UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  December 23, 2004

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrants under any of the following provisions (see General Instruction A.2. below):

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On December 23, 2004 (the “Closing Date”), J. Crew Operating Corp. (“Operating”) borrowed $275,000,000 in term loans (“Term Loans”) under the Senior Subordinated Loan Agreement (the “Senior Subordinated Loan Agreement”) dated as of November 21, 2004, among Operating, as borrower, and certain subsidiaries of Operating, as guarantors, entities managed by Black Canyon Capital LLC and Canyon Capital Advisors LLC (together, “Black Canyon”) and certain other entities party thereto, as lenders, and U.S Bank National Association (“USBNA”), as administrative agent.  The Term Loans will bear interest at a rate equal to 9.75% per annum, payable semiannually, and will mature on the tenth anniversary of the Closing Date.  The proceeds of the Term Loans were used to redeem in full Operating’s outstanding 10 3/8% Senior Subordinated Notes due 2007 and redeem in part J. Crew Intermediate LLC’s 16% Senior Discount Contingent Principal Notes due 2008.  (See Item 8.01 below)  A copy of the Senior Subordinated Loan Agreement is attached as Exhibit 4.1 hereto.

Upon the occurrence of certain events, the Term Loans will be exchanged for new 9¾% Senior Subordinated Notes due 2014 (the “Notes”).  The Notes will be issued by Operating and guaranteed by J. Crew Intermediate LLC (“Intermediate”) and certain subsidiaries of Operating under an indenture to be executed by Operating, the guarantors and USBNA, as trustee (the “Indenture” and, together with the Senior Subordinated Loan Agreement, the “Black Canyon Documents”).  A copy of the form of the Indenture is attached as Exhibit F to the Senior Subordinated Loan Agreement.

On the Closing Date, a Security Agreement, dated as of November 21, 2004, among Operating, Intermediate and certain subsidiaries of Operating, as grantors, and USBNA, as collateral agent (the “Security Agreement”), became effective.  Pursuant to the Security Agreement, the Term Loans are (and the Notes upon issuance will be) secured by assets of Operating and certain subsidiaries of Operating (and Intermediate upon the issuance of the Notes).  The secur ity interest granted under the Security Agreement is junior in priority to that securing certain first-lien obligations, including the obligations under the Amended and Restated Loan Agreement (as defined below).  A copy of the Security Agreement is attached as Exhibit 4.2 hereto.

On the Closing Date, an Intercreditor Agreement, dated as of November 21, 2004, among Operating , Intermediate and certain subsidiaries of Operating, Congress Financial Corporation, as senior credit agent, and USBNA, as collateral agent (the “Intercreditor Agreement”), became effective.  The Intercreditor Agreement details the relative rights and obligations of the Congress Financial Corporation, as senior credit agent, and USBNA, as collateral agent.  A copy of the Intercreditor Agreement is attached as Exhibit 4.3 hereto.

On the Closing Date, an Amendment No. 1, dated as of November 21, 2004 (the “Amendment No. 1”), to the Credit Agreement, dated as of February 4, 2003, among TPG-MD Investment LLC, J. Crew Group, Inc. (“Parent”), Operating and certain subsidiaries of Operating became effective.  Pursuant to Amendment No. 1, TPG-MD Investment LLC agreed to subordinate a portion of its term loans under the TPG-MD Credit Agreement to the indebtedness to be incurred under the Black Canyon Documents.  A copy of the Amendment No. 1 is attached as Exhibit 4.4 hereto.

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To permit the proposed financing under the Black Canyon Documents, Parent, Intermediate, Operating and certain subsidiaries of Operating, Congress Financial Corporation, as agent and as lender, and certain other lenders party thereto entered into an Amendment No. 3, dated as of November 21, 2004 (the “Amendment No. 3”), to the Loan and Security Agreement, dated December 23, 2002 (the “Congress Secured Facility”), among Operating and certain subsidiaries thereof, as borrowers, the Parent and certain subsidiaries thereof, as guarantors, Wachovia Bank, National Association, as arranger, Congress Financial Corporation, as administrative Agent and collateral agent, and the lenders thereto.  A copy of the Amendment No. 3 is attached as Exhibit 4.5 hereto.

