined
elsewhere in this Agreement, the following words and terms shall have the
following meanings, respectively, unless the context clearly requires
otherwise:

 

“2008 Filings” has
the meaning assigned to such term in Section 3.

 

 

39

 

“Affiliate” means,
with respect to any Person, another Person that, directly or indirectly, (i) has
a 5% or more equity interest in that Person, (ii) has 5% or more common
ownership with that Person, (iii) controls that Person, or (iv) shares
common control with that Person.

 

“Agreement” has the
meaning assigned to such term in the preface above.

 

“Benefit Plans” has
the meaning assigned to such term in Section 3(l).

 

“Business” has the
meaning assigned to such term in Section 3(y).

 

“Business Day” means
any day except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in Los Angeles, California generally are
authorized or required by law or other governmental actions to close.

 

“Businesses” has the
meaning assigned to such term in Section 3(y).

 

“Bylaws” has the
meaning assigned to such term in Section 3(c).

 

“Certificate of
Designations” has the meaning assigned to such term in the Recitals.

 

“Certificate of
Incorporation” has the meaning assigned to such term in Section 3(c).

 

“Closing” has the
meaning assigned to such term in Section 1(a).

 

“Closing Date” has
the meaning assigned to such term in Section 1(b).

 

“Closings” has the
meaning assigned to such term in Section 1(a).

 

“Code” means the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.

 

“Comerica Loan” has
the meaning assigned to such term in Section 4(c).

 

“Common Stock” has
the meaning assigned to such term in the Recitals.

 

“Company” has the
meaning assigned to such term in the preface above.

 

 “Control” or “controls” for
purposes hereof means that a Person has the power, direct or indirect, to
conduct or govern the policies of another Person.

 

“Conversion Shares”
has the meaning assigned to such term in the Recitals.

 

“Designation Notice”
has the meaning assigned to such term in Section 4(n).

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.

 

“Exchange Act” has
the meaning assigned to such term in Section 3(f).

 

“GAAP” has the
meaning assigned to such term in Section 3(g).

 

 

40

 

“Gemino Loan” has the
meaning assigned to such term in Section 4(d).

 

“Government Programs”
has the meaning assigned to such term in Section 3(y).

 

“Governmental Entity”
has the meaning assigned to such term in Section 2(e).

 

“Indebtedness” has
the meaning assigned to such term in Section 3(d).

 

“Indemnification
Agreement” has the meaning assigned to such term in Section 4(a).

 

“Initial 8-K” has the
meaning assigned to such term in Section 4(h).

 

“Initial Closing” has
the meaning assigned to such term in Section 1(a).

 

“Initial Closing Date”
has the meaning assigned to such term in Section 1(b).

 

“Irrevocable Transfer
Agent Instructions” has the meaning assigned to such term in Section 5.

 

“Liens” means liens,
charges, claims, licenses, pledges, options, security interests, mortgages,
leases, subleases, easements, covenants, rights-of-way or other similar
encumbrances or other similar restrictions.

 

“Material Adverse Effect”
has the meaning assigned to such term Section 3(a).

 

“Material Contracts”
has the meaning assigned to such term in Section 3(t).

 

 “Medicare and Medicaid Programs” has
the meaning assigned to such term in Section 3(y).

 

“NASDAQ” means the
NASDAQ Capital Market.

 

“NASDAQ Stockholder
Approval” means stockholder approval required by NASDAQ in connection with
the transactions contemplated by the Transaction Documents (as defined herein)
and the Certificate of Designation (including, without limitation, the issuance
or potential issuance of a number of shares of Common Stock which is greater
than or equal to 20% of the number of shares outstanding on the date of this
Agreement and/or any potential change of control (as currently defined under
the rules and regulations of NASDAQ)).

 

“Permits” has the
meaning assigned to such term in Section 3(y).

 

“Permitted Liens”
means (A) Liens set forth in Schedule 3(o), (B) inchoate
mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or
incurred in the ordinary course of business for amounts not yet due and payable
(provided that such items are properly reserved for on the books of the
Company), (C) Liens for governmental taxes and other charges that are not
due and payable (provided that such items are properly reserved for on the
books of the Company), (D) as to real property leased or occupied by the
Company, recorded easements, covenants, rights-of-way and other similar
recorded restrictions of record (including zoning, building and other similar
restrictions).

 

 

41

 

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

 

“Placement Agent” has
the meaning assigned to such term in Section 9(l).

 

“Preferred Shares”
has the meaning assigned to such term in the Recitals.

 

“Preferred Stock” has
the meaning assigned to such term in the Recitals.

 

“Preferred Stock
Certificates” has the meaning assigned to such term in Section (1)(c).

 

“Principal Market”
has the meaning assigned to such term in Section (4)(f).

 

“Private Programs”
has the meaning assigned to such term in Section 3(y).

 

“Purchase Price” has
the meaning assigned to such term in the Recitals.

 

“Purchaser” has the
meanings assigned to such terms in the preface above.

 

“Purchaser Designees”
has the meaning assigned to such term in Section 4(a).

 

“Registration Rights
Agreement” has the meaning assigned to such term in the Recitals.

 

“Regulated Company”
and “Regulated Companies” have the meanings assigned to such terms in Section 3(y).

 

“Regulation D” has
the meaning assigned to such term in the Recitals.

 

“Regulations” has the
meaning assigned to such term in Section 3(y).

 

“Related Party” has
the meaning assigned to such term in Section 4(i).

 

“Reporting Period”
has the meaning assigned to such term in Section 4(c).

 

“Resolutions” has the
meaning assigned to such term in Section 7(a).

 

“Restricted Securities”
has the meaning assigned to such term in Section 4(j).

 

“Rights Agreement”
has the meaning assigned to such term in Section 3(v).

 

“Rule 144” has
the meaning assigned to such term in Section 2(f).

 

“Safeguard” means
Safeguard Delaware, Inc., Safeguard Scientifics, Inc., and Safeguard
Scientifics (Delaware), Inc.

 

 

42

 

“Safeguard Agreement”
means that certain agreement (or agreements, as the case may be) between the
Purchaser and Safeguard, relating to (A) the NASDAQ Stockholder Approval, (B) waiver
of certain anti-dilution protection that may be triggered as a result of the consummation
of the transactions contemplated by the Transaction Documents and (C) certain
“change of control” transactions, in the form attached hereto as Exhibit E.

 

“Safeguard Loan” has
the meaning assigned to such term in Section 4(c).

 

“SEC” has the meaning
assigned to such term in the Recitals.

 

“SEC Documents” has
the meaning assigned to such term in Section 3(g).

 

“Second Closing” has
the meaning assigned to such term in Section 1(a).

 

“Second Closing Date”
has the meaning assigned to such term in Section 1(b).

 

“Securities” has the
meaning assigned to such term in Section 2(a).

 

“Securities Act” has
the meaning assigned to such term in the Recitals.

 

“Series A Preferred
Stock” has the meaning assigned to such term in the Recitals.

 

“Strategic Transaction”
has the meaning assigned to such term in Section 4(k).

 

“Subsidiaries” has
the meaning assigned to such term in Section 3(a).

 

“Takeover Provisions”
has the meaning assigned to such term in Section 3(u).

 

“Trading Affiliates”
has the meaning assigned to such term in Section 4(k).

 

“Transaction Documents”
has the meaning assigned to such term in Section 3(b).

 

*  * 
*  *  *  *

 

 

43

 

[Signature
Page to Clarient, Inc. Series A Purchase Agreement]

 

IN WITNESS
WHEREOF, the Purchaser and the Company have caused this
Stock Purchase Agreement to be duly executed as of the date first written
above.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
  CLARIENT,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ronald A. Andrews

  
	
   

  	
   

  	
  Name:
  

  	
  Ronald
  A. Andrews

  
	
   

  	
   

  	
  Title:
  

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  
	
   

  	
  OAK
  INVESTMENT PARTNERS XII, LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Ann H. Lamont

  
	
   

  	
   

  	
  Ann
  H. Lamont

  
	
   

  	
   

  	
  Managing
  Member of Oak Associates XII, LLC

  
	
   

  	
   

  	
  The
  General Partner of Oak Investment Partners XII, Limited Partnership

  

 

 

 

SCHEDULE
OF EXCEPTIONS

 

TO

 

STOCK
PURCHASE AGREEMENT

 

BETWEEN

 

CLARIENT,
INC.

 

AND

 

OAK INVESTMENT PARTNERS XII, LIMITED PARTNERSHIP

 

Dated as of March 25, 2009

 

 

GENERAL

 

This
constitutes the “Schedule of Exceptions” to Section 3 of the Stock
Purchase Agreement (the “Agreement”) made and entered into as of March 25,
2009, by and between CLARIENT, INC., a Delaware corporation (the “Company”),
and OAK INVESTMENT PARTNERS XII, LIMITED PARTNERSHIP, a Delaware limited
partnership, (the “Purchaser”). 
Unless otherwise defined herein, any capitalized terms in this Schedule
of Exceptions will have the same meaning assigned to such terms in the
Agreement.

 

Nothing
in this Schedule of Exceptions constitutes an admission of any liability or
obligation of the Company to any third party, nor an admission against the
Company’s interests.  This Schedule of
Exceptions contains the statements and exclusions of the Company and its
Subsidiaries only and contains confidential information of the Company and its
Subsidiaries.

 

 

Schedule 3(a)

 

Organization and Qualification

 

1.               The Company is continually
assessing in which states it needs to be qualified to do business based upon
its business operations and the presence of sales representatives in various
states.

 

2.               The following entities are
Subsidiaries of the Company:

 

a.               The Company owns one hundred
percent (100%) of Clarient Diagnostic Services, Inc., a Delaware
corporation.

 

b.              The Company owns one hundred
percent (100%) of ChromaVision International, Inc., a Delaware corporation,
which owns one hundred percent (100%) of the following entities:

 

i.      ChromaVision SARL.

 

i.      ChromaVision GmbH.

 

 

Schedule 3(c)

 

Equity Capitalization

 

1.               Warrant to purchase 50,000
shares of Common Stock pursuant to that certain Common Stock Purchase Warrant,
dated August 1, 2005, by and between Safeguard Delaware, Inc., a
Delaware corporation (“Safeguard”) and the Company.

 

2.               Warrant to purchase 801,000
shares of Common Stock pursuant to that certain Common Stock Purchase Warrant,
dated November 9, 2005, by and between Safeguard and the Company.

 

3.               Warrant to purchase 549,000
shares of Common Stock pursuant to that certain Common Stock Purchase Warrant,
dated December 14, 2005, by and between Safeguard and the Company.

 

4.               Warrant to purchase 50,000
shares of Common Stock pursuant to that certain Common Stock Purchase Warrant,
dated June 19, 2006, by and between Safeguard and the Company.

 

5.               Warrant to purchase 624,306
shares of Common Stock pursuant to that certain Common Stock Purchase Warrant,
dated September 22, 2006, by and between Safeguard and the Company.

 

6.               Warrant to purchase 166,667
shares of Common Stock pursuant to that certain Common Stock Purchase Warrant,
dated April 18, 2007, by and between Safeguard and the Company.

 

7.               Warrant to purchase 62,500
shares of Common Stock pursuant to that certain Common Stock Purchase Warrant,
dated March 7, 2007, by and between Safeguard and the Company.

 

8.               Warrant to purchase 975,000
shares of Common Stock pursuant to that certain Common Stock Purchase Warrant,
dated August 28, 2002, by and between Safeguard and the Company (f/k/a/
ChromaVision Medical Systems, Inc.). 
This warrant has variable terms and, due to forfeitures and expirations,
this warrant is currently exercisable for up to 21,000 shares of Common Stock.

 

9.               Warrant to purchase 500,000
shares of Common Stock pursuant to that certain Common Stock Purchase Warrant,
dated February 27, 2009, by and between Safeguard and the Company.

 

10.         In addition to the
outstanding warrants held by Safeguard, the Company has warrants outstanding to
purchase an aggregate of 849,452 shares of Common Stock held by various
parties, as detailed on the attached Exhibit 1 to these Disclosure
Schedules.

 

11.         The Chief Executive Officer
is currently assessing whether Prediction Sciences, L.L.C. has met certain
performance standards and is entitled to the issuance of additional shares of
the Company’s Common Stock pursuant to that certain License Agreement, dated as
of January 8, 2008, by and between Prediction Sciences, L.L.C. and the
Company.  The determination of the Chief
Executive Officer will then be submitted to the Company’s Advisory Board for a
final determination.  Pursuant to the
terms of the License Agreement, Prediction Sciences, L.L.C. can earn up to an
aggregate of 350,000 shares of the Company’s Common Stock based on the
achievement of certain milestones.

 

 

Schedule 3(d)

 

Indebtedness and Other Contracts

 

1.               The Company has entered into
an $8.0 million credit facility Gemino Healthcare Finance, LLC (“Gemino”)
pursuant to that certain Credit Agreement dated as of July 31, 2008, by
and among Gemino, the Company, Clarient Diagnostic Services, Inc. and
ChromaVision International, Inc., as amended by that certain First
Amendment to Credit Agreement dated as of January 30, 2009, that certain
Second Amendment to Credit Agreement dated as of February 27, 2009, and
that certain Consent Letter, dated on or about March 25, 2009 by Gemino to
the Company, Clarient Diagnostic Services, Inc. and ChromaVision International, Inc.
(the “Gemino Credit Facility”). 
As of March 23, 2009, the outstanding balance under the Gemino
Credit Facility was approximately $3,979,673.

 

2.               The Company entered into a
$12.0 million credit facility with Comerica Bank (“Comerica”) pursuant
to that certain Amended and Restated loan Agreement dated as of February 28,
2008, by and between the Company and Comerica, as amended by that certain First
Amendment and Waiver to Amended and Restated Loan Agreement dated as of March 14,
2008, that certain Second Amendment to Amended and Restated Loan Agreement
dated as of March 21, 2008, that certain Third Amendment and Consent to
Amended and Restated Loan Agreement dated as of July 31, 2008, that
certain Fourth Amendment to Amended and Restated Loan Agreement dated as of January 27,
2009, and that certain Fifth Amendment to Amended and Restated Loan Agreement
dated as of February 27, 2009 (the “Comerica Credit Facility”).  As of March 23, 2009, the outstanding
balance under the Comerica Credit Facility was $9,754,266.

 

3.               Letter of Credit from
Comerica, dated August 2, 2005, issued to Olen Properties Corporation on
behalf of the Company for a sum not to exceed $3,000,000.  The sum under the letter was reduced to a
maximum of $2,250,000 pursuant to a letter from Olen Properties to Comerica,
dated October 8, 2008. On or about March 25, 2009, the Company
entered into that certain Pledge and Security Agreement with Comerica Bank
pursuant to which the Company will create a restricted cash account to secure the
letter of credit.

 

4.               The Company has entered into
a $30.0 million credit facility with Safeguard pursuant to that certain Second
Amended and Restated Senior Subordinated Revolving Credit Agreement dated as of
February 27, 2009, by and between the Company and Safeguard (the “Safeguard
Credit Facility”). As of March 23, 2009, the outstanding balance under
the Safeguard Credit Facility was $20,985,928. The Company and Safeguard will
amend the Safeguard Credit Facility on or prior to the Initial Closing in a
form mutually agreeable between Safeguard, the Company and Purchaser to permit
the payment to Comerica at closing and the termination of the Comerica Credit
Facility, and to decrease the commitment amount of the Safeguard Credit
Facility to $10.0 million.

 

5.               The Company has an aggregate
of $696,000 in gross capital leases from three different vendors as follows: (1) $299,000
from Acis, which expires on February 28, 2011; (2) $73,780 from DSM,
which expires on April 26, 2011; and (3) multiple leases from Beckman
Coulter for an aggregate of $323,156, with the last expiration date on December 31,
2011.

 

 

Schedule 3(f)

 

No Conflicts

 

1.               Pursuant to Section 2
of the Subordination Agreement, dated as of July 31, 2008, by Comerica in
favor of Gemino, to which the Company is also a party, and Section 7.09 of
the Gemino Credit Facility, the Company must obtain the consent of Gemino to
satisfy the indebtedness under the Comerica Credit Facility prior to satisfying
the indebtedness under the Gemino Credit Facility.  Pursuant to 8.01(r) of the Gemino Credit
Facility, the Company may not modify the terms or provisions of the Safeguard
Credit Facility or the Comerica Credit Facility without Gemino’s consent.  Further, pursuant to Sections 8.01(v) and
(w) of the Gemino Credit Facility, the Company must obtain Gemino’s
consent to terminate the Comerica Credit Facility.  The Company will obtain Gemino’s consent
prior to the Initial Closing.

 

2.               Pursuant to Section 7.10
of the Gemino Credit Facility, the Company may not declare, pay or make cash
distributions with respect to its capital stock or redeem any capital stock
without the consent of Gemino.

 

3.               Pursuant to Sections 8.01(v) and
(w) of the Gemino Credit Facility, the Company must obtain Gemino’s
consent to terminate the Safeguard Credit Facility.  Such consent will be obtained prior to the
Second Closing.

 

4.               Pursuant to Section 3
of the Subordination Agreement, dated as of March , 2007, as amended, by
Safeguard in favor of Comerica, to which the Company is also a party, the
Company must obtain the consent of Comerica prior to satisfying the
indebtedness under the Safeguard Credit Facility.  The Company notes that this consent will not
be required as the Comerica Credit Facility will be paid in full and terminated
in connection with the Initial Closing.

 

5.               Pursuant to Section 5.1
of the Safeguard Credit Facility, the Company must obtain the consent of
Safeguard in order to issue additional shares of capital stock.  In addition, upon a “Capital Transaction”,
all outstanding amounts must be paid in full and the Commitment and the
Safeguard Credit Facility must be immediately and irrevocably terminated.  “Capital Transaction” means the issuance by
the Company of (x) debt from a single source (or affiliated sources) or in
a single syndicated facility, (y) equity (including debt convertible to
equity) or (z) both (x) and (y) if the debt and equity are from
a single source or affiliated sources, whether in a single transaction or
series of directly related transactions, which results in net proceeds to the
Company not less than $1,000,000.  “Commitment”
means the maximum aggregate principal amount which may be borrowed under the
Safeguard Credit Facility.  The Company
and Safeguard will amend the Safeguard Credit Facility on or prior to the
Initial Closing in a form mutually agreeable between Safeguard, the Company and
Purchaser to permit the payment to Comerica at closing and the termination of
the Comerica Credit Facility, and to decrease the Commitment to $10.0 million.

 

6.               Pursuant to Section 2(a) of
the Second Amended and Restated Registration Rights Agreement (the “Rights
Agreement”), dated February 27, 2009, by and among the Company,
Safeguard, Safeguard Scientifics, Inc. (“Safeguard Scientifics”)
and Safeguard Scientifics (Delaware), Inc. (“SSDI”, and together
with Safeguard and Safeguard Scientifics, the “Safeguard Entities”),
each of the Safeguard Entities has piggy-back rights with respect to a
registration by the Company of any of its equity securities such that the Company
must provide prompt notice of such a registration to the Safeguard Entities and
must include any

 

 

Registrable Securities (as defined in the Rights Agreement) held by the
Safeguard Entities in such registration that have been specified in a written
request made within twenty (20) days after the date of such notice sent by the
Company.

 

7.               Pursuant to Section 4.1(d) of
the Securities Purchase Agreement, dated as of June 13, 2002, by and among
the Company, Safeguard and Safeguard Scientifics (the “Securities Purchase
Agreement”), the Company has agreed to request that the Board of Directors
of the Company, upon a written request by Safeguard, appoint or nominate for
election by the stockholders to the Board, nominees designated by Safeguard,
provided that the number of nominees so designated, if appointed or elected,
plus all other directors previously so designated and appointed or nominated or
who are directors, officers or employees of Safeguard or any of its affiliates
would not be greater than the number of incumbent directors plus one.  Further, the provision states that provided
that there exists at least one Safeguard director, the Company will cause a
Safeguard director to be a member of each committee of the Board of Directors
of the Company except for the Related Party Transactions Committee (as defined
in Section 4.1(b) of the Securities Purchase Agreement) or the Audit
Committee.  The Company will amend this
section of the Securities Purchase Agreement on or prior to the Initial Closing
in a form mutually agreeable between Safeguard, the Company and Purchaser.

 

8.               A notice filing to CA
Laboratory Field Services will be required to be made within thirty (30) days
after the Initial Closing because the transaction will be considered a “Minor
Change of Ownership,” pursuant to the California laboratory licensure
regulations.

 

9.               Pursuant to the Engagement
Letter, dated as of March 23, 2009, by and between the Company and RBC
Capital Markets Corporation (“RBC”), the Company has agreed to pay RBC
an aggregate cash fee in the amount of 2.75% of the gross proceeds raised from
the purchase and sale of the Shares under the Purchase Agreement (the “Offering
Fee”).  The Offering Fee shall be
paid to RBC at each Closing as earned.

 

 

Schedule 3(h)

 

Absence of Litigation

 

None.

 

 

Schedule 3(l)

 

Employee Relations; Benefit Plans

 

1.               Mike Pellini, the Company’s
Chief Operations Officer, is a former executive officer with Safeguard who
joined the Company last year.  Pursuant
to Mr. Pellini’s agreement with Safeguard, Mr. Pellini has the right
to leave Clarient and resume employment with Safeguard at his option through August 2009.

 

(iii)

 

1.               The Company will reimburse
up to $2,000 of educational expenses at either an undergraduate or graduate
level for full time employees that have completed six (6) months of
service for the Company, so long as the courses taken relate directly to the
employee’s work with the Company.

 

2.               The Company provides eight (6) paid
holidays per year.

 

3.               The Company provides three (3) days
of paid bereavement leave for an immediate family member.

 

4.               The Company provides up to
five (5) days of paid jury duty service days

 

5.               The Company provides PTO to
eligible employees as follows:

 

	
  Years of Service

  	
   

  	
  Bi-weekly
  Accrual 

  Rate

  	
   

  	
  Annual
  PTO Accrual*

  	
   

  	
  Maximum
  Accrual**

  
	
  Years
  One and Two

  	
   

  	
  6.16

  	
   

  	
  20
  days 

  (160 hours)

  	
   

  	
  25
  days 

  (200 hours)

  
	
  Year
  Three

  	
   

  	
  6.77

  	
   

  	
  22
  days 

  (176 hours)

  	
   

  	
  27
  days 

  (216 hours)

  
	
  Years
  Four and Five

  	
   

  	
  7.70

  	
   

  	
  25
  days 

  (200 hours)

  	
   

  	
  30days
  

  (240 hours)

  
	
  Years
  Six through Nine

  	
   

  	
  9.24

  	
   

  	
  30
  days  

  (240 hours)

  	
   

  	
  35
  days  

  (280 hours)

  
	
  10
  or more years

  	
   

  	
  10.77

  	
   

  	
  35
  days 

  (280 hours)

  	
   

  	
  40
  days 

  (320 hours)

  

 

*Annual
PTO Accruals are based on an employee having 2080 paid hours per year (40 hours
per week). 

**No PTO hours will accrue beyond the maximum accruals listed.

 

6.               The Company provides HMO and
PPO dental insurance to its employees through Delta Dental.

 

7.               The Company provides life
insurance benefits to its employees through Cigna.

 

8.               The Company provides long
term disability insurance benefits to its employees through Cigna.

 

9.               The Company provides short
term disability insurance benefits to its employees through Cigna.

 

10.         The Company provides HMO
medical insurance benefits to its employees through Blue Shield.

 

11.         The Company provides PPO
medical insurance benefits to its employees through Blue Shield.

 

 

Schedule 3(m)

 

Intellectual Property Rights

 

None.

 

 

Schedule 3(n)

 

Title

 

1.               Depository Agreements
(Governmental), dated as of July 31, 2008, by and between Gemino and the
Company.

 

2.               Depository Agreements
(Commercial), dated as of July 31, 2008., by and between Gemino and the
Company.

 

3.               Deposit Account Control
Agreement, dated as of July 31, 2008, by and between Gemino and the
Company.

 

4.               Collateral Assignment of
Services Agreement, dated July 31, 2008, by and between Gemino and the
Company.

 

5.               The following liens:

 

	
  Tab

  No.

  	
   

  	
  Original 

  Filing 

  Number

  	
   

  	
  Filing 

  Date

  	
   

  	
  Debtor(s)

  	
   

  	
  Secured Party

  	
   

  	
  Status

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  20082633566

  	
   

  	
  07/31/08

  	
   

  	
  Clarient, Inc.

  	
   

  	
  Gemino Healthcare Finance,
  LLC

  	
   

  	
  Active

  
	
  2

  	
   

  	
  20082633558

  	
   

  	
  07/31/08

  	
   

  	
  Clarient Diagnostic
  Services, Inc.

  	
   

  	
  Gemino Healthcare Finance,
  LLC

  	
   

  	
  Active

  
	
  3

  	
   

  	
  20082633491

  	
   

  	
  07/31/08

  	
   

  	
  ChromaVision
  International, Inc.

  	
   

  	
  Gemino Healthcare Finance,
  LLC

  	
   

  	
  Active

  
	
  4

  	
   

  	
  20081984895

  	
   

  	
  06/02/08

  	
   

  	
  Clarient, Inc.

  	
   

  	
  Republic Bank; Med One
  Capital Funding-California, L.P.; Med One Capital Funding, LLC

  	
   

  	
  Active

  
	
  5

  	
   

  	
  20071268035

  	
   

  	
  04/04/07

  	
   

  	
  Clarient, Inc.

  	
   

  	
  Xerox Corporation

  	
   

  	
  Active

  
	
  6

  	
   

  	
  53010932

  	
   

  	
  09/26/05

  	
   

  	
  Clarient, Inc.

  	
   

  	
  Xerox Corporation

  	
   

  	
  Active

  
	
  7

  	
   

  	
  32014929

  	
   

  	
  08/04/03

  	
   

  	
  ChromaVision Medical
  Systems, Inc.

  	
   

  	
  Xerox Capital Services,
  LLC

  	
   

  	
  Should
  have expired at 5 year anniversary; no continuance filed but still listed on
  DESOS website

  

 

 

Schedule 3(s)

 

Transactions with Affiliates

 

1.               See disclosure regarding
Steve Grenfell in Schedule 3(t) below.

 

 

Schedule 3(t)

 

Contracts

 

1.                Pursuant to Section 11.02
of the Asset Purchase Agreement, dated as of March 8, 2007, by and between
the Company and Carl Zeiss Mercury, Inc. and Carl Zeiss Microimaging, Inc.,
for forty two (42) months after the closing date of the agreement, the Company
may not engage in, directly or indirectly, or acquire all or any part of any
business or person that is engaged in the creation, design, license, sale, etc.
of any telephathology, virtual miscroscopy or automated imaging instructions
(includes the ACIS systems), or any similar image analysis instruments within
the US, Canada, Europe, Australia, New Zealand, Japan, China, Morocco, Egypt,
Libya, Bahrain, Kuwait, Jordan, Syria, Oman, Yemen, Qatar, Iran, Sudan, Saudi
Arabia, UAE and all other geographical regions in which Dako A/S sells its
products.

 

2.                Pursuant to the
Gemino Credit Facility, the Company may not engage, directly or indirectly, in
any line of business substantially different from the business conducted by the
Company immediately prior to the closing date of the Gemino Credit Facility.

 

3.                Pursuant to the
Comerica Credit Facility, the Company may not engage in any business, or permit
any of its subsidiaries to engage in any business, other than the business of
offering systems, equipment, services and other items for diagnostic testing,
and any business substantially similar or related thereto (or incidental
thereto).  The Company notes these
restrictions will no longer be applicable to the Company following the Initial
Closing as the Comerica Credit Facility will be paid in full in connection with
the Initial Closing.

 

4.                Pursuant to the
Safeguard Credit Facility, the Company may not change its general line of
business.  The Company notes this
restriction will no longer be applicable to the Company following the Initial
Closing as the Safeguard Credit Facility will be paid in full in connection
with the Initial Closing.

 

5.                Pursuant to the
Amended and Restated Reimbursement and Indemnity Agreement, dated as of January 17,
2007, by and among the Company, Safeguard and SSDI, as amended by that certain
First Amendment to Amended and Restated Reimbursement and Indemnity Agreement,
dated as of March 6, 2007, that certain Second Amendment to Amended and
Restated Reimbursement and Indemnity Agreement, dated as of March 14, 2008,
and that certain Third Amendment to Amended and Restated Reimbursement and
Indemnity Agreement, dated as of February 27, 2009, (as so amended, the “Restated
Reimbursement and Indemnity Agreement”),the Company is obligated to
indemnity Safeguard and SSDI for certain losses which may be incurred by
Safeguard and/or SSDI in connection with the Third Amended and Restated
Unconditional Guaranty, dated as of January 17, 2007, by and among SSDI,
Safeguard, and Comerica, as affirmed by that certain Amendment and Affirmation
of Guaranty, dated as of February 28, 2007, as affirmed by that certain
Affirmation of Guaranty, dated as of March 15, 2007, as affirmed by the
certain Affirmation of Guaranty, dated as of November 1, 2007, as affirmed
by that certain Affirmation of Guaranty, dated as of July 31, 2008, as
further affirmed by the certain Affirmation of Guaranty, dated February 27,
2009.  The Company notes that the
Restated Reimbursement and Indemnity Agreement will terminate upon payment in
full of the Comerica Credit Facility and the Safeguard Credit Facility.

 

6.                The Company has
agreed to pay Steve Grenfell, an executive officer of Safeguard, all travel and
expense costs, plus a $1,800 daily rate for Mr. Grenfell’s assistance to
the Company in reviewing the Company’s billing structure, as detailed in an
e-mail dated March 5, 2009, which is being provided with this Schedule of
Exceptions.

 

 

Schedule 3(y)

 

Special Regulatory and Other Matters

 

1.                A notice filing
to CA Laboratory Field Services will be required to be made within thirty (30)
days after the Initial Closing because the transaction will be considered a “Minor
Change of Ownership,” pursuant to the California laboratory licensure
regulations.

 

 

Exhibit 1

 

Warrants

 

	
  Agreement Date

  	
   

  	
  Warrants
  

  Granted 

  by CLRT

  	
   

  	
  Assignments

  / Transfers

  	
   

  	
  Adjusted
  

  Warrants

  Outstanding

  	
   

  	
  Exercise

  Price

  	
   

  	
  Initial
  

  Exercise 

  Date

  	
   

  	
  Term 

  (in 

  years)

  	
   

  	
  Expiration
  

  Date

  	
   

  	
  Status

  	
   

  	
  Holder

  
	
  8-Nov-05

  	
   

  	
  8,900

  	
   

  	
  —

  	
   

  	
  8,900

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Amended and Restated Declaration of Trust of Morton
  A. Cohen

  
	
  8-Nov-05

  	
   

  	
  6,100

  	
   

  	
  —

  	
   

  	
  6,100

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Amended and Restated Declaration of Trust of Morton
  A. Cohen

  
	
  25-Mar-04

  	
   

  	
  —

  	
   

  	
  24,427

  	
   

  	
  24,427

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  31-Mar-04

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  BCMF Trustees, LLC

  
	
  8-Nov-05

  	
   

  	
  26,700

  	
   

  	
  (26,700

  	
  )

  	
  —

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Bushido Capital Master Fund L.P.

  
	
  8-Nov-05

  	
   

  	
  18,300

  	
   

  	
  (3,275

  	
  )

  	
  15,025

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Bushido Capital Master Fund L.P.

  
	
  8-Nov-05

  	
   

  	
  53,400

  	
   

  	
  —

  	
   

  	
  53,400

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Capital Ventures International

  
	
  8-Nov-05

  	
   

  	
  36,600

  	
   

  	
  —

  	
   

  	
  36,600

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Capital Ventures International

  
	
  8-Nov-05

  	
   

  	
  17,800

  	
   

  	
  —

  	
   

  	
  17,800

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Castle Creek Technology Partners LLC

  
	
  8-Nov-05

  	
   

  	
  12,200

  	
   

  	
  —

  	
   

  	
  12,200

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Castle Creek Technology Partners LLC

  
	
  8-Nov-05

  	
   

  	
  44,500

  	
   

  	
  —

  	
   

  	
  44,500

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Clarion Capital Corp.

  
	
  8-Nov-05

  	
   

  	
  30,500

  	
   

  	
  —

  	
   

  	
  30,500

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Clarion Capital Corp.

  
	
  8-Nov-05

  	
   

  	
  26,700

  	
   

  	
  (26,700

  	
  )

  	
  —

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Crescent International Ltd  Tsfd to OTA LLC 11/27/07

  
	
  8-Nov-05

  	
   

  	
  18,300

  	
   

  	
  (18,300

  	
  )

  	
  —

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Crescent International Ltd  Tsfd to OTA LLC 11/27/07

  
	
  8-Nov-05

  	
   

  	
  —

  	
   

  	
  41,790

  	
   

  	
  41,790

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Fort Mason Manager LP  Tsfd from Nite Capital 11/27/07

  
	
  8-Nov-05

  	
   

  	
  —

  	
   

  	
  2,710

  	
   

  	
  2,710

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Fort Mason Partners LP  Tsfd from Nite Capital 11/27/07

  
	
  8-Nov-05

  	
   

  	
  —

  	
   

  	
  1,857

  	
   

  	
  1,857

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Fort Mason Partners LP  Tsfd from Nite Capital 11/27/07

  

 

 

	
  Agreement Date

  	
   

  	
  Warrants
  

  Granted 

  by CLRT

  	
   

  	
  Assignments

  / Transfers

  	
   

  	
  Adjusted
  

  Warrants

  Outstanding

  	
   

  	
  Exercise

  Price

  	
   

  	
  Initial
  

  Exercise 

  Date

  	
   

  	
  Term 

  (in 

  years)

  	
   

  	
  Expiration
  

  Date

  	
   

  	
  Status

  	
   

  	
  Holder

  
	
  8-Nov-05

  	
   

  	
  —

  	
   

  	
  28,640

  	
   

  	
  28,640

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Fort Mason Manager LP  Tsfd from Nite Capital 11/27/07

  
	
  8-Nov-05

  	
   

  	
  89,000

  	
   

  	
  —

  	
   

  	
  89,000

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Liberty View Funds, LP

  
	
  8-Nov-05

  	
   

  	
  61,000

  	
   

  	
  —

  	
   

  	
  61,000

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Liberty View Funds, LP

  
	
  8-Nov-05

  	
   

  	
  44,500

  	
   

  	
  (44,500

  	
  )

  	
  —

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Nite Capital LP  Tsfd to Fort Mason 11/27/07

  
	
  8-Nov-05

  	
   

  	
  30,500

  	
   

  	
  (30,497

  	
  )

  	
  3

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Nite Capital LP  Tsfd to Fort Mason 11/27/07

  
	
  8-Nov-05

  	
   

  	
  —

  	
   

  	
  26,700

  	
   

  	
  26,700

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  OTA LLC  Tsfd from Crescent 11/27/07

  
	
  8-Nov-05

  	
   

  	
  —

  	
   

  	
  18,300

  	
   

  	
  18,300

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  OTA LLC  Tsfd from Crescent 11/27/07

  
	
  8-Nov-05

  	
   

  	
  133,500

  	
   

  	
  —

  	
   

  	
  133,500

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Radcliffe SPC, Ltd.

  
	
  8-Nov-05

  	
   

  	
  91,500

  	
   

  	
  —

  	
   

  	
  91,500

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Radcliffe SPC, Ltd.

  
	
  8-Nove-05

  	
   

  	
  26,700

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-09

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  Smithfield Fiduciary LLC

  
	
  8-Nov-05

  	
   

  	
  18,300

  	
   

  	
  —

  	
   

  	
  18,300

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  Smithfield Fiduciary LLC

  
	
  8-Nov-05

  	
   

  	
  35,600

  	
   

  	
  —

  	
   

  	
  35,600

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  9-Nov-05

  	
   

  	
  4

  	
   

  	
  9-Nov-09

  	
   

  	
  Outstanding

  	
   

  	
  The Tail Wind Fund Ltd.

  
	
  8-Nov-05

  	
   

  	
  24,400

  	
   

  	
  —

  	
   

  	
  24,400

  	
   

  	
  $

  	
  1.3500

  	
   

  	
  14-Dec-05

  	
   

  	
  4

  	
   

  	
  14-Dec-09

  	
   

  	
  Outstanding

  	
   

  	
  The Tail Wind Fund Ltd.

  
	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  849,452

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT A

 

FORM OF CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A CONVERTIBLE PREFERRED STOCK

 

See
Exhibit 3.1 to the Current Report on Form 8-K filed by Clarient, Inc.
with the Securities and Exchange Commission on March 27, 2009.

 

 

EXHIBIT B

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

See
Exhibit 10.2 to the Current Report on Form 8-K filed by Clarient, Inc.
with the Securities and Exchange Commission on March 27, 2009.

 

 

LETTER AGREEMENT RE CONVERSION AGENT SERVICES

 

under

 

SERVICE AGREEMENT FOR TRANSFER AGENT SERVICES

 

(Clarient, Inc.)

 

 

THIS LETTER AGREEMENT (this “Letter
Agreement”), dated as of April 15, 2009, is entered into
between Mellon Investor Services LLC, a New Jersey limited liability company (“Mellon”), and Clarient, Inc., a Delaware corporation (“Client”).

 

WHEREAS, Mellon and Client entered into that certain
Service Agreement for Transfer Agent Services dated as of November 20,
2000 (as amended, supplemented or otherwise modified from time to time, the “Transfer Agent Agreement”), pursuant to which Mellon is
providing transfer agent and related services to Client.  Capitalized terms used herein, but not
otherwise defined herein, shall have the meanings set forth in the Transfer
Agent Agreement.

 

WHEREAS, pursuant to that certain Stock Purchase
Agreement (the “Purchase Agreement”), dated as of March 26,
2009, by and between Client and Oak Investment Partners XII, Limited
Partnership, a Delaware limited partnership (the “Purchaser”),
Client has agreed to sell to the Purchaser up to 6,578,948 shares of Client’s Series A
Convertible Preferred Stock, $0.01 par value per share (“Series A
Preferred Stock”), which shall be convertible into shares of Client’s
common stock, par value $0.01 per share (the “Common Stock”).  The shares of Common Stock to be issued as a
result of the conversion of Series A Preferred Stock are referred to
herein as the “Conversion Shares.”

 

WHEREAS, Client has requested that Mellon provide,
as additional services under the Transfer Agent Agreement, conversion agent
services with respect to the Conversion Shares, and Mellon has agreed to
provide such additional services under the Transfer Agent Agreement.

 

NOW THEREFORE, in consideration of the mutual
conditions and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:

 

1.     Appointment and Duties of Agent as Conversion Agent.  As an additional
service to be provided by the Agent under the Transfer Agent Agreement, as
supplemented hereby, Client hereby appoints Agent as its conversion agent, and
Agent accepts such appointment, under and in accordance with and subject to the
terms of the Transfer Agent Agreement, as supplemented hereby, with respect to
the issuance of Conversion Shares in exchange for surrender to Client of shares
of Series A Preferred Stock.  Client
agrees to deliver an opinion of counsel as provided in Exhibit C to the
Transfer Agreement, Sections 7(a) and (b), with respect to the
Conversion Shares.

 

As conversion agent, Agent shall issue Conversion
Shares to or upon the order of the Purchaser from time to time upon Client’s
delivery to Agent of a copy of a Notice of Conversion in substantially the form
attached hereto as Exhibit I (a “Conversion Notice”)
which has been acknowledged by the Company as indicated by the signature of a
duly authorized officer of Client thereon.

 

1

 

Specifically, upon receipt by Client of a Conversion
Notice, Client shall, as soon as practicable, but in no event later than one (1) Trading
Day (as defined below) after receipt of such Conversion Notice, review and
acknowledge such Conversion Notice and forward, via facsimile, a copy of such
Conversion Notice to Agent, which shall constitute an irrevocable instruction
to Agent to process such Conversion Notice in accordance with the terms hereof
and thereof.  Upon Agent’s receipt of a
copy of the executed and acknowledged Conversion Notice, Agent shall as soon as
practicable but in any event within three (3) Trading Days following the
date of receipt thereof, (A) issue and deliver to a common carrier for
overnight delivery to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Purchaser or, as indicated on any
Conversion Notice, its designee, for the number of whole shares of Common Stock
to which the Purchaser shall be entitled as set forth in the Conversion Notice,
or (B) in the event Client as of the date of the Conversion Notice is
eligible pursuant to the Transfer Agent Agreement and provided Agent is
participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the election of the Purchaser
as set forth in the Conversion Notice, credit such aggregate number of shares
of Common Stock to which the Purchaser shall be entitled to the Purchaser’s
(or, if the Conversion Notice is in proper form for transfer, its designee’s)
balance account with DTC through its Deposit Withdrawal At Custodian (“DWAC”) system provided the Purchaser (or its proper
designee) causes its bank or broker to initiate the DWAC transaction. “Trading Day” shall mean any day on which the Nasdaq Market
is open for customary trading and the Agent is conducting business.

 

Upon each of (i) the effectiveness of a
registration statement pursuant to the Registration Rights Agreement, dated as
of March 26, 2009, by and among the Company and the Purchaser (the “Registration Rights Agreement”) and (ii) upon the
termination of all other restrictions on transfer contained in the Purchase
Agreement, Client shall inform Agent in writing of such occurrence and shall
instruct its counsel to deliver to Agent its opinion letter to the effect that
such registration statement has been declared effective by the Securities and
Exchange Commission and that the Conversion Shares are freely transferable by
the Purchaser and accordingly may be issued and delivered to the Purchaser free
of all restrictive and other legends and not subject to any stop-transfer
restrictions (the “Opinion”), provided, however, that Client may from time to time notify
Agent in writing to place and remove stop-transfer restrictions on the
certificates for the Conversion Shares. Until Client informs Agent in writing
that the Conversion Shares have been registered for sale under the Securities
Act of 1933, as amended, and the related Opinion has been received by Agent,
then the certificates for the Conversion Shares issued by Agent shall bear the
following legend:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN

 

2

 

EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SAID ACT AND (II) IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

Until
Client informs Agent in writing that the restrictions on transfer contained in
the Purchase Agreement have terminated and the related opinion has been
received by Agent, then the certificates for the Conversion Shares issued by
Agent shall additionally bear the following legend:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCK PURCHASE AGREEMENT DATED ON OR
ABOUT MARCH 26, 2009 BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THE
SECURITIES.

 

2.       Terms of Service.  In connection with
Agent’s duties as conversion agent under the Transfer Agent Agreement, as
supplemented hereby, and without limitation of the other provisions of the
Transfer Agent Agreement benefiting and protecting Agent, which provisions are
incorporated herein mutatis mutandis,
Client agrees as follows:

 

(a)     Fractional Shares.  No fractional shares of the Conversion Shares
will be issued, and Agent shall not be required to make any payments to the
Purchaser or any other holder of Series A Preferred Stock who would
otherwise be entitled to receive fractional shares of Conversion Shares.  All consideration owing to Purchaser or any
other holder of Series A Preferred Stock in respect of fractional shares
shall be made directly by Client.

 

(b)     Procedure for Deficient Items.  Agent shall examine the Conversion Notice
received by it as exchange agent to ascertain whether they appear to have been
completed and executed in accordance with the instructions set forth in the
Conversion Notice.  In the event Agent
determines that any Conversion Notice does not appear to have been properly
completed or executed, or any other deficiency in connection with the conversion
appears to exist, Agent will consult with Client for instructions as to
processing the irregular Conversion Notice. 
In the absence of such instructions, Agent is authorized not to take
action based on such irregular Conversion Notice.

 

(c)     Designees.  If a Conversion Notice specifies that a conversion
is to be made on behalf of a person other than the Purchaser, Agent will issue
no certificate for Conversion Shares until such Conversion Notice has been
properly endorsed with the signature guaranteed (or otherwise put in proper
form for transfer).

 

(d)     Agent Not Responsible for Cancellation and Debit of Old Shares.  Client will be the
sole recordkeeping agent for the Series A Preferred Stock, and shall
maintain such records in accordance with its standard practices.  Upon the Agent’s issuance of Conversion
Shares in respect of Series A Preferred Stock, the certificates
representing such Series A Preferred Stock will be canceled by Client, and
such cancellation shall be reflected within the records maintained by Client.

 

3

 

(e)     Authorizations and Protection.  As conversion agent for Client under the
Transfer Agent Agreement, as supplemented hereby, Agent:

 

(i)      may perform
any of its duties hereunder either directly or by or through agents or attorneys
and Agent shall not be liable or responsible for any misconduct or negligence
on the part of any agent or attorney appointed with reasonable care hereunder;
and may consult with counsel satisfactory to Agent (including internal
counsel), and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered, or
omitted by Agent hereunder in good faith and in reliance upon the advice of
such counsel;

 

(ii)     shall be
regarded as making no representations and having no responsibilities as to the
validity, sufficiency, value, or genuineness of any certificates or the Series A
Preferred Stock represented thereby surrendered hereunder or Conversion Shares
issued in exchange therefor, and will not be required to or be responsible for
and will make no representations as to, the validity, sufficiency, value or
genuineness of the Purchase Agreement or the transactions contemplated thereby;

 

(iii)       shall not
be liable or responsible for or deemed to have knowledge of any recital or
statement contained in the Purchase Agreement or any other documents relating
thereto;

 

(iv)       shall not
be liable or responsible for any failure of Client or any other party to comply
with any of its covenants and obligations relating to the Purchase Agreement
and the transactions contemplated thereby, including without limitation
obligations under applicable securities laws;

 

(v)        shall have
no obligation to issue any Conversion Shares unless Client shall have provided
a sufficient number of certificates for Conversion Shares, or to make any
payment for fractional shares unless Client shall have provided the necessary
federal or other immediately available funds to pay in full amounts due and
payable with respect thereto;

 

(vi)       shall not
be liable to the Purchaser or any other holder of Series A Preferred Stock
for any Conversion Shares or dividends thereon or, if applicable, cash in lieu
of fractional interests and any related unclaimed property, that has been
delivered to a public official pursuant to applicable abandoned property law;

 

(vii)      shall not
be obligated to take any legal action hereunder; if, however, Agent determines
to take any legal action hereunder, and where the taking of such action might,
in Agent’s judgment, subject or expose it to any expense or liability, Agent
shall not be required to act unless it shall have been furnished with an
indemnity satisfactory to it;

 

4

 

3.             Representations, Warranties and Covenants.  Client represents,
warrants and covenants that (a) the making and consummation of the
Purchase Agreement and the execution, delivery and performance of all
transactions contemplated thereby have been duly authorized by all necessary
corporate action and do not and will not conflict with, violate, result in a
breach of or constitute a default under the certificate of incorporation or
bylaws of Client, any law or regulation, any order or decree of any court or
public authority having jurisdiction, or any mortgage, indenture, contract,
agreement or undertaking to which it is a party or is bound, (b) this
Agreement has been duly executed and delivered by Client and constitutes the
legal, valid, binding and enforceable obligation of it, (c) the Purchase
Transaction will comply in all material respects with all applicable
requirements of law and (d) to the best of its knowledge, there is no
material litigation pending or threatened as of the date hereof in connection
with the Purchase Agreement or the transactions contemplated thereby.

 

4.             Compensation and Expenses.  In addition to the compensation and expense
reimbursement otherwise payable to the Agent pursuant to the Transfer Agent
Agreement, as supplemented hereby, Client shall pay to Agent compensation in
respect of the additional services undertaken hereby in accordance with the fee
schedule attached as Exhibit B hereto. 
Agent shall be additionally entitled to reimbursement for reasonable
fees and disbursements of counsel, regardless of whether any Conversion Notices
are delivered to Agent, for Agent’s additional services provided for hereunder.

 

5.             Miscellaneous.

 

(a)          Term of the Amendment.  This Letter Agreement
shall become effective upon due execution and delivery by both parties hereto
of this Letter Agreement and shall remain in effect for so long as the Transfer
Agent Agreement shall remain in effect.

 

(b)          Ratification.  Except as expressly
set forth herein, the Transfer Agent Agreement is not modified hereby and shall
remain in full force and effect in accordance with the respective provisions
thereof, and is in all respects ratified and affirmed.

 

(c)           Partial Invalidity.  If any provision of
this Letter Agreement is held to be invalid or unenforceable, such invalidity
or unenforceability shall not invalidate this Letter Agreement as a whole, but
this Letter Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable and the rights and
obligations of the parties shall be construed and enforced only to such extent
as shall be permitted by applicable law.

 

5

 

(d)          Counterparts.  This Letter Agreement may be executed in two
or more counterparts, each of which, when executed and delivered, shall be
deemed an original for all purposes, but all of which together shall constitute
one and the same instrument.

 

IN WITNESS WHEREOF, Agent and Client have caused
these presents to be duly executed as of the day and year first above written.

 

 

MELLON
INVESTOR SERVICES LLC

 

 

	
  By:

  	
  /s/
  Mark Cano

  	
   

  
	
  Name:

  	
  Mark
  Cano

  	
   

  
	
  Title:

  	
  Relationship
  Manager

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CLARIENT,
  INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Ray Land

  	
   

  
	
  Name:

  	
  Ray
  Land

  	
   

  
	
  Title:

  	
  Senior
  Vice President and Chief Financial Officer

  	
   

  

 

6

 

EXHIBIT I

TO LETTER
AGREEMENT RE CONVERSION AGENT SERVICES

 

FORM OF
CONVERSION NOTICE

 

Reference
is made to the Stock Purchase Agreement (the “Purchase
Agreement”) between Clarient, Inc., a Delaware corporation (the
“Company”), and Oak Investment Partners
XII, Limited Partnership, a Delaware limited partnership, dated March       ,
2009.  In accordance with and pursuant to
the Stock Purchase Agreement, the undersigned hereby elects to convert Series A
Convertible Preferred Stock into shares of common stock, par value $0.01 per
share (the “Common Stock”), of the Company for
the amount indicated below as of the date specified below.

 

	
  Conversion Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of shares of

  	
   

  	
   

  
	
  Series A Preferred

  	
   

  	
   

  
	
  Stock to be converted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of shares of

  	
   

  	
   

  
	
  Series A Preferred

  	
   

  	
   

  
	
  Stock unconverted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Please confirm the
  following information:

  	
   

  
	
   

  	
   

  	
   

  
	
  Liquidation Preference

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Adjusted Conversion
  Price per share:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of [(whole)]
  shares of Common Stock to be issued:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Please issue the shares
  of Common Stock in the following name and to the following address:

  
	
   

  	
   

  	
   

  
	
  Issue to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Authorized Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  Phone #:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Broker DTC Participant
  Code:

  	
   

  	
   

  
	
  Account Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
																			

 

* Note
that receiving broker must initiate transaction on DWAC System.

 

	
  Name of Stockholder:

  	
   

  	
   

  
	
   

  
	
  Signature:

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
				

 

The foregoing conversion
is acknowledged and agreed to and we hereby instruct the transfer agent to
issue the referenced shares.

 

Clarient, Inc.

 

	
  By:

  	
   

  	
   

  

(Authorized Officer)

 

7

 

EXHIBIT II

TO LETTER AGREEMENT re CONVERSION AGENT SERVICES

 

Fee Schedule

 

	
  Conversion Fee

  	
   

  	
  $

  	
  3,500.00

  	
   

  

 

8

 

	
   

  	
  STRADLING YOCCA CARLSON & RAUTH

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  A PROFESSIONAL CORPORATION

  ATTORNEYS AT LAW

  660 NEWPORT CENTER DRIVE, SUITE 1600

  NEWPORT BEACH, CA 92660-6422  

   

  TELEPHONE (949) 725-4000  

   

  FACSIMILE (949) 725-4100

  	
  ORANGE COUNTY

  (949) 725-4000

  

  SAN DIEGO

  (858) 720-2150

  SACRAMENTO

  (916) 503-1467

  

  SAN FRANCISCO

  (415) 283-2240

  SANTA BARBARA

  (805) 564-0065

  

 

March 26,
2009

 

Oak Investment Partners,
XII, Limited Partnership (the “Purchaser”)

One Gorham Island

Westport, CT  06880

 

Ladies and Gentlemen:

 

We
have acted as counsel to Clarient, Inc., a Delaware corporation (the “Company”),
in connection with the execution and delivery by the Company of that certain
Stock Purchase Agreement dated as of March 25, 2009 (the “Purchase
Agreement”) by and among the Company and the Purchaser.  This opinion is being delivered pursuant to Section 7(a)(vi) of
the Purchase Agreement.  Unless
specifically defined herein or the context requires otherwise, capitalized
terms used herein shall have the meanings ascribed to them in the Purchase
Agreement.

 

In
connection with the preparation of this opinion, we have examined the documents
listed below:

 

A.                                   The Purchase Agreement;

 

B.                                     The Registration Rights Agreement;

 

C.                                     The Irrevocable Transfer Agent
Instructions;

 

D.                                    The Certificate of Designations;

 

E.                                      The Certificate of Incorporation and
Bylaws of the Company;

 

F.                                      The minutes of the meeting of the Board
of Directors of the Company dated March 25, 2009; and

 

The
documents listed in sections A-C above are hereinafter sometimes referred to collectively
as the “Transaction Documents.”

 

In
addition, we have examined such other documents and considered such questions
of law as we have deemed necessary or appropriate.  We have assumed that there are no other
documents or agreements between the parties to any Transaction Document which
would expand or otherwise

 

 

modify the respective rights and obligations of such
parties as set forth in such Transaction Documents and the documents required
or contemplated thereby.

 

We
have assumed the authenticity of all documents submitted to us as originals,
the conformity with originals of all documents submitted to us as copies, and
the genuineness of all signatures (other than signatures of officers of the
Company).  We have also assumed the legal
capacity of all natural persons and that, with respect to all parties to
agreements or instruments relevant hereto (other than the Company), such
parties had the requisite power and authority to execute, deliver and perform
such agreements or instruments, that such agreements or instruments have been
duly authorized by all requisite action, executed and delivered by such
parties, and that such agreements or instruments are the valid, binding and
enforceable obligations of such parties.

 

As to
questions of fact material to our opinions, we have relied upon, and we have,
without independent investigation or verification, assumed the accuracy of, the
representations of each party made in the Transaction Documents and the matters
and statements contained in other documents and certificates delivered in
connection therewith, in certificates of officers of the Company furnished to
us, and in certificates and advices of public officials.

 

Whenever
a statement herein is qualified by the phrases “known to us,” “to our current actual
knowledge,” or any similar phrase, it is intended to indicate that, during the
course of our representation of the Company, no information that would give us
current actual knowledge of the inaccuracy of such statement has come to the
attention of those attorneys in this firm who have rendered legal services to
the Company.  However, except as
otherwise expressly indicated, we have not undertaken any independent
investigation to determine the accuracy of such statement, and any limited
inquiry undertaken by us during the preparation of this opinion letter should
not be regarded as such an investigation; no inference as to our knowledge of
any matters bearing on the accuracy of any such statement should be drawn from
the fact of our representation of the Company.

 

Based
upon the foregoing, and subject to the additional assumptions, exceptions,
qualifications and limitations set forth below, we are of the opinion that:

 

1.             The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.

 

2.             The
Company has the corporate power and authority to own or lease its properties
and assets, to carry on its business as described in the Company’s Report on Form 10-K
for the fiscal year ended December 31, 2008, and as, to our current actual
knowledge, it is now conducted, and to enter into each of the Transaction
Documents and perform its obligations thereunder.

 

3.             The
Transaction Documents have been duly authorized by all necessary corporate
action on the part of the Company and have been duly executed and delivered by
the Company.

 

2

 

4.             Each
of the Transaction Documents is a legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except as such
enforceability thereof may be subject to or limited by (a) bankruptcy,
insolvency, reorganization, arrangement, moratorium, or other similar laws, now
or hereafter in effect relating to or affecting the rights of creditors, and (b) general
equitable principles, regardless of whether the issue of enforceability is
considered in a proceeding in equity or at law.

 

5.             The
shares of Series A Preferred Stock to be issued to the Purchaser at the
Initial Closing, and the Conversion Shares isssuable upon conversion thereof,
have been duly authorized and, when issued and paid for in accordance with the
terms of the Purchase Agreement, will be validly issued, fully paid and
nonassessable and will be free of preemptive rights or similar rights or rights
of first refusal set forth in the Company’s Certificate of Incorporation and
Bylaws, or of which we otherwise have current actual knowledge (other than any
such rights as are disclosed in (or deemed disclosed in) the Transaction Documents
or the exhibits and schedules delivered in connection therewith).

 

6.             Based
in part upon the representations of the Purchaser contained in the Purchase
Agreement, the offer, sale, issuance and delivery of the shares of Series A
Preferred Stock, and the issuance of the Conversion shares issuable upon
conversion thereof, under the circumstances contemplated by the Purchase
Agreement is exempt from the registration requirements of the Securities Act of
1933, as amended, and the qualification requirements of the California
Corporate Securities Law of 1968, as amended.

 

7.             Except
as disclosed in the Transaction Documents or the exhibits and schedules
delivered in connection therewith, the execution and delivery of the
Transaction Documents and the performance by the Company of their respective
terms will not breach or result in a violation of (a) the Company’s
Certificate of Incorporation or Bylaws, (b) any judgment, order or decree
of any domestic court or arbitrator, known to us, to which the Company is a party
or is subject, or (c) the terms, conditions or provisions of any contract,
undertaking, indenture or other agreement or instrument identified as a
material contract in the Company’s Form 10-K for the fiscal year ended December 31,
2008 or in any of the Company’s Current Reports on Form 8-K filed after December 31,
2008, in each case the breach or violation of which would materially and
adversely affect the Company or its business or properties (taken as a whole).

 

8.             Except
as disclosed in the Transaction Documents or the exhibits and schedules
delivered in connection therewith, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority is required
in connection with the valid execution, delivery and performance by the Company
of the Transaction Documents, other than such consents, approvals,
authorizations, designations, declarations or filings as have been made or
obtained on or before the date hereof or which are not required to be made or
obtained until after the date hereof.

 

3

 

9.             Except
as disclosed in the Transaction Documents or the exhibits and schedules
delivered in connection therewith, there is, to our current actual knowledge,
no action, suit or proceeding pending against the Company or its properties in
any court or before any governmental authority or agency, or arbitration board
or tribunal (a) which seeks to restrain, enjoin, prevent the consummation
of, or otherwise challenge the Transaction Documents or any of the transactions
contemplated thereby, or (b) which, if adversely determined, could
reasonably be expected to have a material adverse effect on the Company or its
business or properties (taken as a whole)

 

10.           After
giving effect to filing of the Certificate of Designations, the authorized
capital stock of the Company consists of 150,000,000 shares of Common Stock,
$0.01 par value per share, and 8,000,000 shares of Preferred Stock, $0.01 par
value per share, of which 6,578,948 shares have been designated as Series A
Convertible Preferred Stock, $0.01 par value per share.  To our current actual knowledge, except as
disclosed in the Transaction Documents or the exhibits and schedules delivered
in connection therewith, there are no options, warrants, conversion privileges,
preemptive rights or other rights outstanding granted by the Company to
purchase or otherwise acquire any authorized but unissued shares of capital
stock or other securities of the Company.

 

11.           The
Company is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

 

12.           The
Company’s Common Stock is registered pursuant to Section 12(b) of the
Securities Exchange Act of 1934, as amended.

 

We express no opinion with respect to:

 

(a)           Any
documents referenced in the Transaction Documents, except for the Transaction
Documents themselves.

 

(b)           The
Company’s compliance or noncompliance with applicable federal or state
antifraud or antitrust statutes, laws, rules and regulations.

 

(c)           The
waiver of jury trial provisions contained in the Transaction Documents.

 

(d)           The
enforceability of the provisions of the Transaction Documents with respect to
the selection of trial venue within a particular county or city.

 

(e)           The
enforceability of the choice of law provisions of Transaction Documents.

 

(f)            The
effect of California Civil Code Section 1671, which in part provides that
a contractual provision liquidating the damages for breach of contract will be
invalid if it is established that the provision was “unreasonable” under the
circumstances existing at the time the contract was made.

 

4

 

(g)           The
effect of provisions releasing or indemnifying a party against liability for
its own wrongful or negligent acts, or where indemnification is contrary to
public policy.

 

(h)           The
effect of Section 1698 of the California Civil Code, which provides in
part that provisions of any instrument or agreement that, by the terms of such
instrument or agreement, may only be waived in writing will not be enforced to
the extent that an oral agreement has been entered into modifying provisions of
such instrument or agreement.

 

(i)            The
effect of California Civil Code Section 1670.5, which provides that a
court may refuse to enforce, or may limit the application of, a contract or any
clause thereof which the court finds as a matter of law to have been
unconscionable at the time it was made.

 

(j)            The
effect of judicial decisions which may permit the introduction of extrinsic evidence
to modify the terms or the interpretation of the Transaction Documents.

 

(k)           The
enforceability of provisions of the Transaction Documents providing that rights
or remedies are not exclusive, that every right or remedy is cumulative, or
that the election of a particular remedy or remedies does not preclude recourse
to one or more other remedies.

 

(l)            The
enforceability of provisions to the effect that the failure to exercise or
delay in exercising any right or remedy will not operate as a waiver of that
right or remedy.

 

(m)          The
unenforceability under certain circumstances of provisions permitting various
self-help or summary remedies without adequate notice or opportunity for
hearing or cure.

 

(n)           The
effect of court decisions, invoking statutes or principles of equity, which
have held that certain covenants and provisions of agreements are unenforceable
where enforcement of such covenants or provisions under the circumstances would
violate the enforcing party’s implied covenant of good faith and fair dealing.

 

We are
members of the Bar of the State of California and, for purposes of this
opinion, do not purport to express, nor are we expressing, any opinion herein
concerning any laws other than the laws of the State of California, the
Delaware General Corporation Law and the federal laws of the United States of
America.

 

5

 

This
opinion is as of this date, and we expressly decline any undertaking to advise
you of any matters arising subsequent to the date hereof which would cause us
to amend any portion of the foregoing in whole or in part.

 

The
foregoing opinions are being furnished to you solely for your benefit and may
not be relied upon by any other person without our prior written consent.

 

	
   

  	
  Respectfully submitted,

  
	
   

  	
   

  
	
   

  	
  STRADLING YOCCA
  CARLSON & RAUTH

  
	
   

  	
   

  
	
   

  	
  /s/ Stradling Yocca
  Carlson & Rauth

  

 

6

 

EXHIBIT E

 

FORM OF
SAFEGUARD AGREEMENT

 

See Exhibit 10.6 to
the Current Report on Form 8-K filed by Clarient, Inc. with the
Securities and Exchange Commission on March 27, 2009.Exhibit
10.1

 

EXECUTION
COPY

	
   

  

 

AMENDED AND RESTATED CREDIT AGREEMENT

Dated as of July 15, 2009

 

Among

 

THE FINANCIAL INSTITUTIONS PARTY HERETO,

as the Lenders

 

and

 

BANK OF AMERICA, N.A.,

as Administrative Agent,

 

and

 

BANK OF AMERICA, N.A.

WELLS FARGO RETAIL FINANCE, LLC,

as Co-Collateral Agents

 

and

 

THE NEIMAN MARCUS GROUP, INC.

and the other Borrowers referred to herein,

as Borrowers,

 

and

 

NEIMAN MARCUS, INC.

 

and

 

The subsidiaries of The Neiman Marcus Group, Inc. from time to time
party hereto

 

 

BANC OF AMERICA SECURITIES LLC

WELLS FARGO RETAIL FINANCE, LLC

J.P. MORGAN SECURITIES INC.

REGIONS BUSINESS CAPITAL CORPORATION,

as Joint Lead Arrangers and Joint Bookrunners

 

WELLS FARGO RETAIL FINANCE, LLC,

as Syndication Agent

 

JPMORGAN CHASE BANK, N.A.

REGIONS BANK,

as Co-Documentation Agents

	
   

  

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  
	
  ARTICLE I

  
	
   

  
	
  Definitions

  
	
  SECTION 1.01.

  	
  Defined Terms

  	
  1

  
	
  SECTION 1.02.

  	
  Classification of Loans and Borrowings

  	
  41

  
	
  SECTION 1.03.

  	
  Terms Generally

  	
  41

  
	
  SECTION 1.04.

  	
  Accounting Terms; GAAP

  	
  41

  
	
  SECTION 1.05.

  	
  Amendment and Restatement of Existing Credit Agreement

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  
	
  The Credits

  
	
  SECTION 2.01.

  	
  Revolving Commitments

  	
  42

  
	
  SECTION 2.02.

  	
  Revolving Loans and Borrowings

  	
  42

  
	
  SECTION 2.03.

  	
  Requests for Revolving Borrowings

  	
  43

  
	
  SECTION 2.04.

  	
  Protective Advances

  	
  43

  
	
  SECTION 2.05.

  	
  Swingline Loans

  	
  44

  
	
  SECTION 2.06.

  	
  Letters of Credit

  	
  46

  
	
  SECTION 2.07.

  	
  Funding of Borrowings

  	
  51

  
	
  SECTION 2.08.

  	
  Type; Interest Elections

  	
  52

  
	
  SECTION 2.09.

  	
  Termination and Reduction of Revolving
  Commitments

  	
  53

  
	
  SECTION 2.10.

  	
  Repayment of Loans; Evidence of Debt

  	
  54

  
	
  SECTION 2.11.

  	
  Prepayment of Loans

  	
  55

  
	
  SECTION 2.12.

  	
  Fees

  	
  56

  
	
  SECTION 2.13.

  	
  Interest

  	
  57

  
	
  SECTION 2.14.

  	
  Alternate Rate of Interest

  	
  58

  
	
  SECTION 2.15.

  	
  Increased Costs

  	
  58

  
	
  SECTION 2.16.

  	
  Break Funding Payments

  	
  59

  
	
  SECTION 2.17.

  	
  Taxes

  	
  60

  
	
  SECTION 2.18.

  	
  Payments Generally; Allocation of
  Proceeds; Sharing of Set-offs

  	
  62

  
	
  SECTION 2.19.

  	
  Mitigation Obligations; Replacement of
  Lenders

  	
  65

  
	
  SECTION 2.20.

  	
  Illegality

  	
  66

  
	
  SECTION 2.21.

  	
  Cash Receipts

  	
  66

  
	
  SECTION 2.22.

  	
  Reserves; Change in Reserves; Decisions by
  Co-Collateral Agents

  	
  68

  
	
  SECTION 2.23.

  	
  Revolving Commitment Increases and
  Incremental Term Loans

  	
  69

  
	
  SECTION 2.24.

  	
  Borrower Agent

  	
  73

  
	
  SECTION 2.25.

  	
  Joint and Several
  Liability of the Borrowers

  	
  73

  
	
  SECTION 2.26.

  	
  Loan Account; Statement
  of Obligations

  	
  75

  

 

i

 

	
  ARTICLE III

  
	
   

  
	
  Representations and Warranties

  
	
   

  	
   

  
	
  SECTION 3.01.

  	
  Organization; Powers

  	
  76

  
	
  SECTION 3.02.

  	
  Authorization; Enforceability

  	
  76

  
	
  SECTION 3.03.

  	
  Governmental Approvals; No Conflicts

  	
  76

  
	
  SECTION 3.04.

  	
  Financial Condition; No Material Adverse
  Change

  	
  77

  
	
  SECTION 3.05.

  	
  Properties

  	
  77

  
	
  SECTION 3.06.

  	
  Litigation and Environmental Matters

  	
  78

  
	
  SECTION 3.07.

  	
  Compliance with Laws and Agreements;
  Licenses and Permits

  	
  79

  
	
  SECTION 3.08.

  	
  Investment Company Status

  	
  79

  
	
  SECTION 3.09.

  	
  Taxes

  	
  79

  
	
  SECTION 3.10.

  	
  ERISA

  	
  79

  
	
  SECTION 3.11.

  	
  Disclosure

  	
  79

  
	
  SECTION 3.12.

  	
  Material Agreements

  	
  80

  
	
  SECTION 3.13.

  	
  Solvency

  	
  80

  
	
  SECTION 3.14.

  	
  Insurance

  	
  80

  
	
  SECTION 3.15.

  	
  Capitalization and Subsidiaries

  	
  80

  
	
  SECTION 3.16.

  	
  Security Interest in Collateral

  	
  81

  
	
  SECTION 3.17.

  	
  Labor Disputes

  	
  81

  
	
  SECTION 3.18.

  	
  Federal Reserve Regulations

  	
  82

  
	
  SECTION 3.19.

  	
  Senior Indebtedness

  	
  82

  
	
  SECTION 3.20.

  	
  Intellectual Property

  	
  82

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  
	
  Conditions

  
	
   

  	
   

  
	
  SECTION 4.01.

  	
  Effective Date

  	
  82

  
	
  SECTION 4.02.

  	
  Each Credit Event Other Than Incremental
  Term Loans

  	
  87

  
	
  SECTION 4.03.

  	
  Incremental Term Loans

  	
  87

  
	
   

  	
   

  	
   

  
	
  ARTICLE V 

  
	
   

  
	
  Affirmative Covenants

  
	
   

  	
   

  
	
  SECTION 5.01.

  	
  Financial Statements; Borrowing Base and
  Other Information

  	
  88

  
	
  SECTION 5.02.

  	
  Notices of Material Events

  	
  91

  
	
  SECTION 5.03.

  	
  Existence; Conduct of Business

  	
  92

  
	
  SECTION 5.04.

  	
  Payment of Obligations

  	
  92

  
	
  SECTION 5.05.

  	
  Maintenance of Properties

  	
  92

  
	
  SECTION 5.06.

  	
  Books and Records; Inspection Rights;
  Appraisals; Field Examinations

  	
  93

  
	
  SECTION 5.07.

  	
  HSBC Agreement and Permitted Replacement
  Credit Card Program

  	
  94

  
	
  SECTION 5.08.

  	
  Compliance with Laws

  	
  94

  
	
  SECTION 5.09.

  	
  Use of Proceeds

  	
  94

  
	
  SECTION 5.10.

  	
  Insurance

  	
  94

  

 

ii

 

	
  SECTION 5.11.

  	
  Additional Loan Parties; Additional
  Collateral; Further Assurances

  	
  94

  
	
  SECTION 5.12.

  	
  Maintenance of Corporate Separateness

  	
  97

  
	
  SECTION 5.13.

  	
  Designation of Subsidiaries

  	
  97

  
	
  SECTION 5.14.

  	
  Inventory Covenant

  	
  97

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  
	
  Negative Covenants

  
	
   

  	
   

  
	
  SECTION 6.01.

  	
  Indebtedness

  	
  97

  
	
  SECTION 6.02.

  	
  Liens

  	
  101

  
	
  SECTION 6.03.

  	
  Fundamental Changes

  	
  105

  
	
  SECTION 6.04.

  	
  Investments, Loans, Advances, Guarantees
  and Acquisitions

  	
  106

  
	
  SECTION 6.05.

  	
  Asset Sales

  	
  108

  
	
  SECTION 6.06.

  	
  Sale and Lease-Back Transactions

  	
  110

  
	
  SECTION 6.07.

  	
  Swap Agreements

  	
  110

  
	
  SECTION 6.08.

  	
  Restricted Payments; Certain Payments of
  Indebtedness

  	
  110

  
	
  SECTION 6.09.

  	
  Transactions with Affiliates

  	
  114

  
	
  SECTION 6.10.

  	
  Restrictive Agreements

  	
  115

  
	
  SECTION 6.11.

  	
  Amendment of Material Documents

  	
  115

  
	
  SECTION 6.12.

  	
  Certain Equity Securities

  	
  116

  
	
  SECTION 6.13.

  	
  Designated Disbursement Account

  	
  116

  
	
  SECTION 6.14.

  	
  Minimum Excess
  Availability

  	
  116

  
	
  SECTION 6.15.

  	
  Fixed Charge Coverage
  Ratio

  	
  116

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
   

  
	
  Events of Default

  
	
   

  	
   

  
	
  SECTION 7.01.

  	
  Events of Default

  	
  116

  
	
  SECTION 7.02.