Subsequently, on December 23, 2004, Parent, Intermediate, Operating and certain of their subsidiaries entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”) with Wachovia Capital Markets LLC, as sole lead arranger and sole lead bookrunner, Wachovia Bank, National Association, as administrative agent, Bank of America, N.A., as syndication agent, Congress Financial Corporation, as collateral agent and certain additional financial institutions as lenders.  The Amended and Restated Loan Agreement refinances the previously existing $180,000,000 Congress Secured Facility.  The Amended and Restated Loan Agreement has a five-year term and provides up to $170,000,000 of revolving loans and letters of credit to Operating and its subsidiaries on terms substantially similar to those contained in the Congress Secured Facility.  The pricing and lending formulas used to determine availability under the Amended and Restated Loan Agreement are more favorable to Operating and its subsidiaries than the applicable provisions of the Congress Secured Facility.  A copy of the Amended and Restated Loan Agreement is attached as Exhibit 4.6 hereto.

Item 8.01.                                          Other Events.

On December 23, 2004, Operating redeemed in full its outstanding 10 3/8% Senior Subordinated Notes due 2007 issued under the Indenture dated as of October 17, 1997 among Operating, as issuer, the guarantors named therein and State Street Bank and Trust Company, as trustee.  The redemption price was equal to 101.729% of the aggregate principal amount of the outstanding Senior Subordinated Notes to be redeemed, together with accrued and unpaid interest to the redemption date ($1,036.89 per $1,000 in principal amount of the Senior Subordinated Notes).

On December 23, 2004, Intermediate redeemed in part its outstanding 16% Senior Discount Contingent Principal Notes due 2008 issued under the Indenture dated as of May 6, 2003 between Intermediate, as issuer, and USBNA, as trustee.  The aggregate principal amount at maturity of the Senior Discount Contingent Principal Notes redeemed was $143,377,684.83.  The redemption price was equal to 107.5% of the accreted value of such Senior Discount Contingent Principal Notes to be redeemed as of the redemption date ($937.21 per $1,000 in principal amount at maturity of the Senior Discount Contingent Principal Notes).  The Senior Discount Contingent Principal Notes that remain outstanding will be secured on an equal and ratable basis with the Term Loans and the Notes under the Security Agreement, as described in a letter from Intermediate to USBNA dated as of December 23, 2004.  A copy of this letter is attached as Exhibit 99.1 hereto.

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Item 9.01                                             Financial Statements and Exhibits

(c) Exhibits (all Exhibits are filed electronically)

The information in this Current Report is being furnished under Items 2.03 and 8.01 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), nor shall such information be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly stated by specific reference in such filing.

Certain statements herein are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements reflect the current expectations or beliefs of Parent, Operating and Intermediate (collectively, the “Company”) concerning future events and actual results of operations may differ materially from historical results or current expectations.  Any such forward-looking statements are subject to various risks and uncertainties, including the strength of the economy, changes in the overall level of consumer spending or preferences in apparel, the performance of

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the Company’s products within the prevailing retail environment, trade restrictions, political or financial instability in countries where the Company’s goods are manufactured, postal rate increases, paper and printing costs, availability of suitable store locations at appropriate terms and other factors which are set forth in the Company’s Form 10-K and in all filings with the Securities and Exchange Commission made by the Company subsequent to the filing of the Form 10-K.  The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Exhibit 4.1

CONFORMED COPY

SENIOR SUBORDINATED LOAN AGREEMENT

Dated as of November 21, 2004

among

J. CREW OPERATING CORP., as Borrower

and

the SUBSIDIARIES OF THE BORROWER party hereto,

as Guarantors,

and

the LENDERS party hereto

and

U.S. Bank National Association, as Administrative Agent

TABLE OF CONTENTS

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iii

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EXHIBITS

SCHEDULES

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

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

WHEREAS, in consideration for the Lender’s willingness to lend such amount to the Borrower, upon the occurrence of the Exchange Triggering Event and subject to the terms and conditions set forth below, the Borrower shall exchange the Loans (as defined below) for the Borrower’s 9¾% Senior Subordinated Notes due 2014, to be issued pursuant to the Indenture (as defined below).

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

ARTICLE 1
DEFINITIONS

Section 1.01.                         Defined Terms.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Cash Equivalents” means:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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“Collateral Permitted Liens” means:

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

(ii)                                  Liens securing any First-Lien Obligations;

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

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

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

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

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

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

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

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

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

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

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

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

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

(xv)                            Liens securing Hedging Obligations;

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

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

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

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

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

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

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

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

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

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

“Commission” means the Securities and Exchange Commission.

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

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

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

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

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

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

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

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

(v)                                 non-recurring redundancy and restructuring charges;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Exchange Notes” means any of the Borrower’s 9¾% Senior Subordinated Notes to be issued, authenticated and delivered pursuant to the Indenture.