  	
  Exclusion of Immaterial Subsidiaries

  	
  120

  
	
  SECTION 7.03.

  	
  Agreements Among
  Claimholders

  	
  120

  
	
  SECTION 7.04.

  	
  Exercise of Remedies

  	
  122

  
	
  SECTION 7.05.

  	
  Insolvency and
  Liquidation Proceedings

  	
  125

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
   

  
	
  The Agent

  
	
   

  
	
  ARTICLE IX

  
	
   

  
	
  Miscellaneous

  
	
   

  	
   

  
	
  SECTION 9.01.

  	
  Notices

  	
  132

  
	
  SECTION 9.02.

  	
  Waivers; Amendments

  	
  134

  
	
  SECTION 9.03.

  	
  Expenses; Indemnity; Damage Waiver

  	
  138

  
	
  SECTION 9.04.

  	
  Successors and Assigns

  	
  140

  

 

iii

 

	
  SECTION 9.05.

  	
  Survival

  	
  145

  
	
  SECTION 9.06.

  	
  Counterparts; Integration; Effectiveness

  	
  146

  
	
  SECTION 9.07.

  	
  Severability

  	
  146

  
	
  SECTION 9.08.

  	
  Right of Setoff

  	
  146

  
	
  SECTION 9.09.

  	
  Governing Law; Jurisdiction; Consent to
  Service of Process

  	
  147

  
	
  SECTION 9.10.

  	
  WAIVER OF JURY TRIAL

  	
  147

  
	
  SECTION 9.11.

  	
  Headings

  	
  148

  
	
  SECTION 9.12.

  	
  Confidentiality

  	
  148

  
	
  SECTION 9.13.

  	
  Several Obligations; Nonreliance;
  Violation of Law

  	
  148

  
	
  SECTION 9.14.

  	
  USA PATRIOT Act

  	
  149

  
	
  SECTION 9.15.

  	
  Disclosure

  	
  149

  
	
  SECTION 9.16.

  	
  Appointment for Perfection

  	
  149

  
	
  SECTION 9.17.

  	
  Interest Rate Limitation

  	
  149

  
	
  SECTION 9.18.

  	
  Cumulative Effect; Conflict of Terms;
  Entire Agreement; Credit Inquiries; No Advisory or Fiduciary Responsibility

  	
  149

  
	
  SECTION 9.19.

  	
  Confirmation, Ratification and Affirmation
  by Loan Parties

  	
  150

  
	
  SECTION 9.20.

  	
  INTERCREDITOR AGREEMENT

  	
  151

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  
	
   

  
	
  Loan Guaranty

  
	
   

  	
   

  
	
  SECTION 10.01.

  	
  Guaranty

  	
  152

  
	
  SECTION 10.02.

  	
  Guaranty of Payment

  	
  152

  
	
  SECTION 10.03.

  	
  No Discharge or Diminishment of Loan
  Guaranty

  	
  152

  
	
  SECTION 10.04.

  	
  Defenses Waived

  	
  153

  
	
  SECTION 10.05.

  	
  Rights of Subrogation

  	
  153

  
	
  SECTION 10.06.

  	
  Reinstatement; Stay of Acceleration

  	
  154

  
	
  SECTION 10.07.

  	
  Information

  	
  154

  
	
  SECTION 10.08.

  	
  Taxes

  	
  154

  
	
  SECTION 10.09.

  	
  Maximum Liability

  	
  154

  
	
  SECTION 10.10.

  	
  Contribution

  	
  155

  
	
  SECTION 10.11.

  	
  Liability Cumulative

  	
  155

  
	
  SECTION 10.12.

  	
  Release of Loan Guarantors and Borrowers

  	
  155

  

 

	
  SCHEDULES:

  
	
   

  
	
  Commitment Schedule

  
	
  Schedule 1.01(a)

  	
  —

  	
  Existing Letters of Credit

  
	
  Schedule 1.01(b)

  	
  —

  	
  Immaterial Subsidiaries

  
	
  Schedule 1.01(c)

  	
  —

  	
  Mortgaged Properties

  
	
  Schedule 3.05(a)

  	
  —

  	
  Properties

  
	
  Schedule 3.05(g)

  	
  —

  	
  Intellectual Property

  
	
  Schedule 3.06

  	
  —

  	
  Disclosed Matters

  
	
  Schedule 3.15

  	
  —

  	
  Capitalization and Subsidiaries

  

 

iv

 

	
  Schedule 3.17

  	
  —

  	
  Labor Disputes

  
	
  Schedule 4.01(b)

  	
  —

  	
  Local Counsel

  
	
  Schedule 6.01

  	
  —

  	
  Existing Indebtedness

  
	
  Schedule 6.02

  	
  —

  	
  Existing Liens

  
	
  Schedule 6.04

  	
  —

  	
  Existing Investments

  
	
  Schedule 6.05

  	
  —

  	
  Specified Asset Sales

  
	
  Schedule 6.09

  	
  —

  	
  Transactions with Affiliates

  
	
  Schedule 6.10

  	
  —

  	
  Existing Restrictions

  
	
  Schedule 9.01

  	
  —

  	
  Borrower Agent’s Website for Electronic
  Delivery

  

 

	
  EXHIBITS:

  
	
   

  
	
  Exhibit A — Form of Assignment and Assumption

  
	
  Exhibit B — Form of Borrowing Base Certificate

  
	
  Exhibit C — Form of Compliance Certificate

  
	
  Exhibit D — Joinder Agreement

  
	
  Exhibit E — Form of Letter of Credit Request

  
	
  Exhibit F — Form of Borrowing Request

  
	
  Exhibit G — Form of Revolving Promissory Note

  
	
  Exhibit H — Form of Incremental Term Promissory Note

  

 

v

 

This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 15,
2009 (this “Agreement”), is made by and among THE NEIMAN MARCUS GROUP, INC., a Delaware corporation (the “Company”), NEIMAN MARCUS, INC., a Delaware corporation (“Holdings”), each subsidiary of the
Company from time to time party hereto, the Lenders (as defined in Article I),
BANK OF AMERICA, N.A., as administrative agent for the Lenders hereunder (in
such capacity, the “Agent”), and BANK OF AMERICA, N.A. and WELLS FARGO RETAIL FINANCE, LLC, as co-collateral agents (the “Co-Collateral Agents”).

 

WHEREAS, the Company, the other Loan Parties, certain of the Revolving Lenders party thereto, Deutsche Bank Trust
Company Americas, as administrative agent and collateral agent, and the other
parties thereto are parties to that certain Credit Agreement dated as of October 6,
2005 (as amended prior to the date hereto, the “Existing Credit Agreement”);

 

WHEREAS, the Company has requested that, immediately
upon the satisfaction in full of the applicable conditions precedent set forth
in Article IV below, the Existing
Credit Agreement be amended and restated as provided herein and that, from and
after the Effective Date, (a) the Revolving Lenders extend credit in the
form of Revolving Loans at any time and from time to time during the
Availability Period, in an aggregate principal amount at any time outstanding
not in excess of $600,000,000 or the aggregate amount of Revolving Commitments
in effect from time to time, (b) the Swingline Lender extend credit at any
time and from time to time during the Availability Period in the form of
Swingline Loans, in an aggregate principal amount at any time outstanding not
in excess of $45,000,000, and (c)  the Issuing Banks issue Letters of
Credit in an aggregate face amount at any time outstanding not in excess of
$150,000,000, to support payment obligations incurred in the ordinary course of
business by the Company and its subsidiaries; and

 

WHEREAS,
the Revolving Lenders have indicated their willingness to so amend and restate
the Existing Credit Agreement, and to extend such credit, and the Issuing Banks
have indicated their willingness to issue Letters of Credit, in each case on
the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, the parties hereto amend and restate
the Existing Credit Agreement in its entirety as follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.01.                 Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:

 

“2028 Debentures” means the 7.125% Senior Debentures due 2028 of
the Company outstanding on the Effective Date.

 

“ABR”, when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.

 

 

“Account” has the meaning assigned to such term in the Security
Agreement.

 

“Account Debtor” means any Person obligated on an Account.

 

“ACH” means automated clearing house transfers.

 

“Additional Revolving Commitment Lender” has the meaning set
forth in Section 2.23(b).

 

“Adjusted LIBOR Rate” means, for any Interest Period, the LIBOR
Rate for such Interest Period or, if the Board imposes a Reserve Percentage
with respect to eurodollar deposits in dollars in the London interbank market,
the rate obtained by dividing (a) the LIBOR Rate for such Interest Period
by (b) 1 minus the Reserve Percentage.

 

“Adjustment Date” means the first day of each January, April, July and
October, as applicable.

 

“Administrative Questionnaire” means an Administrative
Questionnaire in a form supplied by the Agent.

 

“Affiliate” means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.

 

“Agent” has the meaning assigned to such term in the preamble to
this Agreement.

 

“Aggregate Incremental Capacity” has the meaning set forth in Section 2.23(a).

 

“Alternate Base Rate” means, for any day, a rate per annum equal
to the greatest of (a) the Prime Rate in effect on such day, (b) the
Federal Funds Effective Rate in effect on such day plus
1⁄2 of 1%, and (c) the LIBOR Rate for an Interest Period of one month
commencing on such date plus
1%.  Any change in the Alternate Base
Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the
LIBOR Rate shall be effective from and including the effective date of such
change in the Prime Rate, the Federal Funds Effective Rate or the LIBOR Rate,
respectively.

 

“Applicable Percentage” means, with respect to any Revolving
Lender, (a) with respect to Revolving Loans, LC Exposure or Swingline
Loans, a percentage equal to a fraction the numerator of which is such Lender’s
Revolving Commitment and the denominator of which is the aggregate Revolving
Commitment of all Revolving Lenders (if the Revolving Commitments have
terminated or expired, the Applicable Percentages shall be determined based
upon such Lender’s share of the aggregate Revolving Exposures at that time), and
(b) with respect to Protective Advances, a percentage based upon its share
of the unused Revolving Commitments.

 

“Applicable Rate” means, for any day, with respect to any ABR
Revolving Loan or LIBOR Rate Revolving Loan, the applicable rate per annum set forth
below under the caption 

 

2

 

“ABR Spread” or “LIBOR Rate Spread”, as the case may be, based upon the Average Historical Excess
Availability as of the most recent Adjustment Date, provided that until the
first Adjustment Date occurring on or after the date that is 12 months after
the Effective Date, the “Applicable Rate” shall be the applicable rate per annum set forth below in Category 2:

 

	
  Average Historical Excess Availability

  	
   

  	
  ABR
  Spread

  	
   

  	
  LIBOR
  Rate Spread

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Category 1

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average Historical
  Excess Availability less than or equal to $165,000,000

  	
   

  	
  3.50

  	
  %

  	
  4.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Category 2

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average Historical
  Excess Availability greater than $165,000,000, but less than or equal to
  $330,000,000

  	
   

  	
  3.25

  	
  %

  	
  4.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Category 3

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average Historical
  Excess Availability greater than $330,000,000

  	
   

  	
  3.00

  	
  %

  	
  4.00

  	
  %

  

 

The Applicable Rate shall be adjusted
quarterly on a prospective basis on each Adjustment Date based upon the Average
Historical Excess Availability in accordance with the table above; provided
that (i) if an Event of Default shall have occurred and be continuing at
the time any reduction in the Applicable Rate would otherwise be implemented,
no such reduction shall be implemented until the date on which such Event of
Default shall have been cured or waived, and (ii) if any Borrowing Base
Certificate delivered pursuant to this Agreement is at any time restated or
otherwise revised, or if the information set forth in any such Borrowing Base Certificate
otherwise proves to be false or incorrect such that the Applicable Margin would
have been higher than was otherwise in effect during any period, without
constituting a waiver of any Default or Event of Default arising as a result
thereof, interest due under this Agreement shall be immediately recalculated at
such higher rate for any applicable periods and shall be due and payable on
demand.

 

“Applicable Total Percentage” means, with respect to any Lender,
a percentage equal to a fraction the numerator of which is the sum of (a) if
such Lender is a Revolving Lender, the amount of such Lender’s Revolving
Commitment (or, if the Revolving Commitments have terminated or expired, such
Lender’s Applicable Percentage of the aggregate Revolving Exposures at that
time) plus (b) if such Lender is an
Incremental Term Loan Lender, the principal amount of the Incremental Term Loan
then owing to such Lender, and the denominator of which is the sum of the
Revolving Commitments (or, if the Revolving Commitments have terminated or
expired, the aggregate Revolving Exposures at that time) plus
the aggregate principal amount of the Incremental Term Loans then outstanding.

 

“Appointed Agent” has the meaning assigned to such term in Article VIII.

 

3

 

“Approved Fund” means any Person (other than an natural person)
that is engaged in making, purchasing, holding or investing in bank loans and
similar extensions of credit in the ordinary course and that is administered or
managed by (1) a Lender, (2) an Affiliate of a Lender or (3) an
entity or an Affiliate of an entity that administers, advises or manages a
Lender.

 

“Assignment and Assumption” means an assignment and assumption
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04), and accepted by the Agent, in the
form of Exhibit A or any other form approved by the Agent.

 

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

 

“Available Revolving Commitment” means, at any time, the
aggregate of the Revolving Commitments of all Revolving Lenders then in effect minus the Revolving Exposure of all Revolving Lenders at such time.

 

“Availability Period” means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date
of termination of the Commitments.

 

“Availability Reserves” means, without duplication of any other
reserves or items that are otherwise addressed or excluded through eligibility
criteria, such reserves as any Co-Collateral Agent from time to time determines
in its Permitted Discretion as being appropriate (a) to reflect any
impediments to the Co-Collateral Agents’ or the Agent’s ability to realize upon
the Collateral consisting of Borrowing Base Assets included in the Borrowing
Base, (b) to reflect claims and liabilities that such Co-Collateral Agent
determines will need to be satisfied in connection with the realization upon
the Collateral consisting of Borrowing Base Assets included in the Borrowing
Base or (c) to reflect criteria, events, conditions, contingencies or
risks which adversely affect any component of the Borrowing Base.

 

“Average Historical Excess Availability” means, at any Adjustment
Date, the average daily Excess Availability for the three-month period
immediately preceding such Adjustment Date (with the Borrowing Base for any
such day used to determine “Excess Availability” calculated by reference to the most recent Borrowing Base Certificate
delivered to the Agent on or prior to such day pursuant to Section 5.01(h)).

 

“Average Revolving Loan Utilization” means, at any Adjustment
Date, the average daily aggregate Revolving Exposure (excluding any Revolving
Exposure resulting from any outstanding Swingline Loans) for the three-month
period immediately preceding such Adjustment Date (or, if less, the period from
the Effective Date to such Adjustment Date), divided
by the aggregate Revolving
Commitments at such time.

 

4

 

“BANA” means Bank of America, N.A., a national banking
association, acting in its individual capacity, and its successors and assigns.

 

“BANA Account” has the meaning assigned to such term in Section 2.21(d).

 

“Banking Services” means each and any of the following bank
services provided to any Loan Party at the written request of such Loan Party
by the Agent, any Revolving Lender or any of their Affiliates:  (a) commercial credit, purchase or debit
cards, (b) stored value cards and (c) treasury management services
(including, without limitation, controlled disbursement, ACH transactions,
return items and interstate depository network services).

 

“Banking Services Obligations” of the Loan Parties means any and
all obligations of the Loan Parties, whether absolute or contingent and however
and whenever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor) in connection
with Banking Services.

 

“Banking Services Reserves” means all Reserves which any
Co-Collateral Agent from time to time after the occurrence and during the
continuance of a Liquidity Event establishes in its Permitted Discretion as
being appropriate to reflect reasonably anticipated liabilities and obligations
of the Loan Parties in respect of Banking Services then provided or
outstanding.

 

“Bankruptcy Law” means Title 11 of the United States Code, or any
similar foreign, federal or state law for the relief of debtors as now or
hereinafter in effect.

 

“Bankruptcy Proceeding” means (a) any voluntary or
involuntary case or proceeding under any Bankruptcy Law or any proceeding of
the type specified in Section 7.01(g), in each case, with respect to any
Loan Party, (b) any other voluntary or involuntary insolvency,
reorganization or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding with respect to
any Loan Party or with respect to a material portion of their respective
assets, (c) any liquidation, dissolution, reorganization or winding up of
any Loan Party whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (d) any assignment for the benefit of
creditors or any other marshalling of assets and liabilities of any Loan Party.

 

“Blocked Account Agreement” has the meaning assigned to such term
in Section 2.21(c).

 

“Blocked Accounts” has the meaning assigned to such term in Section 2.21(c).

 

“Board” means the Board of Governors of the Federal Reserve
System of the United States of America.

 

“Borrower” means any of the Company, each Domestic Subsidiary
party hereto as of the date hereof as a Borrower and each other Domestic
Subsidiary of the Company that becomes a Borrower pursuant to Section 5.11(a).

 

“Borrower Agent” has the meaning set forth in Section 2.24.

 

5

 

“Borrower Percentage” has the meaning assigned
to such term in Section 2.25(f).

 

“Borrower’s Maximum
Liability” has the meaning assigned to such term in Section 2.25(e).

 

“Borrowing” means any (a) Revolving
Loans of the same Type made, converted or continued on the same date and, in
the case of LIBOR Rate Revolving Loans, as to which a single Interest Period is
in effect, (b) Swingline Loan, (c) Protective Advance or (d) Incremental
Term Loans of the same Type made, converted or continued on the same date and,
in the case of LIBOR Rate Incremental Term Loans, as to which a single Interest
Period is in effect.

 

“Borrowing Base” means, at any time, (a) the lesser of (i) 80%
of Eligible Inventory (net of Inventory Reserves), valued at the lower of Cost
and market value, and (ii) 85% of Net Orderly Liquidation Value of
Eligible Inventory (net of Inventory Reserves not already reflected in the
determination of Net Orderly Liquidation Value), plus
(b) 85% of the aggregate outstanding Eligible Accounts, minus (c) without duplication, the
then amount of all Availability Reserves and other Reserves as any
Co-Collateral Agent may at any time and from time to time in the exercise of
its Permitted Discretion establish.  The
Borrowing Base at any time shall be determined by reference to the most recent
Borrowing Base Certificate delivered to the Agent pursuant to Section 5.01(h) (including,
for purposes of Section 2.11, any Non-Ordinary Course Borrowing Base
Certificate delivered pursuant to such Section).

 

“Borrowing Base Assets” means any Loan Party’s Inventory, Credit
Card Processor Accounts and other assets directly related thereto, including
documents, instruments, general intangibles, deposit accounts and the proceeds
of all of the same.

 

“Borrowing Base Certificate” means a certificate, signed and
certified as accurate and complete by a Financial Officer of the Company, in
substantially the form of Exhibit B or another form which is acceptable to
the Agent in its reasonable discretion.

 

“Borrowing Request” means a request by the Borrower Agent for a
Revolving Borrowing in accordance with Section 2.03 and substantially in
the form attached hereto as Exhibit F, or such other form as shall be
approved by the Agent, or a request for a Borrowing consisting of Incremental
Term Loans in such form as may be approved by the Agent.

 

“Business Day” means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed; provided that, when used in connection with a
LIBOR Rate Loan, the term “Business Day” shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.

 

“Capital Expenditures” means, for any period, without
duplication, (a) any expenditure for any purchase or other acquisition of
any asset which would be classified as a fixed or capital asset on a
consolidated balance sheet of the Company and its Subsidiaries prepared in
accordance with GAAP, less (b) any expenditure which is contractually
required to be, and is, reimbursed to the Loan Parties in cash by a third party
(including landlords and developers) during such period of calculation.

 

6

 

“Capital Lease Obligations” of any Person means the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the amount thereof accounted for as
a liability determined in accordance with GAAP.

 

A “Change in Control” shall be deemed to have occurred if (a) prior
to a Qualified Public Offering, the Permitted Holders (i) shall fail to
have the right, directly or indirectly, by voting power, contract or otherwise,
to elect or designate for election at least a majority of the Board of
Directors of Holdings or (ii) shall fail to own, directly or indirectly,
beneficially and of record, shares of Holdings in an amount equal to more than
fifty percent (50%) of the amount of shares owned, directly or indirectly,
by the Permitted Holders, beneficially and of record, as of the Effective Date
and such ownership by the Permitted Holders shall not represent the largest
single block of voting securities of Holdings held, directly or indirectly, by
any Person or related group for purposes of Section 13(d) of the
Exchange Act, (b) after a Qualified Public Offering, any “person” or “group” (within the meaning of Rule 13d-5 of the Exchange Act but
excluding any employee benefit plan of such person and its subsidiaries, and
any person or entity acting in its capacity as trustee, agent or other
fiduciary or administrator of any such plan), other than the Permitted Holders,
shall “beneficially own” (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly,
shares representing more than 35% of the aggregate ordinary voting power
represented by the issued and outstanding Equity Interests of Holdings (or the
Company after a Qualified Public Offering of the Company) and the percentage of
the aggregate ordinary voting power represented by such Equity Interests
beneficially owed by such person or group exceeds the percentage of the
aggregate ordinary voting power represented by Equity Interests of Holdings (or
the Company after a Qualified Public Offering of the Company) then beneficially
owned, directly or indirectly, by the Permitted Holders, unless (i) the
Permitted Holders have, at such time, the right or the ability, directly or
indirectly, by voting power, contract or otherwise to elect or designate for
election at least a majority of the Board of Directors of Holdings (or the
Company after a Qualified Public Offering of the Company) or (ii) during
any period of twelve (12) consecutive months, a majority of the seats (other
than vacant seats) on the board of directors of Holdings (or the Company after
a Qualified Public Offering of the Company) shall be occupied by persons who
were (x) members of the board of directors of Holdings on the Effective Date
or nominated by the board of directors of Holdings (or of the Company after a
Qualified Public Offering of the Company) or by one or more Permitted Holders
or Persons nominated by one or more Permitted Holders or (y) appointed by
directors so nominated, (c) any change in control (or similar event,
however denominated) with respect to Holdings or the Company shall occur under
and as defined in the Existing Notes, the Senior Secured Term Loan Facility,
the 2028 Debentures or any other Subordinated Indebtedness of Holdings or its
Subsidiaries constituting Material Indebtedness, or (d) at any time prior
to a Qualified Public Offering of the Company, Holdings shall cease to
beneficially own, directly or indirectly, 100% of the issued and outstanding
Equity Interests of the Company.

 

“Change in Law” means (a) the adoption of any law, rule or
Regulation after the date of this Agreement, (b) any change in any
law, rule or Regulation or in the interpretation or application
thereof by any Governmental Authority after the date of this Agreement or

 

7

 

(c) compliance by any Lender or any
Issuing Bank (or, for purposes of Section 2.15(b), by any lending office
of such Lender or by such Lender’s or such Issuing Bank’s holding company, if
any) with any request, guideline or directive (whether or not having the force
of law) of any Governmental Authority made or issued after the date of this
Agreement (other than any such request, guideline or directive to comply with
any law, rule or Regulation that was in effect on the date of this
Agreement).

 

“Chattel Paper” means any “chattel paper,” as such term is
defined in the UCC, including electronic chattel paper, now owned or hereafter
acquired by any Loan Party, wherever located.

 

“Class”, when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are Revolving
Loans, Swingline Loans, Incremental Term Loans or Protective Advances.

 

“Co-Collateral Agents” has the meaning assigned
to such term in the preamble of this Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended from
time to time.

 

“Co-Investors” means Credit Suisse and Leonard Green &
Partners, L.P. and their respective Affiliates.

 

“Collateral” means any and all property owned, leased or operated
by a Person subject to a security interest or Lien under the Collateral
Documents and any and all other property of any Loan Party, now existing or
hereafter acquired, that may at any time be or become subject to a security
interest or Lien in favor of Agent, on behalf of itself and the Lenders, to
secure the Secured Obligations; provided, however, that
Collateral shall not at any time include any Margin Stock.

 

“Collateral Access Agreement” has the meaning assigned to such
term in the Security Agreement.

 

“Collateral Documents” means, collectively, the Security
Agreement, the Mortgages and any other documents granting a Lien upon the
Collateral as security for payment of the Secured Obligations.

 

“Collateral Proceeds” means any proceeds, dividends,
distributions or other payments (whether in cash, securities or other property)
in respect of, or in substitution or exchange for, any Collateral or any Liens
or claims on, based on or otherwise arising from or with respect to any
Collateral (including claims in any Bankruptcy Proceeding), or from any sale or
other disposition of any Collateral or any liquidation, foreclosure or similar
transaction with respect to any Collateral.

 

“Commitment” means a Revolving Commitment or an Incremental Term
Loan Commitment.

 

8

 

“Commitment Fee Rate” means, for any
day, the applicable rate per annum set forth below based upon the Average
Revolving Loan Utilization as of the most recent Adjustment Date:

 

	
  Average Revolving Loan Utilization

  	
   

  	
  Commitment
  Fee Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less than or equal
  to 50%

  	
   

  	
  1.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Greater than 50%

  	
   

  	
  0.75

  	
  %

  

 

The Commitment Fee Rate shall be adjusted quarterly on a prospective
basis on each Adjustment Date based upon the Average Revolving Loan Utilization
in accordance with the table above; provided that if an Event of Default
shall have occurred and be continuing at the time any reduction in the
Commitment Fee Rate would otherwise be implemented, no such reduction shall be
implemented until the date on which such Event of Default shall have been cured
or waived.

 

“Commitment Schedule” means the Schedule attached hereto
identified as such.

 

“Company” has the meaning assigned to such term in the preamble
to this Agreement.

 

“Consignment Inventory” has the meaning assigned to such term in
the Security Agreement.

 

“Consolidated Secured Debt Ratio” as of any date of determination
means the ratio of (a) Consolidated Total Indebtedness of the Company and
its Subsidiaries that is secured by Liens as of the end of the most recent
fiscal quarter for which internal financial statements are available
immediately preceding the date on which such event for which such calculation
is being made shall occur to (b) the aggregate amount of EBITDA for the
period of the most recently ended consecutive four full fiscal quarters for
which internal financial statements are available immediately preceding the
date on which such event for which such calculation is being made shall occur,
in each case with such pro forma adjustments to Consolidated Total Indebtedness
and EBITDA as are reasonably satisfactory to the Agent (it being acknowledged
by the Agent that such adjustments as are consistent with the pro forma
adjustment provisions set forth in the definition of “Fixed
Charge Coverage Ratio” in the indentures
governing the Existing Notes shall be satisfactory to it).

 

“Consolidated Total Indebtedness” means, as at any date of
determination, an amount equal to the sum of (a) the aggregate amount of
all outstanding Indebtedness of the Company and its Subsidiaries on a
consolidated basis consisting of Indebtedness for borrowed money, obligations
in respect of Capital Lease Obligations, Attributable Debt in respect of Sale
and Lease-Back Transactions and debt obligations evidenced by bonds, notes,
debentures or similar instruments or letters of credit or bankers’ acceptances
(and excluding any undrawn letters of credit issued in the ordinary course of
business) and (b) the aggregate amount of all outstanding Disqualified
Equity Interests of the Company and all Disqualified Equity Interests and
preferred stock of the Subsidiaries (excluding items eliminated in
consolidation), with the amount of such Disqualified Equity Interests and
preferred stock equal to the greater of their respective voluntary or
involuntary liquidation preferences and Maximum Fixed Repurchase

 

9

 

Prices, in each case determined on a
consolidated basis in accordance with GAAP. 
For purposes of this definition, the “Maximum Fixed Repurchase Price”
of any Disqualified Equity Interests or preferred stock that does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Disqualified Equity Interests or preferred stock as if such Disqualified Equity
Interests or preferred stock were purchased on any date on which Consolidated
Total Indebtedness shall be required to be determined pursuant to this
Agreement, and if such price is based upon, or measured by, the fair market
value of such Disqualified Equity Interests or preferred stock, such fair
market value shall be determined reasonably and in good faith by the Company.

 

“Control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise.  “Controlling” and “Controlled”
have meanings correlative thereto.

 

“Cost” means the cost of purchases of Inventory determined
according to the accounting policies used in the preparation of the Company’s
audited financial statements (pursuant to which the retail method of accounting
is utilized for substantially all merchandise Inventories).

 

“Credit Card Notification” has the meaning assigned to such term
in Section 2.21(c).

 

“Credit Card Processor” means any Person (other than a Loan Party
or any Affiliate of any Loan Party) who issues or whose members or Affiliates
issue credit or debit cards, including, without limitation, MasterCard or VISA
bank credit or debit cards or other bank credit or debit cards issued through
MasterCard International, Inc., Visa, U.S.A., Inc. or Visa
International and American Express, Discover, Diners Club, Carte Blanche and
other non-bank credit or debit cards, including credit or debit cards issued by
or through American Express Travel Related Services Company, Inc., Novus
Services, Inc., or HSBC under the HSBC Arrangements or any Permitted
Replacement Credit Card Program, and any servicing or processing agent or any
factor or financial intermediary that facilitates, services, processes or
manages the credit authorization, billing transfer and/or payment procedures
with respect to any Borrower’s sales transactions involving credit card or debit
card purchases by customers using credit cards or debit cards.

 

“Credit Card Processor Accounts” means Accounts owing to a Borrower from a
Credit Card Processor (including, without limitation, HSBC under the HSBC
Arrangements or any Permitted Replacement Credit Card Program).

 

“Customer
Credit Liabilities” means, at any time, the aggregate remaining balance at
such time of (a) outstanding gift certificates and gift cards of any
Borrower entitling the holder thereof to use all or a portion of the certificate
or gift card to pay all or a portion of the purchase price for any Inventory,
(b) outstanding merchandise credits of any Borrower, net of any dormancy
reserves maintained by the Company on its books and records in the ordinary
course of business consistent with past practices and (c) liabilities
associated with the Company’s InCircle customer rewards program.

 

10

 

“Customer Credit Liabilities Reserve” means, as of any date, an
amount equal to 50% of the Customer Credit Liabilities as reflected in the
books and records of the Company or any other Borrower or such greater
percentage thereof as may be required by any Co-Collateral Agent as a result of
any change in the practices, policies or procedures of any Borrower with
respect to Customer Credit Liabilities at any time after the date hereof.

 

“Customer Deposits” means, at any time, the aggregate balance at
such time of outstanding customer deposits of the Borrowers, net of any
dormancy reserves maintained by the Company on its books and records in the
ordinary course of business consistent with past practices.

 

“Customer Deposits Reserve” means, as of any date, an amount
equal to 100% of the Customer Deposits as reflected in the books and records of
any Borrower.

 

“DDA Notification” has the meaning assigned to such term in Section 2.21(c).

 

“DDAs” means any checking or other demand deposit account
maintained by the Loan Parties; provided that references herein to DDAs
shall be deemed not to refer to any Specified Segregated Account.  All funds in such DDAs shall be conclusively
presumed to be Collateral and proceeds of Collateral and the Agent and the
Lenders shall have no duty to inquire as to the source of the amounts on
deposit in the DDAs, subject to the Security Agreement and the Intercreditor
Agreement.

 

“Default” means any event or condition which constitutes an Event
of Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.

 

“Defaulting Lender” means any Revolving Lender that has (a) defaulted
in its obligation to make a Revolving Loan or to fund its participation in a
Letter of Credit, Swingline Loan or Protective Advance required to be made or
funded by it hereunder (unless such default has been cured in a manner
reasonably satisfactory to the Agent and the Borrower Agent), (b) notified
the Agent or a Loan Party in writing that it does not intend to satisfy any
such obligation or (c) been adjudicated as, or determined by any
Governmental Authority having regulatory authority over such Person or its
assets to be, insolvent or becomes the subject of a Bankruptcy Proceeding.

 

“Derivative Transaction” means (a) an interest-rate
transaction, including an interest-rate swap, basis swap, forward rate
agreement, interest rate option (including a cap, collar, and floor), and any
other instrument linked to interest rates that gives rise to similar credit
risks (including when-issued securities and forward deposits accepted), (b) an
exchange-rate transaction, including a cross-currency interest-rate swap, a
forward foreign-exchange contract, a currency option, and any other instrument
linked to exchange rates that gives rise to similar credit risks, (c) an
equity derivative transaction, including an equity-linked swap, an
equity-linked option, a forward equity-linked contract, and any other
instrument linked to equities that gives rise to similar credit risk and (d) a
commodity (including precious metal) derivative transaction, including a
commodity-linked swap, a commodity-linked option, a forward commodity-linked
contract, and any other instrument linked to commodities that gives 

 

11

 

rise to similar credit risks; provided
that no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Company or its subsidiaries shall be a Derivative
Transaction.

 

“Designated Disbursement Account” has the meaning assigned to
such term in Section 2.21(e).

 

“Discharge of Revolving Facility Obligations” means (a) the
payment in full in cash of the principal and interest (including any interest
that would accrue and become due but for the commencement of a Bankruptcy
Proceeding, whether or not such amounts are allowed or allowable in whole or in
part in such case) of all Revolving Facility Obligations, (b) the payment
in full in cash of all other Revolving Facility Obligations that are due and
payable (including (i) any amounts due or payable under or in respect of
any Secured Swap Obligations as a result of the termination of any associated
Swap Agreement or otherwise as a result of the termination of the Revolving
Commitments and/or payment in full of any other Revolving Facility Obligations,
and (ii) any amounts that would accrue and become due but for the
commencement of a Bankruptcy Proceeding, whether or not such amounts are allowed
or allowable in whole or in part in such case) or otherwise accrued and owing
at or prior to the time such principal and interest are paid (other than
indemnification obligations for which no claim or demand for payment, whether
oral or written, has been made at such time), or, in the case of
indemnification obligations for which such a claim or demand for payment has
been made, the payment of cash collateral (pursuant to an agreement in form and
substance reasonably satisfactory to such indemnitee), or at the relevant
indemnitee’s option, the delivery to such indemnitee of a letter of credit
payable to such indemnitee issued by a bank reasonably acceptable to such
indemnitee and in form and substance reasonably satisfactory to such
indemnitee, in either case in such amount as such indemnitee may reasonably
require, (c) the payment in full in cash of cash collateral (pursuant to
an agreement in form and substance reasonably satisfactory to the Relevant
Issuing Bank), or at the relevant Issuing Bank’s option, the delivery to such
Issuing Bank of a letter of credit payable to such Issuing Bank issued by a
bank reasonably acceptable to such Issuing Bank and in form and substance
reasonably satisfactory to such Issuing Bank, in either case in respect of
Letters of Credit (and including banker’s acceptances or similar instruments)
in an amount equal to 103% of the amount of such Letters of Credit and (d) the
termination of the Revolving Commitments; provided that “Discharge of
Revolving Facility Obligations” shall not include an amendment or modification
of the Revolving Loans or Revolving Commitments permitted by this Agreement.

 

“Disclosed Matters” means the actions, suits and proceedings and
the environmental matters disclosed in Schedule 3.06.

 

“Disqualified Equity Interests” means any Equity Interest which,
by its terms (or by the terms of any security or other Equity Interests into
which it is convertible or for which it is exchangeable), or upon the happening
of any event or condition (a) matures or is mandatorily redeemable (other
than solely for Qualified Equity Interests), pursuant to a sinking fund
obligation or otherwise (except as a result of a change in control or asset
sale so long as any right of the holders thereof upon the occurrence of a
change in control or asset sale event shall be subject to the prior repayment
in full of the Loans and all other Obligations that are then accrued and
payable and the termination of the Commitments), (b) is redeemable at the
option of the

 

12

 

holder thereof (other than solely for
Qualified Equity Interests), in whole or in part (except as a result of a
change in control or asset sale so long as any right of the holders thereof
upon the occurrence of a change in control or asset sale event shall be subject
to the prior repayment in full of the Loans and all other Obligations that are
then accrued and payable and the termination of the Commitments), (c) requires
the payment of any cash dividend or any other scheduled cash payment
constituting a return of capital, in each case, prior to the date that is
ninety-one (91) days after the earlier of the Maturity Date and the date the
Loans are no longer outstanding and the Commitments have expired or been
terminated or (d) is or becomes convertible into or exchangeable for
Indebtedness or any other Equity Interests that would constitute Disqualified
Equity Interests, in each case, prior to the date that is ninety-one (91) days
after the earlier of the Maturity Date and the date the Loans are no longer
outstanding and the Commitments have expired or been terminated; provided
that if such Equity Interest is issued to any plan for the benefit of employees
of Holdings or any of its subsidiaries or by any such plan to such employees, such
Equity Interest shall not constitute Disqualified Equity Interest solely
because it may be required to be repurchased by Holdings or any of its
subsidiaries in order to satisfy applicable statutory or regulatory
obligations.

 

“Document” has the meaning set forth in Article 9 of the
UCC.

 

“Dollars” or “$” refers to lawful money of the United
States of America.

 

“Domestic Subsidiaries” means all Subsidiaries incorporated or
organized under the laws of the United States of America, any State thereof or
the District of Columbia.

 

“EBITDA” means, for any period, Net Income for such period plus (a) without duplication and to the extent deducted in
determining Net Income for such period, the sum of (i) Interest Expense
for such period, (ii) income tax expense for such period net of any tax
refunds, (iii) all amounts attributable to depreciation and amortization
expense for such period, (iv) any extraordinary, nonrecurring or unusual
charges for such period, (v) any other non-cash charges for such period
(but excluding any non-cash charge in respect of an item that was included in
Net Income in a prior period and any non-cash charge that relates to the
write-down or write-off of inventory), (vi) any charges or expenses
related to the Transactions, (vii) payments made pursuant to Section 6.09(h) in
an aggregate amount in any fiscal year not to exceed $10,000,000 and (viii) facilities
closure, severance and other restructuring expenses as shall be reasonably
approved by the Agent, minus (b) without duplication and to
the extent included in Net Income, (i) any cash payments made during such
period in respect of non-cash charges described in clause (a)(iv) or
(a)(v) taken in a prior period and (ii) any extraordinary,
non-recurring or unusual gains and any non-cash items of income for such
period, all calculated for the Company and its Subsidiaries on a consolidated
basis in accordance with GAAP.

 

“Effective Date” means the date on which the conditions specified
in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

 

“Eligible Account” means any Credit Card
Processor Account that constitutes proceeds from the
sale or disposition of Inventory in the ordinary course of business and is deemed by the Co-Collateral Agents, in
their Permitted Discretion, to be an Eligible Account. 

 

13

 

Without limiting the
foregoing, no Credit Card Processor Account shall be an Eligible Account if:

 

(a)    such
Credit Card Processor Account has been outstanding for more than five Business
Days;

 

(b)    such Credit Card
Processor Account is not subject to the first priority, valid and perfected
Lien of the Agent as to such Credit Card Processor Account or is subject to any
other Lien, other than (i) Permitted Encumbrances described in clauses
(a), (b) and (h) of the definition thereof and (ii) Second
Priority Liens;

 

(c)    a
Borrower does not have good, valid and marketable title thereto, free and clear
of any Lien (other than (i) Liens granted to the Agent, for its own
benefit and the benefit of the other Secured Parties pursuant to the Security
Documents, (ii) Permitted Encumbrances described in clauses (a), (b) and
(h) of the definition thereof and (iii) Second Priority Liens);

 

(d)    such
Credit Card Processor Account does not constitute the legal, valid and binding
obligation of the applicable Credit Card Processor enforceable in accordance
with its terms;

 

(e)    such
Credit Card Processor Account is disputed, or a claim, counterclaim, discount,
deduction, reserve, allowance, recoupment, offset or chargeback has been
asserted with respect thereto by the applicable Credit Card Processor (but only
to the extent of such dispute, claim, counterclaim, discount, deduction,
reserve, allowance, recoupment, offset or chargeback);

 

(f)    such
Credit Card Processor Account is owed by a Credit Card Processor that is
subject to a Bankruptcy Proceeding or that is liquidating, dissolving or
winding up its affairs or otherwise deemed not creditworthy by any
Co-Collateral Agent in its Permitted Discretion;

 

(g)    such
Credit Card Processor Account does not conform with a covenant or
representation contained herein as to such Credit Card Processor Account;

 

(h)    unless
otherwise agreed by the Collateral Agents, the Credit Card Processor is organized
or has its principal offices or assets outside the United States or Canada;

 

(i)    such
Credit Card Processor Account is evidenced by Chattel Paper or an Instrument of
any kind, or has been reduced to judgment; or

 

(j)    such
Credit Card Processor Account includes a billing for interest, fees or late
charges, but ineligibility shall be limited to the extent thereof.

 

Anything contained herein to the contrary notwithstanding, for purposes
of determining the amount of Eligible Accounts in the Borrowing Base at any
time, any Credit Card Processor Account that otherwise meets the requirements
for Eligible Accounts may be included in such calculation even though the same
does not constitute proceeds from the sale or disposition of 

 

14

 

Inventory, provided that such amount shall be subject to
adjustment as may be required by any Co-Collateral Agent at any time and from
time to time to reflect such fact.

 

“Eligible Assignee” means (a) a Lender, (b) a commercial
bank, insurance company, or company engaged in the business of making asset
based loans or commercial loans or a commercial finance company, which Person,
together with its Affiliates, has a combined capital and surplus in excess of
$750,000,000, (c) any Affiliate of a Lender under common control with such
Lender or (d) an Approved Fund of a Lender, provided that in any
event, “Eligible Assignee” shall not
include (i) any natural person, (ii) any Defaulting Lender, (iii) Holdings
or the Company or any Affiliate thereof (other than Credit Suisse or any of its
branches or Affiliates engaged in the business of making commercial loans) or (iv) any
Sponsor or any of their respective Affiliates.

 

“Eligible Inventory” means, at any
time, all Inventory of the Borrowers; provided, however, that
Eligible Inventory shall not include any Inventory:

 

(a)                                  which is not subject to a first priority
(subject to Permitted Encumbrances described in clauses (a) and (b) of
the definition thereof) perfected Lien in favor of the Agent;

 

(b)                                 which is subject to any Lien other than (i) a
Lien in favor of the Agent, (ii) a Second Priority Lien, (iii) a
Permitted Encumbrance described in clauses (a) and (b) of the
definition thereof or (iv) a Landlord Lien as to which a Landlord Lien
Reserve applies;

 

(c)                                  which is slow moving (other than Inventory
located at a clearance center that has been appropriately priced consistent
with the Loan Parties’ customary practices), obsolete, unmerchantable,
defective, used or unfit for sale;

 

(d)                                 which does not conform in all material
respects to the representations and warranties contained in this Agreement or
the Security Agreement;

 

(e)                                  which is not owned only by one or more Loan
Parties;

 

(f)                                    which is not finished goods or which
constitutes work-in-process, raw materials, packaging and shipping material,
supplies, samples, prototypes, displays or display items, bill-and-hold goods,
goods that are returned or marked for return (but not held for resale) or
repossessed, or which constitutes goods held on consignment or goods which are
not of a type held for sale in the ordinary course of business;

 

(g)                                 which is not located in the U.S. or is in
transit with a common carrier from vendors or suppliers;

 

(h)                                 which is located at any location (other than
a retail store or clearance center) leased by a Loan Party, unless (i) the
lessor has delivered to the Agent a Collateral Access Agreement as to such
location or (ii) a Reserve for rent, charges, and other amounts due or to
become due with respect to such location has been established by any
Co-Collateral Agent in its Permitted Discretion;

 

15

 

(i)                                     which is located in any third party
warehouse or is in the possession of a bailee (other than a third party processor)
and is not evidenced by a Document, unless (i) such warehouseman or bailee
has delivered to the Agent a Collateral Access Agreement and such other
documentation as the Agent may reasonably require or (ii) an appropriate
Reserve has been established by any Co-Collateral Agent in its Permitted
Discretion;

 

(j)                                     which is being processed offsite at a third
party location or outside processor, or is in-transit to or from said third
party location or outside processor;

 

(k)                                  which is the subject of a consignment by any
Borrower as consignor;

 

(l)                                     which is reported in a Borrower’s books and
records as part of the Company’s “Epicure” division or, without duplication of
the foregoing, is perishable, to the extent the book value of such Inventory
exceeds $5,000,000;

 

(m)                               which contains or bears any intellectual
property rights licensed to any Loan Party by any Person other than a Loan
Party unless the Agent is reasonably satisfied that it may sell or otherwise
dispose of such Inventory without (i) infringing the rights of such
licensor, (ii) violating any contract with such licensor, or (iii) incurring
any liability with respect to payment of royalties other than royalties
incurred pursuant to sale of such Inventory under the current licensing
agreement relating thereto;

 

(n)                                 which is not reflected in a current retail
stock ledger report of the Company or any of its Subsidiaries (except as to
goods received but not recorded in the retail stock ledger); or

 

(o)                                 which is acquired in connection with a
Permitted Acquisition to the extent the Agent or a Co-Collateral Agent shall
not have received a Report in respect of such Inventory, which Report shows
results reasonably satisfactory to the Agent and the Co-Collateral Agents.

 

“Environmental Laws” means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, transportation, disposal, release or threatened
release of any Hazardous Material or to health and safety matters.

 

“Environmental Liability” means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Company or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (c) exposure to
any Hazardous Materials, (d) the release or threatened release of any
Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

 

16

 

“Equity Interests” means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.

 

“ERISA” means the Employee Retirement Income Security Act of
1974, as amended from time to time.

 

“ERISA Affiliate” means any trade or business (whether or not
incorporated) that, together with any Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes
of Section 302 of ERISA and Section 412 of the Code, is treated as a
single employer under Section 414 of the Code.

 

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued
thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the conditions for imposition of a lien
under Section 303(k) of ERISA shall have been met with respect to any
Plan; (c) a determination that any Plan is in “at risk” status (within the
meaning of Section 303(i)(4) of ERISA); (d) the filing pursuant
to Section 412(d) of the Code or Section 303(d) of ERISA of
an application for a waiver of the minimum funding standard with respect to any
Plan; (e) the incurrence by a Borrower or any of its ERISA Affiliates of
any liability under Title IV of ERISA with respect to the termination of any
Plan; (f) the receipt by a Borrower or any ERISA Affiliate from the PBGC
or a plan administrator of any notice of an intent to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (g) the incurrence
by a Borrower or any of its ERISA Affiliates of any liability with respect to
the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (h) the
receipt by a Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from a Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is insolvent or in reorganization, within the meaning of
Title IV of ERISA.

 

“Event of Default” has the meaning assigned to such term in Article VII.

 

“Excess Availability” means, at any time, an amount equal to (a) the
lesser of the aggregate total Revolving Commitments at such time and the
Borrowing Base at such time (as determined by reference to the most recent
Borrowing Base Certificate delivered to the Agent pursuant to Section 5.01(h)),
minus (b) the aggregate Revolving
Exposures of all Revolving Lenders at such time.

 

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

 

“Excluded Taxes” means, with respect to the Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Company or any other Loan Party hereunder, (a) income
or franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes

 

17

 

imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which the Company or any
other Loan Party is located and (c) in the case of a Foreign Lender (other
than an assignee pursuant to a request by the Borrower Agent under Section 2.19(b)),
any withholding tax that is imposed on amounts payable to such Foreign Lender
at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 2.17(e), except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from the Company or any other Loan Party with respect to such
withholding tax pursuant to Section 2.17(a).

 

“Existing Agent” means Deutsche Bank Trust Company Americas, as
administrative agent and collateral agent under the Existing Credit Agreement.

 

“Existing Credit Agreement” has the meaning assigned to such term
in the preliminary statements hereto.

 

“Existing Letter of Credit” means any letter of credit previously
issued for the account of the Company or any other Loan Party by a Lender or an
Affiliate of a Lender that is (a) outstanding on the Effective Date and (b) listed
on Schedule 1.01(a).

 

“Existing
Mortgage” means any “Mortgage” as defined in, and granted pursuant to, the
Existing Credit Agreement and in existence on the Effective Date.

 

“Existing Note Documents” means, collectively, the Senior Note
Documents and the Senior Subordinated Note Documents.

 

“Existing Notes” means the Senior Notes and the Senior
Subordinated Notes.

 

“Federal Funds Effective Rate” means, (a) the weighted
average of interest rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers on the
applicable Business Day (or on the preceding Business Day, if the applicable
day is not a Business Day), as published by the Federal Reserve Bank of New
York on the next Business Day; or (b) if no such rate is published on the
next Business Day, the average rate (rounded up, if necessary, to the nearest
1/8 of 1%) charged to the Agent on the applicable day on such transactions, as
determined by the Agent.

 

“Financial Officer” means the chief financial officer, treasurer
or controller of the Company.

 

“Fixed Charges” means, with reference to any period, without
duplication, the sum of (a) cash Interest Expense, plus (b) the aggregate amount of scheduled principal payments
in respect of long-term Indebtedness of the Company and the Subsidiaries made
during such period (other than payments made by the Company or any Subsidiary
to the Company or a Subsidiary), plus (c) expense for taxes paid in
cash, plus (d) Restricted Payments paid in
cash, plus (e) Restricted Debt Payments, plus (f) scheduled Capital Lease Obligation payments, all
calculated for such period for the Company and its Subsidiaries on a
consolidated basis.

 

18

 

“Fixed Charge Coverage Ratio” means, at any time, the ratio,
determined for the period of 12 fiscal months most recently ended for which
financial statements have been, or were required to be, delivered pursuant to Section 5.01,
of (a) EBITDA minus the unfinanced portion of Capital
Expenditures, excluding (i) any Capital Expenditure made with proceeds
applied within twelve (12) months of receipt of (x) any casualty
insurance, condemnation or eminent domain or (y) any sale of assets (other
than Inventory or Credit Card Processor Accounts) or (ii) any portion of
the purchase price for a Permitted Acquisition which is classified as a fixed
or capital asset on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with GAAP, to (b) Fixed Charges, all
calculated for the Company and its Subsidiaries on a consolidated basis in
accordance with GAAP.

 

“Foreign Lender” means a Lender that is not a “United States
person” within the meaning of Section 7701(a)(30) of the Code.

 

“Foreign Subsidiary” means any Subsidiary that is not a Domestic
Subsidiary.

 

“Funding Account” has the meaning assigned to such term in Section 4.01(i).

 

“GAAP” means generally accepted accounting principles in the
United States of America in effect and applicable to that accounting period in
respect of which reference to GAAP is being made, subject to the provisions of Section 1.04.

 

“Governmental Authority” means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.

 

“Guarantee” of or by any Person (the “Guarantor”) means
any obligation, contingent or otherwise, of the Guarantor guaranteeing or
having the economic effect of guaranteeing any Indebtedness or other monetary
obligation of any other Person (the “Primary Obligor”) in any manner,
whether directly or indirectly, and including any obligation of the Guarantor,
direct or indirect, (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other monetary obligation or
to purchase (or to advance or supply funds for the purchase of) any security
for the payment thereof, (b) to purchase or lease property, securities or
services for the purpose of assuring the owner of such Indebtedness or other
monetary obligation of the payment thereof, (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the Primary Obligor so as to enable the Primary Obligor to pay such
Indebtedness or other monetary obligation or (d) as an account party in
respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or monetary obligation; provided, that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business, or customary and reasonable indemnity obligations in effect on the
Effective Date or entered into in connection with any acquisition or
disposition of assets permitted under this Agreement (other than such
obligations with respect to Indebtedness). 
The amount of any Guarantee shall be deemed to be an amount equal to the
stated or determinable amount of the related primary obligation, or portion
thereof, in respect of

 

19

 

which such Guarantee is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the guaranteeing Person in good faith.

 

“Guaranteed Obligations” has the meaning assigned to such term in
Section 10.01.

 

“Hazardous Materials” means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.

 

“Holdings” has the meaning assigned to such term in the preamble
to this Agreement.

 

“HSBC Agreements” means the Purchase, Sale and Servicing Transfer
Agreement dated as of June 8, 2005, among HSBC Bank Nevada, N.A., HSBC
Finance Corporation (together with their Affiliates, “HSBC”), the
Company and Bergdorf Goodman, Inc., and all material agreements and
instruments entered into in connection therewith, including the Credit Card
Program Agreement and the related Services Agreement, in each case, as amended
prior to the date hereof and as may be further amended from time to time in
accordance with the terms of this Agreement.

 

“HSBC Arrangements” means the private label credit card program
between the Company and HSBC pursuant to the terms of the HSBC Agreements.

 

“Immaterial Subsidiary” means, at any date of determination, any
Subsidiary designated as such in writing by the Company to the Agent and that (i) contributed
2.5% or less of EBITDA for the period of four fiscal quarters most recently
ended more than forty-five (45) days prior to the date of determination, (ii) had
consolidated assets representing 2.5% or less of the consolidated total assets
of the Company and the Subsidiaries on the last day of the most recent fiscal
quarter ended more than forty-five (45) days prior to the date of determination
and (iii) did not own any Inventory with an aggregate value of more than
$5,000,000.  The Immaterial Subsidiaries
as of the Effective Date are listed on Schedule 1.01(b).

 

“Impacted
Lender” means any Lender (a) that is a Defaulting Lender, (b) as
to which the Swingline Lender or applicable Issuing Bank, as the case may be,
has actual knowledge that such Lender has defaulted in fulfilling its
obligations under one or more other syndicated credit facilities, or (c) is
under the Control of an entity that has become subject to a Bankruptcy
Proceeding; provided, however that a Lender shall not be an Impacted
Lender solely by virtue of the ownership or acquisition of any Equity Interest
in such Lender or the Person controlling such Lender by a Governmental
Authority.

 

“Incremental
Term Loan Amendment” has the meaning specified in Section 2.23(c).

 

“Incremental Term Loan Claimholders” means, at any relevant time,
the holders of Incremental Term Loan Obligations at such time.

 

20

 

“Incremental Term Loan Commitment” means, as to any Incremental
Term Loan Lender, the commitment of such Incremental Term Loan Lender to make
an Incremental Term Loan as set forth in an Incremental Term Loan Amendment.

 

“Incremental Term Loan Lender” has the meaning set forth in Section 2.23(c).

 

“Incremental Term Loan Obligations” means all present or future
loans, advances, debts, liabilities and obligations (whether or not performance
is then required or contingent, or such amounts are liquidated or determinable)
owing by any Loan Party to any Incremental Term Loan Lender in respect of any
Incremental Term Loan, whether or not evidenced by a Note, arising under this
Agreement or any of the other Loan Documents, including all principal,
interest, fees, expenses, charges, indemnities and other amounts (including
interest, fees, expenses and other amounts accrued or incurred on and after the
filing of a petition initiating any Bankruptcy Proceeding, whether or not such
interest or fees are deemed to accrue, or such expenses or other amounts are
incurred, after the filing of such petition and whether or not allowed or
allowable as a claim in such proceeding).

 

“Incremental Term Loans” has the meaning set forth in Section 2.23(c).

 

“Indebtedness” of any Person means (in each case, whether such
obligation is with full or limited recourse), without duplication, (a) any
obligation of such Person for borrowed money, (b) any obligation of such
Person evidenced by a bond, debenture, note or other similar instrument, (c) any
obligation of such Person to pay the deferred purchase price of property or
services, except (i) accrued expenses and trade accounts payable that arise
in the ordinary course of business and (ii) any earn-out obligation until
such obligation becomes a liability on the balance sheet of such Person in
accordance with GAAP, (d) all Capital Lease Obligations and Synthetic
Lease Obligations of such Person, (e) all Obligations of such Person in
respect of Disqualified Equity Interests, (f) any obligation of such
Person (whether or not contingent) to any other Person in respect of a letter
of credit or other Guarantee issued by such other Person, (g) any Swap
Obligation, except that if any Swap Agreement relating to such Swap Obligation
provides for the netting of amounts payable by and to such Person thereunder or
if any such agreement provides for the simultaneous payment of amounts by and
to such Person, then in each such case, the amount of such obligation shall be
the net amount thereof, (h) any Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) a Lien on any asset of such Person (provided
that the amount of such Indebtedness shall be the lesser of the fair market
value of such asset at the date of determination determined by such Person in
good faith and the amount of such Indebtedness of others so secured) and (i) any
Indebtedness of others Guaranteed by such Person.  For all purposes hereof, the Indebtedness of
any Person shall exclude purchase price holdbacks arising in the ordinary
course of business in respect of a portion of the purchase price of an asset to
satisfy warranties or other unperformed obligations of the seller of such asset
(other than earn-out obligations).

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Information” has the meaning set forth in Section 3.11(a).

 

21

 

“Information Memorandum” means the Confidential Information
Memorandum dated June 2009, relating to the Company.

 

“Intercreditor Agreement” means the Lien Subordination and
Intercreditor Agreement dated as of the Original Closing Date, among Holdings,
the Company, the Subsidiaries party from time to time thereto, the Existing
Agent and the Term Loan Agent (as defined in the Intercreditor Agreement), as
previously amended, as supplemented as of the date hereof pursuant to the
Substitution of Agent and Joinder Agreement, and as may be further amended,
amended and restated, supplemented or otherwise modified in accordance with its
terms.

 

“Interest Election Request” means a request by the Borrower Agent
to convert or continue a Borrowing in accordance with Section 2.07.

 

“Interest Expense” means, with reference to any period, total
interest expense (including that attributable to Capital Lease Obligations and
Synthetic Lease Obligations and the interest portion of any deferred payment
obligation, but excluding amortization of deferred financing costs and
amortization of original issue discount on any Indebtedness) of the Company and
its Subsidiaries for such period with respect to all outstanding Indebtedness
of the Company and its Subsidiaries (including all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers’
acceptance financing and net costs under Swap Agreements in respect of interest
rates to the extent such net costs are allocable to such period in accordance
with GAAP), calculated on a consolidated basis for the Company and its
Subsidiaries for such period in accordance with GAAP; provided that
there shall be excluded therefrom any Interest Expense of any Person accrued
prior to the date it becomes a Subsidiary of the Company or is merged into or
consolidated with the Company or any of its Subsidiaries.

 

“Interest Payment Date” means (a) with respect to any ABR
Revolving Loan (other than a Swingline Loan), the first Business Day of each
January, April, July and October and the Maturity Date, (b) with
respect to any LIBOR Rate Revolving Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
LIBOR Rate Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months’ duration after the first day of such Interest Period
(or if such day is not a Business Day, the next succeeding Business Day), (c) with
respect to any Swingline Loan, the day that such Loan is required to be repaid,
and (d) with respect to any Incremental Term Loan, each day specified as
an Interest Payment Date in the applicable Incremental Term Loan Amendment.

 

“Interest Period” means (a) with respect to any LIBOR Rate
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the calendar month that is one, two, three
or six months (or, to the extent reasonably acceptable to each Lender, nine or
twelve months) thereafter, as the Borrower Agent may elect; provided,
that (i) if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day
and (ii) any Interest Period that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically

 

22

 

corresponding day in the last calendar month
of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. 
For purposes hereof, the date of a Borrowing initially shall be the date
on which such Borrowing is made and thereafter shall be the effective date of
the most recent conversion or continuation of such Borrowing.

 

“Inventory” has the meaning assigned to such term in the Security
Agreement.

 

“Inventory Grace Period” means, with respect to any Inventory
Shortfall, the earlier of (a) the date which is 30 days after the
occurrence of such Inventory Shortfall, and (b) if on the date of such
Inventory Shortfall or at any time thereafter Excess Availability is or becomes
less than $75,000,000, the date which is five Business Days after the first
date on or after the date of the occurrence of such Inventory Shortfall on
which Excess Availability is or becomes less than $75,000,000.

 

“Inventory Reserves” means (a) such reserves as may be
established from time to time by any Co-Collateral Agent, in its Permitted
Discretion, with respect to changes in the determination of the saleability, at
retail, of the Eligible Inventory or which reflect such other factors as
negatively affect the market value of the Eligible Inventory and (b) Shrink
Reserves.

 

“Inventory Shortfall” has the meaning specified in Section 5.14.

 

“Issuing Bank” means each of Bank of America, N.A., Wells Fargo
Bank, N.A., Wachovia Bank, National Association and any other Revolving Lender
which at the request of the Borrower Agent and with the consent of the Agent
(not to be unreasonably withheld) agrees to become an Issuing Bank and, solely
with respect to any Existing Letter of Credit (and any amendment, renewal or
extension thereof in accordance with this Agreement), the Lender or Affiliate
of a Lender that issued such Existing Letter of Credit.  Each Issuing Bank may, in its discretion,
arrange for one or more Letters of Credit to be issued by Affiliates of such
Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit
issued by such Affiliate.

 

“Joinder Agreement” has the meaning assigned to such term in Section 5.11.

 

“Joint Lead Arrangers” means Banc of America Securities LLC,
Wells Fargo Retail Finance, LLC, J.P. Morgan Securities Inc. and Regions
Business Capital Corporation.

 

“Landlord Lien” means any Lien of a landlord on the Company’s or
any Subsidiary’s property, granted by statute.

 

“Landlord Lien Reserve” means an amount equal to up to two months’
rent for all of the Loan Parties’ leased locations where Eligible Inventory is
located in each Landlord Lien State, other than leased locations with respect
to which the Agent shall have received a landlord’s waiver or subordination of
lien in form reasonably satisfactory to the Agent.

 

“Landlord Lien State” means (i) each of Washington,
Virginia, Pennsylvania, Delaware and the District of Columbia and (ii) such
other state(s) that the Agent determines after the Effective Date and
notifies the Borrower Agent thereof, that, as a result of a change in law (or
in the interpretation or application thereof by any Governmental Authority)
occurring after

 

23

 

the Effective Date, a landlord’s claim for
rent has priority by operation of law over the Lien of the Agent in any of the
Collateral consisting of Eligible Inventory.

 

“LC Collateral Account” has the meaning assigned to such term in Section 2.06(j).

 

“LC Disbursement” means a payment made by an Issuing Bank
pursuant to a drawing on a Letter of Credit.

 

“LC Exposure” means, at any time of determination, the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount
of all LC Disbursements that have not yet been reimbursed by or on behalf of
the Company or any other Loan Party at such time, less
(c) the amount then on deposit in the LC Collateral Account.  The LC Exposure of any Revolving Lender at
any time shall be its Applicable Percentage of the total LC Exposure at such
time.

 

“Lenders” means the Persons listed on the Commitment Schedule,
any Incremental Term Loan Lender, and any other Person that shall have become a
party hereto pursuant to an Assignment and Assumption, other than any such
Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.

 

“Letter of Credit” means any standby or commercial letter of
credit issued (or, in the case of an Existing Letter of Credit, deemed to be
issued) pursuant to this Agreement.

 

“Letter of Credit Request” has the meaning assigned to such term
in Section 2.06(b).

 

“LIBOR Rate” means, with respect to any Interest Period, the per
annum rate of interest (rounded up, if necessary, to the nearest 1/8th of 1%),
determined by the Agent at approximately 11:00 a.m. (London time) two
Business Days prior to commencement of such Interest Period, for a term
comparable to such Interest Period, equal to (a) the British Bankers
Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other
commercially available source designated by the Agent); or (b) if BBA
LIBOR is not available for any reason, the interest rate at which Dollar
deposits in the approximate amount of the LIBOR Rate Loan would be offered by
the Agent’s London branch to major banks in the London interbank Eurodollar
market.

 

“Lien” means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect
as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.

 

“Liquidity Event” means the determination by the Agent or any
Co-Collateral Agent that Excess Availability on any day is less than the
greater of (a) 20% of the lesser of (i) the aggregate Revolving
Commitments and (ii) the Borrowing Base and (b) $75,000,000, provided
that the Agent or such Collateral Agent has notified the Borrower Agent
thereof.  For 

 

24

 

purposes of Section 2.21 only, the
occurrence of a Liquidity Event shall be deemed continuing notwithstanding that
Excess Availability may thereafter exceed the amount set forth in the preceding
sentence unless and until Excess Availability exceeds such amount for ninety
(90) consecutive days, in which event a Liquidity Event shall no longer be
deemed to be continuing for purposes of Section 2.21; provided that
a Liquidity Event may not be cured as contemplated by this sentence more than
two times in any four-fiscal-quarter period.

 

“Loan Account” has the meaning assigned to such term in Section 2.27.

 

“Loan Documents” means this Agreement, any promissory notes
issued pursuant to the Agreement, any Letters of Credit or Letter of Credit
applications, the Collateral Documents, any Perfection Certificate and the
Intercreditor Agreement.  Any reference
in this Agreement or any other Loan Document to a Loan Document shall include
all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto.

 

“Loan Guarantor” means each Loan Party.

 

“Loan Guaranty” means Article X of this Agreement.

 

“Loan Parties” means Holdings, each Borrower, each Domestic Subsidiary
(other than (i) subject to compliance with Section 5.11, any Domestic
Subsidiary that is an Immaterial Subsidiary and (ii) any Unrestricted
Subsidiary), and any other Person who becomes a party to this Agreement as a
Loan Party pursuant to a Joinder Agreement, and their respective successors and
assigns.

 

“Loans” means the loans and advances made by the Lenders pursuant
to this Agreement, including Revolving Loans, Swingline Loans, Protective
Advances and Incremental Term Loans (if any).

 

“Management Services Agreement” means the agreement among
Holdings, the Company and the Sponsors dated as the Original Closing Date, as
amended from time to time in accordance with the terms hereof, pursuant to
which the Sponsors agree to provide certain advisory services to Holdings and
the Company in exchange for certain fees.

 

“Management Stockholders” means the management officers or
employees of the Company or its Subsidiaries who are investors in Holdings or
any direct or indirect parent thereof on the Effective Date.

 

“Margin Stock” shall have the meaning assigned to such term in
Regulation U.

 

“Material Adverse Effect” means a material adverse effect on (a) the
business, assets, operations or financial condition of the Company and the
Subsidiaries taken as a whole, (b) the ability of the Company and the
other Loan Parties (taken as a whole) to perform their obligations under the
Loan Documents or (c) the rights of, or remedies available to the Agent, the
Co-Collateral Agents, the Issuing Banks or the Lenders under, the Loan
Documents.

 

25

 

“Material Indebtedness” means Indebtedness (other than the Loans
and Letters of Credit), or obligations in respect of one or more Swap
Agreements, of any one or more of Holdings, the Company and its Subsidiaries in
an aggregate principal amount exceeding $50,000,000.  For purposes of determining Material
Indebtedness, the “obligations” of Holdings, the Company or any Subsidiary in respect of any Swap
Agreement at any time shall be the maximum aggregate amount (giving effect to
any netting agreements) that Holdings, the Company or such Subsidiary would be
required to pay if such Swap Agreement were terminated at such time.

 

“Maturity Date” means January 15, 2013 or any earlier date on
which the Commitments are reduced to zero or otherwise terminated pursuant to
the terms hereof.

 

“Maximum Liability” has the meaning assigned to such term in Section 10.09.

 

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

 

“Mortgaged Properties” means, initially, the owned real
properties and leasehold and subleasehold interests of the Loan Parties
specified on Schedule 1.01(c), and shall include each other parcel of real
property and improvements thereto with respect to which a Mortgage is granted
pursuant to Section 5.11.

 

“Mortgage Amendments” has the meaning specified in Section 4.01(p).

 

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

 

“Multiemployer Plan” means a multiemployer plan as defined in Section 3(37)
or 4001(a)(3) of ERISA.

 

“Net Cash Proceeds” means with respect to any Non-Ordinary Course
Asset Dispositions, the amount of all cash proceeds (including, when received,
any deferred or escrowed payments) received by the Company or any of its
Subsidiaries in connection with such transaction, net of reasonable and
customary costs and expenses (including taxes) actually incurred and then paid
or due and payable in connection therewith.

 

“Net Income” means, for any period, the consolidated net income
(or loss) of the Company and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded (a) the
income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary of the Company or is merged into or consolidated with the Company or
any of its Subsidiaries, (b) the income (or deficit) of any Person (other
than a Subsidiary of the Company) in which the Company or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received in cash by the Company or such Subsidiary in the
form of dividends or similar distributions and (c) the undistributed
earnings of any Subsidiary of the Company to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary is not at the
time permitted by the terms of 

 

26

 

any contractual obligation (other than under
any Loan Document) or Requirement of Law applicable to such Subsidiary.

 

“Net Orderly Liquidation Value” means, with respect to Inventory
of any Person, the orderly liquidation value thereof, net of all costs of
liquidation thereof, as based upon the most recent Inventory appraisal
conducted in accordance with this Agreement and expressed as a percentage of Cost
of such Inventory.

 

“Non-Consenting Lender” has the meaning assigned to such term in Section 9.02(d).

 

“Non-Ordinary Course Asset Disposition” mean any sale, transfer
or other disposition by one or more Loan Parties of Inventory with a carrying
value in an aggregate amount in excess of $25,000,000, including any such sale,
transfer or other disposition in bulk (other than customary end of season
clearance sales to jobbers) or in connection with the closing of one or more
retail store locations.

 

“Non-Ordinary Course Borrowing Base Certificate” means a
Borrowing Base Certificate delivered in connection with a Non-Ordinary Course
Asset Disposition pursuant to Section 5.01(h) giving pro forma effect
to such Non-Ordinary Course Asset Disposition.

 

“Non-Paying Borrower” has the meaning assigned to such term in Section 2.25(f).

 

“Non-Paying Guarantor” has the
meaning assigned to such term in Section 10.10.

 

“Obligated Party” has the meaning assigned to such term in Section 10.02.

 

“Obligations” means the Revolving Facility Obligations and the
Incremental Term Loan Obligations.

 

“Original Closing Date” means October 6, 2005.

 

“Other Information” has the meaning assigned to such term in Section 3.11(b).

 

“Other Taxes” means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.

 

“Pari Passu Liens” means any Lien on the Collateral granted for
the benefit of the holders of the 2028 Debentures that is required by the terms
of the indenture applicable thereto as a result of the grant of security
interests pursuant to any Loan Document, the Term Loan Security Documents or
otherwise.

 

“Participant” has the meaning assigned to such term in Section 9.04.

 

“Paying Borrower” has the meaning assigned to such term in Section 2.25(f).

 

27

 

“Paying Guarantor” has the meaning assigned to such term in Section 10.11.

 

“Payment Conditions” means, at any time of determination with
respect to any Specified Payment, as of the date of such Specified Payment and
after giving effect thereto, that (a) no Default or Event of Default
exists or has occurred and is continuing, (b) Excess Availability shall be
not less than 25% of the lesser of (i) the Revolving Commitments and (ii) the
Borrowing Base immediately after giving effect to the making of such Specified
Payment, (c) the Agent and Co-Collateral Agents shall have received
projections reasonably satisfactory to the Agent and the Co-Collateral Agents
demonstrating that Projected Average Excess Availability on the last day of
each fiscal month during the 12-month period immediately succeeding any such
Specified Payment (after giving pro forma effect thereto) shall be not less
than 25% of the lesser of (A) the Revolving Commitments and (B) the
Borrowing Base, and (d) the Fixed Charge Coverage Ratio as of the end of
the most recently ended 12-month period, calculated on a pro forma basis to
give effect to such Specified Payment as if such Specified Payment had been
made as of the first day of such period, shall be equal to or greater than 1.20
to 1.00 or, if the Specified Payment is a Restricted Debt Payment, 1.10 to
1.00; provided that, if Excess Availability at the time of determination
(after giving pro forma effect to any Borrowings made in connection with such
Specified Payment) is greater than 35% of the lesser of (i) the Revolving
Commitments and (ii) the Borrowing Base, clauses (d) and (e) of
the definition of Fixed Charges (including, solely for purposes of this clause
(d), any such Specified Payment constituting a Restricted Payment or Restricted
Debt Payment) shall not be included in Fixed Charges for purposes of
calculating the Fixed Charge Coverage Ratio for purposes of this clause (d).

 

“Payment in Full” means, with respect to any
Obligations, (a) the full and indefeasible cash payment thereof, including any interest, fees, expenses or other amounts that would
accrue and become due but for the commencement of a Bankruptcy Proceeding,
whether or not such amounts are allowed or allowable in whole or in part in
such case; and (b) if
such Obligations are LC Exposure (other than LC Disbursements) or inchoate or
contingent in nature, the payment in full
in cash of cash collateral or, at the Agent’s option, the delivery to the Agent
of a letter of credit payable to the Agent issued by a bank reasonably
acceptable to the Agent and in form and substance reasonably satisfactory to
the Agent, in the
amount of 103% of such Obligations.  No
Loans shall be deemed to have been paid in full until all Commitments related
to such Loans have expired or been terminated.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.

 

“Perfection Certificate” shall mean a certificate in the form of Exhibit I
to the Security Agreement or any other form approved by the Agent.

 

“Permitted Acquisition” means the acquisition by the Company or
any Subsidiary of all or substantially all the assets or businesses of a Person
or of assets constituting a business unit, line of business or division of such
Person or not less than 100% (or such lesser percentage that, when combined
with the percentage of Equity Interests owned by the Company or such Subsidiary
prior to such acquisition, would equal 100%) of the Equity Interests (other
than directors’ qualifying shares) of a Person; provided that as of the
date of such acquisition and after

 

28

 

giving effect thereto, (i) no Default
or Event of Default shall exist or have occurred and be continuing; (ii) the
acquired assets, division or Person is in a substantially similar line of
business as that conducted by the Company and the Subsidiaries during the then
current and most recent fiscal year or businesses reasonably related or
ancillary thereto; (iii) each of the Permitted Acquisition Conditions
shall have been satisfied; (iv) in the event that the purchase price of the proposed
acquisition is greater than $25,000,000, the Agent shall have received, not
less than five Business Days’ prior to the date of consummation of such acquisition,
written notice thereof, together with and including (A) the names of the
parties to such acquisition, (B) the proposed date and amount of the
acquisition, (C) a list and description of the assets or shares to be
acquired, (D) the total purchase price and the terms of payment, and (E) such
other information with respect thereto as the Agent may reasonably request; and  (v) the Company and the Subsidiaries shall comply, and (if
applicable) shall cause the acquired Person to comply, with the applicable provisions
of Section 5.11 and the Collateral Documents.

 

“Permitted Acquisition Conditions” means, with respect to any proposed Permitted Acquisition, that (a) immediately
prior to and after giving effect to such Permitted Acquisition, each of the
Payment Conditions is satisfied, and (b) the Agent shall have received
projections reasonably satisfactory to the Agent demonstrating that the
projected Fixed Charge Coverage Ratio as of the last day of the 12-month period
immediately following the consummation of such Permitted Acquisition, shall be
not less than 1.00 to 1.00 after giving pro forma effect to such Permitted
Acquisition as if such Permitted Acquisition (if applicable to such
calculation) had been made as of the first day of such period.

 

“Permitted Cure Security” shall mean any Qualified Equity
Interest of Holdings.

 

“Permitted Discretion” means a determination made in good faith
and in the exercise of commercially reasonable business judgment.

 

“Permitted Encumbrances” means:

 

(a)                                  Liens for taxes, assessments or governmental
charges which are not overdue for a period of more than thirty (30) days or
which are being contested in good faith and by appropriate proceedings
diligently conducted, if adequate reserves with respect thereto are maintained
on the books of the applicable Person in accordance with GAAP;

 

(b)                                 statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen, repairmen, construction contractors or
other like Liens arising in the ordinary course of business which secure amounts
not overdue for a period of more than thirty (30) days, or if more than thirty
(30) days overdue, are unfiled and no other action has been taken to enforce
such Lien or which are being contested in good faith and by appropriate
proceedings diligently conducted, if adequate reserves with respect thereto are
maintained on the books of the applicable Person in accordance with GAAP;

 

(c)                                  leases, subleases, space leases, licenses or
sublicenses, in each case in the ordinary course of business and which do not
interfere in any material respect with the business of Holdings, the Company
and its Subsidiaries;

 

29

 

(d)                                 pledges and deposits of cash and cash
equivalents made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security or similar laws
or regulations; and pledges and deposits in the ordinary course of business
securing liability for reimbursement or indemnification obligations to (including
obligations in respect of letters of credit or bank guarantees for the benefit
of) insurance carriers providing property, casualty or liability insurance to
Holdings, the Company or any Subsidiary;

 

(e)                                  deposits of cash and cash equivalents to
secure the performance of bids, trade contracts, government contracts, leases,
statutory obligations, surety, stay, customs and appeal bonds, performance
bonds and other obligations of a like nature (including those to secure health,
safety and environmental obligations), in each case incurred in the ordinary
course of business;

 

(f)                                    Liens in respect of judgments that do not
constitute an Event of Default under Section 7.01(j);

 

(g)                                 easements, zoning restrictions,
rights-of-way, restrictions, encroachments and similar encumbrances and minor
title defects on real property imposed by law or arising in the ordinary course
of business, and any other liens scheduled as exceptions on any of the Title
Insurance Policies, which do not in the aggregate materially interfere with the
ordinary conduct of business of the Company or any Subsidiary, and any other
Liens “insured over” by the Title Insurance Company; and

 

(h)                                 rights of setoff and other customary Liens
in favor of issuers of credit cards arising in the ordinary course of business
securing the obligation of the Company and its Subsidiaries to pay customary
fees and expenses in connection with credit card arrangements entered into with
such issuers;

 

provided that the term “Permitted
Encumbrances” shall not include
any Lien securing Indebtedness.

 

“Permitted Holders” means the Sponsors, Management Stockholders
and the Co- Investors.

 

“Permitted Investments” shall mean (a) marketable securities
issued or directly and unconditionally guaranteed as to interest and principal by
the United States government or any agency of the United States government, in
each case having maturities of not more than 12 months from the date of
acquisition thereof; (b) securities issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof or any political subdivision of any such state or any
public instrumentality thereof having maturities of not more than 12 months
from the date of acquisition thereof and, at the time of acquisition, having an
investment grade rating generally available from either S&P or Moody’s (or,
if at any time neither S&P nor Moody’s shall be rating such obligations,
then from another nationally recognized rating service); (c) commercial
paper issued by any Revolving Lender or any bank holding company owning any
Revolving Lender who is not a Defaulted Lender at the time of acquisition
thereof; (d) commercial paper maturing no more than 12 months after the
date of

 

30

 

creation thereof and, at the time of
acquisition, having a rating of at least A-1 or P-1 from either S&P or
Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such
obligations, an equivalent rating from another nationally recognized rating
service); (e) domestic and Eurodollar certificates of deposit or bankers’
acceptances issued or accepted by any Revolving Lender or by any commercial
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia that is at least (i) “adequately
capitalized” (as defined in the regulations of its primary Federal banking
regulator) and (ii) has Tier 1 capital (as defined in such regulations) of
not less than $250,000,000, in each case maturing within 12 months after
issuance or acceptance thereof; (f) repurchase agreements with a term of
not more than 30 days for underlying securities of the type described in
clauses (a), (b) and (e) above entered into with any bank
meeting the qualifications specified in clause (e) above or
securities dealers of recognized national standing; (g) marketable
short-term money market and similar securities having a rating of at least A-1
or P-1 from either S&P or Moody’s (or, if at any time neither S&P nor
Moody’s shall be rating such obligations, an equivalent rating from another
nationally recognized rating service); (h) shares of investment companies
that are registered under the Investment Company Act of 1940 and invest solely
in one or more of the types of securities described in clauses (a) through
(g) above; and (i) in the case of investments by any Foreign
Subsidiary or investments made in a country outside the United States of
America, other customarily utilized high-quality investments in the country
where such Foreign Subsidiary is located or in which such investment is made
that would customarily constitute “cash equivalents”.

 

“Permitted Replacement Credit Card Program” means any private
label credit card program or similar arrangement substantially similar in all
material respects to the HSBC Arrangements, with such modifications as the
Agent shall have consented to in writing prior to the effectiveness thereof
(such consent not to be unreasonably withheld or delayed), which, after notice
to the Agent in accordance with Section 5.07, is entered into by the
Company or any of its Subsidiaries on commercially reasonable terms generally
available at that time (as determined in good faith by the Company), or is in
effect with respect to any Person that becomes a Subsidiary after the date
hereof in connection with a Permitted Acquisition and is not created in
contemplation of or in connection therewith, provided that if such
program grants a security interest in any assets other than those certain
Accounts, receivables, or transferor interest or other similar residual
interests subject to such program or arrangement, including a security interest
in any returned goods, and the grant of such security interest could reasonably
be expected to be detrimental in any material respect to the rights and
interests of the Lenders under the Loan Documents, as determined by the Agent
in its reasonable discretion, such program shall not be considered a Permitted
Replacement Credit Card Program unless and until the Agent and the third party
with whom the program is created have entered into an intercreditor agreement
reasonably satisfactory to the Agent with respect to the priority and
enforcement of such security interests.

 

“Person” means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.

 

“Plan” means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412
of the Code or Section 302 of ERISA, and in respect of which a Borrower or
any ERISA Affiliate is (or, if such plan were

 

31

 

terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Prime Rate” the rate of interest announced by the Agent from
time to time as its prime rate.  Such
rate is set by the Agent on the basis of various factors, including its costs
and desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at, above or
below such rate.  Any change in such rate
announced by the Agent shall take effect at the opening of business on the day
specified in the public announcement of such change.

 

“Projected Average Excess Availability” means the projected
average Excess Availability for each month during any 12-month period as
determined in good faith by the Company and certified by a Financial Officer.

 

“Projections” means the projections of the Company and the
Subsidiaries included in the Information Memorandum and any other projections
and any forward-looking statements of such entities furnished to the Lenders or
the Agent by or on behalf of Holdings, the Company or any of the Subsidiaries
prior to the Effective Date.

 

“Protective Advance” has the meaning assigned to such term in Section 2.04.

 

“Qualified Equity Interests” means any Equity Interests that are
not Disqualified Equity Interests.

 

“Qualified Public Offering” means the initial underwritten public
offering of common Equity Interests of Holdings or any direct or indirect
parent of Holdings or the Company pursuant to an effective registration
statement filed with the SEC in accordance with the Securities Act (other than
a registration statement on Form S-8 or any successor form).

 

“Real Estate” means all of the Company’s and its Subsidiaries’
now or hereafter owned or leased estates in real property, including all fee,
leasehold and future interests, together with all of the Company’s and its
Subsidiaries’ now or hereafter owned or leased interests in the improvements
thereon, the fixtures attached thereto and the easements appurtenant thereto.

 

“Real Property Collateral Requirements” means, with respect to
any Mortgaged Property, each of the following, in form and substance reasonably
satisfactory to the Agent:

 

(a)          a Mortgage on such Mortgaged Property or, where applicable, a Mortgage
Amendment;

 

(b)         evidence that a counterpart of the Mortgage or, if applicable, the
Mortgage Amendment has been recorded or delivered to the appropriate title
insurance company subject to arrangements reasonably satisfactory to the Agent
for the prompt recording thereof;

 

(c)          an ALTA or other mortgagee’s title policy or amendment thereto;

 

32

 

(d)   an
opinion of counsel in the state in which such Mortgaged Real Property is
located with respect to the Mortgage or Mortgage Amendment as the Agent may
reasonably require; and

 

(e)   such
consents, estoppels and other information, documentation and certifications as
may be reasonably required by the Agent.

 

“Recovery” has the meaning specified in Section 7.5(f).

 

“Register” has the meaning assigned to such term in Section 9.04.

 

“Regulation T” means Regulation T of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof, and any successor provision thereto.

 

“Regulation U” means Regulation U of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof, and any successor provision thereto.

 

“Regulation X” means Regulation X of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof, and any successor provision thereto.

 

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

 

“Report” means reports prepared by any Co-Collateral Agent or
another Person showing the results of appraisals, field examinations or audits
pertaining to the Loan Parties’ assets from information furnished by or on
behalf of the Loan Parties, after any Co-Collateral Agent has exercised its
rights of inspection pursuant to this Agreement, which Reports may be
distributed to the Lenders by any Co-Collateral Agent, subject to the
provisions of Section 9.12.

 

“Reported Value” means the value of the Inventory of the Loan
Parties as reflected in the Company’s retail stock ledger and excluding any
Consignment Inventory, plus
Inventory received by any Loan Party and not yet reflected in the retail stock
ledger of the Company, in each case as shown in the most recent Borrowing Base
Certificate delivered pursuant to Section 5.01(h).

 

“Required Incremental Term Loan Lenders” means, at any time,
Incremental Term Loan Lenders holding Incremental Term Loans representing more
than 50% of the sum of all Incremental Term Loans at such time.

 

“Required Lenders” means, at any time, Revolving Lenders having
Revolving Exposure and unused Revolving Commitments representing more than 50%
of the sum of the total Revolving Exposure and unused Revolving Commitments at
such time; provided that the Revolving Exposure and unused Revolving
Commitments of any Defaulting Lender shall be disregarded in the determination
of the Required Lenders at any time.

 

33

 

“Required Reserve Notice” means (a) so long as no Event of
Default has occurred and is continuing, at least three days’ advance notice to
the Borrower Agent, and (b) if an Event of Default has occurred and is
continuing, such advance notice to the Borrower Agent, or no advance notice to
the Borrower Agent, as may reasonably be determined to be appropriate by the
Co-Collateral Agents in their Permitted Discretion to protect the interests of
the Lenders.

 

“Requirement of Law” means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or Regulation or determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.

 

“Reserves” means all (if any) Inventory Reserves and Availability
Reserves (including Banking Services Reserves, Landlord Lien Reserves, Customer
Credit Liability Reserves, Customer Deposits Reserves and reserves for Secured
Swap Obligations) and any and all other reserves which any Co-Collateral Agent
deems necessary in its Permitted Discretion.

 

“Reserve Percentage” means the reserve percentage (expressed as a
decimal, rounded up to the nearest 1/8th of 1%) applicable to member banks
under regulations issued from time to time by the Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as “Eurocurrency liabilities”).

 

“Responsible Officer” of any Person means the chief executive
officer, the president, any vice president, the chief operating officer or any
Financial Officer of such Person and any other officer or similar official
thereof responsible for the administration of the obligations of such Person in
respect of this Agreement, and, as to any document delivered on the Effective
Date (but subject to the express requirements set forth in Article IV),
shall include any secretary or assistant secretary of a Loan Party.  Any document delivered hereunder that is
signed by a Responsible Officer of a Loan Party shall be conclusively presumed
to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Loan Party and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Loan Party.

 

“Restricted Debt Payment” has the meaning set forth in Section 6.08(b).

 

“Restricted Payment” means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in Holdings, the Company or any Subsidiary, or any payment (whether
in cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interests in Holdings or the
Company or any option, warrant or other right to acquire any such Equity
Interests in Holdings or the Company.

 

“Revolving Borrowing” means a request for Revolving Loans.

 

“Revolving Commitment” means, with respect to each Revolving
Lender, the commitment of such Revolving Lender to make Revolving Loans and to
acquire participations in Protective Advances, Letters of Credit and Swingline
Loans hereunder, expressed as an amount 

 

34

 

representing the maximum possible aggregate
amount of such Revolving Lender’s Revolving Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.09,
(b) reduced or increased from time to time pursuant to assignments by or
to such Lender pursuant to Section 9.04 and (c) increased from time
to time pursuant to Section 2.23. 
The initial amount of each Revolving Lender’s Revolving Commitment is
set forth on the Commitment Schedule, or in the Assignment and Assumption
pursuant to which such Lender shall have assumed its Revolving Commitment, as
applicable.  The initial aggregate amount
of the Revolving Lenders’ Revolving Commitments is $600,000,000.

 

“Revolving Commitment Increase” has the meaning set forth in Section 2.23(b).

 

“Revolving Commitment Increase Date” has the meaning set forth in
Section 2.23(b).

 

“Revolving Exposure” means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender’s Revolving
Loans and its LC Exposure and an amount equal to its Applicable Percentage of
the aggregate principal amounts of Swingline Loans and Protective Advances
outstanding at such time.

 

“Revolving Facility Claimholders” means, at any relevant time,
the holders of Revolving Facility Obligations at such time, including without
limitation the Revolving Lenders and the Agent to the extent it is owed any
Revolving Facility Obligations by any Loan Party.

 

“Revolving Facility Obligations” means all present or future
loans, advances, debts, liabilities and obligations (whether or not performance
is then required or contingent, or such amounts are liquidated or determinable)
owing by any Loan Party to any Revolving Lender, Issuing Bank, Co-Collateral
Agent, the Existing Agent or the Agent, or any Affiliate of any thereof, in
respect of any Revolving Loan, LC Exposure, Banking Services Obligations or
Secured Swap Obligations or otherwise, whether or not evidenced by a Note,
arising under or secured by this Agreement or any of the other Loan Documents,
including all principal, interest, fees, expenses, charges, indemnities and
other amounts (including interest, fees, expenses and other amounts accrued or
incurred on and after the filing of a petition initiating any Bankruptcy
Proceeding, whether or not such interest or fees are deemed to accrue, or such
expenses or other amounts are incurred, after the filing of such petition and
whether or not allowed or allowable as a claim in such proceeding), provided
that the term Revolving Facility Obligations shall not include any Incremental
Term Loan Obligations owing to any Incremental Term Loan Lender in its capacity
as such.

 

“Revolving Lender” means, as of any date of determination, a
Lender with a Revolving Commitment or, if the Revolving Commitments have
terminated or expired, a Lender with Revolving Exposure.  Unless the context otherwise requires, the
term “Revolving Lenders” includes the Swingline Lender.

 

“Revolving Loan” means the loans and advances made by the
Revolving Lenders pursuant to this Agreement, including a Loan made pursuant to
Section 2.01(a), Swingline Loans and Protective Advances.

 

35

 

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

 

“Sale and Lease-Back Transaction” has the meaning assigned to
such term in Section 6.06.

 

“Season” means the period from January 1 through July 31
or from August 1 through December 31 of any year.

 

“SEC” means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of its functions.

 

“Second Priority Lien” means any Lien on any asset of any Loan Party
that is granted under the Term Loan Security Documents and that, pursuant and
subject to the provisions of the Intercreditor Agreement, is junior in priority
to the Liens of the Agent in the Collateral.

 

“Secured Obligations” means all Obligations.

 

“Secured Swap Obligations” means all Swap Obligations owing to
the Agent, a Joint Lead Arranger or a co-arranger, a Co-Collateral Agent, a
Revolving Lender or any Affiliate thereof and with respect to which the Company
(or other Loan Party) and the Revolving Lender or other Person referred to
above in this definition party thereto (except in the case of the Agent) shall
have delivered written notice to the Agent, at or prior to the time that the
Swap Agreement relating to such Revolving Facility Obligation is entered into
or, if later, the time that such Revolving Lender becomes a party to this
Agreement, that such a transaction has been entered into and that it
constitutes a Secured Swap Obligation entitled to the benefits of the
Collateral Documents and the Intercreditor Agreement.

 

“Secured Parties” has the meaning assigned to such term in the
Security Agreement.

 

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

 

“Security Agreement” means that certain Pledge and Security
Agreement, originally dated as of the Original Closing Date, between the Loan
Parties and the Existing Agent, as amended and restated as of the date hereof
with the Agent in place of the Existing Agent, and as the same may be further
amended, amended and restated or otherwise modified in accordance with the
terms of the Loan Documents.

 

“Senior Note Documents” means the indenture under which the
Senior Notes are issued and all other instruments, agreements and other
documents evidencing the Senior Notes or providing for any Guarantee or other
right in respect thereof.

 

“Senior Notes” means (a) the Company’s 9%/93⁄4% Senior Notes
due 2015, in an initial aggregate principal amount of $700,000,000 and (b) any
additional Senior Notes issued 

 

36

 

after the Original Closing Date pursuant to
the same Senior Note Documents to the extent comprising interest accrued on the
Senior Notes and not paid in cash.

 

“Senior Secured Term Facility Credit Agreement” means the Credit
Agreement, dated as of October 6, 2005, as amended,  among Holdings, the Company, the subsidiaries
of the Company from time to time party thereto, Credit Suisse, as
administrative agent and collateral agent, and the lenders from time to time
party thereto, as such Credit Agreement may be amended, supplemented, amended
and restated or otherwise modified from time to time.

 

“Senior Secured Term Loan Facility” means (i) the credit
facility provided for under the Senior Secured Term Facility Credit Agreement,
including any guarantees, collateral documents, instruments and agreements
executed in connection therewith, and (ii) any amendments, supplements,
modifications, extensions, replacements, renewals, restatements, refundings or
refinancings thereof and any indentures or credit facilities or commercial
paper facilities with banks or other institutional lenders or investors that
extend, replace, refund, refinance, renew or defease any part of the loans,
notes, other credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility or indenture that increases the
amount borrowable thereunder or alters the maturity thereof (provided
that such increase in borrowings is permitted under Section 6.01(k)(ii)),
and provided that any extension of credit referred to in clause (ii) shall
comply with the requirements of Section 6.01(g) as though the same
were a refinancing of the Senior Secured Term Facility Credit Agreement.

 

“Senior Subordinated Notes” means the Company’s 103/8% Senior Subordinated Notes due 2015, in an initial aggregate principal
amount of $500,000,000.

 

“Senior Subordinated Note Documents” means the indenture under
which the Senior Subordinated Notes are issued and all other instruments,
agreements and other documents evidencing the Senior Subordinated Notes or
providing for any Guarantee or other right in respect thereof.

 

“Settlement”
and “Settlement Date” have the meanings specified in Section 2.05(b).

 

“Shrink” means Inventory identified by the Company as lost,
misplaced, or stolen.

 

“Shrink Reserve” means an amount reasonably estimated by any
Co-Collateral Agent to be equal to that amount which is required in order that
the Shrink reflected in current retail stock ledger of the Company and its
Subsidiaries would be reasonably equivalent to the Shrink calculated as part of
the Company’s most recent physical inventory (it being understood and agreed
that no Shrink Reserve established by any Co-Collateral Agent shall be
duplicative of any Shrink as so reflected in the current retail stock ledger of
the Company and its Subsidiaries or estimated by the Company for purposes of
computing the Borrowing Base other than at month’s end).

 

“Specified Payment” means (a) any Permitted Acquisition, (b) any
investment, loan or advance pursuant to Section 6.04(v), (c) any
Restricted Payment pursuant to Section 6.08(a)(x), and (d) any
Restricted Debt Payment pursuant to Section 6.08(b)(ix) or Section 6.08(b)(xi).

 

37

 

“Specified Segregated Accounts” means those segregated checking
or other demand deposit accounts which the Company designates to the Agent as
such in writing, into which (a) funds from the sale of Inventory held by
the Company or any of its subsidiaries on a consignment basis, (b) funds
from the sale of Inventory relating to a leased department within one of the
Company’s or any of its subsidiaries’ retail stores, in the case of each of
clause (a) and (b), which Inventory is not owned by a Loan Party (and
would not be reflected on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with GAAP), or (c) in-store payments
in respect of private label credit cards subject to the HSBC Arrangements or
any Permitted Replacement Credit Card Program are made.

 

“Sponsors” means TPG Capital and Warburg Pincus LLC and their
respective Affiliates but not including, however, any portfolio companies of
any of the foregoing.

 

“Subordinated Indebtedness” of a Person means any Indebtedness of
such Person the payment of which is subordinated to payment of the Secured
Obligations on terms and conditions no less favorable to the Agent and the
Lenders than those contained in the Senior Subordinated Note Documents.

 

“subsidiary” means, with respect to any Person (the “parent”)
at any date, any corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held,
or (b) that is, as of such date, otherwise Controlled, by the parent or
one or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent.

 

“Subsidiary” means, unless the context otherwise requires, a
subsidiary of the Company. 
Notwithstanding the foregoing (and except for purposes of
Sections 3.06, 3.09, 3.10, 3.15, 5.04, 5.08, and the definition of
Unrestricted Subsidiary contained herein), an Unrestricted Subsidiary shall be
deemed not to be a Subsidiary of the Company or any of its Subsidiaries for
purposes of this Agreement.

 

“Substitution of Agent and Joinder Agreement” means the
Substitution of Agent and Joinder Agreement dated as of the date hereof among
the Agent, the Existing Agent, the Term Loan Agent and the Loan Parties.

 

“Super Majority Lenders” means, at any time, Revolving Lenders
having Revolving Exposure and unused Revolving Commitments representing more
than 66-2/3% of the sum of the total Revolving Exposure and unused Revolving
Commitments at such time; provided that the Revolving Exposure and
unused Revolving Commitments of any Defaulting Lender shall be disregarded in
the determination of the Super Majority Lenders at any time.

 

“Swap Agreement” means any agreement
with respect to any Derivative Transaction between the Company or any
Subsidiary and any other Person.

 

“Swap Obligations” of a Person means any and all obligations of
such Person, whether absolute or contingent and however and whenever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions 

 

38

 

therefor), under (a) any and all Swap
Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Swap Agreement transaction.

 

“Swingline Lender” means Bank of America, N.A., in its capacity
as lender of Swingline Loans hereunder.

 

“Swingline Loan” means a Loan made pursuant to Section 2.05.

 

“Synthetic Lease” means, as to any Person, any lease (including
leases that may be terminated by the lessee at any time) of any property (whether
real, personal or mixed) (a) that is accounted for as an operating lease
under GAAP and (b) in respect of which the lessee retains or obtains
ownership of the property so leased for U.S. 
Federal income tax purposes, other than any such lease under which such
person is the lessor.

 

“Synthetic Lease Obligations” means, as to any Person, an amount
equal to the capitalized amount of the remaining lease payments under any
Synthetic Lease that would appear on a balance sheet of such person in
accordance with GAAP if such obligations were accounted for as Capital Lease
Obligations.

 

“Taxes” means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.

 

“Term Loan Pari Passu Lien Obligations” means any Indebtedness
constituting debt securities incurred pursuant to an indenture with an
institutional trustee or loans incurred in the bank credit market (including
institutional investor participation therein), which Indebtedness is secured
with Liens that rank pari passu with the Liens securing the Indebtedness under
the Senior Secured Term Loan Facility outstanding on the Effective Date.

 

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

 

“Term Loan Prepayment Conditions” means, at any time of determination, with respect to any prepayment of
Incremental Term Loans, that immediately prior to such prepayment, and after
giving effect thereto, either (a) the Payment Conditions shall be
satisfied or (b) no Revolving Loans shall then be outstanding and the
Agent and Co-Collateral Agents shall have received projections reasonably
satisfactory to the Agent demonstrating that Projected Average Excess
Availability for each fiscal month during the period of 12 fiscal months
immediately succeeding any such prepayment shall be not less than 50% of the
lesser of (i) the Revolving Commitments and (ii) the Borrowing Base
after giving pro forma effect to such prepayment as if such prepayment (if
applicable to such calculation) had been made as of the first day of each such
period.

 

“Title Insurance Company” means the title insurance company
providing the Title Insurance Policies.

 

“Title Insurance Policies” means the lender’s title insurance
policies issued to Agent with respect to the Mortgaged Properties.

 

39

 

“Total Outstandings” means, at any time of determination, the sum
of (a) the aggregate principal amount of all Revolving Loans then
outstanding, (b) the aggregate LC Exposure then outstanding, and (c) the
aggregate principal amount of all Incremental Term Loans then outstanding .

 

“Transactions” means, collectively, the execution, delivery and
performance by the Loan Parties of the Loan Documents to which they are a party
and the borrowings thereunder.

 

“Trigger Event” means, at any time, that Excess Availability is
less than the greater of (a) $60,000,000 and (b) 15% of the lesser of
(i) the aggregate Revolving Commitments and (ii) the Borrowing
Base.  Upon the occurrence of any Trigger
Event, such Trigger Event shall be deemed to be continuing notwithstanding that
Excess Availability may thereafter exceed the amount set forth in the preceding
sentence unless and until Excess Availability exceeds such amount for ninety
(90) consecutive days, in which event a Trigger Event shall no longer be deemed
to be continuing.

 

“Type”, when used in reference to any Loan or Borrowing, refers
to whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBOR Rate or the
Alternate Base Rate.

 

“UCC” means the Uniform Commercial Code as in effect from time to
time in the State of New York or any other state the laws of which are required
to be applied in connection with the issue of perfection of security interests.

 

“Unliquidated Obligations” means, at any time, any Secured
Obligations (or portion thereof) that are contingent in nature or unliquidated
at such time, including any Secured Obligation that is:  (i) an obligation to reimburse a bank
for drawings not yet made under a letter of credit issued by it; (ii) any
other obligation (including any guarantee) that is contingent in nature at such
time; or (iii) an obligation to provide collateral to secure any of the
foregoing types of obligations; but excluding unripened or contingent
obligations related to indemnification under Section 9.03 for which no
written demand has been made.

 

“Unrestricted Subsidiary” means (a) Neiman Marcus Funding
Corporation and its subsidiaries and (b) any Subsidiary of the Company
that is acquired or created after the Closing Date and designated by the
Company as an Unrestricted Subsidiary hereunder by written notice to the Agent
in accordance with Section 5.13.

 

“USA PATRIOT Act” means The Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (Title III of Pub. L.  No. 107-56
(signed into law October 26, 2001)), as amended or modified from time to
time.

 

“Withdrawal Liability” means liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.

 

40

 

SECTION 1.02.              Classification of Loans and
Borrowings.  For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g.,
a “Revolving Loan”) or by Type (e.g., a “LIBOR Rate Loan”)
or by Class and Type (e.g., a “LIBOR Rate Revolving Loan”).  Borrowings also may be classified and
referred to by Class (e.g., a “Revolving Borrowing”) or by
Type (e.g., a “LIBOR Rate Borrowing”) or by Class and Type (e.g.,
a “LIBOR Rate Revolving Borrowing”).

 

SECTION 1.03.              Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

 

SECTION 1.04.              Accounting Terms; GAAP.  Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if
the Company notifies the Agent that the Company 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
(or if the Agent notifies the Company that the Required Lenders request an
amendment to any provision hereof for such purpose), 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 1.05.              Amendment and Restatement of
Existing Credit Agreement.  This
Agreement amends and restates the Existing Credit Agreement, and on and after
the date hereof, each reference in any Loan Document to “the Credit Agreement”,
“therein”, “thereof”, “thereunder” or words of similar import when referring to
the Existing Credit Agreement shall mean, and shall hereafter be a reference
to, the Existing Credit Agreement, as amended and restated by this
Agreement.  Each Loan Party hereby
acknowledges and agrees, as of the date hereof, for itself and for each of its Subsidiaries,
that it does not have any claims, offsets, counterclaims, cross-complaints,
defenses or demands of any kind or nature whatsoever under or relating to the
Existing Credit Agreement, the other “Loan Documents” (as defined in the
Existing Credit Agreement) or any of the obligations existing thereunder that
could be asserted to 

 

41

 

reduce or
eliminate all or any part of the obligation of any Loan Party to pay any
amounts owed thereunder, or to assert any claim for affirmative relief or
damages against any lender party thereto.

 

ARTICLE II

 

THE CREDITS

 

SECTION 2.01.              Revolving Commitments.  Subject to the terms and conditions set forth
herein, each Revolving Lender agrees, severally and not jointly, to make
Revolving Loans to the Borrowers from time to time during the Availability
Period in an aggregate principal amount that will not result in (i) such
Revolving Lender’s Revolving Exposure exceeding such Revolving Lender’s
Revolving Commitment or (ii) the total Revolving Exposures exceeding the
lesser of (x) the sum of the total Revolving Commitments and (y) the
Borrowing Base (subject to the Agent’s authority, in its sole discretion, to
make Protective Advances pursuant to the terms of Section 2.04).  Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrowers may borrow, repay and
reborrow Revolving Loans.

 

SECTION 2.02.              Revolving Loans and Borrowings.  (a)  Each Revolving Loan (other than a
Swingline Loan or a Protective Advance) shall be made as part of a Borrowing
consisting of Loans of the same Class and Type made by the Revolving
Lenders ratably in accordance with their respective Commitments of the
applicable Class.  Any Protective Advance
and any Swingline Loan shall be made in accordance with the procedures set
forth in Sections 2.04 and 2.05, respectively.

 

(b)           Subject to Section 2.14, each
Revolving Borrowing shall be comprised entirely of ABR Loans or LIBOR Rate
Loans as the Borrower Agent may request in accordance herewith.  Each Swingline Loan and each Protective
Advance shall be an ABR Loan.  Each Revolving Lender at its option may make any LIBOR Rate
Loan by causing any domestic or foreign branch or Affiliate of such Revolving Lender to make such Revolving Loan; provided
that (i) any exercise of such option shall not affect the obligation of
the Borrowers to repay such Revolving Loan in accordance with the terms of this Agreement
and (ii) in exercising such option, such Revolving Lender shall use reasonable efforts to
minimize any increase in the Adjusted LIBOR Rate or increased costs to the
Borrowers resulting therefrom (which obligation of such Lender shall not
require it to take, or refrain from taking, actions that it determines would
result in increased costs for which it will not be compensated hereunder or
that it otherwise determines would be disadvantageous to it and in the event of
such request for costs for which compensation is provided under this Agreement,
the provisions of Section 2.15 shall apply).

 

(c)           At the commencement of each Interest
Period for any LIBOR Rate Revolving Borrowing, such Revolving Borrowing shall comprise an aggregate
principal amount that is an integral multiple of $1,000,000 and not less than
$5,000,000.  Each ABR Revolving Borrowing
when made shall be in a minimum principal amount of $1,000,000; provided
that an ABR Revolving Borrowing may be made in a lesser aggregate amount that
is equal to the entire unused balance of the total Revolving Commitments or that is required to finance
the reimbursement of an LC Disbursement as contemplated by Section 2.06(e).  Revolving 

 

42

 

Borrowings of more than one Type and Class may
be outstanding at the same time; provided that there shall not at any
time be more than a total of ten different Interest Periods in effect for LIBOR
Rate Revolving Borrowings at any time outstanding.

 

(d)           Notwithstanding any other provision
of this Agreement, the Borrower Agent shall not be entitled to request, or to
elect to convert or continue, any Revolving Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.

 

SECTION 2.03.              Requests for Revolving
Borrowings.  To request a Revolving
Borrowing, the Borrower Agent shall notify the Agent of such request either in
writing by delivery of a Borrowing Request (by hand or facsimile) signed by the
Borrower Agent or by telephone (a) in the case of a LIBOR Rate Borrowing,
not later than 11:00 a.m., New York City time, three (3) Business
Days (or, in the case of a LIBOR Rate Borrowing to be made on the Effective
Date, two (2) Business Days) before the date of the proposed Borrowing or (b) in
the case of an ABR Borrowing (including any such notice of an ABR Borrowing to
finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e)),
not later than 10:00 a.m., New York City time, on the date of the proposed
Borrowing.  Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or facsimile to the Agent of a written Borrowing Request signed by the
Borrower Agent.  Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.01:

 

(i)    the
aggregate amount of the requested Revolving Borrowing.

 

(ii)   the
date of such Revolving Borrowing, which shall be a Business Day;

 

(iii)  whether
such Revolving Borrowing is to be an ABR Borrowing or a LIBOR Rate Borrowing;

 

(iv)  in the
case of a LIBOR Rate Borrowing, the initial Interest Period to be applicable
thereto, which shall be a period contemplated by the definition of the term “Interest
Period”; and

 

(v)   the
location and number of the Borrower’s account to which funds are to be
disbursed.

 

If no election as to the Type of Revolving Borrowing is specified, then
the requested Revolving Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with
respect to any requested LIBOR Rate Borrowing, then the Borrower Agent shall be
deemed to have selected an Interest Period of one month’s duration.  Promptly following receipt of a Borrowing
Request in accordance with this Section, the Agent shall advise each Lender of
the details thereof and of the amount of such Lender’s Loan to be made as part
of the requested Borrowing.

 

SECTION 2.04.              Protective Advances.  (a)  Subject to the limitations set
forth below (and notwithstanding anything to the contrary in Section 4.02),
the Agent is authorized by the Borrowers and the Revolving Lenders, from time
to time in the Agent’s sole discretion (but shall have absolutely no
obligation), to make Loans to the Borrowers, on behalf of all Lenders at

 

43

 

any time that any
condition precedent set forth in Section 4.02 has not been satisfied or
waived, which the Agent, in its Permitted Discretion, deems necessary or
desirable (x) to preserve or protect the Collateral, or any portion
thereof, (y) to enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations, or (z) to pay any other
amount chargeable to or required to be paid by the Borrowers pursuant to the
terms of this Agreement, including payments of reimbursable expenses (including
costs, fees, and expenses as described in Section 9.03) and other sums
payable under the Loan Documents (each such Loan, a “Protective Advance”).  Any Protective Advance may be made in a
principal amount that would cause the aggregate Revolving Exposure to exceed
the Borrowing Base; provided that no Protective Advance may be made to
the extent that, after giving effect to such Protective Advance (together with
the outstanding principal amount of any outstanding Protective Advances), the
aggregate principal amount of Protective Advances outstanding hereunder would
exceed five percent (5%) of the Borrowing Base as determined on the date of
such proposed Protective Advance; and provided  further that, the
aggregate amount of outstanding Protective Advances plus
the aggregate of all other Revolving Exposure shall not exceed the aggregate
total Commitments.  No Protective Advance
may remain outstanding for more than forty-five (45) days without the consent
of the Required Lenders.  Protective
Advances may be made even if the conditions precedent set forth in Section 4.02
have not been satisfied or waived.  Each
Protective Advance shall be secured by the Liens in favor of the Agent in and
to the Collateral and shall constitute Revolving Facility Obligations
hereunder.  The Agent’s authorization to
make Protective Advances may be revoked at any time by the Required
Lenders.  Any such revocation must be in
writing and shall become effective prospectively upon the Agent’s receipt
thereof.  The making of a Protective
Advance on any one occasion shall not obligate the Agent to make any Protective
Advance on any other occasion.  At any
time that the conditions precedent set forth in Section 4.02 have been
satisfied or waived, the Agent may request the Revolving Lenders to make a
Revolving Loan to repay a Protective Advance. 
At any other time, the Agent may require the Lenders to fund their risk
participations described in Section 2.04(b).

 

(b)           Upon the making of a Protective
Advance by the Agent (whether before or after the occurrence of a Default),
each Revolving Lender shall be deemed, without further action by any party
hereto, unconditionally and irrevocably to have purchased from the Agent
without recourse or warranty, an undivided interest and participation in such
Protective Advance in proportion to its Applicable Percentage.  From and after the date, if any, on which any
Revolving Lender is required to fund its participation in any Protective
Advance purchased hereunder, the Agent shall promptly distribute to such
Revolving Lender, such Revolving Lender’s Applicable Percentage of all payments
of principal and interest and all proceeds of Collateral received by the Agent
in respect of such Protective Advance.

 

SECTION 2.05.              Swingline Loans.  (a)  Subject to the terms and conditions
set forth herein, the Swingline Lender may in its discretion, and in reliance
upon the agreements of the other Revolving Lenders set forth in this Section 2.05,
make available Swingline Loans to the Borrowers from time to time during the
Availability Period in an aggregate principal amount at any time outstanding
that will not result in (i) the aggregate principal amount of outstanding
Swingline Loans exceeding $45,000,000 or (ii) the total Revolving
Exposures exceeding the lesser of the total Revolving Commitments and the
Borrowing Base; provided that the Swingline Lender shall not be required
to make a Swingline Loan to refinance an outstanding Swingline Loan.  Notwithstanding anything herein to the
contrary, the Swingline Lender shall not be 

 

44

 

obligated to fund
the percentage of any Swingline Loan allocable to any Impacted Lender and with
respect to any portion of a Swingline Loan so not funded, such Impacted Lender
shall not have any obligation to make Revolving Loans or to purchase
participation interests in accordance with Section 2.05(c) and any
pro rata calculations related to such Swingline Loans for purposes thereof
shall disregard such Impacted Lender. 
Within the foregoing limits and subject to the terms and conditions set
forth herein, the Borrowers may borrow, prepay and reborrow Swingline
Loans.  To request a Swingline Loan, the
Borrower Agent shall notify the Agent of such request by telephone (confirmed
by facsimile), not later than 12:00 p.m. (noon), New York City time, on
the day of a proposed Swingline Loan. 
Each such notice shall be irrevocable and shall specify the requested
date (which shall be a Business Day) and amount of the requested Swingline Loan.  The Agent will promptly advise the Swingline
Lender of any such notice received from the Borrower Agent.  The Swingline Lender shall make each
Swingline Loan available to the Borrowers by means of a credit to the Funding
Account or otherwise in accordance with the instructions of the Borrower Agent
(including, in the case of a Swingline Loan made to finance the reimbursement
of an LC Disbursement as provided in Section 2.06(e), by remittance to the
applicable Issuing Bank, and in the case of repayment of another Loan or fees
or expenses as provided by Section 2.18(c), by remittance to the Agent to
be distributed to the Lenders) on the requested date of such Swingline Loan.

 

(b)           To facilitate administration
of the Revolving Loans, the Revolving Lenders and the Agent agree (which
agreement is solely among them, and not for the benefit of or enforceable by
any Borrower) that in order to facilitate the administration of this Agreement
and the other Loan Documents, settlement among them as to the Revolving Loans and
the Swingline Loans and the Protective Advances shall take place on a periodic
basis in accordance with this clause (b). 
The Agent
shall request settlement (a “Settlement”) with the Revolving Lenders on
at least a weekly basis, or on a more frequent basis if so determined by the
Agent, (A) on behalf of the Swingline Lender, with respect to each
outstanding Swingline Loan and (B) with respect to collections received,
in each case, by notifying the Revolving Lenders of such requested Settlement
by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 12:00 noon, New York City Time, on the date
of such requested Settlement (the “Settlement Date”).  Each Revolving Lender (other than the
Swingline Lender, in the case of Swingline Loans) shall make the amount of such
Revolving Lender’s Applicable Percentage of the outstanding principal amount of
the Swingline Loans with respect to which Settlement is requested available to
the Agent, to such account of the Agent as the Agent may designate, not later
than 3:00 p.m., New York City time, on the Settlement Date applicable
thereto, which may occur before or after the occurrence or during the
continuation of a Default or an Event of Default and whether or not the applicable
conditions precedent set forth in Article IV have then been satisfied
without regard to the any minimum amount specified therein.  Such amounts made available to the Agent
shall be applied against the amounts of the applicable Swingline Loan and, together
with the portion of such Swingline Loan representing the Swingline Lender’s pro
rata share thereof, shall constitute Revolving Loans of the Revolving
Lenders.  If any such amount is not made
available to the Agent by any Revolving Lender on the Settlement Date
applicable thereto, the Agent shall, on behalf of the Swingline Lender with
respect to each outstanding Swingline Loan, be entitled to recover such amount
on demand from such Revolving Lender together with interest thereon at the
Federal Funds Effective Rate for the first three days from and after the
Settlement Date and thereafter at the interest rate then applicable to
Revolving Loans.  Between Settlement
Dates the Agent may pay over to the 

 

45

 

Swingline Lender any payments received by the
Agent, which in accordance with the terms of this Agreement would be applied to
the reduction of the Revolving Loans, for application to the Swingline Lender’s
Revolving Loans or Swingline Loans.  If,
as of any Settlement Date, collections received since the then immediately
preceding Settlement Date have been applied to the Swingline Lender’s Revolving
Loans, the Swingline Lender shall pay to the Agent for the accounts of the
Revolving Lenders, to be applied to the outstanding Revolving Loans of such
Revolving Lenders, an amount such that each Revolving Lender shall, upon
receipt of such amount, have, as of such Settlement Date, its Applicable
Percentage of the Revolving Loans. 
During the period between Settlement Dates, the Swingline Lender with
respect to Swingline Loans, the Agent with respect to Protective Advances and
each Revolving Lender with respect to its Revolving Loans shall be entitled to
interest thereon at the applicable rate or rates payable under this Agreement.

 

(c)           In addition, the Swingline Lender may
by written notice given to the Agent not later than 1:00 p.m., New York
City time, on any Business Day require the Revolving Lenders to acquire
participations on such Business Day in all or a portion of the Swingline Loans
outstanding.  Such notice shall specify
the aggregate amount of Swingline Loans in which Revolving Lenders will
participate.  Promptly upon receipt of such
notice, the Agent will give notice thereof to each Revolving Lender, specifying
in such notice such Revolving Lender’s Applicable Percentage of such Swingline
Loan or Loans.  Each Revolving Lender
hereby absolutely and unconditionally agrees, upon receipt of notice as
provided above, to pay to the Agent, for the account of the Swingline Lender,
such Revolving Lender’s Applicable Percentage of such Swingline Loan or
Loans.  Each Revolving Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. 
Each Revolving Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner
as provided in Section 2.07 with respect to Loans made by such Revolving
Lender (and Section 2.07 shall apply, mutatis  mutandis, to
the payment obligations of the Revolving Lenders), and the Agent shall promptly
pay to the Swingline Lender the amounts so received by it from the Revolving
Lenders.  The Agent shall notify the
Borrower Agent of any participations in any Swingline Loan acquired pursuant to
this paragraph, and thereafter payments in respect of such Swingline Loan shall
be made to the Agent and not to the Swingline Lender.  Any amounts received by the Swingline Lender
from the Borrowers (or other party on behalf of any Borrower) in respect of a
Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale
of participations therein shall be promptly remitted to the Agent; any such
amounts received by the Agent shall be promptly remitted by the Agent to the
Revolving Lenders that shall have made their payments pursuant to this
paragraph and to the Swingline Lender, as their interests may appear; provided
that any such payment so remitted shall be repaid to the Swingline Lender or to
the Agent, as applicable, if and to the extent such payment is required to be
refunded to any Borrower for any reason. 
The purchase of participations in a Swingline Loan pursuant to this
paragraph shall not relieve the Borrowers of any default in the payment
thereof.

 

SECTION 2.06.              Letters of Credit.  (a)  General.  On and after the Effective Date, each
Existing Letter of Credit shall be deemed to be a Letter of Credit issued
hereunder for

 

46

 

all purposes of
this Agreement and the other Loan Documents and for purposes hereof will be
deemed to have been issued on the Effective Date.  Subject to the terms and conditions set forth
herein, (i) each Issuing Bank agrees, in reliance upon the agreements of
the other Revolving Lenders set forth in this Section 2.06, (A) from
time to time on any Business Day during the period from the Effective Date to
but not including the 30th day prior to the Maturity Date, upon the request of
the Borrower Agent, to issue Letters of Credit denominated in Dollars only and
issued on sight basis only for the account of one or more of the Borrowers (or
any other Subsidiary of the Company so long as the Company is a joint and
several co-applicant, and references to the Company or a “Borrower” in this Section 2.06
shall be deemed to include reference to such Subsidiary) and to amend or renew
Letters of Credit previously issued by it, in accordance with Section 2.06(b),
and (B) to honor drafts under the Letters of Credit, and (ii) the
Revolving Lenders severally agree to participate in the Letters of Credit
issued pursuant to Section 2.06(d). 
Subject to the terms and conditions hereof, the Borrowers’ ability to
obtain Letters of Credit shall be fully revolving, and accordingly the
Borrowers may, during the foregoing period, obtain Letters of Credit to replace
Letters of Credit that have expired or that have been drawn upon and
reimbursed.

 

(b)           Notice of Issuance, Amendment,
Renewal, Extension; Certain Conditions. 
To request the issuance of a Letter of Credit (or the amendment, renewal
or extension of an outstanding Letter of Credit), the Borrower Agent shall hand
deliver or facsimile (or transmit by electronic communication, if arrangements
for doing so have been approved by the applicable Issuing Bank) to the
applicable Issuing Bank and the Agent, at least two (2) Business Days in
advance of the requested date of issuance (or such shorter period as is
acceptable to the applicable Issuing Bank), a request to issue in the form of Exhibit E
attached hereto (each a “Letter of Credit Request”).  To request an amendment, extension or renewal
of a Letter of Credit, the Borrower Agent shall submit such a request on its
letterhead, addressed to the applicable Issuing Bank (with a copy to the Agent)
at least two (2) Business Days in advance of the requested date of
amendment, extension or renewal, identifying the Letter of Credit to be
amended, renewed or extended, and specifying the proposed date (which shall be
a Business Day) and other details of the amendment, extension or renewal.  Requests for issuance, amendment, renewal or
extension must be accompanied by such other information as shall be necessary
to issue, amend, renew or extend such Letter of Credit.  If requested by the applicable Issuing Bank,
the Borrower Agent also shall submit a letter of credit application on such
Issuing Bank’s standard form in connection with any request for a Letter of
Credit.  In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by the Borrower Agent to, or entered into by the Borrower Agent or
any Borrower with, the applicable Issuing Bank relating to any Letter of Credit,
the terms and conditions of this Agreement shall control.  A Letter of Credit shall be issued, amended,
renewed or extended only with the approval of the Agent and if (and on
issuance, amendment, renewal or extension of each Letter of Credit the applicable
Borrower shall be deemed to represent and warrant that), after giving effect to
such issuance, amendment, renewal or extension (i) the LC Exposure shall
not exceed $150,000,000 and (ii) the total Revolving Exposures shall not
exceed the lesser of the total Commitments and the Borrowing Base.  Promptly after the delivery of any Letter of
Credit or any amendment to a Letter of Credit to an advising bank with respect
thereto or to the beneficiary thereof, the applicable Issuing Bank will also
deliver to the Borrower Agent and the Agent a true and complete copy of such
Letter of Credit or amendment.  Upon
receipt of such Letter of Credit or 

 

47

 

amendment, the Agent shall notify the Revolving
Lenders, in writing, of such Letter of Credit or amendment, and if so requested
by a Revolving Lender the Agent will provide such Revolving Lender with copies
of such Letter of Credit or amendment. 
With respect to commercial Letters of Credit, each Issuing Bank shall,
on the first Business Day of each week, submit to the Agent, by facsimile, a
report detailing the daily aggregate total of commercial Letters of Credit for
the previous calendar week.  Anything
contained herein to the contrary notwithstanding, no Issuing Bank shall have
any obligation to issue a requested Letter of Credit or any other Letter of
Credit if at such time any Revolving Lender is an Impacted Lender unless the
Borrowers shall have cash collateralized such Impacted Lender’s Applicable
Percentage of the requested Letter of Credit in accordance with the procedures
set forth in paragraph (j) below, or other arrangements satisfactory to
such Issuing Bank have been entered into with the Borrowers or such Impacted
Lender to eliminate such Issuing Bank’s risk with respect to such Impacted
Lender.

 

(c)           Expiration Date.  Each standby Letter of Credit shall expire
not later than the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit and (ii) the date that is five (5) Business
Days prior to the Maturity Date; provided that any standby Letter of
Credit may provide for the automatic extension thereof for any number of
additional periods each of up to one year in duration (none of which, in any
event, shall extend beyond the date referred to in clause (ii) of
this paragraph (c)).  Each
commercial Letter of Credit shall expire on the earlier of (i) 180 days
after the date of the issuance of such Letter of Credit and (ii) the date
that is thirty (30) days prior to the Maturity Date.

 

(d)           Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the applicable Issuing Bank or the Revolving
Lenders, the applicable Issuing Bank hereby grants to each Revolving Lender,
and each Revolving Lender hereby acquires from such Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit.  In consideration and in
furtherance of the foregoing, each Revolving Lender hereby absolutely and
unconditionally agrees to pay to the Agent, for the account of the applicable
Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made
by such Issuing Bank and not reimbursed by the Borrowers on the date due as
provided in paragraph (e) of this Section 2.06, or of any
reimbursement payment required to be refunded to any Borrower for any
reason.  Each Revolving Lender acknowledges
and agrees that its obligation to acquire participations pursuant to this
paragraph in respect of Letters of Credit is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including any amendment,
renewal or extension of any Letter of Credit or the occurrence and continuance
of a Default or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.

 

(e)           Reimbursement.  If the applicable Issuing Bank shall make any
LC Disbursement in respect of a Letter of Credit, the Borrowers shall reimburse
such LC Disbursement by paying to the Agent (or, in the case of documentary
Letters of Credit, the applicable Issuing Bank) an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the Business Day
immediately following the date the Borrower Agent receives notice of such LC
Disbursement under paragraph (g) of this Section 2.06; provided
that the Borrower Agent may, subject to the conditions to borrowing set forth
herein, request in

 

48

 

accordance with Section 2.03 or 2.05 that such
payment be financed with an ABR Revolving Borrowing or Swingline Loan in an
equivalent amount and, to the extent so financed, the Borrowers’ obligation to
make such payment shall be discharged and replaced by the resulting ABR
Revolving Borrowing or Swingline Loan. 
If the Borrowers fail to make such payment when due, the Agent shall notify
each Revolving Lender of the applicable LC Disbursement, the payment then due
from the Borrowers in respect thereof and such Lender’s Applicable Percentage
thereof.  Promptly following receipt of
such notice, each Revolving Lender shall pay to the Agent its Applicable
Percentage of the payment then due from the Borrowers, in the same manner as
provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07
shall apply, mutatis  mutandis, to the payment obligations of the
Revolving Lenders), and the Agent shall promptly pay to the applicable Issuing
Bank the amounts so received by it from the Revolving Lenders.  Promptly following receipt by the Agent of
any payment from the Borrowers pursuant to this paragraph, the Agent shall
distribute such payment to the applicable Issuing Bank or, to the extent that
Revolving Lenders have made payments pursuant to this paragraph to reimburse
such Issuing Bank, then to such Lenders and such Issuing Bank as their
interests may appear.

 

(f)            Obligations Absolute.  The Borrowers’ obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section 2.06
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or this Agreement, or any term or
provision therein, (ii) any draft or other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any respect or
any statement therein being untrue or inaccurate in any respect, (iii) payment
by the applicable Issuing Bank under a Letter of Credit against presentation of
a draft or other document that does not comply with the terms of such Letter of
Credit, or (iv) any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section, constitute a legal or equitable discharge of, or provide a right of
setoff against, any Borrower’s obligations hereunder.  Neither the Agent, the Revolving Lenders nor
any Issuing Bank, nor any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to
any Letter of Credit (including any document required to make a drawing
thereunder), any error in interpretation of technical terms or any consequence
arising from causes beyond the control of such Issuing Bank; provided
that the foregoing shall not be construed to excuse such Issuing Bank from
liability to the Borrowers to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by each
Borrower to the extent permitted by applicable law) suffered by any Borrower
that are caused by such Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof.  The
parties hereto expressly agree that, in the absence of gross negligence or
willful misconduct on the part of applicable Issuing Bank (as finally
determined by a court of competent jurisdiction), such Issuing Bank shall be
deemed to have exercised care in each such determination.  In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the 

 

49

 

applicable Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

(g)           Disbursement Procedures.  The applicable Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. 
Such Issuing Bank shall promptly notify the Agent and the Borrower Agent
by telephone (confirmed by facsimile) of such demand for payment and whether
such Issuing Bank has made or will make an LC Disbursement thereunder; provided
that any failure to give or delay in giving such notice shall not relieve the
Borrowers of their obligation to reimburse such Issuing Bank and the Revolving
Lenders with respect to any such LC Disbursement.

 

(h)           Interim Interest.  If an Issuing Bank shall make any LC
Disbursement, then, unless the Borrowers shall reimburse such LC Disbursement
in full on the date such LC Disbursement is made, the unpaid amount thereof
shall bear interest, for each day from and including the date such LC
Disbursement is made to but excluding the date that the Borrowers reimburse
such LC Disbursement, at the rate per annum then applicable to ABR Revolving
Loans; provided that, if the Borrowers fail to reimburse such LC
Disbursement when due pursuant to paragraph (e) of this Section, then
Section 2.13(c) shall apply. 
Interest accrued pursuant to this paragraph shall be for the account of
the applicable Issuing Bank, except that interest accrued on and after the date
of payment by any Revolving Lender pursuant to paragraph (e) of this Section to
reimburse such Issuing Bank shall be for the account of such Lender to the
extent of such payment.

 

(i)            Replacement of an Issuing Bank.  An Issuing Bank may be replaced with the
consent of the Agent (not to be unreasonably withheld or delayed) at any time
by written agreement among the Borrower Agent, the Agent, the replaced Issuing
Bank and the successor Issuing Bank.  The
Agent shall notify the Revolving Lenders of any such replacement of an Issuing
Bank.  At the time any such replacement
shall become effective, the Borrowers shall pay all unpaid fees accrued for the
account of the replaced Issuing Bank pursuant to Section 2.12(b).  From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of the replaced Issuing Bank under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to
the term “Issuing Bank” shall be deemed to refer to such successor or to
any previous Issuing Bank, or to such successor and all previous Issuing Banks,
as the context shall require.  After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by
it prior to such replacement, but shall not be required to issue additional
Letters of Credit.

 

(j)            Cash Collateralization.  If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower Agent receives notice from
the Agent or the Required Lenders (or, if the maturity of the Loans has been
accelerated, Revolving Lenders with LC Exposure representing greater than 50%
of the total LC Exposure) demanding the deposit of cash collateral pursuant to
this paragraph, upon such demand, the Borrowers shall deposit, in an

 

50

 

account with the Agent, in the name of the Agent
and for the benefit of the Revolving Lenders (the “LC Collateral Account”),
an amount in cash equal to 103% of the LC Exposure as of such date; provided
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to any Borrower described in clause (g) or (h) of Article VII.  Such deposit shall be held by the Agent as
collateral for the payment and performance of the Secured Obligations in
accordance with the provisions of this paragraph (j).  The Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account and
each Borrower hereby grants the Agent a security interest in the LC Collateral
Account.  Other than any interest earned
on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Agent and at the Borrowers’ risk and expense,
such deposits shall not bear interest. 
Interest or profits, if any, on such investments shall accumulate in
such account.  Moneys in such account
shall be applied by the Agent to reimburse the applicable Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrowers for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Revolving Lenders with LC
Exposure representing greater than 50% of the total LC Exposure), be applied to
satisfy other Secured Obligations.  If
the Borrowers are required to provide an amount of cash collateral hereunder as
a result of the occurrence of an Event of Default, such amount (together with
all interest and other earnings with respect thereto, to the extent not applied
as aforesaid) shall be returned promptly to the Borrower Agent but in no event
later than three (3) Business Days after such Event of Default has been
cured or waived.

 

SECTION 2.07.              Funding of Borrowings.  (a)  Each Lender shall make each Loan to
be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 (noon), New York City time, to the account
of the Agent most recently designated by it for such purpose by notice to the
Lenders in an amount equal to such Lender’s Applicable Percentage (or, in the
case of any Incremental Term Loan, such Lender’s Incremental Term Loan
Commitment); provided that, Swingline Loans shall be made as provided in
Section 2.05.  The Agent will make
such Loans available to the Borrowers by promptly crediting the amounts so
received, in like funds, to the Funding Account or as otherwise directed by the
Borrower Agent; provided that ABR Revolving Loans made to finance the
reimbursement of (i) an LC Disbursement as provided in Section 2.06(e) shall
be remitted by the Agent to the applicable Issuing Bank and (ii) a
Protective Advance shall be retained by the Agent to be applied as contemplated
by Section 2.04 (and the Agent shall, upon the request of the Borrower
Agent, deliver to the Borrower Agent a reasonably detailed accounting of such
application).

 

(b)           Unless the Agent shall have received
notice from a Lender prior to the proposed date of any Borrowing that such
Lender will not make available to the Agent such Lender’s share of such
Borrowing, the Agent may assume that such Lender has made such share available
on such date in accordance with paragraph (a) of this Section and
may, in reliance upon such assumption, make available to the Borrowers a
corresponding amount.  In such event, if
a Lender has not in fact made its share of the applicable Borrowing available
to the Agent, then the applicable Lender and the Borrowers severally agree to
pay to the Agent forthwith on demand (without duplication) such corresponding
amount with interest thereon, for each day from and including the date such
amount is made available to the Borrowers to but excluding the date of 

 

51

 

payment to the Agent, at (i) in the case of
such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Agent in accordance with banking industry rules on
interbank compensation or (ii) in the case of the Borrowers, the interest
rate applicable to ABR Loans.  If such
Lender pays such amount to the Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing. 
Nothing herein shall be deemed to relieve any Lender from its obligation
to fulfill its Commitment or to prejudice any rights which the Agent or any
Borrower or any Loan Party may have against any Lender as a result of any
default by such Lender hereunder.

 

SECTION 2.08.              Type; Interest Elections.  (a)  Each Borrowing initially shall be
of the Type specified in the applicable Borrowing Request and, in the case of a
LIBOR Rate Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request.  Thereafter, the
Borrower Agent may elect to convert such Borrowing to a different Type or to
continue such Borrowing and, in the case of a LIBOR Rate Borrowing, may elect
Interest Periods therefor, all as provided in this Section 2.08.  The Borrower Agent may elect different
options with respect to different portions of the affected Borrowing, in which
case each such portion shall be allocated ratably among the Lenders holding the
Loans comprising such Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing. 
This Section 2.08 shall not apply to Swingline Borrowings or
Protective Advances, which may not be converted or continued, and shall apply
to any Incremental Term Loans only if and to the extent so specified in the
applicable Incremental Term Loan Amendment.

 

(b)           To make an election pursuant to this
Section, the Borrower Agent shall notify the Agent of such election by
telephone by the time that a Borrowing Request would be required under Section 2.03
if the Borrower Agent were requesting a Borrowing of the Type resulting from
such election to be made on the effective date of such election.  Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery
or facsimile to the Agent of a written Interest Election Request in a form
approved by the Agent and signed by the Borrower Agent.

 

(c)           Each telephonic and written Interest
Election Request shall specify the following information in compliance with Section 2.02:

 

(i)        the
Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the
portions thereof to be allocated to each resulting Borrowing (in which case the
information to be specified pursuant to clauses (iii) and (iv) below
shall be specified for each resulting Borrowing);

 

(ii)       the
effective date of the election made pursuant to such Interest Election Request,
which shall be a Business Day;

 

(iii)      whether
the resulting Borrowing is to be an ABR Borrowing or a LIBOR Rate Borrowing;
and

 

(iv)     if
the resulting Borrowing is a LIBOR Rate Borrowing, the Interest Period to be
applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.

 

52

 

If any such Interest Election Request
requests a LIBOR Rate Borrowing but does not specify an Interest Period, then
the Borrower Agent shall be deemed to have selected an Interest Period of one
month’s duration.

 

(d)           Promptly following receipt of an
Interest Election Request, the Agent shall advise each Lender of the details
thereof and of such Lender’s portion of each resulting Borrowing.

 

(e)           If the Borrower Agent fails to
deliver a timely Interest Election Request with respect to a LIBOR Rate
Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest
Period such Borrowing shall be converted to an ABR Borrowing.  Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the Agent, at
the request of the Required Lenders (or Required Incremental Term Loan Lenders
with respect to outstanding Incremental Term Loans if and to the extent so
provided in the applicable Incremental Term Loan Amendment), so notifies the
Borrower Agent, then, so long as an Event of Default is continuing (i) no
outstanding Borrowing with respect to Revolving Loans or Incremental Term
Loans, as the case may be, may be converted to or continued as a LIBOR Rate
Borrowing and (ii) unless repaid, each LIBOR Rate Borrowing shall be
converted to an ABR Borrowing at the end of the then-current Interest Period
applicable thereto.

 

SECTION 2.09.              Termination and Reduction of
Revolving Commitments.  (a) 
Unless previously terminated, all Revolving Commitments shall terminate on the
Maturity Date.

 

(b)           Upon delivering the notice required
by Section 2.09(d), the Borrower Agent may at any time terminate the Revolving Commitments upon (i) the payment in
full of all outstanding Revolving Loans, together with accrued and unpaid interest
thereon, (ii) the cancellation and return of all outstanding Letters of Credit
(or alternatively, with respect to each such Letter of Credit, the furnishing
to the Agent of a cash deposit (or at the discretion of the Agent a back up
standby letter of credit reasonably satisfactory to the Agent) equal to 103% of
the LC Exposure as of such date) and (iii) the payment in full of all
accrued and unpaid fees and all reimbursable expenses and other Obligations
then due, together with accrued and unpaid interest thereon.

 

(c)           Upon delivering the notice required
by Section 2.09(d), the Borrower Agent may from time to time reduce the Revolving Commitments; provided that (i) each
reduction of the Revolving Commitments shall be in an amount that is an
integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the
Borrower Agent shall not reduce the Revolving Commitments if, after giving effect to any
concurrent prepayment of the Revolving Loans in accordance with Section 2.10,
the sum of the Revolving Exposures would exceed the lesser of the total
Revolving Commitments and the Borrowing Base.

 

(d)           The Borrower Agent shall notify the
Agent of any election to terminate or reduce the Revolving Commitments under paragraph (b) or
(c) of this Section at least three (3) Business Days prior to
the effective date of such termination or reduction, specifying such election
and the effective date thereof.  Promptly
following receipt of any notice, the Agent shall advise the Revolving Lenders of the contents thereof.  Each notice delivered by the Borrower 

 

53

 

Agent pursuant to this Section 2.09 shall be
irrevocable; provided that a notice of termination of the Revolving Commitments delivered by the Borrower Agent
may state that such notice is conditioned upon the effectiveness of other
credit facilities, in which case such notice may be revoked by the Borrower
Agent (by notice to the Agent on or prior to the specified effective date) if
such condition is not satisfied.  Any
termination or reduction of the Revolving Commitments pursuant to this Section 2.09
shall be permanent.  Each reduction of
the Revolving Commitments shall be made ratably among the Revolving Lenders in accordance with their respective Revolving Commitments.

 

SECTION 2.10.              Repayment of Loans; Evidence of
Debt.  (a)  Each Borrower hereby
unconditionally promises to pay (i) to the Agent for the account of each
Revolving Lender the then unpaid principal amount of each Revolving Loan on the
Maturity Date, (ii) to the Agent the then unpaid amount of each Protective
Advance on the earlier of the Maturity Date and demand by the Agent and (iii) to
the Swingline Lender the then unpaid principal amount of each Swingline Loan on
the Maturity Date; provided that on each date that a Revolving Loan is
made while any Swingline Loan or Protective Advance is outstanding, the
Borrowers shall repay all such Swingline Loans and Protective Advances with the
proceeds of such Revolving Loan then outstanding.  The principal of any Incremental Term Loans
shall become due and payable as set forth in the applicable Incremental Term
Loan Amendment, but in no event shall any principal of any Incremental Term
Loans be scheduled to become due and payable on a date that is prior to the
90th day after the Maturity Date other than quarterly principal payments in an
aggregate annual amount not to exceed one percent (1%) of the original
aggregate principal amount of such Incremental Term Loans.

 

(b)           At all times after the occurrence and
during the continuance of a Liquidity Event and notification thereof by the
Agent to the Borrower Agent (subject to the provisions of Section 2.18(b) and
to the terms of the Security Agreement), on each Business Day, at or before
1:00 p.m., New York City time, the Agent shall apply all immediately
available funds credited to the BANA Account or such other account directed by
the Agent pursuant to Section 2.21(d), first to pay any fees or
expense reimbursements then due to the Agent, the Issuing Banks and the
Revolving Lenders (other than in connection with Banking Services, Secured Swap
Obligations or any Incremental Term Loans), pro rata, second to pay
interest due and payable in respect of any Revolving Loans (including Swingline
Loans) and any Protective Advances that may be outstanding, pro rata, third
to prepay the principal of any Protective Advances that may be outstanding, pro
rata, and fourth to prepay the principal of the Revolving Loans
(including Swingline Loans) and to cash collateralize outstanding LC Exposure,
pro rata.

 

(c)           Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrowers to such Lender resulting from each Loan made by
such Lender, including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder.

 

(d)           The Agent shall maintain accounts in
which it shall record (i) the amount of each Loan made hereunder, the Class and
Type thereof and the Interest Period (if any) applicable thereto, (ii) the
amount of any principal or interest due and payable or to become due and
payable from the Borrowers to each Lender hereunder and (iii) the amount
of any sum received by the Agent hereunder for the account of the Lenders and
each Lender’s share thereof.

 

54

 

(e)           The entries made in the accounts
maintained pursuant to paragraph (c) or (d) of this Section shall
be prima facie evidence of the existence and amounts of the obligations
recorded therein; provided that the failure of any Lender or the Agent
to maintain such accounts or any error therein shall not in any manner affect
the obligation of the Borrowers to repay the Loans in accordance with the terms
of this Agreement.

 

(f)            Any Revolving Lender may request
that Revolving Loans made by it be evidenced by a promissory note.  In such event, the Borrowers shall prepare,
execute and deliver to such Revolving Lender a promissory note payable to such
Revolving Lender and its registered assigns and in substantially the form of Exhibit G
hereto.

 

(g)           Any Incremental Term Loan Lender may
request that Incremental Term Loans made by it be evidenced by a promissory
note.  In such event, the Company shall
prepare, execute and deliver to such Incremental Term Loan Lender a promissory
note payable to such Incremental Term Loan Lender and its registered assigns
and in substantially the form of Exhibit H hereto.

 

SECTION 2.11.              Prepayment of Loans.  (a) 
Upon prior notice in accordance with paragraph (c) of this Section 2.11,
the Borrowers shall have the right at any time and from time to time to prepay
any Revolving Borrowing in whole or in part without premium or penalty (but
subject to Section 2.16).  At any time and from time to time, the Borrowers may prepay the
Incremental Term Loans, in whole or in part, without premium or penalty (except
as otherwise agreed in any Incremental Term Loan Amendment applicable to such
Incremental Term Loans), together with accrued and unpaid interest thereon; provided
that no portion of the principal of any Incremental Term Loans may be prepaid
prior to the Discharge of Revolving Facility Obligations unless (i) the
Term Loan Prepayment Conditions are satisfied, or (ii) such prepayment is
otherwise permitted under Section 6.08(b).

 

(b)           Except for Protective Advances
permitted under Section 2.04, in the event and on each Business Day on
which the total Revolving Exposure exceeds the lesser of (i) the aggregate
Revolving Commitments and (ii) the Borrowing Base (including by reason of
the delivery of a Non-Ordinary Course Borrowing Base Certificate as a condition
to the consummation of any Non-Ordinary Course Asset Disposition pursuant to Section 6.05),
the Borrowers shall prepay the Revolving Loans or Swingline Loans and/or reduce
LC Exposure, in an aggregate amount equal to such excess by taking any of the
following actions as the Borrower Agent shall determine at its sole
discretion:  (1) prepayment of
Revolving Loans or Swingline Loans or (2) deposit of cash in the LC
Collateral Account.

 

(c)           The Borrower Agent shall notify the
Agent (and, in the case of prepayment of a Swingline Loan, the Swingline
Lender) by telephone (confirmed by facsimile) of any prepayment hereunder (i) in
the case of prepayment of a LIBOR Rate Borrowing, not later than 11:00 a.m.,
New York City time, three (3) Business Days before the date of prepayment,
(ii) in the case of prepayment of an ABR Borrowing, not later than 10:00 a.m.,
New York City time, on the day of prepayment, or (iii) in the case of
prepayment of a Swingline Loan, not later than 12:00 (noon), New York City time,
on the date of prepayment.  Each such
notice shall be irrevocable and shall specify the prepayment date and the
principal amount of each Borrowing or portion thereof to be prepaid; provided
that, if a notice of prepayment is given in connection with 

 

55

 

a conditional notice of termination of the
Commitments as contemplated by Section 2.09, then such notice of
prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.09. 
Promptly following receipt of any such notice relating to a Borrowing,
the Agent shall advise the Lenders of the contents thereof.  Each partial prepayment of any Borrowing
shall be in an amount that would be permitted in the case of an advance of a
Borrowing of the same Type as provided in Section 2.02.  Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued
interest to the extent required by Section 2.13.

 

SECTION 2.12.              Fees.  (a)  The Borrowers agree to pay to the
Agent for the account of each Revolving Lender a commitment fee, which shall
accrue at the Commitment Fee Rate on the average daily amount of the Available
Revolving Commitment of such Revolving Lender during the period from and
including the Effective Date to but excluding the date on which the Lenders’
Revolving Commitments terminate; provided that any commitment fee
accrued with respect to the Revolving Commitment of a Defaulting Lender during
the period prior to the time such Revolving Lender became a Defaulting Lender
and unpaid at such time shall not be payable by the Borrowers so long as such
Lender shall be a Defaulting Lender except to the extent that such commitment
fee shall otherwise have been due and payable by the Borrowers prior to such
time; and provided  further, that no commitment fee shall accrue
on the Revolving Commitment of a Defaulting Lender so long as such Revolving
Lender shall be a Defaulting Lender. 
Accrued commitment fees shall be payable in arrears on the first
Business Day of each January, April, July and October and on the date
on which the Revolving Commitments terminate, commencing on the first such date
to occur after the date hereof.  All
commitment fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).  For purposes of
calculating the commitment fees only, no portion of the Revolving Commitments shall
be deemed utilized as a result of outstanding Swingline Loans.