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

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

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

“Existing Debentures” means the 13⅛% Senior Discount Debentures due 2008 issued by Holdings.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(i)                                     in respect of borrowed money;

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

(iii)                               in respect of banker’s acceptances;

(iv)                              representing Capital Lease Obligations;

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

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

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

“Indenture” means the Indenture, to be dated as of the Exchange Date by and among the Borrower, the guarantors named therein, and US Bank National Association, as trustee, as amended or supplemented from time to time, relating to the Borrower’s 9¾% Senior Subordinated Notes due 2014, substantially in the form of Exhibit F hereto.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Permitted Investments” means:

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

(ii)                                  any Investment in cash and Cash Equivalents;

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

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

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

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

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

(vii)                           Investments represented by Hedging Obligations;

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

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

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

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

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

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

(xiv)                         prepayments of the Loans;

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

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

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

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

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

(xx)                              Investments made with Excluded Contributions;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Senior Debt” means:

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

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

(iii)                               all Obligations with respect to the foregoing.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Section 1.02.                         Other Definitions.

Section 1.03.                         Accounting Terms; GAAP.

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

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

Section 1.04.                         Rules of Construction.

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

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

(b)                                 “or” is not exclusive;

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

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

(e)                                  provisions apply to successive events and transactions;

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

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

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

ARTICLE 2
THE LOANS; THE EXCHANGE NOTES

Section 2.01.                         Term Loan Commitments.

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

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

(c)                                  All Loans shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Share of the Term Loan Commitments.  Promptly after receipt by the Administrative Agent of the Notice of Borrowing pursuant to Section
2.01(b), the Administrative Agent shall notify each Lender of the proposed borrowing.  Upon notification by the Administrative Agent to the Lenders as to satisfaction or waiver of the conditions precedent specified in Article 9, each Lender shall make the amount of its Loan available by wire transfer to the account or accounts designated by the Borrower in the Notice of Borrowing not later than 12:00 noon (New York time) on the Closing Date, in same day funds in U.S. dollars.

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Section 2.02.                         Additional Loans.

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

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

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

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

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

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

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

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

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

Section 2.03.                         Loan Notes and Evidence of Debt.

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

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

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

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Section 2.04.                         Additional Loan Notes.

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

(a)                                  the date of issuance;

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

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

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

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

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

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

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

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

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

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

Section 2.06.                         Interest on the Loans.

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

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

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

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Section 2.07.                         Default Rate.

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

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

Section 2.08.                         Computation of Interest.

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

Section 2.09.                         Fees.

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

Section 2.10.                         Exchange Notes.

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

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

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

(1)                                  the Exchange Date;

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 2.11.                         Replacement Loan Notes.

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

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

ARTICLE 3
PREPAYMENT OF LOANS

Section 3.01.                         Notice of Prepayment to Administrative Agent.

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

Section 3.02.                         Selection of Loans to be Prepaid.

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

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

Section 3.03.                         Notice of Prepayment to Lenders.

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

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

(1)                                  the date of prepayment;

(2)                                  the prepayment price;

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

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

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

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

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

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

Section 3.04.                         Effect of Notice of Prepayment.

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

Section 3.05.                         Deposit of Prepayment Price.

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

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

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

Section 3.06.                         Loans Prepaid in Part.

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

Section 3.07.                         Voluntary Prepayment.

(a)                                  Voluntary Prepayment.

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

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

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

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

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

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

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

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

Section 3.08.                         Mandatory Prepayment.

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

Section 3.09.                         Asset Sale Offers.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE 4
COVENANTS

Section 4.01.                         Maintenance of Office or Agency.

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

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

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

Section 4.02.                         Commission Reports.

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

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

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

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

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Section 4.03.                         Compliance Certificate.

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

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

Section 4.04.                         Taxes.

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

Section 4.05.                         Stay, Extension and Usury Laws.

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

Section 4.06.                         Restricted Payments.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(xiv)                         Investments that are made with Excluded Contributions;

(xv)                            Distributions or payments of Receivables Fees;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 4.09.                         Asset Sales.

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

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

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

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

(A)                              Cash Equivalents;

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

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

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

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

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

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

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

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

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(iv)                              to make a capital expenditure; or

(v)                                 to acquire Additional Assets.

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

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

Section 4.10.                         Transactions with Affiliates.

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

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

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

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

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

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

(v)                                 payment of reasonable directors’ fees;

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

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

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

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

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

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

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

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

(xiii)                          the issuance of any Subordinated Shareholder Funding;

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

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

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

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

Section 4.11.                         Liens.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 4.13.                         Corporate Existence.

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

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

Section 4.14.                         Business Activities.

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

Section 4.15.                         No Layering of Debt.

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

Section 4.16.                         Additional Loan Guarantees.

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