 

(b)           The Borrowers agree to pay (i) to
the Agent for the account of each Revolving Lender a participation fee with
respect to its participations in Letters of Credit, which shall accrue at the
same Applicable Rate used to determine the interest rate applicable to LIBOR
Rate Revolving Loans on the daily amount of such Revolving Lender’s LC Exposure (excluding any portion
thereof attributable to unreimbursed LC Disbursements), during the period from
and including the Effective Date to but excluding the later of the date on
which such Revolving Lender’s Revolving Commitment terminates and the date on which such
Revolving Lender ceases to have any LC Exposure, and (ii) to each Issuing
Bank, for its own account, a fronting fee, in respect of each Letter of Credit
issued by such Issuing Bank for the period from the date of issuance of such
Letter of Credit through the expiration date of such Letter of Credit (or if
terminated on an earlier date to the termination date of such Letter of
Credit), computed at a rate equal to a percentage per annum to be agreed upon
between the Borrower Agent and such Issuing Bank of the daily stated amount of
such Letter of Credit, as well as such Issuing Bank’s standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of
Credit or processing of drawings thereunder; provided that no fronting
fee payable pursuant to this clause (ii) shall be less than $500.00
per annum. Participation fees and fronting fees accrued through and including
the last day of each March, June, September and December shall be
payable on the first Business Day following such last day, commencing on the
first such date to occur after the Effective Date; provided that all
such fees shall be payable on the date on which 

 

56

 

the Revolving Commitments terminate and any such fees
accruing after the date on which the Commitments terminate shall be payable on
demand.  Any other fees payable to any
Issuing Bank pursuant to this paragraph shall be payable within 10 days after
demand.  All participation fees and
fronting fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed.

 

(c)           The Borrowers agree to pay to the
Agent, for its own account, such agency fees as may be separately agreed upon
by the Company and the Agent payable in the amounts and at the times so agreed.

 

(d)           All fees payable hereunder shall be
paid on the dates due, in immediately available funds, to the Agent (or to the
applicable Issuing Bank, in the case of fees payable to it) for distribution,
in the case of commitment fees and participation fees, to the Lenders.  Fees paid shall not be refundable under any
circumstances.

 

SECTION 2.13.              Interest.  (a)  The Revolving Loans comprising each
ABR Borrowing (including each Swingline Loan and each Protective Advance) shall
bear interest at the Alternate Base Rate plus the
Applicable Rate.

 

(b)           The Revolving Loans comprising each LIBOR Rate Borrowing
shall bear interest at the Adjusted LIBOR Rate for the Interest Period in
effect for such Borrowing plus the
Applicable Rate.

 

(c)           All Incremental Term Loans shall bear
interest as provided in the applicable Incremental Term Loan Amendment.

 

(d)           Notwithstanding the foregoing, if any
principal of or interest on any  Loan or any fee or other amount payable by the
Borrowers hereunder is not paid when due, whether at stated maturity, upon
acceleration or otherwise, such overdue amount shall bear interest, after as
well as before judgment, at a rate per annum equal to (i) in the case of
overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of
this Section.

 

(e)           Accrued interest on each Loan shall
be payable in arrears on each Interest Payment Date for such Loan and upon termination
of the applicable Commitments; provided that (i) interest accrued
pursuant to paragraph (d) of this Section shall be payable on
demand, (ii) in the event of any repayment or prepayment of any Loan
(other than a prepayment of an ABR Revolving Loan prior to the end of the
Availability Period), accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and (iii) in
the event of any conversion of any LIBOR Rate Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.

 

(f)            All interest hereunder shall be
computed on the basis of a year of 360 days, except that interest computed
by reference to the Alternate Base Rate at times when the Alternate Base Rate
is based on the Prime Rate shall be computed on the basis of a year of 365 days
(or 366 days in a leap year), and in each case shall be payable for the actual
number of 

 

57

 

days elapsed (including the first day but excluding
the last day).  The applicable Alternate
Base Rate, Adjusted LIBOR Rate or LIBOR Rate shall be determined by the Agent,
and such determination shall be conclusive absent manifest error.

 

SECTION 2.14.              Alternate Rate of Interest.  If prior to the commencement of any Interest
Period for a LIBOR Rate Borrowing:

 

(a)           the
Agent determines (which determination shall be conclusive absent manifest
error) that adequate and reasonable means do not exist for ascertaining the
Adjusted LIBOR Rate or the LIBOR Rate, as applicable, for such Interest Period;
or

 

(b)           the
Agent is advised by the Required Lenders or, in the case of any Incremental
Term Loans, the Required Incremental Term Loan Lenders, that the Adjusted LIBOR
Rate or the LIBOR Rate, as applicable, for such Interest Period will not
adequately and fairly reflect the cost to such Lenders of making or maintaining
their Loans included in such Borrowing for such Interest Period;

 

then the Agent shall promptly give notice thereof to the Borrower Agent
and the Lenders by telephone or facsimile as promptly as practicable thereafter
and, until the Agent notifies the Borrower Agent and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a LIBOR Rate Borrowing shall be ineffective
and such Borrowing shall be converted to an ABR Borrowing on the last day of the
Interest Period applicable thereof, and (ii) if any Borrowing Request
requests a LIBOR Rate Borrowing, such Borrowing shall be made as an ABR
Borrowing.

 

SECTION 2.15.              Increased Costs.  (a)  If any Change in Law shall impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
any Lender (except any such reserve requirement reflected in the Adjusted LIBOR
Rate) or Issuing Bank; or impose on any Lender or Issuing Bank or the London
interbank market any other condition affecting this Agreement or LIBOR Rate
Loans made by such Lender or any Letter of Credit or participation therein; and
the result of any of the foregoing shall be to increase the cost to such Lender
of making or maintaining any LIBOR Rate Loan (or of maintaining its obligation
to make any such Loan) or to increase the cost to such Lender or Issuing Bank
of participating in, issuing or maintaining any Letter of Credit or to reduce
the amount of any sum received or receivable by such Lender or Issuing Bank
hereunder (whether of principal, interest or otherwise), then, following
delivery of the certificate contemplated by paragraph (c) of this
Section, the Borrowers will pay to such Lender or Issuing Bank, as applicable,
such additional amount or amounts as will compensate such Lender or Issuing
Bank, as applicable, for such additional costs incurred or reduction suffered
(except for any Taxes, which shall be dealt with exclusively pursuant to Section 2.17).

 

(b)           If any Lender or Issuing Bank
determines that any Change in Law regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s or Issuing Bank’s
capital or on the capital of such Lender’s or Issuing Bank’s holding company,
if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by such Issuing Bank, to a 

 

58

 

level below that which such Lender or such Issuing
Bank or such Lender’s or such Issuing Bank’s holding company could have
achieved but for such Change in Law other than due to Taxes, which shall be
dealt with exclusively pursuant to Section 2.17 (taking into consideration
such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s
or such Issuing Bank’s holding company with respect to capital adequacy), then
from time to time following delivery of the certificate contemplated by
paragraph (c) of this Section the Borrowers will pay to such
Lender or such Issuing Bank, as applicable, such additional amount or amounts
as will compensate such Lender or such Issuing Bank or such Lender’s or such
Issuing Bank’s holding company for any such reduction suffered.

 

(c)           A certificate of a Lender or an
Issuing Bank setting forth the amount or amounts necessary to compensate such
Lender or Issuing Bank or its holding company, as applicable, as specified in
paragraph (a) or (b) of this Section and setting forth in
reasonable detail the manner in which such amount or amounts was determined
shall be delivered to the Borrower Agent and shall be conclusive absent
manifest error.  The Borrowers shall pay
such Lender or Issuing Bank, as applicable, the amount shown as due on any such
certificate within 10 days after receipt thereof.

 

(d)           Failure or delay on the part of any
Lender or Issuing Bank to demand compensation pursuant to this Section shall
not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such
compensation; provided that the Borrowers shall not be required to
compensate a Lender or an Issuing Bank pursuant to this Section for any
increased costs or reductions incurred more than 180 days prior to the date
that such Lender or Issuing Bank, as applicable, notifies the Borrower Agent of
the Change in Law giving rise to such increased costs or reductions and of such
Lender’s or Issuing Bank’s intention to claim compensation therefor; provided
further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 180-day period referred to above shall
be extended to include the period of retroactive effect thereof.

 

SECTION 2.16.              Break Funding Payments.  In the event of (a) the payment of any
principal of any LIBOR Rate Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b) the
conversion of any LIBOR Rate Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any LIBOR Rate Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section 2.09(d) and
is revoked in accordance therewith), or (d) the assignment of any LIBOR
Rate Loan other than on the last day of the Interest Period applicable thereto
as a result of a request by the Borrower Agent pursuant to Section 2.19 or
9.02(e), then, in any such event, the Borrowers shall compensate each Lender
for the loss, cost and expense attributable to such event.  In the case of a LIBOR Rate Loan, such loss,
cost or expense to any Lender shall be deemed to be the amount determined by
such Lender to be the excess, if any, of (i) the amount of interest which
would have accrued on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBOR Rate that would have been applicable to such
Loan, for the period from the date of such event to the last day of the then
current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period
for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of 

 

59

 

such period, for
dollar deposits of a comparable amount and period from other banks in the
eurodollar market.  A certificate of any
Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section and the basis therefor and setting forth
in reasonable detail the manner in which such amount or amounts was determined
shall be delivered to the Borrower Agent and shall be conclusive absent
manifest error.  The Borrowers shall pay
such Lender the amount shown as due on any such certificate within 10 days
after receipt thereof.

 

SECTION 2.17.              Taxes.  (a)  Any and all payments by or on account
of any obligation of any Loan Party hereunder shall be made free and clear of
and without deduction for any Indemnified Taxes or Other Taxes; provided
that if a Loan Party shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Agent, Lender or
any Issuing Bank (as applicable) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Loan Party shall
make such deductions and (iii) such Loan Party shall timely pay the full
amount deducted to the relevant Governmental Authority in accordance with applicable
law.  If at any time a Loan Party is
required by applicable law to make any deduction or withholding from any sum
payable hereunder, such Loan Party shall promptly notify the relevant Lender,
Agent or Issuing Bank upon becoming aware of the same.  In addition, each Lender, Agent or Issuing
Bank shall promptly notify a Loan Party upon becoming aware of any
circumstances as a result of which a Loan Party is or would be required to make
any deduction or withholding from any sum payable hereunder.

 

(b)           In addition, the Loan Parties shall
pay any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.

 

(c)           Each Loan Party shall indemnify the
Agent, each Co-Collateral Agent, each Lender and each Issuing Bank, within 10
days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by the Agent, such Co-Collateral Agent, such Lender
or such Issuing Bank, as applicable, on or with respect to any payment by or on
account of any obligation of such Loan Party hereunder (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.  A certificate as
to the amount of such payment or liability delivered to the Borrower Agent by a
Lender or an Issuing Bank, or by the Agent on its own behalf or on behalf of a
Lender, Co-Collateral Agent or an Issuing Bank, shall be conclusive absent
manifest error.

 

(d)           As soon as practicable after any
payment of Indemnified Taxes or Other Taxes by a Loan Party to a Governmental Authority,
such Loan Party shall deliver to the Agent the original or a certified copy of
a receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Agent.

 

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(e)           Any Foreign Lender that is entitled
to an exemption from or reduction of withholding tax under the law of the
jurisdiction in which a Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall
deliver to the Borrower Agent (with a copy to the Agent), at the time or times
prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower Agent as will permit such payments to be made without withholding or
at a reduced rate.  In particular, on or
prior to the date which is ten (10) Business Days after the Effective
Date, each Foreign Lender shall deliver to the Borrower Agent (with a copy to
the Agent) two duly signed, properly completed copies of either IRS Form W-8BEN
or any successor thereto (relating to such Foreign Lender and entitling it to
an exemption from, or reduction of, United States withholding tax on all
payments to be made to such Foreign Lender by any Borrower or any other Loan
Party pursuant to this Agreement or any other Loan Document) or IRS Form W-8ECI
or any successor thereto (relating to all payments to be made to such Foreign
Lender by any Borrower or any other Loan Party pursuant to this Agreement or
any other Loan Document) or such other evidence reasonably satisfactory to the
Borrower Agent and the Agent that such Foreign Lender is entitled to an
exemption from, or reduction of, United States withholding tax, including any
exemption pursuant to Section 871(h) or 881(c) of the Code, and
in the case of a Foreign Lender claiming such an exemption under Section 881(c) of
the Code, a certificate that establishes in writing to the Borrower Agent and
the Agent that such Foreign Lender is not (i) a “bank” as defined in Section 881(c)(3)(A) of
the Code, (ii) a 10- percent stockholder within the meaning of Section 871(h)(3)(B) of
the Code, or (iii) a controlled foreign corporation related to a Borrower
with the meaning of Section 864(d) of the Code.  Thereafter and from time to time, each such
Foreign Lender shall (A) promptly so long as it is eligible to do so
submit to the Borrower Agent (with a copy to the Agent) such additional duly
completed and signed copies of one or more of such forms or certificates (or
such successor forms or certificates as shall be adopted from time to time by
the relevant United States taxing authorities) as may then be available under
then current United States Laws and regulations to avoid, or such evidence as
is reasonably satisfactory to the Borrower Agent and the Agent of any available
exemption from, or reduction of, United States withholding taxes in respect of
all payments to be made to such Foreign Lender by any Borrower or other Loan
Party pursuant to this Agreement, or any other Loan Document, in each case, (1) on
or before the date that any such form, certificate or other evidence expires or
becomes obsolete, (2) after the occurrence of any event requiring a change
in the most recent form, certificate or evidence previously delivered by it to
the Borrower Agent and (3) from time to time thereafter if reasonably
requested by the Borrower Agent or the Agent, and (B) promptly notify the
Borrower Agent and the Agent of any change in circumstances which would modify
or render invalid any claimed exemption or reduction.  For the avoidance of doubt, if, as a result
of a Change in Law, a Foreign Lender is no longer legally able to provide
documentation with respect to an exemption from or a reduction of withholding
tax, such Foreign Lender will be treated as complying with this Section 2.17(e) and
such inability will not affect the Foreign Lender’s rights under Section 2.17(a).

 

(f)            Each Lender, Agent or Issuing Bank
that is a United States person, agrees to complete and deliver to the Borrower
Agent a statement signed by an authorized signatory of the Lender to the effect
that it is a United States person together with a duly completed and executed
copy of Internal Revenue Service Form W-9 or successor form.

 

61

 

(g)           If the Agent or a Lender determines,
in good faith in its reasonable sole discretion, that it has received a refund
of any Indemnified Taxes or Other Taxes as to which it has been indemnified by
a Loan Party or with respect to which such Loan Party has paid additional
amounts pursuant to this Section 2.17, it shall pay over such refund to
such Loan Party (but only to the extent of indemnity payments made, or
additional amounts paid, by such Loan Party under this Section 2.17 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Agent or such Lender (including any Taxes imposed
with respect to such refund) as is determined by the Agent or such Lender in
good faith in its sole discretion, and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund); provided, that such Loan Party, upon the request of the Agent
or such Lender, agrees to repay as soon as reasonably practicable the amount
paid over to such Loan Party (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Agent or such Lender in the event the Agent or such Lender is
required to repay such refund to such Governmental Authority.  This Section shall not be construed to
require the Agent or any Lender to make available its tax returns (or any other
information relating to its taxes which it deems confidential) to such Loan
Party or any other Person.

 

(h)           If the Borrower Agent determines in
good faith that a reasonable basis exists for contesting any Indemnified Taxes
or Other Taxes for which additional amounts have been paid under this Section 2.17,
the relevant Lender, Agent or Issuing Bank shall cooperate with the Borrower
Agent in challenging such Indemnified Taxes or Other Taxes, at the Borrowers’
expense, if so requested by the Borrower Agent in writing.

 

SECTION 2.18.              Payments Generally; Allocation
of Proceeds; Sharing of Set-offs.  (a) 
Unless otherwise specified, each Borrower shall make each payment required to
be made by it hereunder (whether of principal, interest, fees or reimbursement
of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or
2.17, or otherwise) prior to 12:00 (noon), New York City time, on the date when
due, in immediately available funds, without set-off or counterclaim.  Any amounts received after such time on any
date may, in the discretion of the Agent, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest
thereon.  All such payments shall be made
to the Agent to the applicable account designated to the Borrower Agent by the
Agent, except payments to be made directly to the applicable Issuing Bank or
the Swingline Lender as expressly provided herein and except that payments
pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to
the Persons entitled thereto.  The Agent
shall distribute any such payments received by it for the account of any other
Person to the appropriate recipient promptly following receipt thereof.  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, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such
extension.  All payments hereunder shall
be made in Dollars.  Any payment required
to be made by the Agent hereunder shall be deemed to have been made by the time
required if the Agent shall, at or before such time, have taken the necessary
steps to make such payment in accordance with the regulations or operating
procedures of the clearing or settlement system used by the Agent to make such
payment.  At all times that the
circumstances specified in Section 2.21(d) are in effect, solely for
purposes of determining the amount of Revolving Loans available for borrowing
purposes, checks and cash or other immediately available funds from collections
of items of payment and 

 

62

 

proceeds of any
Collateral shall be applied in whole or in part against the applicable
Revolving Facility Obligations, on the day of receipt, subject to actual
collection.

 

(b)           Subject in all respects to the
provisions of the Intercreditor Agreement, all proceeds of Collateral received
by the Agent after an Event of Default has occurred and is continuing and all
or any portion of the Loans shall have been accelerated hereunder pursuant to Section 7.01,
shall upon election by the Agent or at the direction of the Required Lenders be
applied, first, to, ratably, pay any fees, indemnities, or expense
reimbursements then due to the Agent, any Co-Collateral Agent or any Issuing
Bank from the Borrowers (other than in connection with Banking Services or
Secured Swap Obligations), second, ratably, to pay any fees or expense
reimbursements then due to the Revolving Lenders from the Borrowers (other than
in connection with Banking Services or Secured Swap Obligations), third,
to pay interest due and payable in respect of any Revolving Loans (including
any Swingline Loans) and any Protective Advances, ratably, fourth, to
pay the principal of the Protective Advances, fifth, to prepay principal
on the Revolving Loans (other than the Protective Advances) and unreimbursed LC
Disbursements, ratably, sixth, to pay an amount to the Agent equal to
103% of the LC Exposure on such date, to be held in the LC Collateral Account
as cash collateral for such Obligations, seventh, to pay any amounts
owing with respect to Banking Services and Secured Swap Obligations, ratably, eighth,
to the payment of any other Revolving Facility Obligation due to the Agent, any
Co-Collateral Agent or any Revolving Lender by the Borrowers, ninth,
ratably, to pay any fees or expense reimbursements then due to the Incremental
Term Loan Lenders (if any) from the Borrowers, tenth, to pay interest
due and payable in respect of any Incremental Term Loans, ratably, eleventh,
to prepay principal on any Incremental Term Loans, ratably, twelfth, to
the payment of any other Incremental Term Loan Obligations due to the Agent,
any Co-Collateral Agent or any Incremental Term Loan Lender by the Borrowers, thirteenth,
as provided for under the Intercreditor Agreement and fourteenth, to the
Borrowers or as the Borrower Agent shall direct.

 

(c)           (i) If any Revolving 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 Revolving
Loans or participations in LC Disbursements, Swingline Loans or Protective
Advances resulting in such Revolving Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans and participations in
LC Disbursements, Swingline Loans or Protective Advances and accrued interest
thereon than the proportion received by any other Revolving Lender, then the
Revolving Lender receiving such greater proportion shall purchase (for cash at
face value) participations in the Revolving Loans and participations in LC
Disbursements, Swingline Loans and Protective Advances of other Revolving
Lenders at such time outstanding to the extent necessary so that the benefit of
all such payments shall be shared by the Revolving Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans and participations in LC Disbursements,
Swingline Loans and Protective Advances; provided that (A) 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 (B) the
provisions of this paragraph shall not be construed to apply to any payment
made by any Borrower pursuant to and in accordance with the express terms of
this Agreement or any payment obtained by a Revolving Lender as consideration
for the assignment of or sale of a participation in any of its Revolving Loans
or participations in LC Disbursements, 

 

63

 

Swingline Loans or Protective Advances to any
assignee or participant, other than to a Borrower or any subsidiary or
Affiliate thereof (as to which the provisions of this paragraph shall
apply).  Each Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Revolving Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against such Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Revolving
Lender were a direct creditor of such Borrower in the amount of such
participation.

 

(ii) Subject to Section 2.18(c)(iii), if any Incremental Term
Loan 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 Incremental Term Loans resulting in such Incremental Term Loan Lender
receiving payment of a greater proportion of the aggregate amount of its
Incremental Term Loans and accrued interest thereon than the proportion
received by any other Incremental Term Loan Lender, then the Incremental Term Loan
Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Incremental Term Loans of other Incremental Term
Loan Lenders at such time outstanding to the extent necessary so that the
benefit of all such payments shall be shared by the Incremental Term Loan
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Incremental Term Loans; provided
that (A) 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 (B) the provisions of this paragraph shall not be
construed to apply to any payment made by the Company pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by
an Incremental Term Loan Lender as consideration for the assignment of or sale
of a participation in any of its Incremental Term Loans to any assignee or
participant, other than to any Borrower or any subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply).  Each Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Incremental Term Loan Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against such Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Incremental
Term Loan Lender were a direct creditor of such Borrower in the amount of such
participation.

 

(iii)          Anything contained
herein to the contrary notwithstanding, and without limitation on the
provisions of Sections 7.03, 7.04 and 7.05, if any Incremental Term Loan 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 Incremental
Term Loans resulting in such Incremental Term Loan Lender receiving prepayment
that is not otherwise permitted to be made hereunder, such Incremental Term
Loan Lender shall immediately turn such payment over to the Agent for
application to the Revolving Facility Obligations as provided herein.

 

(d)           Unless the Agent shall have received
notice from the Borrower Agent prior to the date on which any payment is due to
the Agent for the account of the Lenders or the applicable Issuing Bank
hereunder that the Borrowers will not make such payment, the Agent may assume
that the Borrowers have made such payment on such date in accordance herewith
and may, in reliance upon such assumption, distribute to the Lenders or the
applicable Issuing Bank, as applicable, the amount due.  In such event, if the Borrowers have not in
fact made such payment, then each of the Lenders or the applicable Issuing
Bank, as applicable, severally agrees

 

64

 

to repay to the Agent forthwith on demand the
amount so distributed to such Lender or Issuing Bank with interest thereon, for
each day from and including the date such amount is distributed to it to but
excluding the date of payment to the Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Agent in accordance with banking
industry rules on interbank compensation.

 

(e)           If any Lender shall fail to make any
payment required to be made by it pursuant to Sections 2.04(b), 2.05(b),
2.05(c), 2.06(d) or (e), 2.07(b), 2.18(c) or 9.03(c), then the Agent
may, in its discretion (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Agent for the account of such Lender to
satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid.

 

(f)            Anything contained herein to
the contrary notwithstanding, the Agent may (but shall not be required to), in
its discretion, retain any payments or other funds received by the Agent that
are otherwise to be provided to a Defaulting Lender hereunder and apply such
funds to such Defaulting Lender’s defaulted obligations or readvance such funds
to the Borrower in connection with the funding of any Revolving Loan or issuance
of any Letters of Credit hereunder, including cash collateralization thereof,
in accordance with this Agreement.

 

SECTION 2.19.              Mitigation Obligations;
Replacement of Lenders.  (a)  If
any Lender requests compensation under Section 2.15, or if any Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then
such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the reasonable judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as
applicable, in the future and (ii) would not subject such Lender to any
material unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender in any material respect.  The Borrowers hereby agree to pay all reasonable
costs and expenses incurred by any Lender in connection with any such
designation or assignment.

 

(b)           If any Lender requests compensation
under Section 2.15, or if any Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 2.17, or if any Lender is a Defaulting Lender,
then the Borrower Agent may, at its sole expense and effort, upon notice to
such Lender and the Agent, replace such Lender by requiring such Lender to
assign and delegate (and such Lender shall be obligated to assign and
delegate), without recourse (in accordance with and subject to the restrictions
contained in Section 9.04), all its interests, rights and obligations
under this Agreement to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (i) the Borrower Agent shall have received the prior written consent
of the Agent and each Issuing Bank, which consent in each case shall not
unreasonably be withheld, (ii) such Lender shall have received payment of
an amount equal to the outstanding principal of its Loans and participations in
LC Disbursements, Swingline Loans and Protective Advances, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrowers (in the case of all other amounts) and (iii) in the
case of any such assignment resulting from a claim for compensation under Section 2.15
or 

 

65

 

payments required to be made pursuant to Section 2.17,
such assignment will result in a reduction in such compensation or
payments.  A Lender (other than a
Defaulting Lender) shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower Agent to require such
assignment and delegation cease to apply. 
Nothing in this Section 2.19 shall be deemed to prejudice any
rights that any Borrower or any Lender may have against any Lender that is a
Defaulting Lender.

 

SECTION 2.20.              Illegality.  If any Lender reasonably determines that any
Change in Law has made it unlawful, or that any Governmental Authority has
asserted after the Effective Date that it is unlawful, for such Lender or its
applicable lending office to make or maintain any LIBOR Rate Loans, then, on
notice thereof by such Lender to the Borrower Agent through the Agent, any
obligations of such Lender to make or continue LIBOR Rate Loans or to convert
ABR Borrowings to LIBOR Rate Borrowings shall be suspended until such Lender
notifies the Agent and the Borrower Agent that the circumstances giving rise to
such determination no longer exist.  Upon
receipt of such notice, the Borrower Agent shall upon demand from such Lender
(with a copy to the Agent), either convert all LIBOR Rate Borrowings of such
Lender to ABR Borrowings, either on the last day of the Interest Period
therefor, if such Lender may lawfully continue to maintain such LIBOR Rate
Borrowings to such day, or immediately, if such Lender may not lawfully
continue to maintain such Loans.  Upon
any such prepayment or conversion, the Borrowers shall also pay accrued
interest on the amount so prepaid or converted. 
Each Lender agrees to designate a different lending office if such
designation will avoid the need for such notice and will not, in the
determination of such Lender, otherwise be disadvantageous to it.

 

SECTION 2.21.              Cash Receipts.  (a)  A list (certified by a Responsible
Officer) of all DDAs, that, to the knowledge of the Responsible Officers of the
Loan Parties, are maintained by the Loan Parties, which list includes, with
respect to each depository (i) the name and address of such depository; (ii) the
account number(s) maintained with such depository, (iii) a contact
person at such depository and (iv) the purpose of such account has been
delivered to the Agent and the Lenders pursuant to Section 4.01(e).

 

(b)           A list (certified by a Responsible
Officer) describing all arrangements to which any Loan Party is a party with
respect to the payment to such Loan Party of the proceeds of all credit card
charges for sales by such Loan Party has been delivered to the
Agent and the Lenders pursuant to Section 4.01(e).

 

(c)           Each Loan Party shall (i) deliver
to the Agent, within five Business Days following the Effective Date,
notifications in form reasonably satisfactory to the Agent which have been
executed on behalf of such Loan Party and addressed to such Loan Party’s Credit
Card Processors (each, a “Credit Card Notification”), (ii) deliver
to the Agent, within five Business Days following the Effective Date,
notifications executed on behalf of the Loan Parties to each depository
institution with which any DDA is maintained in form reasonably satisfactory to
the Agent, of the Agent’s interest in such DDA (each, a “DDA Notification”),
(iii) instruct each depository institution for a DDA to cause all amounts
on deposit and available at the close of each Business Day in such DDA (net of
such minimum balance, not to exceed $15,000, as may be required to be
maintained in the subject DDA by the depository institution at which such 

 

66

 

DDA is maintained), to be swept to one of the Loan
Parties’ concentration accounts no less frequently than on a daily basis, such
instructions to be irrevocable unless otherwise agreed to by the Agent; and (iv) within
sixty (60) days after the Effective Date, with respect to the Loan Parties’
primary concentration account, or ninety (90) days after the Effective Date,
with respect to each other concentration account of the Loan Parties (in each
case, or such later date approved by the Agent), enter into a control agreement
(each, a “Blocked Account Agreement”), in form reasonably satisfactory
to the Agent, with the Agent and any bank with which such Loan Party maintains
a concentration account into which the DDAs are swept (collectively, the “Blocked
Accounts”), which concentration accounts as of the Effective Date are set
forth on a list that has been delivered to the Agent and the Lenders pursuant
to Section 4.01(e).  Each Loan Party
agrees that it will not cause proceeds of such DDAs to be otherwise redirected.

 

(d)           Each Credit Card Notification and
Blocked Account Agreement shall require, after the occurrence and during the
continuance of an Event of Default or a Liquidity Event (and delivery of notice
thereof from the Agent to the Borrower Agent and the other parties to such
instrument or agreement), the ACH or wire transfer no less frequently than once
per Business Day (unless the Commitments have been terminated and the
Obligations have been paid in full), of all available cash balances and cash
receipts, including the then contents or then entire ledger balance of each
Blocked Account (net of such minimum balance, not to exceed $15,000 (or, in the
case of the Loan Parties’ primary concentration account, $50,000), as may be
required to be maintained in the subject Blocked Account by the bank at which
such Blocked Account is maintained), to an account maintained by the Agent at
BANA (the “BANA Account”) or such other account as directed by the
Agent.  Subject to the terms of the
Security Agreement, all amounts received in the BANA Account or such other
account shall be applied (and allocated) by the Agent in accordance with Section 2.10(b);
provided, that if the circumstances described in Section 2.18(b) are
applicable, all such amounts shall be applied in accordance with such Section 2.18(b).  Each Loan Party agrees that it will not cause
any credit card proceeds or proceeds of any Blocked Account to be otherwise
redirected.

 

(e)           If, at any time after the occurrence
and during the continuance of an Event of Default or a Liquidity Event, any
cash or cash equivalents owned by any Loan Party (other than (i) an amount
not to exceed $20,000,000 in the aggregate that is on deposit in a segregated
DDA which the Borrower Agent designates in writing to the Agent as being the “uncontrolled
cash account” (the “Designated Disbursement Account”), which funds shall
not be funded from, or when withdrawn from the Designated Disbursement Account,
shall not be replenished by, funds constituting proceeds of Collateral so long
as such Event of Default or Liquidity Event continues, (ii) de minimus
cash or cash equivalents from time to time inadvertently misapplied by any Loan
Party, (iii) payroll, trust and tax withholding accounts funded in the
ordinary course of business and required by applicable law and (iv) funds
in any Specified Segregated Account) are deposited to any account, or held or
invested in any manner, otherwise than in a Blocked Account subject to a
Blocked Account Agreement (or a DDA which is swept daily to such Blocked
Account), the Agent shall be entitled to require the applicable Loan Party to
close such account and have all funds therein transferred to a Blocked Account,
and to cause all future deposits to be made to a Blocked Account.

 

(f)            The Loan Parties may close DDAs or
Blocked Accounts and/or open new DDAs or Blocked Accounts, subject to the
contemporaneous execution and delivery to the Agent 

 

67

 

of a DDA Notification or Blocked Account Agreement
consistent with the provisions of this Section 2.21 and otherwise
reasonably satisfactory to the Agent. 
Unless consented to in writing by the Agent, the Loan Parties shall not
enter into any agreements with Credit Card Processors other than the ones
listed on Schedule 2.21(b) unless contemporaneously therewith, a
Credit Card Notification is executed and a copy thereof is delivered to the
Agent.

 

(g)           The BANA Account shall at all times
be under the sole dominion and control of the Agent.  Each Loan Party hereby acknowledges and
agrees that, except to the extent otherwise provided in the Security Agreement (i) such
Loan Party has no right of withdrawal from the BANA Account, (ii) the
funds on deposit in the BANA Account shall at all times continue to be
collateral security for all of the Secured Obligations, and (iii) the
funds on deposit in the BANA Account shall be applied as provided in this
Agreement and the Intercreditor Agreement. 
In the event that, notwithstanding the provisions of this Section 2.21,
any Loan Party receives or otherwise has dominion and control of any proceeds
or collections required to be transferred to the BANA Account pursuant to Section 2.21(d),
such proceeds and collections shall be held in trust by such Loan Party for the
Agent, shall not be commingled with any of such Loan Party’s other funds or
deposited in any account of such Loan Party and shall promptly be deposited
into the BANA Account or dealt with in such other fashion as such Loan Party
may be instructed by the Agent.

 

(h)           So long as (i) no Event of
Default has occurred and is continuing, and (ii) no Liquidity Event as to
which the Agent has notified the Borrower Agent has occurred and is continuing,
the Loan Parties may direct, and shall have sole control over, the manner of
disposition of funds in the Blocked Accounts.

 

(i)            Any amounts held or received in the
BANA Account (including all interest and other earnings with respect thereto,
if any) at any time (x) when all of the Secured Obligations have been
satisfied or (y) all Events of Default and Liquidity Events have been
cured shall (subject in the case of clause (x) to the provisions of
the Intercreditor Agreement), be remitted to the operating account of the
Company as specified by the Borrower Agent.

 

SECTION 2.22.              Reserves; Change in Reserves; Decisions by
Co-Collateral Agents.  (a)  Any Co-Collateral Agent may at any
time and from time to time in the exercise of its Permitted Discretion
establish and increase or decrease Reserves, provided that, as a
condition to the establishment of any new category of Reserves, or any increase
in Reserves resulting from a change in the manner of determination thereof, any
Required Reserve Notice shall have been given to the Borrower Agent.  The amount of any Reserve established by any
Co-Collateral Agent shall have a reasonable relationship to the event,
condition or other matter that is the basis for the Reserve.  Upon delivery of such notice, the Co-Collateral
Agents shall be available to discuss the proposed Reserve or increase, and the
Borrowers may take such action as may be required so that the event, condition
or matter that is the basis for such Reserve or increase no longer exists, in a
manner and to the extent reasonably satisfactory to the Co-Collateral Agents in
the exercise of their Permitted Discretion. 
In no event shall such notice and opportunity limit the right of any
Co-Collateral Agent to establish or change such Reserve, unless such Co-Collateral
Agent shall have determined in its Permitted Discretion that the event,
condition or other matter that is the basis for such new Reserve or such change
no longer exists or has otherwise been adequately addressed by the
Borrowers.  Notwithstanding anything
herein to the contrary, 

 

68

 

Reserves shall not
duplicate eligibility criteria contained in the definition of “Eligible Account”
or “Eligible Inventory” and vice versa, or reserves or criteria deducted in
computing the cost or market value of Eligible Account or Eligible Inventory or
the Net Orderly Liquidation Value of Eligible Inventory and vice versa.

 

(b)           Anything contained herein to the
contrary notwithstanding, (i) any Reserve may be established or increased
by any Co-Collateral Agent without the consent of the Agent or the other
Co-Collateral Agent, and (ii) no Reserve may be decreased or eliminated
without the consent of both Co-Collateral Agents.

 

SECTION 2.23.              Revolving Commitment Increases
and Incremental Term Loans.  (a)  So long as no Event of Default then
exists, or would result therefrom, the Borrower Agent shall have the right at
any time, and from time to time, to request one or more increases in the amount
of the total Commitments in an aggregate amount not to exceed $300,000,000 or,
if less, the amount by which $800,000,000 exceeds the total Commitments then in
effect (such amount, the “Aggregate Incremental Capacity”).  Each such increase shall be subject to the
consent of the Agent and the Co-Collateral Agents (which shall not be
unreasonably withheld) and may consist of either Revolving Commitment Increases
or Incremental Term Loans.  Anything
contained herein to the contrary notwithstanding, the aggregate amount of
Commitments and, without duplication, Loans outstanding hereunder at any time,
including the aggregate amount of Revolving Commitment Increases and
Incremental Term Loans, shall not exceed $800,000,000 at any time.

 

(b)           Revolving
Commitment Increases.  (i) Any request to increase the
Revolving Commitments shall be first made to all existing Revolving Lenders on
a pro rata basis.  To the extent that the
existing Revolving Lenders decline to increase their Revolving Commitments, or
decline to increase their Revolving Commitments to the amount requested by the
Borrower Agent, the Agent may arrange for other Persons to become a Revolving
Lender hereunder and to issue revolving commitments in an amount equal to the
amount of the increase in the aggregate total of Revolving Commitments
requested by the Borrower Agent and not accepted by the existing Revolving
Lenders (each such increase by either means, a “Revolving Commitment
Increase”, and each such Person issuing, or Lender increasing, its
Revolving Commitment, an “Additional Revolving Commitment Lender”); provided,
however, that (A) no Revolving Lender shall be obligated to provide
a Revolving Commitment Increase as a result of any such request by the Borrower
Agent, (B) any Additional Revolving Commitment Lender which is not an
existing Revolving Lender shall be an Eligible Assignee and shall be subject to
the approval of the Agent, the Co-Collateral Agents, each Issuing Bank and the
Borrower Agent (each such consent not to be unreasonably withheld), and (C) for
the avoidance of doubt, no Additional Revolving Loans shall be used to effect
any exchange of Existing Notes for Revolving Loans or Revolving
Commitments.  Each Revolving Commitment
Increase shall be in a minimum aggregate amount of at least $25,000,000 and in
integral multiples of $5,000,000 in excess thereof.  Each Revolving Commitment Increase shall be
subject to the terms and conditions set forth in this Section 2.23(b) and
any Revolving Loans pursuant to such Revolving Commitment Increase or new
Revolving Commitments shall be on the same terms and conditions as all other
Revolving Loans, except with respect to any fees payable in connection
therewith as may be separately agreed among the Borrower Agent, the Agent and
the Additional Revolving Commitment Lenders.

 

69

 

(ii)           No
Revolving Commitment Increase shall become effective unless and until each of the
following conditions have been satisfied:

 

(A)       the Borrower Agent, the Agent, and any
Additional Revolving Commitment Lender shall have executed and delivered a joinder to the
Loan Documents in such form as the Agent may reasonably require;

 

(B)        the Borrowers shall have paid such fees
and other compensation as the Borrower Agent, the Agent and each such
Additional Revolving Commitment Lender may agree;

 

(C)        the Borrower Agent shall have delivered
to the Agent and the Revolving Lenders an opinion or opinions, in form and
substance reasonably satisfactory to the Agent, from counsel to the Borrowers
reasonably satisfactory to the Agent (it being agreed that the counsel that
delivers the legal opinions on the Effective Date shall be satisfactory to the
Agent) and dated such date;

 

(D)        to the extent requested by any
Additional Revolving Commitment Lender, a promissory note will be issued at the
Borrowers’ expense, to each such Additional Revolving Commitment Lender, to be
in conformity with the requirements of Section 2.10 (with appropriate
modification) to the extent necessary to reflect the new Revolving Commitment
of such Additional Revolving Commitment Lender;

 

(E)        the Borrower Agent shall have delivered
to the Agent (1) the resolutions adopted by each Borrower approving or
consenting to such Revolving Commitment Increase and (2) a certificate of
a Responsible Officer of the Company to the effect that, after giving effect to
the requested Revolving Commitment Increase, no Event of Default shall have
occurred and be continuing; and

 

(F)        the Borrower Agent, the Borrowers and
the Additional Revolving Commitment Lenders shall have delivered such other
instruments, documents and agreements as the Agent may reasonably request.

 

(iii)          The
Agent shall promptly notify each Lender as to the effectiveness of each
Commitment Increase (with each date of such effectiveness being referred to
herein as a “Revolving Commitment Increase Date”), and at such time (A) the aggregate
total Revolving Commitments and the aggregate total Commitments under, and for all
purposes of, this Agreement shall be increased by the aggregate amount of such Revolving Commitment Increases, (B) the
Commitment Schedule shall be deemed modified, without further action, to
reflect the revised Revolving Commitments of the Lenders, and (C) this
Agreement shall be deemed amended, without further action, to the extent
necessary to reflect such increased aggregate total Commitments.

 

(iv)          In
connection with Revolving Commitment Increases hereunder, the Lenders and the
Borrowers agree that, notwithstanding anything to the contrary in this
Agreement, (A) the Borrowers shall, in coordination with the Agent, (1) repay

 

70

 

outstanding Revolving Loans of certain Lenders, and obtain Revolving
Loans from certain other Revolving Lenders (including the Additional Revolving
Commitment Lenders), or (2) take such other actions as reasonably may be
required by the Agent, in each case to the extent necessary so that all of the
Revolving Lenders effectively participate in each of the outstanding Revolving
Loans pro rata on the basis of their Applicable Percentages (determined after
giving effect to any increase in the aggregate total Revolving Commitments
pursuant to this Section 2.23); and (B) the Borrowers shall pay to
the Revolving Lenders any costs of the type referred to in Section 2.16 in
connection with any repayment and/or prepayment of Revolving Loans required
pursuant to preceding clause (A). 
Without limiting the obligations of the Borrowers provided for in this Section 2.23(b),
the Agent and the Lenders agree that they will use their commercially
reasonable efforts to attempt to minimize the costs of the type referred to in Section 2.16
which the Borrowers would otherwise occur in connection with the implementation
of an increase in the aggregate total Revolving Commitments and the aggregate
total Commitments hereunder.

 

(c)           Incremental Term Loans.  (i)  The Company may also utilize part
or all of the Aggregate Incremental Capacity to obtain one or more incremental
term loans (the “Incremental Term Loans”) as provided herein.  Incremental Term Loans may be exchanged by
the Company for any of the Company’s Existing Notes, or the cash proceeds of
any Incremental Term Loans may be used to repurchase any of the Company’s
Existing Notes, but neither the Incremental Term Loans nor the proceeds thereof
may be used for any other purpose.  The
Incremental Term Loans shall constitute Secured Obligations subject to the
provisions of Sections 7.03, 7.04 and 7.05 hereof.  Each extension of
Incremental Term Loans shall be subject to the terms and conditions set forth
in this Section 2.23(c).

 

(ii)           Each
Incremental Term Loan shall be subject to the terms of this Agreement and each
of the other Loan Documents and, to the extent not specified or inconsistent
with the terms and conditions set forth herein or therein, the terms and
conditions applicable to each Incremental Term Loan shall be set forth in a
separate amendment agreement (each an “Incremental Term Loan Amendment”)
among the Company, the Agent and each lender of such Incremental Term Loans (an
“Incremental Term Loan Lender”); provided that no Lender shall
be obligated to provide any Incremental Term Loan as a result of any request by
the Company.  Unless otherwise agreed by the Required
Lenders, (A) each Incremental Term Loan Amendment shall be in form and
substance reasonably satisfactory to the Agent (and the Agent shall not be
required to seek the direction or consent of the Required Lenders for any such
Incremental Term Loan Amendment to the extent such Incremental Term Loan
Amendment is not inconsistent with the terms and conditions set forth herein),
and (B) no Incremental Term Loan Amendment shall include (1) any
terms or conditions of the Incremental Term Loans (other than interest rates
and fees, maturity date, amortization (if any) and conditions to
effectiveness), or any terms or conditions that are in conflict with any of the
provisions of this Agreement, or (2) any additional covenants or Events of
Default or provisions for mandatory prepayment not otherwise provided for
herein; provided that such Incremental Term Loan Amendment may provide
for assignments and transfers of Incremental Term Loans to third parties (other
than any Loan Party, any 

 

71

 

Sponsor or any of their Affiliates) on terms and conditions other than
those specified in Section 9.04 without the consent of the Required
Lenders or any other Lender.

 

(iii)          No
extension of an Incremental Term Loan shall become effective unless and until
each of the following conditions have been satisfied:

 

(A)          the Company, the Agent, and each
participating Incremental Term Loan Lender shall have executed and delivered an
Incremental Term Loan Amendment and such other loan documentation as the Agent
may reasonably require in connection therewith;

 

(B)           the Company shall have paid such fees
and other compensation to the Incremental Term Loan Lenders as the Company, the
Agent and each such Incremental Term Loan Lender may agree;

 

(C)           the Company shall have delivered to
the Agent and the Incremental Term Loan Lenders and the other Lenders an opinion
or opinions, in form and substance reasonably satisfactory to the Agent, from
counsel to the Company reasonably satisfactory to the Agent (it being agreed
that the counsel that delivers the legal opinions on the Effective Date shall
be satisfactory to the Agent) and dated such date;

 

(D)          to the extent requested by any
Incremental Term Loan Lender, a promissory note will be issued at the Company’s
expense, to each such Incremental Term Loan Lender, to be in conformity with
the requirements of Section 2.10 (with appropriate modification) to the
extent necessary to reflect the Incremental Term Loans of such Incremental Term
Loan Lender;

 

(E)           the Company shall have delivered to
the Agent (1) the resolutions adopted by the Company approving or
consenting to such incurrence of Incremental Term Loans and (2) a
certificate of a Responsible Officer of the Company to the effect that, after
pro forma application of the extension of the requested Incremental Term Loans,
(a) no Event of Default shall have occurred and be continuing, (b) the
Company shall be in compliance with the requirements of Section 5.14
hereof (without regard to any Inventory Grace Period), and (c) Excess
Availability shall be at least 20% of the lesser of (i) the aggregate
Revolving Commitments and (ii) the Borrowing Base;

 

(F)           no Incremental Term Loan shall by its
terms be scheduled to mature or require any other payment of principal prior to
the date that is at least 90 days after the Maturity Date; provided that
Incremental Term Loans may be subject to quarterly scheduled payments of
principal in an annual amount not to exceed 1% of the original principal amount
of such Incremental Term Loans, with the balance payable at the maturity
thereof and may be prepaid pursuant to Section 2.11(a) hereof; and

 

72

 

(G)           the Company and the Incremental Term
Loan Lenders shall have delivered such other instruments, documents and
agreements as the Agent may reasonably request.

 

(iv)          The
Agent shall promptly notify each Lender as to the effectiveness of each
Incremental Term Loan, and at such time (A) the aggregate total
Commitments under, and for all purposes of, this Agreement shall be increased
by the aggregate amount of such Incremental Term Loans, (B) the Commitment
Schedule shall be deemed modified, without further action, to reflect the
revised Incremental Term Loan Commitments of the Lenders, and (C) this
Agreement shall be deemed amended, without further action, to the extent
necessary to reflect such increased aggregate total Commitments.

 

(v)           The Company shall cancel and extinguish the Indebtedness under
any Existing Notes repurchased with the proceeds of Incremental Term Loans.

 

SECTION 2.24.              Borrower Agent.   Each Borrower hereby designates the Company as its
representative and agent (in such capacity, the “Borrower Agent”) for
all purposes under the Loan Documents, including requests for Loans and Letters
of Credit, designation of interest rates, delivery or receipt of
communications, preparation and delivery of Borrowing Base Certificates and
financial reports, receipt and payment of Obligations, requests for waivers,
amendments or other accommodations, actions under the Loan Documents (including
in respect of compliance with covenants), and all other dealings with the
Agent, the Co-Collateral Agents, the Issuing Banks or any Lender.  The Borrower Agent hereby accepts such
appointment.  The Agent, the Issuing
Banks, the Co-Collateral Agents and the Lenders shall be entitled to rely upon,
and shall be fully protected in relying upon, any notice or communication
(including any notice of borrowing) delivered by Borrower Agent on behalf of
any Borrower.  The Agent, the Issuing
Banks, the Co-Collateral Agents and the Lenders may give any notice or
communication with a Borrower hereunder to the Borrower Agent on behalf of such
Borrower.  Each of the Agent, the
Co-Collateral Agents, the Issuing Banks and the Lenders shall have the right,
in its discretion, to deal exclusively with the Borrower Agent for any or all
purposes under the Loan Documents.  Each
Borrower agrees that any notice, election, communication, representation,
agreement or undertaking made on its behalf by the Borrower Agent shall be
binding upon and enforceable against it.  Anything contained herein to the contrary
notwithstanding, no Borrower (other than the Borrower Agent) shall be
authorized to request any Borrowing or Letter of Credit hereunder without the
prior written consent of the Company.

 

SECTION 2.25.              Joint and Several Liability of
the Borrowers.  (a)  Each Borrower agrees that it is
absolutely and unconditionally jointly and severally liable, as co-borrower,
for the prompt payment and performance of all Obligations and all agreements of
each of the Borrowers under the Loan Documents. 
Each Borrower agrees that its co-borrower obligations hereunder are
direct obligations of payment and not of collection, that such obligations
shall not be discharged until Full Payment of the Obligations.

 

(b)           It
is agreed among each Borrower, the Agent, the Co-Collateral Agents, the Issuing
Banks and the Lenders that the provisions of this Section 2.25 are of the
essence of 

 

73

 

the transaction
contemplated by the Loan Documents and that, but for such provisions, the
Agent, the Co-Collateral Agents, the Issuing Banks and the Lenders would
decline to make Loans and issue Letters of Credit.  Each Borrower acknowledges that its
obligations pursuant to this Section are necessary to the conduct and
promotion of its business, and can be expected to benefit such business.

 

(c)           Nothing
contained in this Agreement (including any provisions of this Section 2.25
to the contrary) shall limit the liability of (i) any Borrower to pay
Loans made directly or indirectly to that Borrower (including Loans advanced to
any other Borrower and then re-loaned or otherwise transferred to, or for the
benefit of, such Borrower), LC Exposure and all accrued interest, fees,
expenses and other related Obligations with respect thereto, for which such
Borrower shall be primarily liable for all purposes hereunder, or (ii) the
Company in respect of all of the Revolving Facility Obligations under the Loan
Documents.  The Agent, the Co-Collateral
Agents, the Issuing Banks and the Lenders shall have the right, at any time in
their discretion, to condition Loans and Letters of Credit upon a separate
calculation of borrowing availability for each Borrower and to restrict the
disbursement and use of such Loans and Letters of Credit to such Borrower.

 

(d)           Each
Borrower has requested that the Agent and the Lenders make this credit facility
available to the Borrowers on a combined basis, in order to finance the
Borrowers’ business most efficiently and economically.  The Borrowers’ business is a mutual and collective
enterprise, and the Borrowers believe that consolidation of their credit
facility will enhance the borrowing power of each Borrower and ease the
administration of their relationship with the Lenders, all to the mutual
advantage of the Borrowers.  The
Borrowers acknowledge and agree that the Agent’s and the Lenders’ willingness
to extend credit to the Borrowers and to administer the Collateral on a
combined basis, as set forth herein, is done solely as an accommodation to the
Borrowers and at the Borrowers’ request.

 

(e)           In
any action or proceeding involving any state corporate law, or any state,
Federal or foreign bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of any Borrower
under this Section 2.25 or under this Agreement would otherwise be held or
determined to be avoidable, invalid or unenforceable on account of the amount
of such Borrower’s liability under this Section 2.25 or under this
Agreement, then, notwithstanding any other provision of this Section 2.25
to the contrary, the amount of such liability shall, without any further action
by the Borrowers or the Lenders, be automatically limited and reduced to the
highest amount that is valid and enforceable as determined in such action or
proceeding (such highest amount determined hereunder being the relevant
Borrower’s maximum liability (“Borrower’s Maximum Liability”).  This Section 2.25(e) with respect
to the Borrower’s Maximum Liability of each Borrower is intended solely to
preserve the rights of the Lenders to the maximum extent not subject to
avoidance under applicable law, and no Borrower nor any other Person or entity
shall have any right or claim under this Section with respect to such
Borrower’s Maximum Liability, except to the extent necessary so that the
obligations of any Borrower hereunder shall not be rendered voidable under
applicable law.  Each Borrower agrees
that the Obligations may at any time and from time to time exceed the Borrower’s
Maximum Liability of each Borrower without impairing this Section 2.25 or
this Agreement, or affecting the rights and remedies of the Lenders hereunder,
provided,

 

74

 

that nothing in this
sentence shall be construed to increase any Borrower’s obligations hereunder
beyond its Borrower’s Maximum Liability.

 

(f)            In the event any Borrower (a “Paying
Borrower”) shall make any payment or payments under this Section 2.25
or shall suffer any loss as a result of any realization upon any collateral
granted by it to secure its obligations under this Agreement, each other
Borrower (each a “Non-Paying Borrower”) shall contribute to such Paying
Borrower an amount equal to such Non-Paying Borrower’s “Borrower Percentage” of
such payment or payments made, or losses suffered, by such Paying
Borrower.  For purposes of this Section 2.25,
each Non-Paying Borrower’s “Borrower Percentage” with respect to any such
payment or loss by a Paying Borrower shall be determined as of the date on
which such payment or loss was made by reference to the ratio of (i) such
Non-Paying Borrower’s Maximum Liability as of such date (without giving effect
to any right to receive, or obligation to make, any contribution hereunder) or,
if such Non-Paying Borrower’s Maximum Liability has not been determined, the
aggregate amount of all monies received by such Non-Paying Borrower from any
other Borrower after the date hereof (whether by loan, capital infusion or by other
means) to (ii) the aggregate Borrower’s Maximum Liability of all Borrowers
hereunder (including such Paying Borrower) as of such date (without giving
effect to any right to receive, or obligation to make, any contribution
hereunder), or to the extent that a Borrower’s Maximum Liability has not been
determined for any Borrower, the aggregate amount of all monies received by
such Borrowers from any other Borrower after the date hereof (whether by loan,
capital infusion or by other means). 
Nothing in this provision shall affect any Borrower’s several liability
for the entire amount of the Obligations (up to such Borrower’s Maximum
Liability).  Each of the Borrowers
covenants and agrees that its right to receive any contribution under this Section 2.25
from a Non-Paying Borrower shall be subordinate and junior in right of payment
to the Payment in Full of the Obligations. 
This provision is for the benefit of all of the Agent, the Co-Collateral
Agents, the Issuing Banks, the Lenders, the Borrowers and the Loan Guarantors
and may be enforced by any one, or more, or all of them in accordance with the
terms hereof.

 

SECTION 2.26.            Loan Account; Statement of
Obligations. 
(a) The Agent shall maintain in accordance with its usual and
customary practices an account or accounts (“Loan Account”) evidencing
the Indebtedness of the Borrowers resulting from each Revolving Loan or
issuance of a Letter of Credit from time to time and all other payment
Obligations hereunder or under the other Loan Documents, including accrued
interest, fees and expenses.  Any failure
of the Agent to record anything in the Loan Account, or any error in doing so,
shall not limit or otherwise affect the obligation of the Borrowers to pay any
amount owing hereunder.  The Agent may
maintain a single Loan Account in the name of the Borrower Agent, and each
Borrower confirms that such arrangement shall have no effect on the joint and
several character of its liability for the Obligations.  In the absence of manifest error, entries
made in the Loan Account shall constitute presumptive evidence of the
information contained therein.

 

(b)           The Borrowers hereby authorize the
Agent, from time to time without prior notice to the Borrowers, to charge to
the Loan Account all interest and all fees payable hereunder or under any of
the other Loan Documents, all costs and expenses payable by any Loan Party
hereunder or under any of the other Loan Documents, all fees and costs provided
for in Section 2.12, and all other payments due and payable under any Loan
Document, which amounts so charged shall thereafter constitute Revolving Loans
hereunder which shall accrue

 

75

 

interest at the rate then
applicable to Revolving Loans that are ABR Loans (unless and until converted
into LIBOR Rate Loans in accordance with the terms hereof); provided
that the Agent shall not be authorized to charge any such amount to the Loan
Account unless the same shall not have been paid by any Loan Party within two
Business Days after such payment of such amount has otherwise become due and
payable hereunder or under any other Loan Document.  Any interest not paid by any Loan Party
within two Business Days after such payment of such amount has otherwise become
due and payable hereunder or under any other Loan Document shall be compounded
by being charged to the Loan Account and shall thereafter constitute Loans
hereunder and shall accrue interest at the rate then applicable to Loans that
are ABR Loans (unless and until converted into LIBOR Rate Loans in accordance
with the terms hereof).

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

Each Loan Party represents and warrants to the Lenders that:

 

SECTION 3.01.              Organization; Powers.  Each of the Loan Parties and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to own its property and assets and to carry on its business as now
conducted and, except where the failure to do so, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.

 

SECTION 3.02.              Authorization; Enforceability.  The Transactions are within each applicable
Loan Party’s corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action of such Loan Party.  Each Loan Document to which each Loan Party
is a party have been duly executed and delivered by such Loan Party and is a
legal, valid and binding obligation of such Loan Party, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency or
similar laws affecting creditors’ rights generally and to general principles of
equity.

 

SECTION 3.03.              Governmental Approvals; No
Conflicts.  The Transactions (a) do
not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as have been obtained
or made and are in full force and effect, except for filings necessary to
perfect Liens created pursuant to the Loan Documents (all of which have been
timely made or otherwise provided for (including, where applicable, delivery to
the Agent of documents to perfect Liens created pursuant to the Loan
Documents)) and filings as may be required under the Exchange Act and the
Securities Act, (b) will not violate any Requirement of Law applicable to
any Loan Party or any of its Subsidiaries, (c) will not violate or result
in a default under any indenture, agreement or other instrument binding upon
any Loan Party or any of its Subsidiaries or its assets, or give rise to a
right thereunder to require any payment to be made by any Loan Party or any of
its Subsidiaries, and (d) will not result in the creation or imposition of
any Lien on any asset of any Loan Party or any of its Subsidiaries, except
Liens created pursuant to the Loan Documents and the Term Loan Security
Documents; except, in each case other than with respect to the creation of
Liens, to the extent that any such

 

76

 

violation, default
or right, or any failure to obtain such consent or approval or to take any such
action, would not reasonably be expected to result in a Material Adverse
Effect.

 

SECTION 3.04.              Financial Condition; No
Material Adverse Change.  (a) 
The Company has heretofore furnished to the Lenders its consolidated balance
sheet and statements of earnings, shareholders’ equity and cash flows (i) as
of and for the fiscal years ended July 28, 2007 and August 2, 2008,
each reported on by Ernst & Young LLP, independent public accountants,
and (ii) as of and for each of the three subsequent fiscal quarters of the
Company, and each fiscal month thereafter ended at least thirty (30) days
before the Effective Date, certified by its chief financial officer.  Such financial statements present fairly, in
all material respects, the financial position and results of operations and cash
flows of the Company and its consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP, subject to the absence of footnotes and
normal year-end adjustments in the case of the statements referred to in
clause (ii) above.

 

(b)           No event, change or condition has
occurred that has had, or would reasonably be expected to have, a Material
Adverse Effect, since January 31, 2009.

 

SECTION 3.05.              Properties.  (a)  As of the date of this Agreement,
Schedule 3.05(a) sets forth the address of each parcel of real
property (or each set of parcels that collectively comprise one operating
property) that is owned or leased by each Loan Party, together with a list of
the lessors with respect to all such leased property.  Schedule 3.05(a) also identifies
the principal place of business and chief executive office of each Loan
Party.  The books and records of each
Loan Party, and all of their respective chattel paper and records of Accounts,
are maintained exclusively at such locations. 
There is no location at which any Loan Party has any Collateral (except
for vehicles and Inventory in transit in the ordinary course of business) other
than those locations identified on Schedule 3.05(a).

 

(b)           Each of the Company and each of the Subsidiaries has good and
insurable fee simple title to, or valid leasehold interests in, or easements or
other limited property interests in, all its real properties (including all
Mortgaged Properties) and has good and marketable title to its personal
property and assets, in each case, except for defects in title that do not
materially interfere with its ability to conduct its business as currently
conducted or to utilize such properties and assets for their intended purposes
and except where the failure to have such title would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect.  All such properties and assets
are free and clear of Liens, other than Liens (i) permitted by Section 6.02
or (ii) arising by operation of law (which Liens, in the case of this
clause (ii) do not materially interfere with the ability of Holdings,
the Company or the relevant Subsidiary to carry on its business as now
conducted or to utilize the affected properties or assets for their intended
purposes).

 

(c)           Each of the Company and each of the Subsidiaries has complied
with all obligations under all leases to which it is a party, except where the
failure to comply would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, and all such leases are in full force
and effect, except leases in respect of which the failure to be in full force
and effect would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. 
Each of the Company and each of the Subsidiaries enjoys peaceful and

 

77

 

undisturbed possession under all such leases, other
than leases in respect of which the failure to enjoy peaceful and undisturbed
possession would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

(d)           As of the Effective Date, none of
Holdings, the Company or any Subsidiary has received any notice of, nor
has any knowledge of, any pending or contemplated condemnation proceeding
affecting any of the Mortgaged Properties or any sale or disposition thereof in
lieu of condemnation.

 

(e)           To the Company’s knowledge, as of the Effective Date, none
of the Company or any Subsidiary is obligated under any right of first refusal,
option or other contractual right to sell, assign or otherwise dispose of any
Mortgaged Property or any interest therein.

 

(f)            Copies of certificates of occupancy
relating to each Mortgaged Property that the mortgagor has in its possession
have been delivered to the Agent as mortgagee with respect to each Mortgaged
Property.

 

(g)           Each of the Company and the
Subsidiaries owns or possesses, or is licensed to use, all patents, trademarks,
service marks, trade names and copyrights and all licenses and rights with
respect to the foregoing, necessary for the present conduct of its business,
without any conflict with the rights of others, and free from any burdensome
restrictions on the present conduct of its business, except where such failure
to own, possess or hold pursuant to a license or such conflicts and
restrictions would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or except as set forth on
Schedule 3.05(g).

 

SECTION 3.06.              Litigation and Environmental
Matters.  (a)  Other than the
Disclosed Matters, there are no actions, suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of
any Loan Party, threatened against or affecting the Loan Parties or any of
their Subsidiaries (i) as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, would reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect or (ii) that involve any Loan Documents or the Transactions.

 

(b)           Except for the Disclosed Matters or
any other matters that, individually or in the aggregate, would not reasonably
be expected to result in a Material Adverse Effect (i) no Loan Party nor
any of its Subsidiaries has received notice of any claim with respect to any
Environmental Liability or knows of any basis for any Environmental Liability
and (ii) no Loan Party nor any of its Subsidiaries (1) has failed to
comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law or (2) has
become subject to any Environmental Liability.

 

(c)           Since the date of this Agreement,
there has been no change in the status of the Disclosed Matters that,
individually or in the aggregate, has resulted in, or materially increased the
likelihood of, a Material Adverse Effect.

 

78

 

SECTION 3.07.              Compliance with Laws and
Agreements; Licenses and Permits.  (a) 
Each Loan Party is in compliance with all Requirements of Law applicable to it
or its property and all indentures, agreements and other instruments binding
upon it or its property, except where the failure to do so, individually or in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect.

 

(b)           Each Loan Party and its Subsidiaries
has obtained and holds in full force and effect, all franchises, licenses,
leases, permits, certificates, authorizations, qualifications, easements,
rights of way and other rights and approvals which are necessary or advisable
for the operation of its businesses as presently conducted and as proposed to
be conducted, except where the failure to have so obtained or hold or to be in
force, individually or in the aggregate, would not reasonably be expected to
result in a Material Adverse Effect.  No
Loan Party or any of its Subsidiaries is in violation of the terms of any such
franchise, license, lease, permit, certificate, authorization, qualification,
easement, right of way, right or approval, except where any such violation,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect.

 

SECTION 3.08.              Investment Company Status.  No Loan Party is an “investment company”
as defined in, or is required to be registered under, the Investment Company
Act of 1940.

 

SECTION 3.09.              Taxes.  Each Loan Party and its Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which such Loan Party or such Subsidiary, as
applicable, has set aside on its books adequate reserves in accordance with
GAAP or (b) to the extent that the failure to do so, individually or in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect.

 

SECTION 3.10.              ERISA.  No ERISA Event has occurred in the five year
period prior to the date on which this representation is made or deemed made
and is continuing or is reasonably expected to occur that, when taken together
with all other such ERISA Events for which liability is reasonably expected to
occur, would reasonably be expected to result in a Material Adverse
Effect.  Except as would not reasonably
be expected to have a Material Adverse Effect, the present value of all
accumulated benefit obligations under all Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not,
as of the date of the most recent financial statements reflecting such amounts,
exceed the fair market value of the assets of such Plans, in the aggregate.

 

SECTION 3.11.              Disclosure.  (a)  All written information (other than
the Projections, the pro forma financial statements and estimates and
information of a general economic nature) concerning Holdings, the Company, the
Subsidiaries, the Transactions and any other transactions contemplated hereby
included in the Information Memorandum or otherwise prepared by or on behalf of
the foregoing or their representatives and made available to any Lender or the
Agent in connection with the Transactions on or before the date hereof (the “Information”),
when taken as a whole, as of the date such Information was furnished to the
Lenders and as of the Effective Date, did not contain any untrue statement of a
material fact as of

 

79

 

any such date or
omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which such
statements were made.

 

(b)           The Projections, pro forma financial
statements and estimates and information of a general economic nature prepared
by or on behalf of the Company or any of its representatives and that have been
made available to any Lender or the Agent in connection with the Transactions
on or before the date hereof (the “Other Information”) (i) have
been prepared in good faith based upon assumptions believed to be reasonable as
of the date thereof (it being understood that actual results may vary
materially from the Other Information), and (ii) as of the Effective Date,
have not been modified in any material respect by the Company.

 

SECTION 3.12.              Material Agreements.  No Loan Party is in default in any material
respect in the performance, observance or fulfillment of any of its obligations
contained in (i) any material agreement to which it is a party or (ii) any
agreement or instrument to which it is a party evidencing or governing
Indebtedness, except where any such default would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.

 

SECTION 3.13.              Solvency.  (a)  Immediately after the consummation
of the Transactions to occur on the Effective Date and immediately following
the making of each Loan and after giving effect to the application of the
proceeds of each Loan, (i) the fair value of the assets of the Loan
Parties on a consolidated basis, at a fair valuation, will exceed the debts and
liabilities, direct, subordinated, contingent or otherwise, of the Loan Parties
on a consolidated basis; (ii) the present fair saleable value of the
property of the Loan Parties on a consolidated basis will be greater than the
amount that will be required to pay the probable liability of the Loan Parties
on a consolidated basis, on their debts and other liabilities, direct,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (iii) the Loan Parties on a consolidated
basis will be able to pay their debts and liabilities, direct, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and matured;
and (iv) the Loan Parties on a consolidated basis will not have
unreasonably small capital with which to conduct the businesses in which they
are engaged as such businesses are now conducted and are proposed to be
conducted following the Effective Date.

 

(b)           The Loan Parties do not intend to
incur debts beyond their ability to pay such debts as they mature, taking into
account the timing and amounts of cash to be received by the Loan Parties and
the timing and amounts of cash to be payable by the Loan Parties on or in
respect of their Indebtedness.

 

SECTION 3.14.              Insurance.  A true, complete and correct description of
all insurance maintained by or on behalf of the Loan Parties and the
Subsidiaries as of the Effective Date has been delivered to the Agent and the
Lenders pursuant to Section 4.01(e). 
As of the Effective Date, all such insurance is in full force and effect
and all premiums in respect of such insurance have been duly paid.  The Company believes that the insurance
maintained by or on behalf of the Company and the Subsidiaries is adequate and
is in accordance with normal industry practice.

 

SECTION 3.15.              Capitalization and Subsidiaries.  Schedule 3.15 sets forth (a) a
correct and complete list of the name and relationship to the Company of each
and all of the

 

80

 

Company’s
Subsidiaries, (b) a true and complete listing of each class of each of the
Company’s and each Subsidiary’s authorized Equity Interests, of which all of
such issued shares are validly issued, outstanding, fully paid and
non-assessable, and owned beneficially and of record by the Persons identified
on Schedule 3.15, and (c) the type of entity of the Company and each
of its Subsidiaries.  All of the issued
and outstanding Equity Interests of the Subsidiaries owned by any Loan Party
have been (to the extent such concepts are relevant with respect to such
ownership interests) duly authorized and issued and are fully paid and
non-assessable free and clear of all Liens (other than Liens created under the
Loan Documents and the Term Loan Security Documents).  As of the Effective Date, there are no
outstanding purchase options, warrants, subscription rights, agreements to
issue or sell, convertible interests or powers of attorney granted by the
Company or a Subsidiary of the Company relating to Equity Interests of the
Company or any Subsidiary.

 

SECTION 3.16.              Security Interest in Collateral.  The provisions of this Agreement and the
other Loan Documents create legal and valid Liens on all the Collateral in
favor of the Agent, for the benefit of the Agent, the Co-Collateral Agents, the
Lenders and the other Secured Parties; and upon the proper filing of UCC
financing statements required pursuant to Section 4.01(p) and any
Mortgage Amendments  with respect to Mortgaged Properties, such Liens will
continue to  constitute perfected and continuing Liens on the Collateral, securing
the Secured Obligations, enforceable against the applicable Loan Party and all
third parties, and having priority over all other Liens on the Collateral
except in the case of (a) Permitted Encumbrances, to the extent any such
Permitted Encumbrances would have priority over the Liens in favor of the Agent
pursuant to any applicable law, (b) Liens perfected only by possession
(including possession of any certificate of title) to the extent the Agent has
not obtained or does not maintain possession of such Collateral and (c) subject
to and as provided for under the terms of the Intercreditor Agreement, the
Liens granted under the Term Loan Security Documents.  The Company has delivered to the Agent true
and complete copies of the Collateral Documents.  As of the Effective Date, no Loan Party is in
default under any Collateral Document in any material respect.

 

SECTION 3.17.              Labor Disputes.  Except as, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect: (a) there
are no strikes, lockouts or slowdowns against any Loan Party pending or, to the
knowledge of the Company, threatened, (b) the hours worked by and payments
made to employees of the Loan Parties and the Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable Federal,
state, local or foreign law dealing with such matters and (c) all payments
due from any Loan Party or any Subsidiary, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of the Loan Party or such Subsidiary to the extent
required by GAAP.  Except (i) as,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect or (ii) as set forth on Schedule 3.17, the
consummation of the Transactions will not give rise to a right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which Holdings, the Company or any of its Subsidiaries
(or any predecessor) is a party or by which Holdings, the Company or any of the
Subsidiaries (or any predecessor) is bound.

 

81

 

SECTION 3.18.              Federal Reserve Regulations.  (a)  On the Effective Date, none of the
Collateral is Margin Stock.

 

(b)           None of Holdings, the Company and the
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of buying or carrying Margin
Stock.

 

(c)           No part of the proceeds of any Loan
or any Letter of Credit will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately for any purpose that entails a
violation of, or that is inconsistent with, the provisions of
Regulation T, U or X.

 

SECTION 3.19.              Senior Indebtedness.  The obligations of the Borrowers under the
Loan Documents (a) for principal (including reimbursement obligations with
respect to Letters of Credit whether or not drawn), interest (including, to the
extent legally permitted, all interest accrued thereon after the commencement
of any insolvency or liquidation proceeding at the rate, including any
applicable post-default rate, specified in the applicable agreement), premium
(if any), fees, indemnifications, reimbursements, expenses, damages and other
liabilities payable under the Loan Documents constitute “Senior Indebtedness”
under and as defined in the Senior Subordinated Note Documents, and (b) for
unpaid principal (including reimbursement obligations with respect to drawn
Letters of Credit) and accrued interest (including, to the extent legally
permitted, all interest accrued thereon after the commencement of any
insolvency or liquidation proceeding at the rate, including any applicable
post-default rate, specified in the applicable agreement) constitute “Designated
Senior Indebtedness” under and as defined in the Senior Subordinated Note
Documents.  The Secured Obligations
constitute “Revolving Facility Obligations” under and as defined in the
Intercreditor Agreement.

 

SECTION 3.20.              Intellectual Property.  Each Loan Party owns or has the
lawful right to use all material intellectual property used in the conduct of
its business, without conflict with any intellectual property rights of others,
except as, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. 
Except as, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, there is no pending or, to any
Borrower’s knowledge, threatened claim that any Loan Party’s ownership, use,
marketing, sale or distribution of any Inventory or other product violates
another Person’s intellectual property rights.

 

ARTICLE IV

CONDITIONS

 

SECTION 4.01.              Effective Date.  This Agreement shall become effective on the
date on which each of the following conditions is satisfied (or waived in
accordance with Section 9.02):

 

(a)           Credit
Agreement and Loan Documents.  The
Agent (or its counsel) shall have received (i) from each party hereto
either (A) a counterpart of this Agreement signed on behalf of such party
or (B) written evidence satisfactory to the Agent (which

 

82

 

may include facsimile transmission of a signed signature page of
this Agreement) that such party has signed a counterpart of this Agreement, and
(ii) duly executed copies of joinders, assignments and/or or amendments to
other Loan Documents as the Agent may reasonably require, and such other
certificates, documents, instruments and agreements as the Agent shall
reasonably request in connection with the transactions contemplated by this
Agreement and the other Loan Documents, including any promissory notes
requested by a Lender pursuant to Section 2.10.

 

(b)           Legal
Opinions.  The Agent shall have
received, on behalf of itself, the Lenders and each Issuing Bank on the
Effective Date, a favorable written opinion of (i) Cleary Gottlieb Steen &
Hamilton LLP, special counsel for Holdings and the Company, in form and
substance reasonably satisfactory to the Agent and (ii) local or other
counsel reasonably satisfactory to the Agent as specified on
Schedule 4.01(b), in each case (A) dated the Effective Date, (B) addressed
to each Issuing Bank on the Effective Date, the Agent and the Lenders and (C) in
form and substance reasonably satisfactory to the Agent and covering such other
matters relating to the Loan Documents and the Transactions as the Agent shall
reasonably request.

 

(c)           Financial
Statements and Projections.  The
Lenders shall have received (i) the financial statements and opinion
referred to in Section 3.04(a) and (b) and (ii) projections
in customary form for the Company and its Subsidiaries on a pro forma basis for
completion of the Transactions for the fiscal years 2010 through 2013 and for
each of the twelve fiscal months of fiscal 2010.

 

(d)           Closing
Certificates; Certified Certificate of Incorporation; Good Standing
Certificates.  The Agent shall have
received (i) a certificate of each Loan Party, dated the Effective Date
and executed by its Secretary or Assistant Secretary (or, in the case of NM
Nevada Trust, its Clerk), which shall (A) certify the resolutions of its
Board of Directors, members or other body authorizing the execution, delivery
and performance of the Loan Documents to which it is a party, (B) identify
by name and title and bear the signatures of the Financial Officers and any
other officers of such Loan Party authorized to sign the Loan Documents to
which it is a party, and (C) contain appropriate attachments, including
the certificate or articles of incorporation or organization of each Loan Party
certified by the relevant authority of the jurisdiction of organization of such
Loan Party and a true and correct copy of its by-laws or operating, management
or partnership agreement, and (ii) a good standing certificate for each
Loan Party from its jurisdiction of organization.

 

(e)           No
Default, Etc. Certificate.  The Agent
shall have received a certificate, signed by the chief financial officer of the
Company, dated the Effective Date (i) stating that no Default has occurred
and is continuing, (ii) stating that the representations and warranties of
the Loan Parties contained in the Loan Documents are true and correct in all
material respects (or, if qualified by materiality or Material Adverse Effect,
in all respects) as of such date and (iii) certifying to the accuracy of
the information delivered to the Agent and the Lenders pursuant to Section 2.21(a),
Section 2.21(b), Section 2.21(c) and Section 3.14.

 

83

 

(f)            Fees.  The Lenders, the Joint Lead Arrangers, the
Co-Collateral Agents and the Agent shall have received all fees that have
accrued or are required to be paid, and all expenses for which invoices have
been presented (including the reasonable documented fees and expenses of legal
counsel), on or before the Effective Date.

 

(g)           Lien
and Judgment Searches.  The Agent
shall have received the results of recent lien and judgment searches in each of
the jurisdictions contemplated by the Perfection Certificate, and such search
shall reveal no material judgments and no liens on any of the assets of the
Loan Parties except for liens permitted by Section 6.02 or Liens
discharged on or prior to the Effective Date pursuant to documentation
reasonably satisfactory to the Agent.

 

(h)           Intercreditor
Agreement.  The Agent, the Existing
Agent and the Term Loan Agent and the Loan Parties shall have executed and
delivered the Substitution of Agent and Joinder Agreement designating the Agent
as the “Revolving Facility Agent” under the Intercreditor Agreement.

 

(i)            Funding
Account.  The Agent shall have
received a notice setting forth the deposit account of the Borrower Agent (the “Funding
Account”) to which the Agent is authorized by the Borrowers to transfer the
proceeds of any Borrowings requested or authorized pursuant to this Agreement.

 

(j)            Collateral
Access and Blocked Account Agreements. 
The Loan Parties shall have used commercially reasonable efforts to (i) obtain
and deliver to the Agent each Collateral Access Agreement required to be
provided pursuant to Section 4.12 of the Security Agreement and the
Blocked Account Agreements required to be delivered pursuant to Section 2.21
and (ii) deliver to the Agent each Credit Card Notification and DDA
Notification required to be provided pursuant to Section 2.21.

 

(k)           Solvency.  The Agent shall have received a customary certificate
from the chief financial officer of the Company certifying that Holdings and
its Subsidiaries, on a consolidated basis after giving effect to the
Transactions to occur on the Effective Date, are solvent (within the meaning of
Section 3.13).

 

(l)            Borrowing
Base Certificate.  The Agent shall
have received prior to the Effective Date a Borrowing Base Certificate which
calculates the Borrowing Base as of the last Business Day of the most recent
fiscal month ended at least ten (10) Business Days prior to the Effective
Date.

 

(m)          Closing
Excess Availability.  After giving
effect to all Borrowings to be made on the Effective Date and the issuance of
any Letters of Credit on the Effective Date, Excess Availability shall be not
less than $300,000,000.

 

(n)           Pledged
Stock; Stock Powers; Pledged Notes. 
The Agent (or its bailee) shall have received (i) the certificates
representing the shares of Capital Stock pledged pursuant to the Security
Agreement, together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the pledgor thereof and (ii) each
promissory note (if any) pledged to the Agent (or its bailee) pursuant to the

 

84

 

Security Agreement endorsed (without recourse) in blank (or accompanied
by an executed transfer form in blank) by the pledgor thereof.

 

(o)           Perfection Certificate; Filings,
Registrations and Recordings.  The Agent
shall have received a completed Perfection Certificate dated the Effective Date
and signed by a Responsible Officer of the Company, together with all
attachments contemplated thereby.  Each
document (including any UCC financing statement) required by the Collateral
Documents or under law or reasonably requested by the Agent to be filed,
registered or recorded in order to create in favor of the Agent, for the
benefit of the Agent, the Co-Collateral Agents, the Lenders and other holders
of Secured Obligations, a perfected Lien on the Collateral described therein,
prior and superior in right to any other Person (other than with respect to
Liens expressly permitted by Section 6.02), shall be in proper form for
filing, registration or recordation.  The
Agent, on behalf of the Agent, the Co-Collateral Agents, the Lenders and other
holders of Secured Obligations, shall have a security interest in the
Collateral of the type and priority described in the Collateral Documents
(subject to Liens expressly permitted by Section 6.02 and, subject to the
terms of the Intercreditor Agreement and the Liens granted under the Term Loan
Security Documents).

 

(p)           Mortgages, etc.  The
Company shall have used its commercially reasonable efforts to deliver to the
Agent, with respect to each Mortgaged Property for which an Existing Mortgage
has been granted (subject to the Lien priority set forth in the Intercreditor
Agreement), each of the following, in form and substance reasonably
satisfactory to the Agent:

 

(i)            evidence that mortgage amendments, supplements and restatements (the “Mortgage
Amendments”) with respect to each of the Existing Mortgages have been duly
executed, acknowledged and delivered by each party thereto to the appropriate
title insurance company and are in form suitable for filing or recording in all
applicable filing or recording offices;

 

(ii)           with respect to each Existing Mortgage, fully paid title searches,
mortgage amendment endorsements and/or date-down endorsements (in each case as
reasonably determined by the Agent (which determination may be based, in part,
on the relative costs to the Company and benefits to the Secured Parties of
such alternatives)) or the suitable equivalent or other form available in each
applicable jurisdiction, to the Title Insurance Policies issued in respect of
the Existing Mortgages;

 

(iii)          such advice or opinions from local counsel retained by the Company
in the states in which the Mortgaged Properties for which the Existing
Mortgages have been granted are located as may be reasonably required by the
Agent; and

 

(iv)          evidence that
all fees, costs and expenses have been paid in connection with the Mortgage
Amendments, including filing and recording fees, title insurance company fees
and title charges.

 

85

 

(q)           Material Adverse Effect.  No
event shall have occurred since January 31, 2009  that has had or could reasonably be expected to have a
Material Adverse Effect.

 

(r)            Consents.  Any
consents, approvals, assignments or other actions under the Existing Credit
Agreement in connection with the effectiveness of this Agreement shall have
been obtained or given and shall be in full force and effect, including (i) the
resignation of the Existing Agent, (ii) the consent of the Required
Lenders as defined therein (and any Lender under the Existing Credit Agreement
that is a party hereto hereby provides such consent by execution hereof), and (iii) the
assignment or repayment in full of all amounts owing to lenders under the
Existing Credit Agreement to the extent not constituting amounts or obligations
owing hereunder.

 

(s)           Other Indebtedness. 
After giving effect to the Transactions and the other transactions
contemplated hereby, Holdings, the Company and its Subsidiaries shall not have
any outstanding Indebtedness or preferred stock other than (a) the
Obligations, (b) Indebtedness under the Senior Secured Term Loan Facility,
(c) the Existing Notes, (d) the 2028 Debentures and (e) Indebtedness
set forth on Schedule 6.01.

 

(t)            Insurance.  The Agent
shall have received evidence of insurance coverage in form, scope, and
substance reasonably satisfactory to the Agent and otherwise in compliance with
the terms of Section 5.10 and Section 4.11 of the Security Agreement
and shall have received endorsements naming the Agent (together with the Term
Loan Agent, as applicable) as an additional insured or loss payee, as
applicable, subject to the terms of the Intercreditor Agreement

 

(u)           Collateral Documents.  The
Agent shall have received true and complete certified copies of the Collateral
Documents and the Term Loan Security Documents (as defined in the Intercreditor
Agreement).

 

(v)           Field Examination, Appraisal.  The
Agent and the Co-Collateral Agents shall have received (i) the results of
a completed field examination with respect to the Collateral to be included in
calculating the Borrowing Base and of the relevant accounting systems, policies
and procedures of Holdings and its Subsidiaries, with results satisfactory to
the Co-Collateral Agents and (ii) an appraisal of the Net Orderly
Liquidation Value of Inventory in form and substance reasonably satisfactory to
the Co-Collateral Agents.  The Agent and
the Co-Collateral Agents shall be reasonably satisfied with the cash management
system of the Loan Parties.

 

(w)          PATRIOT Act.  The Agent
shall have received all documentation and other information reasonably
requested by it or any Lender that is required by regulatory authorities under
applicable “know your customer” and anti-money laundering rules and
regulations, including the USA PATRIOT Act.

 

The Agent shall notify the Company and the Lenders of the Effective
Date, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, the
obligations of the Lenders to make Loans and of any Issuing Bank to issue
Letters of Credit hereunder shall not become effective unless each of the
foregoing conditions is satisfied (or waived pursuant to Section 9.02)

 

86

 

at or prior to 5:00 p.m., New York City time, on July 31, 2009
(and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).

 

SECTION 4.02.              Each Credit Event Other Than Incremental Term Loans. 
The obligation of each Revolving Lender to make a Revolving Loan on the
occasion of any Revolving Borrowing, and of any Issuing Bank to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:

 

(a)           The Agent shall have received, in the case
of a Revolving Borrowing, a Borrowing Request as required by Section 2.03
(or a Borrowing Request shall have been deemed given in accordance with the
last paragraph of Section 2.03) or, in the case of the issuance of a
Letter of Credit, the applicable Issuing Bank and the Agent shall have received
a notice requesting the issuance of such Letter of Credit as required by Section 2.06(b) or,
in the case of a Swingline Borrowing, the Swingline Lender and the Agent shall
have received a Swingline Borrowing Request as required by Section 2.05(a).

 

(b)           The representations and warranties of the
Loan Parties set forth in this Agreement and in each of the other Loan
Documents shall be true and correct in all material respects (or, in the case
of any representations and warranties qualified by materiality or Material Adverse
Effect, in all respects) on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit (other than
an amendment, extension or renewal of a Letter of Credit without any increase
in the stated amount of such Letter of Credit), as applicable, with the same
effect as though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and correct in all
material respects (or, in the case of any representations and warranties
qualified by materiality or Material Adverse Effect, in all respects) as of
such earlier date).

 

(c)           At the time of and immediately after giving
effect to such Borrowing or the issuance, amendment, renewal or extension of
such Letter of Credit (other than an amendment, extension or renewal of a
Letter of Credit without any increase in the stated amount of such Letter of
Credit), as applicable, no Event of Default or Default shall have occurred and
be continuing.

 

Each Borrowing and each issuance, amendment, renewal or extension of a
Letter of Credit shall be deemed to constitute a representation and warranty by
the Borrowers on the date thereof as to the matters specified in
paragraphs (b) and (c).

 

SECTION 4.03.              Incremental Term Loans.  The
obligation of each Incremental Term Loan Lender to make an Incremental Term
Loan on the occasion of any Incremental Term Loan Borrowing shall be subject to
the satisfaction of the conditions specified in the applicable Incremental Term
Loan Amendment.

 

87

 

ARTICLE V

AFFIRMATIVE COVENANTS

 

Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder shall have been
paid in full and all Letters of Credit shall have expired or terminated (or
have been cash collateralized pursuant to Section 2.09(b)) and all LC
Disbursements shall have been reimbursed, each Loan Party executing this
Agreement covenants and agrees, jointly and severally with all of the Loan
Parties, with the Lenders that:

 

SECTION 5.01.              Financial Statements; Borrowing Base and Other
Information.  The Company will furnish to the Agent (which
will promptly furnish such information to the Lenders):

 

(a)           within ninety (90) days after the end of
each fiscal year of the Company, its audited consolidated balance sheet and
related statements of earnings, shareholders’ equity and cash flows as of the
end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by Ernst & Young
LLP or other independent public accountants of recognized national standing and
reasonably acceptable to the Agent (without a “going concern” or like
qualification or exception or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly, in all
material respects, the financial condition and results of operations of the
Company  and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP;

 

(b)           within forty-five (45) days after the end of
each of the first three fiscal quarters of each fiscal year of the Company, its
consolidated balance sheet and related statements of earnings, shareholders’
equity and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly, in all material respects,
the financial condition and results of operations of the Company  and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP, subject to normal year-end audit
adjustments and the absence of footnotes;

 

(c)           within thirty-five (35) days after the end
of each of the first two fiscal months of each fiscal quarter of the Company,
its consolidated balance sheet and related statements of earnings and cash
flows as of the end of and for such fiscal month and the then elapsed portion
of the fiscal year, setting forth in each case in comparative form the figures
for (or, in the case of the balance sheet, as of the end of) the corresponding
period or periods of the previous fiscal year, all certified by one of its
Financial Officers as presenting fairly in all material respects the financial
condition and results of operations of the Company  and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP, subject to normal year-end audit adjustments and
the absence of footnotes;

 

88

 

(d)           concurrently with any delivery of financial
statements under clause (a) or (b) or (c) above, a
certificate of a Financial Officer of the Company  in substantially the form of Exhibit C (i) certifying
that no Event of Default or Default has occurred and, if an Event of Default or
Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth, in the case
of the financial statements delivered under clause (a) or (b),
reasonably detailed calculations of the Fixed Charge Coverage Ratio (whether or
not a Liquidity Event then exists) as of the end of the period to which such
financial statements relate, (iii) describing in reasonable detail such
information with respect to Permitted Acquisitions consummated during the
preceding fiscal quarter as the Agent or any Co-Collateral Agent may reasonably
require, to the extent such information has not previously been supplied to the
Agent or the Co-Collateral Agents hereunder, and (iv) certifying, in the
case of the financial statements delivered under clause (a), a list of
names of all Immaterial Subsidiaries (if any) and Unrestricted Subsidiaries (if
any), that each Subsidiary set forth on such list individually qualifies as an
Immaterial Subsidiary or Unrestricted Subsidiary, as applicable, and that all
Domestic Subsidiaries listed as Immaterial Subsidiaries in the aggregate
comprise less than 5% of consolidated total assets of the Company  and the Subsidiaries at the end of the
period to which such financial statements relate and represented (on a
contribution basis) less than 5% of EBITDA for the period to which such
financial statements relate;

 

(e)           concurrently with any delivery of financial
statements under clause (a) above, a certificate of the accounting
firm that reported on such financial statements stating whether they obtained
knowledge during the course of their examination of such financial statements
of any Default or Event of Default (which certificate may be limited to the
extent required by accounting rules or guidelines);

 

(f)            concurrently with any delivery of
consolidated financial statements under clause (a) or (b) above,
the related unaudited consolidating financial statements reflecting the
adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries
(if any) from such consolidated financial statements;

 

(g)           within sixty (60) days after the beginning
of each fiscal year, (i) a detailed consolidated budget of the Company  and its Subsidiaries by month for such
fiscal year (including a projected consolidated balance sheet and the related
consolidated statements of projected cash flows and projected income and
Projected Average Excess Availability for each month of such fiscal year) and (ii) an
update of the annual projections provided pursuant to Section 4.01(c),
including in each case a summary of the underlying material assumptions with
respect thereto (collectively, the “Budget”), and, as soon as available,
significant revisions, if any, of such Budget, which Budget or revisions
thereto shall in each case be accompanied by the statement of a Financial
Officer of the Company  to the effect that, to the best of his knowledge, the Budget is a
reasonable estimate for the period covered thereby;

 

(h)           as soon as available but in any event on or
prior to the 10th Business Day of each fiscal month, a Borrowing Base
Certificate as of the close of business on the last day of the immediately
preceding fiscal month, together with such supporting information in connection
therewith as the Agent or any Co-Collateral Agent may

 

89

 

reasonably request, and which may include, without limitation, Inventory
reports by category and location, together with a reconciliation to the
corresponding Borrowing Base Certificate, a reasonably detailed calculation of
Eligible Inventory, Eligible Accounts and the Reported Value of Inventory, and
a reconciliation of the Borrowers’ Inventory between the amounts shown in the
Company’s retail stock ledger and any Inventory reports delivered pursuant to
this clause (h); provided that (i) by notice to the
Co-Collateral Agents at least 10 days in advance, the Company  may elect at any time to deliver Borrowing
Base Certificates on a weekly basis during any Season, in which case the
Company shall be required to continue to deliver such Borrowing Base
Certificates on a weekly basis until the end of such Season (each such weekly
Borrowing Base Certificate to be delivered on Wednesday of each week (or, if
Wednesday is not a Business Day, on the next succeeding Business Day) as of the
close of business on the immediately preceding Saturday), (ii) upon the
occurrence and during the continuance of an Event of Default or a Liquidity
Event, and during any Inventory Grace Period and until the expiration of 30
consecutive days after any associated Inventory Shortfall has been cured, the
Company  shall deliver
a Borrowing Base Certificate and such supporting information on Wednesday of
each week (or if Wednesday is not a Business Day, on the next succeeding
Business Day), as of the close of business on the immediately preceding
Saturday, (iii) the Company may deliver a Non-Ordinary Course Borrowing
Base Certificate as a condition to any Non-Ordinary Course Asset Disposition
pursuant to Section 6.05, and (iv) after the occurrence of any
Inventory Shortfall and until the same is cured, the Company may deliver
additional Borrowing Base Certificates as of the close of business on any day
subsequent to the day on which any preceding Borrowing Base Certificate has
been delivered; provided, further, that any Borrowing Base
Certificate delivered other than with respect to month’s end may be based on
such reasonable estimates by the Company  of Shrink and other amounts as the Company  may deem necessary;

 

(i)            as soon as practicable upon the reasonable
request of the Agent from time to time, an updated Perfection Certificate (or,
to the extent such request relates to specified information contained in the
Perfection Certificate, such information) reflecting all changes since the date
of the information most recently received pursuant to this clause (i) or
Section 5.11;

 

(j)            promptly after the same become publicly
available, copies of all periodic and other reports, proxy statements and other
materials publicly filed by Holdings, the Company or any Subsidiary with the
SEC, or with any national securities exchange, or, after an initial public
offering of shares of capital stock of Holdings or the Company, distributed by
Holdings or the Company to its shareholders generally, as the case may be;

 

(k)           promptly, a copy of any final “management
letter” received from the Company’s independent public accountants to the
extent such independent public accountants have consented to the delivery of
such management letter to the Agent upon the request of the Company;

 

(l)            promptly following the Agent’s request
therefor, all documentation and other information that the Agent reasonably
requests on its behalf or on behalf of any

 

90

 

Lender in order to comply with its ongoing obligations under applicable “know
your customer” and anti-money laundering rules and regulations, including
the USA PATRIOT Act; and

 

(m)          as promptly as reasonably practicable from
time to time following the Agent’s request therefor, such other information
regarding the operations, business affairs and financial condition of Holdings,
the Company or any Subsidiary, or compliance with the terms of any Loan
Document, as the Agent or any Lender may reasonably request.

 

Notwithstanding the foregoing, the obligations in clauses (a) and
(b) of this Section 5.01 may be satisfied with respect to financial
information of the Company and its Subsidiaries by furnishing (A) the
applicable financial statements of Holdings (or any direct or indirect parent
of Holdings) or (B) the Company’s or Holdings’ (or any direct or indirect
parent thereof), as applicable, Form 10-K or 10-Q, as applicable, filed
with the SEC; provided that, with respect to each of clauses (A) and
(B), (i) to the extent such information relates to Holdings (or a parent
thereof), such information is accompanied by consolidating information that
explains in reasonable detail the differences between the information relating
to Holdings (or such parent), on the one hand, and the information relating to
the Company and its Subsidiaries on a standalone basis, on the other hand and (ii) to
the extent such information is in lieu of information required to be provided
under clause (a) of this Section 5.01, such materials are
accompanied by a report and opinion of Ernst & Young LLP or other
independent public accountants of recognized national standing and reasonably
acceptable to the Agent, which report and opinion shall be prepared in
accordance with generally accepted auditing standards and shall not be subject
to any “going concern” or like qualification or exception or any qualification
or exception as to the scope of such audit.

 

Documents required to be delivered pursuant to clauses (a), (b) or
(j) of this Section 5.01 may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date (i) on which
the Company  posts such documents, or provides a link thereto on the Company’s
website on the Internet at the website address listed on Schedule 9.01; or
(ii) on which such documents are posted on the Company’s behalf on
IntraLinks/IntraAgency or another relevant website, if any, to which each
Lender and the Agent have access (whether a commercial, third-party website or
whether sponsored by the Agent); provided that:  (i) upon written request by the Agent,
the Company  shall deliver paper copies of such documents to the Agent for further
distribution to each Lender until a written request to cease delivering paper
copies is given by the Agent and (ii) the Company  shall notify (which may be by facsimile or electronic mail) the Agent of
the posting of any such documents and provide to the Agent by electronic mail
electronic versions (i.e., soft copies) of such documents.  Notwithstanding anything contained herein, in
every instance the Company  shall be required to provide paper copies of
the compliance certificates required by clause (d) of this Section 5.01
to the Agent.

 

SECTION 5.02.              Notices of Material Events. 
The Company will furnish to the Agent written notice of the following
promptly after any Responsible Officer of Holdings or the Company obtains
knowledge thereof:

 

(a)           the occurrence of any Event of Default or
Default;

 

91

 

(b)           the filing or commencement of, or any
written threat or notice of intention of any person to file or commence, any
action, suit or proceeding, whether at law or in equity or by or before any
Governmental Authority or in arbitration, against Holdings, the Company or any
of the Subsidiaries as to which an adverse determination is reasonably probable
and which, if adversely determined, would reasonably be expected to have a
Material Adverse Effect;

 

(c)           any loss, damage, or destruction to the
Collateral in the amount of $10,000,000 or more, whether or not covered by
insurance;

 

(d)           any and all default notices received under
or with respect to any leased location or public warehouse where any material
Collateral is located;

 

(e)           the occurrence of any ERISA Event that,
together with all other ERISA Events that have occurred and are continuing,
would reasonably be expected to have a Material Adverse Effect;

 

(f)            the occurrence of any Trigger Event; and

 

(g)           any other development that results in, or
would reasonably be expected to result in, a Material Adverse Effect.

 

Each notice delivered under this Section 5.02 shall be accompanied
by a statement of a Responsible Officer of the Company  setting forth the details of the event or development requiring such
notice and any action taken or proposed to be taken with respect thereto.

 

SECTION 5.03.              Existence; Conduct of Business. 
Each Loan Party will, and will cause each Subsidiary to, do or cause to
be done all things reasonably necessary to preserve, renew and keep in full force
and effect its legal existence and the rights, qualifications, licenses,
permits, franchises, governmental authorizations, intellectual property rights,
licenses and permits (except as such would otherwise reasonably expire, be
abandoned or permitted to lapse in the ordinary course of business), necessary
or desirable in the normal conduct of its business, and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted, except (i) other than with respect to Holdings’ or the Company’s
existence, to the extent such failure to do so would not reasonably be expected
to have a Material Adverse Effect or (ii) pursuant to a transaction
permitted by Section 6.03.

 

SECTION 5.04.              Payment of Obligations.  Each Loan
Party will, and will cause each Subsidiary to, pay or discharge all material
Tax liabilities, before the same shall become delinquent or in default, except
where (a) the validity or amount thereof is being contested in good faith
by appropriate proceedings, (b) such Loan Party or such Subsidiary has set
aside on its books adequate reserves with respect thereto in accordance with
GAAP and (c) the failure to make payment pending such contest would not
reasonably be expected to result in a Material Adverse Effect.

 

SECTION 5.05.              Maintenance of Properties. 
Each Loan Party will, and will cause each Subsidiary to (a) at all
times maintain and preserve all material property necessary to the normal
conduct of its business in good repair, working order and condition, ordinary
wear

 

92

 

and tear excepted
and casualty or condemnation excepted and (b) make, or cause to be made,
all needful and proper repairs, renewals, additions, improvements and
replacements thereto as necessary in accordance with prudent industry practice
in order that the business carried on in connection therewith, if any, may be
properly conducted at all times, except, in each case, where the failure to do
so, individually or in the aggregate, would not reasonably be expected to
result in a Material Adverse Effect.

 

SECTION 5.06.              Books and Records; Inspection Rights; Appraisals;
Field Examinations.  (a)  Each Loan Party will, and will
cause each Subsidiary to, (i) keep proper books of record and account in
accordance with GAAP in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities and (ii) permit
any representatives designated by any Co-Collateral Agent (including employees
of any Co-Collateral Agent or any consultants, accountants, lawyers and
appraisers retained by any Co-Collateral Agent), upon reasonable prior notice
(except when an Event of Default exists), to visit and inspect its properties,
to examine and make extracts from its books and records, including
environmental assessment reports and Phase I or Phase II studies, and to
discuss its affairs, prospects, finances and condition with its officers and
independent accountants, all at such reasonable times during normal business
hours and as often as reasonably requested.

 

(b)           At reasonable times during normal business
hours and upon reasonable prior notice (except when an Event of Default exists)
that any Co-Collateral Agent requests, independently of or in connection with the
visits and inspections provided for in clause (a) above, the
Borrowers and the Subsidiaries will grant access to any Co-Collateral Agent
(including employees of any Co-Collateral Agent or any consultants,
accountants, lawyers and appraisers retained by any Co-Collateral Agent) to
such Person’s books, records, accounts and Inventory so that any Co-Collateral
Agent or an appraiser retained by any Co-Collateral Agent may conduct an
Inventory appraisal.  In addition to, and
not in limitation of, the foregoing, at any time and from time to time during
normal business hours and upon reasonable prior notice (except when an Event of
Default exists), any Co-Collateral Agent may conduct (or engage third parties
to conduct) such field examinations, verifications and evaluations as any
Co-Collateral Agent may deem necessary or appropriate.  All such appraisals, field examinations and
other verifications and evaluations shall be at the sole expense of the
Borrowers; provided that such Co-Collateral Agent shall provide the
Company  with a
reasonably detailed accounting of all such expenses and provided  further
that (i) the Co-Collateral Agents may conduct no more than one such
appraisal and field examination in any calendar year at the expense of the
Borrowers if there are no outstanding Revolving Loans at any time during such
year, (ii) the Co-Collateral Agents may conduct no more than two such
appraisals and field examinations per calendar year at the expense of the
Borrowers if any Revolving Loans are outstanding at any time during such
calendar year, (iii) notwithstanding clauses (i) and (ii), the
Co-Collateral Agents may conduct up to three (3) such appraisals and field
examinations at the expense of the Borrowers in any period of 12 consecutive
months following any date upon which Excess Availability is less than the
greater of (A) 20% of the lesser of (1) the aggregate Revolving
Commitments and (2) the Borrowing Base and (B) $75,000,000; provided
however, that (x) any Co-Collateral Agent may conduct as many
appraisals and field examinations at the expense of the Borrowers as it deems
reasonable in its Permitted Discretion during the existence and continuance of
an Event of Default and (y) any Co-Collateral Agent may conduct such other
appraisals and field examinations as such Co-Collateral Agent may reasonably
require at its own expense.

 

93

 

(c)           The Loan Parties acknowledge that any
Co-Collateral Agent, after exercising its rights of inspection, may prepare and
distribute to the Lenders certain Reports pertaining to the Loan Parties’
assets for internal use by the Agent, the Co-Collateral Agents and the Lenders,
subject to the provisions of Section 9.12 hereof.

 

SECTION 5.07.              HSBC Agreement and Permitted Replacement Credit Card
Program.  At least fifteen (15) days prior to the
execution by any Borrower or any Subsidiary of documents evidencing the
proposed adoption of any Permitted Replacement Credit Card Program (or of the
consummation of any Permitted Acquisition of the type referred to in the
definition of the term “Permitted Replacement Credit Card Program”), the
Borrower Agent shall deliver or cause to be delivered notice to the Agent of
such adoption, which notice shall include a copy, in the then-existing form, of
any documents to be executed in connection with such Permitted Replacement
Credit Card Program.  The Borrower Agent
shall deliver or cause to be delivered to the Agent copies of all such
documents delivered in connection with such Permitted Replacement Credit Card
Program within a reasonable period of time after the execution of such
documents, and shall deliver any Credit Card Notification in connection
therewith required under Section 2.21(f) in accordance with the terms
of Section 2.21(f).

 

SECTION 5.08.              Compliance with Laws.  Each Loan
Party will, and will cause each Subsidiary to, comply in all material respects
with all Requirements of Law applicable to it or its property, except where the
failure to do so, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect.

 

SECTION 5.09.              Use of Proceeds.  The proceeds
of the Revolving Loans will be used solely for purposes of refinancing the
loans under the Existing Credit Agreement and for working capital and general
corporate purposes permitted hereunder. 
The Incremental Term Loans and proceeds thereof shall be used solely to
repurchase the Existing Notes, whether for purchase or in exchange for such
Incremental Term Loans.  No part of the
proceeds of any Loan and no Letter of Credit will be used, whether directly or
indirectly, for any purpose that would entail a violation of Regulations T, U
or X.

 

SECTION 5.10.              Insurance.  Each Loan
Party will, and will cause each Subsidiary to, maintain, with financially sound
and reputable insurance companies (a) insurance in such amounts and
against such risks, as are customarily maintained by similarly situated
companies engaged in the same or similar businesses operating in the same or
similar locations (after giving effect to any self-insurance reasonable and
customary for similarly situated companies) and (b) all insurance required
pursuant to the Collateral Documents (and shall cause the Agent to be listed as
a loss payee (together with any other loss payee in accordance with the
Intercreditor Agreement) on property and casualty policies covering loss or
damage to Collateral and as an additional insured on liability policies).  The Company will furnish to the Agent, upon
request, information in reasonable detail as to the insurance so maintained.

 

SECTION 5.11.              Additional Loan Parties; Additional Collateral;
Further Assurances.  (a)  Subject to applicable law, each
Borrower and each Subsidiary that is a Loan Party shall cause (i) each of
its Domestic Subsidiaries (other than any Immaterial Subsidiary (except as
otherwise provided in paragraph (e) of this Section 5.11) or
Unrestricted Subsidiary) formed or acquired after the date of this Agreement in
accordance with the terms of this

 

94

 

Agreement and (ii) any
Domestic Subsidiary that was an Immaterial Subsidiary but, as of the end of the
most recently ended fiscal quarter of the Company has ceased to qualify as an
Immaterial Subsidiary, to become a Loan Party as promptly thereafter as reasonably
practicable by executing a Joinder Agreement in substantially the form set
forth as Exhibit D hereto (the “Joinder Agreement”).  Upon execution and delivery thereof, each
such Person (i) shall automatically become a Loan Guarantor hereunder and
thereupon shall have all of the rights, benefits, duties, and obligations in
such capacity under the Loan Documents and (ii) will simultaneously
therewith or as soon as practicable thereafter grant Liens to the Agent, for
the benefit of the Agent and the Lenders in any property (subject to the
limitations with respect to Equity Interests set forth in paragraph (b) of
this Section 5.11, the limitations with respect to real property set forth
in paragraph (f) of this Section 5.11 and any other limitations
set forth in the Security Agreement) of such Loan Party which constitutes
Collateral, on such terms as may be required pursuant to the terms of the
Collateral Documents and in such priority as may be required pursuant to the
terms of the Intercreditor Agreement. 
Subject to the approval of the Agent and Co-Collateral Agents, any
Domestic Subsidiary that is a Loan Party may be a Borrower hereunder, subject
to (A) execution of a Joinder Agreement pursuant to which such Loan Party
agrees to be bound as a Borrower hereunder and such other agreements, documents
or instruments as the Agent may reasonably request and (B) the completion
of a field examination and appraisal with results satisfactory to the
Co-Collateral Agents.

 

(b)           Each Borrower and each Subsidiary that is a
Loan Party (including a Domestic Subsidiary that is either disregarded as an
entity separate from its owner or treated as a partnership for federal income
tax purposes) will cause (i) 100% of the issued and outstanding Equity
Interests of each of its Domestic Subsidiaries, other than any Domestic
Subsidiary that is either disregarded as an entity separate from its owner or
taxed as a partnership for federal income tax purposes that holds Equity
Interests of a Foreign Subsidiary whose Equity Interests are pledged pursuant
to clause (ii) below, and (ii) 65% of the issued and outstanding
Equity Interests entitled to vote (within the meaning of Treas. Reg.  Section 1.956-2(c)(2)) and 100% of the
issued and outstanding Equity Interests not entitled to vote (within the
meaning of Treas. Reg.  Section 1.956-2(c)(2))
in each Foreign Subsidiary directly owned by any Borrower or any Subsidiary
that is a Loan Party to be subject at all times to a first priority (subject to
the Intercreditor Agreement), perfected Lien in favor of the Agent pursuant to
the terms and conditions of the Loan Documents or other security documents as
the Agent shall reasonably request; provided, however this
paragraph (b) shall not require any Borrower or any Subsidiary to
grant a security interest in (i) any Equity Interests of a Subsidiary to
the extent a pledge of such Equity Interests in favor of the Agent or to secure
any debt securities of any Borrower or any Subsidiary that would be entitled to
such a security interest would require separate financial statements of a
Subsidiary to be filed with the SEC (or any other government agency) under Rule 3-10
or Rule 3-16 of Regulation S-X under the Securities Act (or any
successor thereto) or any other law, rule or regulation) or (ii) the
Equity Interests of any Unrestricted Subsidiary.

 

(c)           Without limiting the foregoing, each Loan
Party will, and will cause each Subsidiary that is a Loan Party to, execute and
deliver, or cause to be executed and delivered, to the Agent such documents,
agreements and instruments, and will take or cause to be taken such further
actions (including the filing and recording of financing statements, fixture
filings, mortgages, deeds of trust and other documents and such other actions
or deliveries of the type required by Section 4.01, as applicable
(including the delivery of the Real Property Collateral

 

95

 

Requirements), which may be required by law or
which the Agent may, from time to time, reasonably request to carry out the
terms and conditions of this Agreement and the other Loan Documents and to
ensure perfection and priority of the Liens created or intended to be created
by the Collateral Documents, all at the expense of the Loan Parties.

 

(d)           Subject to the limitations set forth or
referred to in this Section 5.11, if any material assets (including any
real property or improvements thereto or any interest therein) are acquired by
any Borrower or any Subsidiary that is a Loan Party after the Effective Date (other
than assets constituting Collateral under the Security Agreement that become
subject to the Lien in favor of the Agent upon acquisition thereof), the
Borrower Agent will notify the Co-Collateral Agents thereof, and, if requested
by either of the Co-Collateral Agents, the Borrowers will cause such assets to
be subjected to a Lien securing the Secured Obligations and will take, and
cause the Loan Parties that are Subsidiaries to take, such actions as shall be
necessary or reasonably requested by any Co-Collateral Agent to grant and
perfect such Liens, including actions described in paragraph (c) of
this Section, all at the expense of the Loan Parties.

 

(e)           If, at any time and from time to time after
the Effective Date, Subsidiaries that are not Loan Parties because they are
Immaterial Subsidiaries comprise in the aggregate more than 5% of consolidated
total assets as of the end of the most recently ended fiscal quarter of the
Company  or more than
5% of EBITDA for the period of four consecutive fiscal quarters as of the end
of the most recently ended fiscal quarter of the Company, then the Company  shall, not later than 45 days after the date
by which financial statements for such quarter are required to be delivered
pursuant to this Agreement, cause one or more such Subsidiaries to become
additional Loan Parties (notwithstanding that such Subsidiaries are,
individually, Immaterial Subsidiaries) such that the foregoing condition ceases
to be true.

 

(f)            Notwithstanding anything to the contrary in
this Section 5.11, real property required to be mortgaged under this Section 5.11
shall be limited to real property located in the U.S. that are full-line Neiman
Marcus retail stores owned in fee by a Loan Party or leased by a Loan Party
pursuant to a financeable lease or other real property owned in fee by a Loan
Party having a fair market value at the time of the acquisition thereof of
$5,000,000 or more (provided that the cost of perfecting such Lien is
not unreasonable in relation to the benefits to the Lenders of the security
afforded thereby in the Agent’s reasonable judgment after consultation with the
Borrower Agent; provided  further that the Company shall use
commercially reasonable efforts to ensure that all leases entered into after
the Effective Date by the Borrowers and the other Loan Parties will be
financeable leases).  For any Existing
Mortgage for which the actions described in Section 4.01(p) shall not
have been completed on or prior to the Effective Date (after the Company shall
have used commercially reasonable efforts to do so), the Company shall complete
all such actions described in Section 4.01(p) within 90 days after
the Effective Date (or such later date as may be agreed by the Agent from time
to time).

 

(g)           Notwithstanding anything to the contrary
contained herein, the Loan Parties shall not be required to include as
Collateral any Excluded Assets (as defined in the Security Agreement).

 

96

 

SECTION 5.12.              Maintenance of Corporate Separateness. 
Each Loan Party will, and will cause each Subsidiary to, satisfy
customary corporate or limited liability company formalities, including the
maintenance of corporate and business records.

 

SECTION 5.13.              Designation of Subsidiaries. 
The board of directors of the Company may at any time after the
Effective Date, in accordance with the definition of Unrestricted Subsidiary,
designate any Subsidiary as an Unrestricted Subsidiary or any Unrestricted
Subsidiary as a Subsidiary; provided that (i) immediately before
and after such designation, no Default or Event of Default shall have occurred
and be continuing, (ii) no Subsidiary may be designated as an Unrestricted
Subsidiary if it is a “Restricted Subsidiary” for the purpose of the Existing
Notes and (iii) no Unrestricted Subsidiary that is designated as a
Subsidiary may be redesignated as an Unrestricted Subsidiary at any time after
being so designated as a Subsidiary.  The
designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an
investment by the Company therein at the date of designation in an amount equal
to the net book value of the Company’s investment therein.  The designation of any Unrestricted
Subsidiary as a Subsidiary shall constitute the incurrence at the time of
designation of any Indebtedness or Liens of such Subsidiary existing at such
time.

 

SECTION 5.14.              Inventory Covenant.  If, at any
time, the Reported Value of the Loan Parties’ Inventory (as determined on the
basis of the then most recent Borrowing Base Certificate delivered pursuant to Section 5.01(h),
including any Borrowing Base Certificate delivered after the occurrence of an
Inventory Shortfall) shall be less than the Total Outstandings (any such
occurrence being an “Inventory Shortfall”), the Company shall, on or
before the expiration of the Inventory Grace Period, cause the Total
Outstandings to be not more than the Reported Value of the Loan Parties’
Inventory.

 

ARTICLE VI

NEGATIVE COVENANTS

 

Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees, expenses and other amounts payable
under any Loan Document have been paid in full and all Letters of Credit have
expired or terminated (or have been cash collateralized pursuant to Section 2.09(b))
and all LC Disbursements shall have been reimbursed, the Loan Parties covenant
and agree, jointly and severally, with the Lenders that:

 

SECTION 6.01.              Indebtedness.  No Loan Party
will, nor will it permit any Subsidiary to, create, incur or suffer to exist
any Indebtedness, except:

 

(a)           Indebtedness created under the Loan
Documents;

 

(b)           Indebtedness existing on the date hereof and
set forth in Schedule 6.01;

 

(c)           Indebtedness of the Company to Holdings or
any Subsidiary, Indebtedness of any Subsidiary to the Company, Holdings or any
other Subsidiary and Indebtedness of Holdings to the Company or any Subsidiary,
provided that (i) Indebtedness of any Subsidiary that is not a Loan
Party to the Company, Holdings or any Subsidiary that is a Loan Party shall
only be permitted to the extent permitted under Section 6.04(v) or

 

97

 

6.04(w), (ii) Indebtedness of the Company or Holdings to any
Subsidiary that is not a Loan Party and Indebtedness of any Subsidiary that is
a Loan Party to any Subsidiary that is not a Loan Party shall be subordinated
to the Secured Obligations on terms reasonably satisfactory to the Agent, and (iii) Indebtedness
of Holdings to any other Loan Party shall only be permitted to the extent
permitted by Section 6.04;

 

(d)           Guarantees (i) by Holdings and the
Subsidiaries that are Loan Parties of the Indebtedness of the Company described
in clause (k) hereof, so long as the Guarantee of the Senior
Subordinated Notes is subordinated substantially on terms as set forth in the
Senior Subordinated Note Documents, (ii) by Holdings, the Company or any
Subsidiary that is a Loan Party of any Indebtedness of the Company or any
Subsidiary that is a Loan Party expressly permitted to be incurred under this
Agreement, (iii) by Holdings, the Company or any Subsidiary that is a Loan
Party of Indebtedness otherwise expressly permitted hereunder of any Subsidiary
that is not a Loan Party to the extent such Guarantees are permitted by Section 6.04(v) or
6.04(w); provided that Guarantees by Holdings, the Company or any
Subsidiary that is a Loan Party under this clause (d) of any other
Indebtedness of a Person that is subordinated to other Indebtedness of such
Person shall be expressly subordinated to the Obligations on terms at least as
favorable to the Lenders as the Guarantee of the Senior Subordinated Notes is
under the Senior Subordinated Note Documents, and (iv) by Holdings, the
Company or any Subsidiary that is a Loan Party of any real property lease
obligations of the Company or any Subsidiary that is a Loan Party;

 

(e)           (i) purchase money Indebtedness
(including Capital Lease Obligations and Synthetic Lease Obligations) incurred
exclusively to finance the acquisition, construction, repair, renovations,
replacement or improvement of any fixed or capital assets (other than Real
Estate), and any Indebtedness assumed in connection with the acquisition of any
such assets or secured by a Lien on any such assets prior to the acquisition
thereof and not incurred in contemplation thereof; and (ii) Indebtedness
incurred for the construction or acquisition or improvement of, or to finance
or to refinance, any Real Estate owned or acquired by any Loan Party, provided
that, in the case of clauses (i) and (ii) of this
clause (e), if requested by the Agent, the Loan Parties will use
commercially reasonable efforts to cause the holder of such Indebtedness in
respect of any Real Estate owned or acquired by any Loan Party to enter into a
Collateral Access Agreement providing for access and use of the applicable personal
property located on such premises following the occurrence and during the
continuance of an Event of Default on terms reasonably satisfactory to the
Agent;

 

(f)            Capital Lease Obligations and Synthetic
Lease Obligations incurred by the Company or any Subsidiary in respect of any
Sale and Lease-Back Transaction that is permitted under Section 6.06;

 

(g)           Indebtedness which represents an extension,
refinancing, refunding, replacement or renewal of any of the Indebtedness
described in clauses (b), (e), (f), (g), (j), (k), (l), (t), (v) and (w) hereof;
provided that, (i) the principal amount (or accreted value, if
applicable) thereof does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness so extended, refinanced, refunded, replaced or
renewed,

 

98

 

except by an amount equal to unpaid accrued interest and premium
(including applicable prepayment penalties) thereon (or, in the case of the
Senior Secured Term Loan Facility, the amount set forth in Section 6.01(k)(ii),
if greater) plus fees and expenses
reasonably incurred in connection therewith, (ii) any Liens securing such
Indebtedness are not extended to any additional property of any Loan Party, (iii) no
Loan Party that is not originally obligated with respect to repayment of such
Indebtedness is required to become obligated with respect thereto, (iv) other
than in respect to Indebtedness referred to in clause (e)(ii), such
extension, refinancing, refunding, replacement or renewal does not result in a
shortening of the average weighted maturity of the Indebtedness so extended,
refinanced, refunded, replaced or renewed, (v) if the Indebtedness that is
extended, refinanced, refunded, replaced or renewed was subordinated in right
of payment to the Secured Obligations, then the terms and conditions of the
extension, refinancing, refunding, replacement or renewal Indebtedness must
include subordination terms and conditions that are at least as favorable to
the Lenders as those that were applicable to the extended, refinanced,
refunded, replaced or renewed Indebtedness and (vi) with respect to any
such extension, refinancing, refunding, replacement or renewal of the Senior
Secured Term Loan Facility or any Term Loan Pari Passu Lien Obligations, such
refinancing Indebtedness, if secured, is secured only by assets of the Loan
Parties that constitute Collateral for the Obligations pursuant to a security
agreement subject to the Intercreditor Agreement or another intercreditor
agreement in form and substance reasonably satisfactory to the Agent and in any
event that is no less favorable to the Secured Parties than the Intercreditor
Agreement;

 

(h)           Indebtedness owed to any Person providing
workers’ compensation, health, disability or other employee benefits or
property, casualty or liability insurance, pursuant to reimbursement or
indemnification obligations to such Person, in each case incurred in the
ordinary course of business;

 

(i)            Indebtedness of the Company or any
Subsidiary in respect of performance bonds, bid bonds, appeal bonds, surety
bonds, performance and completion guarantees and similar obligations, or
obligations in respect of letters of credit, bank guarantees or similar
instruments related thereto, in each case provided in the ordinary course of
business;

 

(j)            Indebtedness of any Person that becomes a
Subsidiary after the date hereof and Indebtedness acquired or assumed in
connection with Permitted Acquisitions; provided that such Indebtedness
exists at the time such Person becomes a Subsidiary or at the time of such
Permitted Acquisition and is not created in contemplation of or in connection
therewith;

 

(k)           Indebtedness of the Company pursuant to (i) the
Existing Notes and (ii) the Senior Secured Term Loan Facility in an
aggregate principal amount that is not in excess of $1,975,000,000;

 

(l)            other Indebtedness not otherwise permitted
under this Section 6.01 in an aggregate principal amount not exceeding
$250,000,000 at any time outstanding; provided, that (i) as
of the date of incurrence of such Indebtedness and after giving effect

 

99

 

thereto, no Event of Default shall exist or have occurred and be
continuing, (ii) such Indebtedness (A) shall be on commercially
reasonable terms in light of then prevailing market conditions (including terms
regarding amortization of principal and mandatory prepayments to the extent
permitted by clause (2) below), (B) shall have a maturity no earlier
than six months after the Maturity Date and (C) shall have no required
amortization of principal or mandatory prepayments, (iii) such
Indebtedness shall be unsecured; and (iv) the Agent shall have received
true, correct and complete copies of all agreements, documents or instruments
evidencing or otherwise related to such Indebtedness; provided  further
that (1) up to $75,000,000 in aggregate principal amount of such
Indebtedness incurred pursuant to this Section 6.01(l) and
outstanding at any time shall not be required to comply with the foregoing
clauses (ii) and (iv), and (2) up to $175,000,000 in aggregate
principal amount of such Indebtedness incurred pursuant to this Section 6.01(l) and
outstanding at any time shall not be required to comply with the foregoing
clauses (ii)(C) (provided that aggregate amortization of principal prior
to maturity shall not exceed 10% of the original principal amount of any such
Indebtedness) and (iii) so long as such Indebtedness is subject to an
intercreditor agreement in form and substance reasonably acceptable to the Agent
and that in any case is no less favorable to the Secured Parties than the
Intercreditor Agreement;

 

(m)          Swap Obligations pursuant to Swap Agreements
permitted by Section 6.07;

 

(n)           Indebtedness consisting of promissory notes
issued by any Loan Party to current or former officers, directors and
employees, their respective estates, spouses or former spouses to finance the
purchase or redemption of Equity Interests of Holdings (or any direct or
indirect parent thereof) or of the Company (following a Qualified Public
Offering of the Company) permitted by Section 6.08;

 

(o)           Indebtedness constituting indemnification
obligations or obligations in respect of purchase price or other similar
adjustments in connection with acquisitions and dispositions permitted under
this Agreement;

 

(p)           Indebtedness consisting of obligations of
Holdings, the Company or any Subsidiary under deferred compensation or other
similar arrangements incurred by such Person in connection with the
Transactions and Permitted Acquisitions or any other investment expressly
permitted hereunder;

 

(q)           cash management obligations and other
Indebtedness in respect of netting services, overdraft protections and similar
arrangements in each case in connection with deposit accounts;

 

(r)            Indebtedness consisting of (x) the
financing of insurance premiums or (y) take-or-pay obligations contained
in supply arrangements, in each case, in the ordinary course of business;

 

(s)           Indebtedness incurred by the Company or any
Subsidiary in respect of letters of credit, bank guarantees, bankers’
acceptances or similar instruments issued or

 

100

 

created in the ordinary course of business; provided that any
such documentary letter of credit or other similar instrument may be secured
only by Liens attaching to the related documents of title and not the Inventory
represented thereby;

 

(t)            unsecured Indebtedness of Holdings (“Permitted
Holdings Debt”) (i) that is not subject to any Guarantee by the
Company or any Subsidiary, (ii) that will not mature prior to the date
that is ninety-one (91) days after the Maturity Date, (iii) that has no
scheduled amortization or payments of principal (it being understood that such
Indebtedness may have mandatory prepayment, repurchase or redemption provisions
satisfying the requirements of clause (v) hereof), (iv) that
does not require any payments in cash of interest or other amounts in respect
of the principal thereof prior to the earlier to occur of (A) the date
that is five (5) years from the date of the issuance or incurrence thereof
and (B) the date that is ninety-one (91) days after the Maturity Date, and
(v) that has mandatory prepayment, repurchase or redemption, covenant,
default and remedy provisions customary for senior discount notes of an issuer
that is the parent of a borrower under senior secured credit facilities, and in
any event, with respect to covenant, default and remedy provisions, no more
restrictive than those set forth in the Senior Subordinated Notes Documents
taken as a whole (other than provisions customary for senior discount notes of
a holding company); provided that a certificate of a Responsible Officer
of the Company  delivered to the Agent at least five (5) Business Days prior to the
incurrence of such Indebtedness, together with a reasonably detailed
description of the material terms and conditions of such Indebtedness or drafts
of the documentation relating thereto, stating that the Company has determined
in good faith that such terms and conditions satisfy the foregoing requirement
shall be conclusive evidence that such terms and conditions satisfy the
foregoing requirement unless the Agent notifies the Company within such five (5) Business
Day period that it disagrees with such determination (including a reasonable
description of the basis upon which it disagrees); and provided, further, that any such
Indebtedness shall constitute Permitted Holdings Debt only if both before and
after giving effect to the issuance or incurrence thereof, no Event of Default
shall have occurred and be continuing;

 

(u)           Indebtedness supported by a Letter of
Credit, in a principal amount not to exceed the face amount of such Letter of
Credit;

 

(v)           Subordinated Indebtedness constituting all
or a portion of the deferred purchase price of, or incurred to finance,
Permitted Acquisitions; and

 

(w)          Term Loan Pari Passu Lien Obligations; provided
that at the time of incurrence and after giving pro forma effect thereto, the
Consolidated Secured Debt Ratio would be no greater than 3.75 to 1.00.

 

The accrual of interest and the accretion or amortization of original
issue discount on Indebtedness and the payment of interest in the form of
additional Indebtedness originally incurred in accordance with this Section 6.01
will not constitute an incurrence of Indebtedness.

 

SECTION 6.02.              Liens.  No Loan Party
will, nor will it permit any Subsidiary to, create, incur, assume or permit to
exist any Lien on any property or asset now owned or hereafter

 

101

 

acquired by it, or
assign or sell any income or revenues (including accounts receivable) or rights
in respect of any thereof, except:

 

(a)           Liens created pursuant to any Loan Document;

 

(b)           Permitted Encumbrances;

 

(c)           any Lien on any property or asset of the
Company or any Subsidiary existing on the date hereof and set forth in
Schedule 6.02 and any replacements, renewals or extensions thereof; provided
that (i) such Lien shall not apply to any other property or asset of the
Company or Subsidiary other than after-acquired property affixed or
incorporated thereto and proceeds or products thereof and (ii) such Lien
shall secure only those obligations which it secures on the date hereof and
extensions, renewals, refinancings and replacements thereof that do not increase
the outstanding principal amount thereof (except to the extent permitted under Section 6.01(g));

 

(d)           Liens securing Indebtedness permitted under Section 6.01(e) or
(f); provided that (i) such Liens (other than with respect to Real
Estate) attach concurrently with or within two hundred and seventy (270) days
after the acquisition, repair, replacement, construction or improvement (as
applicable) of the property subject to such Liens, (ii) such Liens do not
at any time encumber any property other than the property financed by such
Indebtedness and any accessions thereto and the proceeds and the products
thereof and (iii) with respect to Capital Lease Obligations and Synthetic
Lease Obligations, such Liens do not at any time extend to or cover any assets
(except for accessions to such assets) other than the assets subject to the
applicable capitalized lease or Synthetic Lease; provided that
individual financings of property provided by one lender may be cross
collateralized to other financings of property provided by such lender;

 

(e)           Liens on the membership interests in, or
other similar Liens resulting from standard joint venture agreements or
stockholder agreements and other similar agreements applicable to joint
ventures;

 

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

 

(g)           Liens (i) on cash advances in favor of
the seller of any property to be acquired in an investment permitted pursuant
to Sections 6.04 to be applied against the purchase price for such
investment, and (ii) consisting of an agreement to transfer any property
in a disposition permitted under Section 6.05 (other than sales, transfers
and dispositions under Section 6.05(j) which constitute Liens, which
sales, transfers and dispositions constituting Liens are not otherwise permitted under Section 6.05),
in each case, solely to the extent such investment or disposition, as the case
may be, would have been permitted on the date of the creation of such Lien;

 

102

 

(h)           Liens on property (i) of any Subsidiary
that is not a Loan Party and (ii) that does not constitute Collateral,
which Liens secure Indebtedness of the applicable Subsidiary permitted under Section 6.01;

 

(i)            Liens in favor of Holdings, the Company or a
Subsidiary securing Indebtedness permitted under Section 6.01, including
Liens granted by a Subsidiary that is not a Loan Party in favor of the Company
or another Loan Party in respect of Indebtedness owed by such Subsidiary;

 

(j)            any interest or title of a lessor under
leases or secured by a lessor’s interests under leases entered into by the
Company or any of the Subsidiaries in the ordinary course of business;

 

(k)           Liens arising out of conditional sale, title
retention, consignment or similar arrangements for sale of goods entered into
by the Company or any of the Subsidiaries in the ordinary course of business or
Liens arising by operation of law under Article 2 of the UCC in favor of a
reclaiming seller of goods or buyer of goods;

 

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

 

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

 

(n)           Liens solely on any cash earnest money
deposits made by Holdings, the Company or any of the Subsidiaries in connection
with any letter of intent or purchase agreement permitted hereunder;

 

(o)           Liens on Accounts, Instruments, General
Intangibles, Documents, Records and proceeds of the foregoing in respect of the
HSBC Arrangements (or any Permitted Replacement Credit Card Program) to the
extent such Liens (i) exist under the HSBC Arrangements as in effect on
the date hereof or (ii) are customarily required in such transactions; provided
that no such Lien shall apply to (A) any Credit Card Processor Account or
to any cash or cash equivalents constituting proceeds of any Credit Card
Processor Account or (B) any Inventory or proceeds thereof (other than
proceeds that are part of the obligations financed in such arrangement);

 

(p)           Liens in respect of the licensing of
patents, copyrights, trademarks, trade names, other indications of origin,
domain names and other forms of intellectual property in the ordinary course of
business;

 

103

 

(q)           Other Liens (other than Liens on Borrowing
Base Assets) securing obligations incurred in the ordinary course of business
which obligations do not exceed $15,000,000 at any time outstanding;

 

(r)            any Lien existing on any property or asset
(other than Liens on Borrowing Base Assets) prior to the acquisition thereof by
the Company or any Subsidiary or existing on any property or asset (other than
Liens on Borrowing Base Assets) of any Person that becomes a Loan Party after
the date hereof prior to the time such Person becomes a Loan Party; provided
that (i) such Lien is not created in contemplation of or in connection
with such acquisition or such Person becoming a Loan Party, as the case may be,
(ii) such Lien shall not apply to any other property or assets of the Loan
Party (other than proceeds or products thereof) and (iii) such Lien shall
secure only those obligations which it secures on the date of such acquisition
or the date such Person becomes a Loan Party, as the case may be and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof (except to the extent permitted under Section 6.01(g));

 

(s)           Liens of a collecting bank arising in the
ordinary course of business under Section 4-208 of the Uniform Commercial
Code in effect in the relevant jurisdiction covering only the items being
collected upon;

 

(t)            Liens arising out of Sale and Lease-Back
transactions permitted by Section 6.06;

 

(u)           Liens on goods or inventory the purchase,
shipment or storage price of which is financed by a documentary letter of
credit or bankers’ acceptance issued or created for the account of the Company
or any of its Subsidiaries; provided that such Lien secures only the
obligations of the Company or such Subsidiaries in respect of such letter of
credit to the extent permitted under Section 6.01;

 

(v)           Liens arising from precautionary UCC
financing statements or similar filings made in respect of operating leases
entered into by the Company or any of its Subsidiaries;

 

(w)          the Pari Passu Liens (or any Liens of no
greater scope securing any extensions, renewals or replacements of the 2028
Debentures that do not increase the outstanding principal amount thereof
(except to the extent permitted under Section 6.01(g)); provided
that such Liens do not apply to any property other than that described in Section 10.6
of the indenture pursuant to which the 2028 Debentures were issued;

 

(x)           Liens granted under the Term Loan Security
Documents (or, in the case of any Term Loan Pari Passu Obligations or other
Indebtedness incurred pursuant to Section 6.01(l) or 6.01(k)(ii), a
separate security agreement or agreements substantially similar in all material
respects to the Term Loan Security Documents) and any extensions and
replacements thereof; provided that (i) such Liens secure only the
obligations referred to in the Term Loan Security Documents or such separate
security agreements (and

 

104

 

extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof (except to the extent permitted under
Sections 6.01(g) or 6.01(k)(ii))), (ii) such Liens do not apply
to any asset other than Collateral that is subject to a Lien granted under a
Collateral Document to secure the Secured Obligations and (iii) all such
Liens shall be subject to the terms of, and have the priorities with respect to
the Collateral as set forth in, the Intercreditor Agreement (or, in the case of
any Term Loan Pari Passu Obligations,  or
other secured Indebtedness incurred pursuant to Section 6.01(l), another
intercreditor agreement in form and substance reasonably acceptable to the
Agent that is no less favorable to the Secured Parties than the Intercreditor
Agreement);

 

(y)                                 Liens deemed to exist in connection with
investments in repurchase agreements under Section 6.04; provided
that such Liens do not extend to any assets other than those assets that are
the subject of such repurchase agreements; and

 

(z)                                  ground leases in respect of Real Property on
which facilities owned or leased by the Company or any of its Subsidiaries are
located.

 

Notwithstanding the foregoing, none of the Liens permitted pursuant to
this Section 6.02 may at any time attach to any Loan Party’s Borrowing
Base Assets, other than those permitted under clauses (a), (b) and (h) of
the definition of Permitted Encumbrance and clauses (a), (f), (g)(ii),
(k), (u), (w) and (x) above.

 

SECTION 6.03.                                         Fundamental Changes.  (a) 
No Loan Party will, nor will it permit any Subsidiary to, merge into or
consolidate with any other Person, or permit any other Person to merge into or
consolidate with it, or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Event of Default shall
have occurred and be continuing, (i) any Person may merge with or into the
Company in a transaction in which the surviving entity is the Company or
another Person organized or existing under the laws of the United States of
America, any State thereof or the District of Columbia and such Person (if not
the Company) expressly assumes, in writing, all the obligations the Company
under the Loan Documents (and provides to the Agent such documentation and
opinions as the Agent may reasonably request in connection therewith), in which
event such Person will succeed to, and be substituted for, the Company under
the Loan Documents, (ii) any Person may merge into any Subsidiary in a
transaction in which the surviving entity is a Subsidiary and, if any party to
such merger is a Subsidiary that is a Loan Party, is or becomes a Subsidiary
that is a Loan Party concurrently with such merger, (iii) any Subsidiary
of the Company may liquidate or dissolve if the Company determines in good
faith that such liquidation or dissolution is in the best interests of the
Company and is not materially disadvantageous to the Lenders, (iv) any
Subsidiary may merge with any Person to effect an investment permitted under Section 6.04
(other than pursuant to Section 6.04(m)) and (v) so long as the same
does not result in the liquidation, dissolution or cessation of existence of
the Company, any merger, dissolution or liquidation may be effected for the
purposes of effecting a transaction permitted by Section 6.05 (other than
sales, transfers and dispositions under Section 6.05(j) that
constitute a merger, dissolution or liquidation, which sales, transfers and
dispositions constituting a merger, dissolution or liquidation is not otherwise
permitted under Section 6.05).

 

105

 

(b)                                 No Loan Party will, nor will it permit any
of its Subsidiaries to, engage to any material extent in any material line of
business substantially different from those lines of business conducted by the
Company and its Subsidiaries on the date of execution of this Agreement or
businesses reasonably related or ancillary thereto.

 

(c)                                 Holdings will not engage in any business or
operations other than (i) the ownership, direct or indirect, of all the
outstanding shares of capital stock of the Company, (ii) performance of
its obligations under and in connection with the Loan Documents, the Existing
Note Documents, the Senior Secured Term Loan Facility and the other agreements
contemplated hereby and thereby, (iii) actions incidental to the
consummation of the Transactions, (iv) actions required by law to maintain
its existence, (v) any public offering of its common stock, any other
issuance of its Equity Interests and performance of its obligations under any
agreements related thereto, (vi) any transaction Holdings is permitted to
enter into in this Article VI and (vii) activities incidental to the
foregoing.

 

SECTION 6.04.                                         Investments, Loans, Advances, Guarantees
and Acquisitions.  No Loan Party will, nor will it permit any
Subsidiary to, purchase, hold or acquire (including pursuant to any merger with
any Person that was not a Loan Party and a wholly owned Subsidiary prior to
such merger) any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, Guarantee any obligations
of, or make or permit to exist any investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of
transactions) all or substantially all of the property and assets or business
of another Person or assets of any other Person constituting a business unit
(whether through purchase of assets, merger or otherwise), except:

 

(a)                                 Permitted Investments, subject to a
perfected security interest in favor of the Agent for the benefit of the
Lenders;

 

(b)                                investments in existence or contemplated on
the date of this Agreement and described in Schedule 6.04; and any
modification, replacement, renewal, reinvestment or extension thereof (provided
that the amount of the original investment is not increased except as otherwise
permitted by this Section 6.04), and any investments, loans and advances
existing on the date hereof by the Company or any Subsidiary in or to the
Company or any other subsidiary of the Company;

 

(c)                                 loans or advances to officers, directors and
employees of Holdings, the Company and any Subsidiary (i) for reasonable
and customary business related travel, entertainment, relocation and analogous
ordinary business purposes and (ii) in connection with such Persons’
purchase of Equity Interests of Holdings (or any direct or indirect parent
thereof (provided that the amount of such loans and advances shall be
contributed to the Company in cash as common equity));

 

(d)                                 investments by Holdings in the Company and
by the Company and the Subsidiaries that are Loan Parties in Equity Interests
in their respective Subsidiaries that are Loan Parties; provided that
any such Equity Interest shall be pledged pursuant to the Security Agreement
(subject to the limitations referred to in Section 5.11);

 

106

 

(e)                                 loans or advances made by the Company to any
Subsidiary that is a Loan Party and made by any Subsidiary that is a Loan Party
to the Company or any other Subsidiary that is a Loan Party;

 

(f)                                   Guarantees constituting Indebtedness
permitted by Section 6.01 by Loan Parties of any Indebtedness of other
Loan Parties;

 

(g)                                investments in the form of Swap Agreements
permitted by Section 6.07;

 

(h)                                investments of any Person existing at the
time such Person becomes a Subsidiary of the Company or consolidates or merges
with the Company or any of the Subsidiaries (including in connection with a
Permitted Acquisition) so long as such investments were not made in
contemplation of such Person becoming a Subsidiary or of such merger;

 

(i)                                   investments received in connection with the
dispositions of assets permitted by Section 6.05;

 

(j)                                   investments constituting deposits described
in clauses (d) and (e) of the definition of the term “Permitted
Encumbrances”;

 

(k)                                accounts receivable or notes receivable
arising and trade credit granted in the ordinary course of business and other
credits to suppliers or vendors in the ordinary course of business;

 

(l)                                   Permitted Acquisitions;

 

(m)                             Liens, Indebtedness, fundamental changes,
dispositions and Restricted Payments permitted under Sections 6.01, 6.02,
6.03 (except to the extent constituting the acquisition of an entity that
becomes a Subsidiary or the acquisition by the Company or any Subsidiary of all
or substantially all the assets or businesses of a Person or of assets
constituting a business unit, line of business or division of such Person),
6.05, 6.06 and 6.08, respectively, solely to the extent constituting Liens,
Indebtedness, fundamental changes, dispositions and Restricted Payments which
are permitted under the foregoing Sections 6.01, 6.02, 6.03, 6.05, 6.06
and 6.08, respectively, which Liens, Indebtedness, fundamental changes,
dispositions and Restricted Payments are not otherwise permitted by this Section 6.04;

 

(n)                                the Transactions;

 

(o)                                investments in the ordinary course of
business consisting of UCC Article 3 endorsements for collection or
deposit and UCC Article 4 customary trade arrangements with customers
consistent with past practices;

 

(p)                                investments (including debt obligations and
Equity Interests) received in connection with the bankruptcy or reorganization
of suppliers and customers or in settlement or delinquent obligations of, or
other disputes with, customers and suppliers 

 

107

 

arising in the ordinary course of business or received upon the
foreclosure with respect to any secured investment or other transfer of title
with respect to any secured investment;

 

(q)                                loans and advances to Holdings (or any
direct or indirect parent thereof) in lieu of, and not in excess of the amount
of (after giving effect to any other loans, advances or Restricted Payments in
respect thereof), Restricted Payments to the extent permitted to be made to
Holdings in accordance with Section 6.08(a)(v);

 

(r)                                  (i) advances of payroll payments to
employees in the ordinary course of business and (ii) investments in
Quality Call Care Solutions, Inc. and Willow Bend Beverage Corporation, in
each case to satisfy ordinary course payroll and other obligations of such
company;

 

(s)                                 investments to the extent that payment for
such investments is made solely with Qualified Equity Interests of Holdings (or
the Company after a Qualified Public Offering of the Company );

 

(t)                                   investments arising as a result of the HSBC
Arrangements or any Permitted Replacement Credit Card Program;

 

(u)                                guarantees by Holdings, the Company or any
Subsidiary of leases (other than capitalized leases) or of other obligations
that do not constitute Indebtedness, in each case entered into in the ordinary
course of business;

 

(v)                                other investments, loans and advances by the
Company and the Subsidiaries provided that, at the time such investment,
loan or advance is made and after giving effect thereto, each of the Payment
Conditions is satisfied; and

 

(w)                             other investments, loans and advances by the
Company and the Subsidiaries which, together with any Restricted Payments made
pursuant to Section 6.08(a)(xii) and Restricted Debt Payments made
pursuant to Section 6.08(b)(x), do not exceed $30,000,000 in the
aggregate; provided that, at the time such investment, loan or advance is
made and after giving effect thereto, no Event of Default exists or has
occurred and is continuing.

 

For purposes of covenant compliance, the amount of any investment shall
be the amount actually invested, without adjustment for subsequent increases or
decreases in the value thereof.

 

SECTION 6.05.                                         Asset Sales. 
No Loan Party will, nor will it permit any Subsidiary to, sell,
transfer, lease or otherwise dispose of any asset, including any Equity
Interest owned by it, nor will the Company permit any Subsidiary to issue any
additional Equity Interest in such Subsidiary (other than to the Company or
another Subsidiary in compliance with Section 6.04 (other than Section 6.04(m)),
except:

 

(a)                                 sales, transfers and dispositions of (i) Inventory
and other assets in the ordinary course of business and (ii) used,
obsolete, worn out or surplus equipment or property in the ordinary course of
business, or of property no longer used or useful in the conduct of the
business of the Company and its Subsidiaries;

 

108

 

(b)                                sales, transfers and dispositions to the
Company or any Subsidiary, provided that any such sales, transfers or
dispositions to a Subsidiary that is not a Loan Party shall be made in
compliance with Section 6.09;

 

(c)                                 sales, transfers and dispositions of
accounts receivable in connection with the compromise, settlement or collection
thereof;

 

(d)                                sales, transfers and dispositions of (i) investments
permitted by clauses (a), (h), (i), (j) and (p) of Section 6.04
and (ii) other investments to the extent required by or made pursuant to
customary buy/sell arrangements made in the ordinary course of business between
the parties to agreements related thereto;

 

(e)                                Sale and Lease-Back transactions permitted
by Section 6.06;

 

(f)                                  dispositions resulting from any casualty or
other insured damage to, or any taking under power of eminent domain or by
condemnation or similar proceeding of, any property or asset of the Company or
any Subsidiary;

 

(g)                                sales, transfers and other dispositions of
Accounts, receivables and residual interests (excluding in any case Credit Card
Processor Accounts and proceeds thereof) in connection with the HSBC
Arrangements or any Permitted Replacement Credit Card Program;

 

(h)                                sales, transfers and other dispositions of
assets (other than Equity Interests in a Subsidiary unless all Equity Interests
in such Subsidiary owned by a Loan Party are sold) that are not permitted by
any other paragraph of this Section, provided that (i) the
aggregate fair market value of all assets sold, transferred or otherwise
disposed of in reliance upon this paragraph (h) (other than in
respect of the sale, transfer or other disposition of the Company’s interest in
any Unrestricted Subsidiary that was an Unrestricted Subsidiary as of the
Effective Date), shall not exceed $50,000,000 during any fiscal year of the
Company or $250,000,000 in the aggregate after the Effective Date and (ii) after
giving effect to such sale, transfer or disposition (A) no Event of
Default shall exist or be continuing and (B) the Company shall be in
compliance with Section 2.11(b);

 

(i)                                   sales, transfer and dispositions of property
to the extent that (i) such property is exchanged for credit against the
purchase price of similar replacement property or (ii) the proceeds of
such disposition are promptly applied to the purchase price of such replacement
property;

 

(j)                                   sales, transfers and dispositions permitted
by Sections 6.03 and 6.08 and Liens permitted by Section 6.02;

 

(k)                                leases, subleases, space leases, licenses or
sublicenses, in each case in the ordinary course of business and which do not
materially interfere with the business of Holdings, the Company and its
Subsidiaries; and

 

(l)                                   sales, transfers and dispositions listed on
Schedule 6.05;

 

109

 

provided that (i) all
sales, transfers, leases and other dispositions permitted hereby (other than
those permitted by paragraphs (a)(ii), (b), (c), (f), (g), (i), (j) and
(k) above) shall be made for fair value and for at least 75% cash
consideration, and (ii) as a condition to any Non-Ordinary Course Asset
Disposition, the Company shall deliver to the Agent a Non-Ordinary Course
Borrowing Base Certificate as of the date of consummation of such Non-Ordinary
Course Asset Disposition and, if required, shall comply with Section 2.11(b) and
as of the date of any such disposition and after giving effect thereto, no
Event of Default exists or is continuing. 
To the extent any Collateral is disposed of as expressly permitted by
this Section 6.05 to any Person other than Holdings, the Company or any
Subsidiary, such Collateral shall be sold free and clear of the Liens created
by the Loan Documents, and the Agent shall be authorized to take any actions
deemed appropriate in order to effect the foregoing.

 

SECTION 6.06.                                         Sale and Lease-Back Transactions. 
No Loan Party will, nor will it permit any Subsidiary to, enter into any
arrangement, directly or indirectly, whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned
or hereafter acquired, and thereafter rent or lease such property or other
property that it intends to use for substantially the same purpose or purposes
as the property sold or transferred (a “Sale and Lease-Back Transaction”);
provided that a Sale and Lease-Back Transaction shall be permitted so
long as (a) such Sale and Lease-Back Transaction (i) is made for cash
consideration in an amount not less than the fair value of such property and (ii) is
pursuant to a lease on market terms and (b) the Agent shall have received
from the purchaser or transferee a Collateral Access Agreement on terms and
conditions reasonably satisfactory to the Agent.

 

SECTION 6.07.                                         Swap Agreements. 
No Loan Party will, nor will it permit any Subsidiary to, enter into any
Swap Agreement, except (a) Swap Agreements entered into to hedge or
mitigate risks to which such Loan Party has actual exposure (other than those
in respect of Equity Interests of such Loan Party or any of its Subsidiaries),
and (b) Swap Agreements entered into in order to effectively cap, collar
or exchange interest rates (from fixed to floating rates, from one floating
rate to another floating rate or otherwise) with respect to any
interest-bearing liability or investment of such Loan Party or any Subsidiary.

 

SECTION 6.08.                                         Restricted Payments; Certain Payments of
Indebtedness.  (a)  No Loan Party will, nor will it
permit any Subsidiary to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, except:

 

(i)                             each of Holdings and the Company may declare
and pay dividends or make other distributions with respect to its Equity
Interests payable solely in additional shares of its Equity Interests (other
than Disqualified Equity Interests not permitted by Section 6.01);

 

(ii)                         Subsidiaries may declare and pay dividends
or make other distributions ratably with respect to their Equity Interests;

 

(iii)                      the Company and its Subsidiaries may make
Restricted Payments to Holdings (and Holdings may make Restricted Payments to
any direct or indirect parent thereof) the proceeds of which are used to
purchase, retire, redeem or otherwise acquire the Equity Interests of Holdings
(or of any such direct or indirect parent of Holdings) or 

 

110

 

of the Company (following a Qualified Public
Offering of the Company) (including related stock appreciation rights or
similar securities) held by then present or former directors, consultants,
officers or employees of Holdings (or of any such direct or indirect parent),
the Company or any of the Subsidiaries or by any stock option plan or other
benefit plan upon such Person’s death, disability, retirement or termination of
employment or under the terms of any such plan or any other agreement under
which such shares of stock or related rights were issued; provided that the
aggregate amount of such purchases, redemptions or other acquisitions under
this clause (a)(iii) shall not exceed in any fiscal year $5,000,000
(plus the amount of net proceeds (x) received by Holdings during such
calendar year from sales of Equity Interests of Holdings to directors,
consultants, officers or employees of Holdings, the Company or any Subsidiary
in connection with permitted employee compensation and incentive arrangements
and (y) of any key-man life insurance policies received during such
calendar year);

 

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

 

(v)                        the Company and its Subsidiaries may make
Restricted Payments to Holdings (x) in an amount (together with loans or
advances made pursuant to Section 6.04(n)) not to exceed $1,500,000 in any
fiscal year, to the extent necessary to pay (or allow any direct or indirect
parent of Holdings to pay) its general corporate and overhead expenses incurred
by Holdings (or any direct or indirect parent thereof) in the ordinary course
of business, plus the amount of any reasonable and customary indemnification
claims made by any director or officer of Holdings (or any direct or indirect
parent thereof), (y) to pay franchise taxes and other fees, taxes and
expenses required to maintain its (or any of its direct or indirect parents’)
corporate existence and (z) in an amount necessary to pay the Tax
liabilities of Holdings (or any such direct or indirect parent) attributable to
(or arising as a result of) the operations of the Company and its Subsidiaries;
provided, however, that in the case of clause (z), the amount of such
dividends shall not exceed the amount that the Company and its Subsidiaries
would be required to pay in respect of Federal, state and local taxes and any
other taxes were the Company and the Subsidiaries to pay such taxes as
stand-alone taxpayers;

 

(vi)                    [Reserved];

 

(vii)                 to the extent constituting Restricted
Payments, Holdings, the Company and its Subsidiaries may enter into and
consummate transactions expressly permitted by any provision of Section 6.03
or 6.09 (other than Section 6.09(e));

 

(viii)              the Company and its Subsidiaries may make
Restricted Payments to Holdings to finance any investment permitted to be made
pursuant to Section 6.04 (other than Section 6.04(m)) provided that (A) such Restricted
Payment shall be made substantially concurrently with the closing of such
investment and (B) Holdings shall, immediately following the closing
thereof, cause (i) all property acquired (whether assets or Equity
Interests) to be contributed to the Company or its Subsidiaries or (ii) the
merger 

 

111

 

(to the extent permitted in Section 6.03) of
the Person formed or acquired into the Company or its Subsidiaries in order to
consummate such Permitted Acquisition;

 

(ix)                      Holdings may make Restricted Payments with
the proceeds of the issuance of Indebtedness of Holdings permitted by Section 6.01
(other than (x) Section 6.01(c) and (y) any such
Indebtedness Guaranteed by or secured directly or indirectly by the assets of
the Company or any of its Subsidiaries);

 

(x)                         in addition to the foregoing Restricted
Payments, Holdings and the Company may make additional Restricted Payments
provided that each of the Payment Conditions is satisfied;

 

(xi)                      the distribution, as a dividend or otherwise
(and the declaration of such dividend), of shares of capital stock of, or
Indebtedness owed to the Company or a Subsidiary by, any Unrestricted
Subsidiary so designated on the date hereof; and

 

(xii)                   other Restricted Payments by Holdings and
the Company which, together with investments, loans and advances made pursuant
to Section 6.04(w) and Restricted Debt Payments made pursuant to Section 6.08(b)(x),
do not exceed $30,000,000 in the aggregate; provided that, at the time
such Restricted Payments are made and after giving effect thereto, no Liquidity
Event or Event of Default exists or has occurred and is continuing.

 

(b)                                 No Loan Party will, nor will it permit any
Subsidiary to, make or agree to pay or make, directly or indirectly, any
payment or other distribution (whether in cash, securities or other property)
of or in respect of principal of or interest on any Indebtedness, or any
payment or other distribution (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any
Indebtedness (collectively, “Restricted Debt Payments”), except:

 

(i)                           payment of Indebtedness under the Loan
Documents, other than prepayments of principal and interest on any Incremental
Term Loans (except to the extent otherwise permitted by Section 6.08(b)(xi)
below) or the last sentence of Section 2.10(a));

 

(ii)                        payment of Indebtedness under the Existing
Credit Agreement in connection with the fulfillment of the conditions to the
Effective Date hereunder;

 

(iii)                     payment of regularly scheduled interest and
principal payments as and when due in respect of any Indebtedness, other than
payments in respect of the Subordinated Indebtedness prohibited by the
subordination provisions thereof;

 

(iv)                     refinancings of Indebtedness to the extent
permitted by Section 6.01;

 

(v)                        payment of secured Indebtedness that becomes
due as a result of the voluntary sale or transfer of the property or assets
securing such Indebtedness so long as such sale is permitted by Section 6.05
(other than sales, transfers and dispositions under Section 6.05(j) the
proceeds of which are to be applied to payments of secured 

 

112

 

Indebtedness, which sales, transfers and
dispositions are not otherwise permitted under Section 6.05));

 

(vi)                     payment of Indebtedness in exchange for or
with proceeds of any substantially contemporaneous issuance of Qualified Equity
Interests or substantially contemporaneous capital contribution in respect of
Qualified Equity Interests of Holdings;

 

(vii)                  payment of Indebtedness under the Senior
Secured Term Loan Facility or any Term Loan Pari Passu Obligations (or any
extensions, renewals or replacements thereof permitted under Section 6.01(g) and
Section 6.02(x)), with the net cash proceeds of any sale, transfer or
other disposition of any Term Loan First Lien Collateral (as defined in the
Intercreditor Agreement), or, in the case of any such extensions, renewals or
replacements or any Term Loan Pari Passu Obligations, any property or assets in
respect of which the security interest of the lenders thereunder has priority
over the security interest of the Agent, for the benefit of the Secured
Parties, in such property or assets, pursuant to the Intercreditor Agreement or
another intercreditor agreement in form and substance reasonably satisfactory
to the Agent that is no less favorable to the Secured Parties than the
Intercreditor Agreement;

 

(viii)              mandatory prepayments of Indebtedness under Section 2.09
of the Senior Secured Term Facility Credit Agreement (or any successor section
thereof, or under any comparable provision in any instrument governing any Term
Loan Pari Passu Obligations or any extension, renewal or replacement thereof or
of the Senior Secured Term Loan Facility, in each case permitted under Section 6.01(g),
pursuant to which mandatory prepayments of Indebtedness thereunder determined
by reference to Excess Cash Flow (as defined in the Senior Secured Term
Facility Credit Agreement or as defined substantially similarly in all material
respects in any such other instrument) are required to be made), in amounts
required under, and in accordance with, the Senior Secured Term Facility Credit
Agreement or such other instrument (in the case of any such other instrument,
in amounts no greater in any material respect than those required under the
Senior Secured Term Facility Credit Agreement);

 

(ix)                      other Restricted Debt Payments, provided
that each of the Payment Conditions is satisfied (it being understood and
agreed that, if an irrevocable notice or contractual obligation is given in,
made or arises in respect of any Restricted Debt Payment, the foregoing
conditions only need to be satisfied at the time of the giving of such
irrevocable notice or entering into (or effectiveness of) any such contractual
obligation);

 

(x)                         other Restricted Debt Payments which,
together with any investments, loans or advances made pursuant to Section 6.04(w) and
Restricted Payments made pursuant to Section 6.08(a)(xii), do not exceed
$30,000,000 in the aggregate; provided that, at the time such Restricted
Debt Payments are made and after giving effect thereto, no Liquidity Event or
Event of Default exists or has occurred and is continuing;

 

113

 

(xi)                       Restricted Debt Payments in respect of
Incremental Term Loans, provided that, at the time such Restricted Debt
Payments are made and after giving effect thereto, (A) the Term Loan
Prepayment Conditions are satisfied, or (B) such Restricted Debt Payments
are permitted under clause (ix) or (x) of this Section 6.08(b);
and

 

(xii)                    Restricted Debt Payments consisting of the
repurchase of Existing Notes in exchange for, or with the proceeds of, (A) Incremental
Term Loans or (B) other Indebtedness of any Loan Party incurred pursuant
to Section 6.01(k)(ii), 6.01(l) or 6.01(w) substantially
simultaneously with such repurchase or exchange.

 

SECTION 6.09.                                         Transactions with Affiliates. 
No Loan Party will, nor will it permit any Subsidiary to, sell, lease or
otherwise transfer any property or assets to, or purchase, lease or otherwise
acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except (a) transactions that (i) are
in the ordinary course of business and (ii) are on terms and conditions
substantially as favorable to such Loan Party as would be obtainable by such
Loan Party at the time in a comparable arm’s-length transaction from unrelated
third parties that are not Affiliates, (b) transactions between or among
the Company and any Subsidiary that is a Loan Party not involving any other
Affiliate, (c) any investment permitted by Sections 6.04, (d) any
Indebtedness permitted under Section 6.01, (e) any Restricted Payment
or Restricted Debt Payment permitted by Section 6.08, (f) the payment
of reasonable fees and out-of-pocket costs to directors of Holdings, the
Company or any Subsidiary, and compensation and employee benefit arrangements
paid to, and indemnities provided for the benefit of, directors, officers or
employees of Holdings, the Company or its Subsidiaries in the ordinary course
of business, (g) any issuances of securities or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of,
employment agreements, stock options and stock ownership plans approved by
Holdings’ (or its direct or indirect parent company’s) or the Company’s board
of directors, (h) the payment of (A) management or monitoring or
similar fees to the Sponsors and Sponsor termination fees and related
indemnities and reasonable expenses, and (B) transaction advisory services
fees with respect to transactions in respect of which the Sponsors provide any transaction,
advisory or other similar services, in each case pursuant to, and in accordance
with, the Management Services Agreement as such agreement is in effect as of
the Effective Date, provided that in each case (x) no Event of
Default has occurred and is continuing or would result after giving effect to
such payment and (y) the Company shall have Excess Availability of at
least $75,000,000 after giving effect to such payment, (i) any
contribution to the capital of Holdings (or any direct or indirect parent
company thereof) by the Sponsors or any Affiliate thereof or any purchase of
Equity Interests of Holdings (or any direct or indirect parent company thereof)
by the Sponsors or any Affiliate thereof, (j) the Transactions, (k) payments
by Holdings (and any direct or indirect parent thereof), the Company and its
Subsidiaries pursuant to the tax sharing agreements among Holdings (and any
such parent thereof), the Company and the Subsidiaries on customary terms to
the extent attributable to the ownership or operation of the Company and its
Subsidiaries, (l) transactions pursuant to permitted agreements in
existence on the Effective Date and set forth on Schedule 6.09 or any
amendment thereto to the extent such an amendment is not adverse to the Lenders
in any material respect and (m) payments by the Company or any Subsidiary
to any of the Co-Investors for any financial advisory, financing, underwriting
or placement services or in respect of other investment banking activities,
including in connection

 

114

 

with acquisitions
or divestitures, which payments are approved by a majority of the members of
the Board of Directors of the Company in good faith.

 

SECTION 6.10.                                         Restrictive Agreements. 
No Loan Party will, nor will it permit any Subsidiary to, directly or
indirectly, enter into, incur or permit to exist any agreement or other
contractual arrangement to which it is a party or by which its property is
bound that prohibits, restricts or imposes any condition upon (a) the
ability of such Loan Party or any of its Subsidiaries to create, incur or
permit to exist any Lien upon any of its property or assets for the benefit of
the Lenders under the Loan Documents, or (b) the ability of any Subsidiary
that is not a Loan Party to pay dividends or other distributions with respect
to any shares of its capital stock or to make or repay loans or advances to the
Company or any other Subsidiary or to Guarantee Indebtedness of the Company or
any other Subsidiary; provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by any Loan Document, (ii) the
foregoing shall not apply to restrictions and conditions (A) existing on
the date hereof identified on Schedule 6.10 and (B) to the extent any
such restrictions or conditions permitted by clause (A) is set forth
in an agreement evidencing Indebtedness, are set forth in any agreement
evidencing any permitted renewal, extension or refinancing of such Indebtedness
so long as such renewal, extension or refinancing does not expand the scope of
any such restriction or condition, (iii) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (iv) the foregoing shall not apply to any agreement
or other instrument of a Person acquired in a Permitted Acquisition by a Loan
Party in existence at the time of such Permitted Acquisition (but not created
in connection therewith or in contemplation thereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person so
acquired; (v) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (vi) clause (a) of
the foregoing shall not apply to (A) customary provisions in joint venture
agreements and other similar agreements applicable to joint ventures to the
extent such joint ventures are permitted hereunder, (B) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of the Company or any Subsidiary or (C) customary
provisions restricting assignment of any agreement entered into in the ordinary
course of business.

 

SECTION 6.11.                                         Amendment of Material Documents. 
No Loan Party will, nor will it permit any Subsidiary to, amend, modify
or waive any of its rights under (a) the Senior Note Documents or the
Senior Secured Term Facility Credit Agreement (or any instrument or agreement
governing any refinancing Indebtedness in respect thereof permitted under Section 6.01),
(b) the Senior Subordinated Note Documents or any other agreement relating
to any Subordinated Indebtedness, (c) its certificate of incorporation,
by-laws, operating, management or partnership agreement or other organizational
documents (except to the extent necessary to implement changes thereto
disclosed to the Agent prior to the Effective Date and reasonably satisfactory
to the Agent), (d) the HSBC Agreements or the documents evidencing any
Permitted Replacement Credit Card Program or (e) the Management Services
Agreement, to the extent, in the case of each of the foregoing clauses (a) through
(e), any such amendment, modification or waiver would be adverse to the Lenders
in any material respect; provided that 

 

115

 

any amendment,
modification or waiver of the HSBC Agreements or any document evidencing any
Permitted Replacement Credit Card Program shall be permitted so long as the
Agent shall have consented thereto in writing prior to the effectiveness
thereof (such consent not to be unreasonably withheld or delayed).

 

SECTION 6.12.                                         Certain Equity Securities. 
No Loan Party will, nor will it permit any Subsidiary to, issue any Equity
Interests that are not Qualified Equity Interests.

 

SECTION 6.13.                                         Designated Disbursement Account. 
After the occurrence and during the continuance of an Event of Default
or Liquidity Event, the Loan Parties shall not utilize the funds on deposit in
the Designated Disbursement Account for any purposes other than (a) the
payment of operating expenses incurred by the Loan Parties in the ordinary
course of business (including any payment in respect of any Indebtedness of the
Loan Parties otherwise permitted hereunder), and (b)  up to $15,000,000
for such other purposes permitted hereunder as the Loan Parties may deem
appropriate, other than for purposes of making any Restricted Payment,
Restricted Debt Payment or Permitted Acquisition.

 

SECTION 6.14.                                         Minimum Excess Availability. 
The Company shall not, at any time during the period from the Effective
Date through April 30, 2011, permit Excess Availability to be less than
the greater of (a) 10% of the lesser of (i) the aggregate Revolving
Commitments and (ii) the Borrowing Base and (b) $50,000,000.

 

SECTION 6.15.                                         Fixed Charge Coverage Ratio. 
If a Trigger Event shall exist or shall have occurred and be continuing
at any time after April 30, 2011, the Company shall not permit the Fixed
Charge Coverage Ratio at any time so long as such Trigger Event is continuing
to be less than 1.1 to 1.0.

 

ARTICLE VII

EVENTS OF DEFAULT

 

SECTION 7.01.                                         Events of Default. 
If any of the following events (“Events of Default”) shall occur:

 

(a)                                  any Borrower shall fail to pay (i) any
principal of any Loan or any reimbursement obligation in respect of any LC
Disbursement when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise, or (ii) any interest on any Loan or any fee or any
other amount payable under this Agreement or any other Loan Document within
three (3) Business Days after it shall become due and payable;

 

(b)                                 any representation or warranty made or
deemed made by or on behalf of any Loan Party herein or in any other Loan
Document or any amendment or modification thereof or waiver thereunder, or in
any report, Borrowing Base Certificate or other certificate, financial
statement or other document furnished pursuant to or in connection with this
Agreement or any Loan Document, shall prove to have been materially incorrect
when made or deemed made;

 

116

 

(c)                                  any Loan Party shall fail to observe or
perform any covenant, condition or agreement contained (i) in Article VI,
(ii) in Section 5.01(h) (after a one (1) Business Day grace
period), (iii) in any of Section 2.21, 5.02(a) or 5.03 (but only
with respect to Holdings’ or the Company’s existence) (provided that if (A) any
such Default described in this clause (iii) is of a type that can be cured
within five (5) Business Days and (B) such Default could not
materially adversely impact the Lender’s Liens on the Collateral, such Default
shall not constitute an Event of Default for five (5) Business Days after
the occurrence of such Default so long as the Loan Parties are diligently
pursuing the cure of such Default) or (iv) in any of Section 5.06(b),
5.09, 5.10 or 5.14;

 

(d)                                 any Loan Party shall fail to observe or
perform any covenant, condition or agreement contained in any Loan Document
(other than those specified in clauses (a) and (c) above) and
such default shall continue unremedied for a period of 30 days after notice
thereof to the Borrower Agent from the Agent, the Required Lenders or, after
Discharge of Revolving Facility Obligations, the Required Incremental Term Loan
Lenders;

 

(e)                                 (i) any Loan Party shall fail to make
any payment beyond the applicable grace period (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) with respect to any
Material Indebtedness, or (ii) any event or condition occurs (other than
with respect to Material Indebtedness constituting Derivative Transactions,
termination events or equivalent events pursuant to the terms of the related
Swap Agreements in accordance with the terms thereof and not as a result of any
default thereunder by any Loan Party) that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with
the giving of notice, if required) the holder or holders of any such Material
Indebtedness or any trustee or agent on its or their behalf to cause any such
Material Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; provided
that this paragraph (e) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness if such sale or transfer is permitted
hereunder and under the documents providing for such Indebtedness;

 

(f)                                   a Change in Control shall occur;

 

(g)                                 an involuntary proceeding shall be commenced
or an involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of a Loan Party or any Subsidiary of
any Loan Party or its debts, or of a substantial part of its assets, under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Loan Party or
any Subsidiary of any Loan Party or for a substantial part of its assets, and,
in any such case of clause (i) or (ii), such proceeding or petition
shall continue undismissed and unstayed for sixty (60) days or an order or
decree approving or ordering any of the foregoing shall be entered;

 

(h)                                 any Loan Party or any Subsidiary of any Loan
Party shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar 

 

117

 

law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (g) of this Article, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for such Loan Party or Subsidiary
of any Loan Party or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of
creditors;

 

(i)                                     any Loan Party or any Subsidiary of any Loan
Party shall become unable, admit in writing its inability or fail generally to
pay its debts in excess of the threshold amount that constitutes Material
Indebtedness as they become due;

 

(j)                                     one or more final judgments for the payment
of money in an aggregate amount in excess of (i) if Excess Availability is
then greater than $100,000,000, $40,000,000, or (ii) if Excess
Availability is then less than or equal to $100,000,000, $20,000,000 (in each
case to the extent not covered by third-party insurance as to which the insurer
has been notified of such judgment and does not deny coverage), shall be
rendered against any Loan Party or any combination of Loan Parties and the same
shall remain undischarged for a period of sixty (60) consecutive days
during which execution shall not be effectively stayed, satisfied or bonded, or
any writ or warrant of attachment or execution or similar process is issued or
levied against all or any material part of the property of any Loan Party and
is not released, vacated, stayed or bonded within sixty (60) days after
its issue or levy;

 

(k)                                  an ERISA Event shall have occurred that,
when taken together with all other ERISA Events that have occurred and are
continuing, would reasonably be expected to result in a Material Adverse
Effect;

 

(l)                                     the Loan Guaranty at any time after its
execution and delivery and for any reason, other than as expressly permitted
hereunder or thereunder, shall fail to remain in full force or effect, or any
action shall be taken by any Loan Party to discontinue or to assert the
invalidity or unenforceability of the Loan Guaranty, or any Loan Guarantor
shall deny or disaffirm in writing that it has any further liability under the
Loan Guaranty to which it is a party;

 

(m)                              (i) any Collateral Document after
delivery thereof pursuant to the terms of the Loan Documents shall for any
reason, other than pursuant to the terms hereunder or thereunder (including as
a result of a transaction permitted under Section 6.03 or 6.05), fail to
create a valid and perfected security interest with the priority required by
the Collateral Documents (subject to the Intercreditor Agreement) in any
Collateral purported to be covered thereby, except to the extent that any such
loss of perfection or priority results from the failure of the Agent to
maintain possession of certificates actually delivered to it representing
securities pledged under the Collateral Documents or to file UCC continuation
statements and except as to Collateral consisting of real property to the
extent that such losses are covered by a lender’s title insurance policy and
such insurer has been notified and has not denied coverage, or (ii) any
Collateral Document shall fail 

 

118

 

to remain in full force or effect or any action shall be taken by any
Loan Party to discontinue or to assert the invalidity or unenforceability of
any Collateral Document;

 

(n)                                 any material provision of any Loan Document
at any time after its execution and delivery and for any reason other than as
expressly permitted hereunder or thereunder (including as a result of a
transaction permitted under Section 6.03 or 6.05) or as a result of the
satisfaction in full of the Obligations, ceases to be in full force and effect,
or any Loan Party shall challenge in writing the validity or enforceability of
any Loan Document or any Loan Party shall deny in writing that it has any
further liability or obligation under any Loan Document (other than as a result
of repayment in full of the Obligations and termination of the Commitments) or
purports in writing to revoke or rescind any Loan Document; or

 

(o)                                 the Obligations referred to in Section 3.19(a) shall
cease to constitute senior indebtedness under the subordination provisions of
any document or instrument evidencing any permitted Subordinated Indebtedness
(including the Indebtedness under the Senior Subordinated Notes as evidenced by
the Senior Subordinated Note Documents) or such subordination provision shall
be invalidated or otherwise cease, for any reason, to be valid, binding and
enforceable obligations of the parties thereto;

 

then, and in every such event (other than an event with respect to any
Loan Party described in clause (g) or (h) of this Article), and
at any time thereafter during the continuance of such event, the Agent may, and
at the request of the Required Lenders (or, after Discharge of the Revolving
Facility Obligations, the Required Incremental Term Loan Lenders) shall, by notice
to the Borrower Agent, take any of the following actions, at the same or
different times:  (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, (ii) declare
the Loans then outstanding to be due and payable in whole (or in part, in which
case any principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrowers accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by each Borrower, and (iii) require
that the Borrowers deposit in the LC Collateral Account an amount in cash equal
to 103% of the then outstanding LC Exposure; provided that upon the
occurrence of an event with respect to any Loan Party described in clause (g) or
(h) of this Article, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrowers accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by each Borrower, and
the obligation of the Borrowers to cash collateralize the outstanding Letters
of Credit as aforesaid shall automatically become effective, in each case
without further act of the Agent or any Lender; and provided  further
that (A) upon the occurrence and during the continuance of an Event of
Default set forth under Section 7.1(a) with respect to the
Incremental Term Loans, the Agent may, and at the request of the Required Incremental
Term Loan Lenders, shall, by written notice to the Borrower Agent, declare all
or any portion of the Incremental Term Loans and all or any portion of the
other Incremental Term Loan Obligations to be, and the same shall forthwith
become, immediately due and payable together with accrued interest thereon, (B) (1) upon
the acceleration of the Revolving Loans 

 

119

 

hereunder, the principal of the Incremental Term Loans then outstanding,
together with accrued interest thereon and all other obligations of the
Borrowers accrued in respect thereof, shall be automatically due and payable in
whole immediately and (2) upon the acceleration of the Incremental Term
Loans hereunder, the principal of the Revolving Loans then outstanding,
together with accrued interest thereon and all other obligations of the
Borrowers accrued in respect thereof, shall be automatically due and payable in
whole immediately and all Commitments shall automatically terminate, in each case
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Borrower and (C) except as expressly set forth
in Section 7.04, no Incremental Term Loan Lender shall have any right to
affirmatively exercise any remedy with respect to the Collateral upon the
occurrence and during the continuance of an Event of Default until the
Discharge of Revolving Facility Obligations. 
Upon the occurrence and the continuance of an Event of Default, the
Agent may, and at the request of the Required Lenders (or, after Discharge of
the Revolving Facility Obligations, the Required Incremental Term Loan Lenders)
shall, exercise any rights and remedies provided to the Agent under the Loan
Documents or at law or equity, including all remedies provided under the UCC.

 

Notwithstanding anything to the contrary contained
above in this Article VII, in the event that an Event of Default shall
occur by reason of the failure of the Company to comply with Section 6.15,
such Event of Default shall be cured if, within five Business Days after the
occurrence of such Event of Default, (a) Holdings shall issue Permitted
Cure Securities for cash or otherwise receive cash contributions to the common
capital of Holdings in an amount not less than the amount which, when added to
EBITDA for the period as to which such Event of Default occurred, would cause
the Company to be in compliance with the Fixed Charge Coverage Ratio for such
period, (b) Holdings shall contribute any such cash to the capital of the
Company (the amount of such cash so contributed to the capital of the Company
being the “Cure Amount”), and (c) the Company shall use such cash
to prepay the principal of the Revolving Loans to the extent then outstanding
(the exercise of such right to cure such Event of Default being referred to as
the “Cure Right”); provided that (i) only three Cure Rights
may be exercised in any period of 12 consecutive months and (ii) no Cure
Right may be exercised within 90 days after the exercise of any other Cure Right.  Upon compliance with the conditions specified
in this paragraph, EBITDA for the last fiscal month of such period shall be
increased, solely for the purpose of determining compliance with Section 6.15
and not for any other purpose under this Agreement, by an amount equal to the
Cure Amount.

 

SECTION 7.02.                                         Exclusion of Immaterial Subsidiaries. 
Solely for the purposes of determining whether an Event of Default has
occurred under clause (g) or (h) of Section 7.01, any
reference in any such paragraph to any Subsidiary shall be deemed not to
include any Immaterial Subsidiary affected by any event or circumstance
referred to in any such paragraph; provided that if it is necessary to
exclude more than one Subsidiary from paragraph (g) or (h) of Section 7.01
pursuant to this Section 7.02 in order to avoid an Event of Default
thereunder, all excluded Subsidiaries shall be considered to be a single
consolidated Subsidiary for purposes of determining whether the condition
specified above is satisfied.

 

SECTION 7.03.                                         Agreements Among Claimholders.  (a) 
In any Bankruptcy Proceeding, the Revolving Lenders may seek adequate
protection in the form of current post-petition interest payments, incurred
fees and expenses, or other cash payments. 
If, in any 

 

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Bankruptcy
Proceeding, the Revolving Facility Claimholders and the Incremental Term Loan
Claimholders as a group are granted adequate protection in the form of current
post-petition interest payments, incurred fees and expenses, or other cash
payments, then the Incremental Term Loan Claimholders agree that the Revolving
Facility Claimholders shall be entitled to receive all such payments until they
have actually received the full amount of post-petition interest, fees, and
expenses owed or to be owed thereto as of the date of each such payment(s),
before any distribution from, or in respect of, any such post-petition payments
may be made to the Incremental Term Loan Claimholders, with the Incremental
Term Loan Claimholders hereby acknowledging and agreeing to turn over to the
Revolving Facility Claimholders any Collateral Proceeds (including proceeds of
post-petition assets) otherwise received or receivable by them to the extent
necessary to effectuate the intent of this sentence, even if such turnover has
the effect of reducing the claim or recovery of the Incremental Term Loan
Claimholders.

 

(b)                                 In any
Bankruptcy Proceeding, the Incremental Term Loan Claimholders shall be entitled
to vote on any proposed plan under Chapter 11 of the Bankruptcy Code, but agree
they shall only do so in the manner as expressly instructed by the Required
Lenders or their agent.  The Incremental
Term Loan Claimholders further agree that they will not raise any objection to,
oppose, or otherwise take any action that could hinder, delay, interfere with,
or impede the approval and confirmation of any plan under Chapter 11 of the
Bankruptcy Code that is supported or proposed by the Required Lenders.

 

(c)                                  The Incremental
Term Loan Claimholders agree that in any Bankruptcy Proceeding, their claims in
respect of the Collateral or otherwise would not be “substantially similar” to
those of the Revolving Facility Claimholders, as such term is utilized in Section 1122(a) of
the Bankruptcy Code, and, therefore, shall be placed into a separate class of
creditors from those of the Revolving Facility Claimholders for voting and all
other purposes under any proposed plan under Chapter 11 of the Bankruptcy Code
and will in any case not raise any objection to, oppose or otherwise take
action that could interfere with such treatment of their claims in such
manner.  The Incremental Term Loan
Claimholders further agree that they will not vote to accept any proposed plan
under Chapter 11 of the Bankruptcy Code that does not so separately classify
their claims from those of the Revolving Facility Claimholders (except to the
extent they are otherwise expressly instructed to do so by the Required Lenders
or their agent).

 

(d)                                 If,
notwithstanding the foregoing clause (c), in any Bankruptcy Proceeding, it is
held that the claims of the Revolving Facility Claimholders and Incremental
Term Loan Claimholders in respect of the Collateral constitute only one secured
claim (rather than separate classes of senior and junior secured claims), then
the Revolving Facility Claimholders shall be entitled to receive, in addition
to Collateral Proceeds distributed to them from, or in respect of, principal,
pre-petition interest and other claims, all amounts owing in respect of
post-petition interest, fees, costs, premium and other charges, irrespective of
whether all or any portion of the claim for such amounts is allowed or
allowable in such Bankruptcy Proceeding pursuant to Section 506(b) of
the Bankruptcy Code or otherwise, until the Discharge of Revolving Facility
Obligations, before any distribution of Collateral Proceeds is made in respect
of the claims held by the Incremental Term Loan Claimholders, with the
Incremental Term Loan Claimholders hereby acknowledging and agreeing to promptly
turn over to the Agent for distribution to the Revolving Facility Claimholders
in accordance with Section 2.18 hereof any Collateral Proceeds otherwise
received or receivable by them, without offset, defense, 

 

121

 

deduction or counterclaim of
any kind, nature or description to the extent necessary to effectuate the
intent of this sentence, until the Discharge of Revolving Facility Obligations,
even if such turnover has the effect of reducing the claim or recovery of the
Incremental Term Loan Claimholders.

 

(e)                                  If (i) any
Revolving Facility Obligations are determined to be unsecured in part for
purposes of Section 506(a) of the Bankruptcy Code, but would not have
been deemed unsecured in part for such purposes, or would have been deemed to
be unsecured in part by a lesser amount for such purposes, or (ii) any
payments received in respect of any Revolving Facility Obligations are voided,
set aside or otherwise required to be returned, but would not have been voided,
set aside or otherwise required to be returned, in either case if the
Incremental Term Loans had been subject to a separate junior lien on the
Collateral, and any payment or distribution is made in respect of the
Collateral to or for the benefit or account of the Incremental Term Loan
Claimholders, such payment or distribution shall be held in trust for the
benefit of Revolving Facility Claimholders up to an amount equal to the
additional amount that would have been paid, payable or distributed in respect
of the Revolving Facility Obligations, or not voided, set aside or otherwise
required to be returned, if such separate junior lien had existed, and shall be
promptly transferred or delivered to the Agent for application to the Revolving
Facility Obligations in the manner provided in Section 2.18.

 

(f)                                    Anything
contained herein to the contrary notwithstanding, the Incremental Term Loan
Claimholders shall not be entitled to share in or receive any Collateral
Proceeds or any liens or claims on, based on or otherwise arising from or with
respect to any Collateral (including claims in any Bankruptcy Proceeding),
until the Discharge of Revolving Facility Obligations or to the extent that the
aggregate amount of the Revolving Facility Obligations and obligations in
respect of the Incremental Term Loans then outstanding exceeds the aggregate
value of the Collateral (net of prior liens and encumbrances) so that no
portion of the claims of the Revolving Facility Claimholders in such Bankruptcy
Proceeding shall be deemed an unsecured claim as a result of such excess.

 

SECTION 7.04.                                         Exercise of Remedies.

 

(a)                                  So long as the
Discharge of Revolving Facility Obligations has not occurred, whether or not
any Bankruptcy Proceeding has been commenced by or against any Borrower or any
other Loan Party:

 

(i)                                    the Incremental
Term Loan Lenders:

 

(A)                              will not,
independently without the express consent and, if requested by the Agent or the
Required Lenders, a joinder by the Required Lenders (or the Agent on their
behalf), exercise or seek to exercise any rights or remedies (including any
right of set-off or recoupment) with respect to any Collateral (including the
exercise of any right under any lockbox agreement, account control agreement,
landlord waiver or bailee’s letter or similar agreement or arrangement to which
the Incremental Term Loan Lenders and/or the Agent is a party) or institute or
commence (or join with any other Person, other than the Required Lenders, in
commencing) any enforcement, collection, execution, levy 

 

122

 

or foreclosure action or
proceeding (including any Bankruptcy Proceeding) with respect to any Lien held
by it or for its benefit under the Collateral Documents or otherwise;

 

(B)                                will not
contest, protest or object to any foreclosure proceeding or action brought by
the Revolving Facility Claimholders or the Agent, on behalf of any or all of
the Revolving Facility Claimholders, or any other exercise by the Revolving
Facility Claimholders, or the Agent, on behalf of any or all of the Revolving
Facility Claimholders, of any rights and remedies relating to the Collateral or
otherwise under the Collateral Documents, applicable law or otherwise, provided
that the respective interests of the Incremental Term Loan Claimholders attach
to the proceeds thereof, subject to the relative priorities described in Section 2.18;

 

(C)                                will not object
to the forbearance by the Revolving Facility Claimholders, or the Agent, on
behalf of the Revolving Facility Claimholders, or the refusal of the Revolving
Facility Claimholders, or the Agent, on behalf of the Revolving Facility
Claimholders, to consent to any requested act by the Incremental Term Loan
Claimholders, or from the Revolving Facility Claimholders, or the Agent, on behalf
of the Revolving Facility Claimholders, bringing or pursuing any foreclosure
proceeding or action or any other exercise of any rights or remedies relating
to the Collateral; and

 

(D)                               will not,
independently, without the express written consent and, if required by the
Agent or the Required Lenders, a joinder by the Required Lenders, file,
pursuant to Section 109 or 303 of the Bankruptcy Code or otherwise, a
petition in order to commence a Bankruptcy Proceeding against any Borrower
and/or any other Loan Party (an “Involuntary Insolvency Proceeding”).  In the event that any Revolving Facility
Claimholder or the Agent, acting on behalf of the Revolving Facility
Claimholders, files a petition with the bankruptcy court pursuant to Section 109
of the Bankruptcy Code in order to commence an Involuntary Insolvency
Proceeding, the Incremental Term Loan Claimholders agree that they will not
oppose such petition or support any Person opposing such petition.

 

(ii)                                 Subject to Section 7.05,
the Revolving Lenders and the Agent, acting on behalf of the Revolving Facility
Claimholders, shall have the exclusive right to enforce rights, exercise
remedies (including set-off and the right to credit bid their debt) and make
determinations regarding the release, disposition, or restrictions with respect
to the Collateral without any consultation with or the consent of the
Incremental Term Loan Claimholders or the Agent, acting on behalf of the
Incremental Term Loan Claimholders; except, however, that, if requested by the
Agent, the Incremental Term Loan Claimholders shall join and shall otherwise
support any such action taken by the Revolving Facility Claimholders; provided,
that

 

(A)                              in any
Bankruptcy Proceeding commenced by or against any Borrower or any other Loan
Party, the Incremental Term Loan Claimholders may 

 

123

 

file a proof of claim or
statement of interest with respect to the Incremental Term Loan Obligations,

 

(B)                                the Incremental
Term Loan Claimholders may join in any action undertaken by the Revolving
Facility Claimholders in order to preserve or protect the Lien of the Agent on
the Collateral, and

 

(C)                                the Incremental
Term Loan Claimholders shall be entitled to file any necessary responsive or
defensive pleadings in opposition to any motion, claim, adversary proceeding or
other pleading made by any Person objecting to or otherwise seeking the
disallowance of the claims of the Incremental Term Loan Claimholders, including
any claims secured by the Collateral, if any, in each case in accordance with
the terms of this Agreement.

 

In exercising rights and remedies with respect to the
Collateral, the Revolving Lenders and the Agent, on behalf of the Revolving
Facility Claimholders, may enforce the provisions of the Loan Documents and
exercise remedies thereunder, all in such order and in such manner as they may
determine in the exercise of their sole discretion.  The Incremental Term Loan Claimholders agree
that the Revolving Facility Claimholders are not acting as the agent of the
Incremental Term Loan Claimholders and do not otherwise owe them any fiduciary
duty, and may instead act for all purposes in a manner that maximizes the
interests of the Revolving Facility Claimholders.  Such exercise and enforcement shall include
the rights of an agent appointed by the Required Lenders to sell or otherwise
dispose of Collateral upon foreclosure, or to consent to the sale or other
disposition of Collateral by or on behalf of any Loan Party, to incur expenses
in connection with such sale or disposition, and to exercise all the rights and
remedies of a secured creditor under the UCC of any applicable jurisdiction and
of a secured creditor under Bankruptcy Laws of any applicable jurisdiction.

 

(b)                                 The Incremental
Term Loan Lenders agree that they will not take or receive any Collateral
Proceeds in connection with the exercise of any right or remedy (including
set-off or recoupment) with respect to any Collateral, and that any Collateral
or Collateral Proceeds taken or received by the Agent, for the benefit of the
Incremental Term Loan Claimholders, will be paid over to, or held by, the Agent
for the benefit of the Revolving Facility Claimholders, unless and until the
Discharge of Revolving Facility Obligations. 
Without limiting the generality of the foregoing, unless and until the
Discharge of Revolving Facility Obligations, except as expressly provided in Section 7.04(a)(ii),
the sole right of the Incremental Term Loan Claimholders with respect to the
Collateral is for the Agent to hold a Lien on the Collateral to secure the
Incremental Term Loan Obligations owing to them pursuant to the Loan Documents
for the period and to the extent granted therein.

 

(c)                                  Subject to the
proviso in clause (ii) of Section 7.04(a) and Section 7.05(d),
the Incremental Term Loan Lenders agree that (i) the Incremental Term Loan
Claimholders will not take any action that would hinder, delay or impede or
object to any exercise of remedies of the Revolving Facility Claimholders (or
the Agent on behalf of any or all of the Revolving Facility Claimholders or in
accordance with the directions of the Required Lenders) under the Loan
Documents, including any sale, lease, exchange, transfer or other disposition
of the Collateral, whether by foreclosure or otherwise, and whether by the
Agent on behalf of the

 

124

 

Revolving Facility
Claimholders or by any Loan Party with the consent of the Required Lenders, and
(ii) the Incremental Term Loan Lenders hereby waive any and all rights
they may have as a secured creditor or otherwise to object to the manner or
order in which the Revolving Loan Claimholders (or the Agent on behalf of the
Revolving Loan Claimholders) seek to enforce or collect the Revolving Facility
Obligations or the Liens granted in any of the Collateral.

 

(d)           The Incremental Term Loan Lenders
hereby acknowledge and agree that no covenant, agreement or restriction
contained in the Loan Documents shall be deemed to restrict in any way the
rights and remedies of the Revolving Facility Claimholders with respect to the
Collateral as set forth in this Agreement and the other Loan Documents.

 

(e)           If any Incremental Term Loan
Claimholder, contrary to this Agreement, commences or participates in any
action or proceeding against any Loan Party or the Collateral, the Agent or the
Revolving Lenders may interpose in the name of the Revolving Facility
Claimholders the making of this Agreement as a defense or dilatory plea.

 

(f)            Should any Incremental Term Loan
Claimholder, contrary to this Agreement, in any way take, or attempt or
threaten to take, any action with respect to the Collateral (including any
attempt to realize upon or enforce any remedy with respect to this Agreement),
or fail to take any action required by this Agreement, the Agent or the
Revolving Lenders (in its own name or in the name of a Loan Party) may obtain
relief against such Incremental Term Loan Claimholder by injunction, specific
performance and/or other appropriate equitable relief, it being understood and
agreed by the Incremental Term Loan Claimholders that (i) the Revolving
Facility Claimholders’ damages from such actions may be difficult to ascertain
and may be irreparable, and (ii) the Incremental Term Loan Claimholders
waive any defense that the Revolving Facility Claimholders cannot demonstrate
damage or can be made whole by the awarding of damages and any requirement for
the posting of a bond.

 

SECTION 7.05.              Insolvency and Liquidation
Proceedings.

 

(a)           Use of Cash Collateral and
Financing Issues.  Until the
Discharge of Revolving Facility Obligations, if any Borrower or any other Loan
Party shall be subject to any Bankruptcy Proceeding and the Required Lenders,
or the Agent, acting on behalf of the Revolving Facility Claimholders, shall
desire to permit the use of cash collateral on which the Revolving Loan
Claimholders or any other creditor has a Lien or to permit any Borrower or any
other Loan Party to obtain financing, from one or more of the Revolving Lenders
(including under this Agreement) under Section 363 or Section 364 of
the Bankruptcy Code or any similar Bankruptcy Law (each, a “DIP Financing”),
then the Incremental Term Loan Claimholders and the Agent, acting on behalf of
the Incremental Term Loan Claimholders, agree that they will raise no objection
to such use of cash collateral or DIP Financing nor support any other Person
objecting to, such use of cash collateral or DIP Financing and will not request
any form of adequate protection or any other relief in connection therewith
(except as agreed by the Agent, acting on behalf of the Revolving Facility
Claimholders, or to the extent expressly permitted by Section 7.05(d))
and, to the extent the Liens securing the Revolving Facility Obligations are
subordinated to or pari passu with any such DIP Financing provided by the
Revolving Lenders, the Incremental Term Loan Lenders agree that Agent may
subordinate the Liens in the Collateral to the extent held for the benefit of
the Incremental Term Loan Lenders to (x) the Liens securing 

 

125

 

such DIP Financing (and all
obligations relating thereto), (y) any adequate protection Liens provided
to the Agent on behalf of the Revolving Facility Claimholders or any of them
(or any other agent on their behalf) and (z) any “carveout” for
professional or United States Trustee fees agreed to by the Revolving Lenders
or the Agent (or any other agent), acting on behalf of the Revolving Facility
Claimholders; and (B) agrees that notice received two (2) calendar
days prior to the entry of an order approving such usage of cash collateral or
approving such DIP Financing shall be adequate notice.  If any Loan Party shall be subject to any
Bankruptcy Proceeding, the Incremental Term Loan Lenders agree that (other than
with respect to any DIP Financing provided by any or all of the Revolving
Lenders in accordance with the immediately preceding clause (i) and
except as otherwise may be instructed by the Required Lenders) they will not
consent to provide or participate in, or otherwise support, any DIP Financing
that, pursuant to Section 364(d) of the Bankruptcy Code or otherwise,
would be secured by a lien on any portion of the Collateral that is senior or
equal to the lien of the Agent for the benefit of the any or all of the
Revolving Facility Claimholders (or any other agent acting on their behalf) on
the Collateral.  The Incremental Term
Loan Lenders further agree that, except as otherwise instructed by the Required
Lenders, they will join in or otherwise support any objection filed by the
Revolving Lenders to any proposed DIP Financing by any Person that would
be secured by a lien on any portion of the Collateral that is senior or equal
to the liens of the Agent held for the benefit of the Revolving Facility
Claimholders on the Collateral.

 

(b)           Sale Issues.  The Incremental Term Loan Lenders agree that
they will not raise any objection to or oppose a sale or other disposition of
any Collateral (including any post-petition assets subject to liens in favor of
the Lenders or the Agent on behalf of any Lenders or any other agent) free and
clear of its Liens or other claims under Section 363 of the Bankruptcy
Code if the Required Lenders under this Agreement have consented to such sale
or disposition of such assets, so long as the interests of the Incremental Term
Loan Claimholders in the Collateral (and any post-petition assets subject to
liens in favor of the Lenders or the Agent on behalf of Lenders or any other
agent) attach to the proceeds thereof, subject to the terms of this
Agreement.  If requested by the Required
Lenders in connection therewith, the Incremental Term Loan Claimholders shall
affirmatively consent to such a sale or disposition and take such other action
as may be required in connection therewith.

 

(c)           Relief from the Automatic Stay.  Until the Discharge of Revolving Facility
Obligations, the Incremental Term Loan Claimholders agree that none of them
shall (i) seek relief from the automatic stay or any other stay in any
Bankruptcy Proceeding in respect of the Collateral, without the prior written
consent of, and, if required by Agent or the Required Lenders, a joinder in any
such action by, the Required Lenders, or (ii) oppose any request by any
Revolving Facility Claimholder (or the Agent on behalf of any Revolving
Facility Claimholder) to seek relief from the automatic stay or any other stay
in any Bankruptcy Proceeding in respect of the Collateral.

 

(d)           Adequate Protection.

 

(i) The Incremental
Term Loan Claimholders agree that none of them shall contest (or support any
other person contesting) (A) any request by the Revolving Facility
Claimholders or the Agent, acting on behalf of the Revolving Facility
Claimholders, for adequate protection or (B) any objection by the
Revolving Facility 

 

126

 

Claimholders to any motion, relief, action or proceeding based on the
Revolving Facility Claimholders claiming a lack of adequate protection.  In any Bankruptcy Proceeding, the Incremental
Term Loan Claimholders may not, without the express written consent of, or
joinder by, the Required Lenders, independently seek adequate protection in
respect of the Incremental Term Loan Obligations.  In the event the Revolving Facility
Claimholders seek or request adequate protection in respect of Revolving
Facility Obligations and such adequate protection is granted in the form of
additional collateral, then the Incremental Term Loan Claimholders agree that
their rights in respect of any Lien on such additional collateral securing the
Incremental Term Loan Obligations shall be junior to the rights in respect of
such Liens securing the Revolving Facility Obligations and any DIP Financing
(and all obligations relating thereto) and to any other Liens granted to the
Revolving Facility Claimholders (or the Agent or any other agent for the
benefit of any or all of the Revolving Facility Claimholders) as adequate
protection, in each case on the same basis as set forth in Section 2.18.

 

(ii) Similarly, if the
Revolving Facility Claimholders and the Incremental Term Loan Claimholders are
granted adequate protection in the form of a superpriority claim, then the
Incremental Term Loan Claimholders agree that their interest in any such
superpriority claim will be junior in all respects to interests of the
Revolving Facility Claimholders in such superpriority claim.

 

(e)           No Waiver.  Nothing contained herein shall prohibit or in
any way limit the Revolving Facility Claimholders or the Agent, acting on
behalf of the Revolving Facility Claimholders, from objecting in any Bankruptcy
Proceeding or otherwise to any action taken by the Incremental Term Loan
Claimholders in violation of this Agreement, including the seeking by the
Incremental Term Loan Claimholders or the Agent, acting on behalf of the
Incremental Term Loan Claimholders, of adequate protection or the asserting by
the Incremental Term Loan Claimholders or the Agent, acting on behalf of the
Incremental Term Loan Claimholders, of any of its rights and remedies under the
Loan Documents or otherwise without the express written consent of the Required
Lenders; provided, however, that this Section 7.05(e) shall
not limit the rights of the Incremental Term Loan Claimholders under the
proviso in Section 7.04(a)(ii) or under Section 7.05(d) or Section 7.05(h).

 

(f)            Avoidance Issues.  In addition to any other rights provided to
the Revolving Facility Claimholders hereunder (including Section 7.03(e)),
if any Revolving Facility Claimholder is required in any Bankruptcy Proceeding,
or otherwise, to turn over or otherwise pay to the estate of any Borrower or
any other Loan Party any amount in respect of a Revolving Facility Obligation
(a “Recovery”), then such Revolving Facility Claimholders shall be
entitled to a reinstatement of Revolving Facility Obligations with respect to
all such recovered amounts.  If this
Agreement shall have been terminated prior to such Recovery, this Agreement
shall be reinstated in full force and effect, and such prior termination shall
not diminish, release, discharge, impair or otherwise affect the obligations of
the parties hereto from such date of reinstatement.  Collateral or Collateral Proceeds received by
the Incremental Term Loan Claimholders or the Agent, acting on behalf of the
Incremental Term Loan Claimholders, after the Discharge of Revolving Facility
Obligations and prior to the reinstatement of such Revolving Facility
Obligations shall be delivered to the Revolving Lenders upon such
reinstatement.

 

127

 

(g)           Reorganization Securities.  If, in any Bankruptcy Proceeding, debt
obligations of the reorganized debtor secured by Liens upon any property of the
reorganized debtor are distributed pursuant to a plan of reorganization or
similar dispositive restructuring plan, both on account of Revolving Facility
Obligations and on account of Incremental Term Loan Obligations, then, to the
extent the debt obligations distributed on account of the Revolving Facility
Obligations and on account of the Incremental Term Loan Obligations are secured
by Liens upon the same property, the provisions of this Agreement will survive
the distribution of such debt obligations pursuant to such plan and will apply
with like effect to the Liens securing such debt obligations.

 

(h)           Post-Petition Claims.

 

(i) Neither the
Incremental Term Loan Claimholders nor the Agent, acting on behalf of the Incremental
Term Loan Claimholders, shall oppose or seek to challenge any claim by the
Revolving Facility Claimholders or the Agent, acting on behalf of the Revolving
Facility Claimholders, for allowance in any Bankruptcy Proceeding of Revolving
Facility Obligations consisting of post-petition interest, fees, costs, charges
or expenses to the extent of the value of the Collateral subject to the Lien of
the Agent to secure the Revolving Facility Obligations, without regard to the
existence of the Lien of the Agent to secure the Incremental Term Loan
Obligations.

 

(ii) Neither the
Revolving Facility Claimholders nor the Agent, acting on behalf of the
Revolving Facility Claimholders shall oppose or seek to challenge any claim by
the Incremental Term Loan Claimholder or the Agent, acting on behalf of the
Incremental Term Loan Claimholders, for allowance in any Bankruptcy Proceeding
of Incremental Term Loan Obligations consisting of post-petition interest,
fees, costs, charges or expenses to the extent of the value of the Incremental
Term Loan Claimholders’ Lien on the Collateral (after taking into account the
Revolving Facility Obligations).

 

(i)            Waiver.  The Incremental Term Loan Claimholders waive
any claim they may hereafter have against the Revolving Facility Claimholders
arising out of the election of the Revolving Facility Claimholders or Agent,
acting on behalf of the Revolving Facility Claimholders, of the application of Section 1111(b)(2) of
the Bankruptcy Code, or out of any cash collateral or financing arrangement or
out of any grant of a security interest in connection with the Collateral in
any Bankruptcy Proceeding.

 

(j)            Expense Claims.  Neither the Incremental Term Loan
Claimholders nor the Agent, acting on behalf of the Incremental Term Loan
Claimholders will (i) contest the payment of fees, expenses or other
amounts to any Revolving Facility Claimholder or the Agent, acting on behalf of
the Revolving Facility Claimholders, under Section 506(b) of the
Bankruptcy Code or otherwise to the extent provided for in this Agreement or (ii) assert
or enforce, at any time prior to the Discharge of Revolving Facility
Obligations, any claim under Section 506(c) of the Bankruptcy Code
senior to or on parity with the Revolving Facility Obligations for costs or
expenses of preserving or disposing of any Collateral.

 

(k)           Other Matters.  To the extent that any Incremental Term Loan
Claimholder or the Agent, acting on behalf of the Incremental Term Loan
Claimholders, has or 

 

128

 

acquires rights under Section 361,
Section 363 or Section 364 of the Bankruptcy Code with respect to any
of the Collateral, the Incremental Term Loan Claimholders agree not to assert
any of such rights without the prior written consent of the Required Lenders; provided
that if requested by the Required Lenders, the Incremental Term Loan Lenders
shall timely exercise such rights in the manner requested by the Required
Lenders, including any rights to payments in respect of such rights.

 

(l)            Effectiveness in Bankruptcy
Proceedings.  Sections 7.03
through 7.05, which the parties hereto expressly acknowledge is a “subordination
agreement” under Section 510(a) of the Bankruptcy Code, shall be
effective before, during and after the commencement of a Bankruptcy
Proceeding.  All references in such
Sections to any Loan Party shall include such Person as a debtor-in-possession
and any receiver or trustee for such Person in any Bankruptcy Proceeding.

 

ARTICLE VIII

THE AGENT

 

Each of the parties hereto hereby acknowledges that
the Agent and the Co-Collateral Agents are successors to the Existing Agent to
the extent provided herein.  Each of the
Lenders and the Issuing Banks hereby irrevocably appoints the Agent and each of
the Co-Collateral Agents (each, an “Appointed Agent”) as its agent and
authorizes each Appointed Agent to take such actions on its behalf, including
execution of the other Loan Documents, and to exercise such powers as are
delegated to each Appointed Agent by the terms of the Loan Documents, together
with such actions and powers as are reasonably incidental thereto, and each of
the parties hereto hereby consents to such appointment of the Agent as
successor to the Existing Agent in the Existing Agent’s capacity as “Agent” and
“Revolving Facility Agent” (as defined in the Intercreditor Agreement)
hereunder and under each other Loan Document. 
Without limiting the generality of the foregoing, the Agent shall have
the sole and exclusive authority to (a) act as the disbursing and
collecting agent for Lenders with respect to all payments and collections
arising in connection with the Loan Documents; (b) execute and deliver as
Agent each Loan Document, including any intercreditor or subordination
agreement, and accept delivery of each Loan Document from any Loan Party or
other Person; (c) act as collateral agent for Secured Parties for purposes
of perfecting and administering Liens under the Loan Documents, and for all
other purposes stated therein; (d) together with the Co-Collateral Agents,
manage, supervise or otherwise deal with Collateral; and (e) take any
enforcement action or otherwise exercise any rights or remedies with respect to
any Collateral under the Loan Documents, applicable law or otherwise.  The Appointed Agents alone shall be
authorized to determine whether any Accounts or Inventory constitute Eligible
Accounts or Eligible Inventory, or whether to impose or release any reserve,
which determinations and judgments, if exercised in good faith, shall exonerate
each Appointed Agent from liability to any Lender or other Person for any error
in judgment.

 

Any bank serving as an Appointed Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not an Appointed Agent, and such
bank and its Affiliates may accept deposits from, lend 

 

129

 

money to and generally
engage in any kind of business with the Loan Parties or any subsidiary of a
Loan Party or other Affiliate thereof as if it were not the Agent hereunder.

 

No Appointed Agent shall have any duties or
obligations except those expressly set forth in the Loan Documents.  Without limiting the generality of the
foregoing, (a) no Appointed Agent shall be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) no Appointed Agent shall have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Loan Documents that such
Appointed 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 9.02), and (c) except
as expressly set forth in the Loan Documents, no Appointed Agent shall have any
duty to disclose, and shall not be liable for the failure to disclose, any
information relating to any Loan Party or any of its subsidiaries that is communicated
to or obtained by the bank serving as an Appointed Agent or any of its
Affiliates in any capacity.  No Appointed
Agent shall be liable for any action taken or not taken by it 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 9.02)
or in the absence of, or for any losses not directly and solely caused by, its
own gross negligence or willful misconduct. 
No Appointed Agent shall be deemed to have knowledge of any Default
unless and until written notice thereof is given to such Appointed Agent by the
Borrower Agent or a Lender, and no Appointed Agent shall be responsible for or
have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with any Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or in
connection with any Loan Document, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth in any
Loan Document, (iv) the validity, enforceability, effectiveness or
genuineness of any Loan Document or any other agreement, instrument or
document, (v) the creation, perfection or priority of Liens on the
Collateral or the existence of the Collateral, or (vi) the satisfaction of
any condition set forth in Article IV or elsewhere in any Loan Document,
other than to confirm receipt of items expressly required to be delivered to
the Agent.

 

If any Lender acquires knowledge of a Default or Event
of Default, it shall promptly notify the Agent and the other Lenders thereof in
writing.  Each Lender agrees that, except
as otherwise provided in any Loan Documents or with the written consent of the
Agent and the Required Lenders, it will not take any enforcement action,
accelerate the Obligations under any Loan Documents, or exercise any right that
it might otherwise have under Applicable Law to credit bid at foreclosure
sales, UCC sales or other similar dispositions of Collateral.  Notwithstanding the foregoing, however, a
Lender may take action to preserve or enforce its rights against a Loan Party
where a deadline or limitation period is applicable that would, absent such
action, bar enforcement of the Obligations held by such Lender, including the
filing of proofs of claim in a Bankruptcy Proceeding.

 

Each Appointed 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.  Each Appointed Agent also may rely upon any
statement made to it orally or by 

 

130

 

telephone and believed by
it to be made by the proper Person, and shall not incur any liability for
relying thereon.  Each Appointed Agent
may consult with legal counsel (who may be counsel for any 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.

 

Each Appointed Agent may perform any and all its
duties and exercise its rights and powers by or through any one or more agents,
co-agents or sub-agents appointed by such Appointed Agent.  Each Appointed Agent and any such agents,
co-agents or sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties.  The Lenders shall execute and deliver such
documents as any Appointed Agent deems appropriate to vest any rights or
remedies in such agents, co-agents or sub-agent.  The exculpatory provisions of the preceding
paragraphs shall apply to any such agents, co-agents or sub-agent and to the
Related Parties of any Appointed Agent and any agents, co-agents or such
sub-agent, and shall apply to their respective activities in connection with
the syndication of the credit facilities provided for herein as well as
activities as such Appointed Agent.

 

Subject to the appointment and acceptance of a
successor to any Appointed Agent as provided in this paragraph, any Appointed
Agent may resign at any time by notifying the Lenders, the Issuing Banks and
the Borrower Agent.  Upon any such
resignation, the Required Lenders (or the Required Incremental Term Loan
Lenders after the Discharge of Revolving Facility Obligations) shall have the
right, with the consent (not to be unreasonably withheld or delayed) of the
Company, to appoint a successor; provided that, during the existence and
continuation of an Event of Default, no consent of the Company shall be
required.  If no successor shall have
been so appointed by the Required Lenders or the Required Incremental Term Loan
Lenders, as applicable, and shall have accepted such appointment within 30 days
after the retiring Appointed Agent gives notice of its resignation, then the
retiring Appointed Agent may, on behalf of the Lenders and the Issuing Banks,
appoint a successor Agent which shall be a commercial bank or an Affiliate of
any such commercial bank reasonably acceptable to the Company.  Upon the acceptance of its appointment as an
Appointed Agent hereunder by a successor, such successor shall succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Appointed Agent, and the retiring Appointed Agent shall be discharged
from its duties and obligations hereunder. 
The fees payable by the Company to a successor Appointed Agent shall be
the same as those payable to its predecessor unless otherwise agreed between
the Company and such successor.  After
the Appointed Agent’s resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Appointed 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 an Appointed Agent.  Any successor to
Bank of America, N.A. by merger or acquisition of stock or this loan shall
continue to be the Agent hereunder without further act on the part of the
parties hereto, unless such successor resigns as provided above.

 

Each Lender acknowledges that it has, independently
and without reliance upon any Appointed 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 any Appointed Agent or any other Lender
and based on such documents and information as it shall 

 

131

 

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 other Loan Document or related
agreement or any document furnished hereunder or thereunder.

 

Each Lender hereby agrees that (a) it has
requested a copy of each Report prepared by or on behalf of any Appointed
Agent; (b) no Appointed Agent (i) makes any representation or
warranty, express or implied, as to the completeness or accuracy of any Report
or any of the information contained therein or any inaccuracy or omission
contained in or relating to a Report or (ii) shall be liable for any
information contained in any Report; (c) the Reports are not comprehensive
audits or examinations, and that any Person performing any field examination
will inspect only specific information regarding the Loan Parties and will rely
significantly upon the Loan Parties’ books and records, as well as on
representations of the Loan Parties’ personnel and that the Agent undertakes no
obligation to update, correct or supplement the Reports; (d) it will keep
all Reports confidential and strictly for its internal use, not share the
Report with any Loan Party or any other Person except as otherwise permitted
pursuant to this Agreement; and (e) without limiting the generality of any
other indemnification provision contained in this Agreement, it will pay and
protect, and indemnify, defend, and hold each Appointed Agent and any such
other Person preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses, and other amounts (including reasonable
attorneys’ fees) incurred by any Appointed Agent or such other Person as the
direct or indirect result of any third parties who might obtain all or part of
any Report through the indemnifying Lender and any action such Lender may take
as a result of or any conclusion it may draw from any such Report.

 

The co-arrangers, joint bookrunners, co-syndication
agents and the documentation agent shall not have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Lenders as such.

 

ARTICLE IX

MISCELLANEOUS

 

SECTION 9.01.              Notices.  (a)  Except in the case of notices and
other communications expressly permitted to be given by telephone (and subject
to paragraph (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
facsimile, as follows:

 

if to any
Loan Party, to the Borrower Agent at:

 

One Marcus Square

1618 Main Street

Dallas, Texas 75201

Attention:  General Counsel

Facsimile No:  (214) 743-7611

 

132

 

if to Bank of
America, N.A., as the Agent, a Co-Collateral Agent, an Issuing Bank or the
Swingline Lender, at:

 

100 Federal Street

Boston, MA 02110

Attention:  David Vega

Facsimile No:  617-434-4131

 

if to Wells
Fargo Bank, N.A., as an Issuing Bank, at:

 

Wells Fargo Bank, N.A.
 One Boston
Place, 18th Floor

Boston,
Ma 02108

Attention:
Danielle Baldinelli

Facsimile No: 
617-523-4027

 

With
a copy to:

David
W. Morse

Otterbourg,
Steindler, Houston & Rosen, P.C.

230
Park Avenue

New
York, NY 10169

Facsimile No: 917-368-7122

 

if to
Wachovia Bank, National Association, as an Issuing Bank, at:

 

Wachovia Bank, National Association
 One Boston
Place, 18th Floor

Boston,
Ma 02108

Attention:
Danielle Baldinelli

Facsimile No: 
617-523-4027

 

With
a copy to:

David
W. Morse

Otterbourg,
Steindler, Houston & Rosen, P.C.

230
Park Avenue

New
York, NY 10169

Facsimile No: 917-368-7122

 

if to Wells
Fargo Retail Finance, LLC, as a Co-Collateral Agent, at:

 

Wells
Fargo Retail Finance, LLC

One
Boston Place, 18th Floor

Boston,
Ma 02108

Attention:
Danielle Baldinelli

Facsimile No: 
617-523-4027

 

133

 

With
a copy to:

David
W. Morse

Otterbourg,
Steindler, Houston & Rosen, P.C.

230
Park Avenue

New
York, NY 10169

Facsimile No: 917-368-7122

 

if to any
other Lender, to it at its address or facsimile number set forth in its
Administrative Questionnaire.

 

All such notices and other communications (i) sent by hand or
overnight courier service, or mailed by certified or registered mail, shall be
deemed to have been given when received or (ii) sent by facsimile shall be
deemed to have been given when sent and when receipt has been confirmed by
telephone, provided that if not given during normal business hours for
the recipient, shall be deemed to have been given at the opening of business on
the next Business Day for the recipient.

 

(b)           Notices and other communications to
the Lenders hereunder may be delivered or furnished by electronic
communications (including e-mail and internet or intranet websites) pursuant to
procedures approved by the Agent; provided that the foregoing shall not
apply to notices pursuant to Article II or to compliance and no Event of
Default certificates delivered pursuant to Section 5.01(d) unless
otherwise agreed by the Agent and the applicable Lender.  The Agent or the Borrower Agent (on behalf of
the Loan Parties) may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may
be limited to particular notices or communications.  All such notices and other communications (i) sent
to an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written acknowledgement),
provided that if not given during the normal business hours of the
recipient, such notice or communication shall be deemed to have been given at
the opening of business on the next Business Day for the recipient, and (ii) posted
to an Internet or intranet website shall be deemed received upon the deemed
receipt by the intended recipient at its e-mail address as described in the
foregoing clause (b)(i) of notification that such notice or
communication is available and identifying the website address therefor.

 

(c)           Any party hereto may change its
address or facsimile number for notices and other communications hereunder by
notice to the other parties hereto.

 

SECTION 9.02.              Waivers; Amendments.  (a)  No failure or delay by the Agent,
an Issuing Bank or any Lender in exercising any right or power hereunder or
under any other Loan Document 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 Agent, the
Issuing Banks and the Lenders hereunder and under any other Loan Document are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any
provision of any Loan Document or consent to

 

134

 

any departure by
any Loan Party therefrom shall in any event be effective unless the same shall
be permitted by paragraph (b) of this Section, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given.  Without limiting the
generality of the foregoing, to the extent permitted by law, the making of a
Loan or issuance of a Letter of Credit shall not be construed as a waiver of
any Default, regardless of whether the Agent, any Lender or an Issuing Bank may
have had notice or knowledge of such Default at the time.

 

(b)           Neither this Agreement nor any other
Loan Document nor any provision hereof or thereof may be waived, amended or
modified except (i) in the case of this Agreement, pursuant to an agreement
or agreements in writing entered into by the Borrowers and the Required Lenders
(or, after Discharge of Revolving Facility Obligations, the Required
Incremental Term Loan Lenders) or, (ii) in the case of any other Loan
Document (other than any such amendment to effectuate any modification thereto
expressly contemplated by the terms of such other Loan Documents), pursuant to
an agreement or agreements in writing entered into by the Agent and the Loan
Party or Loan Parties that are parties thereto, with the consent of the
Required Lenders (or, after Discharge of Revolving Facility Obligations, the
Required Incremental Term Loan Lenders); provided that no such agreement
shall (A) increase the Commitment of any Lender without the written
consent of such Lender; it being understood that a waiver of any condition
precedent set forth in Article IV or the waiver of any Default, mandatory
prepayment or mandatory reduction of the Revolving Commitments, or the making
of any Protective Advance, so long as in compliance with the provisions of Section 2.04,
shall not constitute an increase of any Revolving Commitment of any Revolving
Lender; provided that any change to the second proviso to the second
sentence of Section 2.04(a) shall require the written consent of each
Revolving Lender, (B) reduce or forgive the principal amount of any Loan
or LC Disbursement or reduce the rate of interest thereon, or reduce or forgive
any interest or fees payable hereunder, without the written consent of each
Lender directly affected thereby, (C) postpone any scheduled date of
payment of the principal amount of any Loan or LC Disbursement, or any date for
the payment of any interest, fees or other Revolving Facility Obligations
payable hereunder, or reduce the amount of, waive or excuse any such payment,
or postpone the scheduled date of expiration of any Commitment, without the
written consent of each Lender directly affected thereby; provided that
only the consent of the Required Lenders (or, after Discharge of Revolving
Facility Obligations, the Required Incremental Term Loan Lenders) shall be
necessary to amend the provisions of Section 2.13(c) providing for
the default rate of interest, or to waive any obligations of the Borrowers to
pay interest at such default rate, (D) change Section 2.18(b) or
(c) in a manner that would alter the manner in which payments are shared,
without the written consent of each Lender, (E) increase the advance rates
set forth in the definition of Borrowing Base without the written consent of
each Revolving Lender, (F) change any of the provisions of this Section or
the definition of “Required Lenders”, “Super Majority Lenders” or any other
provision of any Loan Document specifying the number or percentage of Revolving
Lenders (or Revolving Lenders of any Class) required to waive, amend or modify
any rights thereunder or make any determination or grant any consent
thereunder, without the written consent of each Revolving Lender, (G) release
any material Loan Guarantor from its obligation under its Loan Guaranty (except
as otherwise permitted herein or in the other Loan Documents, including
pursuant to Section 6.03, 6.05 or 10.12 hereof), without the written
consent of each Lender, (H) change the definition of “Required Incremental
Term Loan Lenders” or any other provision of any Loan Document specifying the
number or percentage of Incremental Term Loan Lenders required to waive, amend
or modify any rights thereunder or make any determination or 

 

135

 

grant any consent thereunder, without the written
consent of each Incremental Term Loan Lender, (I) amend the Inventory
Covenant in a manner that is adverse to the Incremental Term Loan Lenders
without the consent of the Required Incremental Term Loan Lenders, (J) except
as provided in clause (c) or (d) of this Section or in any
Collateral Document, release all or substantially all of the Collateral,
without the written consent of each Lender or (K)(1) make any change to
the definition of “Eligible Inventory”, “Eligible Account” or “Net Orderly
Liquidation Value” or add any new categories of eligible assets, in each case,
that would have the effect of increasing the amount of the Borrowing Base or (2) amend
any of Section 7.03, 7.04 or 7.05, 
in the case of each of the foregoing clauses (1) and (2), without
the written consent of the Super Majority Lenders; and provided  further
that (x) no such agreement shall (1) increase the Commitment of any
Incremental Term Loan Lender without the written consent of such Incremental
Term Loan Lender; it being understood that a waiver of any condition precedent
set forth in Article IV or the waiver of any Default, mandatory prepayment
or mandatory reduction of the Incremental Term Loan Commitments or Incremental
Term Loans, shall not constitute an increase of any Incremental Term Loan
Commitment of any Incremental Term Loan Lender, (2) reduce or forgive the
principal amount of any Incremental Term Loan or reduce the rate of interest
thereon, or reduce or forgive any interest or fees payable hereunder, without
the written consent of each Incremental Term Loan Lender directly affected
thereby, (3) postpone any scheduled date of payment of the principal
amount of any Incremental Term Loan, or any date for the payment of any
interest, fees or other Incremental Term Loan Obligations payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Incremental Term Loan Commitment, without
the written consent of each Incremental Term Loan Lender directly affected
thereby; provided that only the consent of the Required Incremental Term
Loan Lenders shall be necessary to amend any provisions providing for the
default rate of interest in respect of Incremental Term Loans, or to waive any
obligations of the Borrowers to pay interest in respect of Incremental Term
Loans at such default rate, (4) change Section 2.18(c) in a
manner that would alter the manner in which payments are shared amongst
Incremental Term Loan Lenders, without the written consent of each Incremental
Term Loan Lender and (5) change the definition of “Required Incremental
Term Loan Lenders” or any other provision of any Loan Document specifying the
number or percentage of Incremental Term Loan Lenders (or Incremental Term Loan
Lenders of any Class) required to waive, amend or modify any rights thereunder
or make any determination or grant any consent thereunder, without the written
consent of each Incremental Term Loan Lender, (y) so long as the same is
in compliance with the provisions of Section 2.23(c), any Incremental Term
Loan Amendment may be implemented without the consent of any Lender other than
the Incremental Term Loan Lenders that are parties to such Incremental Term
Loan Amendment and the Agent, and (z) no such agreement shall amend,
modify or otherwise affect the rights or duties of the Agent, any Co-Collateral
Agent, any Issuing Bank or the Swingline Lender hereunder without the prior
written consent of the Agent, such Co-Collateral Agent, such Issuing Bank or
the Swingline Lender, as the case may be, or amend the definitions of
Availability Reserves, Borrowing Base, Borrowing Base Certificate, Excess
Availability, Reserves or Liquidity Event or any other terms to the extent
affecting such definitions without the prior written consent of the
Co-Collateral Agents.  The Agent may also
amend the Commitment Schedule to reflect assignments entered into pursuant to Section 9.04.  Notwithstanding anything to the contrary
herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the Commitment of such
Lender may not be increased

 

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without the consent of such Lender (it being
understood that any Commitment or Loan held or deemed held by any Defaulting
Lender shall be excluded from a vote of the Lenders hereunder requiring any
consent of the Lenders).

 

(c)           The Lenders hereby irrevocably agree
that the Liens granted to the Agent by the Loan Parties on any Collateral shall
be automatically released (i) upon the termination of the Commitments,
payment and satisfaction in full in cash of all Secured Obligations (other than
Unliquidated Obligations), the termination, expiration or, to the extent
effected in a manner reasonably acceptable to the relevant Issuing Banks or as
otherwise provided for herein, cash collateralization or back-stopping of all
outstanding Letters of Credit and the cash collateralization of all
Unliquidated Obligations in a manner satisfactory to the Agent, (ii) upon
the sale or other disposition of the property constituting such Collateral
(including as part of or in connection with any other sale or other disposition
permitted hereunder) to any Person other than another Loan Party, to the extent
such sale or other disposition is made in compliance with the terms of this
Agreement (and the Agent may rely conclusively on a certificate to that effect
provided to it by any Loan Party upon its reasonable request without further
inquiry), (iii) to the extent such Collateral is comprised of property
leased to a Loan Party, upon termination or expiration of such lease, (iv) subject
to paragraph (b) of this Section 9.02, if the release of such
Lien is approved, authorized or ratified in writing by the Required Lenders, (v) to
the extent the property constituting such Collateral is owned by any Loan
Guarantor, upon the release of such Guarantor from its obligations under its
Loan Guaranty in accordance with the provisions of this Agreement, (vi) as
required to effect any sale or other disposition of such Collateral in
connection with any exercise of remedies of the Agent and the Lenders pursuant
to the Collateral Documents or (vii) as required pursuant to the terms of
the Intercreditor Agreement; provided that the Agent may, in its
discretion, release the Lien on Collateral valued in the aggregate not in
excess of $5,000,000 during each fiscal year without consent of any
Lender.  Any such release shall not in
any manner discharge, affect, or impair the Obligations or any Liens (other
than those expressly being released) upon (or obligations of the Loan Parties
in respect of) all interests retained by the Loan Parties, including the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral to the extent required under the provisions of the Loan Documents.

 

(d)           Notwithstanding anything to the
contrary contained in Section 9.02, guarantees, collateral security
documents and related documents executed by Foreign Subsidiaries in connection
with this Agreement may be in a form reasonably determined by the Agent and may
be amended and waived with the consent of the Agent at the request of the
Borrower Agent without the need to obtain the consent of any other Lenders if
such amendment or waiver is delivered in order (i) to comply with local
law or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to
cause such guarantee, collateral security document or other document to be
consistent with this Agreement and the other Loan Documents.

 

(e)           If, in connection with any proposed
amendment, waiver or consent requiring the consent of “each Revolving Lender”, “each
Incremental Term Loan Lender”, “each Lender”, “each Revolving Lender directly
affected thereby”, “each Incremental Term Loan Lender directly affected thereby”
or “each Lender directly affected thereby”, the consent of the Required Lenders
or Required Incremental Term Loan Lenders is obtained, but the consent of other
necessary Lenders is not obtained (any such Lender whose consent is necessary
but not 

 

137

 

obtained being referred to herein as a “Non-Consenting
Lender”), then the Company may elect to replace a Non-Consenting Lender
as a Lender party to this Agreement, provided that, concurrently with
such replacement, (i) another bank or other entity which is reasonably
satisfactory to the Company and the Agent shall agree, as of such date,
to purchase for cash at par the Loans and other Obligations due to the Non-Consenting
Lender pursuant to an Assignment and Assumption and to become a Lender for all
purposes under this Agreement and to assume all obligations of the
Non-Consenting Lender to be terminated as of such date and to comply with the
requirements of clause (b) of Section 9.04, (ii) the
replacement Lender shall pay the processing and recordation fee referred to in Section 9.04(b)(ii)(C),
if applicable in accordance with the terms of such Section, (iii) the
replacement Lender shall grant its consent with respect to the applicable
proposed amendment, waiver or consent and (iv) the Borrowers shall pay to
such Non-Consenting Lender in same day funds on the day of such replacement (1) all
interest, fees and other amounts then accrued but unpaid to such Non-Consenting
Lender by the Borrowers hereunder to and including the date of termination,
including, without limitation, payments due to such Non-Consenting Lender under
Sections 2.15 and 2.17, and (2) an amount, if any, equal to the
payment which would have been due to such Lender on the day of such replacement
under Section 2.16 had the Loans of such Non-Consenting Lender been
prepaid on such date rather than sold to the replacement Lender.

 

(f)            Prior to the Discharge of Revolving
Facility Obligations, any amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement solely affecting the
Incremental Term Loan Lenders or expressly modifying any provision of any Loan
Document in a manner that expressly treats the Incremental Term Loan Lenders
differently than the Revolving Lenders, shall be in writing and signed by the
Agent and the Required Incremental Term Loan Lenders.  Prior to the Discharge of Revolving Facility
Obligations, it is understood that no Incremental Term Loan Lender shall have
any voting or consent rights under, or with respect to, any Loan Document other
than pursuant to the limited exceptions expressly provided herein.

 

SECTION 9.03.              Expenses; Indemnity; Damage
Waiver.  (a)  The Company shall
pay (i) all reasonable documented out-of-pocket expenses incurred by the
Agent, each of the Co-Collateral Agents and their respective Affiliates,
including the reasonable fees, charges and disbursements of Shearman &
Sterling LLP, counsel for the Agent, and of Otterbourg, Steindler, Houston and
Rosen, P.C., counsel to Wells Fargo Retail Finance, LLC, as a Co-Collateral
Agent, in connection with the syndication and distribution (including, without
limitation, via the internet or through a service such as Intralinks) of the
credit facilities provided for herein, the preparation of the Loan Documents
and related documentation, (ii) all reasonable documented out-of-pocket
expenses incurred by the Agent and the Co-Collateral Agents and their
respective Affiliates, including the reasonable fees, charges and disbursements
of outside legal counsel to the Agent and the Co-Collateral Agents, in
connection with any amendments, modifications or waivers of the provisions of
any Loan Documents (whether or not the transactions contemplated thereby shall
be consummated), (iii) all reasonable documented out-of-pocket expenses
incurred by the Agent, the Co-Collateral Agents, Issuing Banks or the Lenders,
including the reasonable documented fees, charges and disbursements of any
counsel for the Agent, for any Co-Collateral Agent and for one law firm
retained by the Lenders, in connection with the enforcement, collection or
protection of its rights in connection with the Loan Documents, including its
rights under this Section, or in connection with the Loans made 

 

138

 

or Letters of
Credit issued hereunder, including all such reasonable documented out-of-pocket
expenses incurred during any workout, restructuring or related negotiations in
respect of such Loans of Letters of Credit, and (iv) subject to any other
provisions of this Agreement and the Loan Documents, all reasonable documented
out-of-pocket expenses incurred by the Agent and the Co-Collateral Agents in
the administration of the Loan Documents. 
Expenses reimbursable by the Company under this Section include,
without limiting the generality of the foregoing, subject to any other
applicable provision of any Loan Document, reasonable documented out-of-pocket
costs and expenses incurred in connection with:

 

(i)         appraisals;

 

(ii)        field
examinations and the preparation of Reports based on the fees charged by a
third party retained by the Agent or any Co-Collateral Agent or
(notwithstanding any reference to “out-of-pocket” above in this Section 9.03)
the internally allocated fees for each Person employed by the Agent or any
Co-Collateral Agent with respect to each field examination;

 

(iii)       lien
and title searches, title insurance and endorsements to Title Insurance
Policies;

 

(iv)       taxes,
fees and other charges for recording any Mortgage Amendments or Mortgages,
filing financing statements and continuations, and other actions to perfect,
protect, and continue the Agent’s Liens; and

 

(v)        forwarding
loan proceeds, collecting checks and other items of payment, and establishing
and maintaining the accounts and lock boxes, and costs and expenses of
preserving and protecting the Collateral.

 

Other than to the extent required to be paid on the
Effective Date, all amounts due under this paragraph (a) shall be
payable by the Company within ten (10) Business Days of
receipt of an invoice relating thereto and setting forth such expenses in
reasonable detail.

 

(b)           Each Borrower shall indemnify the
Agent, the Co-Collateral Agents, each Issuing Bank 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, penalties, liabilities and related expenses,
including the 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 the
Loan Documents or any agreement or instrument contemplated thereby, the
performance by the parties hereto of their respective obligations thereunder or
the consummation of the Transactions or any other transactions contemplated
hereby, (ii) any Loan or Letter of Credit or the use of the proceeds
therefrom (including any refusal by an Issuing Bank to honor a demand for
payment under a Letter of Credit if the documents presented in connection with
such demand do not strictly comply with the terms of such Letter of Credit), (iii) any
Environmental Liability related in any way to any Borrower or any of its
Subsidiaries or to any property owned or operated at any time by any Borrower
or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on 

 

139

 

contract, tort or any other theory and regardless
of whether any Indemnitee is a party thereto (and regardless of whether such
matter is initiated by a third party or by any Borrower, any other Loan Party
or any of their respective Affiliates); provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, penalties, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee.

 

(c)           To the extent that any Borrower fails
to pay any amount required to be paid by it to the Agent, a Co-Collateral
Agent, an Issuing Bank or the Swingline Lender under paragraph (a) or
(b) of this Section, each Lender severally agrees to pay to the Agent,
such Co-Collateral Agent, such Issuing Bank or the Swingline Lender, as the
case may be, such Lender’s Applicable Total Percentage (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, penalty, liability or related expense, as the
case may be, was incurred by or asserted against the Agent, any Co-Collateral
Agent, any Issuing Bank or the Swingline Lender in its capacity as such.

 

(d)           To the extent permitted by applicable
law, no party to this Agreement shall assert, and each hereby waives, any claim
against any other party hereto or any Related Party thereof, 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, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

 

(e)           All amounts due under this Section shall
be paid, unless otherwise specified, promptly after written demand therefor.

 

SECTION 9.04.              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 (including any Affiliate of
an Issuing Bank that issues any Letter of Credit), except that (i) the
Company 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 Company 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 (any
attempted assignment or transfer not complying with the terms of this Section shall
be null and void).  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 (including any Affiliate of an Issuing Bank that issues any
Letter of Credit), Participants (to the extent provided in paragraph (c) of
this Section) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Agent, the Issuing Banks 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 Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans at
the time owing to it) with the prior written consent (such consent not to be
unreasonably withheld or delayed) of:

 

140

 

(A)          the
Company, provided
that no consent of the Company shall be required for (1) an assignment
by a Revolving Lender to another Revolving Lender, an Affiliate of a Revolving
Lender or an Approved Fund of a Revolving Lender or (2) an assignment of Incremental
Term Loans to another Lender or an Affiliate or Approved Fund of a Lender or (3) if
an Event of Default specified in paragraphs (a), (g) or (h) of Section 7.01
has occurred and is continuing, any other Eligible Assignee and provided
further that no consent of the Company shall be required for an
assignment during the primary syndication of this Agreement to Persons
identified by the Agent to the Company on or prior to the Effective Date and
reasonably acceptable to the Company;

 

(B)          the Agent; and

 

(C)          except in the case of any assignment
of Incremental Term Loans, each Issuing Bank.

 

(ii)           Assignments
shall be subject to the following additional conditions:

 

(A)          except in the case of an assignment to
another Lender, an Affiliate of a Lender or an Approved Fund or an assignment
of the entire remaining amount of the assigning Lender’s Commitment or Loans of
any Class, the amount of the Commitment or the principal amount of 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
Agent and determined on an aggregate basis in the event of concurrent
assignments to Related Funds (as defined below)) shall not be less than
$1,000,000 unless each of the Company and the Agent otherwise consent, provided
that no such consent of the Company shall be required if an Event of Default
specified in paragraphs (a), (g) or (h) of Section 7.01 has
occurred and is continuing;

 

(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 assignment shall
execute and deliver to the Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500; and

 

(D)          the assignee, if it shall not be a
Lender, shall deliver on or prior to the effective date of such assignment, to
the Agent (1) an Administrative Questionnaire and (2) if applicable,
an appropriate Internal Revenue Service form (such as Form W-8BEN or
W-8ECI or any successor form adopted by the relevant United States taxing
authority) as required by applicable law supporting such assignee’s position
that no withholding by any Loan Party or the Agent for United States income tax
payable by such assignee in respect of amounts received by it hereunder is
required, or that a reduction in the rate of withholding applies.

 

141

 

The term “Related
Funds” shall mean with respect to any Lender that is an Approved Fund, any
other Approved Fund that is managed or advised by the same investment advisor
as such Lender or by an Affiliate of such investment advisor.

 

(iii)          Subject
to acceptance and recording thereof pursuant to paragraph (b)(iv) of
this Section, 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 Sections 2.15, 2.16, 2.17 and 9.03 with respect to facts and
circumstances occurring on or prior to the effective date of such
assignment).  Any assignment or transfer
by a Lender of rights or obligations under this Agreement that does not comply
with this Section 9.04 shall be treated for purposes of this Agreement as
a sale by such Lender of a participation in such rights and obligations in
accordance with paragraph (c) of this Section.

 

(iv)          The
Agent, acting for this purpose as an agent of the Borrowers, 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 Commitment of, and principal amount of the Loans and LC Disbursements owing
to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, absent manifest error, and the Borrowers, the Agent, the Issuing
Banks 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 Agent, the Issuing Banks 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, the assignee’s completed Administrative
Questionnaire and tax certifications required by Section 9.04(b)(ii)(D)(2) (unless
the assignee shall already be a Lender hereunder), the processing and
recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of
this Section, the Agent shall accept such Assignment and Assumption and record
the information contained therein in the Register; provided that if
either the assigning Lender or the assignee shall have failed to make any
payment required to be made by it pursuant to Section 2.05, 2.06(d) or
(e), 2.07(b), 2.18(c) or 9.03(c), the Agent shall have no obligation to
accept such Assignment and Assumption and record the information therein in the
Register unless and until such payment shall have been made in full, together
with all accrued interest thereon.  No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.

 

142

 

(vi)          By
executing and delivering an Assignment and Assumption, the assigning Lender
thereunder and the assignee thereunder shall be deemed to confirm to and agree
with each other and the other parties hereto as follows:  (i) such assigning Lender warrants that
it is the legal and beneficial owner of the interest being assigned thereby
free and clear of any adverse claim and that its Commitment, and the
outstanding balances of its Loans, in each case without giving effect to
assignments thereof which have not become effective, are as set forth in such
Assignment and Assumption, (ii) except as set forth in (i) above,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of any Borrower or any Subsidiary or the
performance or observance by any Borrower or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee
represents and warrants that it is an Eligible Assignee, legally authorized to
enter into such Assignment and Assumption; (iv) such assignee confirms
that it has received a copy of this Agreement, together with copies of the most
recent financial statements referred to in Section 3.04(a) or
delivered pursuant to Section 5.01 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption; (v) such assignee
will independently and without reliance upon the Agent, any Co-Collateral
Agent, such assigning Lender 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 this Agreement; (vi) such
assignee appoints and authorizes the Agent and the Co-Collateral Agents to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent or the Co-Collateral Agents, as the
case may be, by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.

 

(c)           (i)  Any Lender may, without the
consent of any Borrower, the Borrower Agent, the Agent, the Co-Collateral
Agents, the Issuing Banks or the Swingline Lender, sell participations to one
or more banks or other entities (a “Participant”) in all or a portion of
such Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided that (A) such
Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrowers, the Agent, the
Co-Collateral Agents, the Issuing Banks and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement. 
Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant.  Subject to paragraph (c)(ii) of
this Section, the 

 

143

 

Company
agrees that
each Participant shall be entitled to the benefits of Sections 2.15, 2.16
and 2.17 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (b) of this
Section.  To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 9.08 as
though it were a Lender, provided such Participant agrees to be subject
to Section 2.18(c) as though it were a Lender.

 

(ii)  A
Participant shall not be entitled to receive any greater payment under Section 2.15
or 2.17 than the applicable Lender would have been entitled to receive with
respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Company’s prior written consent.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.17
unless the Company is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrowers, to
comply with Section 2.17(e) as though it were a Lender.

 

(d)           Any Lender may at any time pledge or
assign a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including without limitation
any pledge or assignment to secure obligations to a Federal Reserve Bank, and
this Section shall not apply to any such pledge or assignment of a
security interest; provided that no such pledge or assignment of a
security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(e)           Notwithstanding anything to the
contrary contained herein, any Lender (a “Granting Lender”) may grant to
a special purpose funding vehicle (an “SPC”), identified as such in
writing from time to time by the Granting Lender to the Agent and the Borrower
Agent, the option to provide to the Borrowers all or any part of any Loan that
such Granting Lender would otherwise be obligated to make to the Borrowers
pursuant to this Agreement; provided that (i) nothing herein shall
constitute a commitment by any SPC to make any Loan and (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof and.  The
making of a Loan by an SPC hereunder shall utilize the Commitment of the
Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender.  Each party hereto
hereby agrees that (i) neither the grant to any SPC nor the exercise by
any SPC of such option shall increase the costs or expenses or otherwise
increase or change the obligations of the Borrowers under this Agreement
(including its obligations under Section 2.15, 2.16 or 2.17), (ii) no
SPC shall be liable for any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the Granting Lender) and (iii) the
Granting Lender shall for all purposes including approval of any amendment,
waiver or other modification of any provision of the Loan Documents, remain the
Lender of record hereunder.  In
furtherance of the foregoing, each party hereto hereby agrees (which agreement
shall survive the termination of this Agreement) that, prior to the date that
is one year and one day after the payment in full of all outstanding commercial
paper or other senior indebtedness of any SPC, it will not institute against,
or join any other Person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under the
laws of the United States or any State thereof. 
In addition, notwithstanding anything to the contrary contained in this Section 9.04,
any SPC may (i) with notice to, but without the prior written consent of,
the Borrowers, the Borrower Agent and the Agent and without paying any
processing fee therefor,

 

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assign all or a portion of its interests in any
Loans to the Granting Lender or to any financial institutions (consented to by
the Borrower and Agent) providing liquidity and/or credit support to or for the
account of such SPC to support the funding or maintenance of Loans and (ii) disclose
on a confidential basis any non-public information relating to its Loans to any
rating agency, commercial paper dealer or provider of any surety, guarantee or
credit or liquidity enhancement to such SPC.

 

(f)            In the event that any Lender shall
become an Impacted Lender or S&P, Moody’s and Thompson’s BankWatch (or
InsuranceWatch Ratings Service, in the case of Lenders that are insurance
companies (or Best’s Insurance Reports, if such insurance company is not rated
by Insurance Watch Ratings Service)) shall downgrade the long-term certificate
deposit ratings of such Lender, and the resulting ratings shall be below BBB-,
Baa3 and C (or BB, in the case of a Lender that is an insurance company (or B,
in the case of an insurance company not rated by InsuranceWatch Ratings
Service)) (or, with respect to any Lender that is not rated by any such ratings
service or provider, the Issuing Banks or the Swingline Lender shall have
reasonably determined that there has occurred a material adverse change in the
financial condition of any such Lender, or a material impairment of the ability
of any such Lender to perform its obligations hereunder, as compared to such
condition or ability as of the date that any such Lender became a Lender), then
an Issuing Bank shall have the right, but not the obligation, at its own
expense, upon notice to such Lender and the Agent, to replace such Lender with
an assignee (in accordance with and subject to the restrictions contained in
paragraph (b) above), and such Lender hereby agrees to transfer and
assign without recourse (in accordance with and subject to the restrictions
contained in paragraph (b) above) all its interests, rights and
obligations in respect of its Commitment to such assignee; provided, however,
that (i) no such assignment shall conflict with any law, rule and
Regulation or order of any Governmental Authority and (ii) such Issuing
Bank or such assignee, as the case may be, shall pay to such Lender in
immediately available funds on the date of such assignment at par the principal
of and interest accrued to the date of payment on the Loans made by such Lender
hereunder and all other amounts accrued for such Lender’s account or owed to it
hereunder.

 

SECTION 9.05.              Survival.  All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been relied
upon by the other parties hereto and shall survive the execution and delivery
of the Loan Documents and the making of any Loans and issuance of any Letters
of Credit, regardless of any investigation made by any such other party or on
its behalf and notwithstanding that the Agent, a Co-Collateral Agent, an
Issuing Bank or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit 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 or any Letter of Credit is
outstanding and so long as the Commitments have not expired or terminated.  The provisions of Sections 2.15, 2.16,
2.17 and 9.03 and Article VIII shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of
Credit and the Commitments or the termination of this Agreement or any
provision hereof.

 

145

 

SECTION 9.06.              Counterparts; 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.  This Agreement, the other Loan Documents and
any separate letter agreement with respect to fees payable to the Agent
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 Section 4.01, this
Agreement shall become effective when it shall have been executed by the Agent
and when the 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 facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement.

 

SECTION 9.07.              Severability.  To the extent permitted by law, any provision
of any Loan Document 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 thereof; and the
invalidity of a particular provision in a particular jurisdiction shall not invalidate
such provision in any other jurisdiction.

 

SECTION 9.08.              Right of Setoff.  (a) If an Event of Default shall have
occurred and be continuing, each Revolving Lender and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
obligations at any time owing by such Revolving Lender or Affiliate to or for
the credit or the account of any Borrower or any Loan Guarantor against any of
and all the Secured Obligations held by such Revolving Lender, irrespective of
whether or not such Revolving Lender shall have made any demand under the Loan
Documents and although such obligations may be unmatured.  The applicable Revolving Lender shall notify
the Borrower Agent and the Agent of such set-off or application, provided
that any failure to give or any delay in giving such notice shall not affect
the validity of any such set-off or application under this Section.  The rights of each Revolving Lender under
this Section are in addition to other rights and remedies (including other
rights of setoff) which such Revolving Lender may have.

 

(b)           After
the Discharge of Revolving Facility Obligations, if an Event of Default shall
have occurred and be continuing, each Incremental Term Loan Lender and each of
its Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other obligations at any time owing by such Incremental Term Loan Lender or
Affiliate to or for the credit or the account of any Borrower or any Loan Guarantor
against any of and all the Secured Obligations held by such Incremental Term
Loan Lender, irrespective of whether or not such Incremental Term Loan Lender
shall have made any demand under the Loan Documents and although such
obligations may be unmatured.  The
applicable Incremental Term Loan Lender shall notify the Borrower Agent and the
Agent of such set-off or application, provided that any failure to give
or any delay in giving such notice shall not affect the validity of any such
set-off or application under this Section. 
The 

 

146

 

rights of each
Incremental Term Loan Lender under this Section are in addition to other
rights and remedies (including other rights of setoff) which such Incremental
Term Loan Lender may have.

 

NOTWITHSTANDING THE
FOREGOING, AT ANY TIME THAT ANY OF THE SECURED OBLIGATIONS SHALL BE SECURED BY
REAL PROPERTY LOCATED IN CALIFORNIA, NO LENDER SHALL EXERCISE A RIGHT OF
SETOFF, LENDER’S LIEN OR COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE
ACTION OR INSTITUTE ANY PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT
OR ANY LOAN DOCUMENT UNLESS IT IS TAKEN WITH THE CONSENT OF THE LENDERS
REQUIRED BY SECTION 9.02 OF THIS AGREEMENT, IF SUCH SETOFF OR ACTION OR
PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b, 580d AND 726
OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE
CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE
VALIDITY, PRIORITY, OR ENFORCEABILITY OF THE LIENS GRANTED TO AGENT PURSUANT TO
THE COLLATERAL DOCUMENTS OR THE ENFORCEABILITY OF THE OBLIGATIONS HEREUNDER,
AND ANY ATTEMPTED EXERCISE BY ANY LENDER OR ANY SUCH RIGHT WITHOUT OBTAINING
SUCH CONSENT OF THE PARTIES AS REQUIRED ABOVE, SHALL BE NULL AND VOID.  THIS PARAGRAPH SHALL BE SOLELY FOR THE
BENEFIT OF EACH OF THE LENDERS.

 

SECTION 9.09.              Governing Law; Jurisdiction;
Consent to Service of Process.  (a) 
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE SPECIFIED, SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO
NATIONAL BANKS).

 

(b)           EACH LOAN PARTY HEREBY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH
JURISDICTION OVER THE BOROUGH OF MANHATTAN, IN ANY PROCEEDING OR DISPUTE
RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING
SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT.  EACH LOAN PARTY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL CLAIMS, OBJECTIONS AND DEFENSES
THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL OR SUBJECT MATTER
JURISDICTION, VENUE OR INCONVENIENT FORUM. 
EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN SECTION 9.01, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW.  Nothing
herein shall limit the right of the Agent or any Lender or Co-Collateral Agent
to bring proceedings against any Loan Party in any other court, nor limit the
right of any party to serve process in any other manner permitted by applicable
law.  Nothing in this Agreement shall be
deemed to preclude enforcement by the Agent of any judgment or order obtained
in any forum or jurisdiction.

 

SECTION 9.10.              WAIVER OF JURY TRIAL.  To the fullest extent
permitted by Applicable Law, each Loan Party waives the right to trial by jury
(which the Agent and 

 

147

 

each
Secured Party hereby also waives) in any proceeding or dispute of any kind
relating in any way to any Loan Documents, Obligations or Collateral. 
Each Loan Party acknowledges that the foregoing waivers are a material
inducement to the Agent entering into this Agreement and that the Agent,
Co-Collateral Agents and the Lenders are relying upon the foregoing in their
dealings with the Loan Parties.  Each
Loan Party has reviewed the foregoing waivers with its legal counsel and has
knowingly and voluntarily waived its jury trial and other rights following
consultation with legal counsel.

 

SECTION 9.11.              Headings.  Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.

 

SECTION 9.12.              Confidentiality.  Each of the Agent, each Co-Collateral Agent,
each Issuing Bank and the each Lender agrees (and each Lender agrees to cause
its SPC, if any) to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, members, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory, governmental
or administrative authority, (c) to the extent required by law or by any
subpoena or similar legal process, (d) to any other party to this
Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this Agreement,
including, without limitation, any SPC, (ii) any pledgee referred to in Section 9.04(d) or
(iii) any actual or prospective counterparty (or its advisors) to any swap
or derivative transaction relating to the Loan Parties and their obligations, (g) with
the consent of the Company or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii) becomes
available to the Agent, an Issuing Bank or any Lender on a nonconfidential
basis from a source other than any Borrower. 
For the purposes of this Section, “Information” means all
information received from any Loan Party relating to the Loan Parties or their
businesses, the Sponsors or the Transactions other than any such information
that is available to the Agent, any Co-Collateral Agent, any Issuing Bank or
any Lender on a nonconfidential basis prior to disclosure by any Loan
Party.  Any Person required to maintain
the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

SECTION 9.13.              Several Obligations;
Nonreliance; Violation of Law.  The
respective obligations of the Lenders hereunder are several and not joint and
the failure of any Lender to make any Loan or perform any of its obligations
hereunder shall not relieve any other Lender from any of its obligations
hereunder.  Each Lender hereby represents
that it is not relying on or looking to any Margin Stock for the repayment of
the Borrowings provided for herein and acknowledges that the Collateral shall
not include any Margin Stock.  Anything
contained in this Agreement to the contrary notwithstanding, neither the
Issuing Banks nor any 

 

148

 

Lender shall be
obligated to extend credit to any Borrower in violation of any Requirement of
Law.

 

SECTION 9.14.              USA PATRIOT Act.  Each Lender that is subject to the
requirements of the USA Patriot Act hereby notifies each Borrower that pursuant
to the requirements of the USA Patriot Act, it is required to obtain, verify
and record information that identifies such Borrower, which information
includes the name and address of such Borrower and other information that will
allow such Lender to identify such Borrower in accordance with the USA Patriot
Act.

 

SECTION 9.15.              Disclosure.  Each Loan Party and each Lender hereby
acknowledges and agrees that the Agent and the Co-Collateral Agents and/or
their respective Affiliates from time to time may hold investments in, make
other loans to or have other relationships with any of the Loan Parties and
their respective Affiliates.  In
addition, each Loan Party and each Lender hereby acknowledges that (i) the
Agent or its Affiliate made a loan to the Company under the Senior Secured Term
Loan Facility and (ii) an Affiliate of the Agent was an initial purchaser
of the Existing Notes.

 

SECTION 9.16.              Appointment for Perfection.  Each Lender hereby appoints each other Lender
as its agent for the purpose of perfecting Liens, for the benefit of the Agent,
the Co-Collateral Agents and the Lenders, in assets which, in accordance with Article 9
of the UCC or any other applicable law can be perfected only by
possession.  Should any Lender or
Co-Collateral Agent (other than the Agent) obtain possession of any such
Collateral, such Lender or Co-Collateral Agent shall notify the Agent thereof,
and, promptly upon the Agent’s request therefor shall deliver such Collateral
to the Agent or otherwise deal with such Collateral in accordance with the
Agent’s instructions.

 

SECTION 9.17.              Interest Rate Limitation.  Notwithstanding anything herein to the contrary,
if at any time the interest rate applicable to any Loan, together with all
fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.

 

SECTION 9.18.              Cumulative Effect; Conflict of
Terms; Entire Agreement; Credit Inquiries; No Advisory or Fiduciary
Responsibility.  Each Loan Party
hereby agrees and confirms that, notwithstanding the amendment and restatement
of the Existing Credit Agreement pursuant to this Agreement:

 

149

 

(a)           The provisions of the Loan Documents are cumulative.  The parties acknowledge that the Loan
Documents may use several limitations, tests or measurements to regulate
similar matters, and they agree that these are cumulative and that each must be
performed as provided.  Except as
otherwise provided in another Loan Document (by specific reference to the
applicable provision of this Agreement), if any provision contained herein is
in direct conflict with any provision in another Loan Document (other than the
Intercreditor Agreement), the provision herein shall govern and control.

 

(b)           Time is of the essence of the Loan Documents.  The Loan Documents 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.

 

(c)           Each Loan Party hereby authorizes the Agent and the
Lenders (but they shall have no obligation) to respond to usual and customary
credit inquiries from third parties concerning any Borrower or Subsidiary.

 

(d)           In connection with all aspects of each transaction
contemplated by any Loan Document, the Borrowers acknowledge and agree that (a)(i) this
credit facility and any related arranging or other services by the Agent, any
Co-Collateral Agent, any Lender, any of their Affiliates or any arranger are
arm’s-length commercial transactions between the Borrowers and such Person; (ii) the
Borrowers have consulted their own legal, accounting, regulatory and tax
advisors to the extent they have deemed appropriate; and (iii) the
Borrowers are capable of evaluating and understanding, and do understand and
accept, the terms, risks and conditions of the transactions contemplated by the
Loan Documents; (b) each of the Agent, the Co-Collateral Agents, the
Lenders, their Affiliates and any arranger is and has been acting solely as a
principal in connection with this credit facility, is not the financial
advisor, agent or fiduciary for the Borrowers, any of their Affiliates or any
other Person, and has no obligation with respect to the transactions
contemplated by the Loan Documents except as expressly set forth therein; and (c) the
Agent, the Co-Collateral Agents, Lenders, their Affiliates and any arranger may
be engaged in a broad range of transactions that involve interests that differ
from those of the Borrowers and their Affiliates, and have no obligation to
disclose any of such interests to the Borrowers or their Affiliates.  To the fullest extent permitted by applicable
law, each Borrower hereby waives and releases any claims that it may have
against the Agent, the Co-Collateral Agents, the Lenders, their Affiliates and
any arranger with respect to any breach or alleged breach of agency or
fiduciary duty in connection with any aspect of any transaction contemplated by
a Loan Document.

 

SECTION 9.19.              Confirmation, Ratification and
Affirmation by Loan Parties.  Each
Loan Party hereby agrees and confirms that, notwithstanding the amendment and
restatement of the Existing Credit Agreement pursuant to this Agreement:

 

(e)           The obligations of each Guarantor contained in the Loan
Guaranty shall remain in full force and effect and are hereby confirmed,
renewed, affirmed and continued by this Agreement.

 

150

 

(f)            All rights, benefits, interests, duties, liabilities and
obligations of the parties to the Security Documents and the agreements,
documents and instruments executed and delivered in connection therewith are
hereby confirmed, renewed, affirmed and continued hereby.  Without limitation of the foregoing, all
security interests, pledges, assignments and other Liens previously granted by
any Guarantor, as a Grantor, pursuant to the Security Documents are hereby
confirmed, renewed, affirmed and continued, and all such security interests,
pledges, assignments and other Liens shall remain in full force and effect as
security for all Secured Obligations with no change in the priority applicable
thereto, in each case, subject only to Liens permitted under the Loan
Documents, to the extent provided therein.

 

(g)           This affirmation under this Section 9.18 does not
extinguish the indebtedness or liabilities outstanding in connection with the
Existing Credit Agreement, the Loan Guaranty or the Security Documents, nor
does it constitute a novation with respect thereto; rather, such indebtedness
and liabilities have been redenominated, as set forth herein.

 

(h)           Each reference in the Loan Guaranty and each Security
Document to the “Credit Agreement” or “Revolving Facility Credit Agreement”
shall mean and be a reference to this Agreement, and each reference to any
other term defined in the Existing Credit Agreement shall be a reference to
such term as amended by the execution and delivery of this Agreement.

 

(i)            Each Guarantor acknowledges and stipulates that the Loan
Guaranty, the Security Documents and each other Loan Document (including,
without limitation, in each reference herein to the Loan Documents), each
Banking Services Agreement and each Swap Agreement in respect of Secured Swap
Obligations executed by such Guarantor are legal, valid and binding obligations
of such Guarantor that are enforceable against such Guarantor in accordance
with the terms thereof, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium, or other laws
affecting creditors’ rights generally and by general principles of equity, as
set forth in such Loan Documents, and the security interests and liens granted
under Security Documents and each other Loan Document by such Guarantor in
favor of the Agent, for the benefit of the Secured Parties, are and continue to
be, duly perfected, security interests and liens having the priority set forth
in the Intercreditor Agreement, in each case, to the full extent provided by
the terms of the Security Documents and each other Loan Document and subject
only to Liens permitted under the Loan Documents, to the extent provided
therein.

 

SECTION 9.20.              INTERCREDITOR AGREEMENT.  (a) REFERENCE IS MADE TO THE
INTERCREDITOR AGREEMENT.  EACH LENDER
HEREUNDER (A) CONSENTS TO THE SUBORDINATION OF LIENS PROVIDED FOR IN THE
INTERCREDITOR AGREEMENT, (B) AGREES THAT IT WILL BE BOUND BY AND WILL TAKE
NO ACTIONS CONTRARY TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT AND (C) AUTHORIZES
AND INSTRUCTS THE AGENT TO ENTER INTO THE INTERCREDITOR AGREEMENT AS REVOLVING
FACILITY AGENT AND ON BEHALF OF SUCH LENDER. 
THE FOREGOING

 

151

 

PROVISIONS ARE INTENDED AS AN
INDUCEMENT TO THE LENDERS UNDER THIS AGREEMENT TO EXTEND CREDIT AND SUCH
LENDERS ARE INTENDED THIRD PARTY BENEFICIARIES OF SUCH PROVISIONS AND THE
PROVISIONS OF THE INTERCREDITOR AGREEMENT.

 

(b)                                 EACH
LENDER FURTHER AGREES THAT THE AGENT MAY TAKE ALL ACTIONS UNDER THE
INTERCREDITOR AGREEMENT DEEMED APPROPRIATE BY THE AGENT TO EFFECT THE
RESTATEMENT, INCLUDING, WITHOUT LIMITATION, EXECUTION AND DELIVERY OF ANY
JOINDER AGREEMENT AS THE AGENT AND THE TERM LOAN AGENT (AS DEFINED IN THE
INTERCREDITOR AGREEMENT) MAY AGREE.

 

ARTICLE X

 

LOAN GUARANTY

 

SECTION 10.01.                                   Guaranty.  Each Loan
Guarantor hereby agrees that it is jointly and severally liable for, and, as
primary obligor and not merely as surety, and absolutely and unconditionally
guarantees to the Lenders the prompt payment when due, whether at stated
maturity, upon acceleration or otherwise, and at all times thereafter, of the
Secured Obligations (collectively the “Guaranteed Obligations”).  Each Loan Guarantor further agrees that the
Guaranteed Obligations may be extended or renewed in whole or in part without
notice to or further assent from it, and that it remains bound upon its
guarantee notwithstanding any such extension or renewal.

 

SECTION 10.02.                                   Guaranty of Payment.  This Loan
Guaranty is a guaranty of payment and not of collection.  Each Loan Guarantor waives any right to
require the Agent, any Co-Collateral Agent, any Issuing Bank or any Lender to
sue any Borrower, any Loan Guarantor, any other guarantor, or any other Person
obligated for all or any part of the Guaranteed Obligations (each, an “Obligated
Party”), or otherwise to enforce its payment against any collateral
securing all or any part of the Guaranteed Obligations.

 

SECTION 10.03.                                   No Discharge or Diminishment of Loan Guaranty.  (a) 
Except as otherwise provided for herein, the obligations of each Loan Guarantor
hereunder are unconditional and absolute and not subject to any reduction,
limitation, impairment or termination for any reason (other than the Payment in
Full of the Guaranteed Obligations), including: 
(i) any claim of waiver, release, extension, renewal, settlement,
surrender, alteration, or compromise of any of the Guaranteed Obligations, by
operation of law or otherwise; (ii) any change in the corporate existence,
structure or ownership of any Borrower or any other guarantor of or other
Person liable for any of the Guaranteed Obligations; (iii) any insolvency,
bankruptcy, reorganization or other similar proceeding affecting any Obligated
Party, or their assets or any resulting release or discharge of any obligation
of any Obligated Party; or (iv) the existence of any claim, setoff or
other rights which any Loan Guarantor may have at any time against any
Obligated Party, the Agent, any Co-Collateral Agent, any Issuing Bank, any
Lender, or any other Person, whether in connection herewith or in any unrelated
transactions.

 

152

 

(b)                                 The obligations of each Loan Guarantor
hereunder are not subject to any defense or setoff, counterclaim, recoupment,
or termination whatsoever by reason of the invalidity, illegality, or
unenforceability of any of the Guaranteed Obligations or otherwise, or any
provision of applicable law or Regulation purporting to prohibit payment
by any Obligated Party, of the Guaranteed Obligations or any part thereof.

 

(c)                                  Further, the obligations of any Loan
Guarantor hereunder are not discharged or impaired or otherwise affected
by:  (i) the failure of the Agent, any
Co-Collateral Agent, any Issuing Bank or any Lender to assert any claim or demand or to
enforce any remedy with respect to all or any part of the Guaranteed
Obligations; (ii) any waiver or modification of or supplement to any
provision of any agreement relating to the Guaranteed Obligations; (iii) any
release, non-perfection, or invalidity of any indirect or direct security for
the obligations of each Borrower for all or any part of the Guaranteed
Obligations or any obligations of any other guarantor of or other Person liable
for any of the Guaranteed Obligations; (iv) any action or failure to act
by the Agent, any Co-Collateral Agent, any Issuing Bank or any Lender with respect to any
collateral securing any part of the Guaranteed Obligations; or (v) any
default, failure or delay, willful or otherwise, in the payment or performance
of any of the Guaranteed Obligations, or any other circumstance, act, omission
or delay that might in any manner or to any extent vary the risk of such Loan
Guarantor or that would otherwise operate as a discharge of any Loan Guarantor
as a matter of law or equity (other than the Payment in Full of the Guaranteed
Obligations).

 

SECTION 10.04.                                   Defenses Waived.  To the
fullest extent permitted by applicable law, each Loan Guarantor hereby waives
any defense based on or arising out of any defense of any Borrower or any Loan
Guarantor or the unenforceability of all or any part of the Guaranteed
Obligations from any cause, or the cessation from any cause of the liability of
any Borrower or any Loan Guarantor, other than the Payment in Full of the
Guaranteed Obligations.  Without limiting
the generality of the foregoing, each Loan Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and, to the fullest extent
permitted by law, any notice not provided for herein, as well as any
requirement that at any time any action be taken by any Person against any
Obligated Party, or any other Person. 
The Agent may, at its election, foreclose on any Collateral held by it
by one or more judicial or nonjudicial sales, accept an assignment of any such
Collateral in lieu of foreclosure or otherwise act or fail to act with respect
to any collateral securing all or a part of the Guaranteed Obligations,
compromise or adjust any part of the Guaranteed Obligations, make any other
accommodation with any Obligated Party or exercise any other right or remedy
available to it against any Obligated Party, without affecting or impairing in
any way the liability of such Loan Guarantor under this Loan Guaranty except to
the extent the Guaranteed Obligations have been fully and indefeasibly paid in
cash.  To the fullest extent permitted by
applicable law, each Loan Guarantor waives any defense arising out of any such
election even though that election may operate, pursuant to applicable law, to
impair or extinguish any right of reimbursement or subrogation or other right
or remedy of any Loan Guarantor against any Obligated Party or any security.

 

SECTION 10.05.                                   Rights of Subrogation.  No Loan
Guarantor will assert any right, claim or cause of action, including, without
limitation, a claim of subrogation, contribution or indemnification that it has
against any Obligated Party, or any collateral, until the Loan Parties

 

153

 

and the Loan Guarantors
have fully performed all their obligations to the Agent, the Co-Collateral
Agents, the Issuing Banks and the Lenders.

 

SECTION 10.06.                                   Reinstatement; Stay of Acceleration. 
If at any time any payment of any portion of the Guaranteed Obligations
is rescinded or must otherwise be restored or returned upon the insolvency,
bankruptcy, or reorganization of any Borrower or otherwise, each Loan Guarantor’s
obligations under this Loan Guaranty with respect to that payment shall be
reinstated at such time as though the payment had not been made.  If acceleration of the time for payment of
any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or
reorganization of any Borrower, all such amounts otherwise subject to
acceleration under the terms of any agreement relating to the Guaranteed
Obligations shall nonetheless be payable by the Loan Guarantors forthwith on
demand by the Lender.

 

SECTION 10.07.                                   Information.  Each Loan
Guarantor assumes all responsibility for being and keeping itself informed of
each Borrower’s financial condition and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations and the
nature, scope and extent of the risks that each Loan Guarantor assumes and
incurs under this Loan Guaranty, and agrees that none of the Agent, any
Co-Collateral Agent, any Issuing Bank or any Lender shall have any duty to
advise any Loan Guarantor of information known to it regarding those
circumstances or risks.

 

SECTION 10.08.                                   Taxes.  All payments
of the Guaranteed Obligations will be made by each Loan Guarantor free and
clear of and without deduction for any Indemnified Taxes or Other Taxes; provided
that if any Loan Guarantor shall be required to deduct any Indemnified Taxes or
Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) the Agent,
Co-Collateral Agent, Lender or Issuing Bank (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) such Loan Guarantor shall make such deductions and (iii) such
Loan Guarantor shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.

 

SECTION 10.09.                                   Maximum Liability.  The
provisions of this Loan Guaranty are severable, and in any action or proceeding
involving any state corporate law, or any state, Federal or foreign bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if the obligations of any Loan Guarantor under this Loan Guaranty
would otherwise be held or determined to be avoidable, invalid or unenforceable
on account of the amount of such Loan Guarantor’s liability under this Loan
Guaranty, then, notwithstanding any other provision of this Loan Guaranty to
the contrary, the amount of such liability shall, without any further action by
the Loan Guarantors or the Lenders, be automatically limited and reduced to the
highest amount that is valid and enforceable as determined in such action or
proceeding (such highest amount determined hereunder being the relevant Loan
Guarantor’s “Maximum Liability”). 
This Section 10.09 with respect to the Maximum Liability of each
Loan Guarantor is intended solely to preserve the rights of the Lenders to the
maximum extent not subject to avoidance under applicable law, and no Loan
Guarantor nor any other Person or entity shall have any right or claim under
this Section with respect to such Maximum Liability, except to the extent
necessary so that the obligations of any Loan Guarantor hereunder shall not be
rendered

 

154

 

voidable under applicable
law.  Each Loan Guarantor agrees that the
Guaranteed Obligations may at any time and from time to time exceed the Maximum
Liability of each Loan Guarantor without impairing this Loan Guaranty or
affecting the rights and remedies of the Lenders hereunder, provided,
that nothing in this sentence shall be construed to increase any Loan Guarantor’s
obligations hereunder beyond its Maximum Liability.  Notwithstanding the foregoing, nothing
contained in this Agreement (including any provisions of this Article X to
the contrary) shall limit the liability of the Company in respect of all of the
Obligations under the Loan Documents.

 

SECTION 10.10.                                   Contribution.  In the event
any Loan Guarantor (a “Paying Guarantor”) shall make any payment or
payments under this Loan Guaranty or shall suffer any loss as a result of any
realization upon any collateral granted by it to secure its obligations under
this Loan Guaranty, each other Loan Guarantor (each a “Non-Paying Guarantor”)
shall contribute to such Paying Guarantor an amount equal to such Non-Paying
Guarantor’s “Guarantor Percentage” of such payment or payments made, or losses
suffered, by such Paying Guarantor.  For
purposes of this Article X, each Non-Paying Guarantor’s “Guarantor
Percentage” with respect to any such payment or loss by a Paying Guarantor
shall be determined as of the date on which such payment or loss was made by
reference to the ratio of (i) such Non-Paying Guarantor’s Maximum
Liability as of such date (without giving effect to any right to receive, or
obligation to make, any contribution hereunder) or, if such Non-Paying
Guarantor’s Maximum Liability has not been determined, the aggregate amount of
all monies received by such Non-Paying Guarantor from any Borrower after the
date hereof (whether by loan, capital infusion or by other means) to (ii) the
aggregate Maximum Liability of all Loan Guarantors hereunder (including such
Paying Guarantor) as of such date (without giving effect to any right to
receive, or obligation to make, any contribution hereunder), or to the extent
that a Maximum Liability has not been determined for any Loan Guarantor, the
aggregate amount of all monies received by such Loan Guarantors from any
Borrower after the date hereof (whether by loan, capital infusion or by other
means).  Nothing in this provision shall
affect any Loan Guarantor’s several liability for the entire amount of the
Guaranteed Obligations (up to such Loan Guarantor’s Maximum Liability).  Each of the Loan Guarantors covenants and
agrees that its right to receive any contribution under this Loan Guaranty from
a Non-Paying Guarantor shall be subordinate and junior in right of payment to
the Payment in Full of the Guaranteed Obligations.  This provision is for the benefit of all of the
Agent, the Co-Collateral Agents, the Issuing Banks, the Lenders, the Borrowers
and the Loan Guarantors and may be enforced by any one, or more, or all of them
in accordance with the terms hereof.

 

SECTION 10.11.                                   Liability Cumulative.  The liability
of each Loan Party as a Loan Guarantor under this Article X is in addition
to and shall be cumulative with all liabilities of each Loan Party to the
Agent, the Co-Collateral Agents, the Issuing Banks and the Lenders under this
Agreement and the other Loan Documents to which such Loan Party is a party or
in respect of any obligations or liabilities of the other Loan Parties, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.

 

SECTION 10.12.                                   Release of Loan Guarantors and Borrowers. 
Notwithstanding anything in Section 9.02(b) to the contrary (i) a
Loan Guarantor or a Borrower that is a Subsidiary shall automatically be
released from its obligations hereunder and its Loan Guaranty

 

155

 

and obligations as a
Borrower shall be automatically released upon the consummation of any
transaction permitted hereunder as a result of which such Loan Guarantor or
Borrower ceases to be a Subsidiary of the Company and (ii) so long as no
Event of Default has occurred and is continuing, (A) if a Loan Guarantor
or Borrower is or becomes an Immaterial Subsidiary, and such release would not
result in any Immaterial Subsidiary being required pursuant to Section 5.11(e) to
become a Loan Party hereunder (except to the extent that on and as of the date
of such release, one or more other Immaterial Subsidiaries become Loan
Guarantors or Borrowers hereunder and the provisions of Section 5.11(e) are
satisfied upon giving effect to all such additions and releases) or (B) a
Loan Guarantor or Borrower that is a Subsidiary is designated as an
Unrestricted Subsidiary in accordance with Section 5.13, then, in the case
of each of clauses (A) and (B), such Loan Guarantor shall be
automatically released from its obligations hereunder and its Loan Guaranty and
obligations as a Borrower shall be automatically released upon notification
thereof from the Borrower Agent to the Agent. 
In connection with any such release, the Agent shall execute and deliver
to any Loan Guarantor or Borrower that is a Subsidiary, at such Loan Guarantor’s
or Borrower’s expense, all documents that such Loan Guarantor or Borrower shall
reasonably request to evidence termination or release.  Any execution and delivery of documents
pursuant to the preceding sentence of this Section 10.12 shall be without
recourse to or warranty by the Agent.

 

[SIGNATURES APPEAR ON FOLLOWING PAGES]

 

156

 

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

 

	
   

  	
  THE NEIMAN MARCUS GROUP, INC.,  as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ James E. Skinner

  
	
   

  	
   

  	
  Name:

  	
  James E. Skinner

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President and

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NEIMAN MARCUS, INC., as Holdings

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ James E. Skinner

  
	
   

  	
   

  	
  Name:

  	
  James E. Skinner

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President and

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NEMA BEVERAGE CORPORATION

  
	
   

  	
  NM FINANCIAL SERVICES, INC.

  
	
   

  	
  BERGDORFGOODMAN.COM, LLC

  
	
   

  	
  BERGDORF GOODMAN, INC.

  
	
   

  	
  BERGDORF GRAPHICS, INC.

  
	
   

  	
  NEIMAN MARCUS HOLDINGS, INC.

  
	
   

  	
  NEMA BEVERAGE HOLDING
  CORPORATION

  
	
   

  	
  NEMA BEVERAGE PARENT
  CORPORATION

  
	
   

  	
  WORTH AVENUE LEASING COMPANY

  
	
   

  	
  NMGP, LLC, as Borrowers

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Nelson A. Bangs

  
	
   

  	
   

  	
  Name:

  	
  Nelson A. Bangs

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
  NM NEVADA TRUST, as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Nelson A. Bangs

  
	
   

  	
   

  	
  Name:

  	
  Nelson A. Bangs

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
   

  	
  individually and as Agent, Co-Collateral Agent,
  Issuing Bank and Swingline Lender,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ David Vega

  
	
   

  	
   

  	
  Name:

  	
  David Vega

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  

 

 

	
   

  	
   

  	
  WELLS FARGO RETAIL FINANCE, LLC,

  
	
   

  	
   

  	
  as Co-Collateral Agent and Lender,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Cory Loftus

  
	
   

  	
   

  	
  Name:

  	
  Cory Loftus

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
  BARCLAYS BANK PLC, a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Diane Rolfe

  
	
   

  	
   

  	
  Name:

  	
  Diane Rolfe

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

 

	
   

  	
  CREDIT SUISSE, CAYMAN ISLANDS
  BRANCH, a Lender,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ John Toronto

  
	
   

  	
   

  	
  Name:

  	
  John Toronto

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Christopher Day

  
	
   

  	
   

  	
  Name:

  	
  Christopher Day

  
	
   

  	
   

  	
  Title:

  	
  Associate

  

 

 

	
   

  	
  GOLDMAN SACHS BANK USA, a Lender,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Mark Walton

  
	
   

  	
   

  	
  Name:

  	
  Mark Walton

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A., a Lender,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Courtney Jeans

  
	
   

  	
   

  	
  Name:

  	
  Courtney Jeans

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

 

	
   

  	
  PNC BANK, NATIONAL ASSOCIATION, a Lender,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ John Trieu

  
	
   

  	
   

  	
  Name:

  	
  John Trieu

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
  REGIONS BANK, a Lender,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Jason Nicols

  
	
   

  	
   

  	
  Name:

  	
  Jason Nicols

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
  UBS LOAN FINANCE LLC, a Lender,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Marie Haddad

  
	
   

  	
   

  	
  Name:

  	
  Marie Haddad

  
	
   

  	
   

  	
  Title:

  	
  Associate Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Mary E. Evans

  
	
   

  	
   

  	
  Name:

  	
  Mary E. Evans

  
	
   

  	
   

  	
  Title:

  	
  Associate Director

  

 

 

Commitment Schedule

 

	
  Revolving Lender

  	
   

  	
  Commitment

  	
   

  
	
  Bank
  of America, N.A.

  	
   

  	
  $

  	
  125,000,000

  	
   

  
	
  Wells
  Fargo Retail Finance, LLC

  	
   

  	
  $

  	
  125,000,000

  	
   

  
	
  JP
  Morgan Chase Bank, N.A.

  	
   

  	
  $

  	
  80,000,000

  	
   

  
	
  Regions
  Bank

  	
   

  	
  $

  	
  80,000,000

  	
   

  
	
  Goldman
  Sachs Bank USA

  	
   

  	
  $

  	
  58,000,000

  	
   

  
	
  Barclays
  Bank PLC

  	
   

  	
  $

  	
  45,000,000

  	
   

  
	
  Credit
  Suisse, Cayman Islands Branch

  	
   

  	
  $

  	
  45,000,000

  	
   

  
	
  PNC
  Bank, National Association

  	
   

  	
  $

  	
  25,000,000

  	
   

  
	
  UBS
  Loan Finance LLC

  	
   

  	
  $

  	
  17,000,000

  	
   

  
	
  Total

  	
   

  	
  $

  	
  600,000,000

  	
   

  

 

 

SCHEDULE 1.01(a)

 

Existing Letters of Credit

 

1.                                       Standby Letter of Credit #SM215275W,
issued by Wachovia Bank, N.A. on August 2, 2008.

 

2.                                       Standby Letter of Credit #SM234521W,
issued by Wachovia Bank, N.A. on April 21, 2009.

 

3.                                       Standby Letter of Credit #SM234732W,
issued by Wachovia Bank, N.A. on May 20, 2009.

 

4.                                       Standby Letter of Credit #SM234922W,
issued by Wachovia Bank, N.A. on June 16, 2009.

 

1

 

SCHEDULE
1.01(b)

 

Immaterial Subsidiaries

 

Bergdorf Graphics, Inc.

NEMA Beverage
Corporation

NEMA Beverage
Holding Corporation

NEMA Beverage
Parent Corporation

Worth Avenue
Leasing Company

Quality Call Care
Solutions, Inc.

 

2

 

SCHEDULE 1.01(c)

 

Mortgaged Properties

 

	
  Store

  	
   

  	
  Address

  	
   

  	
  County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Owned

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  San Francisco

  	
   

  	
  150 Stockton Street

  San Francisco, CA 94108

  	
   

  	
  San Francisco County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tyson’s

  	
   

  	
  2255 International Drive

  McLean, VA 22102

  	
   

  	
  Fairfax County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Willow Bend

  	
   

  	
  2201 Dallas Pkwy

  Plano, TX 75093

  	
   

  	
  Collin County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Orlando

  	
   

  	
  4170 Conroy Rd

  Orlando, FL 32839

  	
   

  	
  Orange County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  San Antonio

  	
   

  	
  The Shops at La Cantera

  15900 La Cantera Parkway

  San Antonio, TX 78256

  	
   

  	
  Bexar County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Leased

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Houston Galleria

  	
   

  	
  2600 S. Post Oak Rd.

  Houston, TX 77056

  	
   

  	
  Harris County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Short Hills

  	
   

  	
  1200 Morris Turnpike

  Short Hills, NJ 07078

  	
   

  	
  Essex County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  King of Prussia

  	
   

  	
  The Plaza at King of Prussia

  170 North Gulph Rd.

  King of Prussia, PA 19406

  	
   

  	
  Montgomery County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Scottsdale

  	
   

  	
  6900 East Camelback Road

  Scottsdale, AZ 85251

  	
   

  	
  Maricopa County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Troy

  	
   

  	
  2705 West Big Beaver Road

  Troy, MI 48084

  	
   

  	
  Oakland County

  

 

3

 

	
  Paramus

  	
   

  	
  503 Garden State Plaza

  Paramus, NJ 07652

  	
   

  	
  Bergen County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fort Lauderdale

  	
   

  	
  2442 East Sunrise Boulevard

  Ft. Lauderdale, FL 33304

  	
   

  	
  Broward County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Coral Gables

  	
   

  	
  390 San Lorenzo Avenue

  Coral Gables, FL 33146

  	
   

  	
  Miami-Dade County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Palo Alto

  	
   

  	
  400 Stamford Shop Center

  Palo Alto, CA 94304

  	
   

  	
  Santa Clara County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Denver

  	
   

  	
  Cherry Creek Mall

  3030 East 1st Avenue

  Denver, CO 80206

  	
   

  	
  Denver County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tampa Bay

  	
   

  	
  2223 Westshore Blvd.

  Tampa, FL 33607

  	
   

  	
  Hillsborough County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Los Angeles

  	
   

  	
  9700 Wilshire Boulevard

  Beverly Hills, CA 90212

  	
   

  	
  Los Angeles County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Northpark

  	
   

  	
  400 Northpark Center

  Dallas, TX 75225

  	
   

  	
  Dallas County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Atlanta

  	
   

  	
  3393 Peachtree Road, N.E.

  Atlanta, GA 30326

  	
   

  	
  Fulton County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Westchester

  	
   

  	
  Maple & Paulding Avenues (2 Maple Ave.)

  White Plains, NY 10601

  	
   

  	
  Westchester County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fashion Island

  	
   

  	
  601 Newport Center Drive

  Newport Beach, CA 92660

  	
   

  	
  Orange County

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Washington

  	
   

  	
  5300 Wisconsin Avenue, N.W.

  Washington DC 20015

  	
   

  	
  Washington DC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bergdorf Goodman

  Men’s Store

  	
   

  	
  745 Fifth Avenue

  New York, NY 10019

  	
   

  	
  New York County

  

 

4

 

SCHEDULE 3.05(a)

 

Properties

 

I.  Real
Estate Owned or Leased

 

The Neiman Marcus Group, Inc.
(or “NMG”)

 

	
  ADDRESS

  	
   

  	
  CITY

  	
   

  	
  STATE

  	
   

  	
  ZIP

  	
   

  	
  LESSOR(S) (IF

  APPLICABLE)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1618 Main Street

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75201

  	
   

  	
  James C. Grey

   

  Trustee for S.P. Cimiotti Trust Gregg Edwards

   

  Cholly Edwards

   

  Carolyn Edwards Kazmann

   

  The Dallas Foundation

   

  Trustees for C.C. Slaughter

  William Slaughter Rogers

   

  Nancy MacGregor Rogers
  O’Neil

   

  Richard Slaughter Bauer

   

  SunTrust Bank N.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1517-1523 and 1525 Commerce St.

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75201

  	
   

  	
  Pacifico Partners, Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1600 Commerce St.

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75201

  	
   

  	
  Dalpark Partners, Ltd

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  400 North Park Center

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75225

  	
   

  	
  NorthPark Partners, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2201 Dallas Parkway

  	
   

  	
  Plano

  	
   

  	
  TX

  	
   

  	
  75093

  	
   

  	
  Owned by NMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2100 Green Oaks Rd.

  	
   

  	
  Ft. Worth

  	
   

  	
  TX

  	
   

  	
  76116

  	
   

  	
  Eversan Limited Partnership (77%) and Susan
  Sandelman, as Trustee of the Sansteve Trust (23%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2600 S. Post Oak Road

  	
   

  	
  Houston

  	
   

  	
  TX

  	
   

  	
  77056

  	
   

  	
  HG Shopping Centers, LP

  

 

5

 

	
  ADDRESS

  	
   

  	
  CITY

  	
   

  	
  STATE

  	
   

  	
  ZIP

  	
   

  	
  LESSOR(S) (IF

  APPLICABLE)

  
	
  3393 Peachtree Rd., NE

  	
   

  	
  Atlanta

  	
   

  	
  GA

  	
   

  	
  30326

  	
   

  	
  The Retail Property Trust

   

  Broad Atlanta Properties
  Corp.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9700 Collins Avenue

  	
   

  	
  Bal Harbour

  	
   

  	
  FL

  	
   

  	
  33154

  	
   

  	
  Bal Harbour Shops, Ltd.

   

  Globea Properties
  Associates

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2442 E. Sunrise Blvd.

  	
   

  	
  Ft. Lauderdale

  	
   

  	
  FL

  	
   

  	
  33304

  	
   

  	
  Keystone-Florida Property Holding Corp.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  151 Worth Avenue

  	
   

  	
  Palm Beach

  	
   

  	
  FL

  	
   

  	
  33480

  	
   

  	
  151 Worth Avenue Partnership, Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2223 Westshore Blvd.

  	
   

  	
  Tampa

  	
   

  	
  FL

  	
   

  	
  33607

  	
   

  	
  Tampa Westshore Associates,
  LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Mall at Millenia

  4170 Conroy Road

  	
   

  	
  Orlando

  	
   

  	
  FL

  	
   

  	
  32839

  	
   

  	
  Owned by NMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Village of Merrick Park

  390 San Lorenzo

  	
   

  	
  Coral Gables

  	
   

  	
  FL

  	
   

  	
  33146

  	
   

  	
  Merrick Park, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maple & Paulding Avenues (2 Maple Ave.)

  	
   

  	
  White Plains

  	
   

  	
  NY

  	
   

  	
  10601

  	
   

  	
  Fashion Mall Partners, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2255 International Dr.

  	
   

  	
  McLean

  	
   

  	
  VA

  	
   

  	
  22102

  	
   

  	
  Owned by NMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  503 Garden State Plaza

  	
   

  	
  Paramus

  	
   

  	
  NJ

  	
   

  	
  07652

  	
   

  	
  Westland Garden State
  Plaza, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Plaza at King of Prussia

  170 N. Gulph Road

  	
   

  	
  King of Prussia

  	
   

  	
  PA

  	
   

  	
  19406

  	
   

  	
  King of Prussia Associates,
  GP 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1200 Morris Turnpike

  	
   

  	
  Short Hills

  	
   

  	
  NJ

  	
   

  	
  07078

  	
   

  	
  Short Hills Associates, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5 Copley Place

  	
   

  	
  Boston

  	
   

  	
  MA

  	
   

  	
  02116

  	
   

  	
  Copley Place Associates,
  LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5300 Wisconsin Ave., N.W.

  	
   

  	
  Washington

  	
   

  	
  DC

  	
   

  	
  20015

  	
   

  	
  Teachers Insurance and Annuity Association of
  America

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2705 W. Big Beaver

  	
   

  	
  Troy

  	
   

  	
  MI

  	
   

  	
  48084

  	
   

  	
  Somerset Collection Limited
  Partnership 

  

 

6

 

	
  ADDRESS

  	
   

  	
  CITY

  	
   

  	
  STATE

  	
   

  	
  ZIP

  	
   

  	
  LESSOR(S) (IF

  APPLICABLE)

  
	
  100 Plaza Frontenac

  	
   

  	
  St. Louis

  	
   

  	
  MO

  	
   

  	
  63131

  	
   

  	
  Broad Frontenac Associates,
  LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  505 Nicollet Mall on 5th St.

  	
   

  	
  Minneapolis

  	
   

  	
  MN

  	
   

  	
  55402

  	
   

  	
  Brookfield DB Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  737 N. Michigan Avenue

  	
   

  	
  Chicago

  	
   

  	
  IL

  	
   

  	
  60611

  	
   

  	
  737 North Michigan Avenue Investors, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6 Oakbrook Center

  	
   

  	
  Oak Brook

  	
   

  	
  IL

  	
   

  	
  60523

  	
   

  	
  Oakbrook Shopping Center,
  LLC

   

  Acadia Oakbrook, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5000 Northbrook Ct.

  	
   

  	
  Northbrook

  	
   

  	
  IL

  	
   

  	
  60062

  	
   

  	
  Northbrook Enterprises
  Corp.

   

  Westcoast Estates

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9700 Wilshire Blvd.

  	
   

  	
  Beverly Hills

  	
   

  	
  CA

  	
   

  	
  90212

  	
   

  	
  Joan Keller Selznick, Larry Larson, and as
  Administrator of the Estates of Melissa Oshier and Florence Selznick Howard,
  Susan Archer and Barbara Selznick

   

  Larry Larson

   

  Estate of Melissa Oshier
  Larson

   

  Barbara Smalley-Selznick

   

  Joan Keller-Selznick

   

  Larry Larson as Special Administrator Re:  the Estate of Florence Selznick Howard

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  150 Stockton St.

  	
   

  	
  San Francisco

  	
   

  	
  CA

  	
   

  	
  94108

  	
   

  	
  Owned by NMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Scottsdale Fashion Square

  6900 E. Camelback Rd.

  	
   

  	
  Scottsdale

  	
   

  	
  AZ

  	
   

  	
  85251

  	
   

  	
  Scottsdale Fashion Square, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  601 Newport Center Dr.

  	
   

  	
  Newport Beach

  	
   

  	
  CA

  	
   

  	
  92660

  	
   

  	
  The Irvine Company

  

 

7

 

	
  ADDRESS

  	
   

  	
  CITY

  	
   

  	
  STATE

  	
   

  	
  ZIP

  	
   

  	
  LESSOR(S) (IF

  APPLICABLE)

  
	
  400 Stanford Shop. Ctr.

  	
   

  	
  Palo Alto

  	
   

  	
  CA

  	
   

  	
  94304

  	
   

  	
  SPG Center, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1450 Ala Moana Blvd.

  	
   

  	
  Honolulu

  	
   

  	
  HI

  	
   

  	
  96814

  	
   

  	
  GGP Ala Moana LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fashion Valley Center

  7027 Friars Road

  	
   

  	
  San Diego

  	
   

  	
  CA

  	
   

  	
  92108

  	
   

  	
  Fashion Valley Mall, LLC

   

  Stonestreet Development,
  LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cherry Creek Mall

  3030 E. 1st Avenue

  	
   

  	
  Denver

  	
   

  	
  CO

  	
   

  	
  80206

  	
   

  	
  Taubman—Cherry Creek, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15900 La Cantera Parkway, Suite 14

  	
   

  	
  San Antonio

  	
   

  	
  TX

  	
   

  	
  78256

  	
   

  	
  Owned by NMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5860 Glades Road

  	
   

  	
  Boca Raton

  	
   

  	
  FL

  	
   

  	
  33431

  	
   

  	
  The Town Center at Boca Raton Trust

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  32100 Las Vegas Blvd. South, Suite 116

  	
   

  	
  Primm

  	
   

  	
  NV

  	
   

  	
  89019

  	
   

  	
  Fashion Outlet of Las Vegas
  LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  934 Grapevine Court

  	
   

  	
  Central Valley

  	
   

  	
  NY

  	
   

  	
  10917

  	
   

  	
  Chelsea GCA Realty
  Partnership, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  651 Kapkowski Rd., Suite 0200

  	
   

  	
  Elizabeth

  	
   

  	
  NJ

  	
   

  	
  07201

  	
   

  	
  JG Elizabeth, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4115 Capital of Texas Hwy. S.

  	
   

  	
  Austin

  	
   

  	
  TX

  	
   

  	
  78704

  	
   

  	
  Brodie Oaks Center, Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5000 Arizona Mills Cir.

  	
   

  	
  Tempe 

  	
   

  	
  AZ

  	
   

  	
  85282

  	
   

  	
  Arizona Mills, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4030 Baldwin Road

  	
   

  	
  Auburn Hills

  	
   

  	
  MI

  	
   

  	
  48326

  	
   

  	
  Taubman Auburn Hills Associates
  Limited Partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1634 Franklin Mills Cir.

  	
   

  	
  Philadelphia

  	
   

  	
  PA

  	
   

  	
  19154

  	
   

  	
  Franklin Mills Associates, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12801 W. Sunrise Blvd., #1005

  	
   

  	
  Sunrise

  	
   

  	
  FL

  	
   

  	
  33323

  	
   

  	
  Sawgrass Mills Phase II, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5900 Sugarloaf Pkwy.,

  Space 235/A4  

  	
   

  	
  Lawrenceville

  	
   

  	
  GA

  	
   

  	
  30043

  	
   

  	
  Sugarloaf Mills, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3000 Grapevine Mills Pkwy., Suite 233

  	
   

  	
  Grapevine Mills

  	
   

  	
  TX

  	
   

  	
  76051

  	
   

  	
  Grapevine Mills IV Limited
  Partnership

  

 

8

 

	
  ADDRESS

  	
   

  	
  CITY

  	
   

  	
  STATE

  	
   

  	
  ZIP

  	
   

  	
  LESSOR(S) (IF

  APPLICABLE)

  
	
  14500 W. Colfax Ave., Space 241

  	
   

  	
  Lakewood

  	
   

  	
  CO

  	
   

  	
  80401

  	
   

  	
  Colorado Mills Limited
  Partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11441 NW 12th St. #D100

  	
   

  	
  Miami

  	
   

  	
  FL

  	
   

  	
  33172

  	
   

  	
  Taubman-Dolphin Mall
  Associates, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5000 Katy Mills Circle, Suite 321

  	
   

  	
  Katy

  	
   

  	
  TX

  	
   

  	
  77494

  	
   

  	
  Katy Mills Mall, Limited
  Partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4061 Camino de la Plaza – Suite 490

  	
   

  	
  San Diego

  	
   

  	
  CA

  	
   

  	
  92173

  	
   

  	
  Chelsea San Diego Finance,
  LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Prime Outlets at San Marcos

  3939 IH-35 South

  	
   

  	
  San Marcos

  	
   

  	
  TX

  	
   

  	
  78666

  	
   

  	
  Prime Outlets at San Marcos
  II Limited Partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7000 Arundel Mills Cir. – Suite D-2

  	
   

  	
  Hanover

  	
   

  	
  MD

  	
   

  	
  21076

  	
   

  	
  Arundel Mills Limited
  Partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3400 Preston Rd.,

  Suite 210

  	
   

  	
  Plano

  	
   

  	
  TX

  	
   

  	
  75093

  	
   

  	
  Preston Park Crossing, Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  754 5th Avenue

  	
   

  	
  New York

  	
   

  	
  NY

  	
   

  	
  10019

  	
   

  	
  754 Fifth Avenue Associates, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  745 5th Avenue

  	
   

  	
  New York

  	
   

  	
  NY

  	
   

  	
  10022

  	
   

  	
  WvF-Paramount 745 Property, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  625 Madison Avenue

  	
   

  	
  New York

  	
   

  	
  NY

  	
   

  	
  10022

  	
   

  	
  SLG 625 Lessee LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  43-30 24th Street

  	
   

  	
  Long Island City

  	
   

  	
  NY

  	
   

  	
  11101

  	
   

  	
  Long Island City II LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1201 Elm Street,

  Suite 2800

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75270

  	
   

  	
  Binyan Realty, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1700 Pacific,

  Suite 1300

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75201

  	
   

  	
  Berkeley First City, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1450 Broadway

  	
   

  	
  New York

  	
   

  	
  NY

  	
   

  	
  10018

  	
   

  	
  1450 Realty Associates, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  125 Worth Avenue

  	
   

  	
  Palm Beach

  	
   

  	
  FL

  	
   

  	
  33480

  	
   

  	
  Whalou Properties III LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Space I-2A, 670 Auahi Street

  	
   

  	
  Honolulu

  	
   

  	
  HI

  	
   

  	
  96813

  	
   

  	
  Limit, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9701 Wilshire Blvd.

  	
   

  	
  Beverly Hills

  	
   

  	
  CA

  	
   

  	
  90212

  	
   

  	
  9701 Wilshire Management LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  400 E. Royal Lane,

  Suite 112

  	
   

  	
  Irving

  	
   

  	
  TX

  	
   

  	
  75039

  	
   

  	
  Charter DCC Partners, LP

  

 

9

 

	
  ADDRESS

  	
   

  	
  CITY

  	
   

  	
  STATE

  	
   

  	
  ZIP

  	
   

  	
  LESSOR(S) (IF

  APPLICABLE)

  
	
  5044 Sharp Street

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75247

  	
   

  	
  ProLogis Limited
  Partnership II

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1601 W. Cotton St.

  	
   

  	
  Longview

  	
   

  	
  TX

  	
   

  	
  75604

  	
   

  	
  Longview Warehouse and
  Storage, Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2301 Neiman Marcus Pkwy.

  	
   

  	
  Longview

  	
   

  	
  TX

  	
   

  	
  75602

  	
   

  	
  Owned by NMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5950 Colwell Blvd.

  	
   

  	
  Irving

  	
   

  	
  TX

  	
   

  	
  75039

  	
   

  	
  Owned by NMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4121 Pinnacle Point Dr.

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75211

  	
   

  	
  TR Pinnacle Corp.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2784 Executive Way

  	
   

  	
  Miramar

  	
   

  	
  FL

  	
   

  	
  33025

  	
   

  	
  Sunbeam Properties, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9501 Winona

  	
   

  	
  Schiller Park

  	
   

  	
  IL

  	
   

  	
  60176

  	
   

  	
  Northern Equities, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2500 S. Workman Mill 

  	
   

  	
  Whittier

  	
   

  	
  CA

  	
   

  	
  90601

  	
   

  	
  RR&C Development Co.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14351 E. Bonelli St.

  	
   

  	
  City of Industry

  	
   

  	
  CA

  	
   

  	
  90601

  	
   

  	
  Dr. Earl M. Hill
  Family Limited Partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3302 Miller Road, Suite 700

  	
   

  	
  Garland

  	
   

  	
  TX

  	
   

  	
  75041

  	
   

  	
  Duke-Weeks Realty Limited
  Partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1125 Globe Avenue

  	
   

  	
  Mountainside

  	
   

  	
  NJ

  	
   

  	
  07092

  	
   

  	
  Jackal Holdings Management,
  LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8919 Diplomacy Row

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75247

  	
   

  	
  Cullum-Thomas, GP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3225 Third Street

  	
   

  	
  San Francisco

  	
   

  	
  CA

  	
   

  	
  94124

  	
   

  	
  William D Spencer  d/b/a

  William Spencer Company

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1043 Opakapaka Street

  	
   

  	
  Kapolai

  	
   

  	
  HI

  	
   

  	
  96707

  	
   

  	
  Fort Street Investment Corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2700 Post Oak

  	
   

  	
  Houston

  	
   

  	
  TX

  	
   

  	
  77056

  	
   

  	
  Walton Houston Galleria
  Office, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1499 N. Post Oak

  	
   

  	
  Houston

  	
   

  	
  TX

  	
   

  	
  77055

  	
   

  	
  Warehouse Associates

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3585 S. Highland Drive

  	
   

  	
  Las Vegas

  	
   

  	
  NV

  	
   

  	
  89103

  	
   

  	
  Plaza Vegas Ministorage

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Storage Room M7, M10, N3 @ Galleria - 2442 E.
  Sunrise Blvd.

  	
   

  	
  Ft. Lauderdale

  	
   

  	
  FL

  	
   

  	
  33304

  	
   

  	
  Keystone-Florida Property
  Holding Company

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4400 Sharon Rd.

  	
   

  	
  Charlotte

  	
   

  	
  NC

  	
   

  	
  28211

  	
   

  	
  Southpark Mall Limited
  Partnership

  

 

10

 

	
  ADDRESS

  	
   

  	
  CITY

  	
   

  	
  STATE

  	
   

  	
  ZIP

  	
   

  	
  LESSOR(S) (IF

  APPLICABLE)

  
	
  3400 Palm Way

  	
   

  	
  Austin

  	
   

  	
  TX

  	
   

  	
  78758

  	
   

  	
  SPGIL Domain, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  310 Speen Street

  	
   

  	
  Natick

  	
   

  	
  MA

  	
   

  	
  01760

  	
   

  	
  GGP-Natick West LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6550 Topanga Canyon Blvd.

  	
   

  	
  Canoga Park

  	
   

  	
  CA

  	
   

  	
  91303

  	
   

  	
  Westfield Topanga Owner, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11111 NE 8th St.

  	
   

  	
  Bellevue

  	
   

  	
  WA

  	
   

  	
  98004

  	
   

  	
  S/I Meydenbauer I, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1230 Great Mall Dr.

  	
   

  	
  Milpitas 

  	
   

  	
  CA

  	
   

  	
  95035

  	
   

  	
  Milpitas Mills Limited
  Partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4949 International Drive

  	
   

  	
  Orlando

  	
   

  	
  FL

  	
   

  	
  32819

  	
   

  	
  Orlando Outlet Owner, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  820 W. Stacey Rd.,

  Bldg. 5, Ste. 500

  	
   

  	
  Allen 

  	
   

  	
  TX

  	
   

  	
  75013

  	
   

  	
  Chelsea Allen Development,
  LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10801 Corkscrew Rd.

  	
   

  	
  Estero

  	
   

  	
  FL

  	
   

  	
  33928

  	
   

  	
  Miromar Development
  Corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18 Lightcap Rd., Suite #753

  	
   

  	
  Pottstown

  	
   

  	
  PA

  	
   

  	
  19464

  	
   

  	
  Chelsea Limerick Holdings,
  LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6108 W. Grand Ave.

  	
   

  	
  Gurnee

  	
   

  	
  IL

  	
   

  	
  60031

  	
   

  	
  Mall at Gurnee Mills, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  201 The Arches Circle

  	
   

  	
  Deer Park

  	
   

  	
  NY

  	
   

  	
  11729

  	
   

  	
  Deer Park Enterprise, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5550 Lover’s Lane, Suite 147

  	
   

  	
  Dallas

  	
   

  	
  TX

  	
   

  	
  75209

  	
   

  	
  L&B Depp Inwood
  Village, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  600 Ventura Blvd., Ste. 1350

  	
   

  	
  Camarillo

  	
   

  	
  CA

  	
   

  	
  93010

  	
   

  	
  CPG Partners, LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2700 Potomac Mills Circle, Ste. 884

  	
   

  	
  Woodbridge

  	
   

  	
  VA

  	
   

  	
  22192

  	
   

  	
  Mall at Potomac Mills, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20 City Blvd. West, Suite C-1

  	
   

  	
  Orange

  	
   

  	
  CA

  	
   

  	
  92868

  	
   

  	
  Orange City Mills Limited
  Partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7863-L Tyson’s Corner Center

  	
   

  	
  McLean

  	
   

  	
  VA

  	
   

  	
  22102

  	
   

  	
  Tyson’s Corner Holdings,
  LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10250 Santa Monica

  Blvd., #15

  	
   

  	
  Los Angeles

  	
   

  	
  CA

  	
   

  	
  90067

  	
   

  	
  Century City Mall, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10250 Santa Monica

  Blvd., #10B (storage)

  	
   

  	
  Los Angeles

  	
   

  	
  CA

  	
   

  	
  90067

  	
   

  	
  Westfield Corporation, Inc.
  as agent for Century City Mall, LLC

  

 

11

 

	
  ADDRESS

  	
   

  	
  CITY

  	
   

  	
  STATE

  	
   

  	
  ZIP

  	
   

  	
  LESSOR(S) (IF

  APPLICABLE)

  
	
  3030 M Street NW

  	
   

  	
  Washington

  	
   

  	
  DC

  	
   

  	
  20007

  	
   

  	
  3030 M Street, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1206 Northbrook Court

  	
   

  	
  Northbrook

  	
   

  	
  IL

  	
   

  	
  60062

  	
   

  	
  Northbrook Court I, LLC /
  Westcoast Estates

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  199 Boylston St., Ste. N115

  	
   

  	
  Chestnut Hill

  	
   

  	
  MA

  	
   

  	
  02467

  	
   

  	
  WMACH LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  835 N. Michigan Ave.,

  Suite 3020

  	
   

  	
  Chicago

  	
   

  	
  IL

  	
   

  	
  60611

  	
   

  	
  Water Tower LLC

  

 

NM Nevada Trust

 

	
  ADDRESS

  	
   

  	
  CITY

  	
   

  	
  STATE

  	
   

  	
  ZIP

  	
   

  	
  LESSORS

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3200 Las Vegas 

  Blvd. So.

  	
   

  	
  Las Vegas

  	
   

  	
  NV

  	
   

  	
  89109

  	
   

  	
  Fashion Show Mall, LLC

   

  Stonestreet Nevada, LLC

  

 

12

 

II.  Principal Place of Business and Chief
Executive Office of each Loan Party

 

	
  Loan Party

  	
   

  	
  Principal place of business

  	
   

  	
  Chief executive office

  
	
  Neiman
  Marcus, Inc.

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  
	
  The
  Neiman Marcus Group, Inc.

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  
	
  Bergdorf
  Goodman, Inc.

  	
   

  	
  754 Fifth Avenue

  New York, NY 10019

  	
   

  	
  754 Fifth Avenue

  New York, NY 10019

  
	
  Bergdorf
  Graphics, Inc.

  	
   

  	
  754 Fifth Avenue

  New York, NY 10019

  	
   

  	
  754 Fifth Avenue

  New York, NY 10019

  
	
  BergdorfGoodman.com,
  LLC

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  
	
  NEMA
  Beverage Corporation

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  
	
  NEMA
  Beverage Holding

  Corporation

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  
	
  NEMA
  Beverage Parent

  Corporation

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  
	
  NM
  Financial Services, Inc.

  	
   

  	
  3200 Las Vegas Blvd.

  Las Vegas, NV 89109

  	
   

  	
  3200 Las Vegas Blvd.

  Las Vegas, NV 89109

  
	
  NMGP,
  LLC

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  
	
  NM
  Nevada Trust

  	
   

  	
  3200 Las Vegas Blvd.

  Las Vegas, NV 89109

  	
   

  	
  3200 Las Vegas Blvd.

  Las Vegas, NV 89109

  
	
  Neiman
  Marcus Holdings, Inc.

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  
	
  Worth
  Avenue Leasing Company

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  	
   

  	
  1618 Main Street

  Dallas, TX 75201

  

 

13

 

SCHEDULE 3.05(g)

 

Intellectual Property

 

None

 

14

 

SCHEDULE 3.06

 

Disclosed Matters

 

None

 

15

 

SCHEDULE 3.15

 

Capitalization and Subsidiaries

 

	
  Subsidiary

  (unless otherwise indicated)

  	
   

  	
  Type of Entity

  	
   

  	
  Each Class of

  Authorized and

  Validly Issued

  Equity Interests

  	
   

  	
  Record and

  Beneficial

  Owner

  	
   

  	
  Percentage

  Ownership

  
	
  Neiman
  Marcus, Inc.

  	
   

  	
  Corporation

  	
   

  	
  900
  shares of Common Stock $0.01 par value

  	
   

  	
  Newton

  Holdings, LLC

  	
   

  	
  100%

  
	
  The
  Neiman Marcus Group, Inc.

  	
   

  	
  Corporation

  	
   

  	
  900
  shares of Common Stock $0.01 par value

  	
   

  	
  Neiman
  Marcus, Inc.

  	
   

  	
  100%

  
	
  Bergdorf
  Goodman, Inc.

  	
   

  	
  Corporation

  	
   

  	
  1,000
  shares of Common Stock $1.00 par value

  	
   

  	
  Neiman
  Marcus Holdings, Inc.

  	
   

  	
  100%

  
	
  Bergdorf
  Graphics, Inc.

  	
   

  	
  Corporation

  	
   

  	
  1,000
  shares of Common Stock $0.01 par value

  	
   

  	
  Bergdorf
  Goodman, Inc.

  	
   

  	
  100%

  
	
  BergdorfGoodman.com,
  LLC

  	
   

  	
  Limited
  Liability Company

  	
   

  	
  Membership
  Interests

  	
   

  	
  The
  Neiman Marcus Group, Inc.

  	
   

  	
  100%

  
	
  Neiman
  Marcus Holdings, Inc.

  	
   

  	
  Corporation

  	
   

  	
  100
  shares of Common Stock $1.00 par value

  	
   

  	
  The
  Neiman Marcus Group, Inc.

  	
   

  	
  100%

  
	
  NEMA
  Beverage Corporation

  	
   

  	
  Corporation

  	
   

  	
  100
  shares of Common Stock $1.00 par value

  	
   

  	
  NEMA
  Beverage Holding Corporation

  	
   

  	
  100%

  
	
  NEMA
  Beverage Holding Corporation

  	
   

  	
  Corporation

  	
   

  	
  100
  shares of Common Stock $1.00 par value

  	
   

  	
  NEMA
  Beverage Parent Corporation

  	
   

  	
  100%

  
	
  NEMA
  Beverage Parent Corporation

  	
   

  	
  Corporation

  	
   

  	
  100
  shares of Common Stock $1.00 par value

  	
   

  	
  The
  Neiman Marcus Group, Inc.

  	
   

  	
  100%

  
	
  NM
  Financial Services, Inc.

  	
   

  	
  Corporation

  	
   

  	
  10
  shares of Common Stock No par value

  	
   

  	
  The
  Neiman Marcus Group, Inc.

  	
   

  	
  100%

  

 

16

 

	
  NM
  Nevada Trust

  	
   

  	
  Business
  Trust

  	
   

  	
  100
  shares

  No par value

  	
   

  	
  1.
  The Neiman Marcus Group, Inc.  

   

  2.
  Bergdorf Goodman, Inc.

  	
   

  	
  1.
  90%  

   

   

  2.
  10%

  
	
  NMGP,
  LLC

  	
   

  	
  Limited
  Liability Company

  	
   

  	
  Membership
  Interests

  	
   

  	
  The
  Neiman Marcus Group, Inc.

  	
   

  	
  100%

  
	
  Worth
  Avenue Leasing

  Company

  	
   

  	
  Corporation

  	
   

  	
  10
  shares of Common Stock $1.00 par value

  	
   

  	
  The
  Neiman Marcus Group, Inc.

  	
   

  	
  100%

  

 

17

 

Name
and Relationship to the Company and each of the Company’s Subsidiaries

 

 

(1) 90% NMG; 10% BG.

 

18

 

SCHEDULE 3.17

 

Labor Disputes

 

None

 

19

 

SCHEDULE 4.01(b)

 

Local Counsel

 

	
  Law Firm

  	
   

  	
  State

  	
   

  	
  Street Address

  	
   

  	
  Contact

  	
   

  	
  Telephone/Fax

  	
   

  	
  Email

  
	
  K&L
  Gates

  LLP

  	
   

  	
  CA

  	
   

  	
  10100 Santa

  Monica

  Boulevard, 7th

  Floor, Los

  Angeles, CA

  90067

  	
   

  	
  Bill Bernfeld,

  Partner

  	
   

  	
  Tel: (310) 552-5014

  Fax: (310) 552-5001

  	
   

  	
  william.bernfeld@klgates.com

  
	
   

  	
  FL

  	
   

  	
  200 South

  Biscayne

  Boulevard, Suite

  3900, Miami, FL

  33131-2399

  	
   

  	
  Martin Schrier,

  Partner

  	
   

  	
  Tel: (305) 539-3375

  Fax: (305) 358-7095

  	
   

  	
  martin.schrier@klgates.com

  
	
   

  	
  MA

  	
   

  	
  One Lincoln

  Street, Boston,

  MA 02111-2950

  	
   

  	
  Sean Mahoney,

  Partner

  	
   

  	
  Tel: (617) 261-3202

  Fax: (617) 261-3175

  	
   

  	
  sean.mahoney@klgates.com

  
	
   

  	
  TX

  	
   

  	
  1717 Main
  Street,

  Suite 2800,

  Dallas, TX 75201

  	
   

  	
  David Luther,

  Partner

  	
   

  	
  Tel: (214) 939-5535

  Fax: (214) 939-5849

  	
   

  	
  david.luther@klgates.com

  
	
   

  	
  VA

  	
   

  	
  1601 K Street,

  NW, Washington,

  D.C. 20006-1600

  	
   

  	
  Bruce Nielson,

  Partner

  	
   

  	
  Tel: (202) 778-9256

  Fax: (202) 778-9100

  	
   

  	
  bruce.nielson@klgates.com

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Young

  Conaway

  Stargatt &

  Taylor, LLP

  	
   

  	
  DE

  	
   

  	
  1000 West
  Street,

  17th Floor,

  Wilmington, DE

  19899-0391

  	
   

  	
  Norman M. Powell,

  Partner

  	
   

  	
  Tel: (302) 571-6629

  Fax: (302) 576-3328

  	
   

  	
  NPowell@ycst.com

  

 

20

 

SCHEDULE 6.01

 

Existing Indebtedness

 

	
  Debt

  	
   

  	
  Maturity

  Date

  	
   

  	
  Rate

  	
   

  	
  Outstanding

  Balance

  	
   

  
	
  Capital
  Lease Obligations

  	
   

  	
  Various

  	
   

  	
  Various

  	
   

  	
  $

  	
  554,000

  	
   

  
									

 

21

 

SCHEDULE 6.02

 

Existing Liens

 

Liens securing Capital Lease
Obligations as set forth on Schedule 6.01 in respect of the assets subject to
such capitalized leases.

 

Please see additional information on the attached.

 

22

 

	
  Debtor

  	
   

  	
  State

  	
   

  	
  Jurisdiction

  	
   

  	
  UCCs

  	
   

  	
  Secured
  Party

  	
   

  	
  Collateral
  Description

  
	
  Bergdorf

  Goodman,

  Inc.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200507080770104

  7/8/05

  	
   

  	
  HSBC
  Bank

  Nevada,

  National

  Association

  	
   

  	
  All
  Assets under Securitzation Transfer

  Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200704258165204

  4/25/07

  	
   

  	
  Fred

  Leighton

  LLC

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200711050860126

  11/5/07

  	
   

  	
  E
  J

  Landrigan

  Inc. d/b/a

  Verdura

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  11/15/07

  	
   

  	
   

  	
   

  	
  SP
  Assignment to Brown Brothers

  Harriman & Co.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200804218159368

  4/21/08

  	
   

  	
  Buccellati,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200811246260324

  11/24/08

  	
   

  	
  Franck

  Muller USA,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200902185160698

  2/18/09

  	
   

  	
  Backes &

  Strauss, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200903185250540

  3/18/09

  	
   

  	
  Siegelson’s

  Diamonds,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200903245264681

  3/24/09

  	
   

  	
  Lorraine
  E.

  Schwartz,

  Inc.

  	
   

  	
  Consignment
  Transaction

  

 

23

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200905078157976

  5/7/09

  	
   

  	
  Diamond
  in

  the Rough,

  LLC

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #200906095528546

  6/9/09

  	
   

  	
  Illy
  Caffe

  North

  America

  	
   

  	
  Equipment

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5235162 6

  7/29/05

  	
   

  	
  Irving
  Nelkin

  & Co.

  	
   

  	
  Debtor
  listed as Neiman Marcus Company (Inc.)

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  6/25/09

  	
   

  	
   

  	
   

  	
  Secured
  Party address change

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  6/25/09

  	
   

  	
   

  	
   

  	
  Debtor
  name change to The Neiman

  Marcus Group, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  6/25/09

  	
   

  	
   

  	
   

  	
  Amendment
  to delete additional Debtor,

  Neiman-Marcus GP., Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  7/2/09

  	
   

  	
   

  	
   

  	
  Collateral
  Restatement

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 1516093

  5/01/08

  	
   

  	
  Michael

  Beaudry, Inc.

  	
   

  	
  Consignment
  Transaction

  Debtor listed as JGLM Corp. w/several

  additional Debtors

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  5/19/08

  	
   

  	
   

  	
   

  	
  Debtor
  name change to Neiman Marcus,

  Inc. (was previously one of the additional

  Debtors above)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 3790415

  11/12/08

  	
   

  	
  Esmaru

  Jewels Corp.

  	
   

  	
  Consignment
  Transaction

  Debtor listed as The Neiman Marcus

  Group, Inc., Neiman Marcus, Inc. as

  additional Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0187457

  1/20/09

  	
   

  	
  The
  Other

  Jewelry Co.

  LLC

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
  TX

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #04-0048133780

  11/14/03

  	
   

  	
  Thomas

  Reprographics,

  Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #06-0017989090

  5/25/06

  	
   

  	
  Judith
  Ripka

  	
   

  	
  Consignment
  Transaction

  

 

24

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #06-0017989101

  5/25/06

  	
   

  	
  Judith
  Ripka

  Creations,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #06-0017989212

  5/25/06

  	
   

  	
  Judith
  Ripka

  Creations,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #08-0026988223

  8/12/08

  	
   

  	
  Martin

  Kirschenbaum

  Inc

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09 0000515555

  1/7/09

  	
   

  	
  Doris
  Panos

  Designs, Ltd.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09 0006224659

  3/4/09

  	
   

  	
  Illy
  Caffe

  North

  Amercia

  	
   

  	
  Equipment
  Lease

  
	
  The
  Neiman

  Marcus

  Group, Inc.

  	
   

  	
  DE

  	
   

  	
  SOS

  	
   

  	
  UCC-1

  #1138569 4

  10/12/01

  	
   

  	
  Movado

  Group, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  4/11/06

  	
   

  	
   

  	
   

  	
  Continuation

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2067412 1

  2/25/02

  	
   

  	
  East

  Continental

  Gems, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  8/31/06

  	
   

  	
   

  	
   

  	
  Continuation

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2105814 2

  4/29/02

  	
   

  	
  Premier
  Gem

  Corporation

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  5/16/02

  	
   

  	
   

  	
   

  	
  Collateral
  Restatement

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  3/1/07

  	
   

  	
   

  	
   

  	
  Continuation

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #3052992 8

  1/31/03

  	
   

  	
  M.A.P.
  LTD.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  10/9/07

  	
   

  	
   

  	
   

  	
  Secured
  Party address change and

  continuation

  

 

25

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #3194252 6

  7/3/03

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #3268068 7

  10/2/03

  	
   

  	
  IBM
  Credit

  LLC

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #3302016 4

  11/10/03

  	
   

  	
  IBM
  Credit

  LLC

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #3303457 9

  11/12/03

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4044257 6

  1/27/04

  	
   

  	
  RBC
  100

  LLC d/b/a

  Roberto Coin

  Cento

  Collection

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4057530 0

  2/23/04

  	
   

  	
  IBM
  Credit

  LLC

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4092970 5

  4/2/04

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4115893 2

  4/26/04

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4145409 1

  5/25/04

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4177165 0

  6/25/04

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4194987 6

  7/12/04

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4207420 3

  7/23/04

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  

 

26

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4212134 3

  7/28/04

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4238626 8

  8/24/04

  	
   

  	
  Canon

  Financial

  Services, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4315169 5

  11/8/04

  	
   

  	
  M.
  Fabrikant

  & Sons, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4338824 8

  12/2/04

  	
   

  	
  SENO

  Jewelry,

  LLC/Ippolita

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #4352904 9

  12/14/04

  	
   

  	
  Louis
  Glick

  Diamond

  Corp.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  6/15/09

  	
   

  	
   

  	
   

  	
  Continuation

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5032663 8

  1/29/05

  	
   

  	
  IBM
  Credit

  LLC

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  1/5/07

  	
   

  	
   

  	
   

  	
  SP
  Assignment to Bank of America

  Leasing & Capital, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  1/11/07

  	
   

  	
   

  	
   

  	
  SP
  address change

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5068633 8

  3/3/05

  	
   

  	
  Siegelson’s

  Diamonds,

  Inc.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  10/23/08

  	
   

  	
   

  	
   

  	
  SP
  address change

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5069340 9

  2/23/05

  	
   

  	
  CIT

  Communications

  Finance

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5127395 3

  4/15/05

  	
   

  	
  Roberto

  Coin, Inc.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  

 

27

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5127813 5

  4/26/05

  	
   

  	
  IBM
  Credit

  LLC

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  1/5/07

  	
   

  	
   

  	
   

  	
  SP
  Assignment to Bank of America

  Leasing & Capital, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  1/11/07

  	
   

  	
   

  	
   

  	
  SP
  address change to Banc of America

  Leasing & Capital, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5128720 1

  4/18/05

  	
   

  	
  Roberto

  Coin, Inc.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5137906 5

  4/22/05

  	
   

  	
  Roberto

  Coin, Inc.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5138047 7

  4/22/05

  	
   

  	
  MB
  Financial

  Bank, N.A.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5210420 7

  7/8/05

  	
   

  	
  HSBC
  Bank

  Nevada,

  National

  Association

  	
   

  	
  All
  Assets under

  Securitization Transfer Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5252450 3

  8/15/05

  	
   

  	
  Irwin

  Business

  Finance

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5280534 0

  9/02/05

  	
   

  	
  Diatraco

  Corp.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5337352 0

  10/28/05

  	
   

  	
  Rosy
  Blue

  Fine Inc.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #5366139 5

  11/18/05

  	
   

  	
  MB
  Financial

  Bank, N.A.

  	
   

  	
  Equipment
  Lease

  Assigned to MB by Relational, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #6020880 1

  1/19/06

  	
   

  	
  Relational,

  LLC

  	
   

  	
  Equipment
  Lease

  

 

28

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  1/27/06

  	
   

  	
   

  	
   

  	
  SP
  Assignment to MB Financial Bank, N.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #6053824 9

  2/14/06

  	
   

  	
  CIT

  Communications

  Finance

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #6171852 7

  5/22/06

  	
   

  	
  CIT

  Technologies

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  6/28/06

  	
   

  	
   

  	
   

  	
  SP
  Assignment to Banc of America Leasing

  & Capital, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #6171856 8

  5/22/06

  	
   

  	
  CIT

  Technologies

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  12/27/06

  	
   

  	
   

  	
   

  	
  SP
  Assignment to Banc of America Leasing

  & Capital, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #6241837 4

  7/13/06

  	
   

  	
  Fred

  Leighton

  LLC

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #6278765 3

  8/7/06

  	
   

  	
  CIT

  Technologies

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  9/5/06

  	
   

  	
   

  	
   

  	
  SP
  Assignment to Banc of America Leasing

  & Capital, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #6359634 3

  10/17/06

  	
   

  	
  E.J.

  Landrigan

  Inc. d/b/a

  Verdura

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  10/20/06

  	
   

  	
   

  	
   

  	
  SP
  Assignment to Brown Brothers

  Harriman & Co.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #6366087 5

  10/20/06

  	
   

  	
  Canon

  Financial

  Services

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2007 0272947

  1/22/07

  	
   

  	
  Cusp
  LLC

  	
   

  	
  Trademark,
  goodwill and USPTO

  registration

  

 

29

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2007 2414190

  6/26/07

  	
   

  	
  TCF

  Equipment

  Finance, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2007 2439700

  6/27/07

  	
   

  	
  CIT

  Technologies

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  3/18/08

  	
   

  	
   

  	
   

  	
  SP
  Assignment to Banc of America Leasing

  & Capital, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  8/4/08

  	
   

  	
   

  	
   

  	
  SP
  Assignment to Macquarie Equipment

  Finance, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2007 3310405

  8/30/07

  	
   

  	
  Leasenet

  Group, LLC

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2007 3339313

  8/31/07

  	
   

  	
  Canon

  Financial

  Services

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2007 3470993

  9/13/07

  	
   

  	
  CIT

  Technologies

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2007 3471322

  9/13/07

  	
   

  	
  Banc
  of

  America

  Leasing &

  Capital, LLC

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2007 4082995

  10/26/07

  	
   

  	
  LV

  Associates,

  LLC

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 0676161

  2/25/08

  	
   

  	
  Canon

  Financial

  Services

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 0695211

  2/22/08

  	
   

  	
  Assael

  International

  Inc.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 0712297

  2/25/08

  	
   

  	
  J.R.
  Gold

  Design, Ltd.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  

 

30

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 0824233

  3/7/08

  	
   

  	
  Canon

  Financial

  Services

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 1625662

  5/9/08

  	
   

  	
  Michael

  Beaudry, Inc.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 2403309

  7/14/08

  	
   

  	
  Buccellati,

  Inc.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 3473921

  10/14/08

  	
   

  	
  Jewels
  by

  Star Ltd.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 3583570

  10/23/08

  	
   

  	
  Gumachian

  Fils, Ltd.

  	
   

  	
  Delivery
  of Jewelry Pursuant to

  Consignment Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 3690045

  11/3/08

  	
   

  	
  Harry

  Winston, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 3790415

  11/12/08

  	
   

  	
  Emsaru

  Jewels Corp.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 3942040

  11/25/08

  	
   

  	
  Paul
  Fisher,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 4086946

  12/9/08

  	
   

  	
  CI &
  AO

  Metal

  Industries

  Ltd d/b/a

  Yvel, an

  Israeli

  Company

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 4293666

  12/29/08

  	
   

  	
  Matsui
  Pearl

  Corporation

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  2/26/09

  	
   

  	
   

  	
   

  	
  Debtor
  Name Change to The Neiman

  Marcus Group, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  2/26/09

  	
   

  	
   

  	
   

  	
  Collateral
  Restatement

  

 

31

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2008 4313860

  12/19/08

  	
   

  	
  Somerset

  Manufacturers

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0289949

  1/28/09

  	
   

  	
  Italian

  Jewelry of

  America, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0320504

  1/30/09

  	
   

  	
  Gurhan
  New

  York Inc

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0357894

  1/22/09

  	
   

  	
  Bayco
  Gem

  Corp.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0395878

  2/5/09

  	
   

  	
  Temple
  St

  Clair LLC

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0526993

  2/18/09

  	
   

  	
  Norman

  Silverman

  Diamonds, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0706736

  3/5/09

  	
   

  	
  Roberto

  Coin, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0706751

  3/5/09

  	
   

  	
  Eclat
  Jewels,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0706801

  3/5/09

  	
   

  	
  E.
  Lee

  Martin, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0713435

  3/6/09

  	
   

  	
  Leiber
  Fine

  Jewelry

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0832128

  3/16/09

  	
   

  	
  Jonathan

  Doppelt, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0832144

  3/16/09

  	
   

  	
  A.
  Doppelt

  Company,

  Inc.

  	
   

  	
  Consignment
  Transaction

  

 

32

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0861432

  3/18/09

  	
   

  	
  Semi
  Gems,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0904042

  3/20/09

  	
   

  	
  Alexander

  Primak

  Jewelry, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0924743

  3/24/09

  	
   

  	
  Lorraine
  E.

  Schwartz,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0957073

  3/25/09

  	
   

  	
  Bhasin

  Enterprises,

  Inc. d/b/a

  COOMI

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0958170

  3/26/09

  	
   

  	
  Durland
  Co.,

  Inc.

  	
   

  	
  Inventory

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 0971223

  3/26/09

  	
   

  	
  Chopard

  USA Ltd.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1109104

  4/7/09

  	
   

  	
  WINC

  Creations

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1111936

  4/7/09

  	
   

  	
  N.
  Gogolick

  & Son Corp.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1220018

  4/9/09

  	
   

  	
  Golconda

  LLC d/b/a

  Tepedino

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1225124

  4/13/09

  	
   

  	
  Oscar

  Heyman &

  Brothers, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1309001

  4/24/09

  	
   

  	
  Christian
  Tse

  Corporation

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1356622

  4/29/09

  	
   

  	
  Elizabeth

  Locke, dba

  Elizabeth

  Locke Jewels

  	
   

  	
  Consignment
  Transaction

  

 

33

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1405528

  5/4/09

  	
   

  	
  Di
  Modolo

  International,

  LLC

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1435731

  5/6/09

  	
   

  	
  Elizabeth

  Blair, Ltd.,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1525283

  5/7/09

  	
   

  	
  M.
  Chalom &

  Son, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1533683

  5/7/09

  	
   

  	
  MAIDI
  Corp.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1587499

  5/19/09

  	
   

  	
  Gordon
  J.

  Bares, Inc.

  	
   

  	
  Inventory

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1590931

  5/19/09

  	
   

  	
  A.S.

  International

  Trading

  Corp.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1603908

  5/20/09

  	
   

  	
  Mellika
  Co.

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #2009 1777835

  6/04/09

  	
   

  	
  Muse

  Imports Ltd.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
  TX

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #04-0053714004

  1/12/04

  	
   

  	
  RBC
  100

  LLC d/b/a

  Roberto Coin

  Cento

  Collection

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #05-0039767047

  12/30/05

  	
   

  	
  CIT

  Communications

  Finance

  Corporation

  	
   

  	
  Equipment
  Lease

  

 

34

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #06-0001581748

  1/17/06

  	
   

  	
  CIT

  Communications

  Finance

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  1/20/06

  	
   

  	
   

  	
   

  	
  Amendment
  adding collateral

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #06 0023706872

  7/13/06

  	
   

  	
  Fred

  Leighton

  LLC

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #08-0007721146

  3/4/08

  	
   

  	
  Hirsch

  International

  Corporation

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #08 0037641211

  11/20/08

  	
   

  	
  Franck

  Muller USA,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #08 0037641322

  11/20/08

  	
   

  	
  Pierre
  Kunz

  USA, Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #08 0037641433

  11/20/08

  	
   

  	
  Barthelay,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #08 0038035724

  11/25/08

  	
   

  	
  Paul
  Fisher,

  Inc.

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #08 0040010417

  12/17/08

  	
   

  	
  Barudan

  America, Inc.

  	
   

  	
  Equipment
  Lease

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #08 0041194067

  12/31/08

  	
   

  	
  Matsui
  Pearl

  Corporation

  	
   

  	
  Consignment
  Transaction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-3

  2/26/09

  	
   

  	
   

  	
   

  	
  Amendment
  to restate collateral

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09 0002231996

  1/23/09

  	
   

  	
  J.B.

  International

  	
   

  	
  Diamonds
  and diamond jewelry

  

 

35

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09 0002692068

  1/28/09

  	
   

  	
  Italian

  Jewelry of

  America, Inc.

  	
   

  	
  Consignment
  Transaction

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09 0007747195

  3/19/09

  	
   

  	
  Elizabeth

  Blair, Ltd.,

  Inc.

  	
   

  	
  Consignment
  Transaction

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09 0007849481

  3/20/09

  	
   

  	
  Cynthia

  Bach, Inc.

  	
   

  	
  Consignment
  Transaction

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09 0008490828

  3/26/09

  	
   

  	
  Chopard

  USA Ltd.

  	
   

  	
  Consignment
  Transaction

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09 0011725196

  4/24/09

  	
   

  	
  Christian
  Tse

  Corporation

  	
   

  	
  Consignment
  Transaction

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09

  0013158522

  5/8/09

  	
   

  	
  Sal
  Praschnik

  Inc.

  	
   

  	
  Consignment
  Transaction

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09

  0013628827

  5/13/09

  	
   

  	
  Paul
  Morelli

  Design, Inc

  	
   

  	
  Consignment
  Transaction

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09

  0014215880

  5/19/09

  	
   

  	
  Gordon
  J.

  Bares, Inc.

  	
   

  	
  Inventory

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09

  0014228632

  5/19/09

  	
   

  	
  Durland
  Co.,

  Inc.

  	
   

  	
  Inventory

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  UCC-1

  #09

  0014338886

  5/20/09

  	
   

  	
  Mellika
  Co.

  Inc.

  	
   

  	
  Consignment
  Transaction

  	
   

  

 

36

 

SCHEDULE 6.04

 

Existing Investments

 

Credit Agreement dated October 3, 2005 for a
five-year term between the Company and Helen Lambert, an individual, Lambert &
Associates Limited (formerly Minmar (715) Limited) and related companies
(collectively, “Lambert”) in connection with the renewal of the foreign
buying office arrangement with Actis Grande Associates.  This agreement is secured by the assets and
stock of Lambert, including the Foreign Buying Office Agreement (“FBOA”)
with the Company. The total original amount of the original loan was
approximately 1.1 million euros, upon which interest accrues at a floating
prime rate. Repayment of the loan extended to Lambert pursuant to the Credit
Agreement occurs through reductions in the management fees paid to Lambert by
the Company under the FBOA.

 

37

 

SCHEDULE 6.05

 

Specified Asset Sales

 

	
  Name

  	
   

  	
  Date

  	
   

  
	
  Gurwitch
  Products, L.L.C.

  	
   

  	
  July 27, 2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kate
  Spade LLC

  	
   

  	
  December 13, 2006

  	
   

  

 

38

 

SCHEDULE 6.09

 

Transactions with Affiliates

 

NM Nevada Trust is a Massachusetts business trust
established on December 30, 1996. 
The trustee is NM Financial Services, Inc. NM Nevada Trust is owned
by the Company (90%)
and Bergdorf Goodman, Inc. (10%) and was established for the purpose of
holding the consolidated group’s intangible assets, such as the trademarks,
trade names, etc. Inter-company agreements and notes are in place establishing
the royalty charges and related interest to the Company, Bergdorf Goodman, Inc. and
BergdorfGoodman.com, LLC.

 

NMGP, LLC is a Virginia limited liability corporation
established on April 21, 2003.  It
is a wholly owned subsidiary of the Company, and was established for the purpose of
holding and managing the gift card liabilities of the Company and Bergdorf Goodman, Inc.
Inter-company agreements are in place for the services provided between NMPG,
LLC and the Company.

 

Quality Call Care Solutions, Inc. (QCCS) is a
Canadian Company organized for the purpose of operating a call center in
Edmonton, Ontario. Inter-company agreements are in place for the services
provided by QCCS to the Company, Bergdorf Goodman, Inc. and BergdorfGoodman.com,
LLC.

 

BergdorfGoodman.com, LLC (BG.com) is a Delaware limited
liability company formed for the purpose of operating a website,
BergdorfGoodman.com, selling merchandise under the Bergdorf Goodman trademark.
Inter-company employment and management services agreements are in place
between BG.com and the Company.

 

39

 

SCHEDULE 6.10

 

Existing Restrictions

 

Restrictions and conditions
under the Existing Notes

 

Restrictions and conditions
under the Senior Secured Term Loan Facility

 

Restrictions and conditions
under the 2028 Debentures

 

40

 

SCHEDULE 9.01

 

The Company’s Website for Electronic Delivery

 

www.neimanmarcusgroup.com

 

41

 

EXHIBIT A

 

[FORM OF]

ASSIGNMENT AND ASSUMPTION

 

This Assignment and Assumption (the “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 Credit Agreement identified below
(as amended, supplemented or otherwise modified from time to time, the “Credit
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 Credit Agreement, as
of the Effective Date inserted by the Agent as contemplated below (i) all
of the Assignor’s rights and obligations in its capacity as a Lender under the
Credit 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 any letters of credit,
guarantees, and swingline loans 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 Credit 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 contract claims, tort
claims, malpractice claims, statutory claims and all other 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.

 

	
  1.

  	
  Assignor:

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Assignee:

  	
   

  
	
   

  	
   

  	
  [and is an
  Affiliate/Approved Fund of [identify Lender](1)]

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Borrower(s)

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Agent:

  	
  Bank
  of America, N.A., as the administrative agent and a co-collateral agent under
  the Credit Agreement.

  

 

(1)   Select as applicable.

 

 

	
  5.

  	
  Credit Agreement:

  	
  The Credit Agreement
  dated as of July 15, 2009, among The Neiman Marcus Group, Inc., a
  Delaware corporation (the “Company”), Neiman Marcus, Inc., a
  Delaware corporation (“Holdings”), each subsidiary of the Company from
  time to time party thereto, the Lenders parties thereto, Bank of America,
  N.A. (“BANA”), as administrative agent for the Lenders thereunder (the
  “Agent”) and BANA and Wells Fargo Retail Finance, LLC, as
  co-collateral agents (the “Co-Collateral Agents”).

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Assigned Interest:

  	
   

  

 

	
  Aggregate
  Amount of

  Commitment/Loans

  	
   

  	
  Amount of

  Commitment/Loans Assigned

  	
   

  	
  CUSIP

  	
   

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  

 

7.        Each notice or other communication hereunder shall be in
writing, shall be sent by messenger, by telecopy or facsimile transmission, or
by first-class mail, shall be deemed given when sent and shall be sent as
follows:

 

(a)                                  If to Assignee, to the
following address (or to such other address as Assignee may designate from time
to time):

 

 

 

(b)                                 If to Assignor,
to the following address (or to such other address as Assignor may designate
from time to time):

 

 

 

Payments hereunder shall be made by wire transfer of
immediately available Dollars as follows:

 

If to Assignee, to the following account (or to such
other account as Assignee may designate from time to time):

 

 

ABA
No.

 

Account
No.

 

 

Reference:

 

If to Assignor, to the following account (or to such
other account as Assignor may designate from time to time):

 

 

ABA
No.

 

Account
No.

Reference:

 

Effective Date:                                
    , 20       [TO BE
INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]

 

The terms set forth in this Assignment and Assumption
are hereby agreed to:

 

	
   

  	
  ASSIGNOR

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [NAME OF
  ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [NAME OF
  ASSIGNEE]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
  Consented to and Accepted:

  	
   

  
	
   

  	
   

  
	
  BANK OF AMERICA, N.A., as
  Agent

  	
   

  
	
   

  	
   

  
	
   

  	
  by:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [ISSUING BANK],(2) as Issuing
  Bank

  	
   

  
	
   

  	
   

  
	
   

  	
  by:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [ISSUING BANK], as Issuing Bank

  	
   

  
	
   

  	
   

  
	
   

  	
  by:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [Consented to:](3)

  	
   

  
	
   

  	
   

  
	
  [THE NEIMAN MARCUS GROUP,
  INC.]

  	
   

  
	
   

  	
   

  
	
   

  	
  by:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

(2)          Pursuant to Section 9.04, each Issuing Bank is
required to consent to an assignment under the Credit Agreement.

 

(3)          To be added only if the consent of the Borrower is
required by the terms of the Credit Agreement.

 

 

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, (iii) its Commitment, and the outstanding balances of its Revolving
Loans, in each case without giving effect to assignments thereof which have not
become effective, are as set forth herein, and (iv) 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
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of
the Company, 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 Company, any of its Subsidiaries or Affiliates or any other
Person of any of their respective obligations under any Loan Document.

 

1.2.  Assignee.  The Assignee (a) represents and warrants
that (i) it is an Eligible Assignee and 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 Credit Agreement, (ii) it satisfies the requirements,
if any, specified in the Credit Agreement that are required to be satisfied by
it in order to acquire the Assigned Interest and become a Lender, (iii) from
and after the Effective Date, it shall be bound by the provisions of the Credit
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 Credit Agreement, together with copies of the most recent financial
statements referred to in Section 3.04(a) or delivered pursuant to Section 5.01
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 Agent or any other Lender, and (v) if it is a Foreign
Lender, attached to the Assignment and Assumption is any documentation required
to be delivered by it pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it
will, independently and without reliance on the 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 Loan Documents, (ii) it appoints and
authorizes the Agent to take such action on its behalf and to exercise such
powers under the Credit Agreement as are delegated to the Agent, by the terms
thereof, together with such powers as are reasonably incidental thereto, and (iii) it
will perform in accordance with their terms all of the obligations which by the
terms of the Loan Documents are required to be performed by it as a Lender.

 

2.  Payments.  From and after the Effective Date, the 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 facsimile
shall be effective as delivery of a manually executed counterpart of this
Assignment and Assumption.  This
Assignment and Assumption shall be construed in accordance with and governed by
the laws of the State of New York.

 

 

EXHIBIT B

 

[FORM OF]

BORROWING BASE CERTIFICATE

 

[See Attached]

 

 

Neiman
Marcus, Inc.

Form of
Borrowing Base Certificate

For the Period
Ended               

(Dollar amount in
thousands)

 

	
   

  	
   

  	
    Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Ending
  Stock Ledger Inventory

  	
  As of:

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Plus:

  	
   

  	
   

  	
   

  
	
  Inventory
  received but not recorded in Stock Ledger

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
   

  	
   

  	
   

  
	
  Consignment

  	
   

  	
  $

  	
  —

  	
   

  
	
  Slow
  Moving, Obsolete, Unmerchantable, Defective

  	
   

  	
  $

  	
  —

  	
   

  
	
  Returns,
  WIP, Raw Materials, Packaging, Shipping

  	
   

  	
  $

  	
  —

  	
   

  
	
  Not
  located in U.S. or In-transit

  	
   

  	
  $

  	
  —

  	
   

  
	
  Located
  at Leased Locations without CAA

  	
   

  	
  $

  	
  —

  	
   

  
	
  Located
  with Third party

  	
   

  	
  $

  	
  —

  	
   

  
	
  Shrink
  (in excess of Company’s current retail stock ledger)

  	
   

  	
  $

  	
  —

  	
   

  
	
  Other

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Net
  Eligible Inventory

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  NOLV
  (90.2% Jan-Sept; 94.9% Oct-Dec)

  	
   

  	
  90.20

  	
  %

  
	
  Advance
  Rate (lesser of 80% of Eligible Inventory or 85% of NOLV)

  	
   

  	
  76.67

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Inventory
  Availability

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Credit
  Card Processor Accounts

  	
   

  	
  $

  	
  —

  	
   

  
	
  Ineligibles

  	
   

  	
  $

  	
  —

  	
   

  
	
  Eligible
  Accounts

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Advance
  Rate

  	
   

  	
  85

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Eligible
  Account Availability

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Borrowing
  Base before Availability Reserves

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Availability
  Reserves

  	
   

  	
   

  	
   

  
	
  Gift
  Card Liability (50%)

  	
   

  	
  $

  	
  —

  	
   

  
	
  Merchandise
  Credits (50%)

  	
   

  	
  $

  	
  —

  	
   

  
	
  Customer
  Deposits (100%)

  	
   

  	
  $

  	
  —

  	
   

  
	
  Customer
  Rewards Program (50%)

  	
   

  	
  $

  	
  —

  	
   

  
	
  Undelivered
  Sales (100%)

  	
   

  	
  $

  	
  —

  	
   

  
	
  Landlord
  Lien (two months rent PA, VA, WA, DE, DC)

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Borrowing
  Base

  	
   

  	
  $

  	
  —

  	
   

  
						

 

1

 

Neiman
Marcus, Inc.

 

	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Availability
  Calculation

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning
  Principal Balance

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Add
  prior days advance

  	
   

  	
   

  	
   

  
	
  Add
  fees charged today

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less
  prior day’s pay down

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Ending
  principal

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Add
  Letters of Credit

  	
   

  	
  $

  	
  0

  	
   

  
	
  Commercial L/C

  	
   

  	
   

  	
   

  
	
  Standby L/C

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  liability prior to request

  	
   

  	
  $

  	
  0

  	
   

  
	
  (a) Revolving
  Commitment

  	
   

  	
   

  	
   

  
	
  (b) Borrowing
  Base

  	
   

  	
   

  	
   

  
	
  Not
  to exceed (lower of a or b) 

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Availability prior to today’s request

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Advance Request

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Availability after today’s request

  	
   

  	
  $

  	
  —

  	
   

  
								

 

Pursuant to, and in
accordance with, the terms and provisions of that certain Amended and Restated
Credit Agreement dated as of July [     ], 2009
(the “Credit Agreement”), among The Neiman Marcus Group, Inc. (the
“Company”), Neiman Marcus, Inc., each subsidiary of the Company party
thereto, the financial institutions listed therein as Lenders, Bank of America,
N.A., as administrative agent (“BANA” or the “Agent”) and BANA and Wells Fargo
Retail Finance, LLC as Co-Collateral Agents, the Company is executing and
delivering to Agent this Borrowing Base Certificate accompanied by such
supporting data as the Agent has requested in accordance with the terms of the
Credit Agreement (collectively referred to as the “Certificate”).  The Company represents and warrants to Agent
that (i) this Certificate is true and correct in all material respects, (ii) this
Certificate is based on information contained in the Company’s own financial
accounting records and (iii) the amounts set forth in this Certificate are
determined in accordance with the Credit Agreement.

 

	
  Authorized Signer:

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

2

 

EXHIBIT C

 

[FORM OF]

COMPLIANCE CERTIFICATE

 

To:                              The Lenders parties to the

Credit Agreement described below

 

This Compliance Certificate is furnished pursuant to
that certain Credit Agreement dated as of July 15, 2009,
among The Neiman Marcus Group, Inc., a Delaware corporation (the “Company”),
Neiman Marcus, Inc., a Delaware corporation (“Holdings”), each
subsidiary of the Company from time to time party thereto, the Lenders parties
thereto, Bank of America, N.A. (“BANA”), as administrative agent for the
Lenders thereunder (the “Agent”) and BANA and Wells Fargo Retail
Finance, LLC, as co-collateral agents (the “Co-Collateral Agents”).  Unless otherwise defined herein, capitalized
terms used in this Compliance Certificate have the meanings ascribed thereto in the Credit
Agreement.

 

THE UNDERSIGNED HEREBY CERTIFIES THAT:

 

1.             I
am the duly elected
                                
of the Company and a Financial Officer of the Company;

 

2.             I
have reviewed the terms of the Credit Agreement and I have made, or have caused
to be made under my supervision, a detailed review of the transactions and
conditions of the Company and its Subsidiaries during the accounting period
covered by the attached financial statements;

 

3.             The
examinations described in paragraph 2 did not disclose, except as set
forth below, and I have no knowledge of (i) the existence of any condition
or event which constitutes a Default or Event of Default during or at the end
of the accounting period covered by the attached financial statements or as of
the date of this Certificate and (ii) the disclosure set forth below
specifies the details of any such condition or event and any action taken or
proposed to be taken with respect thereto;

 

4.             No
Loan Party (a) has changed (i) its name, (ii) the location of
its chief executive office or its principal place of business, (iii) its
organizational legal entity designation or jurisdiction of incorporation or
formation, or (iv) its Federal Taxpayer Identification Number or
organizational identification number assigned to it by its jurisdiction of
incorporation or formation, or (b) has made an acquisition of any material
property for which additional filings or recordings are necessary to perfect
and maintain the Agent’s security interest therein, in each case, without
having given the Agent the notice required by Section 4.1 of the Security
Agreement;

 

5.             [For
annual or quarterly certificates, add:  Schedule
I attached hereto sets forth reasonably detailed calculations of the Fixed
Charge Coverage Ratio (whether or not a Liquidity Event then exists) as of the
end of the accounting period covered by the attached financial statements;]

 

 

6.             [For
annual certificates, add:  Schedule II
sets forth a list of names of all Immaterial Subsidiaries, each Subsidiary set
forth on Schedule II individually qualifies as an Immaterial Subsidiary and all
Domestic Subsidiaries listed as Immaterial Subsidiaries in the aggregate
comprise less than 5% of consolidated total assets of the Company and the
Subsidiaries at the end of the accounting period covered by the attached
financial statements and represented (on a contribution basis) less than 5% of
EBITDA for such period;]

 

7.             [For
annual certificates, add:  Schedule
III sets forth a list of names of all Unrestricted Subsidiaries and each
Subsidiary set forth on Schedule III individually qualifies as an Unrestricted
Subsidiary;]

 

8.             [For
annual and quarterly certificates, add:  Schedule
IV hereto sets forth the computations necessary to determine the Applicable
Rate commencing on the Business Day this certificate is delivered;]

 

9.             [For
quarterly certificates, add:  Schedule
V sets forth a list of Permitted Acquisitions consummated during the
preceding fiscal quarter, each described in reasonable detail.]

 

The description below sets forth the exceptions, if
any, to paragraph 3 by listing, in detail, the nature of the condition or
event, the period during which it has existed and the action which the Company
has taken, is taking, or proposes to take with respect to each such condition
or event:

 

 

 

The foregoing certifications, together with the
information set forth in the Schedules hereto and the financial statements
delivered with this Certificate in support hereof, are made and delivered
this day of
                            ,
20      .

 

 

	
   

  	
  THE NEIMAN
  MARCUS GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
				

 

 

SCHEDULE I

 

Calculations of the Company’s 

Fixed Charge Coverage Ratio

 

 

SCHEDULE II

 

Immaterial Subsidiaries

 

 

SCHEDULE III

 

Unrestricted Subsidiaries

 

 

SCHEDULE IV

 

Company’s Applicable Rate Calculation

 

 

SCHEDULE V

 

Permitted Acquisitions

 

 

EXHIBIT D

 

[FORM OF]

JOINDER AGREEMENT

 

THIS JOINDER AGREEMENT (this
“Agreement”), dated as of
                        ,
        , 20    ,
is entered into
between
                                                      ,
a
                              
(the “New Subsidiary”) and BANK OF AMERICA, N.A., as Agent, under that
certain Credit Agreement dated as of July 15, 2009, among The Neiman
Marcus Group, Inc., a Delaware corporation (the “Company”), Neiman
Marcus, Inc., a Delaware corporation (“Holdings”), each subsidiary of the Company from time
to time party thereto, the Lenders parties thereto, Bank of America, N.A. (“BANA”),
as administrative agent for the Lenders thereunder (the “Agent”) and
BANA and Wells Fargo Retail Finance, LLC, as co-collateral agents (the “Co-Collateral
Agents”).  All capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.

 

The New Subsidiary and the Agent, for the benefit of
the Lenders, hereby agree as follows:

 

1.             The
New Subsidiary  hereby acknowledges,
agrees and confirms that, by its execution of this Agreement, the New
Subsidiary will be deemed to be a Loan Party under the Credit Agreement and a
[Borrower and] Loan Guarantor for all purposes of the Credit Agreement and
shall have all of the obligations of a Loan Party and a [Borrower and] Loan
Guarantor thereunder as if it had executed the Credit Agreement.  The New Subsidiary hereby ratifies, as of the
date hereof, and agrees to be bound by, all of the terms, provisions and
conditions contained in the Credit Agreement, including without limitation (a) all
of the representations and warranties of the Loan Parties set forth in Article III
of the Credit Agreement (to the extent made or deemed made on or after the
effective date hereof), (b) all of the covenants set forth in
Articles V and VI of the Credit Agreement, [and] (c) [all of the
terms and conditions set forth in the Credit Agreement to the same extent as
each of the other Borrowers as if it had been a party thereto as a Borrower and
does hereby assume each of the obligations imposed upon a Borrower under the
Credit Agreement, and (d)] all of the guaranty obligations set forth in Article X
of the Credit Agreement.  Without
limiting the generality of the foregoing terms of this paragraph 1, the
New Subsidiary, subject to the limitations set forth in Section 10.09 of
the Credit Agreement, hereby absolutely and unconditionally guarantees, jointly
and severally with the other Loan Guarantors, to the Agent and the Lenders, the
prompt payment of the Guaranteed Obligations in full when due (whether at
stated maturity, upon acceleration or otherwise) to the extent of and in
accordance with Article X of the Credit Agreement.

 

2.             If
required, the New Subsidiary is, simultaneously with the execution of this
Agreement, executing and delivering such Collateral Documents (and such other
documents and instruments) as requested by the Agent in accordance with the
Credit Agreement.

 

3.             The
New Subsidiary hereby agrees that each reference in the Credit Agreement to a [“Borrower”
and]             “Loan Guarantor” shall
also mean and be a reference to the New Subsidiary.

 

 

4.             The
New Subsidiary hereby waives acceptance by the Agent and the Lenders of the
guaranty by the New Subsidiary upon the execution of this Agreement by the New
Subsidiary.

 

5.             This
Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be an original, but all of which shall constitute
one and the same instrument.

 

5.             THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

IN WITNESS WHEREOF, the New Subsidiary has caused this
Agreement to be duly executed by its authorized officer, and the 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.

 

	
   

  	
   

  	
  [NEW SUBSIDIARY]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Acknowledged and accepted:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BANK OF AMERICA,
  N.A., as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT E

 

[FORM OF]

LETTER OF CREDIT REQUEST

 

[Applicable Issuing Bank],(1) 

as Issuing Bank

 

	
  Attention:

  	
  [Name]

  
	
   

  	
  [Address]

  
	
   

  	
  Fax: [·]

  
	
   

  	
   

  
	
  with a copy to:

  	
  Bank of America, N.A., 

  
	
   

  	
  as Agent for the Lenders referred to below,

  
	
   

  	
   

  
	
  Attention:

  	
  [Name]

  
	
   

  	
  [                        ] 

  
	
   

  	
  Fax:  [·]

  

 

[Date]

 

Ladies and Gentlemen:

 

We
hereby request that [·](2), as an Issuing Bank, in its
individual capacity, issue a [Standby][Commercial] Letter of Credit on [·](3),
which Letter of Credit shall be denominated in United States Dollars, shall be
in the aggregate amount of [·](4) and shall be for the account of
[·](5). 
For the purposes of this Letter of Credit Request, unless otherwise
defined herein, all capitalized terms used herein and defined in the Credit
Agreement dated as of July [   ],
2009, among The Neiman Marcus Group, Inc., a Delaware corporation (the “Company”),
Neiman Marcus, Inc., a Delaware corporation (“Holdings”), each
subsidiary of the Company from time to time party thereto, the Lenders parties
thereto, Bank of America, N.A. (“BANA”), as administrative agent for the
Lenders thereunder (the “Agent”) and BANA and Wells Fargo Retail
Finance, LLC, as co-collateral agents (the “Co-Collateral Agents”), shall have the respective meaning
assigned to such terms in the Credit Agreement. 
The beneficiary of the requested Letter of Credit is [·](6),
and such Letter of Credit will be in support of [·](7) and
will have a stated expiration date of [·](8).

 

	
  (1)

  	
  Insert name and
  address of the applicable Issuing Bank.

  
	
  (2)

  	
  Insert name of
  the applicable Issuing Bank.

  
	
  (3)

  	
  Insert date of
  issuance, which must be a Business Day.

  
	
  (4)

  	
  Insert aggregate
  initial amount of the Letter of Credit.

  
	
  (5)

  	
  Insert name of
  account party, which must be the Company or, so long as the Company is a
  joint and several co-applicant, a subsidiary of the Company.

  
	
  (6)

  	
  Insert name and
  address of beneficiary.

  
	
  (7)

  	
  Insert brief
  description of obligation(s) to be supported by the Letter of Credit.

  
	
  (8)

  	
  Date may not be later than the date
  referred to in Section 2.06(c) of the Credit Agreement.

  

 

 

	
   

  	
  [THE NEIMAN
  MARCUS GROUP, INC.]

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT F

 

[FORM OF]

BORROWING REQUEST

 

Bank of America, N.A.,

as Agent for the Lenders referred to below,

[                     
 ]

 

Attention:  [·]

 

[Date](1)

 

Ladies and Gentlemen:

 

Reference is made to the Credit Agreement dated as of
July 15, 2009, among The Neiman Marcus Group, Inc., a Delaware
corporation (the “Company”), Neiman Marcus, Inc., a Delaware
corporation (“Holdings”), each subsidiary of the Company from time to
time party thereto, Bank of America, N.A. (“BANA”), as administrative
agent for the Lenders thereunder (the “Agent”) and BANA and Wells Fargo
Retail Finance, LLC, as co-collateral agents (the “Co-Collateral Agents”) (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”).  Terms defined in the Credit Agreement are
used herein with the same meanings.

 

The undersigned Borrower Agent hereby gives you notice
pursuant to Section 2.03 of the Credit Agreement that it requests a
Borrowing under the Credit Agreement, and in that connection sets forth below
the terms on which such Borrowing is requested to be made:

 

	
  (A)

  	
   

  	
  Date of Borrowing

  (which shall be a Business Day)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (B)

  	
   

  	
  Principal Amount of
  Borrowing(2)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (C)

  	
   

  	
  Type of Borrowing(3)

  	
   

  	
   

  

 

(1)          Must be notified in writing or by
telephone (with such telephonic notification to be confirmed promptly in
writing) (i) in the case of a LIBOR Rate Borrowing, not later than 11:00 a.m.,
New York City time, three (3) Business Days (or, in the case of a
LIBOR Rate Borrowing to be made on the Closing Date, two (2) Business
Days) before the date of the proposed Borrowing or (ii) in the case of an
ABR Borrowing, not later than 10:00 a.m., New York City time, on the date
of the proposed Borrowing.

(2)          Not less than an aggregate principal
amount as indicated in Section 2.02(c) and in an integral multiple as
indicated therein.

(3)          Specify a LIBOR Rate Borrowing or an ABR
Borrowing.

 

 

	
  (D)

  	
   

  	
  Interest Period and the
  last day thereof (4)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (E)

  	
   

  	
  Account Number and
  Location

  	
   

  	
   

  

 

	
   

  	
  [THE NEIMAN
  MARCUS GROUP, INC.]

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

(4)          The initial Interest Period applicable to
a LIBOR Rate Borrowing shall be subject to the definition of “Interest Period”.

 

 

EXHIBIT G

 

[FORM OF]

REVOLVING PROMISSORY NOTE

 

	
  $[        ]

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
  [·], 200[·]

  

 

FOR VALUE RECEIVED, the undersigned, THE NEIMAN MARCUS
GROUP, INC., a Delaware corporation (the “Company” and “Borrower
Agent”) and the certain Domestic Subsidiaries of the Company that are
borrowers pursuant to Section 5.11(a) of the Credit Agreement
(collectively, the “Borrowers”), hereby promises to pay to
[    ] (the “Lender”) or its registered assigns, at
the office of Bank of America, N.A. (the “Agent”) at [                          ], on the dates and
in the amounts set forth in the Credit Agreement dated as of
July 15, 2009 (as the same may be amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), among The Neiman
Marcus Group, Inc., a Delaware corporation (the “Company”), Neiman
Marcus, Inc., a Delaware corporation (“Holdings”), each subsidiary
of the Company from time to time party thereto,   the
Lenders parties thereto, Bank of America, N.A. (“BANA”), as
administrative agent for the Lenders thereunder (the “Agent”) and BANA
and Wells Fargo Retail Finance, LLC, as co-collateral agents (the “Co-Collateral
Agents”), in
lawful money of the United States of America in immediately available funds,
the aggregate unpaid principal amount of all Revolving Loans made by the Lender
to the Borrowers pursuant to the Credit Agreement and to pay interest from the
date of such Revolving Loans on the principal amount thereof from time to time
outstanding, in like funds, at said office, at the rate or rates per annum and
payable on the dates provided in the Credit Agreement.  Terms used but not defined herein shall have
the meanings assigned to them in the Credit Agreement.

 

Principal of and interest on
this promissory note from time to time outstanding shall be due and payable as
provided in the Credit Agreement.  This
promissory note is issued pursuant to and evidences Revolving Loans under the
Credit Agreement, to which reference is made for a statement of the rights and
obligations of Lender and the duties and obligations of Borrowers.  The Credit Agreement contains provisions for
acceleration of the maturity of this promissory note upon the happening of
certain stated events, and for the borrowing, prepayment and reborrowing of
amounts upon specified terms and conditions.

 

The
holder of this promissory note is hereby authorized by Borrowers to record on a
schedule annexed to this promissory note (or on a supplemental schedule) the
amounts owing with respect to Revolving Loans, and the payment thereof.  Failure to make any notation, however, shall
not affect the rights of the holder of this promissory note or any obligations
of Borrowers hereunder or under any other Loan Documents.

 

Time
is of the essence of this promissory note. 
Each Borrower and all endorsers, sureties and guarantors of this
promissory note hereby severally waive demand, presentment for payment,
protest, notice of protest, notice of intention to accelerate the maturity of
this promissory note, diligence in collecting, the bringing of any suit against
any party, and any notice of or defense on account of any extensions, renewals,
partial payments, or changes in any manner of or in this promissory note or in
any of its terms, provisions and covenants, or any releases or substitutions of
any security, or any delay, indulgence or other act of any trustee or any
holder hereof, whether before or after maturity.  Borrowers jointly and severally agree to

 

 

pay,
and to save the holder of this promissory note harmless against, any liability
for the payment of all costs and expenses (including without limitation
reasonable attorneys’ fees) if this promissory note is collected by or through
an attorney-at-law.

 

In no contingency or event
whatsoever shall the amount paid or agreed to be paid to the holder of this
promissory note for the use, forbearance or detention of money advanced
hereunder exceed the highest lawful rate permitted under applicable law.  If any such excess amount is inadvertently paid
by Borrowers or inadvertently received by the holder of this promissory note,
such excess shall be returned to Borrowers or credited as a payment of
principal, in accordance with the Credit Agreement.  It is the intent hereof that Borrowers not
pay or contract to pay, and that holder of this promissory note not receive or
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by Borrowers under applicable law.

 

THIS PROMISSORY NOTE SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW
YORK.

 

	
   

  	
  THE NEIMAN
  MARCUS GROUP, INC., as a Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [                                                  ],

  
	
   

  	
  as a Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

EXHIBIT H

 

[FORM OF]

INCREMENTAL TERM PROMISSORY NOTE

 

	
  $[        ]

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
  [·], 20[·]

  

 

FOR VALUE RECEIVED, the undersigned, THE NEIMAN MARCUS
GROUP, INC., a Delaware corporation (the “Company” and “Borrower
Agent”) and the certain Domestic Subsidiaries of the Company that are
borrowers pursuant to Section 5.11(a) of the Credit Agreement
(collectively, the “Borrowers”), hereby promises to pay to
[    ] (the “Lender”) or its registered assigns, at
the office of Bank of America, N.A. (the “Agent”) at [                          ], on the dates and
in the amounts set forth in the Credit Agreement dated as of
July 15, 2009 (as the same may be amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), among The Neiman
Marcus Group, Inc., a Delaware corporation (the “Company”), Neiman
Marcus, Inc., a Delaware corporation (“Holdings”), each subsidiary
of the Company from time to time party thereto, the Lenders parties thereto,
Bank of America, N.A. (“BANA”), as administrative agent for the Lenders
thereunder (the “Agent”) and BANA and Wells Fargo Retail Finance, LLC,
as co-collateral agents (the “Co-Collateral Agents”), in lawful money of the United States of
America in immediately available funds, the aggregate unpaid principal amount
of all Incremental Term Loans made by the Lender to the Borrowers pursuant to
the Credit Agreement and to pay interest from the date of such
Incremental Term Loans on the principal amount thereof from time to time
outstanding, in like funds, at said office, at the rate or rates per annum and
payable on the dates provided in the Credit Agreement.  Terms used but not defined herein shall have
the meanings assigned to them in the Credit Agreement.

 

Principal of and interest on
this promissory note from time to time outstanding shall be due and payable as
provided in the Credit Agreement.  This
promissory note is issued pursuant to and evidences Lender’s Incremental Term
Loans under the Credit Agreement, to which reference is made for a statement of
the rights and obligations of Lender and the duties and obligations of
Borrowers.  The Credit Agreement contains
provisions for acceleration of the maturity of this promissory note upon the
happening of certain stated events, and for the prepayment of amounts upon
specified terms and conditions.

 

The
holder of this promissory note is hereby authorized by Borrowers to record on a
schedule annexed to this promissory note (or on a supplemental schedule) the
amounts owing with respect to the Incremental Term Loans, including payments
thereon.  Failure to make any notation,
however, shall not affect the rights of the holder of this Note or any
obligations of Borrowers hereunder or under any other Loan Documents.

 

Time
is of the essence of this promissory note. 
Each Borrower and all endorsers, sureties and guarantors of this
promissory note hereby severally waive demand, presentment for payment,
protest, notice of protest, notice of intention to accelerate the maturity of
this promissory note, diligence in collecting, the bringing of any suit against
any party, and any notice of or defense on account of any extensions, renewals,
partial payments, or changes in any manner of or in this promissory note or in
any of its terms, provisions and covenants, or any

 

 

releases
or substitutions of any security, or any delay, indulgence or other act of any
trustee or any holder hereof, whether before or after maturity.  Borrowers jointly and severally agree to pay,
and to save the holder of this promissory note harmless against, any liability
for the payment of all costs and expenses (including without limitation
reasonable attorneys’ fees) if this promissory note is collected by or through
an attorney-at-law.

 

In no contingency or event
whatsoever shall the amount paid or agreed to be paid to the holder of this
promissory note for the use, forbearance or detention of money advanced
hereunder exceed the highest lawful rate permitted under applicable law.  If any such excess amount is inadvertently
paid by Borrowers or inadvertently received by the holder of this promissory
note, such excess shall be returned to Borrowers or credited as a payment of
principal, in accordance with the Credit Agreement.  It is the intent hereof that Borrowers not
pay or contract to pay, and that holder of this promissory note not receive or
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by Borrowers under applicable law.

 

THIS PROMISSORY NOTE SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

 

	
   

  	
  THE NEIMAN
  MARCUS GROUP, INC., as a Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [                                                  ],

  
	
   

  	
  as a Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

Schedule
A to Note

 

LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS

 

	
  Date

  	
   

  	
  Amount
  of ABR Loans

  	
   

  	
  Amount
  Converted to

  ABR Loans

  	
   

  	
  Amount
  of Principal of

  ABR Loans Repaid

  	
   

  	
  Amount
  of ABR Loans

  Converted to LIBOR

  Rate Loans

  	
   

  	
  Unpaid
  Principal Balance of

  ABR Loans

  	
   

  	
  Notation
  Made By

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule
B to Note

 

LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF LIBOR RATE LOANS

 

	
  Date

  	
   

  	
  Amount
  of

  LIBOR Rate

  Loans

  	
   

  	
  Amount

  Converted to

  LIBOR Rate

  Loans

  	
   

  	
  Interest
  Period

  and Adjusted

  LIBOR with

  Respect Thereto

  	
   

  	
  Amount
  of

  Principal of

  LIBOR Rate

  Loans Repaid

  	
   

  	
  Amount
  of LIBOR

  Rate Loans

  Converted to ABR

  Loans

  	
   

  	
  Unpaid

  Principal

  Balance of

  LIBOR Rate

  Loans

  	
   

  	
  Notation
  Made

  By

